##### Table of Contents

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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 20-F



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| ̈ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------------

OR



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended: June 30, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 128 0-30982



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Alto Palermo S.A. (APSA)

(Exact
name of Registrant as specified in its charter)



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Republic of Argentina

(Jurisdiction of incorporation or organization)

Moreno 877, Piso 22

Buenos Aires,
Argentina

(Address of principal executive offices)



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Securities registered or to be
registered pursuant to Section 12(b) of the Act: None

Securities registered or to be registered pursuant to Section 12(g)
of the Act:



|                                                     |  |                                                   
|---------------------------------------------------- |  | --------------------------------------------------
|Title of each class                                  |  | Name of each exchange on which registered         
|ADS, each representingforty shares of Common Stock   |  | Nasdaq National Market of the Nasdaq Stock Market 
|                                                     | 
|Common Stock, face value ten cents of Peso per share |  | Nasdaq National Market of the Nasdaq Stock Market*



|* | Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None



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The number of outstanding shares of
the issuers common stock as of June 30, 2006 was 781,962,632

Indicate by check mark if the registrant is a well known seasoned issuer,
as defined in Rule 405 of the Securities Act: ̈Yes    x  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.    x  Yes ̈No

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.    x  Yes ̈No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated
filer ̈Accelerated
filer ̈Non-accelerated
filer  x

Indicate by check mark which financial statement item the registrant has elected to
follow. ̈Item 17    x  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ̈Yes    x  No



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##### Table of Contents

Table of Contents

ALTO PALERMO S.A. (APSA)



|                                                        |  |                                                       |  |   
|------------------------------------------------------- |  | ----------------------------------------------------- |  | --
|                                                        |  | Page No.                                             
|Disclosure Regarding Forward-Looking Information        |  | 6                                                    
|                                                        | 
|Certain Measurements and Terms                          |  | 6                                                    
|                                                        | 
|Presentation of Financial and Certain Other Information |  | 7                                                    
|                                                        | 
|Market Data                                             |  | 8                                                    
|                                                        |  |                                                      
|                                                        |  | Part I                                                |  |   
|                                                        |  |                                                      
|Item 1                                                  |  | Identity of Directors, Senior Management and Advisers |  | 9 
|                                                        |  |                                                      
|Item 2                                                  |  | Offer Statistics and Expected Timetable               |  | 9 
|                                                        |  |                                                      
|Item 3                                                  |  | Key Information                                       |  | 9 
|                                                        |  |                                                      
|                                                        |  | (a) Selected Financial Data                           |  | 9 
|                                                        |  |                                                      
|                                                        |  | (b) Capitalization and Indebtedness                   |  | 15
|                                                        |  |                                                      
|                                                        |  | (c) Reasons for the Offer and Use of Proceeds         |  | 15
|                                                        |  |                                                      
|                                                        |  | (d) Risk Factors                                      |  | 15
|                                                        |  |                                                      
|Item 4                                                  |  | Information on the Company                            |  | 28
|                                                        |  |                                                      
|                                                        |  | (a) History and Development of the Company            |  | 28
|                                                        |  |                                                      
|                                                        |  | (b) Business Overview                                 |  | 30
|                                                        |  |                                                      
|                                                        |  | (c) Organizational Structure                          |  | 76
|                                                        |  |                                                      
|                                                        |  | (d) Property, Plants and Equipment                    |  | 77
|                                                        |  |                                                      
|Item 4A                                                 |  | Unresolved staff comments                             |  | 78
|                                                        |  |                                                      
|Item 5                                                  |  | Operating and Financial Review and Prospects          |  | 78
|                                                        |  |                                                      
|                                                        |  | (a) Operating Results                                 |  | 78



2



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##### Table of Contents

|        |  |                                                             |  |    
|------- |  | ----------------------------------------------------------- |  | ---
|        |  |                                                            
|        |  | (b) Liquidity and Capital Resources                         |  | 93 
|        |  |                                                            
|        |  | (c) Research and Development, Patents and Licenses, etc.    |  | 100
|        |  |                                                            
|        |  | (d) Trend Information                                       |  | 100
|        |  |                                                            
|        |  | (e) Off-Balance Sheet Arrangements                          |  | 102
|        |  |                                                            
|        |  | (f) Tabular Disclosure of Contractual Obligations           |  | 102
|        |  |                                                            
|        |  | (g) Safe Harbor                                             |  | 102
|        |  |                                                            
|Item  6 |  | Directors, Senior Management and Employees                  |  | 102
|        |  |                                                            
|        |  | (a) Directors and Senior Management                         |  | 102
|        |  |                                                            
|        |  | (b) Compensation                                            |  | 108
|        |  |                                                            
|        |  | (c) Board Practices                                         |  | 110
|        |  |                                                            
|        |  | (d) Employees                                               |  | 110
|        |  |                                                            
|        |  | (e) Share Ownership                                         |  | 111
|        |  |                                                            
|Item  7 |  | Major Shareholders and Related Party Transactions           |  | 114
|        |  |                                                            
|        |  | (a) Major Shareholders                                      |  | 114
|        |  |                                                            
|        |  | (b) Related Party Transactions                              |  | 115
|        |  |                                                            
|        |  | (c) Interests of Experts and Counsel                        |  | 119
|        |  |                                                            
|Item 8  |  | Financial Information                                       |  | 119
|        |  |                                                            
|        |  | (a) Consolidated Statements and Other Financial Information |  | 119
|        |  |                                                            
|        |  | (b) Significant Changes                                     |  | 122
|        |  |                                                            
|Item  9 |  | The Offer and Listing                                       |  | 124
|        |  |                                                            
|        |  | (a) The Offer and Listing Details                           |  | 124
|        |  |                                                            
|        |  | (b) Plan of Distribution                                    |  | 128
|        |  |                                                            
|        |  | (c) Markets                                                 |  | 128



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##### Table of Contents

|        |  |                                                                              |  |    
|------- |  | ---------------------------------------------------------------------------- |  | ---
|        |  |                                                                             
|        |  | (d) Selling Shareholders                                                     |  | 132
|        |  |                                                                             
|        |  | (e) Dilution                                                                 |  | 132
|        |  |                                                                             
|        |  | (f) Expenses of the Issue                                                    |  | 132
|        |  |                                                                             
|Item 10 |  | Additional Information                                                       |  | 132
|        |  |                                                                             
|        |  | (a) Share Capital                                                            |  | 132
|        |  |                                                                             
|        |  | (b) Memorandum and Articles of Association                                   |  | 132
|        |  |                                                                             
|        |  | (c) Material Contracts                                                       |  | 142
|        |  |                                                                             
|        |  | (d) Exchange Controls                                                        |  | 143
|        |  |                                                                             
|        |  | (e) Taxation                                                                 |  | 147
|        |  |                                                                             
|        |  | (f) Dividends and Paying Agents                                              |  | 154
|        |  |                                                                             
|        |  | (g) Statement by Experts                                                     |  | 154
|        |  |                                                                             
|        |  | (h) Documents on Display                                                     |  | 154
|        |  |                                                                             
|        |  | (i) Subsidiary Information                                                   |  | 154
|        |  |                                                                             
|Item 11 |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 155
|        |  |                                                                             
|Item 12 |  | Description of Securities Other than Equity Securities                       |  | 158
|        |  |                                                                             
|        |  | Part II                                                                      |  |    
|        |  |                                                                             
|Item 13 |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 158
|        |  |                                                                             
|Item 14 |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 158
|        |  |                                                                             
|Item 15 |  | (a) Controls and Procedures                                                  |  | 158
|        |  |                                                                             
|        |  | (b) Management ́s Annual Report on Internal Control Over Financial Reporting  |  | 158
|        |  |                                                                             
|        |  | (c) Attestation Report of the Registered Public Accounting Firm              |  | 158
|        |  |                                                                             
|        |  | (d) Changes in Internal Control Over Financial Reporting                     |  | 159



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##### Table of Contents

|        |  |                                                                                  |  |    
|------- |  | -------------------------------------------------------------------------------- |  | ---
|        |  |                                                                                 
|Item 16 |  | Reserved                                                                         |  | 159
|        |  |                                                                                 
|        |  | Item 16.A. Audit Committee Financial Expert                                      |  | 159
|        |  |                                                                                 
|        |  | Item 16.B. Code of Ethics                                                        |  | 159
|        |  |                                                                                 
|        |  | Item 16.C. Principal Accountant Fees and Services                                |  | 159
|        |  |                                                                                 
|        |  | Item 16.D. Exemptions from the Listing Standards for Audit Committees            |  | 161
|        |  |                                                                                 
|        |  | Item 16.E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers |  | 161
|        |  |                                                                                 
|        |  | Part III                                                                         |  |    
|        |  |                                                                                 
|Item 17 |  | Financial Statements                                                             |  | 162
|        |  |                                                                                 
|Item 18 |  | Financial Statements                                                             |  | 162
|        |  |                                                                                 
|Item 19 |  | Exhibits                                                                         |  | 162
|        |  |                                                                                 
|        |  | Signatures                                                                       |  | S-1



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##### Table of Contents

DISCLOSURE REGARDING FORWARD-LOOKING INFORMATION

The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward looking statements.

This annual report includes forward-looking statements, principally under the
captions Summary Risk Factors, Operating and Financial Review and Prospects and Business Overview. We have based these forward-looking statements largely on our current beliefs, expectations and
projections about future events and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our
forward-looking statements, including, among other things:

Factors that could cause actual results to differ materially and adversely
include, but are not limited to:



| |  |  | changes in general economic, business, political or other conditions in Argentina or changes in general economic or business conditions in Latin America;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in capital markets in general that may affect policies or attitudes toward lending to Argentina or Argentine companies;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in exchange rates or regulations applicable to currency exchanges or transfers;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | unexpected developments in certain existing litigation;
| | - |  | -------------------------------------------------------



| |  |  | increased costs;
| | - |  | ----------------



| |  |  | unanticipated increases in financing and other costs or the inability to obtain additional debt or equity financing on attractive terms; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the factors discussed under Risk Factors.
| | - |  | -------------------------------------------

You should not place undue reliance on such statements, which speak only as of the date that they were made. Our independent public accountants have not examined or compiled the forward-looking statements and, accordingly, do not provide
any assurance with respect to such statements. These cautionary statements should be considered in connection with any written or oral forward-looking statements that we might issue in the future. We do not undertake any obligation to release
publicly any revisions to such forward-looking statements after filing of this Form to reflect later events or circumstances or to reflect the occurrence of unanticipated events.

CERTAIN MEASUREMENTS AND TERMS

As used throughout this annual report, the terms APSA, the
Company, we, us, and our refer to Alto Palermo S.A. (APSA), together with our consolidated subsidiaries, except where we make clear that such terms refer only to the parent company.

In Argentina the standard measure of area in the real estate market is the square meter (m2), while in the United States and certain other jurisdictions, the standard measure of area is the square foot (sq. ft.). All units of area shown in this annual
report (e.g., gross leasable area of buildings and size of undeveloped land) are expressed in terms of square meters. One square meter is equal to approximately 10.764 square feet.

As used herein: GLA or gross leasable area, in the case of shopping centers, refers to the total leasable area of the property, regardless of
our ownership interest in such property (excluding common areas and parking and space occupied by supermarkets, hypermarkets, gas stations and co-owners, except where specifically stated).



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PRESENTATION OF FINANCIAL AND CERTAIN OTHER INFORMATION

This annual report contains our audited consolidated
financial statements (consolidated financial statements) as of June 30, 2006 and 2005 and for the years ended June 30, 2006, 2005 and 2004. Our consolidated financial statements have been audited by Price Waterhouse &
Co. S.R.L., Buenos Aires, Argentina member firm of PricewaterhouseCoopers, an independent registered public accounting firm whose report is included herein.

Except as discussed in the following paragraph, we prepare our consolidated financial statements in Pesos and in conformity with generally accepted accounting principles in Argentina (Argentine GAAP) and
the regulations of the National Securities and Exchange Commission in Argentina (Comisión Nacional de Valores), which differ in certain significant respects from generally accepted accounting principles in the United States of
America (U.S. GAAP). Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by U.S. GAAP and Regulation S-X of the SEC. See Note 19 to our
consolidated financial statements contained elsewhere in this annual report for a description of the principal differences between Argentine GAAP and U.S. GAAP, as they relate to us, and reconciliation to U.S. GAAP of net income and
shareholders equity.

As discussed in Note 3.k. to our consolidated financial statements, contained elsewhere in this annual report,
in order to comply with regulations of the Comisión Nacional de Valores, we recognized deferred income tax assets and liabilities on a non-discounted basis. This accounting practice represents a departure from generally accepted accounting
principles in Argentina. However, such departure has not had a material effect on our consolidated financial statements. Additionally, as discussed in Note 2.c to our consolidated financial statements, contained elsewhere in this annual report,
after considering inflation levels for the second half of 2002 and the first months of 2003, on March 25, 2003, the Argentine government repealed the provisions of the previous decree related to the inflation adjustment and instructed the
Comisión Nacional de Valores to issue the necessary regulations to preclude companies under its supervision from presenting price-level restated financial statements. Therefore, on April 8, 2003, the Comisión Nacional de Valores
issued a resolution providing for the discontinuance of inflation accounting as of March 1, 2003. The Company complied with the Comisión Nacional de Valores resolution and accordingly recorded the effects of inflation until
February 28, 2003. Comparative figures were also restated until that date. Since Argentine GAAP required companies to discontinue inflation accounting only as from October 1, 2003, the application of the Comisión Nacional de Valores
resolution represents a departure from generally accepted accounting principles in Argentina. However, due to the low level of inflation rates during the period from March to September 2003, such a departure has not had a material effect on our
consolidated financial statements.

As a result of these matters, until February 28, 2003 our consolidated financial statements were
prepared on the basis of general price-level accounting which reflected changes in the purchasing power of the Peso in our historical financial statements using changes in the Argentine wholesale price index, as published by the National Institute
of Statistics and Census (Instituto Nacional de Estadística y Censos or INDEC), as follows:



| |  |  | we adjusted non-monetary items and consolidated statements of income amounts to reflect the then current general purchasing power;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | we did not adjust monetary items as such items were, by their nature, stated in terms of current general purchasing power in our consolidated financial statements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we recognized monetary gains or losses in our consolidated statements of income, reflecting the effect of holding monetary items; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we included the gain or loss on exposure to inflation (monetary gain or loss) in our consolidated statements of income within Financing results, net.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

The Comisión Nacional de Valores issued General Resolutions 485 and 487 on December 29, 2005 and January 26, 2006, respectively which
adopted, with certain modifications, the new accounting standards



7



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##### Table of Contents

previously issued by the Professional Council in Economic Sciences of the Autonomous City of Buenos Aries through its
Resolution CD 93/2005. These standards are to be mandatorily applied for fiscal years or interim periods corresponding to fiscal years beginning as from January 1, 2006. The standards will be effective for the Company for the year ended
June 30, 2007.

The most significant change included in the accounting standards adopted by Comisión Nacional de Valores
relates to the accounting treatment of differences between the tax basis and book basis of non.monetary items for deferred income tax calculation purposes when companies prepare price-level restated financial statements. The new accounting mandates
companies to treat these differences as temporary differences. However, the standard allows a one-time accommodation to continue treating the differences between the tax basis and indexed book basis of non-monetary items adoption of the standard. As
such, the Company is allowed to continue treating differences as permanent. As June 30, 2006, the estimated effect of treating differences as temporary will be a decrease in shareholders equity of approximately Ps. 150.4 million
against in retained earnings.

Certain amounts which appear in this annual report (including percentage amounts) may not sum due to
rounding. You should not construe the translations as a representation that the amounts shown could have been, or could be, converted into U.S. Dollars at that or any other rate.

References to fiscal years 2002, 2003, 2004, 2005 and 2006 are to the fiscal years ended June 30, 2002, 2003, 2004, 2005 and 2006, respectively.

MARKET DATA

Market data used throughout this annual report were derived from reports prepared by unaffiliated
third-party sources. Such reports generally state that the information contained therein has been obtained from sources believed by such sources to be reliable. Certain market data which appear herein (including percentage amounts) may not sum due
to rounding.



8



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##### Table of Contents

PART I

ITEM 1. Identity of Directors, Senior Management and Advisers

This item is not applicable.

ITEM 2. Offer Statistics and Expected Timetable

This item is not applicable.

ITEM 3. Key Information

A. Selected financial data

In this annual report, references to US$ and U.S. Dollar are
to United States Dollars and references to Ps., Peso or Pesos are to Argentine Pesos. The following selected consolidated financial data has been derived from our audited consolidated financial statements as of
the dates and for each of the periods indicated below. This information should be read in conjunction with and is qualified in its entirety by reference to our consolidated financial statements and the discussion in Operating and Financial Review
and Prospects included elsewhere in this annual report. The selected consolidated statement of income data for the years ended June 30, 2006, 2005 and 2004 and the selected consolidated balance sheet data as of June 30, 2006 and 2005 have
been derived from our consolidated financial statements included in this annual report which have been audited by Price Waterhouse & Co. S.R.L., Buenos Aires, Argentina, member firm of PricewaterhouseCoopers, an independent registered
public accounting firm.

On January 14, 2003, the Professional Council of Economic Science of the City of Buenos Aires (Consejo
Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires or CPCECABA) and the Comisión Nacional de Valores approved, with certain amendments, Technical Resolutions No. 16, 17, 18, 19 and 20
issued by the Argentine Federation of Professional Council of Economic Science (Federación Argentina de Consejos Profesionales de Ciencias Económicas or FACPCE), which established new accounting and disclosure standards
under Argentine GAAP. We adopted such standards on July 1, 2002, except for Technical Resolution No. 20 which was adopted on July 1, 2003. As required by Argentine GAAP, when issuing our 2003 consolidated financial statements we
restated our financial statements for the prior years to give retroactive effect to the newly adopted accounting standards.

The selected
consolidated statements of income data for the years ended June 30, 2003 and 2002 and the selected consolidated balance sheet data as of June 30, 2004 and 2003 have been derived from our audited consolidated financial statements as of
June 30, 2004 and 2003 and for each of the three years in the period ended June 30, 2004 which are not included herein. Certain reclassifications have been made to these figures to conform to current fiscal year presentation.

The selected consolidated balance sheet data as of June 30, 2002 has been derived from our audited consolidated financial statements as of
June 30, 2003 and 2002 and for each of the three years in the period ended June 30, 2003 which are not included herein. Certain reclassifications have been made to these figures to conform to current fiscal year presentation.

The Comisión Nacional de Valores issued General Resolutions 485 and 487 on December 29, 2005 and January 26, 2006, respectively which
adopted, with certain modifications, the new accounting standards previously issued by the Professional Council in Economic Sciences of the Autonomous City of Buenos Aries through its Resolution CD 93/2005. These standards are to be mandatorily
applied for fiscal years or interim periods corresponding to fiscal years beginning as from January 1, 2006. The standards will be effective for the Company for the year ended June 30, 2007.



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##### Table of Contents

The most significant change included in the accounting standards adopted by Comisión Nacional de
Valores relates to the accounting treatment of differences between the tax basis and book basis of non.monetary items for deferred income tax calculation purposes when companies prepare price-level restated financial statements. The new accounting
mandates companies to treat these differences as temporary differences. However, the standard allows a one-time accommodation to continue treating the differences between the tax basis and indexed book basis of non-monetary items adoption of the
standard. As such, the Company is allowed to continue treating differences as permanent. As June 30, 2006, the estimated effect of treating differences as temporary will be a decrease in shareholders equity of approximately Ps.
150.4 million against in retained earnings.

Our consolidated financial statements are presented in Pesos. Except as discussed in the
following paragraph, our financial statements are prepared in accordance with Argentine GAAP and regulations of the Comisión Nacional de Valores which differ in certain significant respects from U.S. GAAP. Note 19 to our consolidated
financial statements provides a description of the principal differences between Argentine GAAP and U.S. GAAP, as they relate to us, and a reconciliation to U.S. GAAP of net income reported under Argentine GAAP for the years ended June 30,
2006, 2005 and 2004, and of shareholders equity reported under Argentine GAAP as of June 30, 2006 and 2005. The differences involve methods of measuring the amounts shown in the financial statements as well as additional disclosures
required by U.S. GAAP and Regulation S-X of the SEC.

As discussed in Notes 2.c. and 3.k. to our consolidated financial statements,
contained elsewhere in this annual report, in order to comply with regulations of the Comisión Nacional de Valores, we discontinued inflation accounting as from March 1, 2003 as well as recognized deferred income tax assets and
liabilities on an undiscounted basis. These accounting practices represent departures from generally accepted accounting principles in Argentina. However, we believe that such departures have not had a material effect on our consolidated financial
statements.

Until February 28, 2003, our consolidated financial statements were prepared on the basis of general price-level
accounting which reflected changes in the purchasing power of the Peso in the historical financial statements using changes in the Argentine wholesale price index, as published by the National Institute of Statistics and Census (Instituto Nacional
de Estadística y Censos or INDEC), as follows:



| |  |  | we adjusted non-monetary items and consolidated statements of income amounts to reflect the then-current general purchasing power,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | we did not adjust monetary items, as such items were by their nature stated in terms of current general purchasing power in our consolidated financial statements,
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we recognized monetary gains or losses in our consolidated statements of income, reflecting the effect of holding monetary items, and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we included the gain or loss on exposure to inflation (monetary gain or loss) in our consolidated statements of income within Financing results, net.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

Certain amounts which appear in this annual report (including percentage amounts) may not sum due to rounding. You should not
construe the translations as a representation that the amounts shown could have been, or could be, converted into U.S. Dollars at that or any other rate.

References to fiscal years 2002, 2003, 2004, 2005 and 2006 are to the fiscal years ended June 30, 2002, 2003, 2004, 2005 and 2006, respectively.



10



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|                                                             |  |                                          |   |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|------------------------------------------------------------ |  | ---------------------------------------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | - |  | ---------- | -
|                                                             |  | As of and for the year ended June 30,(1) |  
|                                                             |  | 2006                                     |   |  | 2006       |   |  | 2005       |   |  | 2004       |   |  | 2003       |   |  | 2002       |  
|                                                             |  | (US$)(2)                                 |   |  | (Ps.)      |   |  | (Ps.)      |   |  | (Ps.)      |   |  | (Ps.)      |   |  | (Ps.)      |  
|U.S. GAAP                                                    |  |                                          |   |  |            |   |  |            |   |  |            |   |  |            |   |  |            |  
|Revenues (6)                                                 |  | 145,582.9                                |   |  | 449,268.7  |   |  | 294,964.9  |   |  | 199,789.2  |   |  | 158,410.2  |   |  | 273,807.8  |  
|Costs (6)                                                    |  | (74,703.4                                | ) |  | (230,534.7 | ) |  | (153,129.5 | ) |  | (128,754.1 | ) |  | (127,411.3 | ) |  | (175,610.5 | )
|Gross Profit                                                 |  | 70,879.5                                 |   |  | 218,734.0  |   |  | 141,835.4  |   |  | 71,035.1   |   |  | 30,998.9   |   |  | 98,197.3   |  
|Net income (loss) from retained securitized recievables      |  | (4,514.9                                 | ) |  | (13,933.1  | ) |  | 2,578.3    |   |  | (2,313.3   | ) |  | (4,077.1   | ) |  | (4,068.8   | )
|Gain from recognition of inventories at net realizable value |  |                                         |   |  |           |   |  |           |   |  |           |   |  |           |   |  |           |  
|Operating Income (loss)                                      |  | 34,163.0                                 |   |  | 105,427.1  |   |  | 87,764.1   |   |  | 38,174.0   |   |  | (8,889.5   | ) |  | 5,593.6    |  
|Equity loss from related companies                           |  | (220.0                                   | ) |  | (678.9     | ) |  | (7,048.5   | ) |  | 626.5      |   |  | (12,072.2  | ) |  | (4,895.0   | )
|Amortization of goodwill                                     |  |                                         |   |  |           |   |  |           |   |  |           |   |  |           |   |  |           |  
|Financial results, net                                       |  | (8,236.9                                 | ) |  | (25,419.0  | ) |  | (11,407.4  | ) |  | (21,122.6  | ) |  | 118,641.1  |   |  | (91,189.0  | )
|Other (expenses) income, net                                 |  | (466.1                                   | ) |  | (1,438.3   | ) |  | (6,025.3   | ) |  | (2,322.6   | ) |  | 10,593.1   |   |  | (8,967.7   | )
|Income (loss) before taxes and minority interest             |  | 25,240.1                                 |   |  | 77,890.9   |   |  | 63,282.9   |   |  | 15,355.3   |   |  | 108,272.5  |   |  | (99,458.1  | )
|Income tax (expense) benefit                                 |  | (9,149.5                                 | ) |  | (28,235.4  | ) |  | (22,494.5  | ) |  | (7,398.3   | ) |  | (46,755.1  | ) |  | (67,447.3  | )
|Minority interest                                            |  | (858.0                                   | ) |  | (2,647.7   | ) |  | (4,619.5   | ) |  | (706.0     | ) |  | 2,339.8    |   |  | 5,113.8    |  
|                                                             |  |                                          |   |  |            |  
|Net income (loss)                                            |  | 15,232.6                                 |   |  | 47,007.8   |   |  | 36,169.0   |   |  | 7,251.1    |   |  | 63,857.2   |   |  | (161,791.6 | )
|                                                             |  |                                          |   |  |            |  
|Basic net income (loss) per common share                     |  | 0.02                                     |   |  | 0.06       |   |  | 0.05       |   |  | 0.01       |   |  | 0.09       |   |  | (0.23      | )
|Basic net income (loss) per ADS                              |  | 0.01                                     |   |  | 0.03       |   |  | 0.02       |   |  | 0.01       |   |  | 0.02       |   |  | (0.23      | )
|Diluted net income (loss) per common share                   |  | 0.78                                     |   |  | 2.40       |   |  | 2.00       |   |  | 0.40       |   |  | 3.60       |   |  | (9.20      | )
|Diluted net income (loss) per ADS                            |  | 0.39                                     |   |  | 1.20       |   |  | 0.80       |   |  | 0.40       |   |  | 0.80       |   |  | (9.20      | )
|Number of shares outstanding                                 |  | 781,962.6                                |   |  | 781,962.6  |   |  | 780,423.6  |   |  | 727,682.3  |   |  | 704,829.7  |   |  | 700,000.0  |  



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|                                                             |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|------------------------------------------------------------ |  | ---------------------------------------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | - |  | ----------- | -
|                                                             |  | As of and for the year ended June 30,(1) |  
|                                                             |  | 2006                                     |   |  | 2006        |   |  | 2005        |   |  | 2004        |   |  | 2003        |   |  | 2002        |  
|                                                             |  | (US$)(2)                                 |   |  | (Ps.)       |   |  | (Ps.)       |   |  | (Ps.)       |   |  | (Ps.)       |   |  | (Ps.)       |  
|BALANCE SHEET DATA                                           |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                             |  |                                          |   |  |             |  
|U.S. GAAP                                                    |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Total assets                                                 |  | 426,684.3                                |   |  | 1,316,747.9 |   |  | 1,227,024.5 |   |  | 1,122,713.3 |   |  | 1,106,138.7 |   |  | 1,161,564.9 |  
|Shareholders equity                                         |  | 208,634.8                                |   |  | 643,847.0   |   |  | 619,975.8   |   |  | 595,230.7   |   |  | 594,736.7   |   |  | 530,253.0   |  
|                                                             |  |                                          |   |  |             |  
|CASH FLOW DATA                                               |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                             |  |                                          |   |  |             |  
|Argentine GAAP:                                              |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Net cash provided by operating activities                    |  | 55,303.3                                 |   |  | 170,666.1   |   |  | 95,100.6    |   |  | 78,510.9    |   |  | 42,896.9    |   |  | 53,319.2    |  
|Net cash used in investing activities                        |  | (40,189.1                                | ) |  | (124,023.5  | ) |  | (61,476.9   | ) |  | (17,898.7   | ) |  | (3,331.3    | ) |  | (3,744.9    | )
|Net cash used in financing activities                        |  | (12,946.3                                | ) |  | (39,952.4   | ) |  | (52,205.7   | ) |  | (20,603.1   | ) |  | (27,737.4   | ) |  | (54,330.6   | )
|                                                             |  |                                          |   |  |             |  
|U.S. GAAP:                                                   |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Net cash provided by operating activities                    |  | 54,932.6                                 |   |  | 169,521.9   |   |  | 95,239.5    |   |  | 76,533.6    |   |  | 44,607.7    |   |  | 66,635.8    |  
|Net cash used in investing activities                        |  | (40,189.1                                | ) |  | (124,023.5  | ) |  | (61,390.1   | ) |  | (17,898.7   | ) |  | (3,331.3    | ) |  | (3,506.1    | )
|Net cash used in financing activities                        |  | (12,946.3                                | ) |  | (39,952.4   | ) |  | (52,205.7   | ) |  | (20,603.1   | ) |  | (27,737.4   | ) |  | (54,330.6   | )
|Effect of exchange rate changes on cash and cash equivalents |  | 370.7                                    |   |  | 1,144.1     |   |  | (225.7      | ) |  | 1,977.3     |   |  | 1,699.7     |   |  | (53.1       | )
|Effect of inflation accounting                               |  |                                         |   |  |            |   |  |            |   |  |            |   |  | (3,410.5    | ) |  | (13,502.4   | )
|                                                             |  |                                          |   |  |             |  
|OTHER FINANCIAL DATA                                         |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|                                                             |  |                                          |   |  |             |  
|Argentine GAAP:                                              |  |                                          |   |  |             |   |  |             |   |  |             |   |  |             |   |  |             |  
|Capital expenditures (4)                                     |  | 32,463.9                                 |   |  | 100,183.6   |   |  | 51,258.9    |   |  | 20,579.7    |   |  | 2,448.0     |   |  | 3,962.8     |  
|Depreciation and amortization                                |  | 22,221.0                                 |   |  | 68,573.9    |   |  | 63,433.5    |   |  | 58,404.5    |   |  | 61,383.2    |   |  | 66,511.4    |  
|Current assets/current liabilities                           |  | 0.24                                     |   |  | 0.73        |   |  | 0.87        |   |  | 0.73        |   |  | 0.90        |   |  | 0.62        |  
|Non-current assets/total assets                              |  | 0.27                                     |   |  | 0.84        |   |  | 0.88        |   |  | 0.89        |   |  | 0.94        |   |  | 0.95        |  
|Net income (loss) /average net worth (5)                     |  | 0.02                                     |   |  | 0.06        |   |  | 0.04        |   |  | 0.02        |   |  | 0.11        |   |  | (0.02       | )
|Dividends per share                                          |  | 0.019                                    |   |  | 0.060       |   |  | 0.037       |   |  | 0.025       |   |  | 0.014       |   |  |            |  
|Dividends per ADS                                            |  | 0.779                                    |   |  | 2.404       |   |  | 1.486       |   |  | 0.984       |   |  | 0.568       |   |  |            |  

---

|(1) | In thousands of Pesos, except per share amounts and ratios. Sums may not total due to rounding.
|--- | -----------------------------------------------------------------------------------------------

|(2) | Solely for the convenience of the reader we have translated Peso amounts into U.S. Dollars at the exchange rate quoted by Banco de la Nación Argentina as of June 30,
2006, which was Ps. 3.086 per US$ 1.0. We make no representation that the Argentine Peso or U.S. Dollar amounts actually represent, could have been or could be converted into Dollars at the rates indicated, at any particular rate or at
all.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Includes interest income, interest expense, results from derivative financial instruments, exchange differences, results on exposure to inflation, impairment charges and reversals,
and results from repurchase of debt.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Capital expenditures represent the cash cost in respect of capital expenditures during the year, which includes acquisition of fixed assets, undeveloped plots of land, and guarantee
deposits related to the acquisition of such assets.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Average net worth is the simple average between the shareholders equity balance at the end of the fiscal period excluding the current fiscal years results and the
shareholders equity at the end of the immediately preceding year.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | As part of the lease agreements, tenants are required to pay their proportionate share of common area maintenance expenses. The Company does not charge any mark up on reimbursable
costs. These expenses are incurred and paid by the Company and then passed through to tenants as reimbursable costs. Under Argentine GAAP, pass-through expenses, such as these reimbursable costs, are accounted for on a net basis and, as such,
excluded from revenues and expenses in the financial statements. Under U.S. GAAP, the Company accounts for pass-through revenue and expenses in accordance with Emerging Issues Task Force, or EITF, Issue 01-14, Income Statement Characterization
of Reimbursements Received for Out of Pocket Expenses Incurred, and include these costs incurred as a component of revenue and as a component of operating expenses in the statement of income. As these expenses are fully reimbursed, without
mark-up, by the tenants, there is no impact on operating income, net income, EPS, cash flows or the balance sheet. Prior year amounts have been modified to reflect this disclosure difference.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Exchange Rates

The following table sets forth, for the periods indicated, the high, low, average and period-end exchange rates for the purchase of U.S. Dollars expressed in nominal Pesos per U.S. Dollar. On November 30, 2006,
the applicable Peso/U.S. Dollar exchange rate was Ps. 3.048 to US$ 1.00. The Federal Reserve Bank of New York does not report a non-buying rate for Pesos.



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##### Table of Contents

Nominal Exchange Rates



|                                |  |                  |  |        |  |            |  |              
|------------------------------- |  | ---------------- |  | ------ |  | ---------- |  | -------------
|                                |  | Exchange Rate(4)
|                                |  | High(1)          |  | Low(2) |  | Average(3) |  | End of Period
|Fiscal year ended June 30, 2002 |  | 3.7400           |  | 0.9990 |  | 1.8206     |  | 3.7900       
|Fiscal year ended June 30, 2003 |  | 3.7400           |  | 2.7120 |  | 3.2565     |  | 2.8000       
|Fiscal year ended June 30, 2004 |  | 2.9510           |  | 2.7100 |  | 2.8649     |  | 2.9580       
|Fiscal year ended June 30, 2005 |  | 3.0400           |  | 2.8460 |  | 2.9230     |  | 2.8670       
|Fiscal year ended June 30, 2006 |  | 3.0880           |  | 2.8590 |  | 3.0006     |  | 3.0860       
|Month ended July 31, 2006       |  | 3.0860           |  | 3.0720 |  | 3.0813     |  | 3.0720       
|Month ended August 31, 2006     |  | 3.0970           |  | 3.0690 |  | 3.0799     |  | 3.0960       
|Month ended September 30, 2006  |  | 3.1070           |  | 3.0940 |  | 3.1002     |  | 3.1040       
|Month ended October 31, 2006    |  | 3.1070           |  | 3.0890 |  | 3.0982     |  | 3.0890       
|Month ended November 30, 2006   |  | 3.0480           |  | 3.067  |  | 3.0551     |  | 3.0480       

---

|(1) | The high rate shown was the highest month-end rate during the year or any shorter period, as noted.
|--- | ---------------------------------------------------------------------------------------------------

|(2) | The low rate shown was the lowest month-end rate during the year or any shorter period, as noted.
|--- | -------------------------------------------------------------------------------------------------

|(3) | Average of month-end rates.
|--- | ---------------------------

|(4) | All mid market prices.
|--- | ----------------------

Source: Banco de la Nación Argentina.
Bloomberg

Fluctuations in the exchange rate between the Peso and the U.S. Dollar may affect the equivalent in U.S. Dollars of the
price in Pesos of notes on the Buenos Aires Stock Exchange. Increases in Argentine inflation or devaluation of the Argentine currency could have a material adverse effect on our operating results.

B. Capitalization and Indebtedness

This section is not applicable.

C. Reasons for the Offer and Use of Proceeds

This section is not applicable.

D. Risk Factors

You should consider the following risks associated with our business, taking into account the
instability of the country in which we operate.

We may also face additional risks and uncertainties that are not presently affecting us,
or that we currently deem immaterial, which may materially impair our business. In general, investing in companies which operate in emerging markets such as Argentina is more risky than investing in companies which operate in more stable markets
such as the United States.



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Risks Related to Argentina

Argentinas current growth and stability may not be sustainable

During 2001 and 2002,
Argentina experienced a period of severe political, economic and social crisis. Although the economy has recovered significantly over the past three years, uncertainty remains as to whether the current growth and relative stability are sustainable.
The Argentine economy remains fragile for reasons as reflected by the following:



| |  |  | unemployment remains high;
| | - |  | --------------------------



| |  |  | the availability of long-term fixed rate credit remains low;
| | - |  | ------------------------------------------------------------



| |  |  | investment as a percentage of GDP remains low;
| | - |  | ----------------------------------------------



| |  |  | the current fiscal surplus could become a fiscal deficit;
| | - |  | ---------------------------------------------------------



| |  |  | the current trade surplus could reverse into a trade deficit;
| | - |  | -------------------------------------------------------------



| |  |  | inflation has risen recently and threatens to accelerate;
| | - |  | ---------------------------------------------------------



| |  |  | volatility of discretionary spending;
| | - |  | -------------------------------------



| |  |  | the regulatory framework continues to be uncertain;
| | - |  | ---------------------------------------------------



| |  |  | the countrys public debt remains high and international financing is limited; and
| | - |  | ----------------------------------------------------------------------------------



| |  |  | the recovery has been dependent to some extent on high commodity prices which are volatile and outside the control of the country, and excess capacity which has reduced
considerably.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Substantially all of our operations, properties and customers are located in Argentina. As a result, our
business is to a very large extent dependent upon the economic conditions prevailing in Argentina. Although the economic situation in Argentina has improved, instability is still prevalent and no assurance can be given that macroeconomic conditions
in Argentina will not deteriorate again.

Inflation may rise again, causing adverse effects on the Argentine real estate markets as
well as the Argentine economy generally

After several years of price stability, the devaluation of the Peso in January 2002 imposed
pressures on the domestic price system that generated high inflation throughout 2002, before substantially stabilizing in 2003. However, inflationary pressures have since reemerged with consumer prices increasing by 6.1% per annum during 2004
and increasing by 12.3% in 2005. During the eleven-month period ended November 30, 2006, the non-annualized inflation rate was 8.8%.

In the past, inflation has materially undermined the Argentine economy and the governments ability to create conditions conducive to growth. A return to a high inflation environment could slow the rebound in the real estate market and
may also undermine Argentinas foreign competitiveness by diluting the effects of the Peso devaluation and negatively impacting the level of economic activity and employment.



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Argentinas sovereign debt restructuring and the early prepayment to the International
Monetary Fund may create certain additional uncertainties, and the Argentine government may face future litigation that could have an impact on Argentina ́s ability to obtain financing from international markets and economic growth

After defaulting on over US$ 144.5 billion in external debt and as part of the debt restructuring process, the Argentine government
consummated a debt exchange offer in the first quarter of 2005 with a rate of participation by bondholders of approximately 76% and an aggregate tendered amount of US$ 62.3 billion. The settlement of the debt exchange was completed on June 2,
2005 due to a delay resulting from legal action by certain bondholders who did not participate in the exchange offer that attempted to attach the tendered bonds. Despite the high levels of acceptance of the exchange offer, the amounts not tendered
for exchange totaled approximately US$ 20 billion. Some bondholders in the United States, Italy and Germany filed legal actions against Argentina that are still pending resolution, and holdout creditors may initiate new suits in the future.
Argentinas past default and its failure to restructure completely its remaining sovereign debt and fully negotiate with holdout creditors may prevent the Argentine government from accessing the international capital markets for the foreseeable
future. Moreover, after consummation of the exchange offer, Argentinas sovereign debt is still significant and may inhibit economic growth and result in lower fiscal surpluses that could further restrict the ability to repay outstanding debt.
Under these circumstances, we cannot assure you that the economy will not suffer additional shocks.

Following settlement of
Argentinas sovereign debt restructuring, the International Monetary Fund (the IMF) agreed to a one-year extension of Argentinas scheduled repayment of debt due to the IMF and on December 15, 2005, the Argentine
government announced its intention to prepay all of its outstanding debt with the IMF, totaling US$ 9.53 billion, using reserves available at the Central Bank. On January 3, 2006, the Argentine government made the prepayment of its outstanding
debt with the IMF using foreign reserves of the Central Bank that were in excess of the amounts necessary to support 100% of Argentinas monetary base. The reduction of the Central Banks foreign-currency reserves may weaken
Argentinas ability to overcome economic deterioration. However, in October 2006 the Central Bank recovered the reserves level previous to the prepayment of its outstanding debt with the IMF. Without international private financing Argentina
may not be able to finance its obligations, and financing from multilateral financial institutions may be limited or not available. This could also inhibit the ability of the Central Bank to adopt measures to combat inflation and could adversely
affect Argentinas economic growth and public finances, which could adversely affect our business, financial conditions or results of operations. In addition, without the restrictions on spending imposed by the IMF arrangement, Argentina may
again experience significant government spending which could result in renewed inflation and other adverse economic consequences.

The Peso has been subject to major devaluations in the past and may suffer significant fluctuations in the future creating uncertainty as to Argentinas economic future what may have a material adverse effect on the results of
our operations and financial condition

The economic policies of the Argentine government as well as any future depreciation of the
Peso against the US$ might have an adverse impact on our financial condition and the results of our operations. The Peso has been subject to major devaluations in the past and may suffer significant fluctuations in the future.

Law No. 25,561, promulgated on January 6, 2002, called Public Emergency and Foreign Exchange Regime Reform Law (Public Emergency
Law), put an end to over a decade of one-to-one parity between the US$ and the Peso and authorized the Argentine government to set the exchange rate. Subsequent to the devaluation of the Peso in early 2002 and since the beginning of the
economic crisis, there have been significant fluctuations in the value of the Peso causing repeated Argentine Central Bank interventions to stabilize the Peso through purchases and sales of U.S. Dollars. The exchange rate between Peso and
U.S. Dollar prevailing on November 30, 2006 was Ps.3.048 = US$1.00, after a peak of Ps.3.90 per US$ on June 25, 2002.

Substantially all of our revenues and assets as of June 30, 2006 in Argentina, and as a result of the enactment of the Public Emergency Law, they are calculated and collected in Pesos. We cannot assure you that the policies to be
implemented by the Argentine government in the future will stabilize the value of the Peso against foreign currencies.



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Therefore, the Peso may continue to be subject to significant fluctuations and further devaluations which might
significantly and adversely affect our financial condition and the results of our operations.

Any further depreciation of the Peso against
the US$ will correspondingly increase the amount of our debt in Pesos, with further adverse effects on our results of operation and financial condition, and may increase the collection risk of our leases and other receivables from our tenants and
mortgage debtors, most of whom have Peso-denominated revenues. Moreover, our Peso-denominated monetary assets and liabilities could be affected by the introduction of different inflation adjustment indexes. We cannot assure you that the policies to
be implemented by the Argentine government in the future will stabilize the value of the Peso against foreign currencies. Therefore, the Peso may continue to be subject to significant fluctuations and further depreciations that might significantly
and adversely affect our financial condition and the results of our operations.

Government measures to preempt or respond to social
unrest may adversely affect the Argentine economy

During its crisis in 2001 and 2002, Argentina experienced social and political
turmoil, including civil unrest, riots, looting, nationwide protests, strikes and street demonstrations. Despite Argentinas ongoing economic recovery and relative stabilization, social and political tension and high levels of poverty and
unemployment continue. Future government policies to avoid or address social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors rights, new
taxation policies, including royalty and tax increases and retroactive tax claims, and changes in laws and policies affecting foreign trade and investment. Such policies could destabilize the country and adversely and materially affect the economy,
and thereby our business.

Exchange controls and restrictions on transfers abroad and capital inflow restrictions have limited, and
can be expected to continue to limit, the availability of international credit and may prevent us from servicing our foreign currency denominated debt obligations

In 2001 and 2002, Argentina imposed exchange controls and transfer restrictions substantially limiting the ability of companies to retain foreign currency or make payments abroad. These restrictions have been
substantially eased, including those requiring the Central Banks prior authorization for the transfer of funds abroad in order to pay principal and interest on debt obligations. However, Argentina may re-impose exchange control or transfer
restrictions in the future, among other things, in response to capital flight or a significant depreciation of the Peso. In addition, the government issued Decree No. 616/05 that established new controls on capital inflows that could result in
less availability of international credit. Additional controls could have a negative effect on the economy and our business if imposed in an economic environment where access to local capital is substantially constrained. Moreover, in such event,
restrictions on the transfers of funds abroad may impede our ability to make payments abroad and your ability to receive payments of principal and interest as a holder of notes.

By contrast, according to Communication C 43075 dated September 26, 2005, inflows of foreign currency caused by a non-resident and to be
applied to payment obligations under a purchase agreement (including installment payments) concerning real estate under construction may be registered as foreign direct investments, provided that certain conditions are met.

Although most capital outflow restrictions with regards to imports of goods, payment of interest, utilities, dividends and financial debts have been
eliminated, there can be no assurance that the Argentine Central Bank will not reverse its position and once again restrict payments of principal and interest outside of Argentina. If more stringent restrictions are imposed by the Argentine Central
Bank, we may be unable to make payments of principal and/or interest on our foreign currency-denominated debt obligations. If that were to occur, we would likely suffer payment defaults on our existing debt obligations, and such defaults would
likely have a material adverse effect on our financial condition and prospects and our ability to service our external debt obligations.



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The Argentine economy could be adversely affected by economic developments in other global markets

Financial and securities markets in Argentina are influenced, to varying degrees, by economic and market conditions in other global
markets. Although economic conditions vary from country to country, investors perception of the events occurring in one country may substantially affect capital flows into and securities from issuers in other countries, including Argentina.
The Argentine economy was adversely impacted by the political and economic events that occurred in several emerging economies in the 1990s, including Mexico in 1994, the collapse of several Asian economies between 1997 and 1998, the economic crisis
in Russia in 1998 and the Brazilian devaluation in January 1999. In addition, Argentina continues to be affected by events in the economies of its major regional partners. Furthermore, the Argentine economy may be affected by events in developed
economies which are trading partners or that impact the global economy.

Shocks of a similar magnitude to the international markets in the
future can be expected to affect adversely the Argentine economy and therefore our business.

You may not be able to enforce your
claims in Argentina

We are a corporation (sociedad anónima) organized under the laws of Argentina. Most of our
shareholders, directors, members of our supervisory committee, members of our executive committee and officers and certain experts named herein reside principally in Argentina and substantially all of our assets are located in Argentina. Under
Argentine law, enforcement of foreign judgments would be recognized provided that the requirements of Articles 517 through 519 of the National Code of Civil and Commercial Procedure are complied with, including, that the judgment does not violate
principles of public policy of Argentine law, as determined by the Argentine court. We cannot assure you that an Argentine court would not deem the enforcement of foreign judgments requiring us to make a payment under the notes in foreign currency
outside of Argentina to be contrary to argentine public policy, if at that time there are legal restrictions prohibiting Argentine debtors from transferring foreign currency outside of Argentina to cancel indebtedness.

Risks Related to Our Business

The devaluation
of the Argentine Peso and the deterioration of the Argentine economy may cause a material adverse effect on the results of our operations and financial condition

As of June 30, 2006, our outstanding financial debt denominated in US$ amounted to Ps. 167.5 million (including accrued and unpaid interest and deferred financing costs), which represented a 70.8% of our
consolidated financial debt. Any further depreciation of the Peso against the U.S. Dollar will correspondingly increase the amount of our debt in Pesos, with further adverse effects on our results of operation and financial condition.

Our level of debt may adversely affect our operations and our ability to pay our debt as it becomes due

We had, and expect to have, substantial liquidity and capital resource requirements to finance our business. As of June 30, 2006, our consolidated
financial debt amounted to Ps. 236.7 million (including accrued and unpaid interests and deferred financing costs).

Although we are
generating sufficient funds from operating cash flows to satisfy our debt service requirements and our capacity to obtain new financing is adequate, we cannot assure you that we will maintain such cash flow and adequate financial structure in the
future.

The fact that we are leveraged may affect our ability to refinance existing debt or borrow additional funds to finance working
capital, acquisitions and capital expenditures. This would require us to allocate a substantial portion of cash flow to repay principal and interest, thereby reducing the amount of money available to invest in operations, including acquisitions and
capital expenditures.



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Our leverage could also affect our competitiveness and limit our ability to react to market conditions, the real estate
industry and economic downturns.

We may not be able to generate sufficient cash flows from operations to satisfy our debt service
requirements or to obtain future financing. If we cannot satisfy our debt service requirements or if we default on any financial or other covenants in our debt arrangements, the holders of our debt will be able to accelerate the maturity of such
debt or cause defaults under the other debt arrangements. Our ability to service debt obligations or to refinance them will depend upon our future financial and operating performance, which will, in part, be subject to factors beyond our control
such as macroeconomic conditions and regulatory changes in Argentina. If we cannot obtain future financing, we may have to delay or abandon some or all of our planned capital expenditures, which could adversely affect our ability to generate cash
flows and repay our obligations.

Risks associated with real estate investments

Our real estate investments are subject to risks common to commercial and residential properties in general, many of which are not within our control. Any
of these risks may materially and adversely affect our business, financial condition or results of operations. The yields available from equity investments in real estate depend on the level of sales or rental income generated and expenses incurred.

Our ability to generate sufficient income from our properties to service our debt and cover other expenses may be adversely affected by
the following factors, among others, some of which we cannot control:



| |  |  | oversupply of retail space or a reduction in demand for retail space, which could result in lower rent prices and lower revenues for us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased competition from other real estate operators which might drive down our prices and profits;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | changes in our ability or our tenants ability to provide for adequate maintenance and insurance, which in turn may decrease the revenues collected from leased property;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increases in operating expenses which could lower our profitability;
| | - |  | --------------------------------------------------------------------



| |  |  | the inability to collect rents due to bankruptcy or insolvency of tenants or otherwise;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the need to periodically renovate, repair and release space, the higher costs thereof; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | exercise by our tenants of their legal right to terminate their leases early.
| | - |  | -----------------------------------------------------------------------------

An economic downturn in the areas in which the shopping centers are located, bankruptcy of tenants and reduction in the shopping center sales due to lower disposable income might materially and adversely affect our
financial condition and results of operations. Increases in operating costs due to inflation and other factors may result in the inability or unwillingness of some tenants to pay rent or increase expense. In addition, we have a number of important
tenants occupying space in more than one shopping center; if any one or more of such tenants were to experience financial difficulties and default in lease payments, our operating results could be materially and adversely affected. During the fiscal
year ended June 30, 2006, our biggest tenant contributed approximately 3.9% of our income from leases and services. Furthermore, as leases on properties expire or terminate early, we may be unable to find new tenants or existing tenants may
enter into new leases on terms that are less favorable to us. The failure to lease such properties could have a material adverse effect on our financial condition.

Failure to sell planned properties will adversely affect our financial condition

We might
have difficulty or fail to sell our futures developments. A failure or a delay in selling these properties would result in lower results of operations and have a material adverse effect on our financial condition.



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We are subject to shopping center operating risks that may affect our profitability

Shopping centers are subject to several factors that could affect their administration and profitability. These factors include:



| |  |  | the accessibility and the attractiveness of the area where the shopping center is located;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the intrinsic attractiveness of the shopping center;
| | - |  | ----------------------------------------------------



| |  |  | the flow of people and the level of sales of each shopping center rental unit;
| | - |  | ------------------------------------------------------------------------------



| |  |  | the amount of rent collected from each shopping center rental unit; and
| | - |  | -----------------------------------------------------------------------



| |  |  | the fluctuations in occupancy levels in the shopping centers.
| | - |  | -------------------------------------------------------------

In the event of an increase in operational costs, caused by inflation or other factors, we could suffer a material adverse effect, if our tenants are unable to pay their higher rent obligations.

Moreover, the profitability of our shopping center is closely related to consumer spending, and, therefore, to the economy in which our shopping centers
operate. All of our shopping centers are located in Argentina, and, as a consequence, their business has been seriously affected by the Argentine recession.

We are subject to great competitive pressure

All of our properties are located in Argentina.
There are other shopping centers and numerous smaller retail stores and residential properties within the market area of each of our properties. The number of competing properties in a particular area could have a material adverse effect on our
ability to lease retail space in our shopping centers or sell units in our residential complexes and on the amount of rent or the sale price that we are able to charge. To date, there have been relatively few companies competing with us for shopping
center properties. However, if additional companies become active in the Argentine shopping center market in the future, such competition could have a material adverse effect on our results of operations.

Our assets are highly concentrated in certain geographic areas and an economic downturn in such areas could have a material adverse effect on our
financial condition

For the fiscal year ended June 30, 2006, approximately 85.3% of our sales from leases and services were
derived from properties in the City of Buenos Aires and the Greater Buenos Aires area. Although we own properties and may acquire or develop additional properties outside of the City of Buenos Aires and the Greater Buenos Aires area, we expect to
continue to depend to a very large extent on economic conditions affecting those areas and therefore, an economic downturn in those areas could have a material adverse effect on our financial condition.

Our acquisition of a significant interest in the Neuquén Project may be voided, and we may lose our original investment.

On July 6, 1999, we acquired 94.6% ownership of Shopping Neuquén S.A. (Shopping Neuquén) for Ps.4.2 million. Shopping
Neuquéns sole asset is a plot of land of approximately 50,000 square meters in which we seek to develop a shopping center. The proposed project also contemplates the building of a shopping center, a hypermarket, a hotel and a housing
complex, none of which have begun. We paid Ps.0.9 million on September 1, 1999, and the remaining Ps.3.3 million were originally scheduled to be paid on the earlier to occur of July 5, 2001, and the completion of the construction
of the shopping center. The balance of the purchase price has not been paid. On August 15, 2003, the former holders of 85.8% of Shopping Neuquén filed a complaint against us seeking recovery of the unpaid balance of the purchase price,
plus interest and legal costs.



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In September 2003, we answered the complaint and raised several defenses including, plaintiffs non-compliance with
her duties under the contract and the pesification of the purchase price balance pursuant to emergency legislation adopted in 2002. We also filed a counterclaim alleging there should be a readjustment of the terms of the contract which became
excessively burdensome given the 2001 economic, social and political crisis. In November 2003, the plaintiffs replied to our counterclaim alleging that the payment under the purchase agreement was overdue before the economic and social crisis
emerged and thus our contract readjustment claim was inadmissible. The matter is currently subject to appeal, as the ruling of the trial court was appealed by both former shareholders of Shopping Neuquén and us. If we cannot reach agreement
with the former owners of Shopping Neuquén, we would be compelled to pay the sum that the court determines. As of September 30, 2006, the Ps.3.3 million deferred balance of the purchase price remains unpaid. The Company maintains a
provision of Ps. 2.5 million which represents the Companys best estimate of the probable loss to be incurred in connection with these claims.

We are engaged in litigation with the Municipality of Neuquén

In June 2001, Shopping
Neuquén filed a request with the Municipality of Neuquén to extend the construction deadlines that had been originally scheduled. In addition, it requested authorization to convey certain plots of land to third parties so that each
participant to the Neuquén project would be able to build on his own land. On December 20, 2002, the Municipality of Neuquén issued Decree 1437/02 denying both requests. In addition, it declared that the rights under Ordinance
5178 had lapsed and that the land purchase agreements would be terminated. As a result, the improvements already made by Shopping Neuquén would be lost and passed on to the Municipality of Neuquén, leaving Shopping Neuquén with
no right to compensation.

On January 21, 2003, Shopping Neuquén submitted its response to the Decree 1437/02 requesting its
revocation and requesting permission to submit a new construction timetable. The Municipal Executive issued Decree 585/2003 rejecting these requests. On May, 2003, Shopping Neuquén filed an administrative action with the Supreme Court of
Neuquén requesting the annulment of Decrees 1437/2002 and 585/2003. On December 21, 2004, the Supreme Court of Neuquén ruled in favor of the Municipality of Neuquén, declaring that the administrative action filed by
Shopping Neuquén had expired. The decision, however, is not final. We filed an appeal, but the Supreme Court of Neuquén has not yet issued a decision with regards to its admissibility. If the Supreme Court of Neuquén declares
the appeal admissible, the final decision will then be made by the Federal Supreme Court, but if it is declared inadmissible we will then file an appeal directly with the Federal Supreme Court.

On December 13, 2006, Shopping Neuquén subscribed an agreement with the Municipality of Neuquén and the Province of Neuquén in
which Shopping Neuquén was given a new time table to implement the commercial and housing project. In addition, Shopping Neuquén will be allowed to transfer further subdivisions of the plot of land owned by Shopping Neuquén to
third parties, provided that the plot to be transferred is not the one on which the shopping center is going to be built.

The agreement is
subject to the City of Neuquén Councils approval and the promulgation of the new Ordinance by the Mayor of the City of Neuquén. Should the agreement be disapproved by the City Council, such agreement will be void.

The shift of consumers to purchasing goods over the Internet may negatively affect sales in our shopping centers

During the last years, retail sales by means of the Internet have grown significantly in Argentina, even though the market share of Internet sales related
to retail sales is still not significant. The Internet enables manufacturers and retailers to sell directly to consumers, diminishing the importance of traditional distribution channels such as retail stores and shopping centers. We believe that our
target consumers are increasingly using the Internet, from home, work or elsewhere, to shop electronically for retail goods, and this trend is likely to continue. If e-commerce and retail sales through the Internet continue to grow, consumers
reliance on traditional distribution channels such as our shopping centers could be materially diminished, having a material adverse effect on our financial condition, results of operations and business prospects.



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Our investments in Internet companies are subject to high risk

Our Internet investments involve a high risk. Internet companies are relatively new and there is little or no historical operating and financial
information available to analyze. Additionally, in the first years of operation, Internet companies generally do not generate earnings or positive cash flows, and their losses must be covered with capital contributions from investors.

We cannot assure you that Internet companies will generate earnings or will be able to obtain financing once the initial capital contributions are
already used. Therefore, our risks associated with Internet companies includes the possibility that:



| |  |  | we will not recover the investments already made; and
| | - |  | -----------------------------------------------------



| |  |  | we will have to increase our capital contributions to finance the Internet companies.
| | - |  | -------------------------------------------------------------------------------------

We may also experience the following additional risks with respect to our investment in Internet companies:



| |  |  | the possibility that the Internet company might not maintain and/or increase the level of traffic of the sites;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | the Internet company might not adapt itself or anticipate the changes in the market;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | the Internet company may be inefficient in updating and developing the necessary systems and organization and in hiring new or specialized personnel;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the chance that the world wide web will not be able to handle the site traffic;
| | - |  | -------------------------------------------------------------------------------



| |  |  | the difficulty in generating expected income;
| | - |  | ---------------------------------------------



| |  |  | the failure in the administration of expansion of operations; and
| | - |  | -----------------------------------------------------------------



| |  |  | the lack of efficiency to merge new lines of business to the existing operations.
| | - |  | ---------------------------------------------------------------------------------

Moreover, it should be taken into account that the expected level of use and acceptance of the Internet and online services might never be reached.

Our future acquisitions may be unprofitable

We intend to acquire additional shopping center properties to the extent that they will be acquired on advantageous terms and meet our investment criteria. Acquisitions of commercial properties entail general
investment risks associated with any real estate investment, including:



| |  |  | the risk that investments will fail to perform as expected, or
| | - |  | --------------------------------------------------------------



| |  |  | the risk that estimates of the cost of improvements needed to bring the property up to established standards for the market may prove to be inaccurate.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

Development and construction activities may render projects unprofitable for us

In the development, renovation and construction of shopping centers and residential apartment complexes, we generally hire third-party contractors. Risks
associated with our development, renovation and construction activities include:



| |  |  | abandonment of development opportunities and renovation proposals;
| | - |  | ------------------------------------------------------------------



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| |  |  | construction costs of a project may exceed original estimates, making a project unprofitable;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | occupancy rates and rents of a newly completed project may not be sufficient to make the project profitable;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | sale prices for residential units may be insufficient to cover development costs;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | we may be unable to obtain financing on favorable terms for the development of a project;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | pre-construction buyers may default on their purchase contracts, or units in new buildings may remain unsold upon completion of construction;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | construction and lease-up may not be completed on schedule, resulting in increased debt service expense and construction costs;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be unable to obtain or may face delays in obtaining all necessary zoning, land use, building, occupancy and other required governmental permits and authorizations; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | contractors claims for the enforcement of labor laws in Argentina (art. 30, 31, 32 Law No. 20,744), which provide for joint and several liability. All kinds of companies
in Argentine are used to hire personel from third companies. Due to such necessity they signed indemnity agreements. However, in the last years there have been several Courts which denied the existence of any kind of independence in those labors
relationships and ruled for the plaintiff (employee) declaring the existence of joint and several liability.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We are
subject to the risk of payment defaults due to our investments in credit card businesses

Investments in credit card businesses can
be adversely affected by delinquency on credit card accounts, defaults in payments by credit card holders, extensive judicial process enforcing the collection of payments, doubtful accounts or losses on receivables. The actual rates of delinquency,
collection proceedings and losses on receivables may vary and be affected by numerous factors, which among others include:



| |  |  | adverse changes in the Argentine economy;
| | - |  | -----------------------------------------



| |  |  | adverse changes in the regional economies;
| | - |  | ------------------------------------------



| |  |  | political instability;
| | - |  | ----------------------



| |  |  | increase of unemployment; and
| | - |  | -----------------------------



| |  |  | loss of value of actual salaries.
| | - |  | ---------------------------------

These and other
factors may have an adverse effect on present rates of delinquency, executions and losses, any one or more of which could have a material adverse effect on the results of our operations. In addition, if our credit card business is adversely affected
by any one or more of the above factors, the asset quality of our securitized receivables are also likely to be adversely affected. Therefore, we could be adversely affected to the extent that at such time we hold a participating interest in any
such securitized receivables.



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We are controlled by two principal shareholders

As of November 30, 2006, IRSA Inversiones y Representaciones Sociedad Anonima (IRSA) and

Parque Arauco S.A. (Parque Arauco), our main shareholders, owned in the aggregate approximately 91.2% of our capital stock. These principal shareholders
control us and have, and will continue to have, significant influence on the election of our directors and the outcome of any action requiring shareholder approval.

The number of shares beneficially owned by IRSA and Parque Arauco in the aggregate will increase by 2,239,716,498 assuming full conversion of US$ 47.23 million Convertible Notes owned by IRSA and Parque Arauco.

We provided mortgage loans to purchasers of our residential development properties and any default on such loans could adversely
affect our cash flow

Although mortgage financing for residential property is available in Argentina from banks and financial
institutions, we have provided seller financing to purchasers of units in our residential development properties by extending mortgage loans to such purchasers. Our mortgage loans were pesified and currently bear interest at a fixed interest rate
averaging 14% per year and for terms ranging generally from 1 to 15 years. As of June 30, 2006, we had approximately Ps. 1.0 million in outstanding mortgage loans.

We are subject to risks normally associated with such financing, including the risk of default in the payment of principal and interest, which could
adversely affect our cash flow. Argentine law imposes significant restrictions on our ability to foreclose and auction properties. Thus, if there is a default under a mortgage loan, we do not have the right to foreclose on the unit. Instead, in
order to reacquire a property, we are required to purchase each unit at a public court ordered auction, or at an out-of-court auction, in accordance with Law No. 24,441. We cannot assure you that we will be able to recover any amount
outstanding on any mortgage loan through the sale of any property at such an auction.

Our business is subject to extensive
regulation

The Argentine real estate industry is subject to extensive building and zoning regulations by various federal, state and
municipal authorities which affect land acquisition, development and construction activities, and certain dealings with customers, as well as consumer credit and consumer protection statutes and regulations. We are required to obtain approval from
various governmental authorities for our development activities, and new laws or regulations could be adopted, enforced or interpreted in a manner that could adversely affect our results of operations and levels of cash flow necessary or available
to meet our obligations. Development activities are also subject to risks relating to the inability to obtain, or delays in obtaining all necessary zoning, environmental, land-use, development, building, occupancy and other required governmental
permits and authorizations. We are also subject to federal, state and municipal environmental laws applicable in Argentina. We believe that such laws and regulations currently do not materially affect our business or results of operations. However,
we are unable to assure that real estate industry regulations and related regulations such as environmental regulations, will not change in a way which could have a material adverse effect on our business.

Argentine lease laws imposes restrictions that limit our flexibility

Argentine laws governing leases impose certain restrictions, including the following:



| |  |  | lease agreements may not contain inflation adjustment clauses based on consumer price indexes or wholesale price indexes. Although many of our lease agreements contain readjustment
clauses, these are not based on an official index nor do they reflect the inflation index. In the event of litigation, there can be no assurance that we may be able to enforce such clauses contained in our lease agreements;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | lease agreements must be for a minimum term of two years for residential properties and three years for retail property, except in the case of stands and/or spaces for special
exhibitions;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | lease terms may not exceed ten years, except for the leases regulated by Law No. 25,248 (which provides that leases containing a purchase option are not subject to term
limitations); and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | tenants may rescind commercial lease agreements after the initial six months. The exercise of such rescission rights by our tenants could materially and adversely affect our
business and we cannot assure you that our tenants will not exercise such right, especially if rent values stabilize or decline in the future.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Argentine government may impose additional restrictions on the lease, operation and ownership of property

In the past, in response to housing shortages, high rates of inflation and difficult access to credit, the Argentine government has imposed strict and burdensome regulations regarding leases. Such regulations limited
or prohibited rental increases and prohibited eviction of tenants, even for failure to pay rent. We cannot assure you that the Argentine government will not impose similar or other regulations in the future. Changes in existing laws or the enactment
of new laws governing the ownership or operation or leasing of properties in Argentina could materially and adversely affect our operations and profitability.

There can be no assurance that additional regulations will not be imposed in the future. Such regulations could negatively affect the Argentine real estate market, and the rental market. Furthermore, most of our
leases provide that the tenants pay all costs and taxes related to their respective leasable areas. In the event of a significant increase in the amount of such costs and taxes, the Argentine government may respond to political pressure to intervene
by regulating this practice, thereby negatively affecting our rental income.

Eviction proceedings in Argentina are difficult and
time consuming

Although Argentine law permits a summary proceeding to collect unpaid rent and a special procedure to evict tenants,
historically, the heavy workload of the courts that hear these matters and the existence of numerous procedural requirements have delayed landlords ́ efforts to evict tenants. Eviction proceedings generally range from six months to two years
from the date of filing of the lawsuit to the time of actual eviction. Such prolonged proceedings could have a negative impact on the enforcement of our lease agreements. Historically, we have generally attempted to negotiate the termination of
lease agreements with defaulting tenants in order to avoid legal proceedings. We cannot assure you that such negotiations will be successful in any particular case.

We are dependent on our chairman Eduardo S. Elsztain

Our success depends, to a significant
extent, on the continued employment of Eduardo S. Elsztain, Chairman of our Board of Directors. The loss of his services for any reason could have a material adverse effect on our business. Our future success also depends in part upon our ability to
attract and retain other highly qualified personnel. We cannot assure you that we will be successful in hiring or retaining qualified personnel, or that any of our personnel will remain employed by us.

Risks Related to the American Shares and the Shares

Shares eligible for sale could adversely affect the price of our shares and American Depositary Shares (ADS)

The market prices of our common shares and ADS could decline as a result of sales by our existing shareholders of common shares or ADS in the market, or the perception that these sales could occur. These sales also might make it difficult
for us to sell equity securities in the future at a time and at a price that we deem appropriate.

The ADS are freely transferable under
U.S. securities laws, including shares sold to our affiliates. IRSA and Parque Arauco, which as of November 30, 2006 own approximately 91.2% of our common shares (or approximately 713,061,316 common shares which may be exchanged for an
aggregate of 17,826,533 ADS), are free to dispose of any or all of their common shares or ADS at any time in their discretion.



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Sales of a large number of our common shares and/or ADS would likely have an adverse effect on the market price of our common shares and the ADS. Different
Corporate Disclosure and Accounting Standards.

We are subject to certain different corporate disclosure requirements and accounting
standards than domestic issuers of listed securities in the United States

There may be less publicly available information about
the issuers of securities listed on the Buenos Aires Stock Market (Bolsa de Comercio de Buenos Aires) than is regularly published by or about domestic issuers of listed securities in the United States and certain other countries. In addition,
all listed Argentine companies must prepare their financial statements in accordance with generally accepted accounting principles in Argentina which differ in certain significant respects from U.S. GAAP. Consequently, the presentation of Argentine
financial statements and reported earnings may differ from that of companies in other countries in this and other respects.

We are
exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in
Section 16 of the Exchange Act.

Investors may not be able to effect service of process within the U.S., limiting their
recovery of any foreign judgment

We are a publicly held stock corporation (sociedad anónima) organized under the laws
of Argentina. Most of our directors and senior managers, and most of our assets are located in Argentina. As a result, it may not be possible for investors to effect service of process within the United States upon us or such persons or to enforce
against them in United States courts judgments obtained in such courts predicated upon the civil liability provisions of the United States federal securities laws. We have been advised by our Argentine counsel, Zang, Bergel & Viñes,
that there is doubt whether the Argentine courts will enforce in all respects, to the same extent and in as timely a manner as a U.S. or foreign court, an action predicated solely upon the civil liability provisions of the United States federal
securities laws or other foreign regulations brought against such persons or against us.

If we are considered to be aPassive Foreign
Investment Company for United States federal income tax purposes, United States holders of our securities would suffer negative consequences

Based on the current and projected composition of our income and valuation of our assets we do not believe we were a Passive Foreign Investment Company (PFIC), for United States federal income tax purposes for the tax year
ending June 30, 2006, and we do not currently expect to become a PFIC, although there can be no assurance in this regard. The determination of whether we are a PFIC is made annually. Accordingly, it is possible that we may be a PFIC in the
current or any future taxable year due to changes in our asset or income composition or if our projections are not accurate. The volatility and instability of Argentinas economic and financial system may substantially affect the composition of
our income and assets and the accuracy of our projections. If we become a PFIC, United States Holders of our shares or ADS will be subject to certain United States federal income tax rules that have negative consequences for United States Holders
such as additional tax and an interest charge upon certain distributions by us or upon a sale or other disposition of our shares or ADS at a gain, as well as reporting requirements. Please see Taxation-United States Taxation for a more
detailed discussion of the consequences if we are deemed a PFIC. You should consult your own tax advisors regarding the application of the PFIC rules to your particular circumstances.



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ITEM 4. Information on the Company

A. History and Development of the Company

General Information

Our legal name is Alto Palermo S.A. (APSA). We were organized and incorporated on August 29,1889 under Argentine law as a stock
corporation (Sociedad Anónima or S.A.). Our bylaws were registered in the Superintendence of Corporations (Inspección General de Justicia orIGJ) on February 27, 1976 under number 323, on page 6,
book 85 of the stock corporations volume. Pursuant to our bylaws, our term of duration expires on August 28, 2087. Our shares are listed and traded on the Buenos Aires Stock Market (Bolsa de Comercio de Buenos Aires) and our ADS on the
NASDAQ. Our headquarters and principal executive offices are located at Moreno 877, 22ndFloor, (C1091AAQ), Buenos
Aires, Argentina. Our telephone is +54-(11)-4344-4600. Our Depositary Agent for the ADS in the United States is Bank of New York whose address is 1258 Church Street Station, New York, New York 10286, and whose telephone is +1-(610)-312-5315. Our
website is www.apsacc.com.ar. Information contained in or accesible through our website is not a part of this annual report. All references in this annual report to this or other internet sites are inactive textual references to these URLs,
or uniform resources locator and are for your information reference only. We assume no responsibility for the information contained on this site.

History

Limited Operating History

We were formed in 1889 under the name Sociedad Anónima Mercado de Abasto Proveedor (SAMAP), and, until 1984, we led the main fresh
produce market in the City of Buenos Aires. Our most important asset during that period was the historic Mercado de Abasto building which served as the location of the market from 1889 to 1984, when we largely ceased operations. In July 1994, IRSA
acquired a controlling interest in our company and, subsequently, we resumed real estate operations. Since then, we have continued to grow through a series of acquisitions and development of businesses. In April 1997 we merged with fourteen of our
wholly owned subsidiaries, including Alto Palermo S.A., and subsequently changed our name from Sociedad Anónima Mercado de Abasto Proveedor (SAMAP) to Alto Palermo S.A. (APSA). As of November 30, 2006 the largest
beneficial owners of our capital stock are IRSA 61.6 % and Parque Arauco 29.6 %. Our remaining shares are owned by the public.

Acquisitions of
Businesses

Fiscal Year ended June 30, 2006

On June 29, 2006, we acquired from Phillips Argentina S.A. a plot of land located in Saavedra district, in the Northern Area of the city of Buenos
Aires covering a surface area of 28,741 square meters. The transaction price was US$ 17.9 million, which has been completely paid at the time the deed of title was subscribed.

Fiscal Year ended June 30, 2005

On September 29, 2004, we entered into a purchase agreement pursuant to which we acquired an additional 49.9% ownership interest in Mendoza Plaza Shopping for US$ 5.3 million, of which US$ 1.77 million were paid on
December 2, 2004. The remaining balance was paid in two installments of US$ 1.77 million each on September 29, 2005 and 2006. As a result of this acquisition, we became holders of 68.8% of the capital stock of Mendoza Plaza Shopping,
which runs the Mendoza Plaza Shopping center in the city of Mendoza. In addition, in May 2005 our ownership interest in Mendoza Plaza Shopping increased to 85.4% as a result of a capital increase made by Mendoza Plaza Shopping through the conversion
of debt owed to us. For detalis see Note 2.f) to our consolidated financial statements.



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Fiscal Year ended June 30, 2004

During the fiscal year ended June 30, 2004 we did not enter into any material business acquisitions.

Capital Expenditures

During fiscal
year 2006 we invested approximately Ps. 100.2 million in capital expenditures of which Ps. 61.3 million were related to the acquisition of a plot of land in the Northern Area of the City of Buenos Aires, in the district of Saavedra, and
other undeveloped plots of land, Ps. 30.3 million correspond to improvements made to our shopping center properties and Ps. 8.6 million are kept in escrow in the Deustche Bank in favor of Argentimo S.A. pursuant to an agreement entered
into between Alto Palermo S.A., Argentimo S.A. and Constructora San José Argentina S.A. which sets forth the guidelines for negotiating the acquisition of land in which we plan to develop a commercial center and a dwelling and / or office
building. For more information on our capital expenditures after June 30, 2006, see Item 8.B. Significant changes of this annual report.

During fiscal year 2005 we invested approximately Ps. 51.3 million in capital expenditures, Ps. 50.6 million were related to the development of Alto Rosario and improvements of our shopping center
properties, Ps. 4.2 million (US$ 1.77 million corresponding to the first installment, net of cash acquired) related to the acquisition of 49.9% of the capital stock of Mendoza Plaza Shopping S.A. We acquired Mendoza Plaza Shopping S.A. for
a total amount of US$ 5.3 million and Ps. 0.6 million related to the acquisition of undeveloped plots of land.

During fiscal
year 2004 we invested approximately Ps. 20.6 million in capital expenditures, related to the development of Alto Rosario and improvements of our shopping center properties.

Recent Developments

Philips
Argentinas Plot of land

On December 1, 2006, we entered into a construction, administration and commercialization agreement
with Centro Comercial Panamericano, S.A. (Centro Comercial Panamericano) in relation to the future shopping mall and housing complex to be built on two properties located in the neighborhood of Saavedra, in the City of Buenos Aires owned
by Panamerican Mall S.A. (PAMSA). We sold one of these properties (a plot of land acquired from Philips Argentina S.A.) to PAMSA. The remaining property was acquired by PAMSA from Centro Comercial Panamericano.

PAMSA is a corporation recently constituted in which we hold 80% of its capital stock. Centro Comercial Panamericano holds the remaining 20%. PAMSA was
organized in order to carry out the agreement entered into between us and Centro Comercial Panamericano. In connection with the aforementioned project, we made a capital contribution of Ps. 158,280,260 to PAMSA.

Commencement of construction of the proposed project remains subject to receipt of certain governmental approvals.

Córdoba Shopping Villa Cabrera

During July 2006, we entered into an agreement with Grupo Roggio pursuant to which we would acquire, subject to completion of a successful due diligence and the fulfillment of certain conditions, the total outstanding shares of Empalme S.A,
owner of Córdoba Shopping Villa Cabrera.

Córdoba Shopping Villa Cabrera is a shopping center covering a surface area of
35,000 square meters, having 160 commercial stores, a multiplex cinema with 12 movie theatres and a parking lot for 1,500 vehicles, located in the Villa Cabrera neighborhood of the city of Córdoba, the second largest city of Argentina.



29



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##### Table of Contents

On December 18, 2006 the transaction was approved and consummated by the Antitrust Agency through
Resolution SCI N° 67 of the Secretary of Commerce. This investment will be an opportunity for Alto Palermo to grow in the shopping center segment, in line with its strategy of expanding and gaining foothold in the main markets of the Argentine
provinces

Proposed Acquisition in Province of Córdoba.

On December 19, 2006, we reported that it was notified of the acceptance of its Ps.32.5 million bid submitted in a public tender organized by
Corporación Inmobiliaria Córdoba S.A. for the sale of a property in the City of Córdoba known as Edificio Ex Escuela Gobernador Vicente de Olmos. The acquired property is the subject of a concession granted in 1990 by the
Province of Cordoba to an unaffiliated joint venture Regam S.C.A. y Corrientes Palace S.A. Unión Transitoria de Empresas. After notification of the acceptance of its bid, the Company made a Ps. 9.7 million down payment in
accordance to the bid rules.

On December 13, 2006, we were notified by a notary that on December 5, 2006, an objection had been
filed with the National Antitrust Commission, the Argentine antitrust authority, seeking to enjoin the Company from accepting the award made pursuant to the tender. To date we have not received any notification issued by the National Antitrust
Commission.

B. Business Overview

Operations and principal activities

We operate in three reportable segments. These segments are: leases and services, credit card operations and others. The leases and services segment
includes the operating results of our shopping centers primarily comprised of lease and service revenues from tenants. The credit card operations segment reflects our portfolio of credit card accounts issued by our majority-owned subsidiary,
Tarshop, S.A. (Tarshop). Others includes the operating results of our construction and sale of residential buildings properties (sales and development properties), the operating results of sale of undeveloped plots of land, and our
equity in the results of E-Commerce Latina (e-commerce activities). As of June 30, 2006, we operate and own a majority equity interest in nine shopping centers in Argentina, as follows:



|                    |  |                   |  |                                 |  | 
|------------------- |  | ----------------- |  | ------------------------------- |  | 
|Property            |  | Interest owned(4) |  | Location                        |  | 
|Paseo Alcorta       |  | 100%              |  | City of Buenos Aires, Argentina |  | 
|Patio Bullrich      |  | 100%              |  | City of Buenos Aires, Argentina |  | 
|Abasto              |  | 100%              |  | City of Buenos Aires, Argentina |  | 
|Alto Palermo        |  | 100%(1)           |  | City of Buenos Aires, Argentina |  | 
|Buenos Aires Design |  | 54%(2)            |  | City of Buenos Aires, Argentina |  | 
|Alto Avellaneda     |  | 100%              |  | Buenos Aires, Argentina         |  | 
|Alto Noa            |  | 100%              |  | Salta, Argentina                |  | 
|Alto Rosario        |  | 100%              |  | Santa Fe, Argentina             |  | 
|Mendoza Plaza       |  | 85%(3)            |  | Mendoza, Argentina              |  | 

---

|(1) | We have a 99.99% interest in Alto Palermo through a 99.99% interest in our subsidiary Shopping Alto Palermo S.A. (SAPSA).
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(2) | We have a 54% equity interest of Emprendimiento Recoleta S.A. (ERSA), which holds the concession to operate the Buenos Aires Design Shopping Center.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | We have a 85% equity interest in Mendoza Plaza Shopping Center, through a 85% interest in our subsidiary Mendoza Plaza Shopping S.A.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(4) | Percentage of equity interest owned has been rounded.
|--- | -----------------------------------------------------

We
also construct residential apartment buildings for sale and shopping centers in order to operate them.



30



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##### Table of Contents

During fiscal year 2006, we sold a plot of land close to Paseo Alcorta. As of June 30, 2006, we owned the following
properties for development:



| |  |  | A residential project, known as the Coto Residential Project, to be built on the top of the existing supermarket, Coto Centro Integral de Comercialización S.A.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A plot of land where both residential and retail space may be developed in the City of Rosario, known as the Torres Rosario Project.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A property for development of a shopping center space in Neuquén, known as the Neuquén Project.
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | A property for development of shopping center space in the neighborhood of Caballito, City of Buenos Aires, known as the Caballito Project.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Through our majority-owned subsidiary Tarshop, we originate credit card accounts which make it more attractive for customers to purchase goods and
services from our shopping centers retail and services businesses. Tarshop is a limited purpose credit card company and is not affiliated with any bank.

We are also engaged in e-commerce activities through our investment in E-Commerce Latina S.A. Through the website Altocity.Com, we replicate the shopping experience to consumers by offering substantially the same
selection of goods and services encountered at our shopping center properties.

Our main operations and markets are located in Argentina.



31



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##### Table of Contents

The following tables set forth certain information regarding our revenues by geographical area and the
percentages of our revenues by business segment for the periods indicated:



|                                     |  |                            |    |  |             |    |  |             |   
|------------------------------------ |  | -------------------------- | -- |  | ----------- | -- |  | ----------- | --
|                                     |  | Fiscal year ended June 30, |   
|                                     |  | 2006                       |    |  | 2005        |    |  | 2004        |   
|Revenues from leases and services by |  |                            |    |  |             |    |  |             |   
|                                     |  |                            |   
|Geographical Area                    |  |                            |    |  |             |    |  |             |   
|                                     |  |                            |   
|City of Buenos Aires                 |  | 158,115,720                |    |  | 127,789,991 |    |  | 95,648,906  |   
|Greater Buenos Aires                 |  | 25,151,278                 |    |  | 19,149,474  |    |  | 14,733,998  |   
|Rest of the country                  |  | 31,702,220                 |    |  | 18,538,449  |    |  | 2,768,596   |   
|                                     |  |                            |   
|Total Revenues                       |  | 214,969,218                |    |  | 165,477,914 |    |  | 113,151,500 |   
|                                     | 
|                                     |  | Fiscal year ended June 30, |   
|                                     |  | 2006                       |    |  | 2005        |    |  | 2004        |   
|Revenues by Product Line             |  |                            |    |  |             |    |  |             |   
|                                     |  |                            |   
|Leases and services                  |  | 59.7                       | %  |  | 72.0        | %  |  | 79.2        | % 
|Credit card operations               |  | 34.0                       | %  |  | 28.1        | %  |  | 21.0        | % 
|Others                               |  | 6.5                        | %  |  | 0.0         | %  |  | 0.0         | % 
|Intersegment eliminations (2)        |  | (0.2                       | )% |  | (0.1        | )% |  | (0.2        | )%
|                                     |  |                            |   
|Total                                |  | 100.0                      | %  |  | 100.0       | %  |  | 100.0       | % 
|Total Revenues (1)                   |  | 361.4                      |    |  | 230.2       |    |  | 143.3       |   

---

|(1) | In million of Pesos.
|--- | --------------------

|(2) | Includes intersegment eliminations from lease revenues and expenses which means eliminations due to consolidation of the financial statements. See the specific notes of this issue
in the notes to our consolidated financial statement (Note 9).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Business Strategy

General

Our principal objective is to
increase cash flow, revenues and asset value by implementing a strategy of:



| |  |  | offering a variety of commercial proposals reflecting recent trends to achieve the satisfaction of our customers.
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | implementing a comprehensive marketing program intended to increase traffic in our shopping centers;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | developing brand name recognition and consumer loyalty to our shopping centers by, among other things, coordinated promotional events, loyalty cards and similar efforts designed to
attract consumers away from traditional street-level stores and by differentiating our shopping centers from those of our competitors;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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##### Table of Contents

| |  |  | developing our credit card operation business, which encourage customers to purchase goods and services from our shopping centers, and seeking to expand the use of our cards to new
stores outside our malls;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expanding family entertainment and restaurant facilities to encourage increased frequency and duration of visits by consumers, and particularly families, to our shopping centers;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | achieving worthy synergies, economies of scale and cost reductions through the consolidated administration of our shopping centers;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | developing new shopping centers in strategic markets with growth opportunities across Argentina; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | taking advantage of tourism to promote sales in our shopping centers.
| | - |  | ---------------------------------------------------------------------

Shopping Centers

General Description

As of June 30, 2006, we owned a majority interest in, and operated, a portfolio of nine shopping centers in Argentina, of which five are located in
the city of Buenos Aires (Abasto, Paseo Alcorta, Alto Palermo, Patio Bullrich and Buenos Aires Design), one is located in the greater Buenos Aires area (Alto Avellaneda), and the rest are located in different provinces (Alto Noa in the city of
Salta, Alto Rosario in the city of Rosario and Mendoza Plaza in the city of Mendoza).

Our shopping centers comprise a total of 212,711
square meters of gross leasable area (excluding certain space occupied by hypermarkets, which are not our tenants). Total tenants sales in nominal value in our shopping centers, as reported by retailers, were approximately Ps.
2,275.1 million for the fiscal year ended June 30, 2006 and Ps. 1,697.9 million for the fiscal year ended June 30, 2005. Tenant sales at our shopping centers are relevant to our revenues and profitability because they are one of
the factors that determine the amount of rent that we charge our tenants. They also affect the tenants overall occupancy costs as a percentage of the tenants sales. As of June 30, 2006, the average occupancy rate of our shopping
centers was 99.1%. During the fiscal year ended June 30, 2006, income from our largest tenants was approximately 3.9% of consolidated sales from revenues and services.

The following table sets forth the total approximate tenant retail sales in Pesos at the shopping centers in which we had an interest for the fiscal
years ended June 30, 2006, 2005 and 2004.



|                       |  |                               |  |               |  |              
|---------------------- |  | ----------------------------- |  | ------------- |  | -------------
|                       |  | Fiscal Year Ended June 30,(1)
|                       |  | 2006                          |  | 2005          |  | 2004         
|                       |  | Ps.                           |  | Ps.           |  | Ps.          
|Abasto                 |  | 453,871,445                   |  | 333,216,597   |  | 270,655,454  
|Alto Palermo           |  | 436,244,953                   |  | 362,089,242   |  | 278,194,070  
|Alto Avellaneda        |  | 308,900,404                   |  | 259,630,930   |  | 188,599,180  
|Paseo Alcorta          |  | 264,060,375                   |  | 212,617,732   |  | 169,131,939  
|Patio Bullrich         |  | 195,877,528                   |  | 170,679,604   |  | 129,586,713  
|Alto Noa               |  | 104,529,187                   |  | 75,648,232    |  | 51,817,401   
|Buenos Aires Design    |  | 91,921,046                    |  | 73,906,709    |  | 60,424,247   
|Mendoza Plaza          |  | 275,864,008                   |  | 159,206,234   |  | 157,251,948  
|Alto Rosario           |  | 143,806,266                   |  | 50,895,239    |  |             
|                       |  |                               |  |               |  |              
|Total Retail Sales (2) |  | 2,275,075,212                 |  | 1,697,890,519 |  | 1,305,660,952

---

|(1) | Retail sales based upon information provided to us by retailers and prior owners. The amounts shown reflect 100% of the retail sales of each shopping center, although in certain
cases we own less than 100% of such shopping centers.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Excludes sales from stands and spaces used for special exhibitions.
|--- | -------------------------------------------------------------------



33



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##### Table of Contents

The following table sets forth certain information regarding the shopping centers in which we held an
interest as of June 30, 2006:



|                        |  |                               |  |                       |  |                      |  |                   |  |                                 |  |                                     
|----------------------- |  | ----------------------------- |  | --------------------- |  | -------------------- |  | ----------------- |  | ------------------------------- |  | ------------------------------------
|                        |  | Date of Acquisitionor Opening |  | GrossLeasableArea (1) |  | TotalNumber ofStores |  | Occupancyrate (2) |  | Alto PalermosOwnershipInterest |  | Net Book Valueas of June 30,2006 (3)
|                        |  |                               |  | (m2)                  |  |                      |  | (%)               |  | (%)                             |  | (Ps.)                               
|Abasto (4) (5)          |  | 7/94                          |  | 39,472.6              |  | 172                  |  | 99.9              |  | 100                             |  | 188,359.7                           
|Alto Palermo (6)        |  | 11/97                         |  | 18,078.8              |  | 150                  |  | 100.0             |  | 100                             |  | 193,512.8                           
|Alto Avellaneda (7)     |  | 11/97                         |  | 27,250.9              |  | 149                  |  | 96.6              |  | 100                             |  | 86,288.7                            
|Paseo Alcorta           |  | 6/97                          |  | 14,704.3              |  | 113                  |  | 99.2              |  | 100                             |  | 62,259.9                            
|Patio Bullrich          |  | 10/98                         |  | 10,749.5              |  | 85                   |  | 100.0             |  | 100                             |  | 109,200.7                           
|Alto Noa (8)            |  | 3/95                          |  | 18,779.4              |  | 85                   |  | 100.0             |  | 100                             |  | 29,016.5                            
|Buenos Aires Design (9) |  | 11/97                         |  | 14,598.0              |  | 59                   |  | 100.0             |  | 54                              |  | 18,516.6                            
|Mendoza Plaza (10)      |  | 12/94                         |  | 39,064.8              |  | 146                  |  | 97.8              |  | 85                              |  | 88,600.8                            
|Alto Rosario (11)       |  | 11/04                         |  | 30,012.8              |  | 145                  |  | 100.0             |  | 100                             |  | 83,171.3                            
|                        |  |                               |  |                       |  |                      |  |                   |  |                                 |  |                                     
|Total                   |  |                               |  | 212,711.1             |  | 1,104                |  | 99.1              |  |                                 |  | 858,927.0                           

---

|(1) | Excludes the gross leasable area occupied by hypermarkets which are not our tenants.
|--- | ------------------------------------------------------------------------------------

|(2) | Calculated by dividing square meters leased under leases in effect by gross leasable area as of June 30, 2006.
|--- | --------------------------------------------------------------------------------------------------------------

|(3) | Book value equals cost of acquisition of fixed assets or development plus improvements, (adjusted for inflation until February 28, 2003), less accumulated depreciation and
impairment charges / recovery.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Opened on November 10, 1998.
|--- | ----------------------------

|(5) | Excludes approximately 3,800 square meters of space occupied by Museo de los Niños, Abasto.
|--- | -------------------------------------------------------------------------------------------

|(6) | On November 18, 1997, we acquired a 75% interest in the property, and on December 23, 1997 we acquired the remaining 25%.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(7) | On November 18, 1997, we acquired a 50% interest in the property, and on December 23, 1997 we acquired the remaining 50%.
|--- | -------------------------------------------------------------------------------------------------------------------------

|(8) | In March 1995, September 1996 and January 2000, we acquired a 50%, 30% and 20% interest in the property, respectively.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(9) | We own directly a 54% interest in the company which holds the concession to operate this property. We consolidate sales of this shopping center. The amounts shown reflect 100% of
the gross leasable area, the total number of stores and of the percentage leased. During May 2006, we acquired an additional 3% interest, increasing our interest from 51% to 54%.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(10) | During fiscal year 2005, we increased our interest in Mendoza Plaza Shopping S.A. by 66% from 19% to 85%. For details, see Note 2.f) to our consolidated financial statements.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(11) | Excludes approximately 1,260 square meters of space occupied by Museo de los Niños, Rosario.
|---- | --------------------------------------------------------------------------------------------



34



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##### Table of Contents

The following table sets forth the occupancy rate expressed as a percentage of the gross leasable area
for the fiscal years ended June 30, 2006, 2005 and 2004:



|                    |  |                            |  |       |  |      
|------------------- |  | -------------------------- |  | ----- |  | -----
|                    |  | Fiscal year ended June 30,
|                    |  | 2006                       |  | 2005  |  | 2004 
|                    |  | %                         
|Abasto              |  | 99.9                       |  | 100.0 |  | 98.9 
|Alto Palermo        |  | 100.0                      |  | 100.0 |  | 100.0
|Alto Avellaneda     |  | 96.6                       |  | 99.1  |  | 99.2 
|Paseo Alcorta       |  | 99.2                       |  | 99.7  |  | 99.4 
|Patio Bullrich      |  | 100.0                      |  | 98.6  |  | 99.6 
|Alto Noa            |  | 100.0                      |  | 99.5  |  | 96.8 
|Buenos Aires Design |  | 100.0                      |  | 96.8  |  | 97.9 
|Mendoza Plaza       |  | 97.8                       |  | 95.5  |  | 96.3 
|Alto Rosario        |  | 100.0                      |  | 98.0  |  |     
|                    |  |                            |  |       |  |      
|Overall Average     |  | 99.1                       |  | 98.4  |  | 98.3 

Rental Price

The following table shows the annual average rental price per square meter for the fiscal years ended June 30, 2006, 2005 and 2004:



|                    |  |                                |  |         |  |        
|------------------- |  | ------------------------------ |  | ------- |  | -------
|                    |  | Fiscal Year Ended June 30, (1)
|                    |  | 2006                           |  | 2005    |  | 2004   
|                    |  | (Ps.)                          |  | (Ps.)   |  | (Ps.)  
|Abasto              |  | 1,021.5                        |  | 779.7   |  | 591.3  
|Alto Palermo        |  | 2,432.2                        |  | 1,926.2 |  | 1,455.7
|Alto Avellaneda     |  | 899.7                          |  | 678.0   |  | 515.9  
|Buenos Aires Design |  | 501.4                          |  | 399.9   |  | 340.0  
|Paseo Alcorta       |  | 1,628.7                        |  | 1,295.5 |  | 1,022.5
|Patio Bullrich      |  | 1,791.6                        |  | 1,455.0 |  | 1,009.4
|Alto Noa            |  | 280.0                          |  | 193.1   |  | 140.7  
|Alto Rosario        |  | 376.0                          |  | 274.1   |  |       
|Mendoza Plaza       |  | 353.8                          |  | 203.2   |  |       

---

|(1) | Annual rental price per gross leasable square meter reflects the sum of base rent, percentage rent, stands and revenues from admission rights (excluding any applicable tax on sales)
divided by gross leasable square meters.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



35



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##### Table of Contents

Lease Expiration

The following table sets forth the schedule of estimated lease expirations for our shopping centers for leases in effect as of June 30, 2006,
assuming that none of the tenants exercise renewal options or terminate their leases early:



|                                |  |                             |  |                                        |  |                                                         |  |                                          |  |                                                   
|------------------------------- |  | --------------------------- |  | -------------------------------------- |  | ------------------------------------------------------- |  | ---------------------------------------- |  | --------------------------------------------------
|Lease Expiration as of June 30, |  | Number ofLeasesExpiring (2) |  | Square MetersSubject toExpiring Leases |  | Percentage of Total Square Meters Subject to Expiration |  | Annual Base RentUnder ExpiringLeases (1) |  | Percentage of Total Base Rent UnderExpiring Leases
|                                |  |                             |  | (m2)                                   |  | (%)                                                     |  | (Ps.)                                    |  | (%)                                               
|2007                            |  | 540                         |  | 90,530                                 |  | 43                                                      |  | 30,028,553                               |  | 17                                                
|2008                            |  | 381                         |  | 68,524                                 |  | 32                                                      |  | 80,954,958                               |  | 46                                                
|2009                            |  | 153                         |  | 23,264                                 |  | 11                                                      |  | 46,315,932                               |  | 26                                                
|2010+                           |  | 30                          |  | 30,394                                 |  | 14                                                      |  | 20,305,510                               |  | 11                                                
|Total                           |  | 1,104                       |  | 212,712                                |  | 100                                                     |  | 177,604,953                              |  | 100                                               

---

|(1) | Include the base rent and does not reflect our ownership interest in each property.
|--- | -----------------------------------------------------------------------------------

|(2) | Include the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | -----------------------------------------------------------------------------------------------

Depreciation

The net book
value of the properties has been determined using the straight-line method of depreciation calculated over the useful life of the property. For more information, see our consolidated financial statements.

Information about each of our shopping centers

Set forth below is information regarding our shopping center portfolio, including tables with the names of the five largest tenants of each shopping center and certain lease provisions agreed with such tenants.

Abasto, City of Buenos Aires.

Abasto is a 172-store shopping center property located in the center of the City of Buenos Aires with direct access from the Carlos Gardel subway station, six blocks from the Once railway terminal and near the
highway to Ezeiza International Airport. Abasto opened on November 10, 1998. We invested approximately US$ 111.6 million in Abasto. The main building is a landmark building that, between 1889 and 1984 was the primary fresh produce market
for Buenos Aires. We converted the property into an 115,905 square meter shopping center with approximately 39,473 square meters of gross leasable area. Abasto is the fourth largest shopping center in Argentina in terms of gross leasable area. This
shopping center is close to Torres de Abasto, our developed residential apartment complex, and to Coto supermarket.

Abasto includes a food
court with 24 restaurants, a multiplex cinema with 12 movie theaters and seating for approximately 2,800 people covering an area of 9,890 square meters, entertainment facilities and a 3,800 square meter childrens museum that is not included in
the gross leasable area. The shopping center is spread out over five levels and has a 1,200-car parking lot consisting of 40,169 square meters (excluding the supermarket).

Abastos target clientele consists of middle-income individuals between the ages of 25 and 45 which we believe represent a significant portion of
the population in this area of Buenos Aires.



36



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##### Table of Contents

On July 15, 1997, we entered into a lending facility agreement with Cinemas Hoyts de Argentina
S.A. (Hoyts) which provides for the terms of the construction and of the space leased to operate a cinema complex in the Abasto. Pursuant to this agreement, Hoyts agreed to finance up to US$ 7.8 million for the construction cost
of the portion of the building where the cinema complex is located. Construction was completed in November 1998, at which time Hoyts started leasing the space for a period of ten years, renewable at the option of Hoyts for two additional consecutive
ten-year periods. As of November 1998, the amount initially extended by Hoyts under the facility was US$ 7.3 million, the same amount of the total construction cost. The loan accrues interest at six-month LIBOR plus 2%. Under the agreement, the
loan is being repaid by offsetting it against the rent owed by Hoyts. The amount outstanding under this loan as of June 30, 2006 was Ps. 2.4 million. Pursuant to Decree No. 214/02, the loan and the lease agreements, which were originally
denominated in U.S. Dollars, were mandatorily converted into Pesos.

During the fiscal year 2006, visitors to the shopping center generated
total retail sales in nominal value of approximately Ps. 453.9 million that represents sales per square meter of approximately Ps. 11,498. Revenues from leases increased from approximately Ps. 34.6 million for the fiscal year 2005 to Ps.
44.7 million for the fiscal year 2006, which represent monthly revenues per gross leasable square meter of Ps. 73.3 in 2005 and Ps. 94.5 in 2006. As of June 30, 2006, the occupancy rate in Abasto was 99.9%.

Abastos five largest tenants

Abastos five largest tenants (in terms of sales in this shopping center) accounted for approximately 35.3% of Abastos gross leasable area as of June 30, 2006 and approximately 13.4% of the annual base rent for the fiscal
year ended on such date.

The following table provides certain information about Abastos five largest tenants:



|          |  |                      |  |                     |  |                         
|--------- |  | -------------------- |  | ------------------- |  | ------------------------
|Tenant    |  | Type of Business     |  | Gross leasable area |  | % of gross leasable area
|          |  |                      |  | (m2)                |  | (%)                     
|Fravega   |  | Housewares           |  | 885                 |  | 2.2                     
|Zara      |  | Clothes and footwear |  | 1,909               |  | 4.8                     
|Garbarino |  | Housewares           |  | 657                 |  | 1.7                     
|Hoyts     |  | Entertainment        |  | 9,890               |  | 25.1                    
|Rodo      |  | Housewares           |  | 606                 |  | 1.5                     
|          |  |                      |  |                     |  |                         
|Total     |  |                      |  | 13,947              |  | 35.3                    



37



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##### Table of Contents

Tenant mix of Abasto

The following table sets forth the tenant mix of the types of business in Abasto:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Entertainment        |  | 14,197              |  | 36.0                    
|Clothes and footwear |  | 11,972              |  | 30.3                    
|Miscellaneous        |  | 4,661               |  | 11.8                    
|Restaurants          |  | 2,299               |  | 5.8                     
|Anchor stores (1)    |  | 2,770               |  | 7.0                     
|Home appliances      |  | 466                 |  | 1.2                     
|Services             |  | 758                 |  | 1.9                     
|Housewares           |  | 2,350               |  | 6.0                     
|                     |  |                     |  |                         
|Total                |  | 39,473              |  | 100.0                   

---

|(1) | The term anchor store refers to strategically located leasable spaces in the shopping centers with more than 1,000 square meters which aim to increase traffic of
visitors and sales of the stores around them. Areas occupied by entertainment areas are not included in the definition.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



38



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##### Table of Contents

Revenues from Abasto

The following table sets forth certain information relating to the revenues of Abasto for the period indicated:



|                                   |  |                            |  |          |  |         
|---------------------------------- |  | -------------------------- |  | -------- |  | --------
|                                   |  | Fiscal year ended June 30,
|                                   |  | 2006                       |  | 2005     |  | 2004    
|                                   |  | (Thousands of Pesos)      
|Revenues:                          |  |                            |  |          |  |         
|Base rent                          |  | 25,544.4                   |  | 20,286.5 |  | 16,225.1
|Percentage rent (1)                |  | 9,243.9                    |  | 6,225.8  |  | 3,968.7 
|                                   |  |                            |  |          |  |         
|Total rent                         |  | 34,788.3                   |  | 26,512.3 |  | 20,193.8
|Revenues from admission rights (2) |  | 5,531.1                    |  | 4,149.8  |  | 3,058.6 
|Management fees                    |  | 600.0                      |  | 600.0    |  | 600.0   
|Parking                            |  | 3,176.5                    |  | 2,714.7  |  | 2,263.5 
|Other                              |  | 643.4                      |  | 606.3    |  | 362.4   
|                                   |  |                            |  |          |  |         
|Total                              |  | 44,739.3                   |  | 34,583.1 |  | 26,478.3

---

|(1) | Percentage rent is the revenue proportional to sales of our tenant see Principal Terms of our leases on page 66.
|--- | ----------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal.
|--- | -----------------------------------------------------------------------------------------------------------------------

Lease expirations for Abasto

The
following table shows a schedule of estimated lease expirations for Abasto during the periods indicated for existing leases as of June 30, 2006, assuming that none of the tenants exercise renewal options or terminate their leases early:



|                                |  |                               |  |                                        |  |                                                        |  |                                      |  |                                                  
|------------------------------- |  | ----------------------------- |  | -------------------------------------- |  | ------------------------------------------------------ |  | ------------------------------------ |  | -------------------------------------------------
|Lease Expiration as of June 30, |  | Number of Leases Expiring (1) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare Meters
Subject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of TotalBase Rent UnderExpiring Leases
|                                |  |                               |  | (m2)                                   |  | (%)                                                    |  | (Ps )                                |  | (%)                                              
|2007                            |  | 90                            |  | 9,455                                  |  | 24                                                     |  | 5,550,215                            |  | 13                                               
|2008                            |  | 60                            |  | 24,340                                 |  | 62                                                     |  | 20,914,435                           |  | 50                                               
|2009                            |  | 16                            |  | 3,266                                  |  | 8                                                      |  | 8,392,840                            |  | 20                                               
|2010+                           |  | 6                             |  | 2,412                                  |  | 6                                                      |  | 7,299,500                            |  | 17                                               
|Total                           |  | 172                           |  | 39,473                                 |  | 100                                                    |  | 42,156,990                           |  | 100                                              

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | ------------------------------------------------------------------------------------------------



39



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##### Table of Contents

Alto Palermo, City of Buenos Aires

Alto Palermo is a 150-store shopping center which opened in 1990 in a well-known middle class and densely populated neighborhood named Palermo in
the City of Buenos Aires. Alto Palermo is located at the intersection of Santa Fe and Coronel Díaz Avenues, only a few minutes from downtown Buenos Aires with nearby access from the Bulnes subway station. Alto Palermo has a total constructed
area of 64,574 square meters that consists of 18,079 square meters of gross leasable area. The shopping center has an entertainment center and a food court with 21 restaurants. Alto Palermo is spread out over four levels and has a 647-car pay
parking lot of 32,405 square meters. In 1992 Alto Palermo was awarded a prize from the International Council of Shopping Centers for its overall design and appearance. Alto Palermos targeted clientele consists of middle-income individuals
between the ages of 28 and 40.

During fiscal year 2006, visitors to the shopping center generated total retail sales in nominal value of
approximately Ps. 436.2 million which represents sales per square meter of approximately Ps. 24,130. Revenues from leases increased from approximately Ps. 37.9 million for the fiscal year 2005 to Ps. 47.7 million for the fiscal year
2006, which represent monthly revenues per gross leasable square meter of Ps. 174.9 in 2005 and Ps. 220.0 in 2006. As of June 30, 2006, the occupancy rate in Alto Palermo was 100.0%.

Alto Palermos five largest tenants

Alto Palermos five largest tenants (in terms of sales in this shopping center) accounted for approximately 14.3% of its gross leasable area at June 30, 2006 and approximately 10.0% of its annual base rent for the fiscal year
ended on such date.

The following table describes Alto Palermos five largest tenants as of June 30, 2006:



|               |  |                      |  |                    |  |                         
|-------------- |  | -------------------- |  | ------------------ |  | ------------------------
|Tenant         |  | Type of Business     |  | Gross leasablearea |  | % of gross leasable area
|               |  |                      |  | (m2)               |  | (%)                     
|Zara           |  | Anchor Store         |  | 1,408              |  | 7.8                     
|Frávega        |  | Housewares           |  | 156                |  | 0.9                     
|Garbarino      |  | Housewares           |  | 154                |  | 0.9                     
|Just for Sport |  | Clothes and footwear |  | 529                |  | 2.9                     
|Musimundo      |  | Miscellaneous        |  | 347                |  | 1.9                     
|               |  |                      |  |                    |  |                         
|Total          |  |                      |  | 2,594              |  | 14.3                    



40



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##### Table of Contents

Tenant Mix of Alto Palermo

The following table sets forth the tenant mix of the types of businesses in Alto Palermo:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Clothes and footwear |  | 7,187               |  | 39.7                    
|Miscellaneous        |  | 2,525               |  | 14.0                    
|Restaurants          |  | 2,909               |  | 16.1                    
|Services             |  | 1,869               |  | 10.3                    
|Entertainment        |  | 1,308               |  | 7.2                     
|Anchor stores.       |  | 1,409               |  | 7.8                     
|Home appliances      |  | 444                 |  | 2.5                     
|Housewares           |  | 428                 |  | 2.4                     
|                     |  |                     |  |                         
|Total                |  | 18,079              |  | 100.0                   

Revenues from Alto Palermo

The following table sets forth certain information relating to the revenues derived from Alto Palermo during the following periods:



|                                   |  |                            |  |          |  |          |  
|---------------------------------- |  | -------------------------- |  | -------- |  | -------- | -
|                                   |  | Fiscal year ended June 30, | 
|                                   |  | 2006                       |  | 2005     |  | 2004     |  
|                                   |  | (Thousands of Pesos)       | 
|Revenues:                          |  |                            |  |          |  |          |  
|Base rent                          |  | 29,046.0                   |  | 23,462.7 |  | 18,660.2 |  
|Percentage rent (1)                |  | 7,843.9                    |  | 6,062.6  |  | 3,677.5  |  
|                                   |  |                            |  |          |  |          |  
|Total rent                         |  | 36,889.9                   |  | 29,525.3 |  | 22,337.7 |  
|Revenues from admission rights (2) |  | 7,081.0                    |  | 5,250.8  |  | 3,719.6  |  
|Management fees                    |  | 664.8                      |  | 664.8    |  | 664.8    |  
|Parking                            |  | 2,826.4                    |  | 2,224.8  |  | 1,618.4  |  
|Other                              |  | 267.5                      |  | 222.7    |  | (0.3     | )
|                                   |  |                            |  |          |  |          |  
|Total                              |  | 47,729.6                   |  | 37,888.4 |  | 28,340.2 |  

---

|(1) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal.
|--- | -----------------------------------------------------------------------------------------------------------------------



41



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##### Table of Contents

Lease expirations for Alto Palermo

The following table shows a schedule of lease expirations for Alto Palermo during the periods indicated for existing leases as of June 30, 2006,
assuming that no one of the tenants exercise their renewal options nor terminates their leases early:



|                                |  |                             |  |                                        |  |                                                        |  |                                      |  |                                                   
|------------------------------- |  | --------------------------- |  | -------------------------------------- |  | ------------------------------------------------------ |  | ------------------------------------ |  | --------------------------------------------------
|Lease Expiration as of June 30, |  | Number ofLeasesExpiring (1) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare Meters Subject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of Total Base Rent UnderExpiring Leases
|                                |  |                             |  | (m2)                                   |  | (%)                                                    |  | (Ps.)                                |  | (%)                                               
|2007                            |  | 83                          |  | 9,017                                  |  | 50                                                     |  | 7,118,288                            |  | 20                                                
|2008                            |  | 43                          |  | 5,984                                  |  | 33                                                     |  | 15,601,162                           |  | 44                                                
|2009                            |  | 21                          |  | 2,766                                  |  | 15                                                     |  | 9,896,698                            |  | 28                                                
|2010+                           |  | 3                           |  | 312                                    |  | 2                                                      |  | 2,867,500                            |  | 8                                                 
|Total                           |  | 150                         |  | 18,079                                 |  | 100                                                    |  | 35,483,648                           |  | 100                                               

---

|(1) | Include the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | -----------------------------------------------------------------------------------------------

Alto Avellaneda, greater Buenos Aires area

Alto Avellaneda is a 149-store suburban shopping center that opened in October 1995 and is located in the City of Avellaneda, which is on the southern border of the City of Buenos Aires. This shopping center is next
to a railway terminal and is close to downtown Buenos Aires. Alto Avellaneda has a total constructed area of 97,655 square meters which consists of 27,251 square meters of gross leasable area and common areas covering 19,918 square meters. The
shopping center has a multiplex cinema with six movie theatres, the first Wal-Mart superstore in Argentina, a bowling center, an entertainment center and a food court with 16 restaurants. Wal-Mart (not included in gross leasable area) purchased the
space it occupies, but it pays for its pro rata share of the common expenses of Alto Avellaneda. The shopping center is contained mostly on one floor, with the cinema located on the second floor, and has a 2,700-car free parking lot consisting of
47,856 square meters. Alto Avellaneda Shoppings targeted clientele consists of middle-income individuals between the ages of 16 and 30.

During the fiscal year 2006, visitors to the shopping center generated total retail sales in nominal value of approximately Ps. 308.9 million which represents sales per square meter of approximately Ps. 11,335. Revenues from leases
increased from approximately Ps. 19.1 million for the fiscal year 2005 to Ps. 25.1 million for the fiscal year 2006 which represent monthly revenues per gross leasable square meter of Ps. 58.4 in 2005 and Ps. 76.9 in 2006. As of
June 30, 2006, the occupancy rate in Alto Avellaneda was 96.6%.

On March 2006, Alto Avellaneda was affected by a fire caused by an
electrical failure in one of the stores which damaged part of the structure of the mall. Although there were neither injured persons nor causalities, this incident affected some stores which had to close for repairs. Hence, our tenantssales
and therefore our revenues were reduced. By September 2006, the mall was restored and functioning as it did before the fire. We were fully insured for this type of peril. We are currently negotiating the amount of reimbursement with the insurance
company. This amount is directly related to the result of the final liquidation process carried out by the insurance company which has not yet been completed (for more information see the note 17 of the financial consolidated statement).

Alto Avellanedas five largest tenants

Alto Avellanedas five largest tenants (in terms of sales in this shopping center) accounted for approximately 16.1% of its gross leasable area at June 30, 2006 and approximately 17.6% of its annual base
rent for the fiscal year ended on such date.



42



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##### Table of Contents

The following table sets forth certain information about Alto Avellanedas five largest tenants as
of June 30, 2006:



|             |  |                  |  |                     |  |                        
|------------ |  | ---------------- |  | ------------------- |  | -----------------------
|Tenant       |  | Type of Business |  | Gross leasable area |  | % of grossleasable area
|             |  |                  |  | (m2)                |  | (%)                    
|Garbarino    |  | Housewares       |  | 860                 |  | 3.2                    
|Fravega      |  | Housewares       |  | 340                 |  | 1.2                    
|Rodo         |  | Housewares       |  | 358                 |  | 1.3                    
|Bingo        |  | Entertainment    |  | 2,470               |  | 9.1                    
|Red Megatone |  | Housewares       |  | 347                 |  | 1.3                    
|             |  |                  |  |                     |  |                        
|Total        |  |                  |  | 4,375               |  | 16.1                   

Tenant mix of Alto Avellaneda

The following table sets forth the tenant mix of the types of business in Alto Avellaneda:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Entertainment        |  | 9,483               |  | 34.8                    
|Clothes and footwear |  | 9,374               |  | 34.4                    
|Miscellaneous        |  | 2,168               |  | 7.9                     
|Housewares           |  | 2,006               |  | 7.4                     
|Services             |  | 1,938               |  | 7.1                     
|Restaurants          |  | 1,933               |  | 7.1                     
|Home appliances      |  | 349                 |  | 1.3                     
|                     |  |                     |  |                         
|Total                |  | 27,251              |  | 100.0                   



43



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##### Table of Contents

Revenues from Alto Avellaneda

The following table sets forth certain information relating to the revenues derived from Alto Avellaneda during the following periods:



|                                   |  |                            |  |          |  |         
|---------------------------------- |  | -------------------------- |  | -------- |  | --------
|                                   |  | Fiscal year ended June 30,
|                                   |  | 2006                       |  | 2005     |  | 2004    
|                                   |  | (Thousands of Pesos)      
|Revenues:                          |  |                            |  |          |  |         
|Base rent                          |  | 16,691.6                   |  | 12,979.2 |  | 10,252.6
|Percentage rent (1)                |  | 5,413.6                    |  | 3,518.7  |  | 1,924.4 
|                                   |  |                            |  |          |  |         
|Total rent                         |  | 22,105.2                   |  | 16,497.9 |  | 12,177.0
|Revenues from admission rights (2) |  | 2,411.3                    |  | 2,021.4  |  | 1,985.9 
|Management fees                    |  | 360.0                      |  | 360.0    |  | 360.0   
|Other                              |  | 274.7                      |  | 270.2    |  | 211.1   
|                                   |  |                            |  |          |  |         
|Total                              |  | 25,151.2                   |  | 19,149.5 |  | 14,734.0

---

|(1) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal
|--- | ----------------------------------------------------------------------------------------------------------------------



44



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##### Table of Contents

Lease expirations for Alto Avellaneda

The following table sets forth a schedule of estimated lease expirations for Alto Avellaneda during the periods indicated for existing leases as of
June 30, 2006, assuming that none of the tenants exercise renewal options nor terminate their leases early:



|                                |  |                               |  |                                        |  |                                                       |  |                                      |  |                                                  
|------------------------------- |  | ----------------------------- |  | -------------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------
|Lease Expiration as of June 30, |  | Number of Leases Expiring (1) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare MetersSubject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of TotalBase Rent UnderExpiring Leases
|                                |  |                               |  | (m2)                                   |  | (%)                                                   |  | (Ps. )                               |  | (%)                                              
|2007                            |  | 93                            |  | 20,205                                 |  | 74                                                    |  | 4,292,014                            |  | 24                                               
|2008                            |  | 34                            |  | 4,072                                  |  | 15                                                    |  | 7,077,383                            |  | 41                                               
|2009                            |  | 21                            |  | 2,799                                  |  | 10                                                    |  | 5,823,762                            |  | 33                                               
|2010+                           |  | 1                             |  | 175                                    |  | 1                                                     |  | 408,410                              |  | 2                                                
|                                |  |                               |  |                                        |  |                                                       |  |                                      |  |                                                  
|Total                           |  | 149                           |  | 27,251                                 |  | 100                                                   |  | 17,601,569                           |  | 100                                              

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | ------------------------------------------------------------------------------------------------

Buenos Aires Design, City of Buenos Aires

Buenos Aires Design is a shopping center with 59 stores specialized in interior and home decoration stores which opened in 1993. We own a 54% interest in Emprendimiento Recoleta S.A. (ERSA), the company
which has the concession to operate Buenos Aires Design. The other shareholders of ERSA is owned by Grupo Bapro S.A.with a 44% interest.

As a result of a public auction, in February 1991, the City of Buenos Aires granted to ERSA a 20-year concession to use a plot of land in the Centro Cultural Recoleta. There can be no assurance that the City of Buenos Aires will extend the
term of this concession upon its expiration. The concession agreement provides for ERSA to pay the City of Buenos Aires a monthly amount of Ps. 20,168. It establishes that the concession may be terminated for any of the following reasons, among
others:



| |  |  | severe breach of the obligations of the parties, which with regard to ERSA include: (i) breach of applicable law, (ii) change of the purpose of the Area under concession;
(iii) non payment of the monthly fee for two consecutive periods;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | destruction or abandonment of the area under concession;
| | - |  | --------------------------------------------------------



| |  |  | bankruptcy or liquidation;
| | - |  | --------------------------



| |  |  | restitution of the plot of land under concession, which shall only take place for public interest reasons.
| | - |  | ----------------------------------------------------------------------------------------------------------

In June 1991, we entered into an agreement with the shareholders of ERSA providing our administration of Buenos Aires Design for a monthly administration
fee of approximately Ps. 12,000 plus VAT.

Buenos Aires Design is in a high-income neighborhood named Recoleta in the City of Buenos
Aires, near Libertador Avenue and downtown Buenos Aires. Buenos Aires Design is located in one of Buenos Aires most popular tourist attraction areas. Many exclusive hotels and restaurants are located in this area, and the shopping center is
close to the National Museum of Fine Arts, the Museum of Modern Art and other popular cultural institutions.



45



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##### Table of Contents

Buenos Aires Design has a total constructed area of 31,645 square meters that consists of 14,598 gross
meters of leasable area. The shopping center has six restaurants anchored by the Hard Rock Café and a terrace that covers 3,700 square meters. The shopping center is divided into two floors and has a 174-car pay parking lot. Buenos Aires
Designs targeted clientele consists of upper-middle income individuals between the ages of 25 and 45.

During the fiscal year 2006,
visitors to the shopping center generated total retail sales in nominal value of approximately Ps. 91.9 million which represents sales per square meter of approximately Ps. 6,297. Revenues from leases increased from approximately Ps.
7.1 million for the fiscal year 2005 to Ps. 8.6 million for the fiscal year 2006 which represent monthly revenues per gross leasable square meter of Ps. 40.4 in 2005 and Ps. 49.2 in 2006. As of June 30, 2006, the occupancy rate in
Buenos Aires Design was 100%.

Buenos Aires Designs five largest tenants

Buenos Aires Designs five largest tenants (in terms of sales in this shopping center) accounted for approximately 28.2% of Buenos Aires
Designs gross leasable area on June 30, 2006 and approximately 22.6% of its annual base rent for the fiscal year ended on such date.

The following table contains certain information about Buenos Aires Designs five largest tenants as of June 30, 2006:



|               |  |                  |  |                     |  |                        
|-------------- |  | ---------------- |  | ------------------- |  | -----------------------
|Tenant         |  | Type of Business |  | Gross leasable area |  | % of grossleasable area
|               |  |                  |  | (m2)                |  | (%)                    
|Barugel Azulay |  | Home appliances  |  | 312                 |  | 2.1                    
|Morph          |  | Anchor Store     |  | 1,032               |  | 7.1                    
|Garbarino      |  | Housewares       |  | 194                 |  | 1.3                    
|Bazar Geo      |  | Home appliances  |  | 889                 |  | 6.1                    
|Hard Rock Café |  | Restaurants      |  | 1,693               |  | 11.6                   
|               |  |                  |  |                     |  |                        
|Total          |  |                  |  | 4,120               |  | 28.2                   



46



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##### Table of Contents

Tenant mix of Buenos Aires Design

The following table sets forth the tenant mix of the types of businesses in Buenos Aires Design:



|                 |  |                     |  |                         
|---------------- |  | ------------------- |  | ------------------------
|Type of Business |  | Gross leasable area |  | % of gross leasable area
|                 |  | (m2)                |  | (%)                     
|Home appliance   |  | 7,057               |  | 48.3                    
|Restaurants      |  | 3,545               |  | 24.3                    
|Anchor stores    |  | 3,331               |  | 22.8                    
|Miscellaneous    |  | 435                 |  | 3.0                     
|Housewares       |  | 194                 |  | 1.3                     
|Services         |  | 36                  |  | 0.3                     
|                 |  |                     |  |                         
|Total            |  | 14,598              |  | 100.0                   



47



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##### Table of Contents

Revenues from Buenos Aires Design

The following table sets forth certain information relating to the revenues of Buenos Aires Design during the following periods:



|                                   |  |                            |  |         |  |        
|---------------------------------- |  | -------------------------- |  | ------- |  | -------
|                                   |  | Fiscal year ended June 30,
|                                   |  | 2006(1)                    |  | 2005(1) |  | 2004(1)
|                                   |  | (Thousands of Pesos)      
|Revenues:                          |  |                            |  |         |  |        
|Base rent                          |  | 5,130.7                    |  | 4,130.4 |  | 3,567.7
|Percentage rent (2)                |  | 1,060.1                    |  | 996.5   |  | 784.8  
|                                   |  |                            |  |         |  |        
|Total rent                         |  | 6,190.8                    |  | 5,126.9 |  | 4,352.5
|Revenues from admission rights (3) |  | 1,129.1                    |  | 710.5   |  | 573.3  
|Management fees                    |  | 183.8                      |  | 153.0   |  | 119.4  
|Parking                            |  | 930.7                      |  | 930.2   |  | 780.2  
|Other                              |  | 184.5                      |  | 161.7   |  | 110.3  
|                                   |  |                            |  |         |  |        
|Total                              |  | 8,618.9                    |  | 7,082.3 |  | 5,935.7

---

|(1) | Does not reflect our ownership interest in the property.
|--- | --------------------------------------------------------

|(2) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal.
|--- | -----------------------------------------------------------------------------------------------------------------------

Lease expirations for Buenos Aires Design

The following table shows a schedule of estimated lease expirations for Buenos Aires Design during the periods indicated for existing leases as of June 30, 2006, assuming that none of the tenants exercise renewal options nor terminates
its lease early:



|                                |  |                               |  |                                        |  |                                                        |  |                                           |  |                                                  
|------------------------------- |  | ----------------------------- |  | -------------------------------------- |  | ------------------------------------------------------ |  | ----------------------------------------- |  | -------------------------------------------------
|Lease Expiration as of June 30, |  | Number of Leases Expiring (2) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare Meters
Subject to Expiration |  | Annual Base RentUnder Expiring
Leases (1) |  | Percentage of TotalBase Rent UnderExpiring Leases
|                                |  |                               |  | (m2)                                   |  | (%)                                                    |  | (Ps )                                     |  | (%)                                              
|2007                            |  | 30                            |  | 9,377                                  |  | 64                                                     |  | 1,664,289                                 |  | 22                                               
|2008                            |  | 16                            |  | 2,074                                  |  | 14                                                     |  | 2,272,463                                 |  | 31                                               
|2009                            |  | 11                            |  | 1,873                                  |  | 13                                                     |  | 3,489,450                                 |  | 47                                               
|2010+                           |  | 2                             |  | 1,274                                  |  | 9                                                      |  |                                          |  |                                                 
|                                |  |                               |  |                                        |  |                                                        |  |                                           |  |                                                  
|Total                           |  | 59                            |  | 14,598                                 |  | 100                                                    |  | 7,426,202                                 |  | 100                                              

---

|(1) | Does not reflect our ownership interest in the property.
|--- | --------------------------------------------------------

|(2) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | ------------------------------------------------------------------------------------------------



48



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##### Table of Contents

Paseo Alcorta, City of Buenos Aires

Paseo Alcorta is a 113-store shopping center which opened in 1992, located in the residential area of Palermo Chico, one of the most exclusive
areas in the City of Buenos Aires, and a short drive from downtown Buenos Aires, has a total constructed area of approximately 54,728 square meters that consists of 14,704 square meters of gross leasable area. Paseo Alcorta has a multiplex cinema
with four screens, a food court with 17 restaurants and a Carrefour hypermarket on the ground floor. Carrefour purchased the space it occupies but pays for its pro rata share of the common expenses of the shopping center. Paseo Alcorta is spread out
over three shopping center levels and has a free parking lot for approximately 1,300 cars. Paseo Alcortas targeted clientele consists of high-income individuals between the ages of 34 and 54.

During the fiscal year 2006, visitors to the shopping center generated total retail sales in nominal value of approximately Ps. 264.1 million which
represents sales per square meter of approximately Ps. 17,958. Revenues from leases increased from approximately Ps. 19.7 million for the fiscal year 2005 to Ps. 24.6 million for the fiscal year 2006, which represent monthly revenues per
gross leasable square meter of Ps. 111.0 in 2005 and Ps. 139.2 in 2006. As of June 30, 2006, the occupancy rate in Paseo Alcorta was 99.2%.

Paseo Alcortas five largest tenants

Paseo Alcortas five largest tenants (in terms of sales in this shopping
center) accounted for approximately 19.1% of Paseo Alcortas gross leasable area at June 30, 2006 and approximately 9.8% of its annual base rent for the fiscal year ended on such date.

The following table provides certain information about Paseo Alcortas five largest tenants as of June 30, 2006:



|               |  |                      |  |                     |  |                         
|-------------- |  | -------------------- |  | ------------------- |  | ------------------------
|Tenant         |  | Type of Business     |  | Gross leasable area |  | % of gross leasable area
|               |  |                      |  | (m2)                |  | (%)                     
|Zara           |  | Clothes and footwear |  | 1,100               |  | 7.5                     
|Fravega        |  | Housewares           |  | 211                 |  | 1.4                     
|Etiqueta Negra |  | Clothes and footwear |  | 249                 |  | 1.7                     
|Rapsodia       |  | Clothes and footwear |  | 258                 |  | 1.8                     
|Musimundo      |  | Miscellaneous        |  | 987                 |  | 6.7                     
|               |  |                      |  |                     |  |                         
|Total          |  |                      |  | 2,805               |  | 19.1                    



49



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##### Table of Contents

Tenant mix of Paseo Alcorta

The following table sets forth the tenant mix of the types of businesses in Paseo Alcorta:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Clothes and footwear |  | 7,348               |  | 50.0                    
|Miscellaneous        |  | 2,045               |  | 13.9                    
|Services             |  | 1,837               |  | 12.5                    
|Entertainment        |  | 1,778               |  | 12.1                    
|Restaurants          |  | 1,058               |  | 7.2                     
|Home appliances      |  | 427                 |  | 2.9                     
|Housewares           |  | 211                 |  | 1.4                     
|                     |  |                     |  |                         
|Total                |  | 14,704              |  | 100.0                   

Revenues from Paseo Alcorta

The following table sets forth certain information relating to the revenues of Paseo Alcorta during the following periods:



|                                   |  |                            |  |          |  |         
|---------------------------------- |  | -------------------------- |  | -------- |  | --------
|                                   |  | Fiscal year ended June 30,
|                                   |  | 2006                       |  | 2005     |  | 2004    
|                                   |  | (Thousands of Pesos)      
|Revenues:                          |  |                            |  |          |  |         
|Base rent                          |  | 14,193.5                   |  | 11,585.0 |  | 9,681.6 
|Percentage rent (1)                |  | 5,813.5                    |  | 4,826.9  |  | 3,224.0 
|                                   |  |                            |  |          |  |         
|Total rent                         |  | 20,007.0                   |  | 16,411.9 |  | 12,905.6
|Revenues from admission rights (2) |  | 3,941.3                    |  | 2,788.1  |  | 2,257.0 
|Management fees                    |  | 212.5                      |  | 212.5    |  | 212.5   
|Other                              |  | 400.7                      |  | 321.4    |  | 59.1    
|                                   |  |                            |  |          |  |         
|Total                              |  | 24,561.5                   |  | 19,733.9 |  | 15,434.2

---

|(1) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal
|--- | ----------------------------------------------------------------------------------------------------------------------



50



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##### Table of Contents

Lease expirations for Paseo Alcorta

The following table shows a schedule of estimated lease expirations for Paseo Alcorta during the periods indicated for existing leases as of June 30,
2006, assuming that no one of the tenants exercises renewal options nor terminates its lease early:



|                                |  |                               |  |                                         |  |                                                        |  |                                      |  |                                                   
|------------------------------- |  | ----------------------------- |  | --------------------------------------- |  | ------------------------------------------------------ |  | ------------------------------------ |  | --------------------------------------------------
|Lease Expiration as of June 30, |  | Number of Leases Expiring (1) |  | Square MetersSubject to Expiring Leases |  | Percentage of TotalSquare Meters Subject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of Total Base Rent UnderExpiring Leases
|                                |  |                               |  | (m2)                                    |  | (%)                                                    |  | (Ps. )                               |  | (%)                                               
|2007                            |  | 65                            |  | 5,992                                   |  | 41                                                     |  | 3,225,599                            |  | 14                                                
|2008                            |  | 26                            |  | 5,503                                   |  | 37                                                     |  | 8,259,861                            |  | 37                                                
|2009                            |  | 19                            |  | 1,784                                   |  | 12                                                     |  | 6,931,634                            |  | 31                                                
|2010+                           |  | 3                             |  | 1,425                                   |  | 10                                                     |  | 3,985,000                            |  | 18                                                
|                                |  |                               |  |                                         |  |                                                        |  |                                      |  |                                                   
|Total                           |  | 113                           |  | 14,704                                  |  | 100                                                    |  | 22,402,094                           |  | 100                                               

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated with one or more stores.
|--- | --------------------------------------------------------------------------------------------------

Patio Bullrich, City of Buenos Aires

Patio Bullrich is a 85-store shopping center which opened in 1988 and the first shopping center to start operations in the City of Buenos Aires. We acquired Patio Bullrich on October 1, 1998 for US$ 72.3 million.

Patio Bullrich is in the neighborhood of Recoleta, one of the most prosperous areas of the City of Buenos Aires. This district is a residential,
cultural and tourist center that includes distinguished private homes, historical sites, museums, theatres and embassies. The shopping center is located within walking distance of prestigious hotels and the Citys subway, bus and train systems.
Furthermore, the shopping center is only 10 minutes by car from the downtown area of the City of Buenos Aires.

Patio Bullrich has a total
constructed area of 28,211 square meters that consist of 10,780 square meters of gross leasable area and common areas covering 12,125 square meters. The shopping center has a multiplex cinema with six- movie theatres complex with 1,381 seats, an
entertainment area of 1,444 square meters and a food court of 15 restaurants. The center is spread out over four levels and has a pay parking lot for 212 cars in an area consisting of 4,825 square meters.

Patio Bullrich is one of the most successful shopping centers in Argentina in terms of sales per square meter. Its targeted clientele consists of
high-income individuals aged of 45 and above.

During the fiscal year 2006, visitors to the shopping center generated total retail sales in
nominal value of approximately Ps. 195.9 million that represents sales per square meter of approximately Ps. 18,222. Revenues from leases increased from approximately Ps. 17.8 million for the fiscal year 2005 to Ps. 21.4 million for
the fiscal year 2006, which represent monthly revenues per gross leasable square meter of Ps. 137.7 in 2005 and Ps. 166.1 in 2006. As of June 30, 2006, the occupancy rate in Patio Bullrich was 100%.

Patio Bullrichs five largest tenants

Patio Bullrichs five largest tenants (in terms of sales in the shopping center) accounted for approximately 9.9% of Patio Bullrichs gross leasable area at June 30, 2006 and approximately 10.1% of its annual base rent for
the fiscal year ended on such date.



51



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##### Table of Contents

The following table sets forth certain information about Patio Bullrichs five largest tenants as of
June 30, 2006:



|               |  |                      |  |                     |  |                         
|-------------- |  | -------------------- |  | ------------------- |  | ------------------------
|Tenant         |  | Type of Business     |  | Gross leasable area |  | % of gross leasable area
|               |  |                      |  | (m2)                |  | (%)                     
|Etiqueta Negra |  | Clothes and Footwear |  | 504                 |  | 4.7                     
|Rapsodia       |  | Clothes and Footwear |  | 280                 |  | 2.6                     
|Christian Dior |  | Clothes and Footwear |  | 87                  |  | 0.8                     
|La Martina     |  | Clothes and Footwear |  | 106                 |  | 1.0                     
|Casa López     |  | Clothes and Footwear |  | 83                  |  | 0.8                     
|               |  |                      |  |                     |  |                         
|Total          |  |                      |  | 1,060               |  | 9.9                     

Tenant mix of Patio Bullrich

The following table sets forth the tenant mix of the types of business in Patio Bullrich:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Clothes and footwear |  | 4,291               |  | 39.9                    
|Entertainment        |  | 3,241               |  | 30.1                    
|Miscellaneous        |  | 1,630               |  | 15.2                    
|Restaurants          |  | 969                 |  | 9.0                     
|Home appliances      |  | 244                 |  | 2.3                     
|Anchor Stores        |  | 150                 |  | 1.4                     
|Services             |  | 224                 |  | 2.1                     
|                     |  |                     |  |                         
|Total                |  | 10,749              |  | 100.0                   



52



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Revenues from Patio Bullrich

The following table sets forth certain information relating to the revenues of Patio Bullrich during the following periods:



|                                   |  |                            |  |          |  |         
|---------------------------------- |  | -------------------------- |  | -------- |  | --------
|                                   |  | Fiscal year ended June 30,
|                                   |  | 2006                       |  | 2005     |  | 2004    
|                                   |  | (Thousands of Pesos)      
|Revenues:                          |  |                            |  |          |  |         
|Base rent                          |  | 11,276.2                   |  | 8,885.5  |  | 6,792.8 
|Percentage rent (1)                |  | 4,153.1                    |  | 4,024.6  |  | 2,656.0 
|                                   |  |                            |  |          |  |         
|Total rent                         |  | 15,429.3                   |  | 12,910.1 |  | 9,448.8 
|Revenues from admission rights (2) |  | 3,829.0                    |  | 2,780.7  |  | 1,535.6 
|Management fees                    |  | 480.0                      |  | 480.0    |  | 480.0   
|Parking                            |  | 1,589.6                    |  | 1,479.9  |  | 1,221.4 
|Other                              |  | 96.6                       |  | 168.3    |  | 58.5    
|                                   |  |                            |  |          |  |         
|Total                              |  | 21,424.5                   |  | 17,819.0 |  | 12,744.3

---

|(1) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal.
|--- | -----------------------------------------------------------------------------------------------------------------------

Lease expirations for Patio Bullrich

The following table shows a schedule of lease expirations for Patio Bullrich during the periods indicated for existing leases as of June 30, 2006, assuming that none of the tenants exercise renewal options nor terminate their leases
early:



|                                |  |                               |  |                                        |  |                                                        |  |                                      |  |                                                   
|------------------------------- |  | ----------------------------- |  | -------------------------------------- |  | ------------------------------------------------------ |  | ------------------------------------ |  | --------------------------------------------------
|Lease Expiration as of June 30, |  | Number of Leases Expiring (1) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare Meters
Subject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of TotalBase Rent Under Expiring Leases
|                                |  |                               |  | (m2)                                   |  | (%)                                                    |  | (Ps.)                                |  | (%)                                               
|2007                            |  | 51                            |  | 7,710                                  |  | 72                                                     |  | 5,098,504                            |  | 33                                                
|2008                            |  | 28                            |  | 2,649                                  |  | 25                                                     |  | 8,401,660                            |  | 55                                                
|2009                            |  | 5                             |  | 339                                    |  | 3                                                      |  | 1,498,200                            |  | 10                                                
|2010+                           |  | 1                             |  | 51                                     |  | 0                                                      |  | 286,000                              |  | 2                                                 
|                                |  |                               |  |                                        |  |                                                        |  |                                      |  |                                                   
|Total                           |  | 85                            |  | 10,749                                 |  | 100                                                    |  | 15,284,364                           |  | 100                                               

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | ------------------------------------------------------------------------------------------------

Alto Noa, City of Salta

Alto
Noa is an 85-store shopping center that opened in 1994. Alto Noa is located in the City of Salta, the capital of the Province of Salta, in the northwestern region of Argentina. The province of Salta has a population of approximately 1.1 million
inhabitants with approximately 0.5 million inhabitants in the City of Salta. The shopping center has a total constructed area of approximately 41,700 square meters which consists of 18,779 square meters of gross leasable area. Alto Noa has a
food court with 13 restaurants, a large entertainment center, a supermarket and a multiplex cinema with eight movie theatres. The shopping center is contained on one floor and has a free parking lot for 551 cars. Alto Noas targeted clientele
consists of middle-income individuals between the ages of 28 and 40.

On May 29, 1998, we entered into a lending facility agreement
with Hoyts which established the terms of the construction and for the lease of space to operate a cinema complex in Alto Noa. Pursuant to this agreement, Hoyts agreed to finance up to US$ 4.0 million of the cost of the construction of the part
of the building where the cinema complex would be located. Construction was completed in August 2000, at which time Hoyts started leasing the space for a period of ten years with options for Hoyts to renew the lease for two additional consecutive
ten-year periods.



53



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As of October 2000, borrowings under the facility totaled US$ 4.0 million. These borrowings accrue interest at the
six-month LIBOR plus 2.25%. Under the agreement, borrowings are being repaid by offsetting against the rent payable by Hoyts Cinema. The amount outstanding under this loan as of June 30, 2006 was Ps 3.9 million. If after 30 years of lease, the
loan has not been repaid in its entirety, the remaining balance shall become due. Pursuant to Decree No. 214/02, the loan and the lease agreements, which were originally denominated in U.S. Dollars, were mandatorily converted into Pesos.

During the fiscal year ended June 30, 2006, visitors to the shopping center generated total retail sales in nominal value of
approximately Ps. 104.5 million, which represents sales per square meter of approximately Ps. 5,566. Revenues from leases increased from approximately Ps. 3.8 million for the fiscal year 2005 to Ps. 5.2 million for the fiscal year
2006 which represent monthly revenues per gross leasable square meter of Ps. 16.9 in 2005 and Ps. 23.3 in 2006. As of June 30, 2006, the occupancy rate in Alto Noa was 100%.

Five largest tenants of Alto Noa

Alto Noas five largest tenants (in terms of sales in this shopping center) accounted for approximately 32.9% of Alto Noas gross leasable area at June 30, 2006 and approximately 8.3% of its annual base rent for the fiscal
year ended on such date.

The following table sets forth certain information about Alto Noas five largest tenants as of June 30,
2006:



|                   |  |                  |  |                     |  |                         
|------------------ |  | ---------------- |  | ------------------- |  | ------------------------
|Tenant             |  | Type of Business |  | Gross leasable area |  | % of gross leasable area
|                   |  |                  |  | (m2)                |  | (%)                     
|Supermercado Norte |  | Supermarket      |  | 3,081               |  | 16.4                    
|Frávega.           |  | Housewares       |  | 407                 |  | 2.2                     
|Garbarino          |  | Housewares       |  | 408                 |  | 2.2                     
|Slots              |  | Entertainment    |  | 469                 |  | 2.5                     
|Y.P.F.             |  | Services         |  | 1,812               |  | 9.6                     
|                   |  |                  |  |                     |  |                         
|Total              |  |                  |  | 6,177               |  | 32.9                    



54



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##### Table of Contents

Tenant mix of Alto Noa

The following table sets forth the types of businesses in Alto Noa:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Entertainment        |  | 6,119               |  | 32.6                    
|Anchor stores        |  | 3,081               |  | 16.4                    
|Clothes and footwear |  | 3,209               |  | 17.1                    
|Services             |  | 2,408               |  | 12.8                    
|Miscellaneous        |  | 1,614               |  | 8.6                     
|Restaurants          |  | 1,240               |  | 6.6                     
|Housewares           |  | 815                 |  | 4.3                     
|Home appliances      |  | 293                 |  | 1.6                     
|                     |  |                     |  |                         
|Total                |  | 18,779              |  | 100.0                   

Revenues from Alto Noa

The following table sets forth certain information relating to the revenues of Alto Noa during the following periods:



|                                   |  |                            |   |  |         |  |        
|---------------------------------- |  | -------------------------- | - |  | ------- |  | -------
|                                   |  | Fiscal year ended June 30,
|                                   |  | 2006                       |   |  | 2005    |  | 2004   
|                                   |  | (Thousands of Pesos)      
|Revenues:                          |  |                            |   |  |         |  |        
|Base rent                          |  | 3,711.4                    |   |  | 2,677.6 |  | 2,169.7
|Percentage rent (1)                |  | 1,367.7                    |   |  | 871.3   |  | 396.3  
|                                   |  |                            |   |  |         |  |        
|Total rent                         |  | 5,079.1                    |   |  | 3,548.9 |  | 2,566.0
|Revenues from admission rights (2) |  | 178.8                      |   |  | 96.5    |  | 82.6   
|Other                              |  | (14.7                      | ) |  | 184.0   |  | 120.0  
|                                   |  |                            |   |  |         |  |        
|Total                              |  | 5,243.2                    |   |  | 3,829.4 |  | 2,768.6

---

|(1) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal.
|--- | -----------------------------------------------------------------------------------------------------------------------



55



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##### Table of Contents

Lease expirations for Alto Noa

The following table shows a schedule of estimated lease expirations for Alto Noa during the periods indicated for existing leases as of June 30,
2006, assuming that none of the tenants exercises renewal options nor terminate their leases early:



|                                |  |                              |  |                                        |  |                                                       |  |                                      |  |                                                  
|------------------------------- |  | ---------------------------- |  | -------------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------
|Lease Expiration as of June 30, |  | Number ofLeases Expiring (1) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare MetersSubject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of TotalBase Rent UnderExpiring Leases
|                                |  |                              |  | (m2)                                   |  | (%)                                                   |  | (Ps. )                               |  | (%)                                              
|2007                            |  | 45                           |  | 7,908                                  |  | 42                                                    |  | 996,089.0                            |  | 19                                               
|2008                            |  | 23                           |  | 2,202                                  |  | 12                                                    |  | 1,520,353.0                          |  | 29                                               
|2009                            |  | 14                           |  | 1,373                                  |  | 7                                                     |  | 1,404,460.0                          |  | 26                                               
|2010+                           |  | 3                            |  | 7,296                                  |  | 39                                                    |  | 1,392,500.0                          |  | 26                                               
|                                |  |                              |  |                                        |  |                                                       |  |                                      |  |                                                  
|Total                           |  | 85                           |  | 18,779                                 |  | 100                                                   |  | 5,313,402.0                          |  | 100                                              

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores.
|--- | ------------------------------------------------------------------------------------------------

Mendoza Plaza, City of Mendoza

Mendoza Plaza is a 146-store shopping center which opened in 1992 and is in the City of Mendoza, the capital of the Province of Mendoza. As of June 30, 2006 we own a 85.4% interest in Mendoza Plaza Shopping S.A. The other shareholder
of Mendoza Plaza Shopping S.A. is Inversiones Falabella S.A. with a 14.6% interest. The city of Mendoza has a population of approximately 1.0 million inhabitants, making it the fourth largest city in Argentina. Mendoza Plaza consists of 39,065
square meters of gross leasable area. Mendoza Plaza has a multiplex cinema covering an area of approximately 3,659 square meters with ten movie theatres, the Chilean department store Falabella, a food court with 21 restaurants, an
entertainment center and a supermarket which is also a tenant. The shopping center has two levels and has a free parking lot for 2,600 cars. Mendoza Plazas targeted clientele consists of middle-income individuals between the ages of 28 and 40.

During the fiscal year 2006, shopping center visitors generated total retail sales in nominal value of approximately Ps.
275.9 million, which represents sales per square meter of approximately Ps. 7,062. Revenues from leases have reached Ps. 14.6 million for the fiscal year 2006 which represent monthly revenues per gross leasable square meter of Ps. 31.2. As
of June 30, 2006, the occupancy rate in Mendoza Plaza Shopping was approximately 97.8%.

Five largest tenants of Mendoza Plaza

Mendoza Plazas five largest tenants (in terms of sales in this shopping center) accounted for approximately 34.0% of Mendoza
Plazas gross leasable area at June 30, 2006 and approximately 23.9% of its annual base rent for the fiscal year ended on such date.



56



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##### Table of Contents

The following table sets forth certain information about Mendoza Plazas five largest tenants as of
June 30, 2006:



|                |  |                  |  |                     |  |                         
|--------------- |  | ---------------- |  | ------------------- |  | ------------------------
|Tenant          |  | Type of Business |  | Gross leasable area |  | % of gross leasable area
|                |  |                  |  | (m2)                |  | (%)                     
|Falabella       |  | Anchor Store     |  | 6,970               |  | 17.9                    
|Super Vea Plaza |  | Anchor Store     |  | 4,419               |  | 11.3                    
|Garbarino       |  | Housewares       |  | 827                 |  | 2.1                     
|Fravega         |  | Housewares       |  | 469                 |  | 1.2                     
|Red Megatone    |  | Housewares       |  | 589                 |  | 1.5                     
|                |  |                  |  |                     |  |                         
|Total           |  |                  |  | 13,274              |  | 34.0                    

Tenant mix of Mendoza Plaza

The following table sets forth the types of businesses of the tenants in Mendoza Plaza:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Entertainment        |  | 9,652               |  | 24.7                    
|Anchor stores        |  | 11,389              |  | 29.2                    
|Clothes and footwear |  | 9,457               |  | 24.2                    
|Services             |  | 816                 |  | 2.1                     
|Miscellaneous        |  | 2,551               |  | 6.5                     
|Restaurants          |  | 3,124               |  | 8.0                     
|Housewares           |  | 191                 |  | 0.5                     
|Home appliances      |  | 1,885               |  | 4.8                     
|                     |  |                     |  |                         
|Total                |  | 39,065              |  | 100.0                   



57



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##### Table of Contents

Revenues from Mendoza Plaza

The following table sets forth certain information relating to the revenues of Mendoza Plaza during the following periods:



|                                   |  |                                 |  |        
|---------------------------------- |  | ------------------------------- |  | -------
|                                   |  | Fiscal year ended June 30, 2006
|                                   |  | 2006                            |  | 2005   
|                                   |  | (Thousands of Pesos)           
|Revenues:                          |  |                                 |  |        
|Base rent                          |  | 8,843.5                         |  | 5,301.8
|Percentage rent (1)                |  | 3,552.8                         |  | 2,257.3
|                                   |  |                                 |  |        
|Total rent                         |  | 12,396.3                        |  | 7,559.1
|Revenues from admission rights (2) |  | 1,425.4                         |  | 594.8  
|Management fee                     |  | 292.7                           |  | 169.7  
|                                   |  |                                 |  |        
|Other                              |  | 521.2                           |  | 888.5  
|                                   |  |                                 |  |        
|Total                              |  | 14,635.6                        |  | 9,212.1

---

|(1) | Percentage rent is the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to a tenant for entering into a lease agreement or a lease agreement renewal.
|--- | ------------------------------------------------------------------------------------------------------------------------

Lease expirations for Mendoza Plaza

The following table shows a schedule of estimated lease expirations for Mendoza Plaza during the periods indicated for existing leases as of June 30, 2006, assuming that none of the tenants exercises renewal options nor terminate their
leases early:



|                                |  |                             |  |                                         |  |                                                       |  |                                      |  |                                                  
|------------------------------- |  | --------------------------- |  | --------------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------
|Lease Expiration as of June 30, |  | Number ofLeasesExpiring (1) |  | Square Meters Subject toExpiring Leases |  | Percentage of TotalSquare MetersSubject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of TotalBase Rent UnderExpiring Leases
|                                |  |                             |  | (m2)                                    |  | (%)                                                   |  | (Ps.)                                |  | (%)                                              
|2007                            |  | 78                          |  | 18,059                                  |  | 46                                                    |  | 2,054,665                            |  | 16                                               
|2008                            |  | 47                          |  | 10,842                                  |  | 28                                                    |  | 4,898,015                            |  | 38                                               
|2009                            |  | 16                          |  | 4,141                                   |  | 11                                                    |  | 3,611,000                            |  | 28                                               
|2010+                           |  | 5                           |  | 6,023                                   |  | 15                                                    |  | 2,376,000                            |  | 18                                               
|                                |  |                             |  |                                         |  |                                                       |  |                                      |  |                                                  
|Total                           |  | 146                         |  | 39,065                                  |  | 100                                                   |  | 12,939,680                           |  | 100                                              

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores
|--- | -----------------------------------------------------------------------------------------------



58



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##### Table of Contents

Alto Rosario, City of Rosario

Alto Rosario is a 145-store shopping center located in the city of Rosario, the third largest city in Argentina in terms of population. It has a total
constructed area of approximately 105,809 square meters, which consists of 30,013 square meters of gross leasable area. Alto Rosario has a food court with 17 restaurants, a large entertainment center, a supermarket and a Showcase cinema with 14
state-of-the-art movie theatres. The shopping center occupies on one floor and has a free parking lot for 1,736 cars. Alto Rosarioss targeted clientele consists of middle-income individuals between the ages of 28 and 40.

During the fiscal year 2006, visitors to the shopping center generated total retail sales in nominal value of approximately Ps. 143.8 million, which
represents sales per square meter of approximately Ps. 4,791. Revenues from leases have reached Ps. 11.8 million for the fiscal year 2006 which represent monthly revenues per gross leasable square meter of Ps. 32.8. As of June 30, 2006,
the occupancy rate in Alto Rosario was 100%.

Five largest tenants of Alto Rosario

Alto Rosarios five largest tenants (in terms of sales in this shopping center) accounted for approximately 35.6% of Alto Rosarios gross
leasable area at June 30, 2006 and approximately 6.6% of its annual base rent for the fiscal year ended on such date.

The following
table sets forth certain information about Alto Rosarios five largest tenants as of June 30, 2006:



|              |  |                      |  |                     |  |                        
|------------- |  | -------------------- |  | ------------------- |  | -----------------------
|Tenant        |  | Type of Business     |  | Gross leasable area |  | % of grossleasable area
|              |  |                      |  | (m2)                |  | (%)                    
|Frávega       |  | Housewares           |  | 454                 |  | 1.5                    
|Red Megatone  |  | Housewares           |  | 407                 |  | 1.4                    
|Cines Rosario |  | Entertainment        |  | 8,984               |  | 29.9                   
|Sport 78      |  | Clothes and footwear |  | 612                 |  | 2.0                    
|Compumundo    |  | Miscellaneous        |  | 233                 |  | 0.8                    
|              |  |                      |  |                     |  |                        
|Total         |  |                      |  | 10,690              |  | 35.6                   



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Tenant mix of Alto Rosario

The following table sets forth the types of businesses in Alto Rosario:



|                     |  |                     |  |                         
|-------------------- |  | ------------------- |  | ------------------------
|Type of Business     |  | Gross leasable area |  | % of gross leasable area
|                     |  | (m2)                |  | (%)                     
|Entertainment        |  | 10,282              |  | 34.2                    
|Anchor stores        |  | 1,295               |  | 4.3                     
|Clothes and footwear |  | 9,343               |  | 31.1                    
|Services             |  | 3,033               |  | 10.1                    
|Miscellaneous        |  | 2,638               |  | 8.8                     
|Restaurants          |  | 2,237               |  | 7.5                     
|Housewares           |  | 324                 |  | 1.1                     
|Home appliances      |  | 861                 |  | 2.9                     
|                     |  |                     |  |                         
|Total                |  | 30,013              |  | 100.0                   



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Revenues from Alto Rosario

The following table sets forth certain information relating to the revenues of Alto Rosario during the following period:



|                                   |  |                                 |  |        
|---------------------------------- |  | ------------------------------- |  | -------
|                                   |  | Fiscal year ended June 30, 2006
|                                   |  | 2006                            |  | 2005   
|                                   |  | (Thousands of Pesos)           
|Revenues:                          |  |                                 |  |        
|Base rent                          |  | 8,335.2                         |  | 4,132.6
|Percentage rent (1)                |  | 2,447.7                         |  | 637.3  
|                                   |  |                                 |  |        
|Total rent                         |  | 10,782.9                        |  | 4,769.9
|Revenues from admission rights (2) |  | 502.6                           |  | 362.4  
|Management fee                     |  | 360.0                           |  | 240.0  
|                                   |  |                                 |  |        
|Other                              |  | 177.9                           |  | 124.7  
|                                   |  |                                 |  |        
|Total                              |  | 11,823.4                        |  | 5,497.0

---

|(1) | Percentage rent refers to the revenue that is proportional to sales of our tenants. See Principal terms of our leases on page 66.
|--- | ---------------------------------------------------------------------------------------------------------------------------------

|(2) | Admission rights are the revenues required to tenants for entering into a lease agreement or a lease agreement renewal.
|--- | -----------------------------------------------------------------------------------------------------------------------

Lease expirations for Alto Rosario

The following table shows a schedule of estimated lease expirations for Alto Rosario during the periods indicated for existing leases as of June 30, 2006, assuming that none of the tenants exercise renewal options nor terminate their
leases early:



|                                |  |                               |  |                                        |  |                                                       |  |                                      |  |                                                  
|------------------------------- |  | ----------------------------- |  | -------------------------------------- |  | ----------------------------------------------------- |  | ------------------------------------ |  | -------------------------------------------------
|Lease Expiration as of June 30, |  | Number of Leases Expiring (1) |  | Square MetersSubject toExpiring Leases |  | Percentage of TotalSquare MetersSubject to Expiration |  | Annual Base RentUnder ExpiringLeases |  | Percentage of TotalBase Rent UnderExpiring Leases
|                                |  |                               |  | (m2)                                   |  | (%)                                                   |  | (Ps.)                                |  | (%)                                              
|2007                            |  | 5                             |  | 2,807                                  |  | 9                                                     |  | 28,890                               |  |                                                 
|2008                            |  | 104                           |  | 10,858                                 |  | 36                                                    |  | 12,009,625                           |  | 63                                               
|2009                            |  | 30                            |  | 4,923                                  |  | 17                                                    |  | 5,267,889                            |  | 28                                               
|2010+                           |  | 6                             |  | 11,425                                 |  | 38                                                    |  | 1,690,600                            |  | 9                                                
|                                |  |                               |  |                                        |  |                                                       |  |                                      |  |                                                  
|Total                           |  | 145                           |  | 30,013                                 |  | 100                                                   |  | 18,997,004                           |  | 100                                              

---

|(1) | Includes the vacant stores as of June 30, 2006. A lease may be associated to one or more stores
|--- | -----------------------------------------------------------------------------------------------



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Residential Complex

Torres de Abasto

In May 1999, we completed the construction of Torres de Abasto,
a 545-apartment high-rise residential complex located one block away from Abasto in the center of the City of Buenos Aires. The complex had a construction cost of US$ 34.3 million and consists of three 28-story buildings and one 10-story
building, all of which target the middle-income market. The complex has a swimming pool, a terrace, 24-hour security, approximately 310 underground parking spaces and four retail stores on the ground floor of one of the buildings.

We began to pre-sell units in this project in March 1997 and offered to contact financial institutions on behalf of purchasers or, in certain cases,
offered financing directly to purchasers. As of June 30, 2003, we had financed through mortgage loans the acquisition of 69 units for a total amount of US$ 3.4 million, representing approximately 61% of the selling price of those units. On
January 6, 2002, Decree No. 214/02 established the conversion to Pesos of all loans and agreements in effect that had been agreed in U.S. Dollars at the exchange rate of Ps. 1.00 = 1.00 U.S. Dollar. As a result, the
U.S. Dollar-denominated mortgage loans offered by our Company, were converted into Pesos. As of June 30, 2006 our outstanding mortgage loans aggregated Ps. 958,644. The loans average interest rate at such date is 14.0%. Up to this
date all the units were sold.

Expansion Opportunities

Torres Rosario, City of Rosario

We own a plot of land spanning a surface of approximately
50,000 square meter in the city of Rosario in the same place where our local Shopping Center, Alto Rosario, is located.

In this land we
are planning to construct a residential complex center, and during the fiscal year 2005 we entered into a preliminary agreement with Villa Hermosa S.A. (VHSA) to sell VHSA a plot of this land, for a total consideration of Euros
3.0 million according to the conditions expressly established in the contract. VHSA plans to construct a luxury hotel on this land. VHSA has given us an advance payment amounting to Euros 0.6 million.

Caballito Project

We have a
plot of land spanning a surface area of 25,539 square meters in the City of Buenos Aires neighborhood of Caballito, one of the most highly populated areas in the City of Buenos Aires. This land could be used to build a 30,000 square meter shopping
center including a hypermarket.

We are currently making the final changes to the commercial project. We have not yet obtained the
authorization from the Government of the City of Buenos Aires to develop the center on this land and cannot at this stage give you any assurance that it will be granted.



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Phillips Argentinas Plot of land

On June 29, 2006 we acquired from Phillips Argentina S.A. a plot of land located in the Northern Area of the city of Buenos Aires the district of
Saavedra, with a surface area of 28,740 square meters. The transaction price was US$ 17.8 million which has been completely paid at the time the deed of title was subscribed.

Córdoba Shopping Villa Cabrera

During July 2006, we entered into an agreement with Grupo Roggio pursuant to which we would acquire, subject to completion of a successful due diligence and the fulfillment of certain conditions, the total outstanding shares of Empalme S.A,
owner of Córdoba Shopping Villa Cabrera.

Córdoba Shopping Villa Cabrera is a shopping center covering a surface area of
35,000 square meters, having 160 commercial stores, a multiplex cinema with 12 movie theatres and a parking lot for 1,500 vehicles, located in the Villa Cabrera neighborhood of the city of Córdoba, the second largest city of Argentina.

On December 18, 2006 the transaction was approved and consummated by the Antitrust Agency through Resolution SCI N° 67 of the
Secretary of Commerce. This investment will be an opportunity for Alto Palermo to grow in the shopping center segment, in line with its strategy of expanding and gaining foothold in the main markets of the Argentine provinces

Neuquén Project

On
July 6, 1999, we acquired 94.6% ownership of Shopping Neuquén S.A. (Shopping Neuquén) for Ps.4.2 million. Shopping Neuquéns sole asset is a plot of land of approximately 50,000 square meters in which we
seek to develop a shopping center. The proposed project also contemplates the building of a shopping center, a hypermarket, a hotel and a housing complex, none of which have begun. We paid Ps. 0.9 million on September 1, 1999, and the
remaining Ps. 3.3 million were originally scheduled to be paid on the earlier to occur of July 5, 2001, and the completion of the construction of the shopping center. The balance of the purchase price has not been paid. On August 15,
2003, the former holders of 85.8% of Shopping Neuquén filed a complaint against us seeking recovery of the unpaid balance of the purchase price, plus interest and legal costs. In September 2003, we answered the complaint and raised several
defenses including, plaintiffs non-compliance with her duties under the contract and the pesification of the purchase price balance pursuant to emergency legislation adopted in 2002. We also filed a counterclaim alleging there should be a
readjustment of the terms of the contract which became excessively burdensome given the 2001 economic, social and political crisis. In November 2003, the plaintiffs replied to our counterclaim alleging that the payment under the purchase agreement
was overdue before the economic and social crisis emerged and thus our contract readjustment claim was inadmissible. The matter is currently subject to appeal, as the ruling of the trial court was appealed by both former shareholders of Shopping
Neuquén and us. If we cannot reach agreement with the former owners of Shopping Neuquén, we would be compelled to pay the sum that the court determines. As of September 30, 2006, the Ps. 3.3 million deferred balance of the
purchase price remains unpaid. The Company maintains a provision of Ps. 2.5 million which represents the Companys best estimate of the probable loss to be incurred in connection with these claims.

We are engaged in litigation with the Municipality of Neuquén

In June 2001, Shopping Neuquén filed a request with the Municipality of Neuquén to extend the construction deadlines that had been
originally scheduled. In addition, it requested authorization to convey certain plots of land to third parties so that each participant to the Neuquén project would be able to build on his own land. On December 20, 2002, the Municipality
of Neuquén issued Decree 1437/02 denying both requests. In addition, it declared that the rights under Ordinance 5178 had lapsed and that the land purchase agreements would be terminated. As a result, the improvements already made by Shopping
Neuquén would be lost and passed on to the Municipality of Neuquén, leaving Shopping Neuquén with no right to compensation.



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On January 21, 2003, Shopping Neuquén submitted its response to the Decree 1437/02 requesting
its revocation and requesting permission to submit a new construction timetable. The Municipal Executive issued Decree 585/03 rejecting these requests. On May, 2003, Shopping Neuquén filed an administrative action with the Supreme Court of
Neuquén requesting the annulment of Decrees 1437/02 and 585/03. On December 21, 2004, the Supreme Court of Neuquén ruled in favor of the Municipality of Neuquén, declaring that the administrative action filed by Shopping
Neuquén had expired. The decision, however, is not final. We filed an appeal, but the Supreme Court of Neuquén has not yet issued a decision with regards to its admissibility. If the Supreme Court of Neuquén declares the appeal
admissible, the final decision will then be made by the Federal Supreme Court, but if it is declared inadmissible we will then file an appeal directly with the Federal Supreme Court.

On December 13, 2006, Shopping Neuquén subscribed an agreement with the Municipality of Neuquén and the Province of Neuquén in
which Shopping Neuquén was given a new time table to implement the commercial and housing project. In addition, Shopping Neuquén will be empowered to transfer to third parties further subdivisions of the plot of land owned by Shopping
Neuquén, provided that the plot to be transferred is not the one in which the shopping center is going to be built.

The agreement
is subject to the City of Neuquén Councils approval and the promulgation of the new Ordinance by the Mayor of the City of Neuquén. Should the agreement be disapproved by the City Council, such agreement will be void.

Related Businesses

Tarjeta
Shopping

In addition to purchasing, developing and managing shopping centers, we own an 80% interest in Tarshop, a credit card
company which originates credit card accounts to promote sales from our tenants and other selected retailers. Tarshop is not affiliated with any bank and originates credit card accounts to encourage customers to purchase goods and services inside
and outside our shopping centers. Tarshop is currently accepted at all of our shopping centers and at an extensive network of supermarkets and stores.

At June 30, 2006, Tarshop had total current assets of approximately Ps. 68.2 million and a net worth of Ps.28.8 million. During the fiscal year ended June 30, 2006, Tarshop had net revenues of Ps.122.9
million, representing approximately 34.0% of our revenues for such fiscal year and had net income of Ps.14.6 million. At June 30, 2006, Tarshop had approximately Ps.311.3 million in credit card accounts receivable, including the securitized
portfolio, compared to Ps.202.8 million at June 30, 2005.

From time to time we consider strategic alternatives with respect to our
investment in Tarshop which, due to its recent growth in size and profitability, competes increasingly with credit card companies that are substantially larger. As a result, we intend to consider alternatives to maximize the value of our investment
in Tarshop including its possible merger with, or sale to, another financial institution actively engaged in the Argentine credit card sector.

E-Commerce Activities

We believe that the Internet market is an excellent commercial channel as a complement to our
shopping centers. Since the malls are limited by geographic barriers, e-commerce becomes an attractive alternative that allows us to reach new markets.

Altocity.Com S.A.

Altocity.Com S.A. (Altocity) is a company engaged in delivering
e-commerce services providing information tailored to customers needs so that they may take informed decisions. Retailers also benefit from such services, since they access a large customer data base. Altocity is a wholly owned subsidiary of
E-Commerce Latina S.A., (E-Commerce Latina), an Internet venture between us and Telefónica de Argentina



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S.A. (Telefónica), in which each has a 50% interest. Previously, our partner in the venture was
Telinver S.A., a wholly owned subsidiary of Telefónica; but on April 27, 2001 Telinver notified us that it had transferred its holdings in E-Commerce Latina to Telefónica.

On October 24, 2006, we entered into a shares purchase agreement with Telefónica Argentina S.A., under which it acquired 808,354 ordinary
shares issued and outstanding of E-Commerce Latina S.A., and 11 ordinary shares issued and outstanding of Altocity.Com S.A. for a total price of Ps. 85,876, which were fully paid. Such agreement is subordinated to the approval of the National
Antitrust Commission.

In the table below we include some relevant data of Altocity.Com:



|                             |  |                |  |                 |  |           |  
|---------------------------- |  | -------------- |  | --------------- |  | --------- | -
|                             |  | Jul 05- Jun 06 |  | Jul 04  Jun 05 |  | Variation |  
|Average Monthly sales (*)    |  | Ps.    876,913 |  | Ps.    396,673  |  | 121       | %
|Average Monthly tickets (**) |  | 238            |  | 209             |  | 14        | %
|Average Monthly orders       |  | 3,752          |  | 1,895           |  | 98        | %

---

|(*) | Includes own sales plus third parties sales of which we charge a sales commission. Both mentioned sales includes VAT, net of returns (Credit notes)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(**) | Sales as described in the previous footnote divided by the number of orders.
|---- | ----------------------------------------------------------------------------

Traffic, Customer Portfolio and Transactions



|                          |  |               |  |               |  |              
|------------------------- |  | ------------- |  | ------------- |  | -------------
|                          |  | June 30, 2006 |  | June 30, 2005 |  | June 30, 2004
|Unique visitors per month |  | 381,000       |  | 352,000       |  | 300,000      
|Average a day             |  | 21,000        |  | 16,000        |  | 13,000       
|Registered citizens       |  | 118,000       |  | 82,000        |  | 55,000       
|Transactions              |  | 119,000       |  | 76,000        |  | 52,000       

For the fiscal year 2007, Altocity plans to review its business model in order to
obtain better operative and total results. For such purpose Altocity will start a process of deep review regarding its mission on the market, aims, strategies and tactics.

Shopping Centers Administration and Management

Management

Prior to acquisition, each of our shopping centers had its own management and administrative structure,
the cost of which had to be paid for by each individual shopping center operator. After acquiring several shopping centers and undergoing a corporate reorganization process, we reduced expenses by centralizing management and eliminating overlapping
managerial positions.

Additional expenses related to the operation of the shopping centers (such as security, maintenance, housekeeping,
electricity, etc.) are treated as pass-through expenses and are paid by tenants. Nonetheless, we try to manage pass-through expenses as efficiently as possible, since from the tenants perspective, rent is equal to total cost of occupancy,
which includes base rent or percentage of sales, expenses and other contributions. Therefore, lower pass-through expenses, allow tenants to reduce their costs. Our pass-through expenses have also been diminished as a consequence of the consolidation
of the management of most of the acquired and developed shopping centers.



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We manage and operate each of the shopping centers in which we have more than 50% ownership. We charge
tenants a monthly administration fee, which varies from shopping center to shopping center, depending on the cost of administration and maintenance of the common areas and the administration of contributions made by tenants to fund promotional
efforts for the shopping center. We charge a monthly administration fee, paid prorated by the tenants, according to their particular lease rates. This administration fee is a fixed amount in Alto Palermo, Alto Avellaneda, Abasto, Paseo Alcorta, Alto
Rosario and Patio Bullrich and a percentage of the common area maintenance expenses in Buenos Aires Design and Mendoza Plaza. The total amount paid monthly to us during fiscal year 2006, was approximately:



| |  |  | Ps. 55,398 in Alto Palermo,
| | - |  | ---------------------------



| |  |  | Ps. 30,000 in Alto Avellaneda,
| | - |  | ------------------------------



| |  |  | Ps. 50,000 in Abasto,
| | - |  | ---------------------



| |  |  | Ps. 40,000 in Patio Bullrich,
| | - |  | -----------------------------



| |  |  | Ps. 30,000 in Alto Rosario.
| | - |  | ---------------------------



| |  |  | Ps. 17,711 in Paseo Alcorta,
| | - |  | ----------------------------



| |  |  | 10% of the total amount of the common area maintenance expenses in Buenos Aires Design and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | 5% of the total amount of the common area maintenance expenses in Mendoza Plaza.
| | - |  | --------------------------------------------------------------------------------

The total revenues from administration fees charged by us during the fiscal year ended June 30, 2006 were approximately Ps. 3.1 million, which accounts for approximately 1.5% of our total revenues.

Principal Terms of our Leases

Under
Argentine Law, terms of commercial leases must be between three to ten years, with most leases in the shopping center business having terms of no more than five years. Our lease agreements are generally denominated in Pesos.

Decree No. 214/02 and Decree No. 762/02, which modify Public Emergency Law No. 25,561, determine that duties to turn over sums of money
which are denominated in U.S. Dollars and which are not related to the financial system as of January 7, 2002 are subject to the following:



| |  |  | obligations will have to be paid in Pesos at a rate of Ps. 1.00 = US$ 1.00. Additionally, these obligations are subject to inflation adjustment through the CER index;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if, as a consequence of this adjustment, the agreement is unfair to any of the parties, as long as the party that has the obligation to pay is not overdue and the adjustment is
applicable, either may ask the other for a fairness adjustment. If they do not reach an agreement, a court will make the decision in order to preserve the continuity of the contract relation in a fair way; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | new lease agreements may be freely entered into between parties, even U.S. Dollar denominated lease agreements.
| | - |  | ---------------------------------------------------------------------------------------------------------------

Leasable space in our shopping centers is marketed through an exclusive arrangement with our real estate broker Fibesa S.A. We have a standard lease
agreement, the terms and conditions of which are described below, which we use for most tenants. However, our largest tenants generally negotiate better terms for their respective leases. No assurance can be given that lease terms will be as set
forth in the standard lease agreement.



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We charge our tenants a rent which consists of the higher of (i) a monthly base rent (the Base
Rent) and (ii) a specified percentage of the tenants monthly gross sales in the store (the Percentage Rent) (which generally ranges between 4% and 8% of tenants gross sales). Furthermore, pursuant to the rent
escalation clause in most leases, a tenants Base Rent generally increases between 4% and 7% each year during the term of the lease. Although many of our lease agreements contain readjustment clauses, these are not based on an official index
nor do they reflect the inflation index. In the event of litigation, there can be no assurance that we may be able to enforce such clauses contained in our lease agreements. Please see item 3.D Risk factors for a more detailed
discussion.

In addition to rent, we charge most of our tenants an admission right, which is required to be paid upon entering into a lease
agreement and upon a lease agreement renewal. The admission right is normally paid in one lump sum or in a small number of monthly installments. If the tenant pays this fee in installments, it is the tenants responsibility to pay for the
balance of any such amount unpaid in the event the tenant terminates its lease prior to its expiration. In the event of unilateral termination and/or resolution for breach of duties by the tenant, a tenant will not be refunded its admission right
without our consent.

We are responsible for supplying each shopping center with the electrical power connection and provision, a main
telephone switchboard, central air conditioning connection and a connection to a general fire detection system. Each rental unit is connected to these systems. We also provide the food court tenants with sanitation and with gas systems connections.
Each tenant is responsible for completing all the necessary installations within its own rental unit, in addition to the direct expenses generated by these items within each rental unit. These direct expenses generally include: electricity, water,
gas, telephone and air conditioning. Tenants must also pay for a percentage of total charges and general taxes related to the maintenance of the common areas. We determine this percentage based on the tenants gross leasable area and the
location of its store. The common area expenses include, among others, administration, security, operations, maintenance, cleaning and taxes.

We carry out promotional and marketing activities to increase attendance to our shopping centers. These activities are paid for with the tenants ́ contributions to the Common Promotional Fund (CPF), which is administered by
us. Every month tenants contribute to the CPF an amount equal to approximately 15% of their rent (Base Rent plus Percentage Rent), in addition to rent and expense payments. We may increase the percentage that tenants must contribute to the CPF, but
the increase cannot exceed 25% of the original amount set forth in the corresponding lease agreement for the contributions to the CPF. We may also require tenants to make extraordinary contributions to the CPF to fund special promotional and
marketing campaigns or to cover the costs of special promotional events that benefit all tenants. We may require tenants to make these extraordinary contributions up to four times a year provided that each such extraordinary contribution may not
exceed 25% of the preceding monthly rental payment of the tenant.

Each tenant leases its rental unit as a shell without any fixtures. Each
tenant is responsible for the interior design of its rental unit. Any modifications and additions to the rental units must be pre-approved by us. We have the option to decide tenants responsibility for all costs incurred in remodeling the
rental units and for removing any additions made to the rental unit when the lease expires. Furthermore, tenants are responsible for obtaining adequate insurance for their rental units, which must include, among other things, coverage for fire,
glass breakage, theft, flood, civil liability and workers compensation.

Control Systems

We have computer systems to monitor tenants sales in all of our shopping centers. We also conduct regular manual audits of our tenants accounting
sales records in all of our shopping centers. Almost every store in those shopping centers has a computerized cash register that is linked to a main computer server in the administration office of such shopping center. We use the information
generated from the computer monitoring system for auditing the Percentage Rent to be charged to each tenant and use the statistics regarding total sales, average sales, peak sale hours, etc., for marketing purposes. The lease contracts for tenants
in Alto Avellaneda, Alto Palermo, Paseo Alcorta, Patio Bullrich, Buenos Aires Design (only with respect to agreements signed after its acquisition), Abasto, Alto Rosario Shopping, Alto Noa and Mendoza Plaza Shopping contain a clause requiring
tenants to be linked to the computer monitoring system.



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Promotional Activities

Fathers Day and Mothers Day

The aim of these promotions is to provide a benefit for our customers. In both cases, the shopping center decided how it wanted to do so, on the basis of the overall requirements of its customer base. These benefits were exclusive to our
customers, without mass communication.

Christmas

Our Christmas marketing activities, carried out jointly by all shopping centers, including one promotion targeted to children and another promotion to stimulate sales.

Insurance

We carry liability
and fire insurance for all of our properties other than undeveloped land. The insurance policies have specifications, limits and deductibles customary for the community where the specific shopping center is located. We believe that the insurance
coverage for our properties is adequate.

Competition

Because most of our shopping centers are located in developed and highly populated areas, there are competing shopping centers within, or in close
proximity to, our targeted areas. The number of shopping centers in a particular area could have a material effect on our ability to lease space in our shopping centers and on the amount of rent that we are able to charge. We believe that due to the
limited availability of large plots of land and zoning restrictions in the City of Buenos Aires, it will be difficult for other companies to compete with us in areas through the development of new shopping center properties. Our principal competitor
in the shopping centers market is Cencosud S.A. which owns and operates Unicenter shopping center and the Jumbo hypermarket chain, among others.



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The following table shows the breakdown of the main owners and operators of shopping centers in
Argentina:



|                                |  |              |  |                    |  |        |  |                                      |  |           
|------------------------------- |  | ------------ |  | ------------------ |  | ------ |  | ------------------------------------ |  | ----------
|Companies                       |  | Location (1) |  | Gross LeasableArea |  | Stores |  | % of national grossleasable area (2) |  | Stores (2)
|                                |  |              |  |                    |  |        |  | (%)                                  |  | (%)       
|Alto Palermo (6)                |  |              |  |                    |  |        |  |                                      |  |           
|Alto Avellaneda (5)             |  | GBA          |  | 58,206             |  | 149    |  | 4.7                                  |  | 3.4       
|Abasto                          |  | CBA          |  | 39,473             |  | 172    |  | 3.1                                  |  | 3.9       
|Mendoza Plaza (3) (5)           |  | Mendoza      |  | 39,065             |  | 146    |  | 3.1                                  |  | 3.4       
|Paseo Alcorta (5)               |  | CBA          |  | 53,354             |  | 113    |  | 4.2                                  |  | 2.6       
|Alto Palermo                    |  | CBA          |  | 18,079             |  | 150    |  | 1.4                                  |  | 3.4       
|Buenos Aires Design (4)         |  | CBA          |  | 14,598             |  | 59     |  | 1.2                                  |  | 1.3       
|Patio Bullrich                  |  | CBA          |  | 10,749             |  | 85     |  | 0.8                                  |  | 1.9       
|Alto Noa (5)                    |  | Salta        |  | 18,779             |  | 85     |  | 1.5                                  |  | 1.9       
|Alto Rosario (5)                |  | Rosario      |  | 41,011             |  | 145    |  | 3.2                                  |  | 3.2       
|                                |  |              |  |                    |  |        |  |                                      |  |           
|Subtotal                        |  |              |  | 293,314            |  | 1,104  |  | 23.2                                 |  | 25.0      
|                                |  |              |  |                    | 
|Cencosud S.A. (7)               |  |              |  |                    |  |        |  |                                      |  |           
|Unicenter Shopping (5)          |  | GBA          |  | 90,869             |  | 287    |  | 7.1                                  |  | 6.3       
|Plaza Oeste Shopping (5)        |  | GBA          |  | 38,720             |  | 138    |  | 3.1                                  |  | 3.1       
|Quilmes Factory (5)             |  | GBA          |  | 31,373             |  | 47     |  | 2.5                                  |  | 1.1       
|Lomas Center Shopping (5)       |  | GBA          |  | 24,271             |  | 50     |  | 1.9                                  |  | 1.1       
|San Martin Factory (5)          |  | GBA          |  | 24,388             |  | 31     |  | 1.9                                  |  | 0.7       
|Parque Brown Factory Outlet (5) |  | GBA          |  | 23,553             |  | 41     |  | 1.9                                  |  | 0.9       
|Las Palmas Pilar (5)            |  | GBA          |  | 37,662             |  | 102    |  | 3.0                                  |  | 2.3       
|Portal Palermo (5)              |  | CBA          |  | 22,763             |  | 46     |  | 1.8                                  |  | 1.0       
|Portal de la Patagonia (5)      |  | GBA          |  | 21,700             |  | 45     |  | 1.7                                  |  | 1.0       
|Portal de Escobar (5)           |  | GBA          |  | 18,886             |  | 24     |  | 1.5                                  |  | 0.5       
|Portal de los Andes             |  | Mendoza      |  | 22,962             |  | 40     |  | 1.8                                  |  | 0.9       
|Portal de Rosario               |  | Rosario      |  | 57,419             |  | 182    |  | 4.5                                  |  | 4.0       
|                                |  |              |  |                    |  |        |  |                                      |  |           
|Subtotal                        |  |              |  | 414,566            |  | 1,033  |  | 32.7                                 |  | 22.9      
|                                |  |              |  |                    | 
|Other Operators (7)             |  |              |  | 558,334            |  | 2,331  |  | 44,1                                 |  | 52.1      
|                                |  |              |  |                    |  |        |  |                                      |  |           
|Totals                          |  |              |  | 1,266,214          |  | 4,468  |  | 100.0                                |  | 100.0     

---

|(1) | GBA means Greater Buenos Aires and CBA means the City of Buenos Aires.
|--- | --------------------------------------------------------------------------

|(2) | Percentage of the total shopping centers in Argentina. Sums may not total due to rounding.
|--- | ------------------------------------------------------------------------------------------

|(3) | During fiscal year 2005, we increased our interest in Mendoza Plaza Shopping from 19% to 85% as a result of a series of transactions. For details, see Note 2.f) to our consolidated
financial statements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(4) | We own directly a 54% interest in ERSA, the company that operates the concession of this property.
|--- | --------------------------------------------------------------------------------------------------

|(5) | Includes gross leasable area occupied by supermarkets and hypermarkets.
|--- | -----------------------------------------------------------------------

|(6) | Source: APSA
|--- | ------------

|(7) | Source: Argentine Chamber of Shopping Centers. We have not independently verified the information obtained from the Argentine Chamber of Shopping Centers.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to our competitors in the shopping centers market, we are also facing competition from many retail shops. It must be taken into account
that the concept of the shopping center and the broad use of shopping centers by consumers are relatively undeveloped in Argentina. The first shopping center of Argentina was inaugurated in 1987, and although there has been a considerable expansion
of shopping center properties since those times, many retail stores in Argentina are not located in shopping centers. Therefore, the continued success of our business plan depends to a certain extent on a continuing shift by consumers from shopping
at traditional street-level retail stores to large-scale shopping centers of the type owned and operated by us.

Seasonability of our
business

Our business is directly related to seasonability, which affects the sales level of our tenants. In Summer Holidays
(January and February) the sales of our tenants reach its minimum levels, contrary to Winter Holidays (July) and the month of December (Christmas) when the sales of our tenants tend to reach their maximum level. Clothes and footwear tenants usually
change their collections in spring and autumn. This has a positive effect in shopping sales. Discount sales at the end of each season are also a major source of impact in our business.

Regulation and government supervision

The laws and regulations governing the acquisition and
transfer of real estate, as well as municipal zoning ordinances, are applicable to the development and operation of our properties.

Currently, Argentine law does not specifically regulate shopping center lease agreements. Since our shopping center leases generally differ from ordinary commercial leases, we have created model provisions that govern the relationship with
our shopping center tenants. In compliance with applicable laws and our own policies, we have established specific provisions regarding store hours, fines and other penalties, tenants sales information duties, centralized administration,
control and supervision.

Leases

Argentine Law imposes certain restrictions on landlords, including:



| |  |  | a prohibition to include price adjustment clauses based on inflation increases in lease agreements; and
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | the imposition of a three-year minimum lease term for retail property, except in the case of stands and/or space for special exhibitions.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------

Although our lease agreements were U.S. Dollar-denominated, Decree N° 214/02, Decree N° 762/02 and Law N° 25,820 that amended the Public
Emergency Law, provided that monetary obligations in force as of January 7, 2002 arising from agreements governed by private law and which provided for payments in U.S. Dollars were subject to the following rules:



| |  |  | the obligations were to be paid in Pesos at the exchange rate of Ps. 1.00 = US$ 1.00 plus the CER for commercial leases;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



| |  |  | from October 1, 2002 and until March 31, 2004 for residential leases, the obligations are to be paid in Pesos at the exchange rate of Ps. 1.00 = US$ 1.00 plus the CVS;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if because of the application of these provisions, the amount of the installment were higher or
| | - |  | -----------------------------------------------------------------------------------------------



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lower than the amount at the moment of the payment, any of the parties could require an equitable
adjustment of the price. If the parties did not reach an agreement, the judicial courts could decide about the difference in each particular case; and



| |  |  | pursuant to Decree 117/04 and Law No. 25,796 that amends Law No. 25,713, the CVS became unenforceable on April 1, 2004.
| | - |  | -----------------------------------------------------------------------------------------------------------------------

In addition, there are currently conflicting policy pronouncements and judicial decisions as to whether rent may be increased during the term of a lease.
For example, section 10 of the Public Emergency Law prohibited lease agreements that adjusted rents for inflation based on an official index such as the Argentine Consumer Price Index or Wholesale Price Index. Most of our lease agreements contain
rent escalation clauses, but they are not based on an official index. To date, no tenant has filed a judicial action or used in court an argument against us based on the existence of escalation clauses, but no assurance can be given that such
actions will not be taken in the future, which if they prevail could materially and adversely affect us.

Under the Argentine Civil Code
and the Lease Law No. 23,091, lease terms may not exceed ten years, except for leases regulated by Law No. 25,248 (which provides that real estate leases containing purchase options leasing inmobiliario-are not subject to
term limitations). Generally, terms in our lease agreements go from 3 to 10 years.

Law No. 23,091, as amended by Law No. 24,808
provides that tenants may rescind commercial lease agreements after the first six months by sending a written notice at least 60 days before the termination of the contract. Such rescission is subject to penalties which range from one to one and a
half months of rent. If the tenant rescinds during the first year of the lease the penalty is one and a half months rent and if the rescission occurs after the first year of lease the penalty is one months rent.

Argentine Law permits the parties to a lease agreement to freely set their rights and obligations thereunder. However, in the past, in response to
housing shortages, high rates of inflation and difficult access to credit, the Argentine Government imposed strict and burdensome regulations regarding leases. Such regulations limited or prohibited rental increases and prohibited the eviction of
tenants even for failure to pay rent. These regulations discouraged both property rental and the construction of new housing.

While
current Argentine government policy discourages Argentine government regulation of lease agreements, there can be no assurance that additional regulations will not be imposed in the future by the Congress, including regulations similar to those
previously in place. Furthermore, most of our leases provide that the tenants pay all costs and taxes related to the property in proportion to their respective leasable areas. In the event of a significant increase in the amount of such costs and
taxes, the Argentine government may respond to political pressure to intervene by regulating this practice, thereby negatively affecting our rental income.

Argentine Civil Proceedings permit us to collect unpaid rent in an ordinary proceeding, although under certain special conditions (e.g. low amount of unpaid rent) the judge may decide for an expedited summary
proceeding. While it is a special procedure to evict tenants, historically, the heavy workload of the courts that hear these matters and the existence of numerous procedural steps required have tended to delay efforts of lessors to evict tenants.
Moreover, the lessor must provide written notice to the tenant at least ten days prior to commencing the eviction proceedings.

Despite the
amendment of the Argentine Civil Procedure Code by which the lessor may, by posting a bond, obtain the immediate eviction of the tenant, eviction proceedings generally take from six months to two years from the date of filing of the suit to the time
of actual eviction. However, historically we have generally attempted to negotiate with defaulting tenants the termination of lease agreements in order to avoid legal proceedings.

The Public Emergency Law, as amended by Law No. 25,640, suspended for the term of 270 days from the enactment of that law (ended on November 15, 2002)
the auction of the debtors property or the property



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used by the debtor for production, service rendering or trade activities and the enforcement of precautionary measures
resulting in the divestiture of property used by the debtor. On February 4, 2003, the Executive Branch enacted Decree 204/2003 establishing a mediation procedure for a limited period of 90 days. On May 2003, the Argentine Congress enacted Law
No. 25,737 which suspends foreclosures for an additional period of 90 days, ended on August 2003. On September 2003, several financial institutions voluntarily agreed not to foreclose on their mortgage loans. On November 2005, the Argentine
Congress enacted a new Law (No. 26,062) which extended the foreclosures suspension for an additional 120 days, which was again extended for 90 days more by Law No. 26,084 and for 180 days more by Law No. 26,103.

On November 6, 2003 Law No. 25,798 was enacted. It established a mechanism to reschedule debts resulting from unpaid mortgages, by creating a
trust (paid by the Argentine Government) which would purchase the mortgage debts and reschedule the maturity date. Financial institutions were given until June 22, 2004 to accept said terms. This law was partially modified by Law
No. 25,908 (enacted on July 13, 2004) which included various conditions referring to the incorporation into this system of the mortgage loans that were in judicial or private execution proceedings. The parties to secured loan agreements
were given a term to express their adhesion to this system. This term was extended twice first by Decree No. 352/2004 and then by Law No. 26,062 effective as of November 4, 2005, which extended the foreclosures suspension for an
additional 120 days, which was again extended for 90 days more by Law No. 26,084 and for 180 days more by Law No. 26,103.

Recently enacted Law No. 26.167 established a special proceeding to replace ordinary trials regarding the enforcement of mortgage loans, by virtue of which creditors have 10 days to inform the amounts owed to them and later agree with
the debtor on the amount and terms of payment. In case of failure by the parties to reach an agreement, payment conditions are to be determined by the judge.

Development and Land Use

Buenos Aires Urban Planning Code. Our real estate activities are subject to
several municipal zoning, building and environmental regulations. In the city of Buenos Aires, where the vast majority of our real estate properties are located, the Buenos Aires Urban Planning Code (Código de Planeamiento Urbano de la
Ciudad de Buenos Aires) generally restricts the density and use of property and controls physical features of improvements on property, such as height, design, set-back and overhang, consistent with the citys urban landscape policy. The
administrative agency in charge of the Urban Planning Code is the Secretary of Urban Planning of the City of Buenos Aires.

Buenos Aires
Building Code. The Buenos Aires Building Code complements the Buenos Aires Urban Planning Code (Código de la Edificación de la Ciudad de Buenos Aires) and regulates the structural use and development of property in the city
of Buenos Aires. The Buenos Aires Building Code requires builders and developers to file applications for building permits, including the submission to the Secretary of Work and Public Services of architectural plans for review, to assure compliance
therewith.

We believe that all of our real estate properties are in material compliance with all relevant laws, ordinances and
regulations.

Sales and Ownership

Real Estate Installment Sales Act. The Real Estate Installment Sales Act Law No. 14,005, as amended by Law No. 23,266 and Decree No. 2015/85, imposes a series of requirements on contracts for the
sale of subdivided plots of land when the sale price is paid in installments and the deed is not conveyed until final payment. The provisions of this law require, among other things:



| |  |  | the registration of the sale in the Real Estate Registry (Registro de la Propiedad Inmueble) corresponding to the jurisdiction of the property; such Registry provides crucial
information such as the liens and encumbrances which the property is subject to; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | the registration of any contract with the Real Estate Registry within 30 days of execution.
| | - |  | -------------------------------------------------------------------------------------------

Once the property is registered, the installment sale may not occur in a manner inconsistent with the Real Estate Installment Sales Act. In the event of a dispute over the title between the purchaser and third-party
creditors of the seller, the installment purchaser who has duly registered the installment sales contract prevails. Further, the purchaser can demand conveyance of title after at least 25% of the purchase price has been paid, although the seller may
demand a mortgage to secure payment of the balance of the purchase price.

After payment of 25% of the purchase price or the construction
of improvements on the property equal to at least 50% of the property value, the Real Estate Installment Sales Act prohibits the rescission of the sales contract for failure by the purchaser to pay the balance of the purchase price. However, in such
event the seller may take action under any mortgage on the property.

Consumer Protection Act. Consumer Protection Act Law
No. 24,240, as amended, regulates several issues concerning the protection of consumers in the formation and execution of contracts.

The Consumer Protection Act purports to prevent potential abuses deriving from the strong bargaining position of sellers of goods and services in a mass-market economy where standard form contracts are widespread.

For said reason, the Consumer Protection Act deems void and unenforceable certain contractual provisions in consumer contracts, including:



| |  |  | warranty and liability disclaimers;
| | - |  | -----------------------------------



| |  |  | waiver of rights, and
| | - |  | ---------------------



| |  |  | changes of the burden of proof.
| | - |  | -------------------------------

In addition, the
Consumer Protection Act imposes fines to induce compliance from sellers.

The Consumer Protection Act defines consumers or users, as the
individuals or legal entities that contract for a price for final use or their own benefit or their family or social group:



| |  |  | the acquisition or hiring of personal property things;
| | - |  | ------------------------------------------------------



| |  |  | the supply of services; and
| | - |  | ---------------------------



| |  |  | the acquisition of new real estate intended for housing, including plots of land acquired with the same intent, when the offer is public and directed to undetermined persons.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

It also establishes that the following will not be considered consumers or users, those who acquire, store, utilize or
consume goods or services to integrate them into a production, transformation, commercialization or supplying to third parties process.

In
addition, the Consumer Protection Act defines the suppliers of goods and services as the individuals or legal entities, either public or private that in a professional way, even occasionally, produce, import, distribute or commercialize goods or
supply services to consumers or users.

The following are excluded from the application of the Consumer Protection Act:



| |  |  | services supplied by professionals that require a registration in officially recognized professional organizations or by a governmental authority and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the contracts involving second-hand assets, executed between consumers.
| | - |  | -----------------------------------------------------------------------



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The Consumer Protection Act determines that the information contained in the offer addressed to
undetermined prospective consumers, binds the offeror during the period in which the offer takes place and until its public revocation. Further, it determines that specifications included in advertisements, announcements, prospectuses, circulars or
other media bind the offeror and are considered part of the contract entered into by the consumer.

With regard to services, the Consumer
Protection Act provides that those who supply services of any nature are obliged to respect the terms, conditions, and other circumstances according to which they have been offered, published or accepted.

On June 2005, Resolution No. 104/05, which complements the Consumer Protection Law, adopted MERCOSURs Resolution on which requires that those
who engage in commerce over the Internet (E-Business) to disclose in a precise and clear manner not only the products and/or services offered but also the sale terms.

Buildings Law. Buildings Law No. 19,724, as amended, sets forth a regime for the construction of buildings for later subdivision into strata title (Propiedad Horizontal). Under this law, developers
must inform potential purchasers of the future existence of a strata regime or co-proprietorship proposal, as well as of all sale conditions, and the size of each unit in relation to the whole. The sale of these units is subject to the subdivision
approvals, and in order to be included in the Buildings Law Regime it must be registered with the Real Estate Registry (Registro de la Propiedad Inmueble). This law also states that, in the event that construction is not completed, all
amounts already deposited must be repaid to the purchasers.

Mortgage Regulation. The Argentine Civil Code of 1871, as amended,
regulates mortgages both as a contract and as a right over property. There are no special provisions in the Civil Code aimed at protecting mortgagors. Nevertheless, any agreement entered into by a mortgagor and a mortgagee at the time of execution
of a mortgage contract or prior to the default of the mortgagor allowing the mortgagee to recover the property without a public auction of the property will not be enforced by the courts as contrary to Argentine public policy.

In an attempt to facilitate the development of a strong secondary market for mortgages, Law No. 24,441, enacted in 1995, sets forth a new
alternative proceeding to collect unpaid amounts secured by a mortgage. The new rules introduced by Law No. 24,441 are aimed at overcoming the difficulties and delays of the traditional ordinary proceeding.

Until the enactment of Law No. 24,441, the only procedure available to collect unpaid amounts secured by a mortgage was a summary proceeding
regulated by the Code of Civil and Commercial Procedure. The heavy caseload on the courts that hear such matters usually delays the summary proceeding, which currently took an average of 9 months to complete.

Chapter V of Law No. 24,441 institutes a new procedure which may expedite collection of unpaid amounts secured by a mortgage. To be applicable, the
new rules, which allow an out-of-court auction, need to be expressly agreed to by the parties in the mortgage contract.

Currently, we
include in our mortgages a clause enabling the enforcement of Law No. 24,441. However, there can be no assurance that such collection provisions will accelerate the recovery of unpaid amounts under mortgage guarantees.

On the other hand, the Public Emergency Law, as amended established the suspension for the term of 270 days from the enactment of that law, of all the
judicial or non-judicial enforcement including the enforcement of mortgages and pledges, regardless of their origin. On February 14, 2002, Law No. 25,563 amending the Bankruptcy Law (the New Bankruptcy Law) was enacted. Under
the New Bankruptcy Law, certain bankruptcies and foreclosures (including foreclosures on mortgage loans) would be suspended for a period of 180 days from the laws effective date. Such period was extended for 180 additional days by Law
No. 25,589 and afterwards for 90 additional days by Law No. 25,640 of September 2002, expiring on February, 2003.



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On February 4, 2003, the Executive Branch enacted Decree No. 204/2003 creating a mediation
procedure, for a limited period of 90 days, to be conducted through the Emergency Legal Units (Unidades de Emergencias Legales) of the Ministry of Labor, Employment and Social Security and the Ministry of Production. Such Emergency Legal
Units shall intervene at the request of debtors or creditors in foreclosure cases.

The mediation procedure is voluntary and free.
Proposals and negotiations made by the parties are subject to the confidentiality of ordinary mediations. The mediation procedure in no case will result in the suspension or interruption of the legal terms running in judicial or out-of-court
foreclosure proceedings.

The Emergency Legal Units will try to approximate the parties proposals to reach an agreement enabling the
debtor the performance of his obligations without lessening the creditors rights. The intervention of the Emergency Legal Units shall conclude with an agreement or with the impossibility of reaching such agreement. The Decree establishes that
the conciliation proceeding shall be in force from the day of its publication in the Official Gazette and will have a term of force of 90 days.

On May 8, 2003 the Congress enacted Law No. 25,737 which suspended foreclosures for a period of 90 days more. Afterwards, private and financial entities have voluntarily decided to suspend foreclosures. On November 2005, the
Argentine Congress enacted a new Law (No. 26,062) which extended the foreclosures suspension for an additional 120 days, which was again extended for 90 days more by Law No. 26,084 and for 180 days more by Law No. 26,103.

On November 6, 2003 Law No. 25,798 was enacted. It establishes a mechanism to reschedule the mortgage debts, by creating a Trust (paid by the
Argentine Government) which will purchase mortgage debts and reschedule the maturity date.

Most mortgages executed by us provide that we
are empowered to declare the anticipated expiration of the loan upon non-payment of an installment. This enables us to recover the unpaid amounts through the sale of the relevant property pursuant to the Civil and Commercial Procedure Code of
Argentina as Law No. 24,441.

Pursuant to the Argentine law, fees and expenses related to collection procedures must be borne by the
debtor, and the proceeds from any auction of the property may be used for the settlement of such obligation.

Although our mortgages are
U.S. Dollar-denominated, Decree No. 214/02 and Decree No. 762/02 that amend the Public Emergency Law provide that monetary obligations in force as of January 7, 2002, resulting from agreements governed by private law and which
provide for payments in U.S. Dollars are subject to the following rules:



| |  |  | the obligations are to be paid in Pesos at the exchange rate of Ps. 1.00 = US$ 1.00 plus the CER for loans granted for the acquisition of commercial properties guaranteed by
mortgages, or
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | since October 1, 2002 and until March 31, 2004, for residential leases, the obligations are to be paid in Pesos at the exchange rate of Ps. 1.00 = US$ 1.00 plus the CVS;
and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if because of the application of these provisions the amount of the installment were higher or lower than the amount at the moment of the payment, any of the parties could require
an equitable adjustment of the price. If in the event the parties do not reach an agreement, the judicial courts will decide about the difference in each particular case.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pursuant to Decree 117/04 and Law No. 25,796 that amends Law No. 25,713, the CVS became unenforceable on April 1, 2004.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



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Protection for the Disabled Law. The Protection for the Disabled Law No. 22,431, enacted on
March 20, 1981, as amended, provides that in connection with the construction and renovation of buildings, obstructions to access must be eliminated in order to enable access by handicapped individuals. In the construction of public buildings,
entrances, transit pathways and adequate facilities for mobility impaired individuals must be provided.

Buildings constructed before the
enforcement of the Protection for the Disabled Law must be adapted to provide accesses, transit pathways and adequate facilities for mobility-impaired individuals.

Those pre-existing buildings, which due to their architectural design may not be adapted to the use by mobility-impaired individuals, are exempted from the fulfillment of these requirements.

The Protection for the Disabled Law provides that residential buildings must ensure access by mobility impaired individuals to elevators and aisles.
Differential architectural requirements refer to pathways, stairs, ramps and parking spaces.

Credit Cards Law. Law No. 25,065,
amended by Law No. 26,010, regulates different aspects of the business known as credit card system. The regulations impose minimum contractual contents and the approval thereof by the Industry, Commerce and Mining Secretary
(Secretaría de Industria, Comercio y Minería de la Nación), as well as the limitations on the interest to be collected by users and the commissions to the stores adhering to the system. The Credit Card Law applies to
banking and non-banking cards, such as Tarjeta Shopping, issued by Tarshop.

Antitrust Law. Law No. 25,156 prevents
antitrust practices and requires administrative authorization for transactions that according to the Antitrust Law constitute an economic concentration. According to this law, mergers, transfers of goodwill, acquisitions of property or rights over
shares, capital or other convertible securities, or similar operations by which the acquirer controls a company are considered as an economic concentration. Whenever an economic concentration involves a company or companies (i) which hold 25%
or more of the relevant market or (ii) which exceed the accumulated sales volume by approximately Ps. 200 million in Argentina or Ps. 2,500 million worldwide; then the respective concentration should be submitted for approval to the
National Antitrust Commission. The request for approval may be filed, either prior to the transaction or within a week after its completion.

The Antitrust Law provides that economic concentrations in which the transaction amount and the value of the assets absorbed, acquired, transferred or controlled in Argentina do not exceed Ps. 20.0 million are exempted from the
administrative authorization. Notwithstanding the foregoing, when the transactions effected during the prior 12-month period exceed in total Ps. 20.0 million or Ps. 60.0 million in the last 36 months these transactions must be notified to
the Comisión Nacional de Defensa de la Competencia (National Antitrust Commission). As the consolidated annual sales volume of APSA and IRSA exceed Ps. 200.0 million, we should give notice to the National
Antitrust Commission of any concentration provided for by the Antitrust Law. As of October 2006, three of the Companys transactions fall under the scope of this law; a) one of the subsidiaries of the Company is in process of acquiring the
shares of a company whose primary asset consists of a shopping center in the province of Córdoba; b) the Company is in the process of acquiring 808,354 outstanding ordinary shares of E-Commmerce Latina S.A. and 11 outstanding ordinary shares
of Altocity.com S.A. These transactions were notified to the National Antitrust Commission prior to execution. Antitrust Law does not affect our ongoing business.

C. Organizational Structure

Our principal shareholders as of June 30, 2006, are IRSA and Parque Arauco.

IRSA is an Argentine real estate company engaged in a range of real estate activities in Argentina. IRSAs shares are listed and
traded on the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos Aires) and the New York Stock Exchange.

Parque
Arauco is a Chilean commercial real estate developer engaged in the acquisition, development and operation of shopping centers, and its shares are listed and traded on the Santiago Stock Exchange.



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The following table presents information relating to our ownership interest and the percentage of our consolidated total
net revenues represented by our subsidiaries as of June 30, 2006:



|                                              |  |                                         |  |                         |  |                          |  |                                |  |                                    |  
|--------------------------------------------- |  | --------------------------------------- |  | ----------------------- |  | ------------------------ |  | ------------------------------ |  | ---------------------------------- | -
|Subsidiary                                    |  | Activity                                |  | Country ofincorporation |  | PercentOwnership (%) (4) |  | Percent ofvoting power (%) (4) |  | Percentage of ourTotal NetRevenues |  
|Shopping Alto Palermo S.A. (SAPSA)            |  | Real Estate investments and development |  | Argentina               |  | 100                      |  | 100                            |  | 13.2                               | %
|Fibesa S.A.                                   |  | Real Estate Agent                       |  | Argentina               |  | 100                      |  | 100                            |  | 3.1                                | %
|Tarshop S.A.                                  |  | Credit card operations                  |  | Argentina               |  | 80                       |  | 80                             |  | 34.0                               | %
|Emprendimiento Recoleta S.A.     (ERSA) (5) |  | Building                                |  | Argentina               |  | 54                       |  | 54                             |  | 2.4                                | %
|Inversora del Puerto S.A.                     |  | Real Estate Investments                 |  | Argentina               |  | 100                      |  | 100                            |  | 0.0                                | %
|Shopping Neuquén S.A.                         |  | Development of undertakings             |  | Argentina               |  | 95                       |  | 95                             |  | 0.0                                | %
|Mendoza Plaza Shopping S.A.                   |  | Real Estate investments                 |  | Argentina               |  | 85                       |  | 85                             |  | 4.1                                | %
|Conil S.A.                                    |  | Real Estate Investments                 |  | Argentina               |  | 50                       |  | 50                             |  | (3                                 | )
|E-Commerce Latina S.A.                        |  | Holding Services                        |  | Argentina               |  | 50                       |  | 50                             |  | (1                                 | )
|AltoCity.Com S.A. (2)                         |  | E-Commerce                              |  | Argentina               |  | 50                       |  | 50                             |  | (1                                 | )

---

|(1) | We do not consolidate this subsidiary. We have these investments valued under the equity method of accounting.
|--- | --------------------------------------------------------------------------------------------------------------

|(2) | Owned indirectly through E-Commerce Latina S.A.
|--- | -----------------------------------------------

|(3) | Percentage of equity interest has been rounded.
|--- | -----------------------------------------------

|(4) | During fiscal year 2006, we increased our interest in ERSA from 51% to 54%.
|--- | ---------------------------------------------------------------------------

D. Property, Plants and Equipment

Our properties include shopping centers and land reserves for the
construction of shopping centers or apartment buildings. All of our properties are located in Argentina.

We lease our headquarters,
located at Moreno 877, 22ndfloor, (C1091AAQ), Buenos Aires, Argentina, from Inversora Bolivar S.A., a subsidiary of
IRSA, pursuant to a lease agreement that will expire in October 2008. We believe that all of our facilities are adequate for our present need and suitable for their intended purposes.

The following table sets forth certain information about our properties that are held in fee:



|                      |  |              |  |                     
|--------------------- |  | ------------ |  | --------------------
|Held in Fee           |  | Encumbrance  |  | Location            
|Neuquén Project (1)   |  | Mortgage (2) |  | City of Neuquén     
|Caballito Project (3) |  |             |  | City of Buenos Aires



---

| | (1) | On July 6, 1999, we had acquired a 95% interest in Shopping Neuquén S.A. (Shopping Neuquén) for Ps. 4.2 million. Shopping Neuquéns sole
asset is a piece of land with preliminary governmental approval for construction of a shopping center on the site. We had paid Ps. 0.9 million of the purchase price in September 1999 and agreed to pay the remaining Ps. 3.3 million on the
earlier of (i) the opening of the shopping center or (ii) July 5, 2001. (see Item 3.D Risk Factors).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | (2) | On June 30, 2006, Shopping Neuquén S.A. had a Ps. 41,791 loan secured by a mortgage on the land. We have a plot of land spanning a surface area of 25,539 square meters
in the Caballito neighborhood, one of the most highly populated areas in the City of Buenos Aires. This land could be used to build a 30,000 square meter shopping center including a hypermarket. We have not yet obtained the authorization
from the Government of the City of Buenos Aires to develop the center on this land and cannot at this stage guarantee that such authorization will be granted. As of July 5, 2006, the Federal Administration of Public Revenues (AFIP)
filed a preliminary injunction with the Federal Court for Administrative Proceedings for an aggregate amount of Ps. 3,689,485.5, plus an added amount, provisionally estimated, of Ps. 900,000 in order to respond to legal costs and interests. The main
dispute is about the amount due for the admission rights of the capital gains tax. In the first instance, AFIP pleaded for a general restraining order. As of November 29, 2006, the Federal Court ordered to substitute such order to be
substituted for an attachment on the plot of land located in Caballito neighborhood, city of Buenos Aires, where we are planning to develop a shopping center.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We do not currently lease any material properties other than our headquarters.

A detailed description of each of our different properties and plans to expand, build or develop have been previously disclosed in this document under
the Business Overview caption, including information about size, use and location of the properties and estimations of cost and methods of financing the planned expansions and developments.

ITEM 4A. Unresolved staff comments

This item is not applicable

ITEM 5. Operating and Financial Review and Prospects

A. Operating Results

The following Operating and Financial Review and Prospects have been derived from our
consolidated financial statements as of the dates and for each of the periods indicated below. This information should be read together with Item 3. Key Information - Selected Financial Data and our consolidated financial statements
appearing elsewhere in this annual report. This Operating and Financial Review and Prospects discussion contains forward-looking statements that involve risks, uncertainties and assumptions. These forward-looking statements include, among others,
those statements including the words expects, anticipates, intends, believes and similar language. Our actual results may differ materially and adversely from those anticipated in these forward-looking
statements as a result of many factors, including those set forth elsewhere in this annual report.

For purposes of the following
discussion, unless otherwise specified, references to fiscal years 2006, 2005 and 2004 relate to the fiscal years ended June 30, 2006, 2005 and 2004, respectively. The consolidated financial statement for those years, have been audited by Price
Waterhouse & Co. S.R.L., Buenos Aires, Argentina, member firm of PriceWaterhouseCoopers, an independent registered public accounting firm.

Our consolidated financial statements are presented in Pesos. Except as discussed in the following paragraph, we prepare our consolidated financial statements in conformity with Argentine GAAP and the regulations of the Comisión
Nacional de Valores. See Note 19 to our consolidated financial statements for a description of the main differences between Argentine GAAP and U.S. GAAP as they relate to us, and a reconciliation to U.S. GAAP of net income and total
shareholders equity. The differences involve methods of measuring the amounts shown in the consolidated financial statements as well as additional disclosures required by U.S. GAAP and Regulation S-X of the SEC.



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As discussed in Notes 2.c. and 3.k. to our consolidated financial statements, contained elsewhere in this
annual report, in order to comply with regulations of the Comisión Nacional de Valores, we discontinued inflation accounting as from March 1, 2003 as well as recognized deferred income tax assets and liabilities on an undiscounted basis.
These accounting practices represent departures from generally accepted accounting principles in Argentina. However, we believe such departures have not had a material effect on our consolidated financial statements.

Critical Accounting Policies and Estimates

In
connection with the preparation of the consolidated financial statements included in this annual report, we have relied on variables and assumptions derived from historical experience and various other factors that we deemed reasonable and relevant.
Although we review these estimates and assumptions in the ordinary course of business, the portrayal of our financial condition and results of operation often requires our management to make judgments regarding the effects of matters that are
inherently uncertain on the carrying value of our assets and liabilities. Actual results may differ from those estimated under different variables, assumptions or conditions. In order to provide an understanding about how management forms its
judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different variables and conditions, we have included comments related to each critical accounting policy
described as follows:



| |  |  | provision for allowances and contingencies;
| | - |  | -------------------------------------------



| |  |  | impairment of long-lived assets;
| | - |  | --------------------------------



| |  |  | asset tax credits; and
| | - |  | ----------------------



| |  |  | extension of our Convertible Notes maturity date.
| | - |  | --------------------------------------------------

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles used in Argentina and regulations of the Comisión Nacional de Valores which differ in certain significant respects
from generally accepted accounting principles in the United States of America. Such differences involve methods of measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by U.S. GAAP and the
Regulation S-X of the SEC.

Provision for allowances and contingencies

We provide for losses relating to accounts and mortgage receivables. The allowance for losses is based on managements evaluation of various factors, including the credit risk of customers, historical trends and
other information. While management uses the information available to make evaluations, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the evaluations.
Management has considered all events and/or transactions that are subject to reasonable and normal methods of estimations, and the consolidated financial statements reflect that consideration.

We have certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor and
other matters. We accrue liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, our estimate of the outcomes of these matters and our
lawyers experience in contesting, litigating and settling other matters. As the scope of the liabilities becomes better defined, there may be changes in the estimates of future costs, which could have a material effect on our future results of
operations and financial condition or liquidity.

Impairment of long-lived assets

We periodically evaluate the carrying value of our long-lived assets for impairment when events or



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changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We consider the carrying
value of a long-lived asset to be impaired when the expected cash flows, undiscounted and without interest, from such asset are separately identifiable and less than its carrying value. In that event, a loss would be recognized based on the amount
by which the carrying value exceeds the fair market value of the long-lived asset. We determine the fair market value primarily using independent appraisals and utilizing anticipated cash flows discounted at a rate commensurate with the risk
involved.

Under generally accepted accounting principles in Argentina, a previously recognized impairment loss should only be reversed
when there is a subsequent change in estimates used to compute the fair market value of the asset. In that event, the new carrying amount of the asset should be the lower of its fair market value or the net carrying amount the asset would have had
if no impairment had been recognized. Both the impairment charge and the impairment reversal are recognized in earnings. U.S. GAAP prohibits the reversal of a previously recognized impairment charge.

We believe that the accounting policy related to the impairment of long-lived assets is a critical accounting policy because:



| |  |  | it requires our management, in determining fair market value, to make estimates and assumptions (such as, future revenues and cost of revenues, future vacancy rates and future
rental prices) that are highly susceptible to change from period to period, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the impact that recognizing or reversing an impairment would have on assets reported on our consolidated balance sheet as well as on the results of our operations could be material.
Estimates about future rental prices and future vacancy rates require significant judgment because actual rental prices and vacancy rates have fluctuated in the past and are expected to continue to do so.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, every year we review our assets related to leases and services, and others segments for impairments. Due to the continued
deterioration of the Argentine economy during the years ended June 30, 2002, 2003 and 2006, the company recognized impairment losses amounting to Ps. 62.8 million, Ps. 12.7 million , and Ps. 0.4 million respectively. As a result
of increases in their fair market values, during fiscal years 2003, 2004 2005 and 2006, the company partially reversed the impairment losses, recognizing a gain of Ps. 15.7 million, Ps. 26.9 million, Ps. 13.1 million and Ps.
9.9 million, respectively, under accounting principles generally accepted in Argentina. In addition, amortization related to the impairment charges amounted to Ps. 1.6 million, Ps. 0.6 million and Ps. 0.3 million during the years
ended June 2004, 2005 and 2006 respectively. Assets reviewed for impairment purposes vis-à-vis those two segments represent approximately 80.3% and 82.8% of our total assets as of June 30, 2006 and 2005, respectively.

Valuation of shopping centers was performed according to the rent value method. We calculated discount rates considering each propertys
location, competition in its market, its historical vacancy rates and cash flow. The average discount rates we used were between 8% and 12%, the average price per leasable square meter was Ps. 6,347 and the average vacancy rate was calculated taking
into consideration the real vacancy. The performance of a sensitivity analysis, which reduced prices per square meter by 5%, resulted in an increased impairment as of June 30, 2006 equal to Ps. 3.3 million.

We used the open market method for the valuation of the land reserve and non-current inventories. Our reserve land constitutes an added value
as a unique portfolio for shopping centers development in CBD (Central Business Districts). Caballito and Neuquén are the largest locations in our portfolio. The performance of a sensitivity analysis, which reduced prices by 5%, resulted in
an increased impairment accounted for as of June 30, 2006 equal to Ps. 1.4 million.

The above mentioned potential impairment losses
totaled Ps. 4.7 million and would affect the balance sheet lines Non Current Inventories, net, Fixed Assets, net, Other investments and Intangible Assets, net, reducing the value of our total
assets by approximately 0.4%. These impairment losses would have reduced our net income for the year ended June 30, 2006 by 10.7%.



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Asset tax Credits

We calculate the asset tax credits by applying the current 1% rate on computable assets at the end of the year. This tax complements income tax. Our tax obligation in each year will coincide with the higher of the two
taxes. However, if the asset tax credits exceeds income tax in a given year, that amount in excess can be offset against income tax arising in any of the following ten years.

We have recognized the asset tax credits paid in previous years as a credit as we estimate that it will offset future years ́ income tax.

We believe that the accounting policy related to asset tax provision is a critical accounting policy because it requires
management to make estimates and assumptions with respect to our future results that are highly susceptible to change from period to period, and as such the impact on our financial position and results of operations could be material.

The performance of a sensitivity analysis reducing our estimated taxable income for the future ten years by 5%, did not affect the recoverable value of
our asset tax credits.

Extension of our Convertible Notes maturity date

On August 20, 2002, the Company issued an aggregate amount of US$ 50.0 million of uncollateralized convertible notes (the Convertible
Notes) in exchange for cash and the settlement of certain liabilities. The Convertible Notes accrue interest at a fixed annual interest rate of 10% (payable semiannually), are convertible at any time at the option of the holder into common
shares of Ps. 0.10 par value per share and originally matured on July 19, 2006. On May 2, 2006 a meeting of noteholders resolved to extend the maturity date of the Convertible Notes through July 19, 2014, although the remaining terms
and conditions were left unchanged.

Under Argentine GAAP, from a debtors perspective, an exchange of debt instruments between, or a
modification of a debt instrument by, a debtor and a creditor shall be deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt instrument is at
least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument The new debt instrument should be initially recorded at fair value and that amount should be used to determine the
extinguishment gain or loss to be recognized.

Fair value should be determined by the present value of the future cash flows to be paid
under the terms of the new debt instrument discounted at a rate commensurate with the risks of the debt instrument and time value of money. If it is determined that the original and new debt instrument are not substantially different, then a new
effective interest rate is to be determined based on the carrying amount of the original debt instrument and the revised cash flows.

We
believe that the accounting policy related to the extension of our Convertible Notes maturity date is a critical accounting policy because it required management to make an estimate of the present value of the future cash flows,
using an estimated discount rate which is highly susceptible to changes from period to period, and as such the impact on the fair market value of our debt instruments could be material.

Based on the analysis performed, we concluded that the instruments were not substantially different and accordingly the old instrument was not
derecognized.

U.S. GAAP Reconciliation

The principal differences, other than inflation accounting, between Argentine GAAP and U.S. GAAP are the following:



| |  |  | the appraisal revaluation of certain fixed assets under Argentine GAAP while fixed assets are valued at cost under U.S. GAAP;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



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| |  |  | the deferral of certain preoperating expenses under Argentine GAAP which are expensed as incurred under U.S. GAAP;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the treatment of expenses incurred for the development and acquisition of software under the provisions of SOP 98-1;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | the application of certain U.S. GAAP adjustments to the estimation of the fair value of net assets acquired;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | the reversal of the amortization expense related to goodwill recognized under Argentine GAAP;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | the impact of certain U.S. GAAP adjustments on our equity investees;
| | - |  | --------------------------------------------------------------------



| |  |  | the accounting for increasing rate debt;
| | - |  | ----------------------------------------



| |  |  | the accounting for securitized credit card receivables in accordance with SFAS No. 140;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | the accounting for available-for-sale securities;
| | - |  | -------------------------------------------------



| |  |  | the amortization of fees related to the Senior Notes;
| | - |  | -----------------------------------------------------



| |  |  | the present-value accounting of asset tax credits;
| | - |  | --------------------------------------------------



| |  |  | the restoration of previously recognized impairment losses;
| | - |  | -----------------------------------------------------------



| |  |  | the reversal of the gain from recognition of inventories at net realizable value;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | the debtors accounting for a modification of convertible debt instruments;
| | - |  | ---------------------------------------------------------------------------



| |  |  | the differences between the price-level restated amounts of assets and liabilities and their historical basis, that under Argentine GAAP, are treated as permanent differences for
deferred income tax calculation purposes while under U.S. GAAP are treated as temporary differences. In addition, the U.S. GAAP adjustment effect on deferred income tax of the foregoing reconciling items, and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the effect on minority interest of the foregoing reconciling items.
| | - |  | -------------------------------------------------------------------

In addition, certain other disclosures required under U.S. GAAP have been included in the U.S. GAAP reconciliation. See Note 19 to our consolidated financial statements included elsewhere in this annual report for
details.

Net income under Argentine GAAP for the years ended June 30, 2006, 2005 and 2004 was Ps. 44.7 million, Ps.
33.3 million and Ps. 18.8 million, respectively, as compared to Ps. 47.0 million, Ps. 36.2 million and Ps. 7.3 million respectively, under U.S. GAAP. Shareholders equity under Argentine GAAP as of June 30, 2006
and 2005, was Ps. 806.8 million and Ps. 791.0 million, respectively, as compared to 643.8 million and Ps. 620.0 million, respectively, under U.S. GAAP.

Overview

Effects of Devaluation and Economic Crisis on us

All of our assets are located and our operations are performed in Argentina. Accordingly, our financial condition and results of operations depend
substantially upon economic conditions prevailing in Argentina. Due to the four-year-old recession ended on the second quarter of 2002, the Argentine economy had deteriorated sharply. However, during year 2003 certain signals of recovery appeared in
the economy, strengthening along 2004, 2005 and 2006.



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In the fourth quarter of 1998, the Argentine economy entered into a recession that caused the gross
domestic product to decrease in real terms by 3.4% in 1999, 0.8% in 2000 and 4.4% in 2001. During the second half of 2001, Argentinas recession worsened significantly, precipitating a serious political and economic crisis. During 2002, the
gross domestic product decreased 10.9% as compared to 2001. In 2003, the economy began to recover, closing the year with year-on-year growth of 11.7%. Exceeding growth expectations, in 2004 and 2005 the GDP increased 9.0% and 9.2% respectively.
Estimates are that during 2006 the GDP will increase 8.6% in comparison with 2005, consolidating the economy expansion.

On
December 23, 2001, President Adolfo Rodriguez Saá declared the suspension of the payment of foreign debt and later Eduardo Duhalde ratified his decision. On January 6, 2002, the Congress enacted the Public Emergency Law which
repeals several provisions of the Convertibility Law which prevailed in Argentina for 10 years, and the executive branch announced the devaluation of the Peso settled in the Only and Free Exchange Market at a floating market rate depending on supply
and demand. This new legislation had a material adverse effect on our financial position and the results of our operations in fiscal year 2002, which was mostly offset during fiscal year 2003, 2004, 2005 and 2006.

During fiscal year 2005, the Government of President Néstor Kirchner submitted a proposal to creditors to continue the payments of external debt.
The official offer for the sovereign debt exchange obtained very good results and was supported by 76.07% of its creditors. The Government was able to record a partial remission of the debt in terms of current value of 65.2%, which exceeds any
remission recorded in any other debt restructuring process in other countries.

On the other hand, in February 2006 the government
cancelled a debt of US$ 9.53 billion with the IMF, reducing considerably Argentinas sovereign debt.

This significant achievement
represented an opportunity for our country to recover reliability of the international market.

Effects of inflation

From 1997 until the end of year 2001, policies adopted by the Argentine government have substantially reduced the level of inflation. Therefore, during
that period inflation did not significantly affect our financial condition and results of operations. The following are annual inflation rates figures published by the Argentine Ministry of Economy and Production:



|                    |  |                      |  |                      
|------------------- |  | -------------------- |  | ---------------------
|Year ended June 30, |  | Consumer Price Index |  | Wholesale Price Index
|1997                |  | 0.9%                 |  | 0.1%                 
|1998                |  | 1.1%                 |  | -1.9%                
|1999                |  | -1.3%                |  | -5.3%                
|2000                |  | -1.1%                |  | 4.4%                 
|2001                |  | -0.3%                |  | -1.6%                
|2002                |  | 30.5%                |  | 95.6%                
|2003                |  | 10.2%                |  | 8.3%                 
|2004                |  | 4.9%                 |  | 0.1%                 
|2005                |  | 9.0%                 |  | 7.7%                 
|2006                |  | 11.0%                |  | 12.2%                



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The inflationary risk increase may erode macroeconomic stability held at present in the country, causing
a negative impact on the development of our operations.

During 2005 retail prices increased significantly, making inflation one of the
main economic issues. In order to hold back inflation, the government signed trade agreements, primarily within the foods and textiles sector. In this regard, the CPI increased by 4.9% and 5.1% for the Wholesale Price Index (IPIM) for
the first semester of 2006. This shows signs of desacceleration in the price increase for the rest of calendar year 2006.

Effects of
interest rate fluctuations

Most of our U.S. Dollar denominated debt accrues interest at a floating rate. An increase in interest
rates implies a significant increase of our financial costs and materially affects our financial condition and our results of operations.

Effects of foreign currency fluctuations

A significant portion of our financial debt is denominated in U.S. Dollars.
Therefore, a devaluation of the Argentine Peso against the U.S. Dollar would increase our indebtedness measured in Pesos and materially affect our results of operations. Foreign currency exchange rate fluctuations significantly increase the
risk of default on our mortgages and lease receivables. Due to the fact that many of our customers have their cash flows in Pesos, a fluctuation of exchange rate may increase their U.S. Dollar-denominated liabilities. Foreign currency exchange
restrictions hereafter imposed by the Argentine Government could prevent or restrict our access to U.S. Dollars, affecting our ability to service our U.S. Dollar denominated liabilities.



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Operating Results

Fiscal Year 2006 as compared to Fiscal Year 2005

Revenues

Revenues increased by 57.0%, from Ps. 230.2 million during fiscal year 2005 to Ps. 361.4 million during fiscal year 2006. Total revenues include
intersegment eliminations of Ps. 0.3 million during fiscal year 2005 and Ps. 0.9 million during fiscal year 2006 due to Leases and Admission Rights.

Leases and Servicesregistered a 30.2% increase from Ps. 165.8 million during fiscal year 2005 to Ps. 215.9 million during fiscal year 2006, mainly resulting from: (i) a sustained increase of
24.5% in sales of our tenants (from Ps. 1,488 million in 2005 to Ps. 1.853 million in 2006), shown in the growth of our revenues from rental and admission rights for Ps. 38.3 million; (ii) an increase in Mendoza Plaza Shoppings
revenues of Ps. 5.4 million resulting from the comparison of nine months of revenues from fiscal year 2005 against the twelve months of revenues from fiscal year 2006 and; (iii) an increase in Alto Rosario Shoppings revenues of Ps.
6.3 million resulting from the comparison of eight months of revenues from fiscal year 2005 against the twelve months of revenues from fiscal year 2006.

Revenues from credit card operation increased by 90.5% from Ps. 64.6 million during fiscal year 2005 to Ps. 123.0 million during fiscal year 2006. The increased revenue from credit card operation
recorded by Tarshop was due to the growth of our customer portfolio, our sales and the number of cardholders, all driven by the economic recovery that has taken place during the year, which led Tarjeta Shopping to open new branches in different
cities country-wide.

Revenues from others segment increased significantly from Ps. 0.1 million during fiscal year 2005 to Ps.
23.4 million during fiscal year 2006, mainly due to the revenues generated by the sale of Alcorta Plaza plot.

Costs

Total costs increased by 50.7%, from Ps. 92.5 million during fiscal year 2005 to Ps. 139.4 million during fiscal year
2006. Total costs include intersegment eliminations from: (i) leases revenues and expenses of Ps. 0.3 million for fiscal year 2005 and Ps. 0.9 million for fiscal year 2006; and (ii) interest expense generated by loans used to
fund credit card activity of Ps. 1.0 millon during fiscal year 2005 and Ps. 0.7 million during fiscal year 2006.

Leases and
services costs increased by 10.7%, from Ps. 69.2 million during fiscal year 2005 to Ps. 76.6 million during fiscal year 2006. This increase was mainly due to: (i) an increase in depreciation and amortization charges of Ps.
4.5 million and (ii) an increase in unrecoverable administration fees of Ps. 2.6 million.

The cost of credit card
operations increased by 86.0%, from Ps. 24.5 million during fiscal year 2005 to Ps. 45.5 million during fiscal year 2006. This increase was mainly due to: (i) an increase of the cost of salaries and social security charges of Ps.
6.2 million, (ii) an increase of taxes, duties and contributions of Ps. 3.0 million and Ps. 1.3 million resulting from the expansion and opening of new branches; (iii) an increase of commissions and interest charges of Ps.
5.6 million; and (iv) an increase of fees and services expenses of Ps. 2.3 million altogether related to the issue of new series of Financial Trusts.

Costs from others segment increased significantly from 0.2 million during fiscal year 2005 to 18.8 million during fiscal year 2006, mainly due to the costs generated by the sale of Alcorta Plaza plot.

Gross Profit

Due to the factors above mentioned, gross profit increased 61.3%, from Ps. 137.7 million during fiscal year 2005 to Ps. 222.0 million during fiscal year 2006. Total gross profit includes intersegment eliminations of Ps.
1.0 million during fiscal year 2005 and Ps. 0.7 million during fiscal year 2006.



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Gross profit, calculated in terms of total revenues percentage, increased from 59.8% during fiscal year
2005 to 61.4% during fiscal year 2006.

Gross profit from leases and services, calculated in terms of leases and services revenues
percentage, increased from 58.3% during fiscal year 2005 to 64.5% during fiscal year 2006. Credit card operations gross profit, calculated as a percentage of revenues from credit card operations, increased from 62.1% during fiscal year 2005
to 63.0% during fiscal year 2006. Gross profit (loss) from others segment, calculated as a percentage of others revenues, rose from a loss of (68.5)% during fiscal year 2005 to an income of 19.7% during fiscal year 2006.

Selling expenses

Selling
expenses registered a 88.1% increase, from Ps. 24.8 million during fiscal year 2005 to Ps. 46.6 million during fiscal year 2006.

Selling expenses from leases and services increased by 34.1% from Ps. 11.0 million during year 2005 to Ps. 14.8 million during year 2006. This increase was mainly due to: (i) an increase in the gross revenue tax
charges of 2.0 million related to the increase of our revenues previously mentioned; (ii) an increase in the charge of allowance for doubtful accounts of Ps. 1.1 million; (iii) an increase in the advertising expenses of Ps. 0.5
million.

Selling expenses from credit card operations increased by 128.9% from Ps. 13.5 million during fiscal year 2005 to Ps.
30.9 million during fiscal year 2006. This increase was mainly due to: (i) an increase of advertising expenses of Ps. 6.7 million; (ii) an increase in the gross revenue tax charges of 3.8 million related to the increase of our
revenues previously stated; and (iii) an increase of the charge of allowance for doubtful accounts of Ps. 6.2 million related to the increase of our credit portfolio.

Selling expenses from others segment did not change significantly from the previous fiscal year, recording losses of Ps. 0.3 million during
fiscal year 2005 and Ps. 0.9 million during fiscal year 2006, mainly due to an increase in the gross revenue tax charges related to sale of Alcorta Plaza plot.

Selling expenses, calculated in terms of total revenues percentage, increased from 10.8% during fiscal year 2005 to 12.9% during fiscal year 2006.

Selling expenses from leases and services, calculated in terms of revenues from leases and services percentage, increased from 6.6% during fiscal
year 2005 to 6.9% during fiscal year 2006.

Selling expenses from credit card operations, calculated in terms of revenues from
credit card operations percentage increased from 20.9% during fiscal year 2005 to 25.1% during fiscal year 2006.

Selling expenses from
others segment, calculated in terms of revenues from others segment percentage decreased from 206.6% during fiscal year 2005 to 3.9% during fiscal year 2006.

Administrative expenses

Administrative expenses increased by 65.6% from Ps. 31.9 million
during fiscal year 2005 to Ps. 52.8 million during fiscal year 2006.

Administrative expenses from leases and services
increased from Ps. 16.9 million during fiscal year 2005 to Ps. 26.3 million during fiscal year 2006 mainly due to: (i) an increase of the board of directors ́ fees of Ps. 3.4 million; (ii) an increase in fees and third
parties services of Ps. 3.2 million; (iii) an increase of the amount of salaries, bonuses and social security charges of Ps. 1.9 million; and (iv) an increase of tax charges, duties and contributions of Ps. 0.6 million, mainly due to
an increase of the financial transactions tax.



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Administrative expenses from credit card operations increased Ps. 11.4 million from Ps.
14.9 million during fiscal year 2005 to Ps 26.3 million during fiscal year 2006 mainly due to: (i) of an increase of the amount of salaries, bonuses and social security charges of Ps. 5.9 million; (ii) an increase in fees and
third parties services of Ps. 2.4 million; and (iii) an increase of tax charges, duties and contributions of Ps. 1.3 million and rent expenses of Ps. 1.6 million due to the opening of new branches.

Administrative expenses from others segment did not change significantly from the previous fiscal year, recording charges of Ps. 0.04 million
during fiscal year 2005 and Ps. 0.1 millon during fiscal year 2006.

Administrative expenses, calculated as a percentage of total revenues,
increased from 13.8% during fiscal year 2005 to 14.6% during fiscal year 2006.

Administrative expenses from leases and servicies,
calculated as a percentage of leases and servicies revenues, increased from 10.2% during fiscal year 2005 to 12.2% during fiscal year 2006.

Administrative expenses from credit card operations, calculated as a percentage of credit card operations revenues, decreased from 23.1% during fiscal year 2005 to 21.4% during fiscal year 2006.

Administrative expenses from others segment, calculated as a percentage of others segment revenues, decreased from 30.0% during fiscal year 2005
to 0.6% during fiscal year 2006.

Net income in credit card trust

Net income in credit card trust increased 2.2 million from Ps. 0.4 million during fiscal year 2005 to Ps. 2.6 million during fiscal year
2006.

Operating income

As a result of the factors mentioned above, operating income increased 47.3 million from Ps. 81.4 million during fiscal year 2005 to Ps. 128.7 million during fiscal year 2006.

Operating income from leases and services increased Ps. 29.6 million, from Ps. 68.6 million during fiscal year 2005 to Ps.
98.2 million during fiscal year 2006.

Operating income from credit card operations increased Ps. 10.7 million, from Ps.
12.1 million during fiscal year 2005 to Ps. 22.8 million during fiscal year 2006.

Operating income from others segment
increased Ps. 7.4 million, from a loss of Ps. -0.4 million during fiscal year 2005 to an income of Ps. 7.0 million during fiscal year 2006.

Operating income, as a percentage of our total revenues, increased from 35.4% during fiscal year 2005 to 35.6% during fiscal year 2006.

Operating income from leases and services as a percentage of our total revenues, increased from 41.4% during fiscal year 2005 to 45.5% during fiscal year 2006.

Operating income from credit card operations as a percentage of our total revenues from credit card operations, decreased from 18.8% during fiscal
year 2005 to 18.6% during fiscal year 2006.

Operating income from others segment as a percentage of our total revenues from others
segment, increased from a loss of (305.0)% during fiscal year 2005 to an income of 30.1% during fiscal year 2006.

Equity loss from
related companies

The result arising from our share in other companies did not vary amounting to Ps. 0.7 million during fiscal
years 2005 and 2006. Net loss is due to our participation in the loss from E-Commerce Latina S.A. in which we share an interest of 50%.



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Amortization of goodwill

The amortization of goodwill did not change significantly from the previous fiscal year, amounting to Ps. 4.8 million for 2005 and Ps.
4.7 million for fiscal year 2006. Such amount represents the amortization of the goodwill generated by the acquisition of Shopping Alto Palermo S.A., Fibesa S.A. and Tarshop.

Financial results, net

Financial results, net decreased Ps. 18.0 million, from an income of Ps. 2.4 million during fiscal year 2005 to a loss of Ps. 15.6 million during fiscal year 2006.

Financial results generated by assets decreased Ps 0.6 million, from an income of Ps. 18.2 million during fiscal year 2005 to an income of Ps.
17.6 million during fiscal year 2006, mainly due to a higher reversal of impairment losses during fiscal year 2005 of 3.6 million, partially offset by: (i) an increase of Ps. 0.9 million from exchange differences; and (ii) a
higher interest income of Ps. 2.1 million.

Financial results generated by liabilities increased by Ps. 17.4 million, from a loss of
Ps. 15.8 million during fiscal year 2005 to a loss of Ps. 33.2 million during fiscal year 2006. This increase was mainly attributed to: (i) a higher charge for interest with affiliated companies and other related parties of Ps.
13.0 million mainly resulting from the Argentine peso depreciation vs. the U.S. Dollar of 6.9%. Such depreciation produces a negative impact on our US$ debt for convertible notes, the majority of which is held by our main shareholders;
(ii) the lack of a positive result recorded during fiscal year 2005 of Ps. 5.2 million due to the cancellation of derivate instruments, and of Ps. 2.2 million due to less indebtedness originated in the advanced cancellation of
financial loans recorded during such fiscal year, partially offset by a less charge of financing expenditures of Ps. 5.0 million generated by a reduction of our debt through the re-structuring of such debt during fiscal year 2005.

Other expense, net

Other
expense, net increased Ps. 2.4 million, from Ps 7.4 million during fiscal year 2005 to Ps. 9.8 million during fiscal year 2006, mainly due to: (i) an allowance for doubtful expenses to be recovered of Ps. 7.5 million; partially
offset by; (ii) an income of Ps. 2.4 million generated by the accelerated recognition of the amounts of attendance from our subsidiary Mendoza Plaza Shopping; (iii) a decrease of donations of Ps. 1.5 million; and (iv) a higher
loss of Ps. 1.1 million related to the tax on personal assets of shareholders, as a consequence of the board of directors ́ decision of not transferring such tax.

Income before taxes and minority interest

As a result of the factors described above, income before taxes and minority interest registered a Ps. 27.0 million increase from Ps. 70.9 million during fiscal year 2005 to Ps. 97.9 million during
fiscal year 2006.

Income tax

The income tax charge increased Ps. 14.8 million, from Ps. 33.6 million during fiscal year 2005 to Ps. 48.5 million during fiscal year 2006. The effective tax rate for fiscal year 2006 was 49% and 47%
for fiscal year 2005. The effective rate differs from the statutory tax rate mainly due to non deductible amortization and depreciation charges originated by inflation accounting. We record income taxes using the deferred tax method. Accordingly,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We have treated the
differences between the price-level restated amounts of assets and liabilities and their historical basis as permanent differences for deferred income tax calculation purposes as prescribed by Argentine GAAP.



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Minority interest

Minority interest registered a Ps. 0.8 million increase, from a loss of Ps. 4.0 million during fiscal year 2005 to a loss of Ps.
4.8 million during fiscal year 2006.

Net income

As a result of the factors explained above, net income increased Ps. 11.4 million, from Ps. 33.3 million during fiscal year 2005 to Ps.
44.7 million during fiscal year 2006.

Fiscal Year 2005 as compared to Fiscal Year 2004

Revenues

Revenues increased
60.7%, from Ps. 143.3 million during fiscal year 2004 to Ps. 230.2 million during fiscal year 2005. Total revenues include intersegment eliminations from lease revenues and expenses of Ps. 0.3 million during fiscal year 2004 and
fiscal year 2005.

Leases and Servicesregistered a 46.2% increase from Ps. 113.4 million during fiscal year 2004 to Ps.
165.8 million during fiscal year 2005, mainly resulting from: (i) a sustained increase of 29.6% in sales of our tenants (from Ps. 1,148 million in 2004 to Ps. 1,488 million in 2005), shown in the growth of our revenues from
rental and admission rights for Ps. 37.7 million; (ii) the inclusion of Mendoza Plaza Shoppings revenues of Ps. 9.2 million resulting from the consolidation of such company as from October 1, 2004 due to gaining control as a
result of the acquisition of an additional 49.9% interest and; (iii) the inauguration of Alto Rosario Shopping that took place on November 9, 2004, which produced an increase in revenues of Ps. 5.5 million.

Revenues from credit card operation increased by 114.9% from Ps. 30.0 million during fiscal year 2004 to Ps. 64.6 million during fiscal
year 2005. The increased revenue from credit card operation recorded by Tarjeta Shopping was due to the growth of our customer portfolio, our sales and the number of cardholders, all driven by the economic recovery that has taken place during the
year, which led Tarjeta Shopping to the opening of new branches in different cities country-wide.

Revenues from others segment did
not change significantly from the previous fiscal year, recording amounts of Ps. 0.1 million in both fiscal years.

Costs

Total costs increased by 26.0%, from Ps. 73.4 million during fiscal year 2004 to Ps. 92.5 million during fiscal year
2005. Total costs include intersegment eliminations from: (i) leases revenues and expenses of Ps. 0.3 million for both fiscal years; and (ii) interest expense generated by loans used to fund credit card activity of Ps. 1.6 millon
during fiscal year 2004 and Ps. 1.0 million during fiscal year 2005.

Leases and services costs increased by 12.7%, from Ps.
61.4 million during fiscal year 2004 to Ps. 69.2 million during fiscal year 2005. This increase was mainly due to: (i) the costs related to the opening of Alto Rosario Shopping, which amounted to Ps. 4.9 million; and (ii) the
consolidation of Mendoza Plaza Shoppings costs for nine months totaling Ps. 3.2 million. The most costs affected were amortization charges and non-recovered general expenses.

The cost of credit card operations increased by 77.1%, from Ps. 13.8 million during fiscal year 2004 to Ps. 24.5 million during fiscal
year 2005. This increase was mainly due to: (i) an increase of the cost of salaries and social security charges of Ps. 3.6 million, (ii) an increase of taxes, duties and contributions of Ps. 1.5 million resulting from the
expansion and opening of new branches; (iii) an increase of commissions and interest charges of Ps. 2.3 million; and (iv) an increase of fees and services expenses of Ps. 1.6 million altogether related to the issue of new series of
Financial Trusts.



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Costs from others segment did not change significantly from the previous fiscal year, although it
increased from Ps. 0.03 million during fiscal year 2004 to Ps. 0.2 million during fiscal year 2005.

Gross Profit

Due to the factors mentioned above, gross profit increased 97.1%, from Ps. 69.8 million during fiscal year 2004 to Ps.
137.6 million during fiscal year 2005. Total gross profit includes intersegment eliminations of Ps. 1.6 million during fiscal year 2004 and Ps. 1.0 million during fiscal year 2005.

Gross profit, calculated in terms of total revenues percentage, increased from 48.7% during fiscal year 2004 to 59.8% during fiscal year 2005.

Gross profit from leases and services, calculated in terms of leases and services revenues percentage, increased from 45.9% during
fiscal year 2004 to 58.3% during fiscal year 2005. Credit card operations gross profit, calculated as a percentage of revenues from credit card operations, increased from 54.0 % during fiscal year 2004 to 62.1% during fiscal year 2005.
Gross profit (loss) from others segment, calculated as a percentage of others revenues, fell from 55.7% during fiscal year 2004 to (68.5)% during fiscal year 2005.

Selling expenses

Selling expenses registered a 152.1% increase, from Ps. 9.8 million
during fiscal year 2004 to Ps. 24.8 million during fiscal year 2005.

Selling expenses from leases and services increased by
112.6% from Ps. 5.2 million during year 2004 to Ps. 11.0 million during year 2005. This increase was mainly due to: (i) an increase in the charge of allowance for doubtful accounts of Ps. 3.4 million; (ii) an increase in the
gross revenue tax charges of 1.4 million related to the increase of our revenues previously mentioned; (iii) the consolidation of Mendoza Plaza Shopping expenses of Ps. 1.3 million; and (iv) seal taxes of Ps. 0.4 million due to
the opening of Alto Rosario Shopping.

Selling expenses from credit card operations increased by 200.0% from Ps. 4.5 million
during fiscal year 2004 to Ps. 13.5 million during fiscal year 2005. This increase was mainly due to: (i) an increase of advertising expenses of Ps. 6.3 million; (ii) an increase in the gross revenue tax charges of 2.1 million
related to the increase of our revenues previously stated; and (iii) an increase of the charge of allowance for doubtful accounts of Ps. 0.5 million related to the increase of our credit portfolio.

Selling expenses from others segment did not change significantly from the previous fiscal year, recording losses of Ps. 0.1 million during
fiscal year 2004 and Ps. 0.3 million during fiscal year 2005.

Selling expenses, calculated in terms of total revenues percentage,
increased from 6.9% during fiscal year 2004 to 10.8% during fiscal year 2005.

Selling expenses from leases and services, calculated
in terms of revenues from leases and services percentage, increased from 4.6% during fiscal year 2004 to 6.6% during fiscal year 2005.

Selling expenses from credit card operations, calculated in terms of revenues from credit card operations percentage increased from 15.0% during fiscal year 2004 to 20.9% during fiscal year 2005.

Selling expenses from others segment, calculated in terms of revenues from others segment percentage increased from 197.2% during fiscal year 2004
to 206.6% during fiscal year 2005.

Administrative expenses

Administrative expenses increased by 53.8% from Ps. 20.7 million during fiscal year 2004 to Ps. 31.9 million during fiscal year 2005.



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Administrative expenses from leases and services increased from Ps. 12.5 million during
fiscal year 2004 to Ps. 16.9 million during fiscal year 2005 mainly due to: (i) the consolidation of Mendoza Plaza Shoppings administrative expenses of Ps. 1.3 million; (ii) an increase of the board of directors ́ fees of
Ps. 1.5 million; (iii) an increase of the amount of salaries, bonuses and social security charges of Ps. 1.4 million; and (iv) an increase of tax charges, duties and contributions of Ps. 1.1 million, mainly due to an increase of the
financial transactions tax.

Administrative expenses from credit card operations increased Ps. 6.7 million from Ps.
8.2 million during fiscal year 2004 to Ps 14.9 million during fiscal year 2005 mainly due to: (i) an increase of the amount of salaries, bonuses and social security charges of Ps. 3.5 million as a consequence of an increase in
the Companys payroll; (ii) an increase in fees and third parties services of Ps. 1.6 million related to new issues of our securitization programs; and (iii) an increase of tax charges, duties and contributions of Ps.
0.6 million and rent expenses of Ps. 0.5 million due to the opening of new branches.

Administrative expenses from others
segment did not change significantly from the previous fiscal year, recording charges of Ps. 0.03 million in both fiscal years.

Administrative expenses, calculated as a percentage of total revenues, decreased from 14.5% during fiscal year 2004 to 13.8% during fiscal year 2005.

Administrative expenses from leases and services, calculated as a percentage of leases and servicies revenues, decreased from 11.0% during fiscal year 2004 to 10.3% during fiscal year 2005.

Administrative expenses from credit card operations, calculated as a percentage of credit card operations revenues, decreased from 27.3% during
fiscal year 2004 to 23.1% during fiscal year 2005.

Administrative expenses from others segment, calculated as a percentage of
others segment revenues, decreased from 47.3% during fiscal year 2004 to 30% during fiscal year 2005.

Net income in credit card
trust

Net income in credit card trust increased from Ps. 0.3 million during fiscal year 2004 to Ps. 0.4 million during
fiscal year 2005.

Operating income

As a result of the factors mentioned above, operating income increased from Ps. 39.6 million during fiscal year 2004 to Ps. 81.4 million during fiscal year 2005.

Operating income from leases and services increased Ps. 34.3 million, from Ps. 34.3 million during fiscal year 2004 to Ps.
68.6 million during fiscal year 2005.

Operating income from credit card operations increased Ps. 8.3 million, from Ps.
3.8 million during fiscal year 2004 to Ps. 12.1 million during fiscal year 2005.

Operating loss from others segment
increased Ps. 0.3 million, from Ps. 0.1 million during fiscal year 2004 to Ps. 0.4 million during fiscal year 2005.

Operating income, as a percentage of our total revenues, increased from 27.6% during fiscal year 2004 to 35.4% during fiscal year 2005.

Operating income from leases and services as a percentage of our total revenues, increased from 30.2% during fiscal year 2004 to 41.4% during fiscal year 2005.

Operating income from credit card operations as a percentage of our total revenues from credit card operations, increased from 12.6% during fiscal
year 2004 to 18.8% during fiscal year 2005.



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Operating loss from others segment as a percentage of our total revenues from others segment,
increased from 188.8% during fiscal year 2004 to 305.0% during fiscal year 2005.

Equity loss from related companies

The result arising from our share in other companies registered a Ps. 0.4 million improvement, from a loss of Ps.
1.1 million during fiscal year 2004 to a loss of Ps. 0.7 million during fiscal year 2005, mainly due to: (i) a decrease in the loss from E-Commerce Latina S.A. in which we share an interest of 50%; and (ii) the consolidation of
Mendoza Plaza Shopping as from October 2004 as a consequence of our acquisition of an additional 49.9% ownership interest.

Amortization of goodwill

The amortization of goodwill did not change from the previous fiscal year, amounting to Ps.
4.8 million for 2004 and for 2005. Such amount represents the amortization of the goodwill generated by the acquisition of Shopping Alto Palermo S.A., Fibesa S.A. and Tarshop.

Financial results, net

Financial results, net decreased Ps. 4.9 million, from an income of Ps. 7.3 million during fiscal year 2004 to an income of Ps. 2.4 million during fiscal year 2005.

Financial results generated by assets decreased Ps 13.6 million, from an income of Ps. 31.8 million during fiscal year 2004 to an income of Ps.
18.2 million during fiscal year 2005, mainly due to a higher recovery recorded during fiscal year 2004 in the allowance for impairment of long-lived assets.

Financial results generated by liabilities decreased by Ps. 8.7 million, from a loss of Ps. 24.5 million during fiscal year 2004 to a loss of Ps. 15.8 million during fiscal year 2005. This decrease was
mainly attributed to: (i) a lesser charge for interest with affiliated companies and other related parties of Ps. 12.0 million mainly resulting from the Argentine peso appreciation vs. the U.S. Dollar of 2.4%, taking into account that
during year 2004 the value of the foreign currency had an inverse performance by depreciating 5.6%. Such appraisal produces a positive impact on our US$ debt for convertible notes, the majority of which is held by our main shareholders;
(ii) less income of Ps. 6.0 million recorded in year 2005 in connection with derivative financial instruments cancelled in April 2005; (iii) a larger income of Ps. 2.1 million originated during fiscal year 2005 mainly due to the
cancellation with discount of financial loans owed by Mendoza Plaza Shopping S.A.; (iv) a decrease of the financial expenses of Ps. 0.9 million primarily due to less indebtedness originated after the repurchase and cancellation of
Negotiable Obligations and the capitalization of interest allocated to the development of Alto Rosario, that were partially offset by the inclusion of the financing expenses of Mendoza Plaza Shopping S.A. and charges arising from the new loans taken
by the Company. We would like to mention that these new loans accrue a lower rate of interest if compared with the loans previously cancelled during the year.

Other expense, net

Other expense, net increased Ps. 2.2 million, from Ps
5.2 million during fiscal year 2004 to Ps. 7.4 million during fiscal year 2005, mainly due to: (i) an increase of donations of Ps. 1.6 million; (ii) a loss of Ps. 1.5 million related to the tax on personal assets of
shareholders, as a consequence of the board of directors ́ decision of not transferring such tax; partially offset by: (iii) the non-existence of negative results for the rejection of a gross income tax exemption on construction for Ps.
2.1 million that were recorded in fiscal year 2004.



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Income before taxes and minority interest

As a result of the factors described above, income before taxes and minority interest registered a Ps. 35.2 million increase from Ps.
35.7 million during fiscal year 2004 to Ps. 70.9 million during fiscal year 2005.

Income tax

The income tax charge increased Ps. 17.3 million, from Ps. 16.3 million during fiscal year 2004 to Ps. 33.6 million during fiscal year
2005. The effective tax rate for fiscal year 2005 was 47% and 46% for fiscal year 2004. The effective rate differs from the statutory tax rate mainly due to non deductible amortization and depreciation charges originated by inflation accounting. We
record income taxes using the deferred tax method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. We have treated the differences between the price-level restated amounts of assets and liabilities and their historical basis as permanent differences for deferred income tax calculation purposes as
prescribed by Argentine GAAP.

Minority interest

Minority interest registered a Ps. 3.4 million decrease, from a loss of Ps. 0.6 million during fiscal year 2004 to a loss of Ps.
4.0 million during fiscal year 2005. This increase was mainly due to the consolidation of the nine-month period results of Mendoza Plaza Shopping S.A. and an increase in the income registered by our subsidiary Tarshop.

Net income

As a result of the
factors explained above, net income increased Ps. 14.4 million, from Ps. 18.8 million during fiscal year 2004 to Ps. 33.3 million during fiscal year 2005.

B. Liquidity and Capital Resources

Our main liquidity and capital resources requirements include:



| |  |  | the acquisition of shopping centers;
| | - |  | ------------------------------------



| |  |  | the development of new shopping centers;
| | - |  | ----------------------------------------



| |  |  | the improvement of existing shopping centers;
| | - |  | ---------------------------------------------



| |  |  | the development of residential properties for sale;
| | - |  | ---------------------------------------------------



| |  |  | working capital needs; and
| | - |  | --------------------------



| |  |  | the maintenance of cash and other liquid assets to enable us to take advantage of the acquisition and development opportunities as they arise.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, 2006, we had cash and cash equivalents totaling Ps. 56.4 million, a 13.5% increase from Ps. 49.7 million held as of
June 30, 2005, primarily due to an increase in cash provided by operating activities of Ps. 75.5 million and a decrease in cash used in financing activities of 12.3 million, partially offset by an increase in cash used in investing
activities of Ps. 62.5 million.

During the fiscal year 2006, we cancelled the second installment of US$ 3.0 million corresponding to
the loan for US$ 11.0 million granted by Deutsche Bank for Mendoza Plaza Shopping ́ s debt restructuring. On August 1, 2006, we cancelled the balance of the loan of US$ 3.0 million. Regarding the syndicated loan of Ps.
50.0 million with Banco Rio de la Plata and Bank Boston N.A. taken during fiscal year 2005, we cancelled half of the capital in two equal installments on October 5th, 2005 and on April 5th, 2006.



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Net Cash from Operating Activities

Our operating activities resulted in a net cash generation of Ps. 170.7 million and Ps. 95.1 million for fiscal years 2006 and 2005,
respectively. Net cash generated by operations during the fiscal year 2006 increased by Ps. 75.5 million as compared to fiscal year 2005, primarily due to an increase in operating cash inflows without considering changes in certain assets and
liabilities of Ps. 62.8 million, an increase in trade accounts payable and accrued interests of Ps. 45.2 million and a decrease in inventory of Ps. 18.2 million, partially offset by increases in accounts receivable of Ps.
32.0 million and a decrease in customer advances and taxes payable of Ps. 21.0 million.

Our operating activities resulted in a net
cash generation of Ps. 95.1 million and Ps. 78.5 million for fiscal years 2005 and 2004, respectively. Net cash generated by operations during the fiscal year 2005 increased by Ps. 16.6 million as compared to fiscal year 2004,
primarily due to an increase in operating cash inflows without considering changes in certain assets and liabilities of Ps. 49.7 million and an increase in customer advances of Ps. 15.0 million, partially offset by increases in accounts
receivable and other receivables and prepaid expenses totaling Ps. 43.5 million and a decrease in accrued interest of Ps. 7.7 million.

Net Cash Used in Investing Activities

The net cash used in investing activities was Ps. 124.0 million and Ps.
61.5 million for fiscal years 2006 and 2005, respectively. The increase in net cash used in investing activities was primarily the result of: (i) the increase in cash used for the acquisition of Phillips Argentinas plot of land and
other land reserve amounting to Ps. 61.3 million during fiscal year 2006 compared to Ps. 0.7 million during fiscal year 2005, (ii) an increase of Ps. 30.3 million related to the improvements of our shopping center properties, and
(iii) Ps. 8.6 million corresponding to a deposit in guarantee kept in the Deustche Bank in favor of Argentimo S.A. related to an agreement entered into between Alto Palermo S.A., Argentimo S.A. and Constructora San José Argentina
S.A. by which the guidelines are established for negotiating the acquisition of land to develop a commercial center and a dwelling and / or office building.

The net cash used in investing activities was Ps. 61.5 million and Ps. 17.9 million for fiscal years 2005 and 2004, respectively. The increase in net cash used in investing activities was primarily the
result of: (i) the increase in cash used for the construction of Alto Rosario Shopping and for the acquisition of other fixed assets amounting to Ps. 50.6 million during fiscal year 2005 as compared to Ps. 20.4 million during fiscal
year 2004, and (ii) Ps. 4.2 million (US$ 1.77 million corresponding to the first installment, net of cash acquired) related to the acquisition of 49.9% of the capital stock of Mendoza Plaza Shopping S.A. We acquired Mendoza Plaza
Shopping S.A. for a total amount of US$ 5.3 million, of which US$ 1.77 million was paid on December 2, 2004 and the remaining balance was paid in two equal annual installments of US$ 1.77 million each beginning on
September 29, 2005 and 2006.

Net Cash Used in/ Provided by Financing Activities

The net cash used in financing activities was Ps. 40.0 million for fiscal year 2006, primarily due to the payment of debts of Ps. 42.0 million
and the payment of dividends of Ps. 29.0 million and the cancellation of Ps. 5.1 million corresponding to the second installment related to the acquisition of 49.9% of the capital stock of Mendoza Plaza Shopping S.A., partially offset by
cash inflows of Ps. 38.4 million as a result of new loans and advances in current account.

The net cash used in financing activities
was Ps. 52.2 million for fiscal year 2005, mainly due to the payment of debts of Ps. 133.3 million and the payment of dividends of Ps. 18.4 million, partially offset by cash inflows of Ps. 99.5 million as a result of new loans
and the settlement of the swap agreement.

The net cash used in financing activities was Ps. 20.6 million during fiscal year 2004,
mainly due to the payment of debts of Ps. 10.9 million and the payment of dividends of Ps. 10.0 million, partially offset by cash inflows of Ps. 0.3 million as a result of new loans.



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Our working capital and our cash from operating activities are adequate for our present and future
requirements. In the event that cash generated from our operations is at any time insufficient to finance our working capital, we would seek to finance such working capital needs through debt or equity financing or selective asset sales.



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Our Indebtedness

On January 18, 2001, we issued US$ 120.0 million of secured Senior Notes (the Senior Notes) due on January 13, 2005 in three classes: (i) US$ 40.0 million of Class A-2 notes
due January 13, 2005, at a corrected Badlar interest rate plus 395 basis points; (ii) US$ 5.0 million of Class B-1 notes, which we issued together with our wholly-owned subsidiary SAPSA, and which were due on January 13, 2005, at
a 90-day LIBOR plus 475 basis points, and (iii) US$ 75.0 million of Class B-2 notes, which we issued together with SAPSA, maturing at various dates through January 13, 2005, at a corrected Badlar rate plus 395 basis points. The
proceeds from this issuance were used to repay financial indebtedness, including outstanding mortgage-collateralized borrowings and other short-term debts. The proceeds from the issuance of the Senior Notes were used to repay financial indebtedness,
including outstanding mortgage-collateralized borrowings and other short-term debts. Pursuant to Decree N° 214, debts in U.S. Dollars in the Argentine financial system were converted to pesos at the rate of exchange of Ps. 1.0 per US$ 1.0
and adjusted based on the Coeficiente de Estabilización de Referencia(CER). In addition, a fixed interest rate between 6% and 8% was established by the Argentine Central Bank for debts converted to pesos. By June 30, 2005 we had
fully paid the Senior Notes. During fiscal years 2001, 2002, 2003, 2004 and 2005 we repurchased and/or made principal payments at their maturity amounting to Ps. 2.5 million, Ps. 11.3 million, Ps. 85.4 million, Ps. 3.3 million
and Ps. 17.5 million, respectively. The Senior Notes were collateralized by a pledge on the shares of our subsidiary SAPSA and included various restrictive covenants, which among other things required us to maintain certain financial ratios.

On April 7, 2000, we issued Ps. 85.0 million 14.875% unsecured notes due April 7, 2005 (the Notes). Proceeds
from this issuance were used to repay outstanding bridge financing. The Notes included various restrictive covenants, which among other things required us to maintain certain financial ratios. During the years ended June 30, 2001, 2002, 2003
and 2005, we redeemed Ps. 18.1 million, Ps. 15.5 million, Ps. 1.8 million and Ps. 1.2 million of the Notes, respectively, at different prices below par plus accrued interest. On April 7, 2005 we paid the balance of the Notes
amounting to Ps. 48.4 million.

In order to cancel the balance of the Notes, on April 5, 2005 we undertook a syndicated loan for Ps.
50.0 million with Banco Rio de la Plata and Bank Boston N.A. This loan is amortized in four equal and consecutive semiannual installments of Ps. 12.5 million beginning October 5, 2005. The syndicated loan accrues interest at a fixed
rate of 7.875% during the first year and will accrue interest at a variable rate (Encuesta) plus 3% during the second year. The terms and conditions of the syndicated loan include various restrictive covenants, which among other things require us to
maintain certain financial ratios. During fiscal year 2006, Alto Palermo S.A. prepaid 50% of the principal in two equal installments on October 5, 2005 and on April 5, 2006. On October 5, 2006, after the closing of fiscal year 2006,
Alto Palermo S.A. amortized the third principal installment for Ps.12.5 million. The outstanding balance as of such date amounts to Ps.12.5 million.

In connection with the issuance of the Notes, we entered into an interest rate swap agreement with Morgan Guaranty Trust to reduce the related financing costs of the Notes. Pursuant to this agreement we had converted
our peso-denominated fixed-rate debt (Notes) to peso-denominated floating-rate debt. This swap agreement initially allowed us to reduce the net cost of our debt. However, subsequent to June 30, 2001, we modified the swap agreement due to an
increase in interest rates as a result of the economic situation prevailing at that moment in Argentina. Under the terms of the revised agreement, we converted our peso-denominated fixed rate debt (Notes) to U.S. Dollar-denominated floating
rate debt for a notional amount of US$ 69.1 million with maturities through April 2005. As collateral for the revised agreement, we were required to make a deposit of US$ 50.0 million with the counterparty. As a result of the devaluation
of the Argentine peso, we recorded net losses totalling US$ 45.0 million in connection with the swap agreement. On April 1, 2005, the swap agreement became due and as a result we collected US$ 5.5 million in cash (including US$
0.5 million of interest on the collateral deposit). This amount represents the net amount of the collateral deposit (including interest) and the amount payable for the swap agreement at its maturity.

In order to finance the US$ 50.0 million collateral deposit and the subsequent transactions related to the swap, we entered into loan agreements
with IRSA and Parque Arauco. As of June 30, 2002 our debt with IRSA and Parque Arauco under those loan agreements amounted to Ps. 45.6 million and Ps. 22.9 million respectively.



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In addition, between May and July 2002, IRSA and Parque Arauco granted to us loans for US$
10.1 million and US$ 4.9 million respectively. The annual interest rate for such loans was 10%. The funds obtained under these loans have been used to fully cancel our short-term bank debt for the total amount of Ps. 43.8 million plus
the accrued CER adjustment. On February 17, 2003, we entered into a repurchase agreement (the Repurchase Agreement) with IRSA and Parque Arauco in which each company granted to us loans for Ps. 4.2 million and Ps.
2.1 million, respectively. According to the Repurchase Agreement, we made a collateral deposit of Ps. 15.5 million Senior Notes with IRSA and other of Ps. 7.8 million Senior Notes with Parque Arauco. On November 5, 2004, we
agreed to repurchase on January 7, 2005 the securities at a price of Ps. 5.1 million and Ps. 2.6 million from IRSA and Parque Arauco, respectively. The amounts we owed under the loans which were granted to us from IRSA and Parque
Arauco, were used by IRSA and Parque Arauco to partially subscribe our offering of US$ 50.0 million Convertible Notes on August 20, 2002 (the Convertible Notes). IRSA and Parque Arauco subscribed for US$ 27.2 million and
US$ 15.2 million respectively of our Convertible Notes.

On August 20, 2002 we issued US$ 50.0 million of uncollateralized
convertible notes (the Convertible Notes) in exchange for cash and the settlement of certain liabilities with our shareholders. Raymond James Argentina Sociedad de Bolsa S.A. acted as subscription and placement agent and the offer was
subscribed in full. Proceeds from the issuance of Convertible Notes were used to repay short-term bank loans for Ps. 27.3 million and for the redemption of the Senior Notes for a principal amount of Ps. 52.8 million. The Convertible Notes
original maturity date was on July 19, 2006, they accrue interest (payable semiannually) at a fixed annual rate of 10% and are convertible, at any time at the option of the holder, into common shares of Ps. 0.10 par value per share. The
conversion rate per U.S. Dollar is the lesser of 30.8642 and the result obtained from dividing the exchange rate in effect at the conversion date by the par value of our common shares. On May 2, 2006 during an extraordinary
noteholders meeting, a resolution was adopted to extend the maturity date and establishing a new maturity date on July 19, 2014, although the remaining terms and conditions were left unchanged. During fiscal years 2006, 2005, 2004 and
2003 holders of approximately US$ 2.77 million of our Convertible Notes exercised their conversion rights and, as a result, we issued 1,539,000; 52,741,373; 22,852,514 and 4,829,745 common shares, respectively. By November 30, 2006 the
outstanding balance of our Convertible Notes amounted to US$ 47,227,934 million. In the event all the bondholders exercise their conversion rights, our common shares would increase from 782.1 million (Ps. 78.2 million) to 2,239.7 million
(Ps. 224.0 million).

On September 29, 2004, we entered into a purchase agreement pursuant to which we acquired an additional 49.9%
ownership interest in Mendoza Plaza Shopping for US$ 5.3 million. The Company paid US$ 1.77 million on December 2, 2004 and the remaining balance was paid in two equal annual installments of US$ 1.77 million each on September 29,
2005 and 2006. We also entered into the following contracts in connection with debt owed by Mendoza Plaza Shopping:



| |  |  | Put option with Banco de Chile S.A. (Banco de Chile), whereby Banco de Chile was entitled, although not obliged, to assign to us two defaulted credit agreements
amounting to US$ 18.0 million originally granted to Mendoza Plaza Shopping. As a result of the economic measures issued in Argentina in 2002, these financial agreements had been converted into Argentine pesos at the exchange rate of Ps.
1.0 per U.S. Dollar and indexed based on the reference stabilization index (CER). On March 30, 2005 Banco de Chile executed the put option, transferring all the rights of the above mentioned credit facilities to us in exchange for US$
8.5 million (Ps. 24.8 million).
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Call option with HSBC Bank Argentina S.A. (HSBC), whereby we were entitled, although not obliged, to acquire, and HSBC Bank Argentina S.A. was obliged to transfer, a
defaulted loan agreement originally granted to Mendoza Plaza Shopping amounting to US$ 7.0 million. As a result of the economic measures issued in Argentina in 2002, this financial agreement had been converted into Argentine pesos at the exchange
rate of Ps. 1.0 per U.S. Dollar and indexed by the reference stabilization index (CER). On March 29, 2005 we transferred the purchase option to Mendoza Plaza Shopping, which exercised the option paying Ps. 6.8 million for the
settlement of the loan (corresponding to the exercise price of Ps. 7.2 million net of rental fees collected by HSBC Bank Argentina S.A. as guarantee amounting to Ps. 0.4 million). This cash payment was funded through a loan granted by us.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We also entered into an agreement with Inversiones Falabella Argentina S.A. (Falabella), the
remaining minority shareholder of Mendoza Plaza Shopping, pursuant to which, among other things, Falabella has the irrevocable right to sell to us (put option) its ownership interest in Mendoza Plaza Shopping for a total consideration of US$ 3.0
million. The put option can be exercised until the last business day of October 2008. At the date of issuance of this annual report, Falabella has not exercised the put option.

On May 31, 2005 the shareholders of Mendoza Plaza Shopping approved the conversion of debt owed to APSA totaling Ps. 36.1 million into common
shares. As a result of this transaction, we increased our ownership interest in Mendoza Plaza Shopping from 68.8% to 85.4%.

On
March 4, 2005 Deutsche Bank S.A. granted us an US$ 11.0 million loan, of which US$ 5.0 million were repaid by the Company on April 4, 2005 with proceeds received in connection with the settlement of the swap agreement. The loan
accrues interest at LIBOR plus 3.25%. Proceeds from this loan were used to settle the debt owed by Mendoza Plaza Shopping as a result of the exercise of the put option with Banco de Chile and the call option with HSBC. The balance of the loan was
cancelled in two equal installments of US$ 3.0 million on February 1 and on August 1, 2006.

As of June 30, 2006, the
Company ́s financial indebtedness is at the lowest levels of the last years, successfully reflecting the restructuring carried out during the prior fiscal year. The following table shows our significant outstanding debt as of June 30, 2006
(accrued interest not included):



|                   |  |                                   |  |           |  |                 |   |  |             |    
|------------------ |  | --------------------------------- |  | --------- |  | --------------- | - |  | ----------- | ---
|                   |  | Debt Outstanding on June 30, 2006 |  |           |  |                 |   | 
|                   |  | Ps.                               |  | US$(1)    |  | Interest Rate   |   |  | Maturity    |    
|                   |  | (million)                         |  | (million) |  |                 |   |  |             |    
|Deutsche Bank Loan |  | 9.26                              |  | 3.00      |  | Libor + 3.25    | % |  | August 2006 | (2)
|Syndicated Loan    |  | 25.00                             |  | 8.10      |  | Encuesta + 3.25 | % |  | April 2007  |    
|Convertible Notes  |  | 145.75                            |  | 47.23     |  | 10              | % |  | July 2014   |    
|Total Debt         |  | 180.01                            |  | 58.33     |  |                 |   |  |             |    

---

|(1) | Solely for the convenience of the reader, we have translated Peso amounts into U.S. Dollars at the exchange rate quoted by Banco de la Nación Argentina for June 2006 which
was Ps. 3.086 per US$ 1.0. We make no representation that the Peso or U.S. Dollar amounts actually represent, could have been or could be converted into U.S. Dollars at the rates indicated, at any particular rate or at all. See
Exchange Rates.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The balance of the loan was totally cancelled on August 1, 2006.
|--- | ----------------------------------------------------------------

Our capital expenditures

Fiscal year 2006

During fiscal year 2006 we invested approximately Ps. 100.2 million in capital expenditures of which Ps. 61.3 million were related to the
acquisition of a plot of land in the Northern Area of the City of Buenos Aires, in the district of Saavedra, and other undeveloped plots of land, Ps. 30.3 million correspond to the improvements made to our shopping center properties and Ps.
8.6 million kept in escrow in the Deustche Bank in favor of Argentimo S.A. pursuant to an agreement entered into between Alto Palermo S.A., Argentimo S.A. and Constructora San José Argentina S.A. which sets forth the guidelines for
negotiating the acquisition of land in which we plan to develop a commercial center and a dwelling and/or office building. For more information on our capital expenditures after June 30, 2006, see Item 8.B. Significant changes of
this annual report.



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Fiscal year 2005

During fiscal year 2005 we invested approximately Ps. 51.3 million in capital expenditures, Ps. 50.6 million were related to the development of Alto Rosario and improvements of our shopping center
properties, Ps. 4.2 million (US$ 1.77 million corresponding to the first installment, net of cash acquired) related to the acquisition of 49.9% of the capital stock of Mendoza Plaza Shopping S.A. We acquired Mendoza Plaza Shopping S.A. for
a total amount of US$ 5.3 million, and Ps. 0.6 million related to the acquisition of undeveloped plots of land.

Fiscal year
2004

During fiscal year 2004 we invested approximately Ps. 20.6 million in capital expenditures, related to the development of
Alto Rosario Shopping and improvements of other shopping center properties.

Recent Developments

Phillips Argentinas Plot of land

On December 1, 2006, we entered into a construction, administration and commercialization agreement with Centro Comercial Panamericano, S.A. (Centro Comercial Panamericano) in relation to the future shopping mall and
housing complex to be built on two properties located in the neighborhood of Saavedra, in the City of Buenos Aires owned by Panamerican Mall S.A. (PAMSA). We sold one of these properties (a plot of land acquired from Philips Argentina
S.A.) to PAMSA. The remaining property was acquired by PAMSA from Centro Comercial Panamericano.

PAMSA is a corporation recently
constituted in which we hold 80% of its capital stock. Centro Comercial Panamericano holds the remaining 20%. PAMSA was organized in order to carry out the agreement entered into between us and Centro Comercial Panamericano. In connection with the
aforementioned project, we made a capital contribution of Ps. 158,280,260 to PAMSA.

Commencement of construction of the proposed project
remains subject to receipt of certain governmental approvals.

Córdoba Shopping Villa Cabrera

During July 2006, we entered into an agreement with Grupo Roggio pursuant to which we would acquire, subject to completion of a successful due diligence
and the fulfillment of certain conditions, the total outstanding shares of Empalme S.A, owner of Córdoba Shopping Villa Cabrera.

Córdoba Shopping Villa Cabrera is a shopping center covering a surface area of 35,000 square meters, having 160 commercial stores, a multiplex cinema with 12 movie theatres and a parking lot for 1,500 vehicles, located in the Villa
Cabrera neighborhood of the city of Córdoba, the second largest city of Argentina.

On December 18, 2006 the transaction was
approved and consummated by the Antitrust Agency through Resolution SCI N° 67 of the Secretary of Commerce. This investment will be an opportunity for Alto Palermo to grow in the shopping center segment, in line with its strategy of expanding
and gaining foothold in the main markets of the Argentine provinces.

Proposed Acquisition in Province of Córdoba

On December 19, 2006, we reported that it was notified of the acceptance of its Ps.32.5 million bid submitted in a public tender organized by
Corporación Inmobiliaria Córdoba S.A. for the sale of a property in the City of Córdoba known as Edificio Ex Escuela Gobernador Vicente de Olmos. The acquired property is the subject of a concession granted in 1990 by the
Province of Cordoba to an unaffiliated joint venture Regam S.C.A. y Corrientes Palace S.A. Unión Transitoria de Empresas. After notification of the acceptance of its bid, the Company made a Ps. 9.7 million down payment in
accordance to the bid rules.

On December 13, 2006, we were notified by a notary that on December 5, 2006, an objection had been
filed with the National Antitrust Commission, the Argentine antitrust authority, seeking to enjoin the Company from accepting the award made pursuant to the tender. To date, we have not received any notification issued by the National Antitrust
Commission.



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Agreement for Shared Corporate Services with IRSA and CRESUD S.A.C.I.F. y A.

In order to reduce administrative expenses and to achieve a more efficient allocation of corporate resources, a program for partial operating integration
was implemented on June 30, 2003 by the Company, Cresud and IRSA (the Parties). The areas now involved are Shared Corporate Services, Human Resources, Finance, Institutional Relations, Administration, Systems, Insurance, Purchasing,
Contracts, Operations and Internal Audit, among others. This program was implemented to reduce operating costs by optimizing the individual administrative efficiencies of each Party.

On the basis of this program, the Parties entered into the Exchange of Operating Services Agreement on June 30, 2004, a two-year agreement (being
renewed for an equal period of time unless any of the Parties decides to terminate it) by which tasks are performed by one or more Parties for the benefit of one or more other Parties in exchange for a fee to be paid primarily through the provision
of services in other areas. Through this agreement, each party continues to maintain its strategic and commercial independence while increasing operating efficiency. This agreement will not affect the independence of each Partys record and
accounting systems or adversely affect internal control systems or external audit tasks. Each party will continue to maintain separate assets and liabilities.

Alejandro Gustavo Elsztain is the General Coordinator of the program and Mr. Abraham Perelman is the individual responsible. The individual responsible for each party shall be member of such Partys Audit
Committee. The main duties of the individual responsible are (a) monitoring the implementation of the project in accordance with the Agreement (b) reviewing the billing report of each party on a monthly basis to analyze and check it
against the provisions of the Agreement, and in the event of discrepancies or deviations preparing a report to submit for the consideration of the General Coordinator, and also by the Parties Boards of Directors and (c) assessing, on a
permanent basis the, results derived from the projects implementation and proposing to the General Coordinator changes in the event of a conflict with the agreement or, if appropriate, the possibility of establishing cost or benefit allocation
mechanisms or criteria more consistent with the goals of the agreement.

In the future and in order to continue with our policy of
achieving a more efficient allocation of corporate resources, we may extend the areas in which we share corporate services with IRSA and Cresud.

Our chairman is also chairman of Cresud and IRSA and our vice-chairman is also vice-chairman of Cresud and IRSA.

We believe that
the terms and conditions of these transactions are consistent in all material respects with those prevailing in the market at the relevant time for agreements between unaffiliated parties

C. Research and Development, Patents and Licenses, etc.

We do not have any research, development, patents or
licenses that are material for the conduct of our business.

D. Trend Information

The Shopping Center industry in Argentina has been benefited from the recovery of the
economy. Our revenues increased by 57.0%, from Ps. 230.2 million during fiscal year 2005 to Ps. 361.4 million during fiscal year 2006 due to a 30.2% increase in leases and services revenues (from Ps. 165.8 million to Ps. 215.9
million) and a 90.5% increase in revenues from credit card operations (from Ps. 64.6 million to Ps. 123.0 million). Revenues from the others segment increased from Ps. 0.1 million to 23.4 million, mainly due to the revenues generated
by the sale of Alcorta Plaza Plot.

The occupancy of our Shopping centers has been one of the ratios that we have been able to maintain in
almost optimum levels during fiscal year 2006. GLA percentage occupied as of June 30, 2006 was 99.1%. The



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drop in the vacancy level in our Shopping Centers reflects an increase in demand as a result of our excellent commercial
offering, and the ability of our commercial department to properly manage this growth in demand from potential tenants.

Tarshop, our
credit card subsidiary, showed good results which were reflected in the substantial growth of its credit portfolio, which amounted to Ps. 393.0 million as of June 30, 2006 as compared to Ps. 204.4 million as of June 30, 2005. In
addition, the amount of sales and the number of credit card holders increased 90.0% and 92.0%, respectively, while short and medium term delinquency rates were maintained at historically low levels. We expanded our operations in the interior of the
country, where our performance was highly satisfactory, and decided to expand into other densely populated cities.

Costs increased by
50.7% from Ps. 92.5 million during fiscal year 2005 to Ps. 139.4 million during fiscal year 2006.

Leases and services costs
increased by 10.7%, from Ps. 69.2 million during fiscal year 2005 to Ps. 76.6 million during fiscal year 2006. This increase was mainly due to: (i) an increase in depreciation and amortization charges of Ps. 4.5 million, and
(ii) an increase in unrecoverable administration fees of Ps. 2.6 million.

Our performance enabled us to distinguish ourselves from
our competitors in the shopping center market in the City of Buenos Aires and the greater Buenos Aires area, while maintaining the efficiency gap obtained over the past fiscal year. For the twelve-month period ended June 30, 2006 our tenants
sold an average of Ps. 12,847 per square meter, 54.7% more than our competitors, in the City of Buenos Aires and the greater Buenos Aires area. Our competitors sales per square meter are determined by calculating the difference between
total square meters of gross leasable area, in the City of Buenos Aires and greater Buenos Aires area, and the square meters of our gross leasable area. Our tenants sales, not including Mendoza Plaza Shoppings sales nor Alto
Rosarios sales, increased 24.5% to Ps. 1,853.0 million during this period in comparison with the Ps. 1,488.0 million reached during fiscal year 2005.

Due to the increased activity in the retail sector, we have been able to negotiate more favorable leasing conditions with our new tenants and the existing tenants upon renewal.

During fiscal year 2006 we maintained our leading position in the shopping center market, holding 38.8% of the gross leasable area available in the City
of Buenos Aires and the greater Buenos Aires area. We are an important channel for positioning first-line brands and high impact promotions.

As part of our business strategy we will continue making changes to attract new customers, including the generation of new offerings in our shopping centers. We have created several exclusive products with the aim of attracting tourists
from abroad, including publicity at hotels, harbors and airports. We also have implemented advertising campaigns at the national and international level. Our customer service centers are now available to respond to questions and confirm the receipt
of orders.

These factors have caused demand for our space to increase, allowing us to choose a higher quality of customers and tenant mix
appropriate for each shopping center. Our tenants also invested significantly in the development of new commercial offerings, improving the conditions offered by each shopping center. We continue to provide our customers with training, advice,
conferences and seminars, thus promoting a stronger relationship with the Company.

Although we expect the positive economic trends to
continue, we cannot assure this will happen. Our business is largely affected by economic downturns. Any decrease in investment and consumption decisions could cause a reduction in retail sales, sales of real estate and commercial space.



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E. Off-Balance Sheet Arrangements

There are no transactions, agreements or other contractual agreements
involving an unconsolidated entity that are not currently reflected in our consolidated balance sheet.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth contractual obligations as of
June 30, 2006 in thousands of Pesos:



|                            |  |                 |  |              |  |              |  |                  |  |          
|--------------------------- |  | --------------- |  | ------------ |  | ------------ |  | ---------------- |  | ---------
|                            |  | Less than 1year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5years |  | Total    
|Long-term debt              |  | 59,940.5        |  | 1,415.3      |  | 268.3        |  | 146,031.7        |  | 207,655.8
|Purchase obligations        |  | 1,024.0         |  | 1,010.1      |  |             |  |                 |  | 2,034.1  
|Other long-term obligations |  | 166.2           |  | 380.6        |  | 416.3        |  | 868.1            |  | 1,831.1  
|                            |  |                 |  |              |  |              |  |                  |  |          
|Total (1)                   |  | 61,130.6        |  | 2,806.0      |  | 684.6        |  | 146,899.8        |  | 211,521.0

---

|(1) | Includes our main financial and related parties debts, foreign suppliers and tax amnesty plan for gross sales tax payable.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(2) | As of June 30, 2006 the average weighted interest rate was 9.66%.
|--- | -----------------------------------------------------------------

|(3) | Does not include unaccrued interest.
|--- | ------------------------------------

G. Safe Harbor

This section is not applicable.

ITEM 6. Directors, Senior Management and Employees

A. Directors and Senior Management

Board of Directors

We are managed by a Board of Directors. Our bylaws establish that our Board of Directors may be composed of eight to twelve directors and eight to twelve
alternate directors. Each director and alternate director is elected for a three-year term by our shareholders by a majority vote at a general ordinary shareholders meeting. The directors and alternate directors may be reelected indefinitely.

Currently our Board of Directors is comprised of 10 directors and 10 alternate directors. The alternate directors will only have a role
when they are called to replace any director in case of absence, vacancy or death, until a new director is appointed.

The annual ordinary
shareholders meeting held last October 31, 2006, which was adjourned for November 30, 2006, decided to make some changes related to the Board of Directors.

Arrangement among Major Shareholders

On November 18, 1997 we and our major shareholders, IRSA
and Parque Arauco, entered into an Agreement, which is still in effect, pursuant to which we agreed that:



| |  |  | the number of directors of our Board of Directors will be ten;
| | - |  | --------------------------------------------------------------



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| |  |  | the directors are appointed pursuant to the shares owned by the shareholders and among the directors elected by IRSA there will be our President and Vice-President;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | as long as Parque Arauco holds at least 25% of our capital stock and IRSA appoints at least 6 directors, IRSA will use its best efforts in order to vote its shares to appoint as our
director a person to be designated by Parque Arauco among the following: José Said, Guillermo Said, or Salvador Said.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Information about Directors



|                                |  |               |  |                         |  |                            |  |                |  |                          
|------------------------------- |  | ------------- |  | ----------------------- |  | -------------------------- |  | -------------- |  | -------------------------
|Name and Position               |  | Date of Birth |  | Occupation in APSA      |  | Date of CurrentAppointment |  | TermExpiration |  | CurrentPosition HeldSince
|Eduardo S. Elsztain             |  | 01/26/1960    |  | Chairman                |  | 2006                       |  | 2009           |  | 1994                     
|Saúl Zang                       |  | 12/30/1945    |  | Vice-Chairman           |  | 2006                       |  | 2009           |  | 2003                     
|Alejandro G. Elsztain           |  | 03/31/1966    |  | Executive Vice-Chairman |  | 2006                       |  | 2009           |  | 2003                     
|Daniel R. Elsztain              |  | 12/22/1972    |  | Director                |  | 2004                       |  | 2007           |  | 2004                     
|Abraham Perelman                |  | 04/04/1941    |  | Director                |  | 2006                       |  | 2009           |  | 2003                     
|Ira Chaplik                     |  | 06/21/1961    |  | Director                |  | 2006                       |  | 2009           |  | 2006                     
|Fernando A. Elsztain            |  | 01/04/1961    |  | Director                |  | 2006                       |  | 2009           |  | 1998                     
|Gabriel A.G. Reznik             |  | 11/18/1958    |  | Director                |  | 2004                       |  | 2007           |  | 2004                     
|José Said Saffie                |  | 04/17/1930    |  | Director                |  | 2006                       |  | 2009           |  | 1998                     
|Andrés Olivos                   |  | 05/14/1958    |  | Director                |  | 2006                       |  | 2009           |  | 2003                     
|David A. Perednik               |  | 11/15/1957    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2003                     
|José D. Eluchans Urenda         |  | 08/06/1953    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2003                     
|Hernán Büchi Buc                |  | 03/06/1949    |  | Alternate Director      |  |                            |  |                |  |                          
|Juan M. Quintana                |  | 02/11/1966    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2003                     
|Pablo Daniel Vergara del Carril |  | 10/03/1965    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2006                     
|Marcos Oscar Barylka            |  | 06/29/1945    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2006                     
|Salvador Darío Bergel           |  | 04/17/1932    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2006                     
|Mauricio Wior                   |  | 10/23/1956    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2006                     
|Gastón Armando Lernoud          |  | 06/04/1968    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2006                     
|Leonardo Fernández              |  | 06/30/1967    |  | Alternate Director      |  | 2006                       |  | 2009           |  | 2003                     

The following is a brief biographical description of each member of our Board of Directors:

Eduardo S. Elsztain. Mr. Elsztain studied Economic Sciences at the University of Buenos Aires. He has been engaged in the real
estate business for more than twenty years. He founded Consultores Asset Management S.A. He is Chairman of the Board of Directors of IRSA, APSA, Consultores Asset Management



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S.A., and Cresud S.A.C.I.F. y A. and Banco de Crédito y Securitización (BACS); Vice-Chairman of Banco
Hipotecario S.A., and E-Commerce Latina S.A., among others. Mr. Eduardo S. Elsztain is the brother of Vice-Chairman, Alejandro G. Elsztain and of our Director, Daniel R. Elsztain and is the cousin of the Director, Fernando A. Elsztain.

Saúl Zang. Mr. Zang obtained a degree in law at the University of Buenos Aires. He is a member of the International Bar
Association and of the Interamerican Federation of Lawyers. He is a founder partner at the law firm Zang, Bergel & Viñes. He is Second Vice Chairman of the Board of Directors of IRSA and Cresud S.A.C.I.F. y A. and he is also a member
of the board of directors of ERSA, Puerto Retiro S.A., Nuevas Fronteras S.A., Cresud S.A.C.I.F. y A., Banco Hipotecario S.A. and Tarshop S.A.

Alejandro G. Elsztain. Mr. Elsztain obtained a degree in Agricultural Engineering from University of Buenos Aires. He is currently President of Tarshop S.A. and ERSA, Director of Altocity and Second Vice-Chairman of IRSA and
Cresud S.A.C.I.F.y A. Alejandro G. Elsztain is a brother of the Chairman of the Board of Directors, Mr. Eduardo S. Elsztain and of the Director Daniel R. Elsztain and cousin of the Director Fernando A. Elsztain.

Daniel R. Elsztain. Mr. Elsztain graduated in Economic Sciences at the Torcuato Di Tella University and has a Master in Business
Administration. He has been the Companys Commercial Director since 1998. Mr. Elsztain is a brother of the Chairman of the Board of Directors, Mr. Eduardo S. Elsztain, and of the Vice-Chairman, Mr. Alejandro G.
Elsztain, and cousin of the Director Fernando A. Elsztain.

Abraham Perelman. Mr. Perelman graduated in Economic
Sciences at the University of Buenos Aires. During the last thirty years he was a director of several outstanding companies in areas such as communications, electronics, aviation, farm technology, public services and art. He also was President of
ISREX Argentina S.A. He is currently a director of Guanaco Mining Co.

Ira Chaplik.Mr. Chaplik is chief operating officer of
Equity International. He has been associated with the Company since its inception in 1999. Mr. Chaplik joined Equity Group Investments, LLC (EGI) in 1989. Prior to the formation of Equity International, he played a
key role in many real estate transactions involving Equity Office Properties Trust (NYSE: EOP), Equity Residential (NYSE: EQR), and Equity Lifestyle Properties, Inc. (NYSE: ELS), as well as the four Zell/Merrill Lynch funds, which led
to the creation of EOP. Mr. Chaplik also has been involved in many corporate transactions including the Zell/Chilmark Fund, as well as acquisitions, dispositions and financing of both public and private companies. Prior to joining EGI,
Mr. Chaplik was an associate at the law firm of Altheimer & Gray. Mr. Chaplik earned a B.S. in accounting and J.D. from the University of Illinois. Mr. Chaplik is also a certified public accountant.

Fernando A. Elsztain. Mr. Elsztain studied Architecture at the University of Buenos Aires. He has been the Chief Commercial Officer of IRSA
since March 1994. He has been engaged in the real estate business as consultant and as managing officer of a familiar real estate company. He is a director of IRSA,and Baldovinos S.A.; and alternate director of Banco Hipotecario S.A., among
others. Mr. Fernando A. Elsztain is the cousin of our Chairman, Eduardo S. Elsztain and is the cousin of our Director Alejandro G. Elsztain.

Gabriel A. G. Reznik. Mr. Reznik obtained a degree in civil engineering from the University of Buenos Aires. He worked for IRSA since 1992 until May 2005 at which time he resigned. He formerly worked for
an independent construction company in Argentina. He is an alternate director of ERSA, Puerto Retiro S.A., Tarshop S.A. and Fibesa S.A., as well as member of the board of Banco Hipotecario S.A., among others.

José Said Saffie. Mr. Said obtained a degree in law at the University of Chile. He is the President of Banco BBVA of Chile and Parque
Arauco S.A.; and director of the Asociación de Bancos e Instituciones Financieras A.G.

Andrés Olivos. Mr. Olivos
graduated as a commercial engineer from the University of Chile. He is Managing Director of Parque Arauco S.A. and Constructora y Administradora Uno S.A.



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David A. Perednik. Mr. Perednik graduated as a public accountant from the University of
Buenos Aires. He has worked in various companies such as Marifran Internacional S.A., a subsidiary of Louis Dreyfus Amateurs, where he acted as Finance Director from 1986 to 1997. Earlier he worked as a senior consultant in the Administration and
Systems management of Deloitte & Touche from 1983 until 1986. He currently works as Administrative Director of Cresud S.A.C.I.F.y A. and IRSA.

José D. Eluchans Urenda. Mr. Eluchans Urenda obtained a degree in law at the Pontifician Catholic University of Chile (Pontificia Universidad Católica de Chile). He is a partner of the
Chilean law firm Eluchans and is a permanent advisor to Parque Araucos board of directors and an advisor to Banco BHIFs board of directors.

Hernán Büchi Buc. Mr. Büchi obtained a degree in civil engineering at the University of Chile and a Masters Degree in economy at Columbia University, New York, U.S.A. From 1979 to
1989, he worked as Undersecretary of Economy, Undersecretary of Health, Minister of Odeplan, Superintendent of Banks and Financial Institutions, and Minister of Finance of Chile. Currently, he is the President of Forestal Terranova and Luchetti and
a director of SQM and Madeco.

Juan M. Quintana. Mr. Quintana obtained a degree in law at the University of Buenos Aires. He is
a partner of the law firm Zang, Bergel & Viñes. He is a director of APSA and an alternate director of Nuevas Fronteras S.A. and Fibesa.

Pablo Daniel Vergara del Carril.Mr. Vergara del Carril obtained a degree in law from the Argentine Catholic University where he teaches Commercial Law and Contract Law. He also teaches Corporate Law,
Contracts and Capital Markets in post-graduate courses. He is a member of the Legal Advisory Committee of the Cámara de Sociedades Anónimas as well as Vice President of the Antitrust Law Committee of the Colegio de Abogados de la
Ciudad de Buenos Aires. He is a member of the board of directors of ERSA, Nuevas Fronteras S.A., Milkaut S.A. and Banco Hipotecario S.A. He is also member of the International Bar Association. Mr. Pablo Vergara del Carril is the son of our
syndic Mr. Ángel D. Vergara del Carril.

Marcos Oscar Barylka.Mr. Barylka studied commercial activities in Gral.
San Martín School. Oscar Barylka has been involved in the retail and the gastronomy industries for over 35 years, having served as partner, manager and consultant for several companies. Since 2006, Mr. Barylka serves as Secretary of the
Pele Ioetz Foundation, which provides support to families suffering economic and social problems in Argentina.

Salvador D. Bergel.
Mr. Bergel obtained a law degree and a PhD from Litoral University (Universidad del Litoral). He is a founding partner of Zang, Bergel & Viñes law firm and a consultant at Repsol YPF S.A. He is also an alternate director
of Cresud S.A.C.I.F. y A.

Mauricio Wior.Mr. Wior obtained a masters degree in finance, as well as a bachelors degree in
economics and accounting from Tel Aviv University in Israel. Mr. Wior is currently a director of Ertach S.A. and Banco Hipotecario S.A. He has held positions at Bellsouth were he was Vice-President for Latin America from 1995 to 2004.
Mr. Wior was also CEO of Movicom Bellsouth from 1991 to 2004. In addition, he led the operations of various cellular phone companies in Uruguay, Chile, Peru, Ecuador and Venezuela. He was president of the Asociación Latinoamericana de
Celulares (ALCACEL); U.S. Chamber of Commerce in Argentina and the Israeli-Argentine Chamber of Commerce. He was director of Instituto para el Desarrollo Empresarial de la Argentina (IDEA), Fundación de Investigaciones
Económicas latinoamericanas (FIEL) and Tzedaka.

Gastón Armando Lernoud.Mr. Lernoud obtained a Law Degree
from El Salvador University (Universidad de El Salvador) in 1992. He finished his Master in Corporate Law at the Palermo University (Universidad de Palermo) in 1996. He was a senior associated member of Zang, Bergel & Viñes Law Firm
until June 2002, and then he entered Cresud S.A.C.I.F. y A as a senior manager.

Leonardo F. Fernández.
Mr. Fernández obtained a degree in law at the University of Buenos Aires. He serves as an alternate director on the board of Disco S.A. and Transportadora de Gas del Norte S.A.



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Employment Contracts With Our Directors

We do not have any employment contracts with our directors.

Executive Committee

Pursuant to our bylaws, our day-to-day business is managed by an Executive Committee consisting of four
directors, including the Chairman and Vice-Chairman. The current members of the Executive Committee are Messrs. Eduardo S. Elsztain, Saúl Zang, Alejandro G. Elsztain and Fernando Elsztain.

The Executive Committee is responsible for the management of the day-to-day business delegated by the Board of Directors in accordance with applicable
law and our bylaws. Our bylaws authorize the Executive Committee to:



| |  |  | designate the managers and establish the duties and compensation of such managers;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | grant and revoke powers of attorney on behalf of us;
| | - |  | ----------------------------------------------------



| |  |  | hire, discipline and fire personnel and determine wages, salaries and compensation of personnel;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | enter into contracts related to our business;
| | - |  | ---------------------------------------------



| |  |  | manage our assets;
| | - |  | ------------------



| |  |  | enter into loan agreements for our business and set up liens to secure our obligations; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | perform any other acts necessary to manage our day-to-day business.
| | - |  | -------------------------------------------------------------------

The Executive Committee does not receive compensation.



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Supervisory Committee

Composition of the Supervisory Committee

The Supervisory Committee (Comisión Fiscalizadora) is
responsible for reviewing and supervising our administration and affairs, and verifying compliance with the by-laws and the resolutions adopted at shareholders meetings.

The members of the Supervisory Committee, the syndics, are appointed at the annual general ordinary shareholders meeting for a term of one year.

The Supervisory Committee is composed of three syndics and three alternate syndics.

Information about Members of the Supervisory Committee

The following table shows information about members of the Supervisory Committee who were elected at the annual general ordinary Shareholders Meeting held on October 31, 2006, which was adjourned for November 30, 2006.
Positions will expire when the next annual general ordinary Shareholders Meeting takes place:



|                             |  |               |  |                   |  |                           
|---------------------------- |  | ------------- |  | ----------------- |  | --------------------------
|Name and Position            |  | Date of Birth |  | Occupation inAPSA |  | Current PositionHeld Since
|Guillermo E. Matta y Trejo   |  | 11/08/1949    |  | Syndic            |  | 2006                      
|José D. Abelovich            |  | 07/20/1956    |  | Syndic            |  | 2005                      
|Ángel. D. Vergara del Carril |  | 03/15/1935    |  | Syndic            |  | 2006                      
|Armando Fabián Ricci         |  | 03/06/1964    |  | Alternate Syndic  |  | 2006                      
|Fabián Cainzos               |  | 11/07/1966    |  | Alternate Syndic  |  | 2006                      
|Marcelo Héctor Fuxman        |  | 11/30/1955    |  | Alternate Syndic  |  | 2005                      

Guillermo E. Matta y TrejoMr. Matta y Trejo obtained a degree in law at the
University of Buenos Aires. He is a member of the International Bar Association and of the Insolvency International Institute. From 1975 to 1998 he taught Commercial Law at the University of Buenos Aires. He also teaches Corporate Law and legal
aspects of Capital Markets in post-graduate courses at University of Buenos Aires, Argentine Catholic University, Austral University and Belgrano University. He is the President of the Board of Directors of Ganadera del Villaguay, S.A.

José D. Abelovich. Mr. Abelovich obtained a degree in accounting from the University of Buenos Aires. He is a
founding member and partner of Abelovich, Polano & Asociados/SC International, a public accounting firm in Argentina. Formerly, he had been a manager of Harteneck, López y Cía/Coopers & Lybrand and has served as a
senior advisor in Argentina for the United Nations and the World Bank. He is a member of the Supervisory Committees of APSA, SAPSA, Hoteles Argentinos and Inversora Bolívar S.A.

Ángel D. Vergara del Carril.Mr. Vergara del Carril graduated as a Lawyer from Universidad de Buenos Aires. In 1976 he received the
degree of Doctor of Juridical Sciences (S.J.D.) from Argentine Catholic University with a thesis on Merger of Business Companies. He served as in-house counsel to the Bunge & Born Corporation. He was Head of the Legal Department of Acindar
S.A. He founded the law firm Cassagne &



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Asociados with other lawyers. He has been teaching Commercial Law at Argentine Catholic University. He is also director
of the capital markets postgraduate course at the same University, as well as member of the Argentine Institute on Commercial Law of the National Law Academy and the International Bar Association. From 2002 to 2006 he acted as external legal advisor
of the Securities Committee of the Buenos Aires Stock Exchange. Currently he is counsel at law firm Zang, Bergel & Viñes, as well as chairman of the Club de Abogados de Empresas. He is an alternate member of the Arbitration Board of
the Buenos Aires Stock Exchange of which rules of arbitration he contributed to enact, as well as syndic of Atanor S.A. and Bodegas Hispano Argentinas S.A. Mr. Ángel D. Vergara del Carril is the father of our alternate director
Mr. Pablo Daniel Vergara del Carril.

Armando F. Ricci.Mr. Ricci obtained a degree in law at the Universidad de Buenos
Aires. He serves as an alternate director on the board of Nuevas Fronteras S.A., Pereiraola S.A., Canteras Natal Crespo S.A., Inversora Bolívar S.A., Palermo Invest S.A. y Tarshop S.A. Mr. Ricci has a master on corporate law at the
ESEADE (Escuela Superior de Economía y Administración de Empresas). He is a trained mediator and is advisor of several argentine listed companies. He is an associate of the law firm Zang, Bergel & Viñes, where he
specializes in corporate law.

Fabián Cainzos. Mr. Cainzos obtained a degree in law from the University of Buenos
Aires. Currently, he is partner of the law firm Cainzos, Fernández & Premrou.He also serves as director of Sullair Argentina S.A. and of the Supervisory Commitee of Editorial Atlántida S.A.

Marcelo H. Fuxman. Mr. Fuxman obtained a degree in accounting from the University of Buenos Aires. He is a partner of Abelovich,
Polano & Asociados/SC International, a public accounting firm in Argentina. He is a member of the Supervisory Committees of SAPSA and Inversora Bolívar S.A.

Senior Managers

Appointment of the Senior Managers

The Board of Directors appoints and removes the senior management. The senior managers perform their duties in accordance with the instructions of the
Board of Directors.

Information about Senior Management

As of December 20, 2004 our Board of Directors appointed the following members as our Senior Management:



|                      |  |               |  |                              |  |                            
|--------------------- |  | ------------- |  | ---------------------------- |  | ---------------------------
|Name                  |  | Date of birth |  | Position                     |  | Current position held since
|Alejandro G. Elsztain |  | 03/31/1966    |  | Chief Executive Officer      |  | 2002                       
|Gabriel Blasi         |  | 11/22/1960    |  | Chief Financial Officer      |  | 2004                       
|David A. Perednik     |  | 11/15/1957    |  | Chief Administrative Officer |  | 2002                       
|Daniel R. Elsztain    |  | 12/22/1972    |  | Chief Commercial Officer     |  | 2004                       

B. Compensation

Compensation of the Members of the Board of Directors and Executive Committee

The Law of Corporations No. 19,550 establishes that if the compensation of the members of the Board of Directors and the supervisory
committee is not established in our bylaws, it should be determined by the shareholders meeting. The maximum amount of total compensation of the members of the Board of Directors and the supervisory committee, including wages and compensation for
technical or administrative permanent activities, cannot exceed 25% of our earnings.



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That amount should be limited to 5% when there is no distribution of dividends to shareholders, and will
be increased proportionally to the distribution until reaching the limit set when all profits are distributed. In applying this rule any reduction in dividend distribution from the deduction of Board and supervisory committee compensation shall not
be taken into account.

When one or more directors perform special commissions or technical or administrative activities, and there are no
earnings to distribute, or they are reduced, the shareholders meeting may approve compensation in excess of the above-mentioned limits.

The compensation of our directors for each fiscal year is determined pursuant to the Corporations Law, and taking into consideration if the directors perform technical or administrative activities and our fiscal years results. Once
the amount is determined, they are considered by the shareholders meeting.

During our annual ordinary shareholders meeting which was held
October 31, 2006, with and adjournment for November 30, 2006, the shareholders agreed to pay to the members of the Board of Directors for the fiscal year ended June 30, 2006 Ps. 7.19 million.

The members of the Executive Committee did not receive compensation other than fees for their services as members of the Board of Directors.

Compensation to the Supervisory Committee

The shareholders meeting held on October 31, 2006, with an adjournment for November 30, 2006, further approved unanimously not to pay any compensation to the Supervisory Committee

Senior Managements Compensation

During the fiscal year ended June 30, 2006 we paid an aggregate amount of approximately Ps. 1.3 million as compensation to our senior management.



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Voluntary compensation plan for key employees

We are planning to start during fiscal year 2007 a special compensation plan for its key managers (the Plan) by means of contributions to be
made by the employees and by the Company.

The Plan is directed to key managers and aims to retain them by increasing their total
compensation package, granted to those who have met certain conditions.

Participation and contributions under the Plan are voluntary. Once
the invitation to participate has been accepted by the employee (the Participant), he/she is required to make two kinds of contributions: monthly contributions (salary based) and extraordinary contribution (annual bonus based). The
suggested contribution to be made by Participants is: up to 2.5% of their monthly salary and up to 15% of their annual bonus.

This Plan is
intended to improve the compensation benefits of the key management employees who are encouraged to increase his/her compensation package by getting an extraordinary reward at the end of the Plan for those who have met certain conditions mentioned
below.

Our contribution will be 200% of the employees ́ monthly contributions and 300% of the extraordinary employees
contributions.

The funds arising out of the Participants contributions will initially flow to a special independent vehicle created
and located in Argentina as a Common Investment Fund (Fondo Común de Inversión) to be approved by the Comisión Nacional de Valores. The Plan will fulfill all the Argentine requirements for this type of instruments. Such funds
(including the rents derived thereof) will be freely redeemable upon request of the participants.

Funds arising out of our contributions
under the Plan will flow to another separate and independent vehicle (e.g., a trust fund).

Participants or their assigns, as the case may
by, would have access to 100% of the benefits of the Plan (that is, the Companys contributions made on their behalf to the specially created vehicle) under the following circumstances:



| | (i) | ordinary retirement in accordance with applicable labor regulations;
| | --- | --------------------------------------------------------------------



| | (ii) | total or permanent incapacity or disability;
| | ---- | --------------------------------------------



| | (iii) | death.
| | ----- | ------

In case of resignation or termination without
good cause, the manager will get the amounts arising out of the Companys contribution only if he or she has participated in the Plan for at least 5 years.

C. Board Practices

Audit Committee

According to the Regime of Transparency in Public Offerings provided by Decree 677/01, the regulations of the Comisión Nacional de Valores and
Resolutions No. 400 and 402 of the Comisión Nacional de Valores, our board of directors decided to establish an Audit Committee which would focus on assisting the Board in exercising its duty of care, compliance with disclosure
requirements, the enforcement of accounting policies, management of our business risks, the management of our internal control systems, ethical conduct of the companys businesses, monitoring the sufficiency of our financial statements, the
companys compliance with the laws, independence and capacity of independent auditors and performance of our internal audit duties both by our company and our external auditors.

As of December 2006, the Board of Directors announced the composition of the Audit Committee provided in Section 15 of the Regime of Transparency in
Public Offerings and approved pursuant to Decree No. 677/01 and Section 13 of Resolution No. 400. Members of the Audit Committee decide their proposals by majority. Our Audit Committee is composed by three members: Abraham Perelman, Gabriel Adolfo
Reznik and Andrés Olivos. Pursuant to the requirements of Argentine law, each member of our Audit Committee is independent. However, as Andrés Olivos is an executive officer of Parque Arauco, one of our affiliates, he does not meet the
independence requirements under the Sarbanes-Oxley Act.

In addition to the Audit Committee, the Company also has a board of auditors
called Comisión Fiscalizadora (Supervisory Committee), that is independent from the board of directors. The Supervisory Committee is elected by a majority vote of all outstanding shares at the annual Shareholders Meeting.
The Supervisory Committee is charged with supervising compliance by the Board of Directors with all of its legal and statutory obligations, as well as informing on the accuracy of the annual report (Memoria) and the companys financial
statements certified by the external auditors that are delivered to shareholders by the Board of Directors. This function normally would be within the purview of the Audit Committee but in our case is managed by our Supervisory Committee.

Rule 10A-3 under the Securities Exchange Act of 1934 provides exemptions for foreign private issuers to comply with independence
requirements under SEC and NASDAQ regulations. Although it is not clear that available exemptions for foreign private issuers apply to our company, we believe that the Supervisory Committee and the Audit Committee together meet the purposes that an
audit committee has under SEC and NASDAQ regulations.

According to our Bylaws the compensation is determined by our Board of Directors.
However, any compensation was set at the present.

Benefits upon Termination of Employment

There are no contracts providing for benefits to Directors upon termination of employment.

D. Employees

As of June 30, 2006, we had 1,945 employees. We believe that our relationship with our
employees is good. Through a bidding process, we subcontract to third parties the construction of our development projects and the provision of security, maintenance and cleaning services for our shopping centers.



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The following table shows the number of our employees employed by us and our subsidiaries as of
June 30, 2006, 2005 and 2004:



|                                    |  |                |  |      |  |     
|----------------------------------- |  | -------------- |  | ---- |  | ----
|                                    |  | As of June 30,
|                                    |  | 2006           |  | 2005 |  | 2004
|Alto Palermo S.A. (APSA)            |  | 680            |  | 615  |  | 499 
|Shopping Alto Palermo S.A. (SAPSA)  |  | 100            |  | 99   |  | 87  
|Emprendimiento Recoleta S.A. (ERSA) |  | 42             |  | 37   |  | 36  
|Fibesa S.A.                         |  | 26             |  | 26   |  | 22  
|Altocity.Com S.A.                   |  | 49             |  | 40   |  | 35  
|Alto Research and Development S.A.  |  |               |  |     |  | 2   
|Tarshop S.A.                        |  | 979            |  | 556  |  | 390 
|Mendoza Plaza Shopping S.A. (1)     |  | 69             |  | 55   |  |    

| | 
| | 

| | (1) | We obtained a controlling interest in this subsidiary during fiscal year 2005.
| | --- | ------------------------------------------------------------------------------

As of June 30, 2006 the number of temporary employees working for us amounted to six.

E. Share Ownership

Share Ownership

The following table sets forth the amount and percentage of our shares beneficially owned by our Directors, Senior Managers, members of the Supervisory Committee and members of the Audit Committee as of December,
2006.



|                          |  |                                     |  |                 |     |  |            |  
|------------------------- |  | ----------------------------------- |  | --------------- | --- |  | ---------- | -
|                          |  |                                     |  | Share Ownership |    
|Name                      |  | Position                            |  | Amount          |     |  | Percentage |  
|Board of Directors        |  |                                     |  |                 |     |  |            |  
|Eduardo S. Elsztain       |  | Chairman                            |  | 481.944.364     | (1) |  | 61.6       | %
|Saúl Zang (3)             |  | Vice Chairman                       |  |                |     |  |           |  
|Alejandro G. Elsztain (2) |  | Executive Vice Chairman / CEO       |  |                |     |  |           |  
|Abraham Perelman (2)      |  | Director                            |  |                |     |  |           |  
|Ira Chaplik (3)           |  | Director                            |  |                |     |  |           |  
|Fernando A. Elsztain (2)  |  | Director                            |  |                |     |  |           |  
|José Said Saffie (3)      |  | Director                            |  |                |     |  |           |  
|Andrés Olivos (3)         |  | Director                            |  |                |     |  |           |  
|Gabriel A.G. Reznik (2)   |  | Director                            |  |                |     |  |           |  
|Daniel R. Elsztain (2)    |  | Director / Chief Commercial Officer |  |                |     |  |           |  



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|                                |  |                                                   |  |                 |  |           
|------------------------------- |  | ------------------------------------------------- |  | --------------- |  | ----------
|                                |  |                                                   |  | Share Ownership
|Name                            |  | Position                                          |  | Amount          |  | Percentage
|David A. Perednik (2)           |  | Alternate Director / Chief Administrative Officer |  |                |  |          
|José D. Eluchans Urenda (3)     |  | Alternate Director                                |  |                |  |          
|Leonardo F. Fernández (3)       |  | Alternate Director                                |  |                |  |          
|Juan M. Quintana (3)            |  | Alternate Director                                |  |                |  |          
|Gastón Lernoud (2)              |  | Alternate Director                                |  |                |  |          
|Hernán Büchi Buc (3)            |  | Alternate Director                                |  |                |  |          
|Marcos O. Barylka (2)           |  | Alternate Director                                |  |                |  |          
|Pablo D. Vergara del Carril (2) |  | Alternate Director                                |  |                |  |          
|Salvador D. Bergel (2)          |  | Alternate Director                                |  |                |  |          
|Mauricio Wior (3)               |  | Alternate Director                                |  |                |  |          



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|                                |  |                         |  |                 |  |           
|------------------------------- |  | ----------------------- |  | --------------- |  | ----------
|                                |  |                         |  | Share Ownership
|Name                            |  | Position                |  | Amount          |  | Percentage
|Senior Management               |  |                         |  |                 |  |           
|Gabriel Blasi (2)               |  | Chief Financial Officer |  |                |  |          
|                                |  |                         | 
|Supervisory Committee           |  |                         |  |                 |  |           
|Angel D. Vergara del Carril (2) |  | Syndic                  |  |                |  |          
|Guillermo E. Matta y Trejo (3)  |  | Syndic                  |  |                |  |          
|José D. Abelovich (3)           |  | Syndic                  |  |                |  |          
|Marcelo H. Fuxman (3)           |  | Alternate Syndic        |  |                |  |          
|Fabián Cainzos (3)              |  | Alternate Syndic        |  |                |  |          
|Armando F. Ricci (3)            |  | Alternate Syndic        |  |                |  |          

---

|(1) | Common shares beneficially owned by IRSA.
|--- | -----------------------------------------

|(2) | Such individuals own less than one percent or do not own shares of our company.
|--- | -------------------------------------------------------------------------------

|(3) | Such individuals do not own shares of our company.
|--- | --------------------------------------------------

Convertible Notes

The following persons own Alto Palermos Convertible Notes as of November 30, 2006.



|                         |  |                 |    
|------------------------ |  | --------------- | ---
|Convertible Notes Holder |  | Number of Notes |    
|Eduardo S. Elsztain (1)  |  | 31,738,262      | (1)
|Saúl Zang                |  |                |    
|Alejandro G. Elsztain    |  | 10,000          |    
|Daniel R. Elsztain       |  |                |    

| | 
| | 

| | (1) | Beneficially owned through IRSA.
| | --- | --------------------------------

The Convertible Notes
originally matured on July 19, 2006. A meeting of noteholders resolved to extend the maturity date of the Convertible Notes through July 19, 2014 although the remaining terms and conditions were left unchanged. The Convertible Notes accrue
interest (payable semiannually) at a fixed annual rate of 10% and are convertible, at any time at the option of the holder, into common shares of Ps. 0.10 par value per share. The conversion rate per U.S. Dollar is the lesser of 30.8642 and the
result obtained from dividing the exchange rate in effect at the conversion date by the par value of our common shares.

Assuming IRSA
exercises its conversion rights of all of its Convertible Notes and no exercise of such rights by any of our other bondholders, IRSA would own 83.0% of our common shares. In the case all shareholders exercise their conversion rights and IRSA
exercises them as well, IRSA would own 65.3% of our common stock.



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Option Ownership

No options to purchase shares have been granted to our Directors, Senior Managers, members of the Supervisory Committee or Audit Committee.

Employees Participation in our Capital Stock

There are no arrangements for involving our employees in our capital stock or related to the issuance of options, shares or securities.

ITEM 7. Major Shareholders and Related Party Transactions

A. Major Shareholders

Information about Major Shareholders

Share Ownership

The following table
shows, as of November 30, 2006, the information known by us, regarding shareholders that beneficially own more than 5% of our outstanding common shares.



|                  |  |                  |  |        
|----------------- |  | ---------------- |  | -------
|Shareholder(s)    |  | Number of Shares |  | Percent
|IRSA (1)          |  | 481,944,364      |  | 61.6   
|Parque Arauco (2) |  | 231,116,952      |  | 29.6   
|Total             |  | 713,061,316      |  | 91.2   

| | 
| | 

| | (1) | The number of shares will increase by 1,461,520,352 assuming full conversion of the US$ 31.7 million Convertible Notes held by IRSA.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Parque Arauco S.A. owns 78,527,252 shares through Parque Arauco S.A. and 152,589,700 shares through Parque Arauco Argentina S.A., a wholly-owned subsidiary. The number of shares
beneficially owned by Parque Arauco will increase by 708,661,150, assuming full conversion of 15,472,432 Convertible Notes owed by Parque Arauco.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Through its ownership of APSAs common stock, IRSA currently shares with Parque Arauco the voting control of APSA, having the power to direct or cause the direction of our management and policies.

IRSA is an Argentine real estate company engaged in a range of real estate activities in Argentina. IRSAs shares are listed and traded on the
Bolsa de Comercio de Buenos Airesand the NYSE and Mr. Eduardo S. Elsztain, Chairman of our Board of Directors, beneficially holds 61.6% of IRSA.

Parque Arauco is a Chilean commercial real estate developer engaged in the acquisition, development and operation of shopping centers, and its shares are listed and traded on the Santiago Stock Exchange.



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Changes in Share Ownership



|                  |  |                                  |  |                               |  |       |  |       |  |      
|----------------- |  | -------------------------------- |  | ----------------------------- |  | ----- |  | ----- |  | -----
|                  |  | Share Ownership as ofNovember 30 |  | Share Ownership as of June 30
|Shareholder       |  | 2006                             |  | 2006                          |  | 2005  |  | 2004  |  | 2003 
|IRSA (1)          |  | 61.6%                            |  | 61.6%                         |  | 61.6% |  | 53.8% |  | 54.8%
|Parque Arauco (2) |  | 29.6%                            |  | 29.6%                         |  | 29.6% |  | 27.8% |  | 27.6%
|Dolphin Fund Plc  |  | 0.0%                             |  | 0.0%                          |  | 0.0%  |  | 1.7%  |  | 2.2% 
|GSEM/AP           |  | 0.0%                             |  | 0.0%                          |  | 0.0%  |  | 6.1%  |  | 6.3% 

---

|(1) | IRSA share ownership is 65.3% assuming full conversion of its holding of Convertible Notes as of November 30, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------

|(2) | Parque Arauco share ownership is 31.6% assuming full conversion of its holding of Convertible Notes as of November 30, 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Differences in Voting Rights

Our
major shareholders do not have different voting rights.

Other Share Ownership Information

There are no differences in voting rights among shareholders.

As of November 30, 2006 we had 782,064,214 shares outstanding which 89.9 % were held in Argentina.

As of November 30, 2006, we had 1,973,778 ADS outstanding (representing 7,895,112 of our common shares, or 10.1% of all of our shares). As of such date, we had four registered holders of our ADS in the United States.

On July 19, 2002 we issued US$ 50.0 million of Convertible Notes which are convertible into shares of our common stock for up to US$ 50.0
million. The offering was subscribed in full. Our Convertible Notes mature on July 19, 2014 and have been convertible since August 28, 2002 and until July 19, 2014. Of the US$ 50.0 million of Convertible Notes that we issued,
IRSA and Parque Arauco subscribed for US$ 27.2 million and US$ 15.2 million respectively.

In the event that all the bondholders
were to convert their Convertible Notes, our share capital would increase from 782,064,214 shares as of November 30, 2006 to approximately 2,239,716,498 shares.

B. Related Party Transactions

Lease of our Headquarters

As from December 2003, we moved our headquarters to the 22nd floor of the Intercontinental Plaza tower, located at Moreno 877, in the City of Buenos
Aires. We lease our headquarters and parking lot spaces from Inversora Bolivar S.A., a subsidiary of IRSA, pursuant to two lease agreements, the first one for our headquarters and ten parking lot spaces and the second one for our subsidiary Fibesa
S.A. ́s headquarters and another eight parking lot spaces. The first agreement has an initial duration of 60 months with an optional extension of 36 additional months, and the second one, effective as from January 2005, has an initial duration
of 46 months with an optional extension of 36 additional months. We pay a monthly rent of US$ 5,958 for the first agreement and US$ 5,386 for the second one, with the first two months free.



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Saúl Zang is our Vice-Chairman and director of Inversora Bolivar S.A. and Alejandro Elsztain is
our executive Vice-Chairman and Vice-president of Inversora Bolivar S.A. Fernando Elsztain is a director of APSA and President of Inversora Bolivar S.A.and Gabriel Reznik is a director in APSA and Inversora Bolivar S.A.

Lease of our Chairman offices

Our Chairman offices
are located at Bolívar 108, City of Buenos Aires. We have leased them from Isaac Elsztain e Hijos S.C.A., a company controlled by relatives of Eduardo S. Elsztain, our chairman, and also from Hamonet S.A., a company controlled by Fernando A.
Elsztain, one of our Directors, and certain of his relatives. A lease agreement was signed among us, IRSA, Cresud and Isaac Elsztain e Hijos S.C.A., in March 2004. This lease has a term of 120 months and monthly rent of Ps. 8,490. We, IRSA and
Cresud each pay one-third of such rent in an amount of Ps. 2,830 each.

Agreement for Shared Corporate Services with IRSA and CRESUD S.A.C.I.F. y A.

In order to reduce administrative expenses and to achieve a more efficient allocation of corporate resources, a program for partial
operating integration was implemented on June 30, 2003 by the Company, Cresud and IRSA (the Parties). The areas now involved are Shared Corporate Services, Human Resources, Finance, Institutional Relations, Administration, Systems,
Insurance, Purchasing, Contracts, Operations and Internal Audit, among others. This program was implemented to reduce operating costs by optimizing the individual administrative efficiencies of each Party.

On the basis of this program, the Parties entered into the Exchange of Operating Services Agreement on June 30, 2004, a two-year agreement (being
renewed for an equal period of time unless any of the Parties decides to terminate it) by which tasks are performed by one or more Parties for the benefit of one or more other Parties in exchange for a fee to be paid primarily through the provision
of services in other areas. Through this agreement, each party continues to maintain its strategic and commercial independence while increasing operating efficiency. This agreement will not affect the independence of each Partys record and
accounting systems or adversely affect internal control systems or external audit tasks. Each party will continue to maintain separate assets and liabilities.

Alejandro Gustavo Elsztain is the General Coordinator of the program and Mr. Abraham Perelman is the individual responsible. The individual responsible for each party shall be member of such Partys Audit
Committee. The main duties for the project for implementation shall consist of (a) monitoring the projects implementation in accordance with the agreement; (b) reviewing the billing report on a monthly basis to analyze and check it
against the provisions of the Agreement, and, in the event of discrepancies or deviations, preparing a report to submit for the consideration of the General Coordinator and by each Partys boards of directors and (c) assessing, on a
permanent basis, the results derived from the projects implementation and proposing to the General Coordinator changes in the event of a conflict with the agreement or, if appropriate, the possibility of establishing cost or benefit allocation
mechanisms or criteria more consistent with the goals of the agreement.

In the future and in order to continue our policy of achieving a
more efficient allocation of corporate resources, we may extend the areas in which we share corporate services with IRSA and APSA. Our chairman is also chairman of IRSA and Cresud and our vice-chairman is also vice-chairman of IRSA and Cresud. We
believe that the terms and conditions of these transactions are consistent in all material respects with those prevailing in the market at the relevant time for agreements between unaffiliated parties.

Loans from our Major Shareholders

In order to
finance the US$ 50.0 million collateral deposit required in connection with the swap agreement, we entered into loan agreements with IRSA and Parque Arauco S.A. As of June 30, 2002 our debt with IRSA and Parque Arauco S.A. in relation to
those loan agreements was Ps. 45.6 million and Ps. 22.9



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million respectively. In addition between May and July 2002, IRSA and Parque Arauco S.A. granted to us loans for US$
10.1 million and US$ 4.9 million respectively. The loans granted by IRSA and Parque Arauco were used to subscribe for US$ 27.2 million and US$ 15.2 million respectively, to our offering of US$ 50.0 million Convertible Notes,
on August 20, 2002.

On February 17, 2003, we entered into a repurchase agreement with IRSA and Parque Arauco in which each
company granted to us loans for Ps. 4.2 million and Ps. 2.1 million, respectively. According to the repurchase agreement, we made collateral deposits of Ps. 15.5 million Senior Notes with IRSA and of Ps. 7.8 million Senior Notes
with Parque Arauco. As of January 7, 2005 we repurchased the securities at a price of Ps. 5.1 million and Ps. 2.6 million from IRSA and Parque Arauco, respectively, thus complying with the agreement.

As of November 30, 2006, IRSA owned 61.6% of our common shares. Assuming IRSA exercises its conversion rights of all of its Convertible Notes and no
exercise of such rights by any of our other bondholders, IRSA would own 83.0% of our common shares. In the case all shareholders exercise their conversion rights and IRSA exercises them as well, IRSA would own 65.3% of our common stock.

The Convertible Notes originally matured on July 19, 2006. A meeting of noteholders resolved to extend the maturity date of the Convertible Notes
through July 19, 2014 although the remaining terms and conditions were left unchanged. The Convertible Notes accrue interest (payable semiannually) at a fixed annual rate of 10% and are convertible, at any time at the option of the holder, into
common shares of Ps. 0.10 par value per share. The conversion rate per U.S. Dollar is the lesser of 30.8642 and the result obtained from dividing the exchange rate in effect at the conversion date by the par value of our common shares.

Conversion of our Convertible Notes by our Major Shareholders

During November and December 2003, Eduardo Elsztain decided to exercise his option to convert 0.03 million aggregate of principal amount of our Convertible Notes. As a result of this conversion, Eduardo Elsztain
has received 0.3 million of our common shares.

In March 2004, Parque Arauco S.A. decided to exercise its option to convert
0.8 million aggregate of principal amount of our Convertible Notes. As a result of this conversion, Parque Arauco S.A has received 7.7 million of our common shares. Furthermore in July 2004, Parque Arauco S.A. exercised its option to
convert 1.4 million aggregate of principal amount of our Convertible Notes, receiving 14.3 million of our common shares.

During
July 2004, IRSA decided to exercise its option to convert 3.7 million aggregate of principal amount of our Convertible Notes. As a result of this conversion, IRSA have received 36.8 million of our common shares.

Agreement with Inversiones Falabella Argentina S.A.

Simultaneously with the purchase-sale of the shares of Mendoza Plaza Shopping, we entered into an Agreement with Inversiones Falabella Argentina S.A. establishing as follows:



| | 1. | Capitalization terms were agreed in the event that the Company or one of its subsidiaries is assigned the loan from Banco de Chile or other bank loan and propose its capitalization
through Companys contributions.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Upon maturity of the lease agreement currently in force between Mendoza Plaza Shopping and Inversiones Falabella Argentina S.A., the Company will provide for the granting of an
option to the latter for the renewal of the contract under the same terms as the current contract, with certain changes expressly established in the contract in force.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | In its capacity as surety, the Company will ensure payment by Mendoza Plaza Shopping to Inversiones Falabella Argentina S.A. of the loan held by the former amounting to US$
1.05 million, under the terms established in the contract.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 4. | Inversiones Falabella Argentina S.A. has an irrevocable right to sell its shares in Mendoza Plaza Shopping (put option) to the Company, which may be exercised until the last
business day of October 2008, for a total consideration of US$ 3.0 million according to the conditions expressly established in the contract.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of November 30, 2006, the events described in point 1 and 3 under the agreement took place.

Options to Purchase
Shares of Altocity.Com S.A.

In January 2000, E-Commerce Latina, a company owned 50% by us and 50% by Telefónica Argentina,
granted Consultores Internet Managers Ltd. an option to purchase certain of its class B shares of Altocity.Com S.A. Consultores Internet Managers Ltd. is a special-purpose Cayman Islands corporation created to act on behalf of its management
and is represented by an independent attorney-in-fact.

The option granted to Consultores Internet Managers represents 15% of the capital
stock of Altocity.Com S.A. and was granted for a period of eight years.

Pursuant to the terms of the agreement, the exercise price is
equal to the quotient of (i) the original value of class B shares at the time of the contribution to Altocity.Com S.A. by E-Commerce Latina, plus interest accrued at an annual fixed interest rate of 14% through the exercise date of the option,
over (ii) the total number of class B shares owned by E-Commerce Latina at the exercise date of the option.

The option was granted to
Consultores Internet Managers Ltd. to be allocated by it among the management of Altocity.Com S.A. as an incentive compensation for their services, but as of today, no individual awards have been determined for participating employees under this
option. Upon exercise of the option, Consultores Internet Managers Ltd.s sole asset will be its 15% interest in Altocity.Com S.A.

On
October 24, 2006, we entered into a shares purchase agreement with Telefónica Argentina S.A., under which it acquired 808,354 ordinary shares issued and outstanding of E-Commerce Latina S.A., and 11 ordinary shares issued and outstanding
of Altocity.Com S.A. for a total price of Ps. 85,876, which were fully paid. Such agreement is subordinated to the approval of the National Antitrust Commission.

Free space for Fundación IRSA

On October 31, 1997, our shareholders approved the execution of an agreement
granting Fundación IRSA the free right to use 3,800 square meters of constructed area in the Abasto for a 30-year period.

Moreover,
on November 29, 2005, our shareholders approved the execution of an agreement granting Fundación Museo de los Niños, the free right to use approximately 2,670.11 square meters of constructed area in the Shopping Rosario for a
30-year period.

Fundación IRSA is a charitable, non-profit organization whose Chairman is Eduardo S. Elsztain and whose Secretary,
is Mariana Carmona de Elsztain, Mr. Elsztains wife. Our Chairman Eduardo S. Elsztain is also the Chairman of IRSA. Fundación IRSA has used the available area to house a museum called Museo de los Niños, Abasto,
an interactive learning center for both children and adults which was opened to the public in April 1999. On September 27, 1999 Fundación IRSA assigned and transferred for free, the Museo de los Niños, Abastos total rights
and obligations to Fundación Museo de los Niños.

Fundación Museo de los Niños is a charitable non-profit
organization created by the same founders of Fundación IRSA and has the same members of the administration committee as Fundación IRSA. Fundación Museo de los Niños acts as special vehicle for the developments of
Museo de los Niños, Abasto and Museo



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de los Niños, Rosario. On October 29, 1999, our shareholders approved the assignment of Museo de
los Niños, Abasto agreement to Fundación Museo de los Niños, and on December 12, 2005, the agreement granting the free right to use of the space designated for Museo de los Niños, Rosario was
signed.

During the fiscal years ended June 30, 2004, 2005 and 2006 we made unconditional promises to give money to Fundación
IRSA amounted our donation to Ps. 2.4 million, Ps. 4.0 million and Ps. 2.5 million, respectively. These donations are paid in the subsequent year. On June 30, 2006 donations related to fiscal year 2006 have not yet been paid.

Legal Services

During the years ended
June 30, 2004, 2005 and 2006, we and our subsidiaries paid the law firm Zang, Bergel & Viñes an aggregate amount of approximately Ps. 0.6 million, Ps. 0.5 million, and Ps. 0.7 million, respectively as payment for
legal services. Our Vice-Chairman Saúl Zang; our alternate directors Juan M. Quintana, Salvador D. Bergel, and Pablo D. Vergara del Carril; our syndic Ángel. D. Vergara del Carril and our alternate syndic Armando F. Ricci are members
of the law firm Zang, Bergel & Viñes.

C. Interests of Experts and Counsel

This section is not applicable.

ITEM 8. Financial Information

A. Consolidated Statements and Other Financial Information

See Item 18 for our consolidated financial
statements.

Legal or Arbitration Proceedings

Neuquén Project

On July 6, 1999, we acquired 94.6% ownership of Shopping Neuquén S.A.
(Shopping Neuquén) for Ps.4.2 million. Shopping Neuquéns sole asset is a plot of land of approximately 50,000 square meters in which we seek to develop a shopping center. The proposed project also contemplates the
building of a shopping center, a hypermarket, a hotel and a housing complex, none of which have begun. We paid Ps.0.9 million on September 1, 1999, and the remaining Ps.3.3 million were originally scheduled to be paid on the earlier
to occur of July 5, 2001, and the completion of the construction of the shopping center. The balance of the purchase price has not been paid. On August 15, 2003, the former holders of 85.8% of Shopping Neuquén filed a complaint
against us seeking recovery of the unpaid balance of the purchase price, plus interest and legal costs. In September 2003, we answered the complaint and raised several defenses including, plaintiffs non-compliance with her duties under the
contract and the pesification of the purchase price balance pursuant to emergency legislation adopted in 2002. We also filed a counterclaim alleging there should be a readjustment of the terms of the contract which became excessively burdensome
given the 2001 economic, social and political crisis. In November 2003, the plaintiffs replied to our counterclaim alleging that the payment under the purchase agreement was overdue before the economic and social crisis emerged and thus our contract
readjustment claim was inadmissible. The matter is currently subject to appeal, as the ruling of the trial court was appealed by both former shareholders of Shopping Neuquén and us. If we cannot reach agreement with the former owners of
Shopping Neuquén, we would be compelled to pay the sum that the court determines. As of September 30, 2006, the Ps.3.3 million deferred balance of the purchase price remains unpaid. The Company maintains a provision of Ps.
2.5 million which represents the Companys best estimate of the probable loss to be incurred in connection with these claims.



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We are engaged in litigation with the Municipality of Neuquén

In June 2001, Shopping Neuquén filed a request with the Municipality of Neuquén to extend the construction deadlines that had been
originally scheduled. In addition, it requested authorization to convey certain plots of land to third parties so that each participant to the Neuquén project would be able to build on his own land. On December 20, 2002, the Municipality
of Neuquén issued Decree 1437/02 denying both requests. In addition, it declared that the rights under Ordinance 5178 had lapsed and that the land purchase agreements would be terminated. As a result, the improvements already made by Shopping
Neuquén would be lost and passed on to the Municipality of Neuquén, leaving Shopping Neuquén with no right to compensation.

On January 21, 2003, Shopping Neuquén submitted its response to the Decree 1437/02 requesting its revocation and requesting permission to submit a new construction timetable. The Municipal Executive issued Decree 585/03
rejecting these requests. On May, 2003, Shopping Neuquén filed an administrative action with the Supreme Court of Neuquén requesting the annulment of Decrees 1437/02 and 585/03. On December 21, 2004, the Supreme Court of
Neuquén ruled in favor of the Municipality of Neuquén, declaring that the administrative action filed by Shopping Neuquén had expired. The decision, however, is not final. We filed an appeal, but the Supreme Court of
Neuquén has not yet issued a decision with regards to its admissibility. If the Supreme Court of Neuquén declares the appeal admissible, the final decision will then be made by the Federal Supreme Court, but if it is declared
inadmissible we will then file an appeal directly with the Federal Supreme Court.

On December 13, 2006, Shopping Neuquén
subscribed an agreement with the Municipality of Neuquén and the Province of Neuquén in which Shopping Neuquén was given a new time table to implement the commercial and housing project. In addition, Shopping Neuquén will
be allowed to transfer further subdivisions of the plot of land owned by Shopping Neuquén to third parties, provided that the plot to be transferred is not the one on which the shopping center is going to be built.

The agreement is subject to the City of Neuquén Councils approval and the promulgation of the new Ordinance by the Mayor of the City of
Neuquén. Should the agreement be disapproved by the City Council, such agreement will be void.

Other Litigation

As of July 5, 2006, the Federal Administration of Public Revenues (AFIP) filed a preliminary injunction with the
Federal Court for Administrative Proceedings for an aggregate amount of Ps. 3,689,485.5, plus an added amount, provisionally estimated, of Ps. 900,000 in order to respond to legal costs and interests. The main dispute is about the amount due for the
admission rights of the capital gains tax. In the first instance, AFIP pleaded for a general restraining order. As of November 29, 2006, the Federal Court ordered such order to be substituted for an attachment on the plot of land located in
Caballito neighborhood, city of Buenos Aires, where we are planning to develop a shopping center.

We are involved in other litigation
which derives from the ordinary course of our business. We accrue liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, our estimates of the
outcomes of these matters and the lawyers experience in contesting, litigating and settling other matters. As the scope of the liabilities becomes better defined, there will be changes in the estimates of future costs, which could have a
material effect on our future results of operations and financial condition or liquidity.

Dividend Policy

Pursuant to Argentine law, the distribution and payment of dividends to shareholders is valid only if they result from realized and net earnings of the
company pursuant to annual financial statements approved by the shareholders. The annual financial statements and amount and payment of dividends are subject to the approval by our shareholders at our annual ordinary shareholders meeting. The
approval of dividends requires the affirmative vote of a majority of the shares entitled to vote at the meeting.



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In accordance with Argentine law and our bylaws, net and realized profits for each fiscal year shall be
distributed as follows:



| |  |  | 5% of such net profits to our legal reserve, until such reserve amounts to 20% of our capital stock;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | a certain amount determined at a shareholders meeting is allocated to compensation of our directors and the members of our supervisory committee; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | dividends, additional dividends to preferred shares if any, or to optional reserve funds or contingency reserves or to a new account, or for whatever purpose the shareholders
meeting determines.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due to the losses generated during fiscal years 2000 and 2002, we did not pay dividends corresponding to
that period.

For the year ended June 30, 2001 the Board of Directors proposed not to declare a dividend as they considered it
advisable to maintain adequate levels of liquidity in order to reduce indebtedness and incur lower financial charges, reinvesting the principal and seeking greater yield in future. On October 16, 2001 our annual shareholders meeting
approved our Board of Directors proposal.

The Board of Directors proposed to the shareholders and they approved in a meeting held on
October 22, 2004 the distribution of a cash dividend amounting to Ps. 17.9 million, of which the shareholders collected approximately 80.0% as established by Section 69.1 of the Income Tax Law. The effective payment representing the
declared amount net of taxes amounts to Ps. 14.7 million were Ps. 0.019 per share.

The Board of Directors proposed to the
shareholders and they approved in a meeting held on November 29, 2005 the distribution of a cash dividend amounting to Ps. 29.0 million, of which the shareholders collected Ps. 0.0372 per share. The payment date was on
December 21, 2005.

The Board of Directors ́ proposal for the distribution of a cash dividend amounting to Ps. 47.0 million,
of which the shareholders will collect Ps. 0.0601 per share, was approved during the annual shareholders meeting, dated October 31, 2006. Our ADS represents fourty shares of our common stock. The payment date was on November 29,
2006.

The following table sets forth the amounts of total dividends paid on each fully paid share common stock in respect of the year
indicated. Amounts in Pesos are presented in historical Pesos of the respective payment dates.



|              |  |                            |  |               
|------------- |  | -------------------------- |  | --------------
|Year Declared |  | Payments per Common Shares |  | Total Payments
|              |  | (Ps.)                      |  | (Ps.)         
|1996          |  |                           |  |              
|1997          |  |                           |  |              
|1998          |  | 0.01197                    |  | 7,601,772     
|1999          |  | 0.00750                    |  | 5,250,087     
|2000          |  |                           |  |              
|2001          |  |                           |  |              



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|              |  |                            |  |               
|------------- |  | -------------------------- |  | --------------
|Year Declared |  | Payments per Common Shares |  | Total Payments
|              |  | (Ps.)                      |  | (Ps.)         
|2002          |  |                           |  |              
|2003          |  | 0.0141                     |  | 10,000,000    
|2004          |  | 0.0250                     |  | 17,895,663    
|2005          |  | 0.0372                     |  | 29,000,000    
|2006          |  | 0.0601                     |  | 47,000,000    

Although we intend to maintain the adopted dividend policy, there can be no assurance that our
future earnings will not be needed to finance the operations and expansion of our business.

B. Significant changes

Phillips Argentinas Plot of land

On December 1, 2006, we entered into a construction, administration and commercialization agreement with Centro Comercial Panamericano, S.A.
(Centro Comercial Panamericano) in relation to the future shopping mall and housing complex to be built on two properties located in the neighborhood of Saavedra, in the City of Buenos Aires owned by Panamerican Mall S.A.
(PAMSA). We sold one of these properties (a plot of land acquired from Philips Argentina S.A.) to PAMSA. The remaining property was acquired by PAMSA from Centro Comercial Panamericano.

PAMSA is a corporation recently constituted in which we hold 80% of its capital stock. Centro Comercial Panamericano holds the remaining 20%. PAMSA was
organized in order to carry out the agreement entered into between us and Centro Comercial Panamericano. In connection with the aforementioned project, we made a capital contribution of Ps. 158,280,260 to PAMSA.

Commencement of construction of the proposed project remains subject to receipt of certain governmental approvals.

Córdoba Shopping Villa Cabrera

During July 2006, we entered into an agreement with Grupo Roggio pursuant to which we would acquire, subject to completion of a successful due diligence and the fulfillment of certain conditions, the total outstanding shares of Empalme S.A,
owner of Córdoba Shopping Villa Cabrera.

Córdoba Shopping Villa Cabrera is a shopping center covering a surface area of
35,000 square meters, having 160 commercial stores, a multiplex cinema with 12 movie theatres and a parking lot for 1,500 vehicles, located in the Villa Cabrera neighborhood of the city of Córdoba, the second largest city of Argentina.

On December 18, 2006 the transaction was approved and consummated by the Antitrust Agency through Resolution SCI N° 67 of the
Secretary of Commerce. This investment will be an opportunity for Alto Palermo to grow in the shopping center segment, in line with its strategy of expanding and gaining foothold in the main markets of the Argentine provinces.

Proposed Acquisition in Province of Córdoba

On December 19, 2006, we reported that it was notified of the acceptance of its Ps.32.5 million bid submitted in a public tender organized by Corporación Inmobiliaria Córdoba S.A. for the sale of a
property in the City of Córdoba known as Edificio Ex Escuela Gobernador Vicente de Olmos. The acquired property is the subject of a concession granted in 1990 by the Province of Cordoba to an unaffiliated joint venture Regam S.C.A. y
Corrientes Palace S.A. Unión Transitoria de Empresas. After notification of the acceptance of its bid, the Company made a Ps. 9.7 million down payment in accordance to the bid rules.



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On December 13, 2006, we were notified by a notary that on December 5, 2006, an objection had
been filed with the National Antitrust Commission, the Argentine antitrust authority, seeking to enjoin the Company from accepting the award made pursuant to the tender. To date, we have not received any notification issued by the National Antitrust
Commission.

We are engaged in litigation with the Municipality of Neuquén

In June 2001, Shopping Neuquén filed a request with the Municipality of Neuquén to extend the construction deadlines that had been
originally scheduled. In addition, it requested authorization to convey certain plots of land to third parties so that each participant to the Neuquén project would be able to build on his own land. On December 20, 2002, the Municipality
of Neuquén issued Decree No. 1437/02 denying both requests. In addition, it declared that the rights under Ordinance 5178 had lapsed and that the land purchase agreements would be terminated. As a result, the improvements already made by
Shopping Neuquén would be lost and passed on to the Municipality of Neuquén, leaving Shopping Neuquén with no right to compensation.

On January 21, 2003, Shopping Neuquén submitted its response to the Decree No. 1437/02 requesting its revocation and requesting permission to submit a new construction timetable. The Municipal
Executive issued Decree No. 585/2003 rejecting these requests. On May, 2003, Shopping Neuquén filed an administrative action with the Supreme Court of Neuquén requesting the annulment of Decrees No. 1437/02 and
No. 585/03. On December 21, 2004, the Supreme Court of Neuquén ruled in favor of the Municipality of Neuquén, declaring that the administrative action filed by Shopping Neuquén had expired. The decision, however, is
not final. We filed an appeal, but the Supreme Court of Neuquén has not yet issued a decision with regards to its admissibility. If the appeal is declared admissible the Federal Supreme Court will give a final decision, but if it is declared
inadmissible we will file an appeal directly with the Federal Supreme Court.

On December 13, 2006, Shopping Neuquén subscribed
an agreement with the Municipality of Neuquén and the Province of Neuquén in which Shopping Neuquén was given a new time table to implement the commercial and housing project. In addition, Shopping Neuquén will be
empowered to transfer further subdivisions of the plot of land owned by Shopping Neuquén to third parties, provided that the plot to be transferred is not the one on which the shopping center is going to be built.

The agreement is subject to the City of Neuquén Councils approval and the promulgation of the new Ordinance by the Mayor of the City of
Neuquén. Should the agreement be disapproved by the City Council, such agreement will be void.

Upgrading in the risk rating of
APSA.

In September 2006, Fitch Argentina Calificadora de Riesgo S.A, rated APSA from raA+ to raAA -. The most significant reasons for
such rating were the strong growth that its cash flows continue to show, which together with its conservative capital structure allow the Company to show robust indicators of loan protection. The rating reflects APSAs positioning as a
leader in the Shopping Center business in Argentina, the quality of its assets and the high margins of the business. Additionally, the increase in the rating of its shares responds to a very good cash flow generation capacity and to the average
liquidity level of the share in the market.

Distribution of dividends and creation of Global Note Program.

The General Ordinary Shareholders Meeting of APSA, held on October 31, 2006, approved by majority vote the distribution of a cash dividend in
the amount of Ps.47.0 million and the allocation of Ps.2.2 million to the legal reserve. In addition, the meeting approved the creation of a Global Program for the issuance of unsecured, unconvertible Notes for a principal amount of up to US$
200.0 million or its equivalent in other currencies, in accordance with the provisions of Law No. 23,576 (Negotiable Obligations Law) as amended and supplemented.



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ITEM 9. The Offer and Listing

A. The offer and listing details

The following summary provides information concerning our share capital and
briefly describes all material provisions of our bylaws and the Argentine Corporation Law.

Stock Exchanges in which our securities are
listed

Our common shares are listed on the Buenos Aires Stock Market (Bolsa de Comercio de Buenos Aires) and our ADS are listed
on the NASDAQ National Market.

As of November 30, 2006, our authorized capital stock consists of 782,064,214 shares of common stock,
Ps. 0.1 face value per share. In addition, we have issued US$ 50.0 million of Convertible Notes. The Convertible Notes mature on July 19, 2014, accrue interest (payable semiannually) at a fixed annual rate of 10% and are convertible, at
any time at the option of the holder, into common shares of Ps. 0.10 par value per share. The conversion rate per U.S. Dollar is the lesser amount of 30.8642 and the result obtained from dividing the exchange rate in effect at the conversion
date by the par value of our common shares.

In the event that all the bondholders were to convert their Convertible Notes, our share
capital would increase from 782,064,214 shares as of November 30, 2006 to approximately 2,239,716,498 shares.

The common stock has
one vote per share. All of the common shares are validly issued, fully paid and non assessable.

The following description of the material
terms of our capital stock is subject to our certificate of incorporation and bylaws, which are included as exhibits to the registration statement of which this Form 20-F forms part, and the provisions of applicable Argentine Law.

Price history of our stock on theBolsa de Comercio de Buenos Aires

Our common shares are listed and traded on theBolsa de Comercio de Buenos Airesunder the trading symbol APSA. The shares began
trading on the Bolsa de Comercio de Buenos Aireson March 26, 1996. The following table shows, for the financial periods indicated, the high and low closing sales price of the common shares on the Bolsa de Comercio de Buenos
Aires. On December 1, 2006, the closing price for the common shares on the Bolsa de Comercio de Buenos Aireswas, Ps. 0.870 per share.



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|               |  |                      |  |      
|-------------- |  | -------------------- |  | -----
|               |  | Pesos per Shares (1)
|               |  | High                 |  | Low  
|Fiscal Year    |  |                      |  |      
|               |  |                     
|2006           |  | 0.705                |  | 0.545
|2005           |  | 0.870                |  | 0.305
|2004           |  | 0.506                |  | 0.255
|2003           |  | 0.312                |  | 0.115
|2002           |  | 0.280                |  | 0.088
|               |  |                     
|Fiscal Quarter |  |                      |  |      
|               |  |                     
|2006           |  |                      |  |      
|4thquarter     |  | 0.680                |  | 0.545
|3rdquarter     |  | 0.705                |  | 0.625
|2ndquarter     |  | 0.701                |  | 0.616
|1stquarter     |  | 0.686                |  | 0.552
|               |  |                     
|2005           |  |                      |  |      
|4thquarter     |  | 0.740                |  | 0.600
|3rdquarter     |  | 0.865                |  | 0.555
|2ndquarter     |  | 0.626                |  | 0.401
|1stquarter     |  | 0.418                |  | 0.302
|               |  |                     
|2004           |  |                      |  |      
|4thquarter     |  | 0.365                |  | 0.290
|3rdquarter     |  | 0.450                |  | 0.320
|2ndquarter     |  | 0.506                |  | 0.260
|1stquarter     |  | 0.285                |  | 0.255
|               |  |                     
|2006           |  |                      |  |      
|June           |  | 0.670                |  | 0.595
|July           |  | 0.687                |  | 0.670
|August         |  | 0.705                |  | 0.687
|September      |  | 0.750                |  | 0.698
|October        |  | 0.950                |  | 0.790
|November       |  | 0.894                |  | 0.934

| | 
| | 

| | (1) | Our shares began trading on the Bolsa de Comercio de Buenos Aireson March 26, 1996.
| | --- | -----------------------------------------------------------------------------------

Source: Bloomberg.



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Price history of our stock on NASDAQ

Each of our ADS represents 40 ordinary shares. The ADS are listed and traded on the NASDAQ under the trading symbol APSA. The ADS began
trading on the NASDAQ on November 15, 2000 and were issued by the Bank of New York Inc, acting as ADS Depositary. The following table sets forth, for the calendar periods indicated, the high and low closing sale prices of our ADS on the NASDAQ.
On December 1, 2006, the closing price for our ADS on the NASDAQ was US$ 12.2 per ADS.



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|               |  |                         |  |     
|-------------- |  | ----------------------- |  | ----
|               |  | U.S. Dollar per ADS (1)
|               |  | High                    |  | Low 
|Fiscal Year    |  |                         |  |     
|2006           |  | 10.25                   |  | 7.59
|2005           |  | 13.14                   |  | 3.75
|2004           |  | 9.95                    |  | 2.76
|2003           |  | 4.20                    |  | 1.50
|2002           |  | 11.85                   |  | 1.29
|               |  |                        
|Fiscal Quarter |  |                         |  |     
|2006           |  |                         |  |     
|4thquarter     |  | 9.35                    |  | 7.88
|3rdquarter     |  | 9.58                    |  | 7.80
|2ndquarter     |  | 9.90                    |  | 8.05
|1stquarter     |  | 10.25                   |  | 7.59
|               |  |                        
|2005           |  |                         |  |     
|4thquarter     |  | 11.50                   |  | 8.15
|3rdquarter     |  | 13.14                   |  | 7.19
|2ndquarter     |  | 8.60                    |  | 5.60
|1stquarter     |  | 5.83                    |  | 3.75
|               |  |                        
|2004           |  |                         |  |     
|4thquarter     |  | 8.33                    |  | 3.97
|3rdquarter     |  | 9.95                    |  | 4.25
|2ndquarter     |  | 7.70                    |  | 3.55
|1stquarter     |  | 4.20                    |  | 2.76
|               |  |                        
|2003           |  |                         |  |     
|4thquarter     |  | 4.20                    |  | 3.25
|3rdquarter     |  | 3.60                    |  | 2.58
|2ndquarter     |  | 3.10                    |  | 2.10
|1stquarter     |  | 2.15                    |  | 1.50



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|          |  |                         |  |      
|--------- |  | ----------------------- |  | -----
|          |  | U.S. Dollar per ADS (1)
|          |  | High                    |  | Low  
|2006      |  |                         |  |      
|June      |  | 9.35                    |  | 8.00 
|July      |  | 8.70                    |  | 7.95 
|August    |  | 9.25                    |  | 7.95 
|September |  | 10.26                   |  | 8.65 
|October   |  | 12.60                   |  | 10.00
|November  |  | 10.91                   |  | 12.57

| | 
| | 

| | (1) | The ADS began trading on the NASDAQ on November 15, 2000.
| | --- | ---------------------------------------------------------

Due to the aggregate ownership of approximately 91.1% as of June 30, 2006 by our two principal shareholders, the liquidity of our shares is restricted and may cause our stock not to be traded daily.

Our current policy that the dividend shall consist of a cash distribution approximately of 40.0% of our net income, subject to general business condition
and other factors deemed relevant by our Board of Directors and shareholders.

B. Plan of Distribution

This section is not applicable.

C. Markets

Argentine Securities Markets

The Comisión Nacional de Valores is a separate governmental entity with jurisdiction covering the territory of the Republic of Argentina. Its main
purpose is to ensure transparency of Argentinas securities markets, to watch over the market price formation process and to protect investors. The Comisión Nacional de Valores supervises corporations authorized to issue securities to
the public, the secondary markets where these securities are traded, and all persons and corporations involved in any capacity in the public offering and trading of these securities. Pension funds and insurance companies are regulated by separate
government agencies. The Argentine markets are governed generally by Law No. 17,811, as amended, which created the Comisión Nacional de Valores and regulates stock exchanges, stockbrokers, market operations and the public offerings of
securities. There is a relatively low level of regulation of the market for Argentine securities and investors activities in such market, and enforcement of existing regulatory provisions has been extremely limited. Furthermore, there may be
less publicly available information about Argentine companies than is regularly published by or about companies in the United States and certain other countries. However, the Argentine government and the Comisión Nacional de Valores, taking
into consideration the deeper global awareness of the importance of having adequate corporate governance practices and a legal framework to enforce principles such as full information, and transparency, have issued decree
No. 677/2001. This decree has the objective of determining the rights of the financial consumer, increasing market transparency and an adequate legal framework to increase the investors protection within the capital market.
Most of its reforms are in line with world trends pertaining to corporate governance practices that have already been adopted by many emerging markets.



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In order to offer securities to the public in Argentina, an issuer must meet certain requirements of the
Comisión Nacional de Valores regarding assets, operating history, management and other matters, and only securities for which an application for a public offering has been approved by the Comisión Nacional de Valores may be listed on
the Bolsa de Comercio de Buenos Aires. This approval does not imply any kind of certification or assurance related to the merits or the quality of the securities, or the issuer ́s solvency. Issuers of listed securities are required to
file unaudited quarterly financial statements and audited annual financial statements, as well as various other periodic reports, with the Comisión Nacional de Valores and the Bolsa de Comercio de Buenos Aires.

There are 10 securities exchanges in Argentina, the principal exchange for the Argentine securities market is the Bolsa de Comercio de Buenos
Aires, which handles approximately 99% of all equity trading in the country.

The Bolsa de Comercio de Buenos Aires is a
complex, non-profit and self-regulated organization. Various markets require different self-organizations of brokers within the Bolsa de Comercio de Buenos Aires , which is one of its particular characteristics. The most important and
traditional of such markets is Mercado de Valores S.A.

The securities that may be listed on the Bolsa de Comercio de Buenos Aires
are: Stocks, Notes, Convertible Notes, Close-ended Investment Funds, Financial Trust, Indexes, Derivatives and Public Bonds. The Bolsa de Comercio de Buenos Aires is legally qualified for admission, suspension, and delisting of securities
according to its own rules approved by the Comisión Nacional de Valores. Furthermore, the Bolsa de Comercio de Buenos Aires works closely with the Comisión Nacional de Valores in surveillance activities. Also under a special
agreement, registration and listing applications are directly filed with the Bolsa de Comercio de Buenos Aires for simultaneous processing.

The Mercado de Valores is a self-regulated incorporated business organization. The capital stock of such entity is divided into 133 shares, the holders of which (natural or artificial persons) are thereby entitled to act as
individual brokers or brokerage firms; i.e. to execute securities purchase and sale transactions in their own name and on behalf of third parties. Brokers receive a commission for their services.

The primary functions of the Mercado de Valores are concerned with the settlement, surveillance and guarantee of market trades. This entity is
also qualified to take disciplinary actions against individual brokers or brokerage firms who might violate the current statutory rules, and/or the rules and regulations governing the Argentine Stock Market System.

Furthermore, the Mercado de Valores regulates, coordinates and implements each and every aspect connected with stock exchange trading, types of
securities, market mechanisms, terms and conditions of payment, and the like. Jointly with the Bolsa de Comercio de Buenos Aires, the Mercado de Valores has implemented the stock-watch mechanism.

The Mercado de Valores has a trading mechanism applicable to corporate securities and government bonds called Concurrent Market, where trades are
executed screen-based or in the traditional open out-cry mode on the floor of the Bolsa de Comercio de Buenos Aires in an automated order-matching system. The Mercado de Valores guarantees the settlement of all trades executed in the
Concurrent Market.

Also trades on government and Notes may be executed on the Continuous Trading Session (with or without Mercado de
Valoress settlement guarantee).

The cash mechanism (standard maturity) in the Concurrent Market admits the following operating
forms:



| |  |  | Automated trade execution based on orders entered from Sistema Integral de Negociación Asistida por Computadora work-stations or through open out-cry
Floor-trade order slips.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Open out-cry Floor-trade executions are subsequently inputted through order slips.
| | - |  | ----------------------------------------------------------------------------------



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Open out-cry trades are executed pursuant to the rules applicable to traditional floor trading.
Automated-execution trades based on the offers are carried out according to the rules of the electronic system. Both executions entail the registration of trades in a unique price-volume structure, and both modes of entering the system feed a unique
order structure per issue.

Among the main features of the open out-cry mechanism carried out on the Floor, the following are highlighted:



| |  |  | trades are executed open out-cry;
| | - |  | ---------------------------------



| |  |  | they are perfected through the preparation of order slips; and
| | - |  | --------------------------------------------------------------



| |  |  | the best-offer rule applies and as in the electronic system, it open out-cry the Mercado de Valores settlement guarantee.
| | - |  | -------------------------------------------------------------------------------------------------------------------------

Block trading is allowed in a minimum amount of Ps. 0.2 million for leader companies which are listed on the leader panel of the Bolsa de
Comercio de Buenos Aires, and Ps. 0.1 million for the companies listed on the general panel of the Bolsa de Comercio de Buenos Aires. Block trading takes place on the floor of the Bolsa de Comercio de Buenos Aires and is
conducted in Spanish by continuous open outcry. Transactions of more than Ps. 1.0 million are announced on the floor and are put on stand by for approximately 30 minutes. For transactions of more than Ps. 5.0 million, a certificate of the
units from Caja de Valores S.A. is additionally required.

As to the electronic system, its outstanding characteristics are:



| |  |  | trades are executed based on bids and offers entered in work-stations, i.e. computers linked to the Stock Exchange information network;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



| |  |  | trades are executed automatically; and
| | - |  | --------------------------------------



| |  |  | offers are recorded as per price-time priority, giving priority to the best of them.
| | - |  | ------------------------------------------------------------------------------------

These trades have the Mercado de Valores guarantee.

Brokers and brokerage firms may trade in this
segment, either by buying or selling government and Notes for their own account, executing trades with another broker or brokerage firm or any other intermediary, by means of direct negotiations. In this system the best-offer rule does not apply and
traders ́ compensations as well as stock market and stock exchange fees are implicit in the price agreed upon.

Trades must be
reported in real-time for their dissemination, registration and publication. Counterpart trades are settled by Mercado de Valores, and may be channeled through the guaranteed or the non-guaranteed segment.

Over the Counter Market, MAE

The Electronic
Open Market (Mercado Abierto Electronico,or MAE) is an exchange organized under the laws of the Argentine Republic, which operates as a self-regulatory organization under the supervision of the Comisión Nacional de
Valores.

The MAE works as an electronic environment to process Over the Counter transactions. It is an electronic exchange where both
government securities and Notes are traded through spot and forward contracts.

MAE has 90 brokers/dealers members, which include national
banks, provincial banks, municipal banks, private national banks, foreign banks, cooperative banks, financial institutions, foreign exchange entities and pure brokers/dealers (exclusively engaged in brokerage activities). Both Argentine or foreign
capital banks and financial institutions may be MAE brokers/dealers.



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Securities to be traded must be registered with the pertinent supervising authorities and may be traded
in MAE, in other exchanges or in both of them concurrently.

Securities Central Depositary, Caja de Valores S.A.

Caja de Valores S.A. is a corporation, totally private, which acts as central depositary of public bonds and private securities. It was established
in 1974 by Act 20,643, and it is supervised by the Comisión Nacional de Valores.

Those authorized to make deposits of securities
with the Caja de Valores S.A. are stockbrokers, banking financial institutions, and mutual funds.

The majority shareholders of the
Caja de Valores S.A. are the Bolsa de Comercio de Buenos Airesand the Mercado de Valores de Buenos Aires S.A. (49.98% each).

Certain information regarding theBuenos Aires Stock Exchange



|                                           |  |                |  |                    |  |       |  |      
|------------------------------------------ |  | -------------- |  | ------------------ |  | ----- |  | -----
|                                           |  | As of June 30, |  | As of December 31,
|                                           |  | 2006           |  | 2005               |  | 2004  |  | 2003 
|Market capitalization (Ps. Billon)         |  | 1,006.8        |  | 771.3              |  | 689.9 |  | 542.4
|Average daily trading volume (Ps. Million) |  | 74.0           |  | 74.6               |  | 52.6  |  | 34.0 
|Number of listed companies                 |  | 105            |  | 104                |  | 107   |  | 110  

Although companies may list all of their capital stock on the Bolsa de Comercio de Buenos
Aires, in many cases a controlling block is retained by the principal shareholders resulting in only a relatively small percentage of many companies stock being available for active trading by the public on the Bolsa de Comercio de
Buenos Aires.

As of June 30, 2006, approximately 105 companies had equity securities listed on the Buenos Aires Stock Exchange.
As of June 30, 2006, approximately 10.2% of the total market capitalization of the Buenos Aires Stock Exchange was represented by the securities of ten national companies.

The Argentine securities markets are substantially more volatile than the securities markets in the United States and certain other developed countries.
The Mercado de Valores experienced a 13% increase in 1995, a 25.0% increase in 1996, a 6.0% increase in 1997, a 37.0% decrease in 1998, a 28.0% increase in 1999, a 24.0% decrease in 2000, a 29.0% decrease in 2001, a 78.0% increase through
September 30, 2002, measured in Pesos, and a 77.0% increase through October 31, 2003, a 38.0% increase through October 29, 2004, and a 26.1% increase through October 24, 2005 and a 9.8% increase through October 27, 2006 also
measured in Pesos. To control volatility, the Bolsa de Comercio de Buenos Aires operates a system by which trades of an issuers stock are suspended for one-half hour when such issuers share price changes by more than 10.0% from
its opening price.

Nasdaq ́s Stock Market.

Our ADS are listed and traded in the Nasdaq National Market of the Nasdaq Stock Market under the trading symbol APSA.



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D. Selling Shareholders

This section is not applicable.

E. Dilution

This section is not applicable.

F. Expenses of the Issue

This section is not applicable.

ITEM 10. Additional Information

A. Share Capital

This section is not applicable.

B. Memorandum and Articles of Association

Our corporate purpose

Our legal name is Alto Palermo S.A. (APSA). We were organized and incorporated on August 29, 1889 under Argentine law as a stock
corporation (Sociedad Anónima or S.A.). Our by-laws were registered in the Superintendence of Corporations (Inspección General de Justicia) on February 27, 1976 under number 323, on page 6, book 85 of the stock
corporations volume. Pursuant to our bylaws, our term of duration expires on August 28, 2087. Article 4 of our bylaws defines our corporate purpose as follows:



| |  |  | Invest, develop and operate real estate, and specially shopping centers;
| | - |  | ------------------------------------------------------------------------



| |  |  | Invest, develop and operate personal property, and specially securities;
| | - |  | ------------------------------------------------------------------------



| |  |  | Manage real or personal property, whether owned by us or by third parties;
| | - |  | --------------------------------------------------------------------------



| |  |  | Build, recycle or repair real property whether owned by us or by third parties;
| | - |  | -------------------------------------------------------------------------------



| |  |  | Advise third parties with respect to the aforementioned activities;
| | - |  | -------------------------------------------------------------------



| |  |  | Fund projects, undertakings, works and/or real estate transactions of third parties.
| | - |  | ------------------------------------------------------------------------------------



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Board of Directors

Voting of proposals in which Directors have material interest

The Comisión Nacional de
Valores enacted Resolution No. 677/01, which establishes in Section 8 that the directors, administrators and members of the supervisory committee of companies whose securities are publicly offered, shall act in a loyal and diligent manner
when exercising their functions. In that sense, they have to:



| | (a) | place the corporate interests of the company and the common interest of the shareholders above any other interest, including the controlling shareholders interests;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | refrain from obtaining a personal benefit from the issuer other than the compensation paid for their functions;
| | --- | ---------------------------------------------------------------------------------------------------------------



| | (c) | organize and implement preventive systems and mechanisms to protect the corporate interests, reducing the risk of conflicts of interests, either permanent or temporary, in the
personal relationship with the company or with entities related to the company. This duty specifically refers to activities in competition with the company, the use or imposition of a lien on corporate assets, the determination of compensation or
proposals related thereto, the use of non public information, the use of business opportunities for their own benefit or for the benefit of third parties and, in general, any situation that may generate a conflict of interests affecting the issuer;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | make the necessary arrangements to perform the companys activities and implement the necessary internal control to ensure a careful management and avoid breaches of the duties
established by the applicable regulations; and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | act with due diligence when preparing and disclosing the information to the market, and maintain the independence of external auditors.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------

The Law of Corporations No 19,550 establishes in Section 271 that directors may contract with the company when the contract is related to the
regular activities of the company and terms and conditions are in accordance to market terms. All other contracts with directors should be approved by the shareholders.

Further, Section 73 of Resolution No. 677/01 establishes a specific procedure for transactions of a company whose securities are publicly offered, entered into with its directors, members of the supervisory
committee, or senior managers and which involve a relevant amount. The transaction is considered to have a relevant amount when it exceeds: (i) one percent (1%) of the corporate capital, measured pursuant to the last approved financial
statements, and (ii) the equivalent of one hundred thousand Pesos (Ps. 100,000).

The related person with an interest in the
transaction should submit all the relevant documentation to the approval of the Board of Directors. The directors must request a report (i) of the audit committee stating if the conditions of the transaction may be reasonably considered
adequate according to normal market conditions; or (ii) of two independent evaluating firms that shall have informed about the same matter and about the other transaction conditions. Immediately after being approved by the Board of Directors
the transaction has to be informed to the Comisión Nacional de Valores.

Notwithstanding the above Section 272 of the Law of
Corporations N° 19,550 provides that when a director has an opposite interest to that of the company, he or she should notify that situation to the Board of Directors and the supervisory committee and abstain from voting in that respect. The
violation of this provision results in the director being jointly and severally liable without limit.

In the event that the results of the
reports are not favorable to the transaction, its approval should be considered by the shareholders meeting.



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Approval of compensation of Directors and Supervisory Committee

Our bylaws do not establish the compensation to be paid to members of the Board of Directors and the supervisory committee, and therefore pursuant to
Section 261 of the Law of Corporations No. 19,550, it should be approved by the majority of the shareholders. The maximum amount that may be paid as compensation to members of the Board of Directors and the supervisory committee should not
exceed 25% of the realized and net earnings of the company and 5% when there is no distribution of dividends. If the company does not distribute the total earnings, the amount of the compensation should be proportional to that distribution and
within the mentioned limits. These limits may only be surpassed by express approval of majority of the shareholders.

Borrowing powers
of Directors

Our bylaws establish, in Section 17, that the board of directors has full and broad powers to organize, manage and
direct us, aimed at fulfilling the corporate purpose.

In case one of our directors borrowed from us, the matter would be subject to the
requirements described above for transactions in which directors have material interest.

Retirement of Directors and ownership of
shares requirement

Our bylaws do not establish any requirements or provisions regarding age limits for directors retirement nor
do they require ownership of a certain number of shares in order to be eligible for appointment as director.

Rights, preferences and restrictions
attaching to the common shares

Dividend rights

The Law of Corporations No. 19,550 establishes that the distribution and payment of dividends to shareholders is valid only if they result from realized and net earnings of the company pursuant to an annual
financial statements approved by the shareholders. The approval, amount and payment of dividends is subject to the approval of our annual ordinary shareholders meeting of the company. That approval requires the affirmative vote of the majority of
the present votes with right to vote at the meeting.

Pursuant to the Law of Corporations No. 19,550 and Section 28 of our
bylaws, liquid and realized profits of each fiscal year shall be distributed as follows:



| |  |  | allocate 5% of such net profits to legal reserve, until the amount of such reserve equals 20% of the capital stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the sum established by the shareholders meeting as remuneration of the of Directors and the supervisory committee;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | dividends, additional dividends to preferred shares if any, or to optional reserve funds or contingency reserves or to a new account, or for whatever purpose the shareholders
meeting determines.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Dividends are paid pro rata according to the interests held by shareholders within thirty days
after approval and the right to collection expires upon the expiration of a term of three years since they were made available to shareholders.

The shareholders meeting may authorize payment of dividends on a quarterly basis provided no applicable regulations are violated. In that case, all and each of the members of the Board of Directors and the supervisory committee will
be jointly and severally liable for the refund of those dividends if, as of the end of the respective fiscal year, the realized and net earnings of the company are not sufficient to allow the payment of dividends.



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Voting rights and Staggered Elections

Our stock capital is composed by book-entry common shares with face value of Ps. 0.1 per share and entitled to one vote each.



| |  |  | All directors and alternate directors are elected for a three-year term.
| | - |  | ------------------------------------------------------------------------



| |  |  | Our bylaws do not establish staggered elections.
| | - |  | ------------------------------------------------

Rights to share in APSAs profits

The holders of our common shares have the right to participate in our net and
realized profits on a pro rata basis of their respective interests.

Surplus rights to share in the event of liquidation

Section 29 of our bylaws determine that, in the event of liquidation, dissolution or winding-up, our assets (i) will be
applied to satisfy liabilities and (ii) will be proportionally distributed among holders of preferred stock if there are any and in accordance with the terms of the preferred stock. If any surplus remains, the holders of common shares are
entitled to receive and share on a pro rata basis in all net assets remaining for distribution.

Procedure to change the rights of
stockholders

The rights of stockholders are established in the Law of Corporations No. 19,550 and in the bylaws. The rights of
shareholders provided for by the Law of Corporations No. 19,550 may not be diminished by the bylaws. Section 235 of the Law of Corporations No. 19,550 establishes that the amendment of the bylaws should be approved by shareholders in
an extraordinary shareholders meeting.

On October 31, 2003 under an annual ordinary and extraordinary meeting decided not to adhere
to the Optional Statue of Public Offerings of Compulsory Acquisition (Régimen Estatutario Optativo de Oferta Pública de Adquisición Obligatoria) established by Decree No. 677/2001. Therefore, shareholders decided to
incorporate said provision under section 1 of our bylaws.

Ordinary and extraordinary Shareholders Meeting

General

Shareholders meetings
may be ordinary or extraordinary. We are required to hold an ordinary shareholders meeting within four months of the close of each fiscal year to approve our financial statements, the allocation of net income for the fiscal year, the approval
of the reports of the Board of Directors and the audit committee and the election and remuneration of directors and members of the audit committee. Other matters which may be considered at an ordinary meeting include the responsibility of directors
and members of the audit committee, capital increases and the issuance of certain corporate bonds. Extraordinary shareholders meetings may be called at any time to consider matters beyond the scope of an ordinary meeting, including amendment
of the bylaws, issuance of debentures, early dissolution, merger, spin-off, reduction of capital stock and redemption of shares, changing the limiting or extending the shareholders liability by changing our corporate legal status and limitation of
shareholders preemptive rights.

Notices

Notice of shareholders meetings must be published for five days in the Official Gazette of the Republic of Argentina, in an Argentine newspaper of wide circulation and in the publications of Argentine exchanges
or



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securities markets in which our shares are traded, at least ten days prior to the date on which the meeting is to be held
as per Argentine Corporation Law, and at least 20 days prior to the meeting as per Executive Order 677/01. The notice must include information regarding the type of meeting to be held, the date, time and place of the meeting and the agenda. If there
is no quorum at the meeting, notice for a meeting on second call must be published for three days, at least eight days before the date of the second meeting, and must be held within 30 days of the date for which the first meeting was called. The
first call and second call notices may be sent simultaneously in order for the meeting on second call to be held on the same day as the meeting on first call, but only in the case of ordinary shareholders meetings. Shareholders meetings
may be validly held without notice if all shares of our outstanding capital stock are present and resolutions are adopted by unanimous vote.

The Board of Directors will determine appropriate publications for notice outside Argentina in accordance with requirements of jurisdictions and exchanges where our shares are traded.

Quorum and Voting Requirements

The
quorum for ordinary meetings of shareholders on first call is a majority of the shares entitled to vote, and action may be taken by the affirmative vote of an absolute majority of the shares present that are entitled to vote on such action. If a
quorum is not available, a second call meeting may be held at which action may be taken by the holders of an absolute majority of the shares present, regardless of the number of such shares. The quorum for extraordinary shareholders meeting on
first call is sixty percent of the shares entitled to vote, and if such quorum is not available, a second call meeting may be held, for which there are no quorum requirements.

Action may be taken at extraordinary shareholders meetings by the affirmative vote of an absolute majority of shares present that are entitled to
vote on such action, except that the approval of a majority of shares with voting rights, without application of multiple votes, is required in both first and second call for: (i) the transfer of our domicile outside Argentina, (ii) a
fundamental change of the corporate purpose set forth in the bylaws, (iii) our anticipated dissolution, (iv) the total or partial repayment of capital, (v) a merger of our company, if we are not the surviving entity, (vi) a
spin-off of our company, or (vii) changing our corporate legal status.

Shareholders meetings may be called by the Board of
Directors or the members of the statutory audit committee whenever required by law or whenever they deem it necessary. Also, the board or the members of the statutory audit committee are required to call shareholders meetings upon the request
of shareholders representing an aggregate of at least five percent of our outstanding capital stock. If the board or the statutory audit committee fails to call a meeting following this request, a meeting may be ordered by the Comisión
Nacional de Valores or by the courts. In order to attend a meeting, a shareholder must deposit with us a certificate of book-entry shares registered in his name and issued by Caja de Valores at least three business days prior to the date on which
the meeting is to be held. A shareholder may be represented by proxy. Proxies may not be granted to directors, members of the audit committee or officers or employees of our company.

Conflict of Interest

A shareholder
who votes on a matter involving our Company in which he has a conflicting interest may, under Argentine law, be liable for damages suffered by the Company as a result of the decision, provided the transaction would not have been approved without his
vote.

Limitations to own securities

There are no legal limitations to own securities or exercise voting rights for residents, non-resident or foreign shareholders.

Ownership threshold above which ownership should be disclosed

The Comisión Nacional de
Valores regulations require that transactions, which cause a persons holdings of capital stock of a registered Argentine company, to equal or exceed 5% of the voting power, should be immediately notified to the Comisión Nacional de
Valores. Thereafter, every change in the holdings that represents a multiple of 5% of the voting power should also be notified.



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Directors, senior managers, executive officers, members of the supervisory committee, and controlling
shareholders of an Argentine company whose securities are publicly offered, should notify the Comisión Nacional de Valores on a monthly basis, their beneficial ownership of shares, debt securities, and call and put options related to
securities of such companies and their controlling, controlled or affiliated companies.

Further, the Comisión Nacional de Valores
must be immediately notified of transactions which cause a persons holdings of capital stock of an Argentine company whose securities are publicly offered to equal or exceed 5% of the voting power and every change in the holdings that
represents a multiple of 5% of the voting power. Holders of more than 50% of the common shares or who otherwise control decision making in shareholders meetings, as well as directors, officers and members of the supervisory committee must
provide the Comisión Nacional de Valores with annual reports of their holdings in the capital stock of such companies and monthly reports of any change in their holdings.

Compliance with NASDAQ Listing Standards on Corporate Governance

Significant differences between our
corporate governance practices and US Companies practices under NASDAQ Rules:

Our corporate governance practices are governed by the
applicable Argentine law; particularly, the Business Companies Law, Decree N°677/01 and the Standards of the Comisión Nacional de Valores, as well as by its Bylaws. APSA has securities that are registered with the Securities and Exchange
Commission (the SEC) and are listed on the NASDAQ Stock Market (the NASDAQ), and is therefore subject to corporate governance requirements applicable to NASDAQ-listed non-US companies (a NASDAQ-listed company).

Pursuant to NASDAQ Marketplace Rule 4350(a), NASDAQ-listed non-U.S. companies that are categorized as Foreign Private Issuers
may follow home country corporate governance practices in lieu of the requirements of Rule 4350, provided that the foreign private issuer complies with certain mandatory sections of Rule 4350, discloses each requirement of Rule 4350 that it does not
follow and describes the home country practice followed in lieu of such requirement. The requirements of Rule 4350 and the Argentine corporate governance practices that the Company follows in lieu thereof are described below:



|                                                                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NASDAQ Standards for U.S. companies                              |  | APSAs Corporate Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Rule 4350(b)(1)(A) - Distribution of Annual and Interim Reports. |  | In lieu of the requirements of Rule 4350(b)(1)(A), we follow Argentine law, which requires that companies make public an annual report in Spanish, including annual audited consolidated
financial statements prepared in accordance with generally accepted accounting principles in Argentina, by filing such annual report with the Comisión Nacional de Valores and the Buenos Aires Stock Exchange (Bolsa de Comercio de Buenos
Aires), within 70 calendar days of the end of the companys fiscal year. Interim reports must be filed with the Comisión Nacional de Valores and the Bolsa de Comercio de Buenos Aires within 42 calendar days of the end of each
fiscal



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|                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NASDAQ Standards for U.S. companies                             |  | APSAs Corporate Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                                |  | quarter. The Bolsa de Comercio de Buenos Aires publishes the annual reports and interim reports in the CBA bulletin and makes the bulletin available for inspection at its offices. In
addition, our shareholders can receive copies of annual reports and any interim reports upon such shareholders request. English language translations of our annual reports and interim reports are furnished to the Securities and Exchange
Commission (the SEC). We also post the English language translation of our annual reports and quarterly press releases on its website. Furthermore, under the terms of the Deposit Agreement, dated November 10, 2000, among us, The Bank of
New York, as depositary, and owners of ADS issued thereunder, we are required to furnish The Bank of New York with, among other things, English language translations of their annual reports. Annual reports are available for inspection by ADR holders
at the offices of The Bank of New York located at, 101 Barclay Street, 22nd Floor, New York, New York. Finally, Argentine law requires that 20 calendar days before the date of a shareholders meeting, the board of directors must provide to our
shareholders, at our executive office or through electronic means, all information relevant to the shareholders meeting, including copies of any documents to be considered by the shareholders (which includes the annual
report).
|                                                                | 
|Rule 4350(c)(1) - Majority of Independent Directors.            |  | In lieu of the requirements of Rule 4350(c)(1), we follow Argentine law which does not require that a majority of the board of directors be comprised of independent directors. Argentine law
instead requires that public companies in Argentina such as the Company must have a sufficient number of independent directors to be able to form an audit committee of at least three members, the majority of which must be independent pursuant to the
criteria established by the Comisión Nacional de Valores.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                | 
|Rule 4350(c)(2) - Executive Sessions of the Board of Directors. |  | In lieu of the requirements of Rule 4350(c)(2), we follow Argentine law which does not require independent directors to hold regularly scheduled meetings at which only such independent
directors are                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                



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|------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NASDAQ Standards for U.S. companies         |  | APSAs Corporate Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                            |  | present (i.e., executive sessions). Our board of directors as a whole is responsible for monitoring our affairs. In addition, under Argentine law, the Board of Directors may approve the
delegation of specific responsibilities to designated directors or non-director managers of the company. Also, it is mandatory for public companies to form a supervisory committee (composed of syndics) which is responsible for monitoring the
legality of the companys actions under Argentine law and the conformity thereof with its by-laws.                                                                                                                                                                                                                                                                                                                                
|                                            | 
|Rule 4350(c)(3) - Compensation of Officers. |  | In lieu of the requirements of Rule 4350(c)(3), we follow Argentine law which does not require companies to form a compensation committee comprised solely of independent directors. For the
determination of the compensation of the chief executive officer and all other executive officers no decision of a majority of independent directors or a compensation committee comprised solely of independent directors is required under Argentine
law. Under Argentine law, the board of directors is the corporate body responsible for determining the compensation of the chief executive officer and all other executive officers, so long as they are not directors. In addition, under Argentine law,
the audit committee shall give its opinion about the reasonableness of managements proposals on fees and option plans for directors or managers of the Company.
|                                            | 
|Rule 4350(c)(4) - Nomination of Directors.  |  | In lieu of the requirements of Rule 4350(c)(4), we follow Argentine law which requires that directors be nominated directly by the shareholders at the shareholders meeting and that they
be selected and recommended by the shareholders themselves. Under Argentine law, it is the responsibility of the ordinary shareholders meeting to appoint and remove directors and to set their compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                            | 
|Rule 4350(d)(1) - Audit Committee Charter.  |  | In lieu of the requirements of Rule 4350(d)(1), we follow Argentine law which requires that audit committees have a charter but does not require that companies certify as to the adoption of
the charter nor does it require an annual review and assessment thereof. Argentine                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



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|---------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NASDAQ Standards for U.S. companies            |  | APSAs Corporate Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                               |  | law instead requires that companies prepare a proposed plan or course of action with respect to those matters which are the responsibility of the companys audit committee. Such plan or
course of action could, at the discretion of our audit committee, include a review and assessment of the audit committees charter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                               | 
|Rule 4350(d)(2) - Audit Committee Composition. |  | Argentine law does not require that companies have an audit committee comprised solely of independent directors and it is equally not customary
business practice in Argentina to have such a committee. Argentine law instead requires that companies establish an audit committee with at least three members comprised of a majority of independent directors as defined by Argentine law. See
Item 6. Directors, Senior Management and Employees.  As of December 2006,
the Board of Directors announced the composition of the Audit Committee provided in Section 15 of the Regime of Transparency in Public Offerings and approved pursuant to Decree No. 677/01 and Section 13 of Resolution No. 400. Members of the Audit
Committee decide their proposals by majority. Our Audit Committee is composed by three members: Abraham Perelman, Gabriel Adolfo Reznik and Andrés Olivos. Pursuant to the requirements of Argentine law, each member of our Audit Committee is
independent. However, as Andrés Olivos is an executive officer of Parque Arauco, one of our affiliates, he does not meet the independence requirements under the Sarbanes-Oxley Act.  In addition to the Audit Committee, the Company also has a board of auditors
called Comisión Fiscalizadora (Supervisory Committee), that is independent from the board of directors. The Supervisory Committee is elected by a majority vote of all outstanding shares at the annual Shareholders Meeting.
The Supervisory Committee is charged with supervising compliance by the Board of Directors with all of its legal and statutory obligations, as well as informing on the accuracy of the annual report (Memoria) and the companys financial
statements certified by the external auditors that are delivered to shareholders by the Board of Directors. This function normally would be within the purview of the Audit Committee but in our case is managed by our Supervisory Committee.
 Rule 10A-3 under the Securities Exchange Act of 1934 provides exemptions for
foreign private issuers to comply with independence requirements under SEC and NASDAQ regulations. Although it is not clear that available exemptions for foreign private issuers apply to our company, we believe that the Supervisory Committee and the
Audit Committee together meet the purposes that an audit committee has under SEC and NASDAQ regulations.



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|                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NASDAQ Standards for U.S. companies     |  | APSAs Corporate Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Rule 4350(f) - Quorum.                  |  | In lieu of the requirements of Rule 4350(f), the Company follows Argentine law and our bylaws, which distinguish between ordinary meetings and extraordinary meetings and require, in
connection with ordinary meetings, that a quorum consist of a majority of stocks entitled to vote. If no quorum is present at the first meeting, a second meeting may be called, in which the shareholders present, regardless of their number,
constitute a quorum. Resolutions may be adopted by an absolute majority of the votes present. Argentine law, and our bylaws, requires in connection with extraordinary meetings, that a quorum consist of 60% of the stock entitled to vote. However, if
such quorum is not present at the first meeting, our bylaws provide that a second meeting may be called and may be held with the number of shareholders present. In both ordinary and extraordinary meetings, decisions are adopted by an absolute
majority of votes present at the meeting, except for certain fundamental matters (such as mergers and spin-offs (when the Company is not the surviving entity and the surviving entity is not listed on any stock exchange), anticipated liquidation,
change in its domicile outside of Argentina, total or partial recapitalization of its statutory capital following a loss, any transformation in our corporate legal form or a substantial change in our corporate purpose, or the issue of bonds) which
require an approval by vote of the majority of all the stock entitled to vote (all stock being entitled to only one vote.
|                                        | 
|Rule 4350(g)  Solicitation of Proxies. |  | In lieu of the requirements of Rule 4350(g), the Company follows Argentine law which requires that notices of shareholders meetings be published, for five consecutive days, in the
Official Gazette and in a widely published newspaper in Argentina no earlier than 45 calendar days prior to the meeting and at least 20 calendar days prior to such meeting. In order to attend a meeting and be listed on the meeting registry,
shareholders are required to submit evidence of their book-entry share account held at Caja de Valores up to three business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



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|------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NASDAQ Standards for U.S. companies  |  | APSAs Corporate Practices                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                                     |  | days prior to the scheduled meeting date. If entitled to attend the meeting, a shareholder may be represented by proxy (properly executed and delivered with a certified signature) granted to
any other person, with the exception of a director, syndic, member of the Comisión fiscalizadora, manager or employee of the issuer, which are prohibited by Argentine law from acting as proxies. In addition, our ADS holders receive, prior to
the shareholders meeting, a notice listing the matters on the agenda, a copy of the annual report and a voting card.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                     | 
|Rule 4350(h)  Conflicts of Interest |  | In lieu of the requirements of Rule 4350(h), the Company follows Argentine law which requires that related party transactions be approved by the audit committee when the transaction exceeds
one percent (1%) of the corporations net worth, measured pursuant to the last audited balance sheet, so long as the relevant transaction exceeds the equivalent of three hundred thousand Argentine Pesos (Ps. 300,000). Directors can contract
with the corporation only on an arms length basis. If the contract is not in accordance with prevailing market terms, such transaction must be pre-approved by the board of directors (excluding the interested director). In addition, under
Argentine law, a shareholder is required to abstain from voting on a business transaction in which its interests may be in conflict with the interests of the company. In the event such shareholder votes on such business transaction and such business
transaction would not have been approved without such shareholders vote, such shareholder may be liable to the company for damages and the resolution may be declared void.

C. Material Contracts

We have not entered into any material contracts outside the ordinary course of business
other than those contracts described in the Related Party Transactions and Our Indebtedness Sections contained in this annual report.



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D. Exchange Controls

Currency Exchange Regulation

All foreign currency exchange transactions must be carried out in the free exchange market, in which the Argentine Central Bank participates by purchasing
and selling foreign currency.

Import and Export of Capital

Import of Capital

Currently, there
are no laws, executive orders or regulations nor any exchange controls in force in Argentina which limits the import of capital.

Pursuant
to the Argentine Foreign Investment Law No. 21,382, and Decree No. 1,853/93, enacted in 1993, the purchase by foreign investors (any natural or legal person domiciled out of Argentina or an Argentine company of foreign capital)
of capital participation in a company existing in Argentina (according to the Foreign Investment Act) shall constitute a foreign investment.

At present there are no restrictions on foreign investments in industries other than public broadcasting media, and no prior authorization is required to make foreign investments.

Therefore, no prior authorization is required in order to purchase our securities.

See Item 3: Key Information  Exchange Rates

Export of Capital, including the availability of cash or cash equivalents

From 1989 to
December 3, 2001, there were no exchange controls restricting the peso-U.S. Dollar translation or the remittance of U.S. Dollars abroad. In compliance with the economic measures set forth by the Government by means of Decree
No. 1570/01 dated December 3, 2001 and subsequent amendments thereto, aimed at protecting the integrity of the Argentine financial system, money could not be transferred abroad, unless expressly authorized by the Argentine Central Bank.

For purposes of accessing the funds deposited with financial institutions, clients were allowed to make electronic transfers between
accounts of the same institution or others and in favor of the same holder or other persons; pay expenses by means of debit cards, checks, automatic debits and credit cards. Additionally, the Decree declared that new foreign currency deposits can
only be received as time deposits, and no demand accounts denominated in foreign currency may be opened. Such restrictions were later relaxed and deposits of foreign currency in savings accounts (cajas de ahorro) by residents were
allowed. Law No. 25,561 declared a public emergency in social, economic, administrative, financial and foreign exchange market matters, delegating to the Argentine executive branch until December 10, 2003, the powers to reorganize the
financial, banking and foreign exchange system, reactivate the performance of the economy and improve the employment level and distribution of income, focusing on a program for the development of regional economies, creating the conditions for a
sustainable economic growth, consistent with the public debt restructuring, and restructuring outstanding obligations affected by the new foreign exchange system. Such period was extended until December 31, 2006 by Law No. 26,077. Among
other provisions, this law put an end to the convertibility system that had been in effect since April 1991, whereby pesos were convertible to U.S. Dollars at a rate of Ps. 1.0 per U.S Dollar.

As a consequence of the enactment of Decree 260/02, as of February 8, 2002 a single and free exchange market was implemented, through which all
foreign currency exchange transactions are made. Exchange transactions are freely entered into by parties, but subject to the regulations and requirements set forth by the Central Bank. The Central Bank issued Communication A 3471, as
amended, establishing restrictions or special requirements for exchange transactions. Lack of compliance with requirements and conditions shall result in the application of sanctions established by the Criminal Law Exchange Regime.



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Such regulation has been modified several times and, therefore, only the most important provisions
currently in force are mentioned below:



| |  |  | Argentine individuals and companies are authorized to buy up to US$ 2,000,000 per month;
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | the sale of foreign currency to non-residents, with the exception of international organizations, in an aggregate monthly amount exceeding US$ 5,000 shall also be previously
authorized by the Central Bank, except when it is evidenced that the amounts used to purchase foreign currency (i) come from the payment of a resident to the non-resident which orders the transfer; and (ii) the payment is performed in
relation to import, services, revenues or other commercial transfers for which the resident should have accessed to the exchange market in accordance to the exchange rules that regulated payments abroad to commercial account;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | foreign currency exchange or arbitrage transactions with financial institutions located abroad must be previously authorized by the Central Bank, except where such financial
institutions are located in countries which are members of the Basel Committee and have an international credit rating not lower than A granted by international rating agencies registered with the Central Bank, or where such transactions
are entered into with branches of Argentine official banks located abroad;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | future operations in regulated markets, options or forwards transactions and any other type of derivatives entered into and cancelled in Argentina and settled in local currency are
not subject to any restriction, provided, however, that: (i) such operations do not contemplate any payment or transfer obligation of a resident to a foreign country; (ii) any inflow of foreign currency into the local exchange market for
the purposes of such an operation by a non resident who is party to such a transaction is subject to a non-transferable deposit denominated in U.S. Dollars for an amount equal to 30% of the relevant transaction for a period of 365 days in accordance
to such further conditions as indicated bellow (the Non- Transferable Deposit); and (iii) transfer of foreign currency abroad by a non resident derived from such transactions involving an aggregate monthly amount exceeding US$ 5,000
shall also be previously authorized by the Central Bank.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Communication A 4285 dated January 17, 2005, relaxed restrictions on foreign currency transactions by abrogating the requirement of prior approval of the Central
Bank for the execution of certain future and forward operations and for the access to the foreign exchange market for their cancellation. These operations include: (i) transactions executed by the financial system for the acquisition of certain
time deposits having variable retribution; (ii) agreements for the coverage of foreign currencies and interest rates, (iii) agreements executed by exporters or importers for the coverage of commodity prices, as long as they are related to
argentine foreign trade transactions; and (iv) the execution of external transactions in the form of Repos provided that they are executed for a term of at least 180 days. With the exception of inflows related to the external transactions in
the form of Repos mentioned in (iv), any other inflow of foreign currency devoted to future or forward operations mentioned in (i) to (iii) is exempted from the obligation to constitute the Non- Transferable Deposit.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | financial institutions must obtain prior authorization of the Central Bank in order to purchase any kind of asset, where the payment for such a transaction is made against delivery
of foreign currency or any other kind of foreign denominated asset that is part of the General Exchange Position (Posición General de Cambios) (the GEP) of these financial institutions;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | new imports of goods may be fully paid in advance, without consideration of the kind of good, as well as debts for imports with any maturity date;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | access to the free and sole exchange market is allowed for payment of expired capital services
| | - |  | ----------------------------------------------------------------------------------------------



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originated in financial debts, except for financial entities subject to advance refinancings and
rediscounts granted by the Central Bank and restructuring of its foreign debt (Decree No. 739/03 and Communication A 3940);



| |  |  | non-residents may have access to the exchange market for purposes of transferring funds in foreign currency collected in Argentina, originated from the amortization installments
from national public bonds issued in foreign currency, to accounts in foreign banks;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | there are no restrictions to make payments abroad for services rendered by non-residents on any basis (freight, insurance, royalties, technical advise, fees, etc.);
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | transfers abroad for the payment of indebtedness of private entities (comprising both financial and non-financial institutions) and government owned entities; provided that they
fulfill certain regulatory requirementsamong otherssuch as (i) a sworn statement affirming the fulfillment of Communication A 3602 informative requirements; (ii) the possession of documents which evidence the
genuineness of the operation being cancelled, i.e., the entry into the country of the finance proceed and/or its use to cancel the financial or commercial debt, etc.; (iii) the amounts to be transferred have been adjusted, as the case may be,
in accordance to Decree 214/02 as amended; and (iv) the fact that the inflows have remained in the county for the legal minimum term (180 days until May 26, 2005 or 365 for funds entered into after that date) has been verified;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | effective as of January 8, 2003, Argentine companies may freely transfer corporate profits and dividends corresponding to audited financial statements of local companies
without prior Central Bank approval and transfers of funds abroad in order to pay reinsurance premiums will be subject only to the issuance of a statement from the regulatory authority on insurance matters Superintendencia de Seguros de la
Nación (Superintendent of Insurance Board), with respect to the reason and amount to be transferred;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | there is an obligation to enter the funds received as payment for the export of goods and services into the exchange market and to convert them into local currency within a time
limit established by the Ministry of Economy and Production;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | foreign currency obtained from the collection of exports corresponding to bills of lading shall be sold at the reference exchange rate when the foreign currency so obtained was not
clear at the exchange market within the applicable legal terms, in accordance with applicable regulation.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | before September 2005, inflows of foreign currency which would be applied to export advances and prefinancing were allowed into the local exchange market avoiding the
non-transferable deposit requirement established by Decree No. 616/05, issued on June 10, 2005 by providing a sworn statement stating that foreign funds would be used for a specific purchase transaction entered into with the buyer.
Subsequently, the BCRA by means of the Communication A 4415 substituted the sworn statement requirement with the exhibition of the shipping contract involved in said transaction. Later, on November 22, 2005 BCRAs Communication
A4443 relaxed this requirement exempting exporters from providing such documentary evidence if they proved that the inflow of funds would not exceed more than 25% of the amount they received during the last year for similar transactions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Government, through the Central Bank, holds control over capital inflows and outflows, enacting the applicable rules in
this regard. Decree No. 616/05, issued on June 10, 2005, established that inflows and outflows of foreign currency into the local exchange market, and indebtedness transactions incurred by local residents that may result in a foreign
currency-denominated payment to non-residents, need to be registered with the Central Bank. Furthermore, as from May 26, 2005, the following situations will be subject to certain requirements and conditions: (a) inflows of funds derived
from foreign borrowing by the private financial and non financial sector, and (b) inflows of foreign currency by non-residents for the purpose of (i) holding a position in local currency, (ii) purchasing financial debt or assets and
(iii) investing in government bonds in the



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secondary market. In these situations, the following requirements must be met: (i) inflows must remain in Argentina
for 365 days to be computed as from the day they were negotiated in the local exchange market; (ii) the funds involved in the transactions covered by this decree must be deposited in a local bank account; (iii) a non-transferable deposit
denominated in U.S. Dollars for an amount equal to 30% of the relevant transaction has to be made with the resulting proceeds. This deposit will only be reimbursed after the expiration of a 365 term, cannot bear interest (nor yield any other type of
profit) and may not be used as collateral in any credit transaction. Such requirements do not apply to: (a) foreign direct investment, (b) primary placement of publicly traded debt or equity securities listed in one or more exchange
markets, and (c) foreign trade and export finance debt related transactions.

Subsequently, Resolution No. 365/2005 from the
Ministry of Economy and Production established that non-resident capital inflows destined for the primary subscription of Argentine Central Bank notes and income derived from the sale by residents of foreign assets for an amount greater than US$
2 million per month, will also be subject to the aforementioned requirements.

Moreover, said resolution provided certain exemptions
to the requirement of making the non-transferable deposit requirement such as: (i) inflows derived from borrowings extended by multilateral and bilateral financial institutions and official credit agencies, and (ii) inflows derived from
financial borrowings extended by foreign creditors, so long as they are devoted to investments in non-financial assets and the borrowed amounts are repaid at least 24 months after they were granted. However, neither Resolution No. 365/2005 nor
the relevant Central Bank Communications contain any definition or example as to what would constitute a non-financial asset that would fall under the said exception. Therefore, inflows of foreign currency derived from loans extended by foreign
creditors to residents devoted to finance the acquisition or the construction of any real estate property are likely to be subject to the non-transferable deposit requirement even if such borrowings are to be repaid no earlier than 24 months after
they were granted.

By contrast, according to Communication C 43075 dated September 26, 2005, inflows of foreign currency
caused by a non-resident and devoted to the cancellation of payment obligations under a purchase agreement (including installment payments thereof) concerning a real estate property under construction may be registered as foreign direct investments
provided that certain conditions are met.

Finally, Resolution No. 637/2005 from the Ministry of Economy and Production dated
November 16, 2005 established that any inflow of foreign currency to the local exchange market devoted to the primary subscription of notes, bonds or participation certificates issued by the trustee of a trust, regardless of the channels in
which they are traded (public or private offerings, or listings in self-regulated markets) is subject to the non-transferable deposit requirement established by Decree 616/05 if such requirement would be deemed applicable to the acquisition of the
underlying assets of the trust.

Reporting requirements on Direct Investments

On March 4, 2005 the Argentine Central Bank issued Communication A 4305 that regulates the reporting system of direct investments and
real estate investments carried out by non-residents in Argentina and by Argentine residents abroad, which had been implemented through Communication A 4237 dated November 10, 2004.

Direct investments in Argentina of non-Argentine residents

Non-Argentine residents are compelled to comply with the reporting regime if the value of their investments in Argentina reaches or surpasses the equivalent of US$ 500,000  measured in terms of the net worth of the company in which
they participate or fiscal value of the real estate owned. If the investments do not reach such amount, the compliance with such regime is optional.

According to Communication A 4237, companies in which non-Argentine residents participate in and administrators of real estate pertaining to non-Argentine residents are those obliged to comply with the
reporting regime.



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Direct investments made abroad by Argentine residents

Argentine investors are compelled to comply with the reporting regime if the value of their investments abroad reaches or surpasses the equivalent of US$
1,000,000  measured in terms of net worth of the company in which they participate or the fiscal value of the real estate they own.

If the value of those investments abroad does not exceed the equivalent of US$ 5,000,000, the declaration could be carried out annually instead of semiannually. If the investments do not reach the equivalent of US$ 1,000,000, the compliance
with such regime is optional.

The first declarations will correspond to the semester ended on December 31, 2004, and will have to be
filed within 90 calendar days as of such date.

Conclusions:

While the foreign exchange market system in Argentina has become increasingly flexible under recent regulations, Decree No. 616/05 severely deters short term inflows of foreign currency which are presumed to be
of a speculative nature. Such determination on the part of the government is associated also to another short term economic policy goal and combined measures aimed at pegging or reasonably adjusting the United States Dollar value around Ps.
3.10 per U.S. Dollar. We cannot assess whether these policies will be maintained in the longer run and how changes made therein may affect the economy and our business perspectives. Furthermore, we cannot predict how changes in the evolution of
the world economy and commodity prices which constitutes an important part of Argentinas exports may influence exchange rates and control policies. Moreover, failure of the government to comply with financial commitments with the IMF or
failure to reach an agreement with said institution may have an impact on the foreign exchange system. No assurance can be made as to the extent to which all such factors may lead to future restrictions that might further tighten foreign exchange
controls or otherwise change the current foreign exchange system.

E. Taxation

United States Taxation

The following summary describes the material United States federal income tax consequences of the ownership of shares and ADS as of the date hereof. The
discussion set forth below is applicable to U.S. Holders (as defined below). Except where noted, this discussion deals only with U.S. Holders that hold the shares or ADS as capital assets. This summary does not represent a detailed description of
the United States federal income tax consequences applicable to you if you are subject to special treatment under the United States federal income tax laws, including if you are:



| |  |  | a bank;
| | - |  | -------



| |  |  | a dealer in securities or currencies;
| | - |  | -------------------------------------



| |  |  | a financial institution;
| | - |  | ------------------------



| |  |  | a regulated investment company;
| | - |  | -------------------------------



| |  |  | a real estate investment trust;
| | - |  | -------------------------------



| |  |  | an insurance company;
| | - |  | ---------------------



| |  |  | a tax exempt organization;
| | - |  | --------------------------



| |  |  | a person holding the shares or ADS as part of a hedging, integrated or conversion transaction, constructive sale or straddle;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



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| |  |  | a trader in securities that has elected the mark-to-market method of accounting for your securities;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | a person liable for alternative minimum tax;
| | - |  | --------------------------------------------



| |  |  | a person who owns 10% or more of the voting stock of our company;
| | - |  | -----------------------------------------------------------------



| |  |  | a partnership or other pass through entity for United States federal income tax purposes; or
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | a person whose functional currency is not the U.S. Dollar.
| | - |  | ------------------------------------------------------------

Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended (the Code), and regulations, rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be replaced, revoked or modified so as to result in federal income tax consequences different from those discussed below. In addition, this summary is based, in part, upon representations made by the depositary (the
Depositary) to us and assumes that the deposit agreement governing the ADS, and all other related agreements, will be performed in accordance with their terms. IF YOU ARE CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF SHARES OR
ADS YOU SHOULD CONSULT YOUR OWN TAX ADVISOR CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO YOU AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.

U.S. Holder means a beneficial owner of a share, or ADS that is for United States federal income tax purposes:



| |  |  | an individual citizen or resident of the United States;
| | - |  | -------------------------------------------------------



| |  |  | a corporation created or organized in or under the laws of the United States or any political subdivision of the United States;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate or the income of which is subject to United States federal income taxation regardless of its source; or
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons has authority to control all substantial
decisions of the trust or (2) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If a partnership holds shares or ADS, the tax treatment of a partner will generally depend on the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding shares or ADS, you should consult your tax advisors.

ADS

In general, for United States federal income tax purposes, U.S. Holders of ADS will be treated as the owners of the underlying
shares that are represented by the ADS. However, the United States Treasury has expressed concerns that intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking actions
that are inconsistent with the claiming of foreign tax credits by the holders of ADS. Such actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to dividends received by certain non-corporate
holders. Accordingly, the analysis of the creditability of Argentine taxes and the availability of the reduced tax rate for dividends received by certain non-corporate U.S. Holders, each discussed below, could be affected by actions taken by
intermediaries in the chain of ownership between the holder of an ADS and our company. Deposits or withdrawals of shares by U.S. Holders for ADS will not be subject to United States federal income tax.



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Distributions on Shares or ADS

Subject to the discussion under Passive Foreign Investment Company Rules below, the gross amount of distributions on the shares or ADS,
(including amounts withheld to reflect Argentine withholding taxes, if any) will be taxable as dividends to the extent paid out of our current and accumulated earnings and profits (as determined under United States federal income tax principles).
Such income (including withheld taxes) will be includable in your gross income as ordinary income on the day actually or constructively received by you, in the case of shares, or by the Depositary, in the case of ADS. Such dividends will not be
eligible for the dividends-received deduction allowed to corporations under the Code.

With respect to non-corporate United States
investors, certain dividends received before January 1, 2011 from a qualified foreign corporation may be subject to reduced rates of taxation. A foreign corporation is treated as a qualified foreign corporation with respect to dividends
received from that corporation on shares (or ADS backed by such shares) that are readily tradable on an established securities market in the United States. United States Treasury Department guidance indicates that our ADS (which are listed on the
NASDAQ National Market), but not our Shares, are readily tradable on an established securities market in the United States. Thus, we do not believe that dividends that we pay on our shares that are not backed by ADS currently meet the conditions
required for these reduced tax rates. There can be no assurance that our ADS will be considered readily tradable on an established securities market in later years. Non-corporate holders that do not meet a minimum holding period requirement during
which they are not protected from the risk of loss or that elect to treat the dividend income as investment income pursuant to Section 163(d)(4) of the Code will not be eligible for the reduced rates of taxation regardless of our
status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This
disallowance applies even if the minimum holding period has been met.

The amount of any dividend paid in Pesos will equal the
U.S. Dollar value of the Pesos received calculated by reference to the exchange rate in effect on the date the dividend is actually or constructively received by you in the case of shares, or by the Depositary, in the case of ADS, regardless of
whether the Pesos are converted into U.S. Dollars. If the Pesos received are not converted into U.S. Dollars on the day of receipt, you will have a basis in the Pesos equal to their U.S Dollar value on the date of receipt. Any gain or loss you
realize on a subsequent conversion or other disposition of the Pesos will be treated as United States source ordinary income or loss.

Subject to certain significant conditions and limitations, Argentine tax withheld from dividends, if any, may be treated as foreign income tax eligible for credit or deduction against your United States federal income tax liability. For
purposes of the foreign tax credit, dividends paid on the shares or ADS will be treated as income from sources outside the United States and will generally constitute passive income. Further, in certain circumstances, if you:



| |  |  | have held ADS or shares for less than a specified minimum period during which you are not protected from risk of loss, or
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | are obligated to make payments related to the dividends,
| | - |  | --------------------------------------------------------

you will not be allowed a foreign tax credit for foreign taxes imposed on dividends paid on ADS or shares.

The rules governing
the foreign tax credit are complex. Investors are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

To the extent that the amount of any distribution exceeds our current and accumulated earnings and profits for a taxable year, as determined under United
States federal income tax principles, the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the ADS or Shares (thereby increasing the amount of gain, or decreasing the amount of loss, to
be recognized by you on a



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subsequent disposition of the ADS or Shares), and the balance in excess of adjusted basis will be taxed as capital gain
recognized on a sale or exchange. Consequently, such distributions in excess of our current and accumulated earnings and profits would generally not give rise to foreign source income and you would generally not be able to use the foreign tax credit
arising from any Argentine withholding tax imposed on such distributions unless such credit can be applied (subject to applicable limitations) against United States federal income tax due on other foreign source income in the appropriate category
for foreign tax credit purposes. However, we do not expect to keep earnings and profits in accordance with United States federal income tax principles. Therefore, you should expect that a distribution will generally be treated as a dividend (as
discussed above).

Taxation of Capital Gains

Subject to the discussion under Passive Foreign Investment Company Rules below, upon the sale, exchange or other disposition of shares or ADS, you generally will recognize capital gain or loss equal to the
difference between the U.S. Dollar value of the amount realized upon the sale, exchange or other disposition and the adjusted tax basis of the shares or ADS, determined in U.S. Dollars. The capital gain or loss will be long-term capital gain or
loss if at the time of sale, exchange or other disposition you have held the shares or ADS for more than one year. Capital gains of individuals derived with respect to capital assets held for more than one year are eligible for reduced rates of
taxation. The deductibility of capital losses is subject to limitations. Any gain or loss you recognize will generally be treated as United States source gain or loss. Consequently, you may not be able to use the foreign tax credit arising from any
Argentine tax imposed on the disposition of an ADS or Share unless such credit can be applied (subject to applicable limitations) against tax due on other income treated as derived from foreign sources.

Passive Foreign Investment Company Rules

Although it is an inherently uncertain factual issue, we may be a PFIC for the current or future taxable years.

In general, we will be a PFIC for any taxable year in which, either (i) at least 75% of the gross income of our company for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a
quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes dividends, interest, royalties, rents (other than rents and royalties
derived in the active conduct of a trade or business and not derived from a related person), annuities and gains from assets that produce passive income. If we own at least 25% by value of the stock of another corporation, we will be treated for
purposes of the PFIC tests as owning a proportionate share of the assets of the other corporation, and as receiving directly a proportionate share of the other corporations income.

The determination of whether we are a PFIC is made annually. If we are a PFIC for any taxable year during which you hold shares or ADS in our company,
unless you make the mark-to-market election discussed below, you will be subject to special tax rules discussed below.

If we are a PFIC
for any taxable year during which you hold our shares or ADS, you will be subject to special tax rules with respect to any excess distribution received and any gain realized from a sale or other disposition, including a pledge, of such
shares or ADS. Distributions received in a taxable year that are greater than 125% of the average annual distributions received during the shorter of the three preceding taxable years or your holding period for the equity interests will be treated
as excess distributions. Under these special tax rules (i) the excess distribution or gain will be allocated ratably over your holding period for the equity interests, (ii) the amount allocated to the current taxable year, and any taxable
year prior to the first taxable year in which we were a PFIC, will be treated as ordinary income, and (iii) the amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge
generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.

In certain
circumstances, in lieu of being subject to the excess distribution rules discussed above, you



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may make an election to include gain on the stock of a PFIC as ordinary income under a mark-to-market method provided
that such stock is regularly traded on a qualified exchange. Under current law, the mark-to-market election is only available for stock traded on certain designated United States exchanges and foreign exchanges which meet certain trading, listing,
financial disclosure and other requirements to be treated as a qualified exchange under applicable United States Treasury regulations. Consequently, the mark-to-market election may be available to you with respect to the ADS because the ADS will be
listed on the Nasdaq, which constitutes a qualified exchange under the regulations, although there can be no assurance that the ADS will be regularly traded. You should note that only the ADS and not the shares are listed on the Nasdaq. The shares
are listed on the Buenos Aires Stock Exchange. Consequently, the Buenos Aires Stock Exchange would need to meet the trading, listing, financial disclosure and other requirements of the United States Treasury regulations. The ADS or shares would need
to be regularly traded on such exchanges in order for the ADS or shares to be potentially eligible for the mark-to-market election.

If we
are a PFIC in any taxable year in which you hold our shares or ADS, but you do not make a mark-to-market election until a subsequent taxable year, you will be subject to special rules in the taxable year of the election. You should consult your own
tax advisors regarding the application of the mark-to-market election in your particular situation.

If you make an effective
mark-to-market election, you will include in income each year as ordinary income, rather than capital gain, the excess, if any, of the fair market value of your PFIC shares or ADS at the end of the taxable year over your adjusted tax basis in the
shares or ADS and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of such shares or ADS over their fair market value at the end of the taxable year, but only to the extent of the net amount previously
included in income as a result of the mark-to-market election. Your basis in the shares or ADS will be adjusted to reflect any such income or loss amounts. Any gain or loss on the sale of the shares or ADS will be ordinary income or loss, except
that such loss will be ordinary loss only to the extent of the previously included net mark-to-market gain.

If you make a mark-to-market
election it will be effective for the taxable year for which the election is made and all subsequent taxable years unless the shares or ADS are no longer regularly traded on a qualified securities exchange or the IRS consents to the revocation of
the election. Under proposed Treasury regulations, mark-to-market inclusions and deductions will be suspended during taxable years in which are not a PFIC, but would resume if they subsequently become a PFIC. You are urged to consult your own tax
advisor about the availability of making such a mark-to-market election.

Alternatively, a United States Holder of shares or ADS in a PFIC
can sometimes avoid the rules described above by electing to treat the company as a qualified electing fund under section 1295 of the Code. This option is not available to you because we do not intend to comply with the requirements
necessary to permit you to make this election.

A United States Holder who owns shares or ADS during any year that we are a PFIC must file
IRS Form 8621.

You should consult your own tax advisors concerning the United States federal income tax consequences of holding the shares
or ADS if we are considered a PFIC in any taxable year.

Argentine Personal Assets Taxes

Amounts paid on account of the Argentine Personal Assets Taxes, if any, will not be eligible as a credit against your United States federal income tax
liability, but may be deductible subject to applicable limitations in the Code.

Information Reporting and Backup Withholding

In general, information-reporting requirements will apply to distributions on shares or ADS and to the proceeds of sale of a share
or ADS paid to you within the United States (and in certain cases, outside the United



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States), unless you are an exempt recipient (such as a corporation). Backup withholding may apply to such payments if you
fail to provide a correct taxpayer identification number or certification of foreign or other exempt status or fail to report in full dividend and interest income.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your United States federal income tax liability provided you furnish the required information to the IRS.

Argentine Taxation

The following discussion is a summary of certain Argentine tax considerations associated with an investment in, ownership or disposition of, the shares or the ADS by an individual holder that is not domiciled or resident in Argentina and a
legal entity that is not organized under the laws of Argentina and does not have a permanent establishment in Argentina or is not otherwise doing business in Argentina on a regular basis (a Foreign Holder). The discussion is for general
information only and is based on current Argentine tax laws. Moreover, while this summary is considered to be a correct interpretation of existing laws in force as of the date of this 20-F Form, no assurance can be given that the courts or
administrative authorities responsible for the administration of such laws will agree with this interpretation or that changes in such laws or interpretations will not occur. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISOR
REGARDING THE PARTICULAR TAX CONSEQUENCES ARISING UNDER ANY TAXING JURISDICTION.

Taxation of Dividends

Dividends, either in cash, shares or kind approved by our shareholders are currently exempt from Argentine withholding or other taxes.

Notwithstanding the foregoing, according to Argentine law, income tax will be applied to the amount of dividends distributed in excess of a
companys net taxable income determined in accordance with general income tax regulations for the fiscal years preceding the date of the distribution of such dividends. The legislation requires that companies withhold 35% of the amount of
distributed dividends in excess of the net taxable income of such distribution, as determined in accordance with the income tax law. The withholding would not be applied to the payment of future dividends derived out of retained earnings obtained in
the fiscal years ended prior to December 30, 1998. Dividends distributed by an Argentine company are not subject to this tax to the extent that those dividends arise from dividend income or other distributions received by such company from
other Argentine companies.

Taxation of Capital Gains

Pursuant to Decree No. 2,284/91 gains on sales or other dispositions of listed shares or ADS by non-resident individuals and foreign entities without
a permanent establishment in Argentina are currently exempt from income tax.

Gains on sales or other dispositions of listed shares or ADS
by resident individuals are currently exempt from taxation.

Gains on the sale or other dispositions of listed shares or ADS by Argentine
entities are subject to Argentine income tax at the fixed rate of 35% but the losses generated by such transaction may only be offset against income from the same type of transactions.

WE RECOMMEND PROSPECTIVE INVESTORS TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE PARTICULAR TAX CONSEQUENCES CONCERNING THE SALE OR OTHER
DISPOSITIONS OF THE SHARES OR ADS.



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Value Added Tax

The sale, exchange, disposition, or transfer of shares or ADS is not subject to Value Added Tax.

Personal Assets Tax

Law
No. 25,585 issued on April 24, 2002 and published in the Official Gazette on May 15, 2002 (and applicable to personal assets held as of December 31, 2002) introduces amendments to Law No. 23,966 and imposes the personal
assets tax on shares and ADS held by individuals and undivided estates domiciled or located in Argentina or abroad and legal entities not domiciled in Argentina, separately from other assets.

This amendment imposes the obligation to pay the personal assets tax on the Argentine private issuer of the shares and ADS, and authorizes it to seek
recovery of the amount so paid, without limitation, by way of withholding or by foreclosing on the assets that gave rise to such payment. The tax is levied on the proportional equity value of the shares as reflected in the most recent balance sheet
closed as of December 31 of the taxable year, at the rate of 0.5% without any non-taxable minimum being applicable.

The shareholders
approved the absorption of personal asset tax by the Company for the years 2002 to 2005.

There can be no assurance that in the future this
tax will be absorbed by the Company.

Tax on Minimum National Income (Impuesto a la Ganancia Mínima Presunta, IGMP)

Companies domiciled in Argentina, partnerships, foundations, sole proprietorships, trusts, certain mutual funds organized in
Argentina, and permanent business establishments owned by foreign persons, among other taxpayers, shall apply a 1% rate to the total value of assets held by such persons, above an aggregate nominal amount of Ps. 200,000. Nevertheless, shares and ADS
issued by entities subject to such tax are exempt from paying the IGMP.

Gross Income Tax

The gross income tax is local in nature; therefore, the rules of the relevant provincial jurisdiction should be considered, which may levy this tax on the
purchase and sale of shares and/or the collection of dividends. In the particular case of the city of Buenos Aires, any transaction involving shares and/or the collection of dividends and revaluations is exempt from this tax.

There is no gross income tax withholding system applicable to the payments made to foreign beneficiaries. Those investors who customarily perform, or who
are deemed to perform, transactions in any jurisdiction in which they obtain their income from the sale of shares and/or the collection of dividends are subject to this tax at an average rate of 3%, unless an exemption is applicable to them.

Stamp Tax

The
stamp tax is a local tax that is generally levied on the instrumentation of onerous acts executed within a certain territorial jurisdiction or outside a certain territorial jurisdiction but with effects in such jurisdiction.

In the city of Buenos Aires, the stamp tax has been repealed for all those acts that do not imply an onerous conveyance of real property. However, most
provincial tax authorities maintain this tax in effect for all acts in general; therefore, the instruments which implement onerous transactions (including issuance, subscription, placement and transfer) involving the shares or ADS, executed in other
jurisdictions, or with effects in those jurisdictions, could be deemed to be subject to this tax.



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Tax on Credits and Debits in Bank Accounts

This tax is levied upon debits and credits in bank accounts and upon other transactions which, due to their special nature and characteristics, are
similar or could be used in substitution for a checking account, such as payments on behalf of or in the name of third parties, procedures for the collection of securities or documents, drafts and transfers of funds made by any means, when these
transactions are performed by local banks.

The tax law and its regulations provide several exemptions to this tax. For example, it does
not apply to entities recognized as exempt from income tax, to debits and credits relating to salaries, to retirement and pension emoluments credited directly by banking means and withdrawals made in connection with such credits, to credits in
checking accounts originating from bank loans, and to transfers of cheques by endorsement.

The general rate of the tax is 0.6%. An
increased rate of 1.2% applies in cases in which there has been a substitution for the use of a checking account.

Court and Other
Taxes

In the event that it becomes necessary to institute legal actions in relation to the shares or ADS in Argentina, a court tax
(currently at a rate of 3.0%) will be imposed on the amount of any claim brought before the Argentine courts sitting in the city of Buenos Aires.

Argentina imposes neither an estate nor gift tax on a decedent, donor, legatee or donee. No Argentine tax is imposed on the deposit or withdrawal of shares in exchange for ADS. Other than the taxes discussed above, no other Argentine taxes
are applicable to an investment in shares or ADS. At present, there is no national tax specifically applicable to the transfer of securities.

Tax Treaties

Argentina has entered into tax treaties with several countries. There is currently no tax treaty or
convention in effect between Argentina and the United States.

F. Dividends and Paying Agents

This section is not applicable.

G. Statement by Experts

This section is not applicable.

H. Documents on Display

We file annual, quarterly and other information with the SEC. You may read and copy
any document that we file at the public reference rooms of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You may obtain information on the operation of the public reference
rooms by calling the SEC at 1-800-SEC-0330. Our Internet address is http://www.apsacc.com.ar. You may request a copy of these filings at no cost, by writing to: finanzas@altopalermo.com.ar or calling the office at +54(11) 4323-7440.

I. Subsidiary Information

This section is not applicable.



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ITEM 11. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of
loss that may impact our consolidated financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and interest rates. We are exposed to market risk in the areas of interest rates and
foreign currency exchange rates. This discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results could vary materially as a result of a number of factors. Uncertainties that are either nonfinancial or
nonquantifiable, such as political, economic, tax, other regulatory or credit risks, are not included in the following assessment of our market risks.

Interest Rate Risk

Our exposure to market risk associated with changes in interest rate risk is limited to the exposure
related to our current investments and floating rate debt.

We place our cash and current investments in high quality financial
institutions in Argentina and the United States. Our policy is to limit exposure with any institution. Our investment portfolio primarily consists of money market, mutual funds and short term deposits. As of June 30, 2006 we had cash and cash
equivalents of Ps. 56.4 million. In view of the nature of our total portfolio, an immediate 100 BPs parallel shift change in the interest rate curve would not have a significant impact on the value of our investment portfolio.

We are exposed to changes in interest rates primarily as a result of our borrowing activities, which include short-term, medium-term and long-term debt
used to maintain liquidity and fund for our business operations.

Our medium and long term debts are the following:



| |  |  | Convertible Note
| | - |  | ----------------



| |  |  | Syndicated Loan
| | - |  | ---------------



| |  |  | Deutsche Bank Loan
| | - |  | ------------------

In August 2002 we issued US$
50.0 million of Convertible Notes. Under U.S. GAAP, the Company applied APB 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, which requires that no portion of the proceeds be allocated to the
conversion feature if the convertible debt securities are convertible into common stock of the issuer at a specified price at the option of the holder and are sold at a price or have a value at issuance not significantly in excess of the face
amount. In considering the accounting treatment of the Convertible Notes under U.S. GAAP we took account of the guidance provided in EITF 98-5. EITF 98-5 requires that embedded beneficial conversion features present in convertible securities be
valued separately at issuance when the non-detachable conversion feature is in-the-money at the commitment date. The embedded beneficial conversion feature should be recognized and measured by allocating to additional paid-in capital a
portion of the proceeds equal to the intrinsic value of that feature. That amount is calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security
is convertible, multiplied by the number of shares into which the security is convertible (intrinsic value). As a result of the analysis we performed, no proceeds were allocated to the embedded conversion feature since it was
out-the-money at the commitment date (i.e. the intrinsic value at the commitment date was zero).

The Convertible Note expense
is not sensitive to changes to the general level of interest rates because it bears interest at fixed rate. The Convertible Notes initially mature on July 19, 2006, accrue interest (payable semiannually) at a fixed annual rate of 10% and are
convertible, at any time at the option of the holder, into common shares of Ps. 0.10 par value per share. The conversion rate per U.S. Dollar is the lesser of 30.8642 or the result obtained from dividing the exchange rate in effect at the
conversion date by the par value of our



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common shares. On May 2, 2006 during an extraordinary noteholders meeting, a resolution was adopted to extend
the maturity date and establishing a new maturity date on July 19, 2014. As a result of the modification in the maturity date, the change in fair value of the conversion option amounts to Ps. 2.9 million. As of June 30, 2006, its intrinsic
value is 6.32 US$ per 1.0 US$ face value. Due to this its present value is not sensitive to interest rate curve movements.

On
April 5, 2005 we undertook a syndicated loan of Ps. 50.0 million with Banco Rio de la Plata and Bank Boston N.A. This loan will be amortized in four equal and consecutive semiannual installments of Ps. 12.5 million beginning
October 5, 2005. This syndicated loan is structured in two tranches. The first one accrues at a fixed rate of 7.875% and the second one pays a floating interest rate (Tasa de encuesta corregida index) + 300 Bps. During fiscal year
2006, we prepaid 50% of the principal in two equal installments on October 5, 2005 and on April 5, 2006. On October 5, 2006, after the close of fiscal year 2006, we amortized the third principal installment for Ps.12.5 million. The
outstanding balance as of such date amounts to Ps.12.5 million. The current level of Tasa de encuesta corregida index is 8.15%. This index arises from a daily survey realized by the Central Bank as a benchmark of the short term cost of
funds of banking system. It usually is used to calculate interest in structured loans. A positive shift of 100 Bps in this index implies a quarterly increase in interest expenses of US$ 10,120.

These sensitivity analyses provide only a limited, point-in-time view of the market risk sensitivity of certain of our financial instruments. The actual
impact of our market interest rate changes on our financial instruments may differ significantly from the impact shown in the sensitivity analysis.

On March 4, 2005 Deutsche Bank S.A. granted us an US$ 11.0 million loan, of which US$ 5.0 million were repaid by the Company on April 4, 2005. The loan accrues interest at LIBOR plus 3.25%. The balance of the loan was
cancelled in two equal installments of US$ 3.0 million each on February 1 and on August 1, 2006.

For our debt obligations,
the following table presents principal cash flows and related weighted average interest rates by expected maturity dates.



|                                                    |  |                                                                    |   |  |        |   |  |        |   |  |                |   |  |        |   |  |       |   |  |          
|--------------------------------------------------- |  | ------------------------------------------------------------------ | - |  | ------ | - |  | ------ | - |  | -------------- | - |  | ------ | - |  | ----- | - |  | ---------
|                                                    |  | June 30, 2006 Expected Maturity Date (U.S.$
Equivalent in million)
|Liabilities                                         |  | FY2007                                                             |   |  | FY2008 |   |  | FY2009 |   |  | FY2010toFY2014 |   |  | FY2015 |   |  | Total |   |  | FairValue
|Fixed Rate Debt (US$). Principal Payment (1)        |  | 0.05                                                               |   |  |        |   |  |        |   |  |                |   |  | 47.23  |   |  | 47.23 |   |  | 47.23    
|Average interest rate                               |  | 10                                                                 | % |  | 10     | % |  | 10     | % |  | 10             | % |  | 10     | % |  | 10    | % |  |          
|Syndicated Loan (Pesos). Principal Payments (2) (3) |  | 8.09                                                               |   |  |        |   |  |        |   |  |                |   |  |        |   |  | 8.09  |   |  | 8.09     
|Average interest rate (2) (3) (4)                   |  | 11.1                                                               | % |  |        |   |  |        |   |  |                |   |  |        |   |  |       |   |  |          
|Floating Rate Debt (US$). Principal Payments (5)    |  | 3.0                                                                |   |  |        |   |  |        |   |  |                |   |  |        |   |  | 3.0   |   |  | 3.0      
|Average interest rate (5)                           |  | 8.0                                                                | % |  |        |   |  |        |   |  |                |   |  |        |   |  |       |   |  |          

---

|(1) | It corresponds to Convertible Note.
|--- | -----------------------------------



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|(2) | Peso-denominated loans were converted to U.S. Dollar at an exchange rate of Ps. 3.086 per U.S. Dollar.
|--- | ------------------------------------------------------------------------------------------------------

|(3) | Syndicated Loan structured in two tranches: the first one accrues a fixed rate of 7.875% and the second one pays a floating interest rate (Tasa de encuesta corregida
index) + 300 Bps.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Tasa de encuesta corregida interest rate index is based on current level.
|--- | ---------------------------------------------------------------------------

|(5) | It bears Libor interest rate + 325 Bps. The average interest rate is the last setting. The balance of the loan was totally cancelled on August 1, 2006.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

As a matter of policy, from time to time, we use derivative instruments only to minimize our financing costs. However, there
can be no assurance that such risks would be managed in the future through a variety of strategies, including the use of hedging transactions. We do not use derivative instruments for trading or speculative purposes.

As of March 30, 2001, the Company had an interest rate swap agreement outstanding with an aggregate notional amount of Ps. 85.0 million with
maturities through April 2005. This swap agreement initially allowed the Company to reduce the net cost of its debt. However, subsequent to June 30, 2001, the Company modified the swap agreement due to an increase in interest rates as a result
of the economic situation prevailing at that moment. Under the terms of the revised agreement, the Company converted its peso-denominated fixed rate debt to U.S. Dollar-denominated floating rate debt for a notional amount of US$
69.1 million with maturities through April 2005. As collateral for the revised agreement, the Company was required to make a deposit of US$ 50.0 million with the counterparty. At June 30, 2004 the swap agreement had a fair market
value of US$ (45.4) million. The swap agreement was fully settled at its maturity and, as a result, the Company collected US$ 5.5 million in cash representing the net amount of the collateral deposit and the fair market value of the swap
at its maturity. During the years ended June 30, 2005 and 2004 the Company recognized gains of Ps. 5.2 million and Ps. 11.2 million, respectively, in connection with the swap agreement, which have been included within Financial
results, net in the accompanying consolidated statements of income.

During the year ended June 30, 2006 the Company had no
derivative activity.

Foreign Exchange Exposure

We transact our business primarily in Pesos. Accordingly, our earnings are subject to exposure from adverse movements in currency exchange rates primarily related to our U.S. Dollar denominated debt.

Historically, volatility has been caused by currency devaluation, among other factors. Most of theses factors have occurred at various times in the last
two decades in Argentina.

From April 1, 1991, until the beginning of year 2002, the Convertibility Law No. 23,928 was applicable
in Argentina. This law established a fixed exchange rate, under which the Argentine Central Bank was forced to sell U.S. Dollars to any person at a fixed rate of Ps. 1.00 per US$ 1.00. Accordingly, the foreign currency fluctuations were reduced
to a minimum level during this period.

The primarily economic change implemented by the Argentine government in January 2002 was the
announcement of the devaluation of the Peso. Most of our lease contracts and most of our liabilities were denominated in U.S. Dollars. Decree No. 214/02 and Decree No. 762/02 mandatorily converted into Pesos all monetary obligations in
U.S. Dollars entered into between parties under Argentine Law. Consequently, all of our leases and most of our liabilities were pesified at a one-to-one exchange rate and, additionally, those leases and liabilities would be adjusted by the CER index
(a daily compounding of the Consumer Price Index).

Due to the end of the Convertibility Plan and our issuance of Convertible Notes
denominated in U.S. Dollars, our foreign exchange exposure has increased considerably. Currently all of our revenues are derived from our operations in Argentina and foreign exchange volatility will probably affect our Peso-denominated revenues,
making it more burdensome for us to pay our U.S. Dollar-denominated debt.

Foreign currency exchange fluctuations may additionally
affect the risk of default on our leases and services and other receivables, as any of our customers that have Peso-denominated revenue streams may



157



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experience a relative increase in their U.S. Dollar-denominated liabilities compared to their Peso-denominated
revenues. Foreign currency exchange restrictions hereafter imposed by the Argentine government could prevent or restrict our access to U.S. Dollars, affecting our ability to service our U.S. Dollar-denominated liabilities.

Our strategies may prove ineffective to address the effect of foreign currency exchange movement on our financial condition. We have experienced net
losses in the past, and we could experience such losses in the future to the extent that foreign exchange rates shift in excess of the risk covered by derivative financial instruments. In entering into foreign currency contracts, we bear the credit
risk of counterparties being unable to meet the terms of their contracts; and we may be unable to recover damages from any such defaulting counterparty through legal enforcement actions due to laws affording bankruptcy or protection to insolvent
obligors, foreign laws limiting cross-border enforcement actions or otherwise.

Due to the fact that our income stream is basically in
pesos our exposure to foreign exchange risk is derived from our liabilities. To see our exposure to such Dollar denominated liabilities please refer to the above table.

ITEM 12. Description of Securities Other than Equity Securities

This item is not applicable.

PART II

ITEM 13. Defaults, Dividend Arrearages and Delinquencies

This item is not applicable.

ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

This item is not
applicable.

ITEM 15.

A.Controls and Procedures

As of the end of fiscal year 2006, we carried out an evaluation of the controls and procedures of our company with the participation of our Chief Executive Officer and Chief Financial Officer to determine the
effectiveness of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in all material respects to ensure that
the information we file and submit under the U.S. Securities and Exchange Act of 1934 is recorded, processed, summarized and reported as and when required.

Furthermore, the evaluation found no significant changes in our internal controls that Materially affected, or are reasonably likely to materially affect our internal controls.

B. Management ́s Annual Report on Internal Control Over Financial Reporting

This section is not applicable.

C. Attestation Report of the Registered Public Accounting Firm

This section is not applicable.



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D. Changes in Internal Control Over Financial Reporting

This section is not applicable.



|ITEM 16. | 
|-------- | 

A. Audit Committee Financial Expert

In our annual ordinary shareholders meeting held on October 31,
2003, the audit committee plan was unanimously approved. Pursuant to this plan, the Board of Directors shall appoint the members of the audit committee. The Board of Directors established that the Audit Committee shall be a Committee of the Board of
Directors. The Audit Committee will focus on assisting the Board in exercising its duty of care, the enforcement of accounting policies, disclosure requirements, the management of our business risk, the management of our internal control systems,
the ethical conduct of the companys business, maintenance of the integrity of our financial statements, compliance with legal provisions, the independence and capability of our independent auditors and the performance of our internal audit
function and of our external auditors.

As of December 2006, the Board of Directors announced the composition of the Audit Committee
provided in Section 15 of the Regime of Transparency in Public Offerings and approved pursuant to Decree No. 677/01 and Section 13 of Resolution No. 400. Members of the Audit Committee decide their proposals by majority. Our Audit Committee is
composed by three members: Abraham Perelman, Gabriel Adolfo Reznik and Andrés Olivos. Pursuant to the requirements of Argentine law, each member of our Audit Committee is independent. However, as Andrés Olivos is an executive officer
of Parque Arauco, one of our affiliates, he does not meet the independence requirements under the Sarbanes-Oxley Act.

In addition to the
Audit Committee, the Company also has a board of auditors called Comisión Fiscalizadora (Supervisory Committee), that is independent from the board of directors. The Supervisory Committee is elected by a majority vote of all
outstanding shares at the annual Shareholders Meeting. The Supervisory Committee is charged with supervising compliance by the Board of Directors with all of its legal and statutory obligations, as well as informing on the accuracy of the
annual report (Memoria) and the companys financial statements certified by the external auditors that are delivered to shareholders by the Board of Directors. This function normally would be within the purview of the Audit Committee but in our
case is managed by our Supervisory Committee.

Rule 10A-3 under the Securities Exchange Act of 1934 provides exemptions for foreign private
issuers to comply with independence requirements under SEC and NASDAQ regulations. Although it is not clear that available exemptions for foreign private issuers apply to our company, we believe that the Supervisory Committee and the Audit Committee
together meet the purposes that an audit committee has under SEC and NASDAQ regulations.

The board of directors named Andrés Olivos
as the financial expert in accordance with the relevant SEC rules.

B. Code of Ethics

We have adopted a code of ethics that applies to our directors, officers and employees. On
date July 25 2005, our Code of Ethics was amended by our Board of Directors. The reformed Code was informed by means of a 6K Form filing on August 1, 2005. Our code of ethics is available on our web site at www.apsacc.com.

An Ethics Committee comprised by three members of the board of directors how will be responsible for the solution of issues related to the
Code of Ethics for Directors and officers and shall determine the appropriate disciplinary action for any violation of such Code of Ethics.

If we make any substantive amendment to the code of ethics, we will disclose the nature of such amendment on our website, www.apsacc.com or in our next Form 20-F. If we grant any waivers, including any implicit waiver, from a
provision of the code of ethics, we will disclose the nature of such waiver in a Form 6-K or in our next Form 20-F.

C. Principal Accountant Fees and Services

Audit Fees

During fiscal years ended June 30, 2006 and 2005, we were billed for a total amount of Ps. 0.6 million and Ps. 0.5 million respectively,
for professional services rendered by our principal accountants for the audit of our annual financial statements and other services normally provided in connection with regulatory filings or engagements, such as the review of our interim financial
statements.



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Audit-Related Fees

During fiscal years 2006 and 2005 we were not billed for professional services rendered by our principal accountants related to the performance of the audit or review of our financial statements, not included in the
Audit Fees category. During fiscal years ended 2005, we were billed for a total amount of Ps. 5,000.

Tax Fees

During fiscal years ended June 30, 2006 and 2005, we were billed for a total amount of Ps. 38,200 and Ps. 74,200 respectively, for professional
services rendered by our principal accountants for tax compliance, tax advice and tax planning.

All Other Fees

During fiscal year 2006, we were not billed for professional services rendered by our principal accountants mainly including fees related to courses.
During fiscal year 2005, we were billed for a total amount of Ps. 10,400.

Audit Committee Pre-Approval Policies and Procedures

Our audit committee approves, in advance, the engagement of auditors and their fees for audit and non-audit services pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X.

Our Audit Committee pre-approves all services, fees and services provided by the external auditors to ensure
auditors independence. One of the main tasks of the Audit Committee is to give it opinion in relation to the appointment of the external auditors, proposed by the Board of Directors to the General Shareholders Meeting. In order to
accomplish such task, the Audit Committee shall:

Require any additional and complementary documentation related to this analysis.



| |  |  | Verify the independence of the external auditors;
| | - |  | -------------------------------------------------



| |  |  | Analyze different kinds of services that the external auditor would provide to the company. This description must also include an estimate of the fees payable for such services,
specifically in order to maintain the principle of independence;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Inform the fees billed by the external auditor, separating the services related to the Audit Committee and other special services that could be not included as fees related to the
Audit Committee;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Take notice of any strategy proposed by of the external auditors and review it in accordance with the reality other business and the risks involved;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Analyze and supervise the working plan of the external auditors considering the business reality and the estimated risks;
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | Propose adjustments (if necessary) to such working plan;
| | - |  | --------------------------------------------------------



| |  |  | Hold meetings with the external auditors in order to: (a) analyze the difficulties, results and conclusions of the proposed working plan; (b) analyze eventual possible
conflicts of interests, related party transactions, compliance with the legal framework and information transparency;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Evaluate the performance of external auditors and their opinion regarding the Financial Statements.
| | - |  | ---------------------------------------------------------------------------------------------------



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D. Exemption from the Listing Standards for Audit Committees

As of December 2006, the Board of Directors
announced the composition of the Audit Committee provided in Section 15 of the Regime of Transparency in Public Offerings and approved pursuant to Decree No. 677/01 and Section 13 of Resolution No. 400. Members of the Audit Committee decide their
proposals by majority. Our Audit Committee is composed by three members: Abraham Perelman, Gabriel Adolfo Reznik and Andrés Olivos. Pursuant to the requirements of Argentine law, each member of our Audit Committee is independent. However, as
Andrés Olivos is an executive officer of Parque Arauco, one of our affiliates, he does not meet the independence requirements under the Sarbanes-Oxley Act.

In addition to the Audit Committee, the Company also has a board of auditors called Comisión Fiscalizadora (Supervisory Committee), that is independent from the board of directors. The Supervisory
Committee is elected by a majority vote of all outstanding shares at the annual Shareholders Meeting. The Supervisory Committee is charged with supervising compliance by the Board of Directors with all of its legal and statutory obligations,
as well as informing on the accuracy of the annual report (Memoria) and the companys financial statements certified by the external auditors that are delivered to shareholders by the Board of Directors. This function normally would be within
the purview of the Audit Committee but in our case is managed by our Supervisory Committee.

Rule 10A-3 under the Securities Exchange Act
of 1934 provides exemptions for foreign private issuers to comply with independence requirements under SEC and NASDAQ regulations. Although it is not clear that available exemptions for foreign private issuers apply to our company, we believe that
the Supervisory Committee and the Audit Committee together meet the purposes that an audit committee has under SEC and NASDAQ regulations.

E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers

There were no repurchases of shares
or other units of any class of our equity securities that are registered pursuant to Section 12 of the Exchange Act during fiscal years 2004, 2005 and 2006.



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PART III

ITEM 17. Financial Statements

Our Financial Statements have been prepared in accordance with Item 18
hereof.

ITEM 18. Financial Statements

Reference is made to pages F-1 through F-74.

ITEM 19. Exhibits

INDEX OF EXHIBITS



|            |  |                                                                                                                                                                         
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                  
|1.1*        |  | Estatutos of the registrant, which serve as the registrants articles of incorporation and bylaws, and an English translation thereof.                                  
|            | 
|2.1.1*      |  | Form of Deposit Agreement among the Company, The Bank of New York, as Depositary, and the holders from time to time of American Depositary Receipts issued there under. 
|            | 
|2.1.2*      |  | Shareholders Agreement, dated November 18, 1997, among IRSA International Limited, Parque Arauco S.A. and Sociedad Anónima Mercado de Abasto Proveedor (SAMAP).         
|            | 
|2.1.3*      |  | Put Option Agreement dated November 17, 1997, among IRSA Inversiones y Representaciones Sociedad Anónima and GSEM/AP                                                    
|            | 
|2.2.1*      |  | Offering Circular, dated March 24, 2000, regarding the issuance of Ps. 85,000,000 of the Companys 14.875% Notes due 2005.                                              
|            | 
|2.2.2*      |  | Summary Description of the principal terms of the U.S.$ 40 million loan agreement between the Company and Banco de la Provincia secured by a mortgage on Patio Bullrich.
|            | 
|4.1**       |  | Agreement for the exchange of Corporate Service.                                                                                                                        
|            | 
|11.1***     |  | Code of Ethics of the Company.                                                                                                                                          
|            | 
|12.1        |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act 2002                                                                                                    
|            | 
|12.2        |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act 2002                                                                                                    
|            | 
|13.1        |  | Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                         
|            | 
|13.2        |  | Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                         

---

|* | Incorporated herein by reference to the same-numbered exhibit to the registrants registration statement on Form 20-F (File No. 000-30982)
|- | ------------------------------------------------------------------------------------------------------------------------------------------

|** | Incorporated herein by reference to the registrants registration statement on Form 6-K (SEC FILE NUMBER: 000-30982).
|-- | ---------------------------------------------------------------------------------------------------------------------

|*** | Incorporated herein by reference to the registrants registration statement on Form 6-K reported on August 1, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------



162



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SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filling on Form 20-F and that it has duly
caused and authorized the undersigned to sign this annual report on its behalf.



ALTO PALERMO S.A. (APSA)By:

/s/ Alejandro ElsztainName:

Alejandro ElsztainPosition:

Director and Chief Executive OfficerDate:

December 28, 2006




S-1



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Index to Consolidated Financial Statements



|                                                                                                            |  |     
|----------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                            |  | Page
|Report of Independent Registered Public Accounting Firm                                                     |  | F-2 
|Consolidated Balance Sheets as of June 30, 2006 and 2005                                                    |  | F-3 
|Consolidated Statements of Income for the years ended June 30, 2006, 2005 and 2004                          |  | F-4 
|Consolidated Statements of Changes in Shareholders Equity for the years ended June 30, 2006, 2005 and 2004 |  | F-5 
|Consolidated Statements of Cash Flows for the years ended June 30, 2006, 2005 and 2004                      |  | F-6 
|Notes to the Consolidated Financial Statements                                                              |  | F-8 



F-1



---

##### Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Alto Palermo S.A. (APSA)

In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of income, of changes in shareholders equity and of cash flows present fairly, in all material respects, the financial position of Alto Palermo S.A. (APSA) and its subsidiaries at
June 30, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2006 in conformity with accounting principles generally accepted in Argentina. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

Accounting principles generally accepted in Argentina vary in certain
significant respects from accounting principles generally accepted in the United States of America and as allowed by Item 18 to Form 20-F. Information relating to the nature and effect of such differences is presented in Note 19 to the
consolidated financial statements.



|                              |  |                   |  |          
|----------------------------- |  | ----------------- |  | ---------
|PRICE WATERHOUSE & Co. S.R.L.
|                              |  |                  
|By                            |  | /s/ Andrés Suárez |  | (Partner)
|                              |  | Andrés Suárez     |  |          
|                             
|Buenos Aires, Argentina      
|December 21, 2006            

F-2



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Consolidated Balance Sheets

as of June 30, 2006 and 2005

(In
Argentine Pesos, except as otherwise indicated)



|                                                            |  |      |               |      |     |              
|----------------------------------------------------------- |  | ---- | ------------- | ---- | --- | -------------
|                                                            |  | 2006 |               | 2005
|ASSETS                                                      |  |      |               |      |     |              
|Current Assets                                              |  |      |               |      |     |              
|Cash and banks (Notes 4.a and 20.f)                         |  | Ps.  | 38,222,036    |      | Ps. | 24,961,116   
|Other investments, net (Notes 4.b and 20.f)                 |  |      | 32,250,484    |      |     | 41,712,702   
|Accounts receivable, net (Note 4.d and 20.f)                |  |      | 104,312,709   |      |     | 56,195,415   
|Other receivables and prepaid expenses (Notes 4.e and 20.f) |  |      | 30,929,095    |      |     | 32,075,756   
|Inventory, net (Notes 4.f and 20.e)                         |  |      | 7,989,246     |      |     | 888,118      
|                                                            |  |      |               |      |     |              
|Total current assets                                        |  |      | 213,703,570   |      |     | 155,833,107  
|                                                            |  |      |               |      |     |              
|Non-Current Assets                                          |  |      |               |      |     |              
|Accounts receivable, net (Note 4.d and 20.f)                |  |      | 32,539,707    |      |     | 7,698,839    
|Other receivables and prepaid expenses, net (Note 4.e)      |  |      | 13,254,535    |      |     | 11,402,424   
|Inventory, net (Notes 4.f and 20.e)                         |  |      |              |      |     | 18,048,447   
|Fixed assets, net (Note 20.a)                               |  |      | 912,795,140   |      |     | 949,137,110  
|Investments (Note 4.c)                                      |  |      | 129,474       |      |     | 808,355      
|Others investments, net (Note 4.b)                          |  |      | 167,842,865   |      |     | 83,704,637   
|Intangible assets, net (Note 20.b)                          |  |      | 3,222,276     |      |     | 4,385,229    
|                                                            |  |      |               |      |     |              
|Subtotal                                                    |  |      | 1,129,783,997 |      |     | 1,075,185,041
|                                                            |  |      |               |      |     |              
|Goodwill, net (Note 20.c)                                   |  |      | 11,557,921    |      |     | 16,876,670   
|                                                            |  |      |               |      |     |              
|Total non-current assets                                    |  |      | 1,141,341,918 |      |     | 1,092,061,711
|                                                            |  |      |               |      |     |              
|Total Assets                                                |  | Ps.  | 1,355,045,488 |      | Ps. | 1,247,894,818
|                                                            |  |      |               |      |     |              
|LIABILITIES                                                 |  |      |               |      |     |              
|Current Liabilities                                         |  |      |               |      |     |              
|Trade accounts payable (Notes 4.g and 20.f)                 |  | Ps.  | 101,949,564   |      | Ps. | 49,992,145   
|Short-term debt (Notes 4.h and 20.f)                        |  |      | 90,816,638    |      |     | 56,417,505   
|Salaries and social security payable (Note 4.i)             |  |      | 10,885,364    |      |     | 8,443,939    
|Taxes payable (Note 4.j)                                    |  |      | 23,761,968    |      |     | 10,994,872   
|Customer advances (Notes 4.k and 20.f)                      |  |      | 48,052,765    |      |     | 36,306,564   
|Related parties (Notes 6 and 20.f)                          |  |      | 6,383,668     |      |     | 3,760,530    
|Dividends payable (Note 6)                                  |  |      |              |      |     | 39,000       
|Other liabilities (Note 4.l)                                |  |      | 11,200,163    |      |     | 10,575,022   
|                                                            |  |      |               |      |     |              
|Total debts                                                 |  |      | 293,050,130   |      |     | 176,529,577  
|                                                            |  |      |               |      |     |              
|Provisions (Notes 4.m and 20.d)                             |  |      | 506,714       |      |     | 2,032,500    
|                                                            |  |      |               |      |     |              
|Total current liabilities                                   |  |      | 293,556,844   |      |     | 178,562,077  
|                                                            |  |      |               |      |     |              
|Non-Current Liabilities                                     |  |      |               |      |     |              
|Trade accounts payable (Notes 4.g and 20.f)                 |  |      | 1,010,150     |      |     | 1,870,602    
|Long-term debt (Notes 4.h and 20.f)                         |  |      | 145,853,844   |      |     | 175,139,901  
|Taxes payable (Note 4.j)                                    |  |      | 13,707,025    |      |     | 8,463,670    
|Customer advances (Note 4.k)                                |  |      | 41,535,275    |      |     | 39,264,344   
|Related parties (Notes 6 and 20.f)                          |  |      | 925,800       |      |     | 1,732,200    
|Other liabilities (Note 4.l)                                |  |      | 10,959,031    |      |     | 13,829,834   
|                                                            |  |      |               |      |     |              
|Total debts                                                 |  |      | 213,991,125   |      |     | 240,300,551  
|                                                            |  |      |               |      |     |              
|Provisions (Notes 4.m and 20.d)                             |  |      | 10,667,309    |      |     | 10,606,121   
|                                                            |  |      |               |      |     |              
|Total non-current liabilities                               |  |      | 224,658,434   |      |     | 250,906,672  
|                                                            |  |      |               |      |     |              
|Total Liabilities                                           |  |      | 518,215,278   |      |     | 429,468,749  
|                                                            |  |      |               |      |     |              
|Minority interest                                           |  |      | 29,989,705    |      |     | 27,418,496   
|                                                            |  |      |               |      |     |              
|SHAREHOLDERS EQUITY                                        |  |      | 806,840,505   |      |     | 791,007,573  
|                                                            |  |      |               |      |     |              
|Total Liabilities and Shareholders Equity                  |  | Ps.  | 1,355,045,488 |      | Ps. | 1,247,894,818
|                                                            |  |      |               |      |     |              

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Consolidated Statements of Income for the years ended June 30, 2006, 2005 and
2004

(In Argentine Pesos, except as otherwise indicated)



|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|---------------------------------------------------------------------- |  | ---- | ------------ | - | ---- | --- | ----------- | ---- |  | --- | ----------- | -
|                                                                       |  | 2006 |              |   | 2005 |     |             | 2004 | 
|Revenues                                                               |  | Ps.  | 361,355,913  |   |      | Ps. | 230,157,321 |      |  | Ps. | 143,250,046 |  
|Costs (Note 20.e)                                                      |  |      | (139,369,778 | ) |      |     | (92,510,366 | )    |  |     | (73,400,373 | )
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Gross profit                                                           |  |      | 221,986,135  |   |      |     | 137,646,955 |      |  |     | 69,849,673  |  
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Selling expenses (Note 20.g).                                          |  |      | (46,600,926  | ) |      |     | (24,774,356 | )    |  |     | (9,826,839  | )
|Administrative expenses (Note 20.g)                                    |  |      | (52,773,070  | ) |      |     | (31,875,300 | )    |  |     | (20,720,934 | )
|Net income from retained interest in securitized receivables (Note 11) |  |      | 2,625,001    |   |      |     | 423,508     |      |  |     | 260,941     |  
|Gain from recognition of inventories at net realizable value           |  |      | 3,497,632    |   |      |     |            |      |  |     |            |  
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Operating income                                                       |  |      | 128,734,772  |   |      |     | 81,420,807  |      |  |     | 39,562,841  |  
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Equity loss from related companies                                     |  |      | (678,881     | ) |      |     | (706,619    | )    |  |     | (1,126,516  | )
|Amortization of goodwill (Note 20.c)                                   |  |      | (4,739,675   | ) |      |     | (4,826,798  | )    |  |     | (4,826,542  | )
|Financial results, net (Note 7)                                        |  |      | (15,633,866  | ) |      |     | 2,411,200   |      |  |     | 7,324,781   |  
|Other expenses, net (Note 8)                                           |  |      | (9,761,768   | ) |      |     | (7,381,960  | )    |  |     | (5,227,566  | )
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Income before taxes and minority interest                              |  |      | 97,920,582   |   |      |     | 70,916,630  |      |  |     | 35,706,998  |  
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Income tax expense (Note 14)                                           |  |      | (48,457,137  | ) |      |     | (33,615,874 | )    |  |     | (16,311,318 | )
|Minority interest                                                      |  |      | (4,784,413   | ) |      |     | (4,045,356  | )    |  |     | (558,140    | )
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Net income                                                             |  | Ps.  | 44,679,032   |   |      | Ps. | 33,255,400  |      |  | Ps. | 18,837,540  |  
|                                                                       |  |      |              |   |      |     |             |      |  |     |             |  
|Earnings per share(Note 13):                                           |  |      |              |   |      |     |             |      |  |     |             |  
|Basic net income per common share                                      |  | Ps.  | 0.06         |   |      | Ps. | 0.04        |      |  | Ps. | 0.03        |  
|Diluted net income per common share                                    |  | Ps.  | 0.03         |   |      | Ps. | 0.02        |      |  | Ps. | 0.02        |  

The accompanying notes are an integral part of these consolidated financial statements.



F-4



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##### Table of Contents

Alto Palermo S.A. (APSA)

Consolidated Statements of Changes in Shareholders Equity

for the years ended June 30, 2006, 2005 and 2004

(In Argentine Pesos, except as otherwise indicated)



|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  
|------------------------------------ |  | --------------------------- | ---------- | ------------------------------------------------ | --- | -------------------------- |  | ----------------------------- | ----------- |  | -------------------- | ----------- |  | --- | --------- |  | --- | ---------- |  | --- | ----------- | - |  | --- | ----------- | -
|                                     |  | Shareholders contributions |            | Appraisal revaluation (Note
3.f.)                |     | Legal reserve (Note
5.c.)  |  | Accumulated retained earnings |             |  | Shareholders equity |            
|                                     |  | Common stock(Note 5.a.)     |            | Inflation adjustment of common stock (Note 5.b.) |     | Additional paid-in-capital |  | Total                         |             |  |                      |            
|Balances as of June 30, 2003         |  | Ps.                         | 70,482,974 |                                                  | Ps. | 84,620,909                 |  | Ps.                           | 522,805,043 |  | Ps.                  | 677,908,926 |  | Ps. | 3,952,571 |  | Ps. | 4,401,179  |  | Ps. | 72,988,231  |   |  | Ps. | 759,250,907 |  
|                                     |  |                             |            |                                                  |     |                            |  |                              
|Conversion of debt into common stock |  |                             | 2,285,251  |                                                  |     |                           |  |                               |            |  |                      | 2,285,251   |  |     |          |  |     |           |  |     |            |   |  |     | 2,285,251   |  
|Increase in legal reserve            |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     | 3,649,412  |  |     | (3,649,412  | ) |  |     |            |  
|Cash dividends                       |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     |           |  |     | (10,000,000 | ) |  |     | (10,000,000 | )
|Net income for the year              |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     |           |  |     | 18,837,540  |   |  |     | 18,837,540  |  
|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  
|Balances as of June 30, 2004         |  | Ps.                         | 72,768,225 |                                                  | Ps. | 84,620,909                 |  | Ps.                           | 522,805,043 |  | Ps.                  | 680,194,177 |  | Ps. | 3,952,571 |  | Ps. | 8,050,591  |  | Ps. | 78,176,359  |   |  | Ps. | 770,373,698 |  
|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  
|Conversion of debt into common stock |  |                             | 5,274,138  |                                                  |     |                           |  |                               |            |  |                      | 5,274,138   |  |     |          |  |     |           |  |     |            |   |  |     | 5,274,138   |  
|Increase in legal reserve            |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     | 941,877    |  |     | (941,877    | ) |  |     |            |  
|Cash dividends                       |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     |           |  |     | (17,895,663 | ) |  |     | (17,895,663 | )
|Net income for the year              |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     |           |  |     | 33,255,400  |   |  |     | 33,255,400  |  
|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  
|Balances as of June 30, 2005         |  | Ps.                         | 78,042,363 |                                                  | Ps. | 84,620,909                 |  | Ps.                           | 522,805,043 |  | Ps.                  | 685,468,315 |  | Ps. | 3,952,571 |  | Ps. | 8,992,468  |  | Ps. | 92,594,219  |   |  | Ps. | 791,007,573 |  
|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  
|Conversion of debt into common stock |  |                             | 153,900    |                                                  |     |                           |  |                               |            |  |                      | 153,900     |  |     |          |  |     |           |  |     |            |   |  |     | 153,900     |  
|Increase in legal reserve            |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     | 1,662,770  |  |     | (1,662,770  | ) |  |     |            |  
|Cash dividends                       |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     |           |  |     | (29,000,000 | ) |  |     | (29,000,000 | )
|Net income for the year              |  |                             |           |                                                  |     |                           |  |                               |            |  |                      |            |  |     |          |  |     |           |  |     | 44,679,032  |   |  |     | 44,679,032  |  
|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  
|Balances as of June 30, 2006         |  | Ps.                         | 78,196,263 |                                                  | Ps. | 84,620,909                 |  | Ps.                           | 522,805,043 |  | Ps.                  | 685,622,215 |  | Ps. | 3,952,571 |  | Ps. | 10,655,238 |  | Ps. | 106,610,481 |   |  | Ps. | 806,840,505 |  
|                                     |  |                             |            |                                                  |     |                            |  |                               |             |  |                      |             |  |     |           |  |     |            |  |     |             |   |  |     |             |  

The accompanying notes are an integral part of these consolidated financial statements.



F-5



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##### Table of Contents

Alto Palermo S.A. (APSA)

Consolidated Statements of Cash Flows

for the years ended June 30, 2006, 2005 and 2004

(In Argentine Pesos, except as otherwise indicated)



|                                                                                                         |  |                |   |  |                |   |  |                |  
|-------------------------------------------------------------------------------------------------------- |  | -------------- | - |  | -------------- | - |  | -------------- | -
|                                                                                                         |  | 2006           |   |  | 2005           |   |  | 2004           |  
|Cash flows from operating activities:                                                                    |  |                |   |  |                |   |  |                |  
|Net income for the year                                                                                  |  | Ps. 44,679,032 |   |  | Ps. 33,255,400 |   |  | Ps. 18,837,540 |  
|Adjustments to reconcile net income to cash flows from operating activities:                             |  |                |   |  |                |   |  |                |  
|Exchange differences                                                                                     |  | 11,186,017     |   |  | (4,273,908     | ) |  | 5,829,797      |  
|Depreciation and amortization                                                                            |  | 68,573,879     |   |  | 63,433,541     |   |  | 58,404,539     |  
|Impairment losses                                                                                        |  | 395,599        |   |  |               |   |  |               |  
|Reversal of impairment losses                                                                            |  | (9,894,355     | ) |  | (13,093,117    | ) |  | (26,908,076    | )
|Loss from sale of fixed assets                                                                           |  | 70,512         |   |  |               |   |  |               |  
|Provision for contingencies                                                                              |  | 1,201,459      |   |  | 2,022,504      |   |  | 2,174,327      |  
|Charge (recovery) of allowance for doubtful accounts                                                     |  | 10,897,356     |   |  | 2,883,259      |   |  | (1,045,008     | )
|Loss on fire damages (net of insurance recoveries)                                                       |  | 5,787,577      |   |  |               |   |  |               |  
|Unreimbursed expenses                                                                                    |  | 1,743,141      |   |  |               |   |  |               |  
|Gain on redemption of loans                                                                              |  |               |   |  | (1,853,639     | ) |  | (784,560       | )
|Loss on repurchase of debt                                                                               |  |               |   |  | 213,228        |   |  |               |  
|Equity loss from related companies                                                                       |  | 678,881        |   |  | 706,619        |   |  | 1,126,516      |  
|Other provisions                                                                                         |  | 10,302,706     |   |  | 8,972,414      |   |  | 4,776,171      |  
|Easement income                                                                                          |  | (2,427,718     | ) |  |               |   |  |               |  
|Gain from recognition of inventories at net realizable value                                             |  | (3,497,632     | ) |  |               |   |  |               |  
|Tax amnesty plan for gross revenue tax                                                                   |  |               |   |  |               |   |  | 2,121,888      |  
|Net loss (income) in credit card trust                                                                   |  | 882,782        |   |  | 1,047,546      |   |  | (78,336        | )
|Minority interest                                                                                        |  | 4,784,413      |   |  | 4,045,356      |   |  | 558,140        |  
|Income tax                                                                                               |  | 48,457,137     |   |  | 33,615,874     |   |  | 16,311,318     |  
|Changes in certain assets and liabilities, net of non-cash transactions and the effects of acquisitions: |  |                |   |  |                |   |  |                |  
|Increase in accounts receivable                                                                          |  | (78,447,914    | ) |  | (46,410,340    | ) |  | (10,103,933    | )
|Increase in other receivables and prepaid expenses                                                       |  | (5,964,490     | ) |  | (11,972,767    | ) |  | (4,755,013     | )
|Increase in intangible assets                                                                            |  | (50,000        | ) |  | (2,023,118     | ) |  | (416,094       | )
|Decrease (increase) in inventory                                                                         |  | 18,066,785     |   |  | (111,108       | ) |  | (24,928        | )
|Increase in trade accounts payable                                                                       |  | 51,054,057     |   |  | 15,265,076     |   |  | 11,600,995     |  
|Increase in customer advances                                                                            |  | 14,017,132     |   |  | 25,367,124     |   |  | 10,348,326     |  
|Decrease in taxes payable                                                                                |  | (16,387,507    | ) |  | (6,693,227     | ) |  | (7,043,413     | )
|Increase in salaries and social security payable                                                         |  | 2,441,425      |   |  | 2,497,217      |   |  | 1,960,750      |  
|(Decrease) increase in provision for contingencies                                                       |  | (2,666,057     | ) |  | 347,348        |   |  | (105,754       | )
|Decrease in other liabilities                                                                            |  | (10,120,650    | ) |  | (7,089,728     | ) |  | (4,999,828     | )
|Increase in due to related parties                                                                       |  | 2,611,646      |   |  | 2,100,558      |   |  | 187,000        |  
|Increase (decrease) in accrued interest                                                                  |  | 2,290,873      |   |  | (7,151,518     | ) |  | 538,576        |  
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Net cash provided by operating activities                                                                |  | 170,666,086    |   |  | 95,100,594     |   |  | 78,510,940     |  
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Cash flows from investing activities:                                                                    |  |                |   |  |                |   |  |                |  
|Acquisition of fixed assets                                                                              |  | (30,261,398    | ) |  | (50,607,966    | ) |  | (20,397,126    | )
|Guarantee deposit                                                                                        |  | (8,610,000     | ) |  |               |   |  |               |  
|Payment for acquisition of subsidiary company, net of cash acquired                                      |  |               |   |  | (4,163,271     | ) |  |               |  
|Acquisition of minority interest                                                                         |  | (163,952       | ) |  |               |   |  |               |  
|Acquisition of undeveloped parcels of land                                                               |  | (61,312,261    | ) |  | (680,941       | ) |  | (182,557       | )
|Loans granted to third parties                                                                           |  | (375,000       | ) |  |               |   |  |               |  
|Net procedures from sales of fixed assets                                                                |  | 484,800        |   |  |               |   |  |               |  
|(Increase) decrease in investments                                                                       |  | (23,785,702    | ) |  | (6,024,728     | ) |  | 2,681,011      |  
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Net cash used in investing activities                                                                    |  | (124,023,513   | ) |  | (61,476,906    | ) |  | (17,898,672    | )
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Cash flows from financing activities:                                                                    |  |                |   |  |                |   |  |                |  
|Proceeds from short-term and long-term debt                                                              |  | 38,426,054     |   |  | 83,667,000     |   |  | 300,000        |  
|Payment of short-term and long-term debt                                                                 |  | (41,954,440    | ) |  | (126,368,358   | ) |  | (10,903,120    | )
|Payment of loans granted by related parties                                                              |  | (765,000       | ) |  | (6,925,340     | ) |  |               |  
|Proceeds from settlement of swap agreement                                                               |  |               |   |  | 15,840,364     |   |  |               |  
|Dividends paid by subsidiaries to minority shareholders                                                  |  | (39,000        | ) |  | (523,678       | ) |  |               |  
|Payment to ERSAs minority shareholders for reduction of common stock                                    |  | (1,470,178     | ) |  |               |   |  |               |  
|Payment of seller financing of Mendoza Plaza Shopping S.A.                                               |  | (5,149,834     | ) |  |               |   |  |               |  
|Payment of cash dividends                                                                                |  | (29,000,000    | ) |  | (17,895,663    | ) |  | (10,000,000    | )
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Net cash used in financing activities                                                                    |  | (39,952,398    | ) |  | (52,205,675    | ) |  | (20,603,120    | )
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Increase (decrease) in cash and cash equivalents                                                         |  | 6,690,175      |   |  | (18,581,987    | ) |  | 40,009,148     |  
|Cash and cash equivalents as of the beginning of the year                                                |  | 49,714,480     |   |  | 68,296,467     |   |  | 28,287,319     |  
|                                                                                                         |  |                |   |  |                |   |  |                |  
|Cash and cash equivalents as of the end of the year                                                      |  | Ps. 56,404,655 |   |  | Ps. 49,714,480 |   |  | Ps. 68,296,467 |  
|                                                                                                         |  |                |   |  |                |   |  |                |  

The accompanying notes are an integral part of these consolidated financial statements.



F-6



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##### Table of Contents

Alto Palermo S.A. (APSA)

Consolidated Statements of Cash Flows

for the years ended June 30, 2006,
2005 and 2004 (continued)

(In Argentine Pesos, except as otherwise indicated)



|                                                                                           |  |      |            |      |     |             |      |  |     |           
|------------------------------------------------------------------------------------------ |  | ---- | ---------- | ---- | --- | ----------- | ---- |  | --- | ----------
|                                                                                           |  | 2006 |            | 2005 |     |             | 2004
|Supplemental cash flow information                                                         |  |      |            |      |     |             |      |  |     |           
|Cash paid during the year for:                                                             |  |      |            |      |     |             |      |  |     |           
|Interest                                                                                   |  | Ps.  | 24,680,120 |      | Ps. | 30,790,090  |      |  | Ps. | 28,684,283
|Income tax                                                                                 |  |      | 11,094,593 |      |     | 1,417,966   |      |  |     | 1,002,190 
|                                                                                           |  |      |           
|Non-cash investing and financing activities:                                               |  |      |            |      |     |             |      |  |     |           
|Liquidation of interest in credit card receivables                                         |  |      | 10,364,005 |      |     | 3,348,278   |      |  |     | 209,543   
|Increase in inventory through a decrease in other investments                              |  |      | 3,827,433  |      |     |            |      |  |     |          
|Retained interest in credit card receivables                                               |  |      | 3,555,119  |      |     | 13,976,125  |      |  |     | 11,103,478
|Increase in Trust debt securities through a decrease in credit card receivable             |  |      | 1,524,325  |      |     | 222,860     |      |  |     | 1,410,000 
|Increase in fixed assets through an increase in other receivables and prepaid expenses     |  |      | 348,521    |      |     |            |      |  |     |          
|Conversion of Convertible Notes into common shares                                         |  |      | 153,900    |      |     | 5,274,138   |      |  |     | 2,285,251 
|Increase in other receivables and prepaid expenses through a decrease in fixed assets      |  |      | 71,092     |      |     |            |      |  |     |          
|Increase in other receivables and prepaid expenses through a decrease in intangible assets |  |      | 11,800     |      |     |            |      |  |     |          
|Increase in fixed assets through a decrease in other investments                           |  |      | 8,097      |      |     |            |      |  |     |          
|Increase in other investments through a decrease in fixed assets                           |  |      |           |      |     | 3,882,712   |      |  |     | 15,414,281
|Increase in fixed assets through an increase in trade accounts payable                     |  |      |           |      |     | 925,610     |      |  |     |          
|Increase in intangible assets through a decrease in fixed assets                           |  |      |           |      |     | 1,555,070   |      |  |     |          
|Increase in fixed assets through a decrease in intangible assets                           |  |      |           |      |     |            |      |  |     | 30,890    
|Increase in other investments through a decrease in intangible assets                      |  |      |           |      |     | 18,332      |      |  |     |          
|Increase in fixed assets through a decrease in other receivables and prepaid expenses      |  |      |           |      |     | 103,318     |      |  |     |          
|Increase in fixed assets through a decrease in equity investments                          |  |      |           |      |     | 596,076     |      |  |     |          
|                                                                                           |  |      |           
|                                                                                           |  | 2006 |            | 2005 |     |             | 2004
|Acquisition of subsidiary:                                                                 |  |      |            |      |     |             |      |  |     |           
|Cash and cash equivalents                                                                  |  | Ps.  |           |      | Ps. | 1,238,417   |      |  | Ps. |          
|Fair value of fixed assets acquired                                                        |  |      |           |      |     | 85,674,963  |      |  |     |          
|Fair value of other assets acquired                                                        |  |      |           |      |     | 11,902,483  |      |  |     |          
|Fair value of liabilities assumed                                                          |  |      |           |      |     | (67,516,352 | )    |  |     |          
|                                                                                           |  |      |            |      |     |             |      |  |     |           
|Net assets acquired                                                                        |  | Ps.  |           |      | Ps. | 31,299,511  |      |  | Ps. |          
|Minority interest                                                                          |  |      |           |      |     | (16,310,400 | )    |  |     |          
|                                                                                           |  |      |            |      |     |             |      |  |     |           
|Purchase price                                                                             |  |      |           |      |     | 14,989,111  |      |  |     |          
|Seller financing                                                                           |  |      |           |      |     | (9,587,423  | )    |  |     |          
|                                                                                           |  |      |            |      |     |             |      |  |     |           
|Purchase price paid                                                                        |  | Ps.  |           |      | Ps. | 5,401,688   |      |  | Ps. |          
|Less: Cash and cash equivalents acquired                                                   |  |      |           |      |     | (1,238,417  | )    |  |     |          
|                                                                                           |  |      |            |      |     |             |      |  |     |           
|Net cash paid for the acquisition                                                          |  | Ps.  |           |      | Ps. | 4,163,271   |      |  | Ps. |          
|                                                                                           |  |      |            |      |     |             |      |  |     |           

The accompanying notes are an integral part of these consolidated financial statements.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements

(In Argentine Pesos, except as otherwise indicated)



|1. | Organization and description of business
|-- | ----------------------------------------

Alto
Palermo S.A. (APSA) (formerly Sociedad Anónima Mercado de Abasto Proveedor (SAMAP)), an Argentine real estate holding company incorporated under the laws of Argentina, and subsidiaries (collectively, APSA or the
Company) are primarily involved in the acquisition, development and operation of shopping center properties in Argentina. APSA was formed in 1889 and, until 1984, was the operator of the principal fresh product market in the city of
Buenos Aires, Argentina. The Companys principal asset during this period was the historic Mercado de Abasto building which served as the location of the market from 1889 to 1984, when the Company largely ceased operations. In July 1994,
IRSA Inversiones y Representaciones Sociedad Anónima (IRSA) acquired a controlling interest in the Company and, subsequently, the Company resumed its real estate operations. In December 1994, IRSA sold part of its holdings in the
Company to Parque Arauco S.A. (Parque Arauco). As of June 30, 2006, the Companys direct and indirect principal shareholders are IRSA (61.5%) and Parque Arauco (29.6%). The Companys shares are listed and traded on
the Buenos Aires Stock Exchange. Effective November 2000, the Companys shares are listed and traded on the NASDAQ under the ticker symbol APSA.

Since recommencing operations, the Company has continued to grow through a series of acquisitions and developments. As of June 30, 2006, the Company owns a majority interest in, and operates, a portfolio of nine
shopping centers in Argentina, of which five are located in the City of Buenos Aires (Abasto Shopping, Paseo Alcorta, Alto Palermo Shopping, Patio Bullrich and Buenos Aires Design), one is located in Greater Buenos Aires (Alto Avellaneda) and the
other three are located in the cities of Rosario (Alto Rosario), Mendoza (Mendoza Plaza Shopping) and Salta (Alto NOA). The Company also constructs residential apartment buildings for sale.

Through Tarshop S.A. (Tarshop), a majority-owned subsidiary of the Company, the Company originates credit card accounts, which makes it more
attractive for customers to purchase goods and services from the Companys shopping centers retail and services businesses. Tarshop is a limited purpose credit card company and is not affiliated with any bank. As of June 30, 2006,
Tarshop card, the credit card, accounted for approximately 44% of the total accounts receivable of the Company. Tarshop has ongoing securitization programs through which it transfers a portion of the Companys credit card customer
receivable balances to master trusts that issue certificates to public and private investors. See Note 11 for details.

The Company is also
engaged in e-commerce activities through its equity investment in E-Commerce Latina S.A. Through the website Altocity.Com, the Company replicates the shopping experience to consumers by offering the same selection of goods and services encountered
at its shopping center properties. These activities are not significant for the years presented.



|2. | Preparation of financial statements
|-- | -----------------------------------



| | a. | Basis of presentation
| | -- | ---------------------

The consolidated financial
statements of the Company have been prepared in accordance with generally accepted accounting principles used in Argentina (Argentine GAAP), and the regulations of the Comisión Nacional de Valores (CNV), the National
Securities Commission in Argentina, which differ in certain significant respects from generally accepted accounting principles in the United States of America (US GAAP). Such differences involve methods of measuring the amounts shown in
the consolidated financial statements, as well as additional disclosures required by US GAAP and Regulation S-X of the Securities and Exchange Commission (SEC). A description of the significant differences between Argentine GAAP and
US GAAP as they relate to the Company are set forth in Note 19 to these consolidated financial statements.

As discussed in Notes 2.d.
and 3.k., in order to comply with regulations of the CNV, the Company (i) discontinued inflation accounting as from February 28, 2003 and (ii) recognized deferred income tax assets and liabilities on an undiscounted basis. The
application of these CNV resolutions represents a departure from Argentine GAAP. However, such departures did not have a material effect on the accompanying consolidated financial statements.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|2. | Preparation of financial statements (continued)
|-- | -----------------------------------------------



| | b. | Basis of consolidation
| | -- | ----------------------

The consolidated financial
statements include the accounts of APSA and its subsidiaries over which APSA has effective control. Investments in companies in which the Company exercises significant influence, but not control, are accounted for under the equity method.
Investments in jointly controlled operations in which the Company exercises joint control are accounted for under the proportionate consolidation method. All significant intercompany balances and transactions have been eliminated in consolidation.

In accordance with Argentine GAAP, the presentation of the parent companys individual financial statements is mandatory.
Consolidated financial statements are to be included as supplementary information to the individual financial statements. For the purpose of these financial statements, individual financial statements have been omitted since they are not required
for SEC reporting purposes.

A description of the subsidiaries with their respective percentage of capital stock owned is presented as
follows:



|                                          |  |                                                     |   |  |      |   |  |      |  
|----------------------------------------- |  | --------------------------------------------------- | - |  | ---- | - |  | ---- | -
|Subsidiaries                              |  | Percentage of capital stockowned as of June 30, (a) |  
|                                          |  | 2006                                                |   |  | 2005 |   |  | 2004 |  
|Emprendimiento Recoleta S.A. (i)          |  | 54                                                  | % |  | 51   | % |  | 51   | %
|Tarshop S.A.                              |  | 80                                                  | % |  | 80   | % |  | 80   | %
|Mendoza Plaza Shopping S.A. (ii).         |  | 85                                                  | % |  | 85   | % |  | 19   | %
|Shopping Neuquén S.A.                     |  | 95                                                  | % |  | 95   | % |  | 95   | %
|Inversora del Puerto S.A.                 |  | 100                                                 | % |  | 100  | % |  | 100  | %
|Alto Research and Development S.A. (iii). |  |                                                    |   |  |     |   |  | 100  | %
|Shopping Alto Palermo S.A.                |  | 100                                                 | % |  | 100  | % |  | 100  | %
|Fibesa S.A.                               |  | 100                                                 | % |  | 100  | % |  | 100  | %

| | 
| | 

| | (a) | Percentage of equity interest owned has been rounded.
| | --- | -----------------------------------------------------

| | (i) | During fiscal year 2006, the Company increased the ownership interest in Emprendimiento Recoleta S.A. from 51.0% to 53.7%.
| | --- | --------------------------------------------------------------------------------------------------------------------------

| | (ii) | During the year ended June 30, 2005 the Company increased its ownership interest in Mendoza Plaza Shopping S.A. (Mendoza Plaza Shopping) from 19% to 85% through a
series of transactions. For details, see Note 2.h. As a result of gaining control, the results of operations of Mendoza Plaza Shopping were included in the consolidated statement of income as from October 1, 2004.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Alto Research and Development S.A. was merged with and into the Company effective June 1, 2005.
| | ----- | -----------------------------------------------------------------------------------------------



| | c. | Proportionate consolidation
| | -- | ---------------------------

The Company exercises
joint control over Metroshop. As required by Technical Resolution No. 21 Equity Method of Accounting, Consolidation of Financial Statements and Related Party Transactions (RT No. 21), under Argentine GAAP,
proportionate consolidation has been applied to these investments. Accordingly, these financial statements reflect the Companys pro rata equity interest in these investments on a line-by-line basis.



| | d. | Presentation of financial statements in constant Argentine pesos
| | -- | ----------------------------------------------------------------

On August 22, 1995, the Argentine government issued Decree No. 316/95 discontinuing the requirement that financial information be restated for inflation for any date or period after August 31, 1995.
Effective September 1, 1995 in accordance with CNV resolutions and Argentine GAAP, the Company began accounting for its financial transactions on a historical cost basis, without considering the effects of inflation. Prior to September 1,
1995, the financial statements were prepared on the basis of general price level accounting, which reflected changes in purchasing power of the Argentine Peso in the historical financial statements. The financial statement information of periods
prior to August 31, 1995 was restated to pesos of general purchasing power as of August 31, 1995. The August 31, 1995 balances, adjusted to the general purchasing power of the Peso at that date, became the historical cost basis for
subsequent accounting and reporting.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|2. | Preparation of financial statements (continued)
|-- | -----------------------------------------------



| | d. | Presentation of financial statements in constant pesos (continued)
| | -- | ------------------------------------------------------------------

However, as a result of the inflationary environment in Argentina in 2002, the Consejo Profesional de Ciencias Económicas de la Ciudad Autónoma de Buenos Aires (CPCECABA), approved on
March 6, 2002, a resolution reinstating the application of inflation accounting in financial statements as from January 1, 2002. This resolution provided that all recorded amounts restated for inflation through August 31, 1995, as
well as those arising between that date and December 31, 2001 are to be considered stated in currency as of December 31, 2001.

On July 16, 2002, the Argentine Government issued a decree, instructing the CNV to issue the necessary regulations for the acceptance of financial statements prepared in constant currency. On July 25, 2002, the CNV reinstated the
requirement to submit financial statements in constant currency.

However, after considering inflation levels for the second half of 2002
and the first months of 2003, on March 25, 2003, the Argentine government repealed the provisions of the previous decree related to the inflation adjustment and instructed the CNV to issue the necessary regulations to preclude companies under
its supervision from presenting price-level restated financial statements. Therefore, on April 8, 2003, the CNV issued a resolution providing for the discontinuance of inflation accounting as of March 1, 2003. The Company complied with the
CNV resolution and accordingly recorded the effects of inflation until February 28, 2003.

Since Argentine GAAP required companies to
discontinue inflation accounting as from October 1, 2003, the application of the CNV resolution represents a departure from generally accepted accounting principles. However, due to the low level of inflation rates during the period from March
to September 2003, such a departure has not had a material effect on the accompanying consolidated financial statements.



| | e. | Adoption by CNV of accounting standards
| | -- | ---------------------------------------

The CNV
issued General Resolutions No. 485 and No. 487 on December 29, 2005 and January 26, 2006, respectively which adopted, with certain modifications, the new accounting standards previously issued by the Professional Council in
Economic Sciences of the Autonomous City of Buenos Aries through its Resolution CD 93/2005. These standards are to be mandatorily applied for fiscal years or interim periods corresponding to fiscal years beginning as from January 1, 2006. The
standards will be effective for the Company for the year ended June 30, 2007.

The most significant change included in the accounting
standards adopted by CNV relates to the accounting treatment of differences between the tax basis and book basis of non-monetary items for deferred income tax calculation purposes when companies prepare price-level restated financial statements. The
new accounting mandates companies to treat these differences as temporary differences. However, the standard allows a one-time accommodation to continue treating the differences between the tax basis and indexed book basis of non-monetary items
adoption of the standard. As such, the Company is allowed to continue treating differences as permanent. As June 30, 2006, the estimated effect of treating differences as temporary will be a decrease in shareholders equity of
approximately Ps. 150.4 million against in retained earnings.



| | f. | Reclassifications
| | -- | -----------------

Certain reclassifications of
prior year information have been made to conform to the current year presentation. Balance sheet reclassifications mainly relate to the reclassification of Ps. 32.1 million, Ps. 31.4 million, Ps. 19.2 million and Ps. 0.9 million
from non-current Fixed Assets, net, non-current Inventory, net, non-current Investments and non-current Intangibles, net, respectively, to a new balance sheet line item titled Other Investments, net which includes all investments other
than investments in equity investees. This reclassification does not affect current, non-current or total assets, and was completed to conform to current year presentation.



| | g. | Use of estimates
| | -- | ----------------

The preparation of the
consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates include those required in the accounting for the allowance for doubtful accounts, the
depreciation, amortization and impairment of long-lived assets, the provision for contingencies and income taxes. Actual results could differ from those estimates and evaluations made at the date of preparation of these financial statements.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|2. | Preparation of financial statements (continued)
|-- | -----------------------------------------------



| | h. | Acquisitions and developments
| | -- | -----------------------------

General Paz plot
of land

On June 29, 2006 Alto Palermo S.A. (APSA) acquired from Philips Argentina S.A. a plot of land located in the northern area
of Buenos Aires, covering 28,741 square meters of surface area. The purchase price was established in US$ 17.9 million, which has been totally paid at the time the deed title was registered.

Mendoza Plaza Shopping

On
September 29, 2004, the Company entered into a purchase agreement pursuant to which the Company acquired an additional 49.9% ownership interest in Mendoza Plaza Shopping for US$ 5.3 million. The Company paid US$ 1.77 million on
December 2, 2004 and the remaining balance was paid in two equal annual installments of US$ 1.77 million each on September 29, 2006 and 2005. Through this acquisition, the Company became the holder record of 68.8% of the capital stock
of Mendoza Plaza Shopping, the main activity of which is the operation of the Mendoza Plaza Shopping center in the city of Mendoza. The Company also entered into the following contracts in connection with debt owed by Mendoza Plaza Shopping:

i) Put option with Banco de Chile S.A. (Banco de Chile), whereby Banco de Chile was entitled, although not obliged, to assign to the Company
two defaulted credit agreements amounting to US$ 18 million originally granted to Mendoza Plaza Shopping. As a result of the economic measures issued in Argentina in 2002, these financial agreements had been converted into Argentine pesos at
the exchange rate of Ps. 1.0 per US Dollar and indexed based on the reference stabilization index (CER). On March 30, 2005 Banco de Chile executed the put option, transferring all the rights of the credit facilities to the Company in
exchange for US$ 8.5 million (Ps. 24.8 million).

(ii) Call option with HSBC Bank Argentina S.A., whereby the Company was entitled, although not
obliged, to acquire, and HSBC Bank Argentina S.A. was obliged to transfer, a defaulted loan agreement originally granted to Mendoza Plaza Shopping amounting to US$ 7.0 million. As a result of the economic measures issued in Argentina in 2002, this
financial agreement was converted into Argentine pesos at the exchange rate of Ps. 1.0 per US Dollar and indexed by the reference stabilization index (CER). On March 29, 2005 the Company transferred the purchase option to Mendoza Plaza
Shopping, which exercised the option paying Ps. 6.8 million for the settlement of the loan (corresponding to the exercise price of Ps. 7.2 million net of rental fees collected by HSBC Bank Argentina S.A. as guarantee amounting to Ps. 0.4
million). This cash payment was funded through a loan granted by the Company.

The Company also entered into an agreement with Inversiones
Falabella Argentina S.A. (Falabella), the remaining minority shareholder of Mendoza Plaza Shopping, pursuant to which, among other things, Falabella has the irrevocable right to sell to the Company (put option) its ownership interest in
Mendoza Plaza Shopping for a total consideration of US$ 3.0 million. The put option can be exercised until the last business day of October 2008. At the date of issuance of these financial statements, Falabella has not exercised the put option.

On May 31, 2005 the shareholders of Mendoza Plaza Shopping approved the conversion of debt owed to the Company totaling Ps.
36.1 million into common shares. As a result of this transaction, the Company increased its ownership interest in Mendoza Plaza Shopping from 68.8% to 85.4%.

Alto Rosario Shopping

On November 9, 2004 the Company completed the development and opened a
new shopping center, Alto Rosario, in the City of Rosario, Province of Santa Fe.



|3. | Significant accounting policies
|-- | -------------------------------

On
January 14, 2003, the CPCECABA and the CNV approved, with certain amendments, Technical Resolutions (RT) No. 16, Framework for the Preparation and Presentation of Financial Statements; RT No. 17, Overall
Considerations for the Preparation of Financial Statements; RT No. 18, Specific Considerations for the Preparation of



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|3. | Significant accounting policies (continued)
|-- | -------------------------------------------

Financial
Statements; RT No. 19, Amendments to Technical Resolutions No. 4, 5, 6, 8, 9, 11 and 14; and RT No. 20, Accounting for Derivative Instruments and Hedging Activities issued by the Federación
Argentina de Consejos Profesionales en Ciencias Económicas (FACPCE), which established new accounting and disclosure principles under Argentine GAAP. The Company adopted such standards on July 1, 2002, except for Technical
Resolution No. 20 which was adopted on July 1, 2003. As required by Argentine GAAP, when issuing the 2003 financial statements the Company restated its prior year financial statements to give retroactive effect to the newly adopted
accounting standards. These new accounting standards relate to the harmonization of Argentine GAAP with International Financial Reporting Standards.

The following is a summary of significant accounting policies followed by the Company in the preparation of these consolidated financial statements.



| | a. | Revenue recognition
| | -- | -------------------

The Company primarily derives
its revenues from leases and services operations, the sale and development of properties, credit card operations and to a lesser extent, from e-commerce activities. See Note 9 for details on the Companys business segments.



| |  |  | Leases and services
| | - |  | -------------------

Leases with tenants are accounted for
as operating leases. Tenants are generally charged a rent, which consists of the higher of: (i) a monthly base rent (the Base Rent) and (ii) a specified percentage of the tenants monthly gross retail sales (the
Percentage Rent) (which generally ranges between 4% and 8% of tenants gross sales). Furthermore, pursuant to the rent escalation clause in most leases, a tenants Base Rent generally increases between 4% and 7% each year
during the term of the lease. For the years ended June 30, 2006, 2005 and 2004, the majority of the tenants were charged the Percentage Rent.

Certain lease agreements contain provisions, which provide for rents based on a percentage of sales or based on a percentage of sales volume above a specified threshold. The Company determines the compliance with specific targets and
calculates the additional rent on a monthly basis as provided for in the contracts. Thus, these contingent rents are not recognized until the required thresholds are exceeded.

Generally, the Companys lease agreements vary from 36 to 120 months. Law No. 24,808 provides that tenants may rescind commercial lease
agreements after the initial six months, upon not less than 60 days written notice, subject to penalties which vary from one to one and a half months rent if the tenant rescinds during the first year of its lease, and one month of rent if the
tenant rescinds after the first year of its lease.

The Company also charges its tenants a monthly administration fee, prorated among the
tenants according to their leases, which varies from shopping center to shopping center, relating to the administration and maintenance of the common area and the administration of contributions made by tenants to finance promotional efforts for the
overall shopping centers operations. Administration fees are recognized monthly when earned.

In addition to rent, tenants are
generally charged admission rights, a non-refundable admission fee that tenants may be required to pay upon entering into a lease and upon lease renewal. Admission right is normally paid in one lump sum or in a small number of monthly
installments. Admission rights are recognized using the straight-line method over the life of the respective lease agreements.

The Company
also derives revenues for parking lot fees charged to visitors. Parking revenues are recognized as services are performed.

In September
2000, the Company completed the acquisition of the 99.99% equity interest of Fibesa S.A. (FIBESA), a related company. FIBESA acts as the leasing agent for the Company bringing together the Company and potential lessees for the retail
space available in certain of the Companys shopping centers. FIBESAs revenues are derived primarily from success fees paid by tenants calculated as a percentage of the final rental income value for both the lessee and the Company.
Revenues related to success fees are recognized at the time that the transaction is successfully concluded. A transaction is considered successfully concluded when both parties have signed the related lease contract.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)





|3. | Significant accounting policies (continued)
|-- | -------------------------------------------



| | a. | Revenue recognition (continued)
| | -- | -------------------------------



| |  |  | Sales and development properties
| | - |  | --------------------------------

The Company records
revenue from the sale of properties when all of the following criteria are met:



| | (i) | the sale has been consummated;
| | --- | ------------------------------



| | (ii) | the Company has determined that the buyers initial and continuing investments are adequate to demonstrate a commitment to pay for the property;
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | the Companys receivable is not subject to future subordination; and
| | ----- | --------------------------------------------------------------------



| | (iv) | the Company has transferred to the buyer the risk of ownership.
| | ---- | ---------------------------------------------------------------



| |  |  | Credit card operations
| | - |  | ----------------------

The Company, through its
subsidiary, Tarshop, derives revenues from credit card transactions which primarily are comprised of (i) merchant discount fees which are recognized when transactional information is received and processed by the Company; (ii) data
processing services which consist of processing and printing cardholders statement of accounts, and which are recognized as services are provided; and (iii) life and disability insurance charges to cardholders which are recognized on an accrual
basis.



| | b. | Cash and cash equivalents
| | -- | -------------------------

The Company considers
all highly liquid investments with original maturities of three months or less to be cash equivalents. Cash equivalents consist of mutual funds which invest in time deposits and time deposits with original maturities of less than three months at
date of purchase.



| | c. | Other investments, net
| | -- | ----------------------



| |  | (i) Current
| |  | -----------

Current investments include mutual funds,
government and mortgage bonds, and time deposits. Mutual funds and government and mortgage bonds are carried at their market value with unrealized gains and losses recorded within Financial results, net in the consolidated statements of
income. Time deposits are valued at cost plus accrued interest at year-end.

Current investments also include retained interests in
securitized receivables pursuant to the securitization programs of the Company ́s subsidiary, Tarshop S.A. (See Note 11 for details).



| |  | (ii) Non-current
| |  | ----------------

Undeveloped parcels of land are valued
at acquisition cost, restated in accordance with Note 2.d.

Non-current investments also include the non-current portion of the
Companys retained interests in securitized receivables (CPs) and trust debt securities (TDFs) pursuant to the securitization programs of credit card receivables (See Note 11 for details).

The Company acquired undeveloped properties as land reserves located in strategic areas for the future development of shoppings centers,
residential apartment complex and others.

During the years ended June 30, 2002 and 2006, the Company had recognized impairment losses
amounting to Ps. 15.9 million and Ps. 0.2 million, respectively, in connection with Caballito Project and other properties. As a result of increases in their fair market values, during fiscal years 2003, 2004, 2005 and 2006, the Company
partially reversed the impairment losses, recognizing a gain of Ps. 0.2 million, Ps. 5.1 million, Ps. 2.7 million and Ps. 6.4 million, respectively. The impairment losses and the gains associated with the reversal of previously
impairment losses have been included within Financial results, net in the accompanying consolidated statements of income.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|3. | Significant accounting policies (continued)
|-- | -------------------------------------------



| | d. | Investments
| | -- | -----------

The Company accounts for its
investment in E-Commerce S.A. over which it exercises significant influence under the equity method of accounting.

During the year ended
June 30, 2003, the Company had recognized an impairment loss related to the equity investment in Mendoza Plaza Shopping S.A. amounting to Ps. 7.5 million. During fiscal years 2004 and 2005, the Company reversed Ps. 0.3 million and Ps.
6.6 million, respectively, of this impairment loss as a result of increases in their recoverable values. Both the impairment charge and the impairment reversal of 2004 have been included within Equity loss from related companies in
the accompanying consolidated statements of income. The impairment reversal recognized in 2005 has been included within Financial results, net in the accompanying consolidated statements of income due to the consolidation of Mendoza
Plaza Shopping as from October 1, 2004.



| | e. | Inventory
| | -- | ---------

Properties acquired for purposes of its
development and subsequent sale are classified as inventory. Inventory is stated at cost adjusted for inflation as described in Note 2.d less accumulated impairment charges, except in certain circumstances as described further below. The cost of
inventory is comprised of all direct contract costs, such as land, materials and construction fees associated with development properties, as well as capitalized interest when applicable. No interest cost was capitalized in inventory during the
years ended June 30, 2006, 2005 and 2004 since there were no developments during these periods. Inventory is classified as current or non-current based on the estimated date of sale and the time at which the related receivables are expected to
be collected.

Inventory is charged to the statement of income as cost of revenues as the related revenue is recognized, using the
percentage-of-completion method.

Certain inventories for which preliminary sale agreement were entered into by the Company and down
payments were received are valued at net realizable value at year-end. Gains are shown in the line item Gain from recognition of inventories at net realizable value.

During the year ended June 30, 2002, the Company recognized an impairment loss amounting to Ps. 2.2 million in connection with the Alcorta
Plaza plot of land. As a result of increases in the fair market value, such impairment losses were subsequently reversed during fiscal years 2003, 2004 and 2005, recognizing gains of Ps. 0.1 million, Ps. 1.6 million and Ps.
0.5 million, respectively.

Alcorta Plaza was sold in March 2006. An impairment charge of Ps. 0.2 million was recognized in 2006
in connection with Torres de Abasto. See Note 16 for details.



| | f. | Fixed assets, net
| | -- | -----------------

Properties purchased for rental
purposes are classified as fixed assets. Fixed assets are stated at cost, adjusted for inflation (as described in Note 2.d), less accumulated depreciation and impairment charges, except for a parcel of land acquired prior to June 30, 1986,
which was originally recorded at its appraised value as of such date. This appraisal increased the carrying value of the land by Ps. 4.0 million, which was recorded against an appraisal revaluation reserve account within shareholders
equity. This appraisal revaluation reserve will be charged against income once the land is disposed of or its value becomes impaired.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|3. | Significant accounting policies (continued)
|-- | -------------------------------------------



| | f. | Fixed assets, net (continued)
| | -- | -----------------------------

Depreciation expense
has been determined using the straight-line method over the estimated useful lives of the related assets as specified below:



|                         |  |  |  |                              
|------------------------ |  |  |  | -----------------------------
|Asset                    |  |  |  | Estimated useful life (years)
|- Properties:            |  |  |  |                              
|Shopping centers         |  |  |  | Between 16 and 31            
|Other                    |  |  |  | Between 26 and 50            
|- Leasehold improvements |  |  |  | 5                            
|- Facilities             |  |  |  | 10                           
|- Furniture and fixtures |  |  |  | Between 3 and 10             
|- Vehicles               |  |  |  | 3                            
|- Computer equipment     |  |  |  | 3                            
|- Software               |  |  |  | 5                            
|- Other                  |  |  |  | 10                           

The Company capitalizes interest on real estate development projects. The Company capitalized
interest costs amounting to Ps. 2.1 million during the year ended June 30, 2005.

The cost of maintenance and repairs is charged
to expense as incurred. The cost of significant renewals and improvements are added to the carrying amount of the respective asset.

When
assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in the consolidated statement of income.

During the years ended June 30, 2002 and 2003, the Company had recognized impairment losses amounting to Ps. 44.7 million and Ps.
5.2 million, respectively, in connection with Alto Avellaneda, Alto Noa, Abasto, Shopping Neuquén, Alto Rosario and other properties. As a result of increases in their fair market values, during fiscal years 2003, 2004, 2005 and 2006,
the Company partially reversed the impairment losses, recognizing a gain of Ps. 15.4 million, Ps. 20.2 million, Ps. 3.3 million and Ps. 3.5 million, respectively. The impairment losses and the gains associated with the
restoration of the previously recognized impairments have been included within Financial results, net in the accompanying consolidated statements of income. In addition, amortization related to the impairment charges amounted to Ps.
2.9 million, Ps. 1.6 million, Ps. 0.6 million and Ps. 0.3 million during the years ended June 30, 2003, 2004, 2005 and 2006, respectively.



| | g. | Software obtained or developed for internal use
| | -- | -----------------------------------------------

The Company capitalizes certain costs associated with the development of computer software for internal use. Costs capitalized during the years ended June 30, 2006, 2005, 2004 were Ps. 2.4 million, Ps. 0.4 million and Ps.
0.3 million, respectively. These costs are being amortized on a straight-line basis over 5 years.



| | h. | Intangible assets, net
| | -- | ----------------------

Intangible assets are
stated at cost, adjusted for inflation (as described in Note 2.d), less accumulated amortization and impairment charges.

(i) Trademarks

Fees and expenses related to the registration of trademarks are amortized on a straight-line basis over 10 years.

(ii) Preoperating expenses

Represent
primarily expenses incurred relating to pre-opening activities of certain shopping centers. These expenses are amortized on a straight-line basis over a three-year period commencing upon the opening of the shopping center.



F-15



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|3. | Significant accounting policies (continued)
|-- | -------------------------------------------



| | i. | Goodwill, net
| | -- | -------------

This item represents the difference
between the purchase price and the market value of assets acquired restated for inflation as mentioned in Note 2.d, which is being amortized by the straight-line method over a term not exceeding 10 years. Goodwill recorded under this caption was
generated by the purchase of shares in Tarshop S.A., Fibesa S.A. and Emprendimiento Recoleta S.A.

The net carrying value of goodwill is
shown under non-current investments (Note 20.c). Amortization is shown in Note 20.c and in Amortization of goodwill in the consolidated statements of income.



| | j. | Foreign currency assets and liabilities
| | -- | ---------------------------------------

Assets and
liabilities denominated in foreign currencies are translated at the prevailing exchange rates as of year-end. Transactions denominated in foreign currencies are translated into Argentine pesos at the prevailing exchange rates on the date of
transaction settlement. Foreign currency transaction gains and losses are recorded within Financial results, net in the consolidated statements of income.



| | k. | Income tax
| | -- | ----------

The subsidiaries of the Company
calculate their income taxes on a separate basis. The Company did not either calculate or pay income taxes on a consolidated basis for any of the years presented. The statutory income tax rate was 35% for all years presented.

The Company records income taxes using the deferred tax method required by Technical Resolution No. 17 (RT 17) Overall
Considerations for the Preparation of Financial Statements. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recorded or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the fiscal years that includes the enactment date. A valuation allowance is recognized for that component of net deferred tax
assets which is not recoverable.

As discussed in Note 2.e., the Company has treated the differences between the price-level
restated amounts of assets and liabilities and their historical basis as permanent differences for deferred income tax calculation purposes.

In accordance with CNV regulations, deferred tax assets and liabilities have not been discounted. Since Argentine GAAP requires the accounting for deferred tax assets and liabilities on a discounted basis, the application of the CNV
resolution represents a departure from generally accepted accounting principles. However, such a departure did not have a significant effect on the accompanying consolidated financial statements.



| | l. | Asset tax
| | -- | ---------

The Company is subject to the asset tax.
Pursuant to this tax regime, the Company is required to pay the greater of the income tax or the asset tax. Any excess of the asset tax over the income tax may be carried forward and recognized as a tax credit against future income taxes payable
over a 10-year period. The asset tax provision is calculated on an individual entity basis at the statutory asset tax rate of 1% and is based upon the taxable assets of each company as of the end of each year, as defined by Argentine law.



| | m. | Customer advances
| | -- | -----------------

Customer advances represent
payments received in advance in connection with the lease of properties. Customer advances include admission rights paid by tenants upon entering into a lease and upon lease renewal. See Note 3.a for details.



F-16



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|3. | Significant accounting policies (continued)
|-- | -------------------------------------------



| | n. | Provisions for contingencies and allowances
| | -- | -------------------------------------------

The
Company provides for losses relating to accounts and mortgage receivables. The allowance for losses is based on managements evaluation of various factors, including the credit risk of customers, historical trends and other information. While
management uses the information available to make evaluations, future adjustments to the allowance may be necessary if future economic conditions differ substantially from the assumptions used in making the evaluations. Management has considered all
events and/or transactions that are subject to reasonable and normal methods of estimations, and the consolidated financial statements reflect that consideration.

The Company has certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving labor and other matters. The Company accrues liabilities when it
is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Companys estimates of the outcomes of these matters and the Companys lawyers experience
in contesting, litigating and settling other matters. As the scope of the liabilities becomes better defined, there will be changes in the estimates of future costs, which could have a material effect on the Companys future results of
operations and financial condition or liquidity.



| | o. | Advertising expenses
| | -- | --------------------

The Company generally
expenses advertising and promotion costs as incurred with the exception of advertising and promotion expenses incurred to launch new shopping centers. Advertising and promotion expenses were approximately Ps. 16.5 million, Ps. 9.2 million
and Ps. 2.6 million for the years ended June 30, 2006, 2005 and 2004, respectively.

Advertising and promotion expenses to launch
new shopping centers are capitalized as preoperating expenses, within intangible assets.



| | p. | Pension information
| | -- | -------------------

The Company does not maintain
any pension plans. Argentine laws provide for pension benefits to be paid to retired employees from government pension plans and/or private fund managed plans to which employees may elect to contribute.

The Company does not sponsor any employee stock ownership plans.



| | q. | Impairment of long-lived assets
| | -- | -------------------------------

The Company
periodically evaluates the carrying value of its long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying value of a long-lived asset is considered
impaired by the Company when the expected cash flows, undiscounted and without interest, from such asset is separately identifiable and less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value
exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved or based on independent appraisals.

RT 17 establishes that a previously recognized impairment loss should only be reversed when there is a subsequent change in estimates used to compute the
fair market value of the asset. In that event, the new carrying amount of the asset should be the lower of its fair market value or the net carrying amount the asset would have had if no impairment had been recognized.



F-17



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|3. | Significant accounting policies (continued)
|-- | -------------------------------------------



| | r. | Impairment of inventories and undeveloped parcels of land
| | -- | ---------------------------------------------------------

The Company periodically evaluates the carrying value of its inventories and undeveloped parcels of land for impairment. Such evaluation is performed by comparing the respective carrying values against market values determined on the basis
of comparable property values. As discussed in note 3.q., if there are increases in the fair market value of the assets previously impaired assets are restored and reversals are shown in financial results, net.



| | s. | Vacation expenses
| | -- | -----------------

Vacation expenses are fully
accrued in the year the employee renders services to earn such vacation.



| | t. | Derivative financial instruments
| | -- | --------------------------------

The Company has
used certain financial instruments to lower its overall financing costs. The Company does not engage in trading or other speculative use of these financial instruments. Also, the Company has not utilized financial instruments to hedge anticipated
transactions. Derivative financial instruments are carried at their estimated fair market value as of year-end. For details on the Companys derivative instruments activity, see Note 12.



| | u. | Monetary assets and liabilities
| | -- | -------------------------------

Monetary assets
and liabilities are stated at their face value plus or minus the related financial gain or loss.



| | v. | Receivables from leases and services and trade payables
| | -- | -------------------------------------------------------

Receivables from leases and services and trade payables have been valued at the price applicable to spot operations at the time of the transaction plus interest and implicit financial components accrued at the internal rate of return
determined at that moment.



| | w. | Financial receivables and payables
| | -- | ----------------------------------

Financial
receivables and payables have been valued at the amount deposited and collected, respectively, net of related costs, plus accrued interest based on the interest rate estimated at the time of the transaction. In the case, the Company has the
intention and feasibility of selling financial receivables after the year-end, those receivables are valued at their net realizable value.



| | x. | Other receivables and liabilities
| | -- | ---------------------------------

Asset tax
credits have been measured based on the best estimate of the amount receivable discounted at the interest rate applicable to freely available savings accounts published by the Argentine Central Bank in effect at the time of incorporation to the
balance sheet. The remaining other receivables and liabilities have been valued at their nominal value plus interest, if any.



| | y. | Related parties balances
| | -- | ------------------------

Receivables and
liabilities with related parties generated by financial transactions and other sundry transactions have been valued in accordance with the terms agreed by the parties.



| | z. | Earnings per share
| | -- | ------------------

The Company is required to
disclose earnings per share information for all years presented. Basic earnings per share (basic EPS) are computed by dividing the net income available to common shareholders for the year by the weighted-average number of common shares
outstanding during the year. Diluted earnings per share (diluted EPS) are computed by dividing the adjusted net income for the year by the weighted-average number of common shares and potential common shares outstanding during the year.

In computing diluted EPS, income available to common shareholders used in the basic EPS calculation is adjusted to add back the after-tax
amount of interest recognized for the year with respect to any debt convertible to common stock. Additional adjustments are made for any other income or loss items that would result from the assumed conversion of potential common shares. The
weighted-average number of common shares outstanding is adjusted to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. Diluted EPS is based on the most
advantageous conversion rate or exercise price over the entire term of the instrument from the standpoint of the security holder. The calculation of diluted EPS excludes potential common shares if their effect is anti-dilutive. The Company has
considered the dilutive effect of the outstanding convertible debt in calculating diluted EPS.



F-18



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions
|-- | ------------------------------



| | a. | Cash and banks:
| | -- | ---------------



|                                                              |  |                |             |      |     |           
|------------------------------------------------------------- |  | -------------- | ----------- | ---- | --- | ----------
|                                                              |  | As of June 30,
|                                                              |  | 2006           |             | 2005
|Cash in local currency                                        |  | Ps.            | 1,896,305   |      | Ps. | 1,877,650 
|Cash in foreign currency (Note 20.f)                          |  |                | 2,164,853   |      |     | 1,839,228 
|Banks in local currency                                       |  |                | 6,205,496   |      |     | 6,436,660 
|Banks in foreign currency (Note 20.f)                         |  |                | 26,311,435  |      |     | 12,702,123
|Bank saving accounts                                          |  |                | 1,643,947   |      |     | 2,105,455 
|                                                              |  |                |             |      |     |           
|                                                              |  | Ps.            | 38,222,036  |      | Ps. | 24,961,116
|                                                              |  |                |             |      |     |           
|                                                              |  |               
|b.      Other investments, net:                               |  |                |             |      |     |           
|                                                              |  | As of June 30,
|                                                              |  | 2006           |             | 2005
|Current                                                       |  |                |             |      |     |           
|Mutual funds                                                  |  | Ps.            | 13,980,801  |      | Ps. | 18,714,676
|Retained interests in securitized receivables (i) (ii)        |  |                | 10,318,797  |      |     | 10,411,456
|Time deposits in local currency                               |  |                | 4,201,818   |      |     | 6,038,688 
|Government bonds (ii)                                         |  |                | 1,254,485   |      |     | 3,483,037 
|Mortgage bonds issued by Banco Hipotecario S.A. (ii) (Note 6) |  |                | 2,170,258   |      |     | 2,841,985 
|TDFs (ii)                                                     |  |                | 324,325     |      |     |          
|Others                                                        |  |                |            |      |     | 222,860   
|                                                              |  |                |             |      |     |           
|                                                              |  | Ps.            | 32,250,484  |      | Ps. | 41,712,702
|                                                              |  |                |             |      |     |           
|                                                              | 
|                                                              |  | As of June 30,
|                                                              |  | 2006           |             | 2005
|Non-current                                                   |  |                |             |      |     |           
|Undeveloped parcels of land                                   |  |                |             |      |     |           
|- General Paz plot of land                                    |  | Ps.            | 59,837,466  |      | Ps. |          
|- Caballito plot of land (iii)                                |  |                | 36,622,004  |      |     | 31,396,153
|- Torres Rosario                                              |  |                | 16,079,162  |      |     | 19,848,362
|- Air Space Supermercado Coto  Agüero 616                    |  |                | 13,143,445  |      |     | 11,695,040
|- Other real estate                                           |  |                | 2,347,423   |      |     | 1,508,628 
|Others                                                        |  |                | 1,247,080   |      |     |          
|TDFs                                                          |  |                | 752,114     |      |     | 222,860   
|Retained interests in securitized receivables (i)             |  |                | 37,814,171  |      |     | 19,033,594
|                                                              |  |                |             |      |     |           
|                                                              |  | Ps.            | 167,842,865 |      | Ps. | 83,704,637
|                                                              |  |                |             |      |     |           

| | 
| | 

| | (i) | As part of its credit card securitization programs, the Company transfers credit card receivables to trusts in exchange for cash and certificates representing undivided interests in
such receivables. Trusts debt securities represent debt certificates (TDFs) issued by trusts which are valued at amortized cost. Retained interests in transferred credit card receivables represent equity certificates (CPs) issued by trusts which are
accounted for under the equity method of accounting (See Note 11 for details).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-19



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | b. | Other investments, net (continued)
| | -- | ----------------------------------



| | (ii) | Not considered as cash equivalents for purposes of presenting the consolidated statements of cash flows.
| | ---- | --------------------------------------------------------------------------------------------------------

| | (iii) | As of July 5, 2006, the Federal Administration of Public Revenues (AFIP) filed with the Federal Court for Administrative proceedings a preliminary injunction for an
aggregate amount of Ps. 3,689,485.5, plus and added amount -provisionally estimated- of Ps. 900,000 in order to respond to legal costs and interests. The main dispute is about the amount due of the admission rights of the capital gains tax. In first
instance AFIP pleaded for a general restraining order. As of November 29, 2006, the Federal Court ordered to substitute said order for an attachment on Caballito plot of land.
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. | Investments:
| | -- | ------------



|                                    |  |                |         |      |     |        
|----------------------------------- |  | -------------- | ------- | ---- | --- | -------
|                                    |  | As of June 30,
|                                    |  | 2006           |         | 2005
|Non-current                         |  |                |         |      |     |        
|E-Commerce Latina S.A. (i) (Note 6) |  | Ps.            | 129,474 |      | Ps. | 808,355
|                                    |  |                |         |      |     |        
|                                    |  | Ps.            | 129,474 |      | Ps. | 808,355
|                                    |  |                |         |      |     |        

| | 
| | 

| | (i) | The Company owns a 49% interest in Altocity.com through a 50% interest in E-Commerce Latina. E-Commerce Latina is a holding company organized in Argentina in December 1999 as an
internet joint venture between the Company and Telefónica de Argentina S.A. (Telefónica). Altocity.Com primarily derives its revenues from monthly maintenance fees charged to suppliers, from sales of products on its website
and, to a lesser extent, from sales of advertising and sponsorships. See Note 19.I.i) for details of a stock option agreement entered into by E-Commerce Latina with Consultores Internet Managers Ltd.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | d. | Accounts receivable, net:
| | -- | -------------------------



|                                                            |  |                |             |   |      |     |             |  
|----------------------------------------------------------- |  | -------------- | ----------- | - | ---- | --- | ----------- | -
|                                                            |  | As of June 30, |            
|                                                            |  | 2006           |             |   | 2005 |    
|Current                                                     |  |                |             |   |      |     |             |  
|Leases and services receivables                             |  | Ps.            | 22,152,659  |   |      | Ps. | 15,652,309  |  
|Credit card receivables                                     |  |                | 58,315,941  |   |      |     | 28,859,463  |  
|Debtors under legal proceedings                             |  |                | 22,635,986  |   |      |     | 21,752,565  |  
|Checks to be deposited                                      |  |                | 26,154,553  |   |      |     | 20,318,949  |  
|Pass-through expenses receivables (i)                       |  |                | 10,013,772  |   |      |     | 5,108,278   |  
|Receivables from the sale of Alcorta Plaza ́s land (Note 16) |  |                | 5,863,550   |   |      |     |            |  
|Notes receivables                                           |  |                | 2,230,951   |   |      |     | 1,517,963   |  
|Mortgage receivables (ii)                                   |  |                | 380,490     |   |      |     | 353,115     |  
|Less:                                                       |  |                |             |   |      |     |             |  
|Allowance for doubtful accounts (Note 20.d)                 |  |                | (43,435,193 | ) |      |     | (37,367,227 | )
|                                                            |  |                |             |   |      |     |             |  
|                                                            |  | Ps.            | 104,312,709 |   |      | Ps. | 56,195,415  |  
|                                                            |  |                |             |   |      |     |             |  
|Non-current                                                 |  |                |             |   |      |     |             |  
|Credit card receivables                                     |  | Ps.            | 21,076,452  |   |      | Ps. | 7,898,673   |  
|Receivables from the sale of Alcorta Plaza ́s land (Note 16) |  |                | 11,991,670  |   |      |     |            |  
|Mortgage receivables (ii)                                   |  |                | 578,155     |   |      |     | 769,385     |  
|Notes receivable                                            |  |                | 226,248     |   |      |     |            |  
|Less:                                                       |  |                |             |   |      |     |             |  
|Allowance for doubtful accounts (Note 20.d)                 |  |                | (1,332,818  | ) |      |     | (969,219    | )
|                                                            |  |                |             |   |      |     |             |  
|                                                            |  | Ps.            | 32,539,707  |   |      | Ps. | 7,698,839   |  
|                                                            |  |                |             |   |      |     |             |  

| | 
| | 

| | (i) | Represents receivables for common area maintenance and other operating expenses passed through to tenants of shopping centers.
| | --- | ------------------------------------------------------------------------------------------------------------------------------



F-20



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | (ii) | Mortgage receivables consist of fixed-rate mortgage receivables from several borrowers. At June 30, 2006 the amount due from the largest individual borrower was Ps. 80,189 at a
contractual interest rate of 14%. See Note 19.II.r).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | e. | Other receivables and prepaid expenses, net:
| | -- | --------------------------------------------



|                                                       |  |                |            |   |      |     |            |  
|------------------------------------------------------ |  | -------------- | ---------- | - | ---- | --- | ---------- | -
|                                                       |  | As of June, 30 |           
|                                                       |  | 2006           |            |   | 2005 |    
|Current                                                |  |                |            |   |      |     |            |  
|Guarantee deposits (i)                                 |  | Ps.            | 10,481,439 |   |      | Ps. | 4,365,163  |  
|Related parties (Note 6)                               |  |                | 6,716,890  |   |      |     | 2,172,003  |  
|Prepaid expenses                                       |  |                | 4,271,499  |   |      |     | 4,643,461  |  
|Asset tax credits                                      |  |                | 3,171,734  |   |      |     | 15,442,360 |  
|Prepaid services                                       |  |                | 2,139,765  |   |      |     | 1,612,785  |  
|Other tax credits                                      |  |                | 1,691,759  |   |      |     | 978,871    |  
|Income tax credits, net                                |  |                | 839,624    |   |      |     | 867,562    |  
|Prepaid gross revenue tax                              |  |                | 766,949    |   |      |     | 1,037,331  |  
|Other prepaid taxes                                    |  |                | 401,901    |   |      |     | 322,220    |  
|Others                                                 |  |                | 447,535    |   |      |     | 634,000    |  
|                                                       |  |                |            |   |      |     |            |  
|                                                       |  | Ps.            | 30,929,095 |   |      | Ps. | 32,075,756 |  
|                                                       |  |                |            |   |      |     |            |  
|                                                       | 
|                                                       |  | As of June, 30 |           
|                                                       |  | 2006           |            |   | 2005 |    
|Non-Current                                            |  |                |            |   |      |     |            |  
|Deferred income tax (Note 14)                          |  | Ps.            | 5,917,757  |   |      | Ps. | 7,752,542  |  
|Guarantee deposits (iii)                               |  |                | 5,585,646  |   |      |     | 2,076,725  |  
|Mortgage receivable under legal proceedings (ii)       |  |                | 2,208,275  |   |      |     | 2,208,275  |  
|Allowance for doubtful mortgage receivable (Note 20.d) |  |                | (2,208,275 | ) |      |     | (2,208,275 | )
|Prepaid gross revenue tax                              |  |                | 882,620    |   |      |     | 782,445    |  
|Value Added Tax (VAT) receivable                     |  |                | 266,774    |   |      |     | 252,438    |  
|Asset tax credits                                      |  |                | 266,113    |   |      |     | 202,087    |  
|Others                                                 |  |                | 335,625    |   |      |     | 336,187    |  
|                                                       |  |                |            |   |      |     |            |  
|                                                       |  | Ps.            | 13,254,535 |   |      | Ps. | 11,402,424 |  
|                                                       |  |                |            |   |      |     |            |  

| | 
| | 

| | (i) | Mainly comprise of a guarantee deposit held by Deutsche Bank in favor of the owner of an undeveloped land, Argentimo S.A. amounting to US$ 3 million. The deposit was part of an
agreement between the Company, Argentimo and a developer, Constructora San José S.A., pursuant to which the Company will acquire the land to build a commercial center and/or office buildings. The remaining balance consists of the current
portion of cash reserves related to the Companys securitization programs.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | Corresponds to a loan granted to an unaffiliated third party, which is collateralized by a mortgage on certain properties. During fiscal year 2001, this debtor filed for bankruptcy.
As a result, the Company has recognized an allowance for the entire balance based on the opinion of its legal counsel.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (iii) | Mainly comprise of the non-current portion of cash reserves related to the Companys securitization programs.
| | ----- | -------------------------------------------------------------------------------------------------------------



F-21



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | f. | Inventory, net
| | -- | --------------



|                             |  |                |           |      |     |           
|---------------------------- |  | -------------- | --------- | ---- | --- | ----------
|                             |  | As of June 30,
|                             |  | 2006           |           | 2005
|Current                      |  |                |           |      |     |           
|Rosario undeveloped land (i) |  | Ps.            | 7,325,065 |      | Ps. |          
|Torres de Abasto             |  |                | 312,000   |      |     | 517,599   
|Resale merchandise           |  |                | 340,707   |      |     | 301,695   
|Others                       |  |                | 11,474    |      |     | 68,824    
|                             |  |                |           |      |     |           
|                             |  | Ps.            | 7,989,246 |      | Ps. | 888,118   
|                             |  |                |           |      |     |           
|Non-Current                  |  |                |           |      |     |           
|Alcorta Plaza                |  | Ps.            |          |      | Ps. | 18,048,447
|                             |  |                |           |      |     |           
|                             |  | Ps.            |          |      | Ps. | 18,048,447
|                             |  |                |           |      |     |           

| | 
| | 

| | (i) | Valued at net realized value. See Note 3.e) for details.
| | --- | --------------------------------------------------------



| | g. | Trade accounts payable:
| | -- | -----------------------



|                  |  |                |             |      |     |           
|----------------- |  | -------------- | ----------- | ---- | --- | ----------
|                  |  | As of June 30,
|                  |  | 2006           |             | 2005
|Current           |  |                |             |      |     |           
|Suppliers         |  | Ps.            | 89,923,116  |      | Ps. | 43,733,267
|Accruals          |  |                | 10,348,668  |      |     | 5,209,859 
|Foreign suppliers |  |                | 1,023,961   |      |     | 971,616   
|Others            |  |                | 653,819     |      |     | 77,403    
|                  |  |                |             |      |     |           
|                  |  | Ps.            | 101,949,564 |      | Ps. | 49,992,145
|                  |  |                |             |      |     |           
|Non-current       |  |                |             |      |     |           
|Foreign suppliers |  | Ps.            | 1,010,150   |      | Ps. | 1,870,602 
|                  |  |                |             |      |     |           
|                  |  | Ps.            | 1,010,150   |      | Ps. | 1,870,602 
|                  |  |                |             |      |     |           



| | h. | Short-term and long-term debt:
| | -- | ------------------------------

Short-term debt
consists of the following:



|                                                    |  |                |            |      |     |           
|--------------------------------------------------- |  | -------------- | ---------- | ---- | --- | ----------
|                                                    |  | As of June 30,
|                                                    |  | 2006           |            | 2005
|Syndicated loan plus accrued interest (i)           |  |                | 25,581,973 |      |     | 25,927,740
|Deutsche Bank loan plus accrued interest (ii)       |  |                | 9,601,200  |      |     | 8,985,194 
|Uncollateralized loans plus accrued interest (iii)  |  |                | 34,512,703 |      |     | 3,560,600 
|Accrued interest on Convertible Notes (iv) (Note 6) |  |                | 6,588,951  |      |     | 6,133,192 
|Interest payable to credit card trust               |  |                | 1,489,767  |      |     |          
|Seller financings plus accrued interest (v)         |  |                | 12,843,639 |      |     | 11,167,584
|Mortgage loans                                      |  |                | 41,791     |      |     | 41,791    
|Others                                              |  |                | 156,614    |      |     | 601,404   
|                                                    |  |                |            |      |     |           
|                                                    |  | Ps.            | 90,816,638 |      | Ps. | 56,417,505
|                                                    |  |                |            |      |     |           



F-22



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | h. | Short-term and long-term debt (continued)
| | -- | -----------------------------------------

Long-term debt consists of the following:



|                                |  |                |             |      |     |             |  
|------------------------------- |  | -------------- | ----------- | ---- | --- | ----------- | -
|                                |  | As of June 30, |            
|                                |  | 2006           |             | 2005 |    
|Convertible Notes (iv) (Note 6) |  | Ps.            | 145,755,576 |      | Ps. | 136,500,911 |  
|Syndicated loan (i)             |  |                |            |      |     | 25,000,000  |  
|Deutsche Bank loan (ii)         |  |                |            |      |     | 8,661,000   |  
|Deferred financing costs (vi)   |  |                |            |      |     | (51,563     | )
|Seller financing (v)            |  |                |            |      |     | 5,029,553   |  
|Other                           |  |                | 98,268      |      |     |            |  
|                                |  |                |             |      |     |             |  
|                                |  | Ps.            | 145,853,844 |      | Ps. | 175,139,901 |  
|                                |  |                |             |      |     |             |  

| | 
| | 

| | (i) | On April 5, 2005 Banco Rio de la Plata and Bank Boston N.A. granted the Company a syndicated loan in a total amount of Ps. 50 million, which will be amortized in four
six-month equal and consecutive installments beginning October 5, 2005. The syndicated loan accrued interest at a 7.875% fixed rate during the first year and accrues interest at a variable rate (Encuesta) plus 3% during the second year. The
terms and conditions of the syndicated loan include various restrictive covenants, which among other things require the Company to maintain certain financial ratios.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Proceeds from this loan were used to repay the balance of the Notes at their maturity for Ps. 48.4 million. On October 5, 2005, April 5, 2006 and October 5,
2006, the first, second and third principal installments of Ps. 12.5 million were cancelled. On July 5, 2006 the Company cancelled the fifth interest falling due of the loan.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (ii) | On March 4, 2005 Deutsche Bank S.A. granted the Company a US$ 11 million loan, of which US$ 5 million was repaid by the Company on April 4, 2005 with proceeds
received in connection with the settlement of the swap agreement. The balance of the loan will be amortized in two equal installments on February 1, 2006 and August 1, 2006. The loan accrues interest at LIBOR plus 3.25%. On August 1,
2006, the Company has cancelled the second capital installment plus accrued interest. As of closing, the totality of this loan has been cancelled by the Company.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iii) | Generally, the Companys short-term borrowings are in the form of overdraft facilities and/or bank loans with original maturities of less than one year. The weighted average
interest rates on short-term debt were 9.5 % and 9.8% as of June 30, 2006 and 2005, respectively. The Company generally used the proceeds from these borrowings for working capital needs and other general corporate purposes. The Company had
unused lines of credit under the short-term bank lines of Ps. 74.1 million at June 30, 2006.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (iv) | See Note 15, for details of the issuance of Convertible Notes.
| | ---- | --------------------------------------------------------------



| | (v) | As of June 30, 2006 the balances were primarily comprised of (a) Ps. 3.3 million of principal plus Ps. 3 million of CER and Ps. 1.2 million of accrued
interest relating to the seller financing obtained in the acquisition of Shopping Neuquén, which accrues interest at six-month LIBOR (4.99% as of June 30, 2006), and (b) Ps. 5.4 million relating to the seller financing obtained
in the acquisition of Mendoza Plaza Shopping (including imputed interest). This amount was cancelled on September 29, 2006.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (vi) | Deferred financing costs represent fees and expenses incurred in connection with the issuance of Unsecured Convertible Notes, which are being amortized to expense during the term of
the related debt. The rate is 25% per annum.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | i. | Salaries and social security payable:
| | -- | -------------------------------------



|                                   |  |                 |  |              
|---------------------------------- |  | --------------- |  | -------------
|                                   |  | As of June 30, 
|                                   |  | 2006            |  | 2005         
|Provision for vacation and bonuses |  | Ps.   8,289,725 |  | Ps. 5,423,491
|Salaries payable                   |  | 85,770          |  | 1,395,176    
|Social security payable            |  | 2,232,366       |  | 1,370,106    
|Others                             |  | 277,503         |  | 255,166      
|                                   |  |                 |  |              
|                                   |  | Ps. 10,885,364  |  | Ps. 8,443,939
|                                   |  |                 |  |              



F-23



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



|                                                     |  |                |            |      |     |           
|---------------------------------------------------- |  | -------------- | ---------- | ---- | --- | ----------
|j.       Taxes payable:                              |  |                |           
|                                                     |  | As of June 30,
|                                                     |  | 2006           |            | 2005
|Current                                              |  |                |            |      |     |           
|Income tax, net                                      |  | Ps.            | 13,182,274 |      | Ps. | 3,198,346 
|VAT payable, net                                     |  |                | 5,378,086  |      |     | 3,871,201 
|Other tax withholdings                               |  |                | 2,524,548  |      |     | 1,516,641 
|Gross revenue tax provision                          |  |                | 954,062    |      |     | 850,081   
|Provision for tax on personal assets of shareholders |  |                | 268,494    |      |     | 233,221   
|Gross revenue tax withholdings                       |  |                | 353,864    |      |     | 273,000   
|Asset tax payable, net                               |  |                | 248,286    |      |     | 416,326   
|Turn over tax accrued (not claimable)                |  |                | 175,907    |      |     |          
|Property tax provision                               |  |                | 407        |      |     | 215,754   
|Tax amnesty plan for gross revenue tax payable       |  |                | 166,173    |      |     | 169,039   
|Others                                               |  |                | 509,867    |      |     | 251,263   
|                                                     |  |                |            |      |     |           
|                                                     |  | Ps.            | 23,761,968 |      | Ps. | 10,994,872
|                                                     |  |                |            |      |     |           
|Non-current                                          |  |                |            |      |     |           
|Deferred income tax (Note 14)                        |  | Ps.            | 11,690,310 |      | Ps. | 6,632,596 
|Tax amnesty plan for gross revenue tax payable       |  |                | 1,664,902  |      |     | 1,831,074 
|Turn over tax accrued (not claimable)                |  |                | 351,813    |      |     |          
|                                                     |  |                |            |      |     |           
|                                                     |  | Ps.            | 13,707,025 |      | Ps. | 8,463,670 
|                                                     |  |                |            |      |     |           



| | k. | Customer advances:
| | -- | ------------------



|                                            |  |                |            |      |     |           
|------------------------------------------- |  | -------------- | ---------- | ---- | --- | ----------
|                                            |  | As of June 30,
|                                            |  | 2006           |            | 2005
|Current                                     |  |                |            |      |     |           
|Admission rights                            |  | Ps.            | 23,659,140 |      | Ps. | 18,041,169
|Lease advances (i)                          |  |                | 19,710,934 |      |     | 15,766,796
|Advance for the sale of a plot of land (ii) |  |                | 2,365,800  |      |     | 1,006,218 
|Guarantee deposits                          |  |                | 2,316,891  |      |     | 1,492,381 
|                                            |  |                |            |      |     |           
|                                            |  | Ps.            | 48,052,765 |      | Ps. | 36,306,564
|                                            |  |                |            |      |     |           
|Non-current                                 |  |                |            |      |     |           
|Admission rights                            |  | Ps.            | 29,802,684 |      | Ps. | 26,060,797
|Lease advances (i)                          |  |                | 11,679,327 |      |     | 13,150,283
|Guarantee deposits                          |  |                | 53,264     |      |     | 53,264    
|                                            |  |                |            |      |     |           
|                                            |  | Ps.            | 41,535,275 |      | Ps. | 39,264,344
|                                            |  |                |            |      |     |           

| | 
| | 

| | (i) | Lease advances include current and non-current balances of Ps. 1.2 million and Ps. 5.0 million as of June 30, 2006, respectively, and Ps. 1.2 million and Ps.
6.1 million as of June 30, 2005, respectively, related to advances received from Hoyts Cinemas (Hoyts) for the construction of the movie theater complexes at the Abasto and Alto Noa Shopping Centers. These advances accrue
interest at the six-month LIBOR plus 2-2.25%. As of June 30, 2006 the six-month LIBOR was 4.99%. Based on the agreement between the Company and Hoyts, the Company settles the advances by offsetting them against lease expense owed by Hoyts for
the spaces it rents.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-24



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | k. | Customer advances: (continued)
| | -- | ------------------------------



| | (ii) | As of June 30, 2006 and 2005, represents a payment received from Villa Hermosa S.A. in connection with a preliminary sale contract for a plot of land that is currently an
integral part of the property located in Rosario, on which the Company plans to build high-rise buildings for housing. The liability is disclosed net of expenses incurred by the Company on behalf of Villa Hermosa S.A.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-25



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | l. | Other liabilities:
| | -- | ------------------



|                                       |  |                |            |   |      |     |            |  
|-------------------------------------- |  | -------------- | ---------- | - | ---- | --- | ---------- | -
|                                       |  | As of June 30, |           
|                                       |  | 2006           |            |   | 2005 |    
|Current                                |  |                |            |   |      |     |            |  
|Accrual for directors fees (Note 6)    |  | Ps.            | 8,117,840  |   |      | Ps. | 5,216,591  |  
|Fees advanced to directors (Note 6)    |  |                | (315,134   | ) |      |     | (204,177   | )
|Donations payable (Note 6)             |  |                | 2,500,000  |   |      |     | 3,960,000  |  
|Contributed leasehold improvements (i) |  |                | 525,525    |   |      |     | 525,525    |  
|Withholdings and guarantee deposits    |  |                | 237,161    |   |      |     | 428,709    |  
|Unearned income (ii)                   |  |                |           |   |      |     | 109,934    |  
|Others                                 |  |                | 134,771    |   |      |     | 538,440    |  
|                                       |  |                |            |   |      |     |            |  
|                                       |  | Ps.            | 11,200,163 |   |      | Ps. | 10,575,022 |  
|                                       |  |                |            |   |      |     |            |  
|Non-current                            |  |                |            |   |      |     |            |  
|Contributed leasehold improvements (i) |  | Ps.            | 10,946,931 |   |      | Ps. | 11,472,466 |  
|Unearned income (ii)                   |  |                |           |   |      |     | 2,345,268  |  
|Directors guarantee deposits (Note 6) |  |                | 12,000     |   |      |     | 12,000     |  
|Others                                 |  |                | 100        |   |      |     | 100        |  
|                                       |  |                |            |   |      |     |            |  
|                                       |  | Ps.            | 10,959,031 |   |      | Ps. | 13,829,834 |  
|                                       |  |                |            |   |      |     |            |  

| | 
| | 

| | (i) | Contributed leasehold improvements relate to improvements made by tenants in Abasto Shopping Center and Mendoza Plaza Shopping. The Company has recorded the improvements as fixed
assets based on construction costs incurred with a corresponding deferred liability. Contributed leasehold improvements are amortized to income over the term of lease. Such amortization, net of the related depreciation of the leasehold improvement,
was not significant for the years ended June 30, 2006 and 2005.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (ii) | On February 2, 1999 Mendoza Plaza Shopping S.A. entered into a contract with Riocruz S.C.S. (C&A Shop), granting the latter a mutual right of way in perpetuity, for
valuable consideration for the first ten years and subsequently free of charge. The price agreed for this easement is US$ 2.9 million, which was accrued over a period of the properly appreciation, as from April 1999, date on which it was
registered with the Real Estate Record Office. On September 16, 2005 Mendoza Plaza Shopping S.A. acquired the store that belonged to Riocruz S.C.S. (C&A Shop) and the easement right was left ineffective. Therefore, Mendoza Plaza Shopping
S.A. reflected for this operation an income of Ps. 2.4 million, due to accelerated depreciation which is shown in Other expenses, net of the statement of income.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | m. | Provisions:
| | -- | -----------



|                                                 |  |                |  |               
|------------------------------------------------ |  | -------------- |  | --------------
|                                                 |  | As of June 30,
|                                                 |  | 2006           |  | 2005          
|Current                                          |  |                |  |               
|Provision for contingencies (i) (Note 20.d)      |  | Ps. 506,714    |  | Ps. 2,032,500 
|                                                 |  |                |  |               
|                                                 |  | Ps. 506,714    |  | Ps. 2,032,500 
|                                                 |  |                |  |               
|Non-current                                      |  |                |  |               
|Provision for contingencies (i) (ii) (Note 20.d) |  | Ps. 10,667,309 |  | Ps. 10,606,121
|                                                 |  |                |  |               
|                                                 |  | Ps. 10,667,309 |  | Ps. 10,606,121
|                                                 |  |                |  |               

| | 
| | 

| | (i) | This reserve relates to: (a) labor lawsuits filed against the Company, (b) an assessment issued by the national fiscal authorities to the Company relating to differences
in the computation of estimated useful lives of shopping centers, (c) the claims related to Shopping Neuquén S.A. as disclosed in (ii), and (d) other sundry claims. In the opinion of management and based on consultation with
external legal counsel, the Company has established provisions for amounts which are probable of adverse occurrence and which, according to estimates developed by the Companys legal counsel, would meet all related contingencies and
corresponding fees relating to these claims.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-26



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|4. | Breakdown of the main captions (continued)
|-- | ------------------------------------------



| | m. | Provisions (continued)
| | -- | ----------------------



| | (ii) | On July 6, 1999, the Company acquired 95% ownership of Shopping Neuquén S.A. (Shopping Neuquén) for Ps.4.2 million. Shopping Neuquéns
sole asset is a plot of land of approximately 50,000 square meters in which the Company seek to develop a shopping center. The proposed project also contemplates the building of a shopping center, a hypermarket, a hotel and a housing complex, none
of which have begun. The Company paid Ps. 0.9 million on September 1, 1999, and the remaining Ps. 3.3 million were originally scheduled to be paid on the earlier to occur of July 5, 2001, and the completion of the construction of
the shopping center. The balance of the purchase price has not been paid. On August 15, 2003, the former holders of 85.8% of Shopping Neuquén filed a complaint against us seeking recovery of the unpaid balance of the purchase price, plus
interest and legal costs. In September 2003, the Company answered the complaint and raised several defenses including, plaintiffs non-compliance with her duties under the contract and the pesification of the purchase price balance pursuant to
emergency legislation adopted in 2002. The Company also filed a counterclaim alleging there should be a readjustment of the terms of the contract which became excessively burdensome given the 2001 economic, social and political crisis. In November
2003, the plaintiffs replied to our counterclaim alleging that the payment under the purchase agreement was overdue before the economic and social crisis emerged and thus our contract readjustment claim was inadmissible. The matter is currently
subject to appeal, as the ruling of the trial court was appealed by both former shareholders of Shopping Neuquén and us. If the Company cannot reach agreement with the former owners of Shopping Neuquén, and would be compelled to pay
the sum that the court determines. As of September 30, 2006, the Ps. 3.3 million deferred balance of the purchase price remains unpaid. The Company maintains a provision of Ps. 2.5 million which represents the Companys best
estimate of the probable loss to be incurred in connection with these claims.
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In June 2001, Shopping Neuquén filed a
request with the Municipality of Neuquén to extend the construction deadlines that had been originally scheduled. In addition, it requested authorization to convey certain plots of land to third parties so that each participant to the
Neuquén project would be able to build on his own land. On December 20, 2002, the Municipality of Neuquén issued Decree 1437/02 denying both requests. In addition, it declared that the rights under Ordinance 5178 had lapsed and
that the land purchase agreements would be terminated. As a result, the improvements already made by Shopping Neuquén would be lost and passed on to the Municipality of Neuquén, leaving Shopping Neuquén with no right to
compensation.

On January 21, 2003, Shopping Neuquén submitted its response to the Decree 1437/02 requesting its revocation and
requesting permission to submit a new construction timetable. The Municipal Executive issued Decree 585/2003 rejecting these requests. On May, 2003, Shopping Neuquén filed an administrative action with the Supreme Court of Neuquén
requesting the annulment of Decrees 1437/2002 and 585/2003. On December 21, 2004, the Supreme Court of Neuquén ruled in favor of the Municipality of Neuquén, declaring that the administrative action filed by Shopping
Neuquén had expired. The decision, however, is not final. The Company filed an appeal, but the Supreme Court of Neuquén has not yet issued a decision with regards to its admissibility. If the Supreme Court of Neuquén declares
the appeal admissible, the final decision will then be made by the Federal Supreme Court, but if it is declared inadmissible the Company will then file an appeal directly with the Federal Supreme Court.

On December 13, 2006, Shopping Neuquén subscribed an agreement with the Municipality of Neuquén and the Province of Neuquén in
which Shopping Neuquén was given a new time table to implement the commercial and housing project. In addition, Shopping Neuquén will be empowered to transfer to third parties further subdivisions of the plot of land owned by Shopping
Neuquén, provided that the plot to be transferred is not the one in which the shopping center is going to be built.

The agreement
is subject to the City of Neuquén Councils approval and the promulgation of the new Ordinance by the Mayor of the City of Neuquén. Should the agreement be disapproved by the City Council, such agreement will be void.



|5. | Shareholders equity
|-- | --------------------



| | a. | Common stock
| | -- | ------------

As of June 30, 2006, the Company
had 781.9 million authorized and outstanding shares of common stock, having a par value of Ps. 0.10 per share. Holders of the common stock are entitled to one vote for each share held of record on all matters submitted to a vote of
shareholders. During fiscal years 2004, 2005 and 2006, certain holders of the Convertible Notes exercised their conversion rights and, as a result, the Company issued 22.9 million, 52.7 million and 1.5 million shares of common stock,
respectively.



F-27



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|5. | Shareholders equity (continued)
|-- | --------------------------------



| | b. | Inflation adjustment of common stock
| | -- | ------------------------------------

As discussed
in Note 2.d., the Companys consolidated financial statements were prepared on the basis of general price-level accounting which reflects changes in the purchase price of the peso in the historical financial statements through February 28,
2003. The inflation adjustment related to common stock was appropriated to an inflation adjustment reserve that forms part of shareholders equity. According to Argentine GAAP, the balance of the inflation adjustment reserve may be applied only
towards the issuance of common stock to shareholders of the Company.



| | c. | Restrictions on distribution of profits
| | -- | ---------------------------------------

In
accordance with the Argentine Corporations Law and the Companys by-laws, 5% of the net and realized profit for the year calculated in accordance with Argentine GAAP plus (less) prior year adjustments must be appropriated by resolution of
shareholders to a legal reserve until such reserve equals 20% of the Companys outstanding capital. This legal reserve may be used only to absorb losses.



F-28



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|6. | Balances and transactions with related parties
|-- | ----------------------------------------------

The following is a
summary of the balances and transactions with related parties:



|                                                     |  |                                                                      |      |                                                        |  |                                                                                  |             |   |                                             |     |            |      |  |     |             |   |  |             |   |  |             |  
|---------------------------------------------------- |  | -------------------------------------------------------------------- | ---- | ------------------------------------------------------ |  | -------------------------------------------------------------------------------- | ----------- | - | ------------------------------------------- | --- | ---------- | ---- |  | --- | ----------- | - |  | ----------- | - |  | ----------- | -
|Company                                              |  | Relation                                                             |      | Description
ofTransaction / caption                    |  | (Expense) income included in the statement of income for the year ended
June 30, |             |   | Balance receivable (payable) as of June 30, |    
|                                                     |  |                                                                      | 2006 |                                                        |  | 2005                                                                             |             |   | 2004                                        |     |            | 2006 |  |     | 2005        |  
|                                                     |  | SHAREHOLDERS                                                         |      |                                                        |  |                                                                                  |             |   |                                             |     |            |      |  |     |             |   |  |             |   |  |             |  
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Other current receivables and prepaid expenses         |  | Ps.                                                                              |            |   |                                             | Ps. |           |      |  | Ps. |            |   |  | Ps. 479,243 |   |  | Ps. 153,707 |  
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Interest and exchange differences with related parties |  |                                                                                  | (15,972,539 | ) |                                             |     | (6,909,676 | )    |  |     | (14,557,945 | ) |  |            |   |  |            |  
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (267,760    | ) |  | (613,047    | )
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Short-term debt (i)                                    |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (4,427,618  | ) |  | (4,117,000  | )
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Long-term debt (i)                                     |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (97,944,277 | ) |  | (91,628,362 | )
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Shared services - Salaries and bonuses                 |  |                                                                                  | 305,997     |   |                                             |     | 89,517     |      |  |     | 59,319      |   |  |            |   |  |            |  
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Shared services - Salaries and bonuses                 |  |                                                                                  | (26,143     | ) |                                             |     | (69,219    | )    |  |     | (122,826    | ) |  |            |   |  |            |  
|IRSA Inversiones y Representaciones Sociedad Anónima |  | Shareholder                                                          |      | Interest income from related parties                   |  |                                                                                  |            |   |                                             |     | 2,774      |      |  |     |            |   |  |            |   |  |            |  
|Goldman Sachs and Co.                                |  | Shareholder until December 2004                                      |      | Interest and exchange differences with related parties |  |                                                                                  |            |   |                                             |     |           |      |  |     | (1,381,633  | ) |  |            |   |  |            |  
|Parque Arauco S.A.                                   |  | Shareholder                                                          |      | Short-term debt                                        |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (2,158,468  | ) |  | (2,007,041  | )
|Parque Arauco S.A.                                   |  | Shareholder                                                          |      | Long-term debt                                         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (47,747,925 | ) |  | (44,668,911 | )
|Parque Arauco S.A.                                   |  | Shareholder                                                          |      | Interest and exchange differences with related parties |  |                                                                                  | (7,786,627  | ) |                                             |     | (4,035,186 | )    |  |     | (7,015,548  | ) |  |            |   |  |            |  
|Parque Arauco S.A.                                   |  | Shareholder                                                          |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  |            |   |  | (5,282      | )
|Other shareholders                                   |  | Shareholder                                                          |      | Other expense, net-Tax on personal assets              |  |                                                                                  | (572,263    | ) |                                             |     | (1,663,051 | )    |  |     | (188,860    | ) |  |            |   |  |            |  
|                                                     |  | SUBSIDIARIES AND EQUITY INVESTEES                                    |      |                                                        |  |                                                                                  |             |   |                                             |     |            |      |  |     |             |   |  |             |   |  |             |  
|E-Commerce Latina S.A.                               |  | Equity investee                                                      |      | Other current receivables and prepaid expenses         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | 24,666      |   |  | 19,406      |  
|E-Commerce Latina S.A.                               |  | Equity investee                                                      |      | Administration fees                                    |  |                                                                                  | 6,000       |   |                                             |     | 6,000      |      |  |     | 6,000       |   |  |            |   |  |            |  
|E-Commerce Latina S.A.                               |  | Equity investee                                                      |      | Related parties results                                |  |                                                                                  | (678,881    | ) |                                             |     | (626,684   | )    |  |     | (1,464,171  | ) |  |            |   |  |            |  
|E-Commerce Latina S.A.                               |  | Equity investee                                                      |      | Equity investment                                      |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | 129,474     |   |  | 808,355     |  
|Altocity.com S.A.                                    |  | Subsidiary of E-Commerce Latina S.A.                                 |      | Other current receivables and prepaid expenses         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | 596,240     |   |  | 139,374     |  
|Altocity.com S.A.                                    |  | Subsidiary of E-Commerce Latina S.A.                                 |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (470,511    | ) |  | (187,936    | )
|Altocity.com S.A.                                    |  | Subsidiary of E-Commerce Latina S.A.                                 |      | Administration fees                                    |  |                                                                                  | 42,000      |   |                                             |     | 42,000     |      |  |     | 42,000      |   |  |            |   |  |            |  
|Altocity.com S.A.                                    |  | Subsidiary of E-Commerce Latina S.A.                                 |      | Interest income from related parties                   |  |                                                                                  | 15,185      |   |                                             |     |           |      |  |     |            |   |  |            |   |  |            |  
|Mendoza Plaza Shopping S.A.                          |  | Equity investee until September 2004                                 |      | Related parties results                                |  |                                                                                  |            |   |                                             |     | (79,935    | )    |  |     | 337,655     |   |  |            |   |  |            |  
|                                                     |  | OTHER RELATED PARTIES                                                |      |                                                        |  |                                                                                  |             |   |                                             |     |            |      |  |     |             |   |  |             |   |  |             |  
|Metroshop S.A.                                       |  | Subsidiary of Tarshop S.A.                                           |      | Other current receivables and prepaid expenses         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | 4,057,462   |   |  | 826,676     |  
|Metroshop S.A.                                       |  | Subsidiary of Tarshop S.A.                                           |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (1,241,926  | ) |  | (214,084    | )
|Metronec S.A.                                        |  | Tarshop S.A. Equity investee                                         |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (854,543    | ) |  | (125,791    | )
|Cresud S.A.C.I.F. y A.                               |  | Shareholder of IRSA Inversiones y Representaciones Sociedad Anónima  |      | Other current receivables and prepaid expenses         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | 827,692     |   |  | 232,153     |  
|Cresud S.A.C.I.F. y A.                               |  | Shareholder of IRSA Inversiones y Representaciones Sociedad Anónima  |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (1,377,090  | ) |  | (39,099     | )
|Cresud S.A.C.I.F. y A.                               |  | Shareholder of IRSA Inversiones y Representaciones Sociedad Anónima  |      | Shared services - Salaries and bonuses                 |  |                                                                                  | 607,262     |   |                                             |     | 222,871    |      |  |     |            |   |  |            |   |  |            |  
|Cresud S.A.C.I.F. y A.                               |  | Shareholder of IRSA Inversiones y Representaciones Sociedad Anónima  |      | Interest income from related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     | 21,384      |   |  |            |   |  |            |  
|Inversora Bolívar S.A.                               |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Other current receivables and prepaid expenses         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | 40          |   |  |            |  
|Inversora Bolívar S.A.                               |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Interest income from related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     | 10,227      |   |  |            |   |  |            |  
|Inversora Bolívar S.A.                               |  | Subsidiaries of IRSA Inversiones y Representaciones Sociedad Anónima |      | Leases                                                 |  |                                                                                  | (407,533    | ) |                                             |     | (394,538   | )    |  |     | (159,713    | ) |  |            |   |  |            |  
|Inversora Bolívar S.A.                               |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (132,254    | ) |  | (84,718     | )
|Dalor S.A.                                           |  | Related company of a minority shareholder of Tarshop S.A.            |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (100,137    | ) |  | (161,118    | )
|Dalor S.A.                                           |  | Related company of a minority shareholder of Tarshop S.A.            |      | Accrued interest                                       |  |                                                                                  |            |   |                                             |     | (36,655    | )    |  |     | (23,672     | ) |  |            |   |  |            |  
|Leon Halac                                           |  | Tarshop S.A. shareholder (minority interest)                         |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (771,212    | ) |  | (1,322,481  | )
|Llao-Llao S.A.                                       |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Other current receivables and prepaid expenses         |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  |            |   |  | 24,632      |  
|Llao-Llao S.A.                                       |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  |            |   |  | (13,194     | )
|Nuevas Fronteras S.A.                                |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Current payable with related parties                   |  |                                                                                  |            |   |                                             |     |           |      |  |     |            |   |  | (291        | ) |  | (2,250      | )



F-29



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|6. | Balances and transactions with related parties (continued)
|-- | ----------------------------------------------------------



|                                            |  |                                                                           |      |                                                        |  |                                                                                 |   |  |                                            |   |  |            |   |  |            |   |  |            |  
|------------------------------------------- |  | ------------------------------------------------------------------------- | ---- | ------------------------------------------------------ |  | ------------------------------------------------------------------------------- | - |  | ------------------------------------------ | - |  | ---------- | - |  | ---------- | - |  | ---------- | -
|Company                                     |  | Relation                                                                  |      | Description ofTransaction / caption                    |  | (Expense) income included in the statement of incomefor the year ended
June 30, |   |  | Balance receivable (payable)as of June 30, |  
|                                            |  |                                                                           | 2006 |                                                        |  | 2005                                                                            |   |  | 2004                                       |   |  | 2006       |   |  | 2005       |  
|Directors and management                    |  | Directors and management                                                  |      | Other current receivables and prepaid expenses         |  |                                                                                |   |  |                                           |   |  |           |   |  | 820        |   |  | 160        |  
|Estudio Zang, Bergely Viñes (legal advisor) |  | Shareholders of law firm are directors and/or shareholders of the Company |      | Current payable with related parties                   |  |                                                                                |   |  |                                           |   |  |           |   |  | (179,284   | ) |  | (218,120   | )
|Estudio Zang, Bergely Viñes (legal advisor) |  | Shareholders of law firm are directors and/or shareholders of the Company |      | Fees for legal services                                |  | (724,271                                                                        | ) |  | (503,034                                   | ) |  | (628,377   | ) |  |           |   |  |           |  
|Fundación IRSA                              |  | Related to IRSA Inversiones y Representaciones Sociedad Anónima           |      | Other current liabilities - Donations payable          |  |                                                                                |   |  |                                           |   |  |           |   |  | (2,500,000 | ) |  | (3,960,000 | )
|Fundación IRSA                              |  | Related to IRSA Inversiones y Representaciones Sociedad Anónima           |      | Other expense, net - Donations                         |  | (2,549,506                                                                      | ) |  | (4,012,457                                 | ) |  | (2,384,893 | ) |  |           |   |  |           |  
|Loans to personnel                          |  | Employees                                                                 |      | Other current receivables and prepaid expenses         |  |                                                                                |   |  |                                           |   |  |           |   |  | 556,552    |   |  | 320,529    |  
|Falabella S.A.                              |  | Mendoza Plaza Shopping S.A. Shareholder (minority interest)               |      | Other current receivables and prepaid expenses         |  |                                                                                |   |  |                                           |   |  |           |   |  | 164,175    |   |  | 454,310    |  
|Falabella S.A.                              |  | Mendoza Plaza Shopping S.A. Shareholder (minority interest)               |      | Current payable with related parties                   |  |                                                                                |   |  |                                           |   |  |           |   |  | (988,660   | ) |  | (773,410   | )
|Falabella S.A.                              |  | Mendoza Plaza Shopping S.A. Shareholder (minority interest)               |      | Non current payable with related parties               |  |                                                                                |   |  |                                           |   |  |           |   |  | (925,800   | ) |  | (1,732,200 | )
|Falabella S.A.                              |  | Mendoza Plaza Shopping S.A. Shareholder (minority interest)               |      | Interest and exchange differences with related parties |  | (305,026                                                                        | ) |  | (78,837                                    | ) |  |           |   |  |           |   |  |           |  
|Falabella S.A.                              |  | Mendoza Plaza Shopping S.A. Shareholder (minority interest)               |      | Dividends payable                                      |  |                                                                                |   |  |                                           |   |  |           |   |  |           |   |  | (39,000    | )
|Falabella S.A.                              |  | Mendoza Plaza Shopping S.A. Shareholder (minority interest)               |      | Leases and services                                    |  | 1,333,433                                                                       |   |  | 1,114,617                                  |   |  |           |   |  |           |   |  |           |  
|Ritelco S.A.                                |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima        |      | Interest income from related parties                   |  |                                                                                |   |  | 2,554                                      |   |  |           |   |  |           |   |  |           |  
|Abril S.A.                                  |  | Subsidiary of IRSA Inversiones y Representaciones Sociedad Anónima        |      | Other current receivables and prepaid expenses         |  |                                                                                |   |  |                                           |   |  |           |   |  | 16         |   |  | 16         |  
|Museo de los niños                          |  | Related to IRSA Inversiones y Representaciones Sociedad Anónima           |      | Other current receivables and prepaid expenses         |  |                                                                                |   |  |                                           |   |  |           |   |  | 5,816      |   |  | 1,040      |  
|Personnel                                   |  | Employees                                                                 |      | Interest and exchange differences with related parties |  |                                                                                |   |  |                                           |   |  | (1,138     | ) |  |           |   |  |           |  
|Banco Hipotecario S.A. Directors            |  | Equity investee of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Short-term debt                                        |  |                                                                                |   |  |                                           |   |  |           |   |  | (1,855     | ) |  | (940       | )
|Banco Hipotecario S.A. Directors            |  | Equity investee of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Long-term debt                                         |  |                                                                                |   |  |                                           |   |  |           |   |  | (22,343    | ) |  | (20,902    | )
|Banco Hipotecario S.A. Directors            |  | Equity investee of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Interest and exchange differences with related parties |  | (3,642                                                                          | ) |  | (1,815                                     | ) |  | (6,535     | ) |  |           |   |  |           |  
|Banco Hipotecario S.A.                      |  | Equity investee of IRSA Inversiones y Representaciones Sociedad Anónima   |      | Current investments                                    |  |                                                                                |   |  |                                           |   |  |           |   |  | 2,170,258  |   |  | 2,841,985  |  
|Directors                                   |  | Directors                                                                 |      | Short-term debt                                        |  |                                                                                |   |  |                                           |   |  |           |   |  | (1,010     | ) |  | (8,211     | )
|Directors                                   |  | Directors                                                                 |      | Long-term debt                                         |  |                                                                                |   |  |                                           |   |  |           |   |  | (41,031    | ) |  | (182,736   | )
|Directors                                   |  | Directors                                                                 |      | Interest and exchange differences with related parties |  | (6,692                                                                          | ) |  | (15,870                                    | ) |  | (37,591    | ) |  |           |   |  |           |  
|Directors                                   |  | Directors                                                                 |      | Directors fees                                         |  | (8,883,474                                                                      | ) |  | (8,950,771                                 | ) |  | (4,300,763 | ) |  |           |   |  |           |  
|Directors and management                    |  | Directors                                                                 |      | Other current liabilities                              |  |                                                                                |   |  |                                           |   |  |           |   |  | (7,802,706 | ) |  | (5,012,414 | )
|Directors and management                    |  | Directors                                                                 |      | Other non current liabilities                          |  |                                                                                |   |  |                                           |   |  |           |   |  | (12,000    | ) |  | (12,000    | )
|Canteras Natal Crespo                       |  | Related to IRSA Inversiones y Representaciones Sociedad Anónima           |      | Other current receivables and prepaid expenses         |  |                                                                                |   |  |                                           |   |  |           |   |  | 4,168      |   |  |           |  

---

|(i) | As discussed in Note 15, in August 2002 the Company issued US$ 50 million of Convertible Notes, of which US$ 30 million were purchased by IRSA, the principal shareholder
of the Company. In addition, during the years ended June 30, 2004 and 2005 IRSA acquired U$S 1 million and US$ 2 million of Convertible Notes, respectively. Also during the year ended June 30, 2005 IRSA exercised its conversion
rights and converted US$ 1.3 million of Convertible Notes. As a result, at June 30, 2006 IRSA holds US$ 31.7 million of the Companys Convertible Notes. For details of the issuance, see Note 15.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-30



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|7. | Financial results, net
|-- | ----------------------



|                                                                |  |                      |             |   |      |     |             |      |  |     |             |  
|--------------------------------------------------------------- |  | -------------------- | ----------- | - | ---- | --- | ----------- | ---- |  | --- | ----------- | -
|                                                                |  | Years ended June 30, |            
|                                                                |  | 2006                 |             |   | 2005 |     |             | 2004 | 
|Generated by assets:                                            |  |                      |             |   |      |     |             |      |  |     |             |  
|Impairment losses .                                             |  |                      | (395,599    | ) |      |     |            |      |  |     |            |  
|Reversal of impairment losses                                   |  | Ps.                  | 9,894,355   |   |      | Ps. | 13,093,117  |      |  | Ps. | 26,908,076  |  
|Interest income                                                 |  |                      | 6,802,699   |   |      |     | 4,776,876   |      |  |     | 4,892,383   |  
|Exchange differences                                            |  |                      | 1,251,757   |   |      |     | 350,766     |      |  |     |            |  
|Interest income from related parties (Note 6)                   |  |                      | 15,185      |   |      |     | 5,328       |      |  |     | 31,611      |  
|                                                                |  |                      |             |   |      |     |             |      |  |     |             |  
|                                                                |  | Ps.                  | 17,568,397  |   |      | Ps. | 18,226,087  |      |  | Ps. | 31,832,070  |  
|                                                                |  |                      |             |   |      |     |             |      |  |     |             |  
|Generated by liabilities:                                       |  |                      |             |   |      |     |             |      |  |     |             |  
|Interest expense                                                |  | Ps.                  | (7,336,013  | ) |      | Ps. | (12,366,004 | )    |  | Ps. | (14,556,268 | )
|Gain from derivative instruments (Note 12)                      |  |                      |            |   |      |     | 5,222,271   |      |  |     | 11,238,451  |  
|Gain on redemption of loans                                     |  |                      |            |   |      |     | 2,204,857   |      |  |     | 784,560     |  
|Exchange differences                                            |  |                      | (1,791,724  | ) |      |     | 378,601     |      |  |     | 1,026,358   |  
|Interest and exchange differences with related parties (Note 6) |  |                      | (24,074,526 | ) |      |     | (11,041,384 | )    |  |     | (23,000,390 | )
|Loss on repurchase of debt                                      |  |                      |            |   |      |     | (213,228    | )    |  |     |            |  
|                                                                |  |                      |             |   |      |     |             |      |  |     |             |  
|                                                                |  | Ps.                  | (33,202,263 | ) |      | Ps. | (15,814,887 | )    |  | Ps. | (24,507,289 | )
|                                                                |  |                      |             |   |      |     |             |      |  |     |             |  
|                                                                |  | Ps.                  | (15,633,866 | ) |      | Ps. | 2,411,200   |      |  | Ps. | 7,324,781   |  
|                                                                |  |                      |             |   |      |     |             |      |  |     |             |  



|8. | Other expenses, net
|-- | -------------------



|                                                   |  |                      |            |   |      |     |            |      |  |     |            |  
|-------------------------------------------------- |  | -------------------- | ---------- | - | ---- | --- | ---------- | ---- |  | --- | ---------- | -
|                                                   |  | Years ended June 30, |           
|                                                   |  | 2006                 |            |   | 2005 |     |            | 2004 | 
|Donations (Note 6)                                 |  | Ps.                  | (2,549,506 | ) |      | Ps. | (4,012,457 | )    |  | Ps. | (2,384,893 | )
|Easement income (i)                                |  |                      | 2,427,718  |   |      |     |           |      |  |     |           |  
|Loss on fire damages (net of insurance recoveries) |  |                      | (5,787,577 | ) |      |     |           |      |  |     |           |  
|Unreimbursed expenses (ii)                         |  |                      | (1,743,141 | ) |      |     |           |      |  |     |           |  
|Provision for contingencies, net                   |  |                      | (236,945   | ) |      |     | (1,356,740 | )    |  |     | (772,126   | )
|Tax on personal assets of shareholders (Note 6)    |  |                      | (572,263   | ) |      |     | (1,663,051 | )    |  |     | (188,860   | )
|Tax amnesty plan for gross revenue tax             |  |                      |           |   |      |     |           |      |  |     | (2,132,910 | )
|Other taxes                                        |  |                      | (872,467   | ) |      |     |           |      |  |     |           |  
|Others                                             |  |                      | (427,587   | ) |      |     | (349,712   | )    |  |     | 251,223    |  
|                                                   |  |                      |            |   |      |     |            |      |  |     |            |  
|                                                   |  | Ps.                  | (9,761,768 | ) |      | Ps. | (7,381,960 | )    |  | Ps. | (5,227,566 | )
|                                                   |  |                      |            |   |      |     |            |      |  |     |            |  

---

|(i) | See Note 4.l. (ii).
|--- | -------------------

|(ii) | Belongs to expenses incurred by the Company when constructing Alto Rosario Shopping. Certain expenses were going to be borned by Coto (a hypermarket beside the shopping center).
Coto rejected the expenses and the Company deemed them as not recoverable.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-31



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|9. | Segment information
|-- | -------------------

General information

The Company is required to disclose segment information in accordance with Technical Resolution No. 18 (RT 18)
Specific Considerations for the Preparation of Financial Statements. RT 18 establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information about
operating segments in interim financial reports issued to shareholders. Operating segments are components of a company about which separate financial information is available that is regularly evaluated by the chief operating decision maker(s) in
deciding how to allocate resources and assess performance. The statement also establishes standards for related disclosures about a companys products and services, geographical areas and major customers. The Company has determined that its
reportable segments are those that are based on the Companys method of internal reporting. The Company has three reportable segments. These segments are leases and services, credit card operations and
others. Others primarily include sales and development properties and e-commerce activities.

A general description of each
segment follows:



| |  |  | Leases and services
| | - |  | -------------------

This segment includes the operating
results of the Companys shopping centers principally comprised of lease and service revenues from tenants.



| |  |  | Credit card operations
| | - |  | ----------------------

This segment includes revenues
derived from credit card transactions that consist of commissions, financing income and results from securitized receivables operations.



| |  |  | Others
| | - |  | ------

As stated above, this segment includes the
operating results of the Companys construction and ultimate sale of residential buildings properties (sales and development properties) and the Companys equity in the results of E-Commerce Latina (e-commerce activities). This segment
also includes the operating results generated by the provision of managerial, technological, commercial and financial training, primarily focused on shopping center-related activities during fiscal years 2005 and 2006. Until May 2005, this service
was provided by Alto Research and Development S.A. (formerly Alto Invest S.A.), a subsidiary which was merged with and into the Company effective on June 1, 2005. In the past, Alto Invest S.A. was a web-based provider of comprehensive investing
tools, planning and financial information which generated revenues from website advertising and commissions charged to customers for on-line trading.

The Companys primary operations are located in Argentina. All revenues and long-lived assets are attributable to the Companys country of domicile.

The Company measures its reportable segments based on net income. Inter-segment transactions are accounted for at current market prices. The Company
evaluates performance of its segments and allocates resources to them based on net income. The Company is not dependent on any single customer.

The accounting policies of the segments are the same as those described in Note 3. The column titled eliminations includes the eliminations of inter-segment activities.



F-32



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|9. | Segment information (continued)
|-- | -------------------------------

As of and for the year ended
June 30, 2006:



|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|------------------------------------------------------------ |  | ------------------- | ------------- | - | --------------------- | --- | ----------- | ------ |  | --- | ------------------------ | - |  | ------------ | ------------- | - | ----------------------------------------------- | --- | ---------------------- | - |  | --- | ------------- | -
|                                                             |  | Leases and services |               |   | Credit cardOperations |     |             | Others |  |     | Total reportablesegments |   |  | Eliminations |               |   | Total as of and forthe year
ended June 30, 2006 |    
|Revenues                                                     |  | Ps.                 | 215,860,822   |   |                       | Ps. | 122,968,616 |        |  | Ps. | 23,418,079               |   |  | Ps.          | 362,247,517   |   |                                                 | Ps. | (i)           (891,604 | ) |  | Ps. | 361,355,913   |  
|Costs                                                        |  |                     | (76,620,249   | ) |                       |     | (45,532,952 | )      |  |     | (18,816,309              | ) |  |              | (140,969,510  | ) |                                                 |     | (i) (ii)    1,599,732  |   |  |     | (139,369,778  | )
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Gross profit                                                 |  | Ps.                 | 139,240,573   |   |                       | Ps. | 77,435,664  |        |  | Ps. | 4,601,770                |   |  | Ps.          | 221,278,007   |   |                                                 | Ps. | 708,128                |   |  | Ps. | 221,986,135   |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Selling expenses                                             |  |                     | (14,787,461   | ) |                       |     | (30,900,024 | )      |  |     | (913,441                 | ) |  |              | (46,600,926   | ) |                                                 |     |                       |   |  |     | (46,600,926   | )
|Administrative expenses                                      |  |                     | (26,279,600   | ) |                       |     | (26,349,116 | )      |  |     | (144,354                 | ) |  |              | (52,773,070   | ) |                                                 |     |                       |   |  |     | (52,773,070   | )
|Net income from retained interest in securitized receivables |  |                     |              |   |                       |     | 2,625,001   |        |  |     |                         |   |  |              | 2,625,001     |   |                                                 |     |                       |   |  |     | 2,625,001     |  
|Gain from recognition of inventories at net realizable value |  |                     |              |   |                       |     |            |        |  |     | 3,497,632                |   |  |              | 3,497,632     |   |                                                 |     |                       |   |  |     | 3,497,632     |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Operating income                                             |  | Ps.                 | 98,173,512    |   |                       | Ps. | 22,811,525  |        |  | Ps. | 7,041,607                |   |  | Ps.          | 128,026,644   |   |                                                 | Ps. | 708,128                |   |  | Ps. | 128,734,772   |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Equity loss from related companies                           |  |                     |              |   |                       |     |            |        |  |     | (678,881                 | ) |  |              | (678,881      | ) |                                                 |     |                       |   |  |     | (678,881      | )
|Amortization of goodwill                                     |  |                     | (4,516,101    | ) |                       |     | (223,574    | )      |  |     |                         |   |  |              | (4,739,675    | ) |                                                 |     |                       |   |  |     | (4,739,675    | )
|Financial results, net                                       |  |                     | (16,477,323   | ) |                       |     | 106,367     |        |  |     | 1,445,218                |   |  |              | (14,925,738   | ) |                                                 |     | (ii)          (708,128 | ) |  |     | (15,633,866   | )
|Other expense, net                                           |  |                     | (9,634,483    | ) |                       |     | (124,863    | )      |  |     | (2,422                   | ) |  |              | (9,761,768    | ) |                                                 |     |                       |   |  |     | (9,761,768    | )
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Income before taxes and minority interest                    |  | Ps.                 | 67,545,605    |   |                       | Ps. | 22,569,455  |        |  | Ps. | 7,805,522                |   |  | Ps.          | 97,920,582    |   |                                                 | Ps. |                       |   |  | Ps. | 97,920,582    |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Income tax expense                                           |  |                     | (34,284,744   | ) |                       |     | (8,238,421  | )      |  |     | (5,933,972               | ) |  |              | (48,457,137   | ) |                                                 |     |                       |   |  |     | (48,457,137   | )
|Minority interest                                            |  |                     | (1,873,491    | ) |                       |     | (2,910,922  | )      |  |     |                         |   |  |              | (4,784,413    | ) |                                                 |     |                       |   |  |     | (4,784,413    | )
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Net income                                                   |  | Ps.                 | 31,387,370    |   |                       | Ps. | 11,420,112  |        |  | Ps. | 1,871,550                |   |  | Ps.          | 44,679,032    |   |                                                 | Ps. |                       |   |  | Ps. | 44,679,032    |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Depreciation and amortization                                |  |                     | 66,692,169    |   |                       |     | 1,881,710   |        |  |     |                         |   |  |              | 68,573,879    |   |                                                 |     |                       |   |  |     | 68,573,879    |  
|Acquisitions of fixed assets                                 |  |                     | 26,675,136    |   |                       |     | 3,586,262   |        |  |     |                         |   |  |              | 30,261,398    |   |                                                 |     |                       |   |  |     | 30,261,398    |  
|Investment in equity method investee (see note 4.c.(i))      |  |                     |              |   |                       |     |            |        |  |     | 129,474                  |   |  |              | 129,474       |   |                                                 |     |                       |   |  |     | 129,474       |  
|Operating assets                                             |  |                     | 890,806,541   |   |                       |     | 74,147,989  |        |  |     | 25,838,333               |   |  |              | 990,792,863   |   |                                                 |     |                       |   |  |     | 990,792,863   |  
|Non operating assets                                         |  |                     | 272,448,684   |   |                       |     | 65,933,904  |        |  |     | 29,352,085               |   |  |              | 367,734,673   |   |                                                 |     | (iii)      (3,482,048  | ) |  |     | 364,252,625   |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  
|Total Assets                                                 |  | Ps.                 | 1,163,255,225 |   |                       | Ps. | 140,081,893 |        |  | Ps. | 55,190,418               |   |  | Ps.          | 1,358,527,536 |   |                                                 | Ps. | (3,482,048             | ) |  | Ps. | 1,355,045,488 |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                        |   |  |     |               |  

---

|(i) | Represents inter-segment lease revenues and expenses.
|--- | -----------------------------------------------------

|(ii) | Represents interest expense generated by inter-segment loan used to fund the credit card activity.
|---- | --------------------------------------------------------------------------------------------------

|(iii) | Represents other inter-segment receivables eliminated in consolidation.
|----- | -----------------------------------------------------------------------



F-33



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|9. | Segment information (continued)
|-- | -------------------------------

As of and for the year ended
June 30, 2005:



|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|------------------------------------------------------------ |  | ------------------- | ------------- | - | --------------------- | --- | ----------- | ------ |  | --- | ------------------------ | - |  | ------------ | ------------- | - | ----------------------------------------------- | --- | --------------------- | - |  | --- | ------------- | -
|                                                             |  | Leases and services |               |   | Credit cardOperations |     |             | Others |  |     | Total reportablesegments |   |  | Eliminations |               |   | Total as of and for theyear
ended June 30, 2005 |    
|Revenues                                                     |  | Ps.                 | 165,824,082   |   |                       | Ps. | 64,557,977  |        |  | Ps. | 121,430                  |   |  | Ps.          | 230,503,489   |   |                                                 | Ps  | (i)          (346,168 | ) |  | Ps. | 230,157,321   |  
|Costs                                                        |  |                     | (69,203,912   | ) |                       |     | (24,474,324 | )      |  |     | (204,586                 | ) |  |              | (93,882,822   | ) |                                                 |     | (i) (ii)  1,372,456   |   |  |     | (92,510,366   | )
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Gross profit (loss)                                          |  | Ps.                 | 96,620,170    |   |                       | Ps. | 40,083,653  |        |  | Ps. | (83,156                  | ) |  | Ps.          | 136,620,667   |   |                                                 | Ps. | 1,026,288             |   |  | Ps. | 137,646,955   |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Selling expenses                                             |  |                     | (11,027,272   | ) |                       |     | (13,496,245 | )      |  |     | (250,839                 | ) |  |              | (24,774,356   | ) |                                                 |     |                      |   |  |     | (24,774,356   | )
|Administrative expenses                                      |  |                     | (16,948,434   | ) |                       |     | (14,890,490 | )      |  |     | (36,376                  | ) |  |              | (31,875,300   | ) |                                                 |     |                      |   |  |     | (31,875,300   | )
|Net income from retained interest in securitized receivables |  |                     |              |   |                       |     | 423,508     |        |  |     |                         |   |  |              | 423,508       |   |                                                 |     |                      |   |  |     | 423,508       |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Operating income (loss)                                      |  | Ps.                 | 68,644,464    |   |                       | Ps. | 12,120,426  |        |  | Ps. | (370,371                 | ) |  | Ps.          | 80,394,519    |   |                                                 | Ps. | 1,026,288             |   |  | Ps. | 81,420,807    |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Equity loss from related companies                           |  |                     | (79,935       | ) |                       |     |            |        |  |     | (626,684                 | ) |  |              | (706,619      | ) |                                                 |     |                      |   |  |     | (706,619      | )
|Amortization of goodwill                                     |  |                     | (4,584,543    | ) |                       |     | (242,255    | )      |  |     |                         |   |  |              | (4,826,798    | ) |                                                 |     |                      |   |  |     | (4,826,798    | )
|Financial results, net                                       |  |                     | 1,525,233     |   |                       |     | 96,316      |        |  |     | 1,815,939                |   |  |              | 3,437,488     |   |                                                 |     | (ii)     (1,026,288   | ) |  |     | 2,411,200     |  
|Other (expense) income, net                                  |  |                     | (7,383,867    | ) |                       |     | 55,526      |        |  |     | (53,619                  | ) |  |              | (7,381,960    | ) |                                                 |     |                      |   |  |     | (7,381,960    | )
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Income before taxes and minority interest                    |  | Ps.                 | 58,121,352    |   |                       | Ps. | 12,030,013  |        |  | Ps. | 765,265                  |   |  | Ps.          | 70,916,630    |   |                                                 | Ps. |                      |   |  | Ps. | 70,916,630    |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Income tax expense                                           |  |                     | (28,874,276   | ) |                       |     | (4,864,295  | )      |  |     | 122,697                  |   |  |              | (33,615,874   | ) |                                                 |     |                      |   |  |     | (33,615,874   | )
|Minority interest                                            |  |                     | (2,563,762    | ) |                       |     | (1,481,594  | )      |  |     |                         |   |  |              | (4,045,356    | ) |                                                 |     |                      |   |  |     | (4,045,356    | )
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Net income                                                   |  | Ps.                 | 26,683,314    |   |                       | Ps. | 5,684,124   |        |  | Ps. | 887,962                  |   |  | Ps.          | 33,255,400    |   |                                                 | Ps. |                      |   |  | Ps. | 33,255,400    |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Depreciation and amortization                                |  |                     | 62,260,039    |   |                       |     | 1,173,502   |        |  |     |                         |   |  |              | 63,433,541    |   |                                                 |     |                      |   |  |     | 63,433,541    |  
|Acquisitions of fixed assets                                 |  |                     | 49,070,871    |   |                       |     | 2,462,705   |        |  |     |                         |   |  |              | 51,533,576    |   |                                                 |     |                      |   |  |     | 51,533,576    |  
|Investment in equity method investee (see note 4.c.(i))      |  |                     |              |   |                       |     |            |        |  |     | 808,355                  |   |  |              | 808,355       |   |                                                 |     |                      |   |  |     | 808,355       |  
|Operating assets                                             |  |                     | 959,338,889   |   |                       |     | 31,537,807  |        |  |     | 51,255,612               |   |  |              | 1,042,132,308 |   |                                                 |     |                      |   |  |     | 1,042,132,308 |  
|Non operating assets                                         |  |                     | 167,880,436   |   |                       |     | 42,889,870  |        |  |     | 1,382,121                |   |  |              | 212,152,427   |   |                                                 |     | (iii)    (6,389,917   | ) |  |     | 205,762,510   |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  
|Total Assets                                                 |  | Ps.                 | 1,127,219,325 |   |                       | Ps. | 74,427,677  |        |  | Ps. | 52,637,733               |   |  | Ps.          | 1,254,284,735 |   |                                                 | Ps. | (6,389,917            | ) |  | Ps. | 1,247,894,818 |  
|                                                             |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                 |     |                       |   |  |     |               |  

---

|(i) | Represents inter-segment lease revenues and expenses.
|--- | -----------------------------------------------------

|(ii) | Represents interest expense generated by inter-segment loan used to fund the credit card activity.
|---- | --------------------------------------------------------------------------------------------------

|(iii) | Represents other inter-segment receivables eliminated in consolidation.
|----- | -----------------------------------------------------------------------



F-34



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|9. | Segment information (continued)
|-- | -------------------------------

As of and for the year ended
June 30, 2004:



|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|---------------------------------------------------------- |  | ------------------- | ------------- | - | --------------------- | --- | ----------- | ------ |  | --- | ------------------------ | - |  | ------------ | ------------- | - | ------------------------------------------------ | --- | ------------------- | - |  | --- | ------------- | -
|                                                           |  | Leases and services |               |   | Credit cardOperations |     |             | Others |  |     | Total reportablesegments |   |  | Eliminations |               |   | Total as of and for the year ended June 30, 2004 |    
|Revenues                                                   |  | Ps.                 | 113,437,829   |   |                       | Ps. | 30,034,394  |        |  | Ps. | 64,153                   |   |  | Ps.          | 143,536,376   |   |                                                  | Ps. | (i)        (286,330 | ) |  | Ps. | 143,250,046   |  
|Costs                                                      |  |                     | (61,406,872   | ) |                       |     | (13,821,151 | )      |  |     | (28,440                  | ) |  |              | (75,256,463   | ) |                                                  |     | (i) (ii) 1,856,090  |   |  |     | (73,400,373   | )
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Gross profit                                               |  | Ps.                 | 52,030,957    |   |                       | Ps. | 16,213,243  |        |  | Ps. | 35,713                   |   |  | Ps.          | 68,279,913    |   |                                                  | Ps. | 1,569,760           |   |  | Ps. | 69,849,673    |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Selling expenses                                           |  |                     | (5,185,605    | ) |                       |     | (4,514,727  | )      |  |     | (126,507                 | ) |  |              | (9,826,839    | ) |                                                  |     |                    |   |  |     | (9,826,839    | )
|Administrative expenses                                    |  |                     | (12,505,361   | ) |                       |     | (8,185,224  | )      |  |     | (30,349                  | ) |  |              | (20,720,934   | ) |                                                  |     |                    |   |  |     | (20,720,934   | )
|Net loss from retained interest in securitized receivables |  |                     |              |   |                       |     | 260,941     |        |  |     |                         |   |  |              | 260,941       |   |                                                  |     |                    |   |  |     | 260,941       |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Operating income (loss)                                    |  | Ps.                 | 34,339,991    |   |                       | Ps. | 3,774,233   |        |  | Ps. | (121,143                 | ) |  | Ps.          | 37,993,081    |   |                                                  | Ps. | 1,569,760           |   |  | Ps. | 39,562,841    |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Equity gain (loss) from related companies                  |  |                     | 337,656       |   |                       |     |            |        |  |     | (1,464,172               | ) |  |              | (1,126,516    | ) |                                                  |     |                    |   |  |     | (1,126,516    | )
|Amortization of goodwill                                   |  |                     | (4,584,275    | ) |                       |     | (242,267    | )      |  |     |                         |   |  |              | (4,826,542    | ) |                                                  |     |                    |   |  |     | (4,826,542    | )
|Financial results, net                                     |  |                     | 4,850,232     |   |                       |     | 957,448     |        |  |     | 3,086,861                |   |  |              | 8,894,541     |   |                                                  |     | (ii)    (1,569,760  | ) |  |     | 7,324,781     |  
|Other (expense) income, net                                |  |                     | (3,101,994    | ) |                       |     | 8,106       |        |  |     | (2,133,678               | ) |  |              | (5,227,566    | ) |                                                  |     |                    |   |  |     | (5,227,566    | )
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Income (loss) before taxes and minority interest           |  | Ps.                 | 31,841,610    |   |                       | Ps. | 4,497,520   |        |  | Ps. | (632,132                 | ) |  | Ps.          | 35,706,998    |   |                                                  | Ps. |                    |   |  | Ps. | 35,706,998    |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Income tax expense                                         |  |                     | (14,389,040   | ) |                       |     | (1,927,565  | )      |  |     | 5,287                    |   |  |              | (16,311,318   | ) |                                                  |     |                    |   |  |     | (16,311,318   | )
|Minority interest                                          |  |                     | 4,304         |   |                       |     | (562,444    | )      |  |     |                         |   |  |              | (558,140      | ) |                                                  |     |                    |   |  |     | (558,140      | )
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Net income (loss)                                          |  | Ps.                 | 17,456,874    |   |                       | Ps. | 2,007,511   |        |  | Ps. | (626,845                 | ) |  | Ps.          | 18,837,540    |   |                                                  | Ps. |                    |   |  | Ps. | 18,837,540    |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Depreciation and amortization                              |  |                     | 56,102,331    |   |                       |     | 2,245,179   |        |  |     | 57,029                   |   |  |              | 58,404,539    |   |                                                  |     |                    |   |  |     | 58,404,539    |  
|Acquisitions of fixed assets                               |  |                     | 19,335,091    |   |                       |     | 1,062,035   |        |  |     |                         |   |  |              | 20,397,126    |   |                                                  |     |                    |   |  |     | 20,397,126    |  
|Investment in equity method investee                       |  |                     | 5,763,106     |   |                       |     |            |        |  |     | 1,435,039                |   |  |              | 7,198,145     |   |                                                  |     |                    |   |  |     | 7,198,145     |  
|                                                           |  |                     |               |   |                       |    
|Operating assets                                           |  |                     | 864,186,375   |   |                       |     | 14,681,185  |        |  |     | 47,975,819               |   |  |              | 926,843,379   |   |                                                  |     |                    |   |  |     | 926,843,379   |  
|Non operating assets                                       |  |                     | 205,974,269   |   |                       |     | 26,207,486  |        |  |     | 1,650,198                |   |  |              | 233,831,953   |   |                                                  |     | (iii)   (9,363,570  | ) |  |     | 224,468,383   |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  
|Total Assets                                               |  | Ps.                 | 1,070,160,644 |   |                       | Ps. | 40,888,671  |        |  | Ps. | 49,626,017               |   |  | Ps.          | 1,160,675,332 |   |                                                  | Ps. | (9,363,570          | ) |  | Ps. | 1,151,311,762 |  
|                                                           |  |                     |               |   |                       |     |             |        |  |     |                          |   |  |              |               |   |                                                  |     |                     |   |  |     |               |  

---

|(i) | Represents inter-segment lease revenues and expenses.
|--- | -----------------------------------------------------

|(ii) | Represents interest expense generated by inter-segment loan used to fund the credit card activity.
|---- | --------------------------------------------------------------------------------------------------

|(iii) | Represents other inter-segment receivables eliminated in consolidation.
|----- | -----------------------------------------------------------------------



F-35



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|10. | Additional information on assets and liabilities
|--- | ------------------------------------------------

The breakdown of main assets and liabilities as of June 30, 2006 is as follows:



|                                            |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            
|------------------------------------------- |  | --------------------- | ----------- | -------------------------------- | --- | -------------------------------- |  | -------------------------------- | ---------- | -------------------------------- | --- | ---------- |  | ------------- | ----------- | ----- | --- | ---------- |  | --- | ---------- |  | --- | -----------
|                                            |  | To mature in 3 months |             | To mature between 4 and 6 months |     | To mature between 7 and 9 months |  | To maturebetween 10 and 12months |            | To mature in greater than 1 year |     | Past due   |  | No fixed term |             | Total
|Assets                                      |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            
|Investments (1)                             |  | Ps.                   | 8,898,929   |                                  | Ps. | 3,837,362                        |  | Ps.                              | 1,965,246  |                                  | Ps. | 1,400,091  |  | Ps.           | 39,813,365  |       | Ps. | 1,519,888  |  | Ps. | 14,628,968 |  | Ps. | 72,063,849 
|Accounts receivable, net                    |  |                       | 42,312,396  |                                  |     | 16,186,049                       |  |                                  | 10,889,711 |                                  |     | 8,123,495  |  |               | 32,539,707  |       |     | 26,694,258 |  |     | 106,800    |  |     | 136,852,416
|Other receivables and prepaid expenses, net |  |                       | 3,852,116   |                                  |     | 6,618,528                        |  |                                  | 569,338    |                                  |     | 1,165,580  |  |               | 7,036,324   |       |     | 6,444,180  |  |     | 18,497,564 |  |     | 44,183,630 
|                                            |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            
|                                            |  | Ps.                   | 55,063,441  |                                  | Ps. | 26,641,939                       |  | Ps.                              | 13,424,295 |                                  | Ps. | 10,689,166 |  | Ps.           | 79,389,396  |       | Ps. | 34,658,326 |  | Ps. | 33,233,332 |  | Ps. | 253,099,895
|                                            |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            
|Liabilities                                 |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            
|Trade accounts payable                      |  | Ps.                   | 85,852,390  |                                  | Ps. | 11,713,836                       |  | Ps.                              | 286,319    |                                  | Ps. | 208,377    |  | Ps.           | 1,010,150   |       | Ps. | 3,888,642  |  | Ps. |           |  | Ps. | 102,959,714
|Customer advances                           |  |                       | 16,206,442  |                                  |     | 9,747,042                        |  |                                  | 9,456,135  |                                  |     | 9,456,135  |  |               | 41,535,275  |       |     | 204,691    |  |     | 2,982,320  |  |     | 89,588,040 
|Short-term and long-term debt               |  |                       | 57,761,620  |                                  |     | 12,211,892                       |  |                                  | 16,406     |                                  |     | 12,478,495 |  |               | 145,853,844 |       |     | 8,215,656  |  |     | 132,569    |  |     | 236,670,482
|Related parties                             |  |                       | 5,609,678   |                                  |     | 246,039                          |  |                                  | 246,039    |                                  |     | 246,039    |  |               | 925,800     |       |     |           |  |     | 35,873     |  |     | 7,309,468  
|Other liabilities (2)                       |  |                       | 23,580,212  |                                  |     | 17,750,099                       |  |                                  | 1,116,419  |                                  |     | 783,736    |  |               | 12,975,645  |       |     |           |  |     | 25,481,463 |  |     | 81,687,574 
|                                            |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            
|                                            |  | Ps.                   | 189,010,342 |                                  | Ps. | 51,668,908                       |  | Ps.                              | 11,121,318 |                                  | Ps. | 23,172,782 |  | Ps.           | 202,300,714 |       | Ps. | 12,308,989 |  | Ps. | 28,632,225 |  | Ps. | 518,215,278
|                                            |  |                       |             |                                  |     |                                  |  |                                  |            |                                  |     |            |  |               |             |       |     |            |  |     |            |  |     |            



|                                            |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            
|------------------------------------------- |  | --------------------------------- | ---------- | ------------------------------------ | --- | --------------------- |  | ----------- | ---------- | ------- | --- | ----------- |  | ----- | ----------- |  | --- | ---------- |  | --- | -----------
|                                            |  | Accruing interest at a fixed rate |            | Accruing interest at a variable rate |     | Not accruing interest |  |            
|                                            |  | Current                           |            | NonCurrent                          |     | Current               |  | NonCurrent |            | Current |     | NonCurrent |  | Total
|Assets                                      |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            
|Investments (1)                             |  | Ps.                               | 21,607,362 |                                      | Ps. |                      |  | Ps.         | 10,643,122 |         | Ps. | 39,813,365  |  | Ps.   |            |  | Ps. |           |  | Ps. | 72,063,849 
|Accounts receivable, net                    |  |                                   |           |                                      |     |                      |  |             | 6,244,040  |         |     | 12,569,825  |  |       | 98,068,669  |  |     | 19,969,882 |  |     | 136,852,416
|Other receivables and prepaid expenses, net |  |                                   | 551,805    |                                      |     |                      |  |             |           |         |     |            |  |       | 30,377,290  |  |     | 13,254,535 |  |     | 44,183,630 
|                                            |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            
|                                            |  | Ps.                               | 22,159,167 |                                      | Ps. |                      |  | Ps.         | 16,887,162 |         | Ps. | 52,383,190  |  | Ps.   | 128,445,959 |  | Ps. | 33,224,417 |  | Ps. | 253,099,895
|                                            |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            
|Liabilities                                 |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            
|Trade accounts payable                      |  | Ps.                               |           |                                      | Ps. |                      |  | Ps.         | 1,023,961  |         | Ps. | 1,010,150   |  | Ps.   | 100,925,603 |  | Ps. |           |  | Ps. | 102,959,714
|Customer advances                           |  |                                   |           |                                      |     |                      |  |             | 1,220,000  |         |     | 5,044,892   |  |       | 46,832,765  |  |     | 36,490,383 |  |     | 89,588,040 
|Short-term and long-term debt               |  |                                   | 77,882,224 |                                      |     | 145,853,844           |  |             | 7,558,178  |         |     |            |  |       | 5,376,236   |  |     |           |  |     | 236,670,482
|Related parties                             |  |                                   | 4,279,792  |                                      |     | 925,800               |  |             |           |         |     |            |  |       | 2,103,876   |  |     |           |  |     | 7,309,468  
|Other liabilities (2)                       |  |                                   | 166,173    |                                      |     | 1,664,901             |  |             |           |         |     |            |  |       | 46,188,036  |  |     | 33,668,464 |  |     | 81,687,574 
|                                            |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            
|                                            |  | Ps.                               | 82,328,189 |                                      | Ps. | 148,444,545           |  | Ps.         | 9,802,139  |         | Ps. | 6,055,042   |  | Ps.   | 201,426,516 |  | Ps. | 70,158,847 |  | Ps. | 518,215,278
|                                            |  |                                   |            |                                      |     |                       |  |             |            |         |     |             |  |       |             |  |     |            |  |     |            

---

|(1) | Represents mutual funds, time deposits, government bonds, mortgage bonds, trust debt securities, retained interest in transferred credit card receivables and others.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents salaries and social security payable, taxes payable, other liabilities and provisions.
|--- | -------------------------------------------------------------------------------------------------



F-36



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|11. | Tarshop credit card receivables securitization
|--- | ----------------------------------------------

The
Company has ongoing revolving year securitization programs through which Tarshop, a majority-owned subsidiary of the Company, transfers a portion of its customer credit card receivable balances to master trusts that issue certificates to public and
private investors.

Under the securitization programs, the trusts may issue two types of certificates representing undivided interests in
the Trust  Títulos de Deuda Fiduciaria (TDF) and Certificados de Participación (CP),which represent debt, and equity certificates, respectively. Interest and principal services are
paid periodically to the TDF holders throughout the life of the security. CPs are subordinated securities which entitle the CP holders to share pro rata in the cash flows of the securitized credit card receivables, after principal and interest on
the TDFs and other fees and expenses have been paid. During the revolving period no payments are made to TDF and CP holders. Principal collections of the underlying financial assets are used by the Trust to acquire additional credit card receivables
throughout the revolving period. Once the revolving period ends, a period of liquidation occurs during which: (i) no further assets are purchased and (ii) all cash collections are used to fulfill the TDF service requirements and
(iii) the remaining proceeds are used to fulfill the CPs service requirements.

At the time of the securitization, Tarshop transfers
credit card receivables to the trust in exchange for cash and retained interests in the trust (CPs). Part of the proceeds is retained by the trustee and maintained as a cash reserve to serve as collateral for the payment of amounts due on the TDFs.
Cash reserves flow back to Tarshop on a monthly basis according to a schedule until all TDFs are fully paid. Cash reserves are stated at cost and are classified as guarantee deposits within the caption Other receivables and prepaid
expenses in the accompanying consolidated balance sheets. CPs are carried at their equity value based on financial statements issued by the trusts and classified as investments in the accompanying consolidated balance sheets. Gain or losses on
CPs are reported as a component of net income in credit card trust. Tarshop recognizes a result on the sale of receivables when the carrying value of transferred credit card receivables differs from the amount of cash and CPs received. Results
recognized on the sale of receivables are reported as a component of Net income from retained interest in securitized receivables in the accompanying statements of income. Expenses related to the securitization of receivables are
expensed as incurred.

At June 30, 2006 the Company has twelve securitization programs outstanding, pursuant to which Tarshop has sold
an aggregate amount of Ps. 312.4 million of its customer credit card receivable balances to Trusts in exchange for Ps. 258.8 million in cash proceeds, Ps. 25.5 million variable rate interest TDFs, and Ps. 28.1 million nominal
value subordinated CPs. Under the securitization programs, the Trusts issued Ps. 14.4 million 7.75% fixed-rate interest TDFs, Ps. 38.5 million 9.00% fixed-rate interest TDFs, Ps. 27.5 million 10.25% fixed-rate interest TDFs, Ps.
16.0 million 10.50% fixed-rate interest TDFs, Ps. 18.2 million 11.50% fixed-rate interest TDFs, Ps. 58.9 million 12.00% fixed-rate interest TDFs, Ps. 22.0 million 12.50% fixed-rate interest TDFs, Ps. 61.9 million 13.00%
fixed-rate interest TDFs, and Ps. 1.6 million 12.00% fixed-rate interest TDFs. Except for certain TDFs acquired by Tarshop as mentioned above, the TDFs were sold to other investors through a public offering in Argentina. As a credit protection
for investors, Tarshop has established cash reserves for losses amounting to Ps. 6.4 million.



|12. | Derivative financial instruments
|--- | --------------------------------

The
Companys derivative activity during fiscal years 2006, 2005 and 2004 is presented below:

Interest rate swap

In order to minimize exposure on interest rate risk, the Company entered into an interest rate swap agreement to effectively convert a portion of its
peso-denominated fixed-rate debt to peso-denominated floating rate debt. As of March 30, 2001, the Company had an interest rate swap agreement outstanding with an aggregate notional amount of Ps. 85.0 million with maturities through April
2005. This swap agreement initially allowed the Company to reduce the net cost of its debt. However, subsequent to June 30, 2001, the Company modified the swap agreement due to an increase in interest rates as a result of the economic situation
prevailing at that time. Under the terms of the revised agreement, the Company converted its peso-denominated fixed rate debt to U.S. dollar-denominated floating rate debt for a notional amount of US$ 69.1 million with maturities through April
2005. As collateral for the revised agreement, the Company was required to deposit US$ 50.0 million with the counterparty. At June 30, 2004 the swap agreement had a fair market value of US$ (45.4) million. The swap agreement was
settled at maturity and, as a result, the Company collected US$ 5.5 million in cash representing the net amount of the collateral deposit and the fair market value of the swap at its maturity. During the years ended June 30, 2005 and 2004
the Company recognized gains of Ps. 5.2 million and Ps. 11.2 million, respectively, in connection with the swap agreement, which have been included within Financial results, net in the accompanying consolidated statements of
income.

During the year ended June 30, 2006 the Company had not derivative activity.



|13. | Earnings per share
|--- | ------------------

The following tables set forth
the computation of basic and diluted net income per share under Argentine GAAP for all periods presented:



|                                                                     |  |                     |            |   |      |     |            |      |  |     |            |  
|-------------------------------------------------------------------- |  | ------------------- | ---------- | - | ---- | --- | ---------- | ---- |  | --- | ---------- | -
|                                                                     |  | Year ended June 30, |           
|                                                                     |  | 2006                |            |   | 2005 |     |            | 2004 | 
|Numerator:                                                           |  |                     |            |   |      |     |            |      |  |     |            |  
|Net income available to common shareholders                          |  | Ps.                 | 44,679,032 |   |      | Ps. | 33,255,400 |      |  | Ps. | 18,837,540 |  
|Plus (less): income (loss) impact of assumed conversions:            |  |                     |            |   |      |     |            |      |  |     |            |  
|Interest expense on Convertible Notes                                |  |                     | 14,360,936 |   |      |     | 12,217,475 |      |  |     | 14,283,721 |  
|Foreign currency exchange loss (gain) on convertible debt            |  |                     | 9,408,565  |   |      |     | (2,999,252 | )    |  |     | 7,857,459  |  
|Income tax effects                                                   |  |                     | (8,319,325 | ) |      |     | (3,226,378 | )    |  |     | (7,749,413 | )
|                                                                     |  |                     |            |   |      |     |            |      |  |     |            |  
|Net income available to common shareholders plus assumed conversions |  | Ps.                 | 60,129,208 |   |      | Ps. | 39,247,245 |      |  | Ps. | 33,229,307 |  
|                                                                     |  |                     |            |   |      |     |            |      |  |     |            |  



F-37



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|13. | Earnings per share (continued)
|--- | ------------------------------



|                                                 |  |                     |               |      |     |               |  |     |              
|------------------------------------------------ |  | ------------------- | ------------- | ---- | --- | ------------- |  | --- | -------------
|                                                 |  | Year ended June 30,
|                                                 |  | 2006                |               | 2005 |     | 2004         
|Denominator:                                     |  |                     |               |      |     |               |  |     |              
|Weighted-average number of shares outstanding    |  | Ps.                 | 780,432,065   |      | Ps. | 777,017,782   |  | Ps. | 716,436,002  
|Plus: incremental shares of assumed conversions: |  |                     |               |      |     |               |  |     |              
|Convertible Notes                                |  |                     | 1,363,565,610 |      |     | 1,365,009,110 |  |     | 1,451,354,820
|                                                 |  |                     |               |      |     |               |  |     |              
|Adjusted weighted-average number of shares       |  | Ps.                 | 2,143,997,675 |      | Ps. | 2,142,026,892 |  | Ps. | 2,167,790,822
|                                                 |  |                     |               |      |     |               |  |     |              
|Basic and diluted EPS:                           |  |                     |               |      |     |               |  |     |              
|Basic net income per common share                |  | Ps.                 | 0.06          |      | Ps. | 0.04          |  | Ps. | 0.03         
|Diluted net income per common share              |  | Ps.                 | 0.03          |      | Ps. | 0.02          |  | Ps. | 0.02         



|14. | Income taxes
|--- | ------------

As described in Note 3.k, the Company
accounts for income taxes using the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax based assets and liabilities and are measured using the enacted
tax rates.

Income tax expense for the years ended June 30, 2006, 2005 and 2004 consisted of the following:



|                                      |  |      |            |      |     |            |      |  |     |           
|------------------------------------- |  | ---- | ---------- | ---- | --- | ---------- | ---- |  | --- | ----------
|                                      |  | 2006 |            | 2005 |     |            | 2004
|Current income tax expense            |  | Ps.  | 41,564,638 |      | Ps. | 34,678,072 |      |  | Ps. | 2,203,177 
|Deferred income tax (benefit) expense |  |      | 6,892,499  |      |     | (1,062,198 | )    |  |     | 14,108,141
|                                      |  |      |            |      |     |            |      |  |     |           
|Income tax expense                    |  | Ps.  | 48,457,137 |      | Ps. | 33,615,874 |      |  | Ps. | 16,311,318
|                                      |  |      |            |      |     |            |      |  |     |           

The tax effects of temporary differences that give rise to the Companys deferred tax assets
and liabilities at June 30, 2006 and 2005 are presented below:



|                                             |  |                               |             |   |                      |     |            |                      |  |     |            |  
|-------------------------------------------- |  | ----------------------------- | ----------- | - | -------------------- | --- | ---------- | -------------------- |  | --- | ---------- | -
|                                             |  | 2006                          |            
|                                             |  | Balances at beginning of year |             |   | Changes for the year |     |            | Balances at year-end | 
|Deferred tax assets (liabilities):           |  |                               |             |   |                      |     |            |                      |  |     |            |  
|Accounts receivable                          |  | Ps.                           | 2,810,068   |   |                      | Ps. | 3,127,580  |                      |  | Ps. | 5,937,648  |  
|Other receivables and prepaid expenses       |  |                               | (414,697    | ) |                      |     | (149,534   | )                    |  |     | (564,231   | )
|Inventory                                    |  |                               | 245,584     |   |                      |     | (5,998,024 | )                    |  |     | (5,752,440 | )
|Undeveloped parcels of land                  |  |                               | (413,916    | ) |                      |     | (18,045    | )                    |  |     | (431,961   | )
|Investments                                  |  |                               |            |   |                      |     | (93,740    | )                    |  |     | (93,740    | )
|Fixed assets                                 |  |                               | (11,238,620 | ) |                      |     | 1,670,165  |                      |  |     | (9,568,455 | )
|Intangible assets                            |  |                               | (288,288    | ) |                      |     | (294,781   | )                    |  |     | (583,069   | )
|Salaries and social security payable payable |  |                               | 1,411,886   |   |                      |     | (1,310,981 | )                    |  |     | 100,905    |  
|Short-term and long-term debt                |  |                               | 16,902      |   |                      |     | (16,902    | )                    |  |     |           |  
|Trade accounts payable                       |  |                               |            |   |                      |     | 400,092    |                      |  |     | 400,092    |  
|Other liabilities                            |  |                               | 1,548,152   |   |                      |     | (327,211   | )                    |  |     | 1,220,941  |  
|Provisions                                   |  |                               | 2,081,523   |   |                      |     | (748,877   | )                    |  |     | 1,332,646  |  
|Tax loss carryforwards (i)                   |  |                               | 8,190,799   |   |                      |     | (5,788,591 | )                    |  |     | 2,402,208  |  
|Valuation allowance                          |  |                               | (2,829,447  | ) |                      |     | 2,656,350  |                      |  |     | (173,097   | )
|                                             |  |                               |             |   |                      |     |            |                      |  |     |            |  
|Net deferred income tax asset (liability)    |  | Ps.                           | 1,119,946   |   |                      | Ps. | (6,892,499 | )                    |  | Ps. | (5,772,553 | )
|                                             |  |                               |             |   |                      |     |            |                      |  |     |            |  

| | 
| | 

| | (i) | As of June 30, 2006 the Company and its subsidiaries had accumulated tax loss carryforwards of approximately Ps. 6.9 million, which expire at various dates beginning in
2007 and ending in 2011.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-38



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|14. | Income taxes (continued)
|--- | ------------------------

Income tax expense for
the years ended June 30, 2006, 2005 and 2004 differed from the amounts computed by applying the Companys statutory income tax rate to pre-tax income as a result of the following:



|                                                          |  |      |            |   |      |     |            |      |  |     |            |  
|--------------------------------------------------------- |  | ---- | ---------- | - | ---- | --- | ---------- | ---- |  | --- | ---------- | -
|                                                          |  | 2006 |            |   | 2005 |     |            | 2004 | 
|Income tax expense at statutory tax rate on pretax income |  | Ps.  | 34,272,204 |   |      | Ps. | 24,820,821 |      |  | Ps. | 12,497,449 |  
|Non-deductible expenses                                   |  |      | 2,192,646  |   |      |     | 2,310,072  |      |  |     | 1,606,662  |  
|Net loss in related companies                             |  |      | 235,074    |   |      |     | 287,161    |      |  |     | (3,879,640 | )
|Change in valuation allowance                             |  |      | (1,390,120 | ) |      |     | (3,221,633 | )    |  |     | (143,338   | )
|Inflation adjustment                                      |  |      | 12,338,654 |   |      |     | 8,002,704  |      |  |     | 6,252,192  |  
|Others, net                                               |  |      | 808,679    |   |      |     | 1,416,749  |      |  |     | (22,007    | )
|                                                          |  |      |            |   |      |     |            |      |  |     |            |  
|Income tax expense                                        |  | Ps.  | 48,457,137 |   |      | Ps. | 33,615,874 |      |  | Ps. | 16,311,318 |  
|                                                          |  |      |            |   |      |     |            |      |  |     |            |  



|15. | Issuance of Convertible Notes
|--- | -----------------------------

On August 20,
2002, the Company issued an aggregate amount of US$ 50 million of uncollateralized convertible notes (the Convertible Notes) in exchange for cash and the settlement of certain liabilities. The issuance was approved by the meeting of
shareholders on December 4, 2001 and subsequently by the CNV on March 15, 2002. The issuance was authorized for listing on the Buenos Aires Stock Exchange on July 8, 2002. Proceeds from the issuance were used to repay certain
short-term debt aggregating Ps. 27.3 million and the redemption of previously issued Senior Notes for a principal amount of Ps. 52.8 million. The Convertible Notes accrue interest at a fixed annual interest rate of 10%, are convertible at
any time at the option of the holder into common shares of Ps. 0.10 par value per share and originally matured on July 19, 2006. A meeting of noteholders resolved to extend the maturity date of the Convertible Notes through July 19,
2014 although the remaining terms and conditions were left unchanged. Argentine GAAP requires that an exchange of debt instruments with substantially different terms be considered a debt extinguishment and that the old instrument be derecognized.
Argentine GAAP clarifies that from a debtors perspective, an exchange of debt instruments between, or a modification of a debt instrument by, a debtor and a creditor shall be deemed to have been accomplished with debt instruments that are
substantially different if the present value of the cash flows under the terms of the new debt instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. The new debt
instrument should be initially recorded at fair value and that amount should be used to determine the debt extinguishment gain or loss to be recognized. Fair value should be determined by the present value of the future cash flows to be paid under
the terms of the new debt instrument discounted at a rate commensurate with the risks of the debt instrument and time value of money. If it is determined that the original and new debt instruments are not substantially different, then a new
effective interest rate is to be determined based on the carrying amount of the original debt instrument and the revised cash flows. Based on the analysis performed, the Company concluded that the instruments were not substantially different and
accordingly, the old instrument was not derecognized. The outstanding balance was reclassified to non-current in these consolidated financial statements. The outstanding balance of the Convertible Notes as of June 30, 2006 amounts to US$ 47.2
million.

During fiscal years 2006, 2005 and 2004, holders of approximately US$ 0.05 million, US$ 1.7 million and US$
0.8 million Convertible Notes exercised their conversion rights and, as a result, the Company issued 1,539,000, 52,741,380 and 22,852,510 common shares, respectively. At June 30, 2006 the outstanding balance of Convertible Notes amounted
to US$ 47.2 million.



|16. | Sale of the Alcorta Plaza plot of land
|--- | --------------------------------------

On
December 22, 2005, the Company subscribed a preliminary purchase contract with possession, by which the Company sold to RAGHSA S.A. the plot of land denominated Alcorta Plaza for a total price of US$ 7.7 million. On March 13, 2006 the deed
title of the building was registered and a first privilege degree mortgage guarantee was established on certain functional units to be used as offices and garages of the building property of RAGHSA S.A., located in Buenos Aires. The mortgage
amounted to US$ 4.4 million. The terms and conditions of payment agreed were determined in four



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|16. | Sale of the Alcorta Plaza plot of land (continued)
|--- | --------------------------------------------------

installments of
US$ 1.9 million and 7.5% annual interest on the balance, the first installment to be due at the date of the preliminary revenues contract and the next ones to be paid annually as from July 2006. The first two installments have been collected at
the date of these financial statements.

This transaction has been included in the Others line of the Segment information (Note
9).



|17. | Damages in Alto Avellaneda
|--- | --------------------------

On March 5, 2006,
one of the shopping centers of the Company, Alto Avellaneda Shopping Mall was affected by a fire caused by an electrical failure in one the stores. The fire produced no injuries to persons, or casualties, but caused significant damages to the
property. The total area damaged by the fire represented 36 stores or 15.7% of the square meters built. The area was reopened for normal business between June and August 2006. The Company carries insurance coverage which covers fire damage. Final
assessments, and corresponding reimbursements, by the insurance companies are not completed as of the date of these financial statements. As of June 30, 2006, the Company recognized a loss of Ps. 5.8 million related to the fire net of
insurance recoveries.



|18. | Subsequent events
|--- | -----------------

Acquisition of
Córdoba Shopping

During July 2006, the Company entered into an agreement with Grupo Roggio pursuant to which acquire, subject to
completion of a successful due diligence and the fulfillment of certain conditions, the total outstanding shares of Empalme S.A, owner of Córdoba Shopping Villa Cabrera.

Córdoba Shopping Villa Cabrera is a shopping center covering a surface area of 35,000 square meters, having 160 commercial stores, a multiplex
cinema with 12 movie theatres and a parking lot for 1,500 vehicles, located in the Villa Cabrera neighborhood of the city of Córdoba, the second largest city of Argentina.

On December 18, 2006 the transaction was approved and consummated by the Antitrust Agency through Resolution SCI N° 67 of the Secretary of
Commerce. This investment will be an opportunity for Alto Palermo to grow in the shopping center segment, in line with its strategy of expanding and gaining foothold in the main markets of the Argentine provinces.

Panamerican Mall project

On
December 1, 2006, the Company entered into a construction, administration and commercialization agreement with Centro Comercial Panamericano, S.A. (Centro Comercial Panamericano) in relation to the future shopping mall and housing
complex to be built on two properties located in the neighborhood of Saavedra, in the City of Buenos Aires owned by Panamerican Mall S.A. (PAMSA). The Company sold one of these properties (a plot of land acquired from Philips Argentina
S.A.) to PAMSA. The remaining property was acquired by PAMSA from Centro Comercial Panamericano.

PAMSA is a corporation recently
constituted in which the Company hold 80% of its capital stock. Centro Comercial Panamericano holds the remaining 20%. PAMSA was organized in order to carry out the agreement entered into between us and Centro Comercial Panamericano. In connection
with the aforementioned project, the Company made a capital contribution of Ps. 158,280,260 to PAMSA.

Commencement of construction of the
proposed project remains subject to receipt of certain governmental approvals.

Upgrading in the risk rating of APSA

In September 2006, Fitch Argentina Calificadora de Riesgo S.A., rated APSA from raA+ to raAA-. The most significant reasons for such rating were the
strong growth that its cash flows continue to show, which together with its conservative capital structure allow the Company to show robust indicators of loan protection. The rating reflects APSAs positioning as a leader in the Shopping Center
business in Argentina, the quality of its assets and the high margins of the business. Additionally, the increase in the rating of its shares responds to a very good cash flow generation capacity and to the average liquidity level of the share in
the market.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|18. | Subsequent events(continued)
|--- | ----------------------------

Distribution of dividends and creation of Global Note Program

The General Ordinary Shareholders Meeting of APSA, held
on October 31, 2006, approved by majority vote the distribution of a cash dividend in the amount of Ps. 47.0 million and the allocation of Ps. 2.2 million to the legal reserve. In addition, the meeting approved the creation of a
Global Program for the issuance of unsecured, unconvertible Notes for a principal amount of up to US$ 200.0 million or its equivalent in other currencies, in accordance with the provisions of Law No. 23,576 (Negotiable Obligations
Law) as amended and supplemented.

Acquisition of Patio Olmos

On December 19, 2006, the Company was notified of the acceptance of its Ps.32.5 million bid submitted in a public tender organized by
Corporación Inmobiliaria Córdoba S.A. for the sale of a property in the City of Córdoba known as Edificio Ex Escuela Gobernador Vicente de Olmos. The acquired property is the subject of a concession granted in 1990 by the
Province of Cordoba to an unaffiliated joint venture Regam S.C.A. y Corrientes Palace S.A. Unión Transitoria de Empresas. After notification of the acceptance of its bid, the Company made a Ps. 9.7 million down payment in
accordance to the bid rules.

On December 13, 2006, the Company was notified by a notary that on December 5, 2006, an objection
had been filed with the National Antitrust Commission, the Argentine antitrust authority, seeking to enjoin the Company from accepting the award made pursuant to the tender. To date, the Company has not received any notification issued by the
National Antitrust Commission.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP
|--- | ----------------------------------------------

The Companys consolidated financial statements have been prepared in accordance with Argentine GAAP and the regulations of the CNV, which differ in certain significant respects from US GAAP. Such differences involve methods of
measuring the amounts shown in the consolidated financial statements, as well as additional disclosures required by US GAAP and Regulation S-X of the SEC.

As discussed in Notes 2.d. and 3.k., in order to comply with regulations of the CNV, the Company (i) discontinued inflation accounting as from February 28, 2003 and (ii) recognized deferred income tax
assets and liabilities on an undiscounted basis. The application of these CNV resolutions represents a departure from Argentine GAAP. However, such departures have not had a material effect on the accompanying consolidated financial statements.



| | I. | Difference in measurement methods
| | -- | ---------------------------------

The following
reconciliation to US GAAP does not include the reversal of the adjustments to the financial statements for the effects of inflation through February 28, 2003, because the application of this standard represents a comprehensive measure of
the effects of price level changes in the Argentine economy.

The principal differences, other than inflation accounting, between Argentine
GAAP and US GAAP are described below, together with an explanation, where appropriate, of the method used in the determination of the necessary adjustments.



|                                                                                                 |  |                     |            |   |      |     |             |      |  |     |             |  
|------------------------------------------------------------------------------------------------ |  | ------------------- | ---------- | - | ---- | --- | ----------- | ---- |  | --- | ----------- | -
|                                                                                                 |  | Year ended June 30, |           
|                                                                                                 |  | 2006                |            |   | 2005 |     |             | 2004 | 
|Reconciliation of net income:                                                                    |  |                     |            |   |      |     |             |      |  |     |             |  
|Net income as reported under Argentine GAAP                                                      |  | Ps.                 | 44,679,032 |   |      | Ps. | 33,255,400  |      |  | Ps. | 18,837,540  |  
|US GAAP adjustments:                                                                             |  |                     |            |   |      |     |             |      |  |     |             |  
|Pre-operating expenses                                                                           |  |                     |            |   |      |     |             |      |  |     |             |  
|-Original value (Note 19.I.b)                                                                    |  |                     | 1,018,954  |   |      |     | (4,281,731  | )    |  |     | (561,090    | )
|-Amortization (Note 19.I.b)                                                                      |  |                     | 93,649     |   |      |     | 880,289     |      |  |     | 426,516     |  
|Software developed or obtained for internal use (Note 19.I.c)                                    |  |                     | (100,831   | ) |      |     | (48,282     | )    |  |     | 156,664     |  
|Amortization and depreciation expense (Note 19.I.e)                                              |  |                     | 4,269,276  |   |      |     | 4,548,659   |      |  |     | 4,826,542   |  
|Non-current investments in unconsolidated affiliated companies (Note 19.I.f)                     |  |                     |           |   |      |     | 17,485      |      |  |     | 1,752,963   |  
|Accounting for increasing rate debt (Note 19.I.g)                                                |  |                     | (9,510     | ) |      |     | (193,972    | )    |  |     |            |  
|Reversal of the gain from recognition of inventories at net realizable value (Note 19.I.h)       |  |                     | (3,497,632 | ) |      |     |            |      |  |     |            |  
|Securitization accounting (Note 19.I.j)                                                          |  |                     | (8,338,782 | ) |      |     | 2,154,801   |      |  |     | (2,574,229  | )
|Available-for-sale securities (Note 19.I.k)                                                      |  |                     | (48,034    | ) |      |     | (85,060     | )    |  |     | 159,930     |  
|Debtors accounting for a modification of convertible debt instruments (Note 19.I.l)             |  |                     | (46,056    | ) |      |     |            |      |  |     |            |  
|Amortization of fees related to the Senior Notes (Note 19.I.m)                                   |  |                     |           |   |      |     | 401,670     |      |  |     | 597,117     |  
|Present-value accounting (Note 19.I.o)                                                           |  |                     | 5,656      |   |      |     | (602,796    | )    |  |     | (782,244    | )
|Reversal of previously recognized impairment losses (Note 19.I.p)                                |  |                     | (5,157,096 | ) |      |     | (10,424,685 | )    |  |     | (24,353,824 | )
|Reversal of gain from recognition of financial receivables at net realizable value (Note 19.I.q) |  |                     | (8,219,285 | ) |      |     |            |      |  |     |            |  
|Deferred income tax (Note 19.I.r)                                                                |  |                     | 20,221,740 |   |      |     | 11,121,422  |      |  |     | 8,913,120   |  
|Minority interest (Note 19.I.s)                                                                  |  |                     | 2,136,735  |   |      |     | (574,231    | )    |  |     | (147,904    | )
|                                                                                                 |  |                     |            |   |      |     |             |      |  |     |             |  
|Net income under US GAAP                                                                         |  | Ps.                 | 47,007,816 |   |      | Ps. | 36,168,969  |      |  | Ps. | 7,251,101   |  
|                                                                                                 |  |                     |            |   |      |     |             |      |  |     |             |  
|Earnings per share under US GAAP (Note 19.II.i):                                                 |  |                     |            |   |      |     |             |      |  |     |             |  
|Basic net income per common share                                                                |  | Ps.                 | 0.06       |   |      | Ps. | 0.05        |      |  | Ps. | 0.01        |  
|Diluted net income per common share                                                              |  | Ps.                 | 0.03       |   |      | Ps. | 0.02        |      |  | Ps. | 0.01        |  



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



|                                                                                                 |  |                     |              |   |      |     |              |  
|------------------------------------------------------------------------------------------------ |  | ------------------- | ------------ | - | ---- | --- | ------------ | -
|                                                                                                 |  | As of June 30,      |             
|                                                                                                 |  | 2006                |              |   | 2005 |    
|Reconciliation of shareholders equity:                                                          |  |                     |              |   |      |     |              |  
|Total shareholders equity under Argentine GAAP                                                  |  | Ps.                 | 806,840,505  |   |      | Ps. | 791,007,573  |  
|US GAAP adjustments:                                                                             |  |                     |              |   |      |     |              |  
|Appraisal revaluation of fixed assets (Note 19.I.a)                                              |  |                     | (3,952,571   | ) |      |     | (3,952,571   | )
|Pre-operating expenses                                                                           |  |                     |              |   |      |     |              |  
|-Original value (Note 19.I.b)                                                                    |  |                     | (15,558,214  | ) |      |     | (16,577,168  | )
|-Accumulated amortization (Note 19.I.b)                                                          |  |                     | 11,607,926   |   |      |     | 11,514,277   |  
|Software developed or obtained for internal use (Note 19.I.c)                                    |  |                     | (178,516     | ) |      |     | (77,685      | )
|Differences in basis relating to purchase accounting                                             |  |                     |              |   |      |     |              |  
|-Original value (Note 19.I.d)                                                                    |  |                     | 23,856,024   |   |      |     | 23,856,024   |  
|-Accumulated amortization and depreciation (Note 19.I.e)                                         |  |                     | 13,737,808   |   |      |     | 9,468,532    |  
|Accounting for increasing rate debt (Note 19.I.g)                                                |  |                     | (203,482     | ) |      |     | (193,972     | )
|Reversal of the gain from recognition of inventories at net realizable value (Note 19.I.h)       |  |                     | (3,497,632   | ) |      |     |             |  
|Securitization accounting (Note 19.I.j)                                                          |  |                     | 53,803       |   |      |     | 2,954,410    |  
|Debtors accounting for a modification of convertible debt instruments (Note 19.I.l)             |  |                     | 2,833,371    |   |      |     |             |  
|Present-value accounting (Note 19.I.o)                                                           |  |                     | 61,500       |   |      |     | 55,844       |  
|Reversal of previously recognized impairment losses (Note 19.I.p)                                |  |                     | (56,208,412  | ) |      |     | (51,051,316  | )
|Reversal of gain from recognition of financial receivables at net realizable value (Note 19.I.q) |  |                     | (8,219,285   | ) |      |     |             |  
|Deferred income tax (Note 19.I.r)                                                                |  |                     | (132,102,668 | ) |      |     | (150,404,235 | )
|Minority interest (Note 19.I.s)                                                                  |  |                     | 4,776,875    |   |      |     | 3,376,071    |  
|                                                                                                 |  |                     |              |   |      |     |              |  
|Shareholders equity under US GAAP                                                               |  | Ps.                 | 643,847,032  |   |      | Ps. | 619,975,784  |  
|                                                                                                 |  |                     |              |   |      |     |              |  
|                                                                                                 | 
|                                                                                                 |  | Year ended June 30, |             
|                                                                                                 |  | 2006                |              |   | 2005 |    
|Description of changes in shareholders equity under US GAAP:                                    |  |                     |              |   |      |     |              |  
|Shareholders equity as of the beginning of the year                                             |  | Ps.                 | 619,975,784  |   |      | Ps. | 595,230,727  |  
|Cash dividends                                                                                   |  |                     | (29,000,000  | ) |      |     | (17,895,663  | )
|Conversion of debt into common stock                                                             |  |                     | 153,900      |   |      |     | 5,274,138    |  
|Additional Paid in Capital                                                                       |  |                     | 2,879,427    |   |      |     |             |  
|Other comprehensive income                                                                       |  |                     | 2,830,105    |   |      |     | 1,197,613    |  
|Net income under US GAAP                                                                         |  |                     | 47,007,816   |   |      |     | 36,168,969   |  
|                                                                                                 |  |                     |              |   |      |     |              |  
|Shareholders equity as of the end of the year                                                   |  | Ps.                 | 643,847,032  |   |      | Ps. | 619,975,784  |  
|                                                                                                 |  |                     |              |   |      |     |              |  



| | a) | Appraisal revaluation of fixed assets
| | -- | -------------------------------------

As discussed
in Note 3.f., under Argentine GAAP, the Company recognized a parcel of land acquired prior to June 30, 1986 at its appraised value as of such date. This appraisal increased the carrying value of the land by approximately Ps. 4.0 million,
which was recorded against an appraisal revaluation reserve account in the shareholders equity. Under Argentine GAAP, this appraisal revaluation reserve will be amortized to income once the land is disposed of or its value becomes impaired.
Under US GAAP, this parcel of land was recorded at original cost and therefore, this reserve has been reversed.



| | b) | Pre-operating expenses
| | -- | ----------------------

Under Argentine GAAP, the
Company capitalizes certain costs related to pre-opening activities of the Companys shopping centers. These costs are being amortized under the straight-line basis over 3 years. Under US GAAP, these costs are expensed as incurred.



| | c) | Software developed or obtained for internal use
| | -- | -----------------------------------------------

During fiscal years 2006 and 2005, under Argentine GAAP, the Company capitalized certain costs amounting to Ps. 0.1 million and Ps. 0.1 million, respectively, which would be expensed under US GAAP pursuant to the provisions
of Statement of Position 98-1

Accounting for the Costs of Computer Software Developed or Obtained for Internal Use (SOP 98-1). The US GAAP
adjustment for the fiscal years 2006 and 2005 represents the net effect of (i) expense such costs and (ii) reversal of depreciation charges for 2006 and 2005 and previously capitalized costs under Argentine GAAP and expensed under US GAAP.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | c) | Software developed or obtained for internal use (continued)
| | -- | -----------------------------------------------------------

During fiscal year 2004, the US GAAP adjustment represents the reversal of depreciation charges for such fiscal year amounting to Ps. 0.2 million related to the reversal of depreciation charges for previously capitalized costs
under Argentine GAAP which were expensed under US GAAP.



| | d) | Differences in basis relating to purchase accounting
| | -- | ----------------------------------------------------

Under Argentine GAAP and US GAAP, the acquisition of businesses have been accounted for by the purchase method of accounting, and accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed
based on the estimated fair values at the date of acquisition. Any excess of the purchase price over the net identifiable tangible and other intangible assets is assigned to goodwill. Goodwill is amortized over a term not exceeding ten years
under Argentine GAAP. The US GAAP adjustment for Differences in basis relating to purchase accounting reflects the application of certain US GAAP adjustments when estimating the fair value of such assets and liabilities
acquired in the acquisitions consummate in fiscal years prior to 2006. As such, the amount of goodwill recorded under both GAAPs differed.

As discussed in Note 2.b. (i), the Company acquired an additional 2.7% interest in Emprendimiento Recoleta S.A. in May 18, 2006. Under Argentine GAAP, the excess of fair value of net assets acquired over the purchase price paid was
assigned to negative goodwill. Negative goodwill is amortized over the weighted-average remaining useful lives of the assets acquired, which mainly is comprised of the shopping center property. Under US GAAP, the Company applied the provisions
of SFAS No. 141 Business Combination and SFAS No. 142 Goodwill and Other Intangible Assets and allocated the negative goodwill to reduce the carrying amount of the assets acquired, which results in lower
depreciation charges under US GAAP. Since the amortization of the negative goodwill equals the lower depreciation charge of the assets acquired, there is no effect in the US GAAP reconciliation.



| | e) | Amortization and depreciation expense
| | -- | -------------------------------------

The
differences in the carrying amount of goodwill between Argentine GAAP and US GAAP as described in Note 19.I.d. gave rise to differences in amortization expense until June 30, 2002. Amortization expense recorded in this connection totaled
Ps. 4.8 million. Effective July 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets and, as such, discontinued amortization of goodwill as from that date. As such, amortization expense recorded under
Argentine GAAP reversed under US GAAP was Ps. 4.8 million for all of the years presented.

The differences in the carrying amount
of fixed assets acquired between Argentine GAAP and US GAAP as described in Note 19.I.d. give rise to higher depreciation charges. Higher depreciation expense under US GAAP totaled Ps. 0.5 million and Ps. 0.3 million during
fiscal year 2006 and 2005, respectively.



| | f) | Non-current investments in unconsolidated affiliated companies
| | -- | --------------------------------------------------------------

The Company has assessed the impact of US GAAP adjustments for its equity investees. As a consequence of this assessment, the Company recognized a net gain of Ps. 0.02 million and Ps. 1.8 million for
the years ended June 30, 2005 and 2004, respectively. These adjustments relate principally to (i) the recognition of pre-operating and organization costs as expenses, (ii) the accounting for certain assets and liabilities on a
non-discounted basis, (iii) the reversal of a gain recognized under Argentine GAAP related to the restoration of a previously recognized impairment loss, (iv) the treatment of the differences between the price-level restated amounts of
assets and liabilities and their historical basis as temporary differences in calculating deferred income taxes, and (v) the effect on deferred income taxes of the mentioned reconciled items, as appropriate. These adjustments primarily
correspond to the Companys interest in Mendoza Plaza Shopping which, as from October 1, 2004, is being consolidated as a result of a series of transactions pursuant to which the Company gained control. Therefore, as from that date the
US GAAP adjustments related to Mendoza Plaza Shopping are included line by line in the reconciliation of net income and shareholders equity. At June 30, 2006 there are no US GAAP differences in the accounting for the
Companys investment in E-Commerce Latina.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | g) | Accounting for increasing rate debt
| | -- | -----------------------------------

As discussed
in Note 4.h.(i), on April 5, 2005 Banco Rio de la Plata and Bank Boston N.A. granted the Company a syndicated financial loan in a total amount of Ps. 50 million, which will be amortized in four six-month equal and consecutive installments
beginning October 5, 2005. The syndicated loan accrued interest at a fixed rate of 7.875% during the first year and then accrue interest at a variable rate (Encuesta) plus 3% during the second year.

Under Argentine GAAP, interest is recognized based on the interest rate applicable to each interest period. Under US GAAP, in accordance with EITF
86-15, Increasing Rate Debt, the Company is recognizing the periodic interest cost related to the syndicated loan using the effective interest method over the period it is estimated that the loan will be outstanding.



| | h) | Reversal of the gain from recognition of inventories at net realizable value
| | -- | ----------------------------------------------------------------------------

As discussed in Note 4.k.(ii), during fiscal year 2006 the Company entered into a preliminary contract to sell a plot of land. This sale transaction has not been consummated at year-end. Under Argentine GAAP, however,
since the Company received an advance payment fixing the sale price, the Company valued this plot of land at their estimated net realizable value. As a result, the Company recognized a gain of Ps. 3.5 million during the year ended June 30,
2006. Under US GAAP, inventories are valued at cost. As such, the US GAAP adjustment represents the reversal of the gain recognized under Argentine GAAP.



| | i) | Stock option agreement with CIM
| | -- | -------------------------------

E-Commerce Latina
entered into a stock option agreement with Consultores Internet Managers Ltd. (CIM), pursuant to which options were granted, to purchase class B shares of Altocity.Com, representing 15% of its common stock. CIM is a special-purpose
Cayman Islands ́ corporation created to act on behalf of the Companys management and is represented by an independent attorney-in-fact. Pursuant to the terms of the agreement, options were granted for a period up to eight years and at an
exercise price to be determined by the quotient of (i) the original value of class B shares at the time of the contribution to Altocity.Com by the holding company, plus interest accrued at an annual fixed interest rate of 14% through the
exercise date of the option over (ii) the total number of class B shares owned by the holding company at the exercise date of the option. CIM has a vested interest in 50% of the underlying shares within 30 days after the grant date and the
remaining 50% will vest upon the third anniversary of the grant date. The option was granted to CIM to be allocated by it among the management of Altocity.com as an incentive compensation for their services. Upon exercise of the option, CIMs
sole asset will be its 15% interest in Altocity.Com. As of the date of these financial statements, the options were not individually allocated. As such, there was no grant date established.

In December 2004, the FASB issued SFAS No. 123R (Share-Based Payment). SFAS No. 123R revises SFAS No. 123 and requires entities to
recognize compensation expense for all share-based payment transactions in an amount equal to the fair value of share-based payments granted to employees. SFAS No. 123R requires a company to record compensation expense for all awards granted
after the date of adoption of SFAS No. 123R and for the unvested portion of previously granted awards that remain outstanding at the date of adoption. The revised statement generally requires that an entity account for those transactions using
the fair-value-based method, and eliminates the intrinsic value method of accounting in APB 25, which was permitted under SFAS No. 123, as originally issued. The Company will apply the provisions of SFAS No. 123R as from the grant date of
the options which will be established when they will be allocated to management on an individual basis.



| | j) | Securitization Accounting
| | -- | -------------------------

As discussed in Note 11,
the Company enters into two-year revolving-period securitization programs, through which Tarshop, a majority-owned subsidiary of the Company, transfers credit card receivables to the trust in exchange for cash and retained interests in the trust
(CPs). Part of the proceeds is retained by the trustee and maintained as a cash reserve to serve as collateral for the payment of amounts due on the TDFs. Cash reserves flow back to Tarshop on a monthly basis according to a schedule until all TDFs
are fully paid.

Under Argentine GAAP, the Company recognizes a gain or loss on the sale of receivables when the carrying value of
transferred credit card receivables differs from the amount of cash and CPs received. Results recognized on the sale of receivables are reported as a component of Net income from retained interest in securitized receivables in the



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | j) | Securitization Accounting (continued)
| | -- | -------------------------------------

accompanying statements of
income. Cash reserves are stated at cost and are classified as guarantee deposits within the caption Other receivables and prepaid expenses in the accompanying consolidated balance sheets. CPs are carried at their equity
value based on financial statements issued by the trusts and classified as investments in the accompanying consolidated balance sheets. Certain expenses associated with the securitization of credit card receivables are capitalized and amortized over
the term of the agreements.

Under US GAAP, the Company adopted Statement of Financial Accounting Standards No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 140). SFAS No. 140 was issued in September 2000 and replaced, in its entirety, SFAS No. 125. The Company
was required to adopt the provisions of SFAS No. 140 prospectively for transactions beginning after March 31, 2001. Although SFAS No. 140 has changed many of the rules regarding securitizations under SFAS No. 125, it continues to
require an entity to recognize the financial and servicing assets it controls and the liabilities it has incurred and to derecognize financial assets when control has been surrendered. The proceeds of securitized financial assets are allocated to
the assets sold, the servicing asset or liability and retained interest, based on their relative estimated fair values at the transfer date in determining the gain on the securitization transaction. SFAS No. 140 and SFAS No. 125 also
require an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service financial assets that have been securitized and amortize it over the period of estimated net servicing income or loss. The
Company has not recognized any servicing asset or liability since the estimated fair value of the servicing right was zero. In determining the estimated fair value, the Company considered the fees received as compensation just adequate to compensate
the Company for its servicing responsibilities (i.e. the fees received as compensation for the services rendered are similar to those that would be paid to a substitute servicer, should one be required, according to estimated market values).

The retained interests in securitized credit card receivables are treated as a debt security classified as available-for-sale in
accordance with Statement of Financial Accounting Standards No. 115 (SFAS No. 115), Accounting for Certain Investments in Debt and Equity Securities, and are carried at fair value. At the time of securitization, the
retained interest is initially recorded at the basis allocated in accordance with SFAS No. 140. This original cost basis is periodically adjusted to fair value, which is based on the discounted anticipated future cash flows on a cash
out basis. The cash out method projects cash collections to be received only after all amounts owed to investors have been paid. Adjustments to fair value (net of related deferred income taxes) are recorded as a component of other
comprehensive income. SFAS No. 115 also states that for individual securities classified as available-for-sale an enterprise shall determine whether a decline in fair value below the amortized cost basis is other than temporary. In such event,
accumulated unrealized losses included in other comprehensive income shall be reclassified into the statement of income. Cash reserves are considered retained interests and as such they are considered in calculating the gain or loss on the sale of
receivables under US GAAP.

Provided below is an analysis of the securitization accounting adjustments, including a description of each
significant component, where appropriate.

- The shareholders equity adjustments represent the difference in the valuation of the
Companys retained interests in the trusts related to securitization programs that qualified for sale treatment under US GAAP. Under Argentine GAAP, retained interests in the trusts are carried at their equity value. Under US GAAP those
retained interests are considered available-for-sale securities in accordance with SFAS 115 and, as a result, are carried at their estimated fair market value. The US GAAP adjustments affecting shareholders equity at June 30, 2006
and 2005 are as follows:



|                                                                                                                                           |  |      |             |   |      |     |            |  
|------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ----------- | - | ---- | --- | ---------- | -
|                                                                                                                                           |  | 2006 |             |   | 2005 |    
|Equity value as reported under Argentine GAAP                                                                                              |  | Ps.  | 47,228,091  |   |      | Ps. | 29,521,657 |  
|Less: retained interests related to securitization programs that did not qualify as a sale under US GAAP                                   |  |      | (20,009,994 | ) |      |     | (9,476,300 | )
|                                                                                                                                           |  |      |             |   |      |     |            |  
|Equity value reported under Argentine GAAP of retained interests related to securitization programs that qualified as a sale under
US GAAP |  | Ps.  | 27,218,097  |   |      | Ps. | 20,045,357 |  
|Estimated fair market value of retained interests related to securitization programs that qualified as a sale under
US GAAP                |  |      | 27,271,900  |   |      |     | 22,999,767 |  
|                                                                                                                                           |  |      |             |   |      |     |            |  
|US GAAP adjustment                                                                                                                         |  | Ps.  | 53,803      |   |      | Ps. | 2,954,410  |  
|                                                                                                                                           |  |      |             |   |      |     |            |  



F-46



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | j) | Securitization Accounting (continued)
| | -- | -------------------------------------

- The
US GAAP adjustments affecting net income as reported under Argentine GAAP for the years ended June 30, 2006, 2005 and 2004 are as follows:



|                                                        |  |      |            |   |      |     |           |  |     |            |  
|------------------------------------------------------- |  | ---- | ---------- | - | ---- | --- | --------- |  | --- | ---------- | -
|                                                        |  | 2006 |            |   | 2005 |     | 2004      | 
|Reversal of results recognized under Argentine GAAP (1) |  | Ps.  | (450,274   | ) |      | Ps. | 641,103   |  | Ps. | (166,294   | )
|Recognition of results under US GAAP (2)                |  |      | (7,888,508 | ) |      |     | 1,513,698 |  |     | (2,407,935 | )
|                                                        |  |      |            |   |      |     |           |  |     |            |  
|US GAAP adjustment                                      |  | Ps.  | (8,338,782 | ) |      | Ps. | 2,154,801 |  | Ps. | (2,574,229 | )
|                                                        |  |      |            |   |      |     |           |  |     |            |  

---

|(1) | Includes the reversal of results reported in Net income from retained interest in securitized receivables in the Companys consolidated statements of income as well
as the reversal of inflation accounting results reported within Financial results, net in the Companys consolidated statements of income.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Primarily includes the gain or loss recorded on the sale of receivables plus unrealized losses on retained interests considered other-than-temporary.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------

Regarding receivables transferred in connection with the Companys securitization programs that qualified for sale treatment under US GAAP,
neither the Company nor the trustee have responsibility over any shortfall or failure in collecting the receivables which are the source of cash payment for the TDF holders. Furthermore, the agreements relating to the securitization stipulate that
the rights of the beneficiaries (TDF holders) will not be affected by any financial or liquidity failure of either the trustee or the Company. The agreements also state that the transfer qualifies as a non-recourse transfer of receivables since if
receivables are not collected in full, neither the trustee nor the Company is obligated to use its own cash flows to cover any potential shortfall or collection failure.

The following summarizes the changes in the balance of the Companys retained interests for the years ended June 30, 2006, 2005 and 2004:



|                                  |  |      |             |   |                                |     |            |  |     |             |  
|--------------------------------- |  | ---- | ----------- | - | ------------------------------ | --- | ---------- |  | --- | ----------- | -
|                                  |  | Cost |             |   | Estimatedunrealized gain(loss) |     | Fair value | 
|Balance at June 30, 2003          |  | Ps.  | 1,976,942   |   |                                | Ps. |           |  | Ps. | 1,976,942   |  
|Increase in retained interest     |  |      | 5,903,139   |   |                                |     |           |  |     | 5,903,139   |  
|Change in unrealized gain         |  |      |            |   |                                |     | 1,999,979  |  |     | 1,999,979   |  
|                                  |  |      |             |   |                                |     |            |  |     |             |  
|Balance at June 30, 2004          |  | Ps.  | 7,880,081   |   |                                | Ps. | 1,999,979  |  | Ps. | 9,880,060   |  
|Increase in retained interest     |  |      | 12,909,592  |   |                                |     |           |  |     | 12,909,592  |  
|Liquidation of retained interests |  |      | (1,976,942  | ) |                                |     |           |  |     | (1,976,942  | )
|Change in unrealized gain         |  |      |            |   |                                |     | 2,187,057  |  |     | 2,187,057   |  
|                                  |  |      |             |   |                                |     |            |  |     |             |  
|Balance at June 30, 2005          |  | Ps.  | 18,812,731  |   |                                | Ps. | 4,187,036  |  | Ps. | 22,999,767  |  
|Increase in retained interest     |  |      | 10,833,191  |   |                                |     |           |  |     | 10,833,191  |  
|Liquidation of retained interests |  |      | (11,999,233 | ) |                                |     |           |  |     | (11,999,233 | )
|Change in unrealized gain         |  |      |            |   |                                |     | 5,438,175  |  |     | 5,438,175   |  
|                                  |  |      |             |   |                                |     |            |  |     |             |  
|Balance at June 30, 2006          |  | Ps.  | 17,646,689  |   |                                | Ps. | 9,625,211  |  | Ps. | 27,271,900  |  
|                                  |  |      |             |   |                                |     |            |  |     |             |  

(i) As the Company considered the decline in fair value as other than temporary
unrealized losses at June 30, 2003 had been recognized in earnings. Unrealized gains for the years ended June 30, 2004, 2005 and 2006 were included as a component of Accumulated Other Comprehensive Income in shareholders
equity.

The key economic assumptions used in measuring the fair value of retained interests at the time of and subsequent to a
securitization are the estimated cash flows and the discount rate. The estimated cash flows have been discounted at rates that include charges for losses. The following represents the sensitivity of the current fair value of retained interest in
securitizations at June 30, 2006 to changes to key assumptions:



|                                   |  |                           |             |                            |                         
|---------------------------------- |  | ------------------------- | ----------- | -------------------------- | ------------------------
|                                   |  | Impact on fair value of a
|                                   |  | 5% interest rate increase |             | 10% interest rate increase
|Rates including charges for losses |  | Ps.                       | (1,604,704) |                            | Ps.          (3,018,484)



F-47



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | j) | Securitization Accounting (continued)
| | -- | -------------------------------------

The above
sensitivities are hypothetical and should be used with caution. As the amounts indicate, changes in fair value based on variations in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in
fair value may not be linear. Also, in this table, the effect of a variation in a particular assumption on the fair value of the retained interest is calculated without changing any other assumption. In reality, changes in one factor may result in
changes in another, which might magnify or counteract the sensitivities.

The Companys managed credit card receivables consist of
retained interest in credit card receivable securitizations and investors share of securitizations sold to unrelated parties without recourse. The Company records its retained interest in credit card receivable securitizations on the balance
sheet.



| | k) | Available-for-sale securities
| | -- | -----------------------------

Under Argentine
GAAP, investments in mutual funds and government and mortgage bonds are carried at market value, with unrealized gains and losses recorded in income. Under US GAAP, pursuant to SFAS 115, Accounting for Certain Investments in Debt and
Equity Securities, these investments are classified as available-for-sale securities, and accordingly unrealized gains and losses are excluded from income and reported as a separate component of shareholders equity.



| | l) | Debtors accounting for a modification of convertible debt instruments
| | -- | ----------------------------------------------------------------------

As indicated in Note 15, in August 2002 the Company issued US$ 50 million of Convertible Notes. Under US GAAP, the Company applied APB 14, Accounting for Convertible Debt and Debt Issued with Stock
Purchase Warrants, which requires that no portion of the proceeds be allocated to the conversion feature if the convertible debt securities are convertible into common stock of the issuer at a specified price at the option of the holder and
are sold at a price or have a value at issuance not significantly in excess of the face amount. In considering the accounting treatment of the Convertible Notes under US GAAP the Company took account of the guidance provided in EITF 98-5. EITF
98-5 requires that embedded beneficial conversion features present in convertible securities be valued separately at issuance when the non-detachable conversion feature is in-the-money at the commitment date. The embedded beneficial
conversion feature should be recognized and measured by allocating to additional paid-in capital a portion of the proceeds equal to the intrinsic value of that feature. That amount is calculated at the commitment date as the difference between the
conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible (intrinsic value). As a result of the analysis the Company
performed, no proceeds were allocated to the embedded conversion feature since it was out-the-money at the commitment date (i.e. the intrinsic value at the commitment date was zero).

The terms of the convertible debt instrument were modified to extend the maturity date through July 19, 2014. Argentine GAAP requires that an
exchange of debt instruments with substantially different terms be considered a debt extinguishment and that the old debt instrument be derecognized. Argentine GAAP clarifies that from a debtors perspective, an exchange of debt instruments
between, or a modification of a debt instrument by, a debtor and a creditor shall be deemed to have been accomplished with debt instruments that are substantially different if the present value of the cash flows under the terms of the new debt
instrument is at least 10 percent different from the present value of the remaining cash flows under the terms of the original instrument. The new debt instrument should be initially recorded at fair value and that amount should be used to determine
the debt extinguishment gain or loss to be recognized. Fair value should be determined by the present value of the future cash flows to be paid under the terms of the new debt instrument discounted at a rate commensurate with the risks of the debt
instrument and time value of money. If it is determined that the original and new debt instruments are not substantially different, then a new effective interest rate is to be determined based on the carrying amount of the original debt instrument
and the revised cash flows. Based on the analysis performed, the Company concluded that the instruments were not substantially different and accordingly the old instrument was not derecognized. The outstanding balance was reclassified to non-current
in these consolidated financial statements.



F-48



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | l) | Debtors accounting for a modification of convertible debt instruments (continued)
| | -- | ----------------------------------------------------------------------------------

Under US GAAP, in November 2006, the EITF reached a final consensus in EITF Issue 06-6 Debtors Accounting for a Modification (or
Exchange) of Convertible Debt Instruments. EITF 06-6 reconsidered the original consensus in Issue 05-7 Accounting for Modification to Conversion Options Embedded in Debt Instruments and Related Issues that the change in fair value
of an embedded conversion option should be included in the cash flow analysis under EITF Issue 96-19, Debtors Accounting for a Modification or Exchange of Debt Instruments, in determining whether a debt instrument has been modified
or extinguished. This Issue considers the accounting for a modification of debt terms (or exchange in debt instruments) when a change in the fair value of an embedded conversion option has occurred or an embedded conversion option has been added or
eliminated from the debt instrument. This Issue also amended the guidance in EITF Issue 96-19.

The consensus stipulates that, in
evaluating whether a convertible debt instrument has been modified or extinguished, three aspects of the modification (or exchange of debt instruments) must be considered.



| | 1. | Change in cash flows: If the change in cash flows as prescribed by the analysis under Issue 96-19 is greater than 10% of the carrying value of the original debt instrument, the
modification (or exchange of debt instruments) should be accounted for as an extinguishment. This test would not include any changes in fair value to the embedded conversion option.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | Change in fair value of the embedded conversion option: If the change in the fair value of the embedded conversion option is greater than 10% of the carrying value of the original
debt instrument immediately before the change (or exchange of debt instruments), the modification (or exchange) should be accounted for as an extinguishment.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | Addition or removal of an embedded conversion option: The addition or removal of a substantive conversion option would automatically result in extinguishment accounting.
Whether an embedded conversion option is substantive would be assessed as of the modification date and would be based on the definition of substantive in EITF Issue 05-1, Accounting for the Conversion of an Instrument That Becomes Convertible
upon the Issuers Exercise of a Call Option.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Any one of the three criteria needs to be met to account for the
modification of the debt instrument (or exchange of debt instruments) as an extinguishment. When the result of the three-pronged evaluation above results in a conclusion that a convertible debt instrument has been modified (and not extinguished),
the Task Force affirmed as a final consensus that any increase in the fair value of the embedded conversion option should reduce the carrying value of the debt instrument (with a corresponding increase to additional paid-in capital), but any
decrease in the fair value of the embedded conversion option is ignored.

Based on the analysis performed, neither of criteria 1, 2 or 3
above are met. Accordingly, the change of the debt instrument has not been accounted for as an extinguishment. Thus, the increase in the fair value of the conversion option reduced the carrying value of the debt instrument with a corresponding
increase to additional paid-in-capital). This resulted in an increase in interest expense prospectively.



| | m) | Amortization of fees related to the Senior Notes
| | -- | ------------------------------------------------

For the years ended June 30, 2005 and 2004, under Argentine GAAP, fees and expenses relating to the Senior Notes were amortized on a straight-line method over the term of the agreement. Under US GAAP, such costs were amortized
over the same period but using the effective interest method of amortization. The Senior Notes were paid in January and April, 2005.



F-49



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | n) | Accounting for derivatives and hedging activities
| | -- | -------------------------------------------------

As discussed in Notes 3.t. and 12, the Company has used certain financial instruments to lower its overall borrowing costs. As of June 30, 2006 and 2005, there were no outstanding derivative financial instruments.

Under Argentine GAAP, the Company applies Technical Resolution No. 20 (RT 20), Accounting for Derivative Instruments and Hedging
Activities, which establishes accounting and reporting standards for derivative instruments and for hedging activities. RT 20 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and how it is designated. RT 20 prescribes that changes in the fair value of effective cash flow hedges are
deferred as a separate component of the balance sheet and subsequently reclassified into earnings when the hedged items affect earnings. Gains and losses from fair value hedges are recognized in earnings in the period of any changes in the fair
value of the related recognized asset or liability. Gains and losses on derivative instruments that are not designated as a hedging instrument are recognized in earnings in the period of change.

Under US GAAP, the Company applies Statement of Financial Accounting Standards No.133 Accounting for Derivative Instruments and Hedging
Activities and subsequent amendments (SFAS No. 133). SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in the derivatives fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a
derivatives gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.

As a result, no differences exist in accounting for derivatives and hedging activities between Argentine GAAP and US GAAP.



| | o) | Present-value accounting
| | -- | ------------------------

As indicated in Note
3.x., under Argentine GAAP, asset tax credits are present-valued as of year-end. Under US GAAP, present valuing or discounting of these assets is precluded.



| | p) | Reversal of previously recognized impairment losses
| | -- | ---------------------------------------------------

As a result of increases in the fair market value of property and equipment and inventories, and as required by Argentine GAAP, during fiscal years 2004, 2005 and 2006 the Company partially reversed certain impairment losses that had been
previously recognized during fiscal year 2002. Amounts reversed during fiscal years 2004, 2005 and 2006 amounted to Ps. 26.9 million, Ps. 13.1 million and Ps. 9.9 million, respectively, giving rise to higher depreciation charges under
Argentine GAAP. Under US GAAP, reversal of a previously recognized impairment loss is prohibited. When an impairment loss is recognized, the adjusted carrying amount of the asset becomes the new cost basis, which is depreciated over the
remaining useful life of the asset. Depreciation expense reversed under US GAAP for fiscal years 2004, 2005 and 2006 amounted to Ps. 2.5 million, Ps. 2.7 million and Ps. 4.7 million, respectively, and are shown netted against the
reversal of impairment losses under Argentine GAAP.



| | q) | Reversal of gain from recognition of financial receivables at net realizable value
| | -- | ----------------------------------------------------------------------------------

Under Argentine GAAP the Company has accounts receivables originated in financial transactions which are accounted at its net realizable value as of June 30, 2006.

Under US GAAP, those accounts receivable are accounted at fair value.

The difference between the net realizable value and the fair value of those financial accounts receivables as of June 30, 2006 is Ps. 8.2 million.



F-50



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | r) | Deferred income tax
| | -- | -------------------

As discussed in Note 3.k, the
Company records income taxes using the liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recorded or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is
recognized for that component of net deferred tax assets which is not recoverable. This standard is similar to the principles of US GAAP set forth in Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes.

However, under Argentine GAAP, the Company has treated the differences between the price-level restated amounts of
assets and liabilities and their historical basis as permanent differences for deferred income tax calculation purposes in accordance with Resolution MD No.11/2003 issued by the CPCECABA. Under US GAAP, the Company applies EITF 93-9,
Application of FASB Statement No.109 in Foreign Financial Statements Restated for General Price-Level Changes, which requires such differences to be treated as temporary differences in calculating deferred income taxes.

Furthermore, the CNV issued General Resolutions 485 and 487 on December 29, 2005 and January 26, 2006, respectively. Such resolutions have
adopted, with certain modifications, the new accounting standards previously issued by the Professional Council in Economic Sciences of the Autonomous City of Buenos Aries through its Resolution CD 93/2005. These standards are to be mandatorily
applied for fiscal years or interim periods corresponding to fiscal years beginning as from January 1, 2006. The standards will be effective for the Company for the year ended June 30, 2007.

The most significant change included in the accounting standards adopted by the CNV relates to the accounting treatment of differences between the tax
basis and book basis of non-monetary items for deferred income tax calculation purposes when companies prepare price-level restated financial statements. The new accounting mandates companies to treat these differences as temporary differences.
However, the standard allows a one-time accommodation to continue treating the differences between the tax basis and indexed book basis of non-monetary items as permanent if this policy had been applied by the Company prior to the adoption of the
standard. As such, the Company is allowed to continue treating differences as permanent. As of June 30, 2006, the estimated effect of treating differences as temporary will be a decrease in shareholders equity of approximately Ps.
150.4 million against retained earnings.

In addition, the US GAAP adjustment includes the effect on deferred income taxes of the
foregoing reconciling items, as appropriate.



| | s) | Minority interest
| | -- | -----------------

This adjustment represents the
effect on minority interest of the foregoing reconciling items, as appropriate.



F-51



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | II. | Additional disclosure requirements
| | --- | ----------------------------------



| | a) | Disclosure of maturities of long-term debt
| | -- | ------------------------------------------

Scheduled maturities of the long-term debt for the next years (excluding current portion), as of June 30, 2006, are as follows:



|     |  |     |            
|---- |  | --- | -----------
|2008 |  | Ps. | 64,736     
|2009 |  |     | 33,532     
|2014 |  |     | 145,755,576
|     |  |     |            
|     |  | Ps. | 145,853,844
|     |  |     |            



| | b) | Disclosure of operating lease information
| | -- | -----------------------------------------

The
Company enters into cancelable commercial leases with its tenants for terms ranging from three to ten years, with most leases having terms of no more than five years. Tenants are generally charged a rent, which consists of the higher of (i) the
base rent and (ii) the percentage rent (which generally ranges between 4% and 8% of the tenants sales). Furthermore, pursuant to the rent escalation clause in most leases, a tenants base rent generally increases between 4% and 7% each
year during the term of the lease.

Included in lease revenues for the years ended June 30, 2006, 2005 and 2004 were contingent
rentals of Ps. 40.9 million, Ps. 29.4 million and Ps. 16.6 million, respectively.



| | c) | Disclosure of related parties transactions
| | -- | ------------------------------------------

The
following additional disclosures of transactions with related parties are required under US GAAP:

Donations: On October 31,
1997, the Companys Board of Directors agreed to enter into an agreement with Fundacion IRSA, a charitable, not-for profit corporation of which Eduardo S. Elsztain is a Director and his wife is the President, whereby the Company granted
to Fundación IRSA, the right to use 3,800 square meters of constructed area in Abasto for no charge for a period of 30 years. This area is used for a childrens museum called Museo de los Niños - Abasto, which is an
interactive learning center for both children and adults. The museum opened in April 1999 and the Company expects that the childrens museum attracts additional customers to Abasto.

During the years ended June 30, 2004, 2005 and 2006 the Company made unconditional promises to give money to Fundación IRSA amounting to Ps.
2.4 million, Ps. 4.0 million and Ps. 2.5 million, respectively. Unconditional promises are paid in the year subsequent to the respective promise. At the date of issuance of these consolidated financial statements unconditional
promises related to fiscal year 2006 have not yet been paid.

Loans from major shareholders: In order to finance the US$
50 million collateral deposit required in connection with the swap agreement described in Note 12, the Company entered into loan agreements with IRSA and Parque Arauco. As of June 30, 2002 the Companys debt with IRSA and Parque
Arauco in relation to those loan agreements was Ps. 45.6 million and Ps. 22.9 million respectively. In addition between May and July 2002, IRSA and Parque Arauco granted to the Company loans for US$ 10.1 million and US$
4.9 million, respectively. The loans granted by IRSA and Parque Arauco were used to subscribe for US$ 27.2 million and US$ 15.2 million, respectively, of the Companys offering of its US$ 50.0 million Convertible Notes, on
August 20, 2002.

Repurchase agreement entered into with the Company ́s major shareholders: On February 17, 2003, the
Company entered into a repurchase agreement with IRSA and Parque Arauco pursuant to which they granted the Company loans for Ps. 4.2 million and Ps. 2.1 million, respectively. According to the repurchase agreement, the Company made
collateral deposits of Ps. 15.5 million nominal value of Senior Notes with IRSA and of Ps. 7.8 million nominal value of Senior Notes with Parque Arauco. On January 7, 2005, the Company repurchased the securities at a price of Ps.
5.1 million and Ps. 2.6 million to IRSA and Parque Arauco, respectively.



F-52



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | c) | Disclosure of related parties transactions (continued)
| | -- | ------------------------------------------------------

Lease of office property: From December 2001 to December 2003, Cresud S.A.C.I.F.y A. (Cresud), the principal shareholder of IRSA, subleased its headquarters from the Company. Cresud paid a monthly rent of Ps.
2,541. The agreement was terminated as a result of Cresud moving its headquarters.

The Company leases its headquarters and parking spaces
from Inversora Bolivar S.A. (Inversora Bolivar), a subsidiary of IRSA. Pursuant to two agreements signed in December 2003 and January 2005, the Company pays monthly rental expenses of US$ 5,958 and US$ 5,386, respectively. The agreements
have an initial duration of 60 months and 46 months, respectively, and are renewable for an additional period of 36 months.

The Company,
IRSA, and Cresud lease their chairman offices from Elsztain e Hijos S.C.A. and Hamonet S.A. pursuant to an agreement signed in March 2004. The lease agreement has a term of 10 years and monthly rental expense amounts to Ps. 8,490. The Company pays
one third of such amount. Elsztain e Hijos S.C.A. and Hamonet S.A. are companies controlled by certain of our directors and/or their relatives. Certain directors of the Company are also directors of Inversora Bolivar.

Corporate services: In order to reduce administrative expenses and to achieve a more efficient allocation of corporate resources, a program for
partial operating integration was implemented on June 30, 2003 by the Company, Cresud and IRSA (the Parties). The areas now involved are Shared Corporate Services, Human Resources, Finance, Institutional Relations, Administration,
Systems, Insurance, Purchasing, Contracts, Operations, Internal Audit, and Delivery Services. This program was planned to reduce operating costs by optimizing the individual administrative efficiencies of each Party. On the basis of this program,
the Parties entered into the Exchange of Operating Services Agreement on June 30, 2004, a two-year agreement (being renewed for an equal period of time unless any of the Parties decides to terminate it) by which tasks are performed by one or
more Parties for the benefit of one or more other Parties in exchange for a fee to be paid primarily through the provision of services in other areas. The Company ́s chairman is also chairman of Cresud and IRSA and the Company ́s
vice-chairman is also vice-chairman of Cresud and IRSA.

Options to Purchase Shares of Altocity.Com S.A.: see Note 19.I.i. for
details.

Agreement with Inversiones Falabella Argentina S.A.: The Company has entered into an agreement with Inversiones Falabella
Argentina S.A. (Falabella), the minority shareholder of Mendoza Plaza Shopping, pursuant to which, among other things, Falabella has the irrevocable right to sell to the Company (put option) its ownership interest in Mendoza Plaza
Shopping for a total consideration of US$ 3 million. The put option can be exercised until the last business day of October 2008. At the date of issuance of these financial statements, Falabella has not exercised the put option.

Legal services: During the years ended June 30, 2006, 2005 and 2004, the law firm Zang, Bergel & Viñes provided the Company
legal services amounting to Ps. 0.7 million, Ps. 0.5 million and Ps. 0.6 million, respectively. The Companys Vice-Chairman Saúl Zang, and the alternate directors Juan M. Quintana and Juan C. Quintana Terán are
members of the law firm Zang, Bergel & Viñes.



| | d) | Disclosure about fair value of financial instruments
| | -- | ----------------------------------------------------

Under Argentine GAAP, there are no specific rules regarding disclosure of fair value of financial instruments.

Under
US GAAP, SFAS No. 105 requires reporting entities to disclose certain information about financial instruments with off-balance sheet risk of accounting loss. SFAS No. 107, Disclosures About Fair Value of Financial
Instruments, requires disclosure of fair value information about financial instruments whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Financial instruments include such items as cash and
cash equivalents and accounts receivable and other instruments. SFAS No. 107 excludes from its disclosure requirements lease contracts and various significant assets and liabilities that are not considered to be financial instruments. SFAS
No. 119 requires reporting entities to disclose certain information for derivative financial instruments. SFAS No. 133 superseded SFAS No. 105 and SFAS No. 119 and amended SFAS No. 107 to include in SFAS No. 107 the
disclosure requirements of credit risk concentrations from SFAS No. 105. See Note 19.II.e) for details of concentration of credit risk.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | d) | Disclosure about fair value of financial instruments (continued)
| | -- | ----------------------------------------------------------------

Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and the relevant market information. Where available, quoted market prices are used. In other
cases, fair values are based on estimates using other valuation techniques, such as discounting estimated future cash flows using a rate commensurate with the risks involved or other acceptable methods. These techniques involve uncertainties and are
significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, prepayments, discount rates, estimates of future cash flows, future expected loss experience, and other factors.
Changes in assumptions could significantly affect these estimates. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also,
because of differences in methodologies and assumptions used to estimate fair value, the Companys fair values should not be compared to those of other companies.

Under this statement, fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not
considered financial instruments.

Accordingly, the aggregate fair value amount presented does not represent the underlying value of the
Company. For certain assets and liabilities, the information required under this statement is supplemental with additional information relevant to an understanding of the fair value.

The methods and assumptions used to estimate the fair values of each class of financial instruments as of June 30, 2006 and 2005 are as follows:

Cash and cash equivalents

The Company considers all highly liquid investments with original maturities of three months or less, consisting of mutual funds and time deposits, to be cash and cash equivalents. The carrying amount reported in the consolidated balance
sheet approximates their fair value.

Mortgages and leases receivable, net

The carrying amount of mortgages and leases receivables reported in the consolidated balance sheet approximates their fair value.

Accounts and notes receivable, net

Carrying amounts are considered to approximate fair value. All amounts that are assumed to be uncollectible within a reasonable time are written off and/or reserved.

Retained interests in transferred credit card receivables

Fair value is estimated by discounting anticipated future cash flows using a discount rate based on specific factors. The anticipated future cash flows are projected on a cash out basis to reflect the
restriction of cash flows until the investors have been fully paid. As of June 30, 2006 and 2005, the fair value of retained interests in transferred credit card receivables amounted to Ps. 27.3 million and Ps. 23.0 million,
respectively.

Accounts and notes payable

The carrying amount of accounts and notes payable reported in the consolidated balance sheet approximates their fair value.

Short-term debt

The carrying amount of short-term debt reported in the consolidated balance sheet
approximates fair value due to its short-term nature.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | d) | Disclosure about fair value of financial instruments (continued)
| | -- | ----------------------------------------------------------------

Long-term debt

As of June 30, 2006 and 2005, except for the Company ́s Convertible Notes
as discussed below, the carrying amount of long-term debt reported in the consolidated balance sheet approximates their fair value.

The
fair value of the Company ́s Convertible Notes was Ps. 976.6 million and Ps. 873.6 million as of June 30, 2006 and 2005, respectively. Such fair value was determined based on the market price of the shares assuming full
conversion of the notes at year-end.

Other receivables and other liabilities

The carrying amount of other receivables and other liabilities reported in the consolidated balance sheet approximates fair value due to their short-term
nature.



| | e) | Credit risk
| | -- | -----------

Financial instruments that potentially
subject the Company to a concentration of credit risk primarily consist of cash and current investments. The Company places its cash and current investments in high quality financial institutions that are located in Argentina and in the United
States of America. The Companys policy is to limit the exposure with any one institution.

As of June 30, 2006 and 2005,
approximately Ps. 52.0 million and Ps. 46.0 million included in the cash balances were held with 38 institutions, respectively. The Company has not experienced any significant losses in such accounts.

Credit card receivables arise primarily under open-end revolving credit accounts used to finance purchases of goods and services offered by the
Companys shopping centers. These accounts have various billing and payment structures, including varying minimum payment levels and finance charge rates. Credit card receivables are shown net of an allowance for uncollectible accounts. The
Company provides an allowance for uncollectible accounts based on impaired accounts, historical charge-off patterns and management judgment.

As of June 30, 2006 the Company has sold credit card receivables of Ps. 312.4 million through securitization transactions, for which the Companys credit risk exposure is contractually limited to the subordinated CPs held by
the Company representing Ps. 48.1 million (equity value) and a Ps. 6.4 million escrow reserves for losses.



| | f) | Recently issued accounting standards
| | -- | ------------------------------------

In
May 30, 2005, the FASB issued SFAS No. 154 Accounting Changes and Error Corrections, that replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim
Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principles. It also applies to changes required by an
accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. This Statement
(1) requires retrospective application to prior periods financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change,
(2) defines retrospective application as the application of a different accounting principle to prior accounting periods as if that principle had always been used or as the adjustment of previously issued financial statements to reflect a
change in the reporting entity, (3) redefines restatement as the revising of previously issued financial statements to reflect the correction of an error, (4) requires that a change in depreciation, amortization, or depletion method for
long-lived, nonfinancial assets be accounted for as a change in accounting estimate effected by a change in accounting principle, (5) carries forward without change the guidance contained in Opinion 20 for reporting the correction of an error
in previously issued financial statements and a change in accounting estimate and (6) carries forward the guidance in Opinion 20 requiring justification of a change in accounting principle on the basis of preferability. This standard is
effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. This standard will be effective for the Company ́s fiscal year ended June 30, 2007. The Company expects the adoption of
this standard will not have a material effect on the Company ́s financial position or results of its operations.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | f) | Recently issued accounting standards (continued)
| | -- | ------------------------------------------------

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, which resolves issues addressed in FASB SFAS No. 133 Implementation Issue No. D1, Application of Statement 133
to Beneficial Interests in Securitized Financial Assets. Among other things, it permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement
is effective for all instruments acquired, issued, or subject to a remeasurement event occurring after the beginning of an entitys first fiscal year that begins after September 15, 2006. This standard will be effective for the
Companys fiscal year ended June 30, 2008. As of the date of these financial statements, the Company has not analyzed the impact, if any, that is standard will have on its financial position and results of operations.

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, which permits an entity to choose either the
amortization method or fair value method for each class of separately recognized servicing assets and servicing liabilities. This statement is effective for an entitys first fiscal year that begins after September 15, 2006. This standard
will be effective for the Companys fiscal year ended June 30, 2008. As of the date of these financial statements, the Company has not analyzed the impact, if any, that is standard will have on its financial position and results of
operations.

In July 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48). FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in an enterprises financial statements in accordance with FASB Statement
No. 109, Accounting for Income Taxes (SFAS No. 109). Tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48
and in subsequent periods. FIN 48 will be effective for fiscal years beginning after December 15, 2006 and the provisions of FIN 48 will be applied to all tax positions accounted for under SFAS No. 109 upon initial adoption. The standard
will be effective for the Companys fiscal year ended June 30, 2008. The cumulative effect of applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of retained earnings for that fiscal year.
The Company is currently in the process of evaluating the provisions of FIN 48 and its impact, if any, on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement, which provides a single definition of fair value, together with a framework for measuring it, and requires additional
disclosures about the use of fair value to measure assets and liabilities. This statement emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and sets about a fair value hierarchy with the highest priority
being quoted prices in active markets. Under the Statement, fair value measurements are disclosed by level within the hierarchy. While the statement does not add any new fair value measurements, it does change current practice. Changes to practice
include (a) a requirement for an entity to include its own credit standing in the measurement of its liabilities, (b) a modification of the transaction price presumption, (c) a prohibition on the use of block discounts when valuing
large blocks of securities for broker-dealers and investment companies, (d) a requirement to adjust the value of restricted stock for the effect of the restriction even if the restriction lapses within one year. This statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007. This standard will be effective for the Companys fiscal year ended June 30, 2009. As of the date of these financial statements, the Company has not
analyzed the impact, if any, that is standard will have on its financial position and results of operations.

In September 2006, the
Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB No. 108), which expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of
determining whether financial statement restatement is necessary. SAB No. 108 is effective for the Company ́s June 30, 2007 financial statements. The Company is currently evaluating the potential impact of SAB
No. 108 on its consolidated financial statements.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | g) | Risks and uncertainties
| | -- | -----------------------

The Companys
operations are subject to risks and uncertainties with respect to:

Risks associated with Argentine operations. All Companys
operations and properties are located in Argentina. As a result, the Company financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing in Argentina.

Shopping center operating risks: The development, administration and profitability of shopping centers are impacted by various factors including:
the accessibility and the attractiveness of the area where the shopping center is located, the intrinsic attractiveness of the shopping center, the flow of people and the level of sales of each shopping center rental unit within the Companys
shopping centers, the amount of rent collected from each shopping center rental unit and the fluctuations in occupancy levels in the shopping centers. In the event that there is an increase in operational costs, caused by inflation or other factors,
it could have a material adverse effect on the Company if its tenants are unable to pay their higher rent obligations due to the increase in expenses.

Since May 28, 1997, Law No. 24,808 provides that tenants may rescind commercial lease agreements after the initial six months upon not less than sixty days written notice, subject to penalties of only
one-and-a-half months rent if the tenant rescinds during the first year of the lease, and one-month rent if the tenant rescinds after the first year of the lease. The exercise of such rescission rights could materially and adversely affect the
Company.

Real estate market operating risks: The Companys property is currently and will continue to be subject to risks
incident to the ownership and operation of commercial real estate and residential development properties. The Companys lease sales from its real estate operations may be adversely affected by (i) local or national economic conditions in
the areas in which the properties are located; (ii) oversupply of retail space or a reduction in demand for retail space; (iii) increased competition from other real estate operators; (iv) changes in the ability of the Company or the
tenants to provide for adequate maintenance and/or insurance; (v) increases in operating expenses; and/or (vi) adverse changes in the regional or national economy. Other risks include the inability to collect rent due to bankruptcy or
insolvency of tenants or otherwise, the need to periodically renovate, repair and release space and the costs thereof and the ability of a tenant to provide adequate maintenance and insurance. In addition, the failure to sell the property to be
constructed (General Paz Project, Caballito Project, Coto Residential Project and Rosario Project), could have a material adverse effect on the Company.

An economic downturn in the areas in which the shopping centers are located might adversely affect the Companys sales (through bankruptcy of tenants and reduction in the shopping center sales due to lower
variable income). Increases in operating costs due to inflation and other factors may result in some tenants being unable or unwilling to pay rent or expense increases. In addition, the Company has several tenants occupying space in more than one
shopping center and, as a result, if any of such tenants should experience financial difficulties and cease paying rent, the Companys operating results could be adversely affected. Furthermore, as leases on properties expire, the Company may
be unable to find new tenants or tenants may enter into new leases on terms that are less favorable to the Company. The failure to lease such properties could have a material adverse effect on the Company.

Credit card operating risks: Credit card operations are subject to federal legislation and regulation. From time to time, such legislation, as
well as competitive conditions, may affect, among other things, credit card finance charges. While the Company cannot predict the effect of future competitive conditions and legislation or the measures the Company might take in response thereto, a
significant reduction in the finance charges imposed by Tarshop would have an adverse effect on the Company. In addition, changes in general Argentine economic conditions, including, but not limited to, higher interest rates and increases in
delinquencies, charge-offs and personal bankruptcies could have an adverse effect on the Company.

E-commerce risks: The Company
also offers its services over the Internet, and competes in the market for Internet services and products, which is characterized by intense competition and rapid technological changes. The Companys internet ventures have a limited operating
history, have never generated profits, and their prospects are subject to the risks, expenses, and uncertainties frequently encountered by companies in new and rapidly evolving markets for internet products and services. These risks include the
failure to develop and extend the Companys online service brands, the rejection of the Companys services by Web consumers, vendors and/or advertisers, the inability of the Company to maintain and increase the levels of traffic on its
online services, as well as other risks and uncertainties. In the event that the Company does not successfully implement its business plan, certain assets may not be recoverable.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | h) | Statements of cash flows
| | -- | ------------------------

Under Argentine GAAP, the
Company is required to present the statement of cash flows in the primary financial statements in accordance with Technical Resolution No. 9, (RT No. 9), as amended. Guidance prescribed by RT No. 9 is similar in most
respects to the guidelines set forth in SFAS No. 95, Statements of Cash Flows (SFAS No. 95).

Under
US GAAP, the total amounts of cash and cash equivalents at the end of the year shown in the consolidated statement of cash flows are required to be the same amounts as similarly titled line items shown in the consolidated balance sheets, as
those dates. Note 19 to the consolidated financial statements includes a reconciliation between the balances included as cash and banks in the consolidated balance sheets to the total amounts of cash and cash equivalents at the end of the year shown
in the consolidated statement of cash flows.

As described in Note 3.b., under Argentine GAAP, the Company considers all highly liquid
investments with original maturities of three months or less at date of purchase to be cash equivalents. Therefore, there are no differences in the type of items considered as cash equivalents under US GAAP. However, as discussed in Note 2.c., under
Argentine GAAP, the Company consolidates the accounts of Metroshop S.A. on a pro rata basis. Under US GAAP, proportionate consolidation is not appropriate since the Company does not exercise control over these investments. As a result,
differences exist between the amount of cash and cash equivalents reported in the primary financial statements and the amount of cash and cash equivalents that would be reported in a statement of cash flows prepared using US GAAP numbers. In
addition, cash flows from operating, investing and financing activities would be different in a statement of cash flows prepared using US GAAP numbers since each line item would exclude the pro rata equity interest of the accounts of Metroshop
S.A.

The following table presents the cash flows from operating, investing and financing activities as well as the effects of inflation
accounting and exchange rate changes on cash and cash equivalents that would be reported in the statement of cash flows using Argentine GAAP numbers but following the guidelines prescribed by SFAS No. 95. Therefore, the effect of the
elimination of the proportionate consolidation has not been considered in the preparation of the following reconciliation:



|                                                                  |  |                |   |  |             |   |  |            |  
|----------------------------------------------------------------- |  | -------------- | - |  | ----------- | - |  | ---------- | -
|                                                                  |  | As of June 30, |  
|                                                                  |  | 2006           |   |  | 2005        |   |  | 2004       |  
|Cash and banks                                                    |  | 38,222,036     |   |  | 24,961,116  |   |  | 43,925,295 |  
|Current investments                                               |  | 32,250,484     |   |  | 41,712,702  |   |  | 31,348,394 |  
|                                                                  |  |                |   |  |             |   |  |            |  
|Total cash and banks and current investments as per balance sheet |  | 70,472,520     |   |  | 66,673,818  |   |  | 75,273,689 |  
|Less: Items not considered cash and cash equivalents              |  |                |   |  |             |   |  |            |  
|- Retained interests in transferred credit card receivables       |  | (10,318,797    | ) |  | (10,411,456 | ) |  | (6,676,928 | )
|- Mortgage bonds issued by Banco Hipotecario S.A.                 |  | (2,170,258     | ) |  | (2,841,985  | ) |  |           |  
|- Government bonds                                                |  | (1,254,485     | ) |  | (3,483,037  | ) |  | (300,294   | )
|- Trust debt securities                                           |  | (324,325       | ) |  |            |   |  |           |  
|- Others                                                          |  |               |   |  | (222,860    | ) |  |           |  
|                                                                  |  |                |   |  |             |   |  |            |  
|Cash and cash equivalents as shown in the statement of cash flows |  | 56,404,655     |   |  | 49,714,480  |   |  | 68,296,467 |  
|                                                                  |  |                |   |  |             |   |  |            |  

Under Argentine GAAP, cash flow from purchases, sales and maturities of available-for-sale
securities were reported as operating activities. Under US GAAP, these transactions would be classified as cash flows from investing activities. Also, under Argentine GAAP neither the effect of exchange rate changes on cash and cash
equivalents, nor the effects of inflation were disclosed by presenting additional cash flow statement categories as required by US GAAP.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | h) | Statements of cash flows (continued)
| | -- | ------------------------------------



|                                                             |  |                     |              |   |      |     |             |      |  |     |             |  
|------------------------------------------------------------ |  | ------------------- | ------------ | - | ---- | --- | ----------- | ---- |  | --- | ----------- | -
|                                                             |  | Year ended June 30, |             
|                                                             |  | 2006                |              |   | 2005 |     |             | 2004 | 
|Net cash provided by operating activities                    |  | Ps.                 | 169,521,946  |   |      | Ps. | 95,239,538  |      |  | Ps. | 76,533,593  |  
|Net cash used in investing activities                        |  |                     | (124,023,513 | ) |      |     | (61,390,153 | )    |  |     | (17,898,672 | )
|Net cash used in financing activities                        |  |                     | (39,952,398  | ) |      |     | (52,205,675 | )    |  |     | (20,603,120 | )
|Effect of exchange rate changes on cash and cash equivalents |  |                     | 1,144,140    |   |      |     | (225,697    | )    |  |     | 1,977,347   |  



| | i) | Earnings per share
| | -- | ------------------

Under Argentine GAAP the
Company is required to disclose earnings per share information in accordance with RT 18 for all periods presented. Note 13 to the consolidated financial statements disclose the computation of basic and diluted net income per common share under
Argentine GAAP. Guidance set forth in RT 18 is similar to the basic principles set forth in SFAS No. 128 Earnings per Share (SFAS No.128). See Note 3.z., for details.

Under US GAAP, basic and diluted earnings per share are presented in conformity with SFAS No. 128.

The following tables set forth the computation of basic and diluted net income per common share under US GAAP for all periods presented:



|                                                                     |  |                     |               |   |      |     |               |      |  |     |               |  
|-------------------------------------------------------------------- |  | ------------------- | ------------- | - | ---- | --- | ------------- | ---- |  | --- | ------------- | -
|                                                                     |  | Year ended June 30, |              
|                                                                     |  | 2006                |               |   | 2005 |     |               | 2004 | 
|Numerator:                                                           |  |                     |               |   |      |     |               |      |  |     |               |  
|Net income available to common shareholders                          |  | Ps.                 | 47,007,816    |   |      | Ps. | 36,168,969    |      |  | Ps. | 7,251,101     |  
|Plus (less): income (loss) impact of assumed conversions:            |  |                     |               |   |      |     |               |      |  |     |               |  
|Interest expense on convertible debt                                 |  |                     | 14,406,991    |   |      |     | 12,217,475    |      |  |     | 14,283,721    |  
|Foreign currency exchange loss (gain) on convertible debt            |  |                     | 9,408,565     |   |      |     | (2,999,252    | )    |  |     | 7,857,459     |  
|Income tax effects                                                   |  |                     | (8,319,325    | ) |      |     | (3,226,378    | )    |  |     | (7,749,413    | )
|                                                                     |  |                     |               |   |      |     |               |      |  |     |               |  
|Net income available to common shareholders plus assumed conversions |  | Ps.                 | 62,504,047    |   |      | Ps. | 42,160,814    |      |  | Ps. | 21,642,868    |  
|                                                                     |  |                     |               |   |      |     |               |      |  |     |               |  
|Denominator:                                                         |  |                     |               |   |      |     |               |      |  |     |               |  
|Weighted-average number of shares outstanding                        |  |                     | 780,432,065   |   |      |     | 777,017,782   |      |  |     | 716,436,002   |  
|Plus: incremental shares of assumed conversions:                     |  |                     |               |   |      |     |               |      |  |     |               |  
|Convertible debt                                                     |  |                     | 1,363,565,610 |   |      |     | 1,365,009,110 |      |  |     | 1,451,354,820 |  
|                                                                     |  |                     |               |   |      |     |               |      |  |     |               |  
|Adjusted weighted-average number of shares                           |  | Ps.                 | 2,143,997,675 |   |      | Ps. | 2,142,026,892 |      |  |     | 2,167,790,822 |  
|                                                                     |  |                     |               |   |      |     |               |      |  |     |               |  
|Basic and diluted EPS:                                               |  |                     |               |   |      |     |               |      |  |     |               |  
|Basic net income per common share                                    |  | Ps.                 | 0.06          |   |      | Ps. | 0.05          |      |  | Ps. | 0.01          |  
|Diluted net income per common share                                  |  |                     | 0.03          |   |      |     | 0.02          |      |  |     | 0.01          |  



| | j) | Severance indemnities
| | -- | ---------------------

Under Argentine law and
labor agreements, the Company is required to make minimum severance payments to its dismissed employees without cause and employees leaving its employment in certain other circumstances. Under Argentine GAAP, severance payments are expensed as
incurred. Under US GAAP, the Company follows the guidelines established by SFAS No. 112, Employers Accounting for Post-employment Benefits, and SFAS No. 43, Accounting for Compensated Absences, which
requires the accrual of severance costs if they relate to services already rendered, are related to rights that accumulate or vest, are probable of payment and are reasonably estimable. While the Company expects to make severance payments in the
future, it is impossible to estimate the number of employees that will be dismissed without proper cause in the future, if any, and accordingly the Company has not recorded such liability.



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | k) | Balance sheet classification differences
| | -- | ----------------------------------------

Under
Argentine GAAP, assets and liabilities are classified either as current or non-current, principally depending on the expected settlement dates. Under US GAAP, real estate enterprises generally do not present a classified balance sheet.

Under Argentine GAAP, the net deferred tax position by company has been classified as a non-current other receivable or as a non-current
tax payable. Under US GAAP, the classification of deferred taxes is determined by the classification of the asset or liability for financial reporting to which the temporary difference is related. A temporary difference is related to an asset
or liability if reduction of the asset or liability causes the temporary difference to reverse. For deferred tax balances not related to an asset or liability for financial reporting (e.g. tax loss carryforwards), the classification is based on the
expected realization date. As of June 30, 2006 and 2005, Ps. 7.7 million and Ps. 5.4 million, respectively, would have been classified as current assets; Ps. 3.7 million and Ps. 5.2 million, respectively, would have been
classified as non-current assets; and Ps. 16.5 million and Ps. 9.5 million, respectively, would have been classified as non-current liabilities. As of June 30, 2006, Ps. 0.7 would have been classified as current liabilities.



| | l) | Statement of income classification differences
| | -- | ----------------------------------------------

Gross vs. net presentation

As part of the lease agreements, tenants are required to pay their proportionate share of common
area maintenance expenses. The Company does not charge any mark up on reimbursable costs. These expenses are incurred and paid by the Company and then passed through to tenants as reimbursable costs.

Under Argentine GAAP, pass-through expenses, such as these reimbursable costs, are accounted for on a net basis and, as such, excluded from revenues and
expenses in the financial statements. However, Note 4.d. shows the total amount of expenses passed through to tenants by expense category with the corresponding offsetting amount therefore having no impact in the consolidated costs of the Company.
No amount is shown as revenues.

Under US GAAP, the Company accounts for pass-through revenue and expenses in accordance with Emerging
Issues Task Force, or EITF, Issue 01-14, Income Statement Characterization of Reimbursements Received for Out of Pocket Expenses Incurred, and include these costs incurred as a component of revenue and as a component of operating
expenses in the statement of income. These costs, which are pass-through expenses to tenants included in both revenues and expenses were Ps. 87.9 million, Ps. 64.8 million and Ps. 56.5 million for the years ended June 30, 2006,
2005 and 2004, respectively. As these expenses are fully reimbursed, without mark-up, by the tenants, there is no impact on operating income, net income, EPS, cash flows or the balance sheet.

Net revenues under US GAAP would have been Ps. 449.3 million, Ps. 295.0 million and Ps. 199.8 million for the years ended
June 30, 2006, 2005 and 2004, respectively.

As discussed in Note 3.a., certain of the Companys lease contracts provide for the
payment of additional rent based on a percentage of the tenants revenues. The Company determines the compliance with specific targets and calculates the additional rent on a monthly basis as provided for in the contracts. Thus, the Company
does not have the inherent estimation process of a lessor that determines additional rent less frequently. Under both Argentine GAAP and US GAAP, these contingent rents are not recognized until the required thresholds are exceeded.



F-60



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | l) | Statement of income classification differences (continued)
| | -- | ----------------------------------------------------------

Operating income

Under US GAAP, certain expense and/or income items included in the Argentine GAAP financial
statements of the Company within Other expenses, net and Financial results, net would have been included in the determination of operating income. In addition, under Argentine GAAP, the recovery of certain allowances and
provisions has been included within Other expenses, net. Under US GAAP, such items would have been classified as a reversal to the amounts in the line items, which were originally recorded. Operating income under US GAAP but
using Argentine GAAP numbers would have been Ps. 113.4 million, Ps. 85.9 million and Ps. 41.5 million for the years ended June 30, 2006, 2005 and 2004, respectively.

m) Equity investments

The Company
uses the equity method of accounting for its investments over which the Company exercises significant influence. As such, these investments are recorded at the amount of the underlying equity in their net assets and adjusted to recognize the
Companys share of the undistributed earnings or losses. The Companys share of the losses of these companies was Ps. 0.7 million, Ps. 0.7 million and Ps. 1.1 million during the years ended June 30, 2006, 2005 and 2004,
respectively, and its investments in these companies totaled Ps. 0.1 million at June 30, 2006 and Ps. 0.8 million at June 30, 2005. Summarized financial information of these affiliates (on a 100% basis) is as follows:



|                                |  |                                 |            |  
|------------------------------- |  | ------------------------------- | ---------- | -
|Mendoza Plaza Shopping S.A. (i) |  |                                 |            |  
|                                |  | For the year endedJune 30, 2004 |           
|Revenues                        |  | Ps.                             | 8,998,280  |  
|Operating income                |  |                                 | 4,873,790  |  
|Net loss                        |  | Ps.                             | (1,367,331 | )

---

|(i) | During the year ended June 30, 2005 the Company increased its ownership interest in Mendoza Plaza Shopping S.A. (Mendoza Plaza Shopping) from 18.9% to 85.4% through
a series of transactions. For details, see Note 2.h. As a result of gaining control, the results of operations of Mendoza Plaza Shopping were included in the consolidated statement of income as from October 1, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                        |  |                |           |      |     |          
|----------------------- |  | -------------- | --------- | ---- | --- | ---------
|E-Commerce Latina       |  |                |          
|                        |  | As of June 30,
|                        |  | 2006           |           | 2005
|Current assets          |  | Ps.            | 1,547,667 |      | Ps. | 1,155,517
|Non-current assets      |  |                | 1,675,012 |      |     | 1,814,958
|                        |  |                |           |      |     |          
|Total assets            |  |                | 3,222,679 |      |     | 2,970,475
|                        |  |                |           |      |     |          
|Current liabilities     |  |                | 2,963,222 |      |     | 1,323,470
|Non-current liabilities |  |                | 500       |      |     | 30,277   
|                        |  |                |           |      |     |          
|Total liabilities       |  |                | 2,963,722 |      |     | 1,353,747
|                        |  |                |           |      |     |          
|Minority interest       |  |                | 5         |      |     | 20       
|                        |  |                |           |      |     |          
|Shareholders equity    |  | Ps.            | 258,952   |      | Ps. | 1,616,708
|                        |  |                |           |      |     |          



|               |  |                             |            |   |      |     |            |      |  |     |            |  
|-------------- |  | --------------------------- | ---------- | - | ---- | --- | ---------- | ---- |  | --- | ---------- | -
|               |  | For the year ended June 30, |           
|               |  | 2006                        |            |   | 2005 |     |            | 2004 | 
|Revenues       |  | Ps.                         | 5,593,472  |   |      | Ps. | 2,636,028  |      |  | Ps. | 1,684,519  |  
|Operating loss |  |                             | (1,298,919 | ) |      |     | (1,287,525 | )    |  |     | (2,171,410 | )
|Net loss       |  | Ps.                         | (1,357,755 | ) |      | Ps. | (1,253,367 | )    |  | Ps. | (2,928,342 | )



F-61



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | m) | Equity investments (continued)
| | -- | ------------------------------

As of June 30,
2006 and 2005 accumulated losses of E-Commerce Latina totaled Ps. 1.4 million and Ps. 42.4 million, respectively. On February 6, 2006 the Extraordinary Shareholders Meeting approved a capital increase for the amount of Ps.
22,010,575 through the capitalization of additional paid-in-capital. The Company issued 22,010,575 nominative common stock of Ps. 1 nominal value each and 1 vote per share. As a result, the capital stock increased to Ps. 22,034,275.

Because of the fact that the Companys accumulated losses as of June 30, 2005 amounted to Ps. 42,373,308, the shareholders approved unanimously
the absorption of the additional paid-in-capital, the Integral Adjustment and capital stock, and consequently the capital stock amounted to Ps. 1,616,708 as of June 30, 2006, which represented 1,616,708 nominative common stock of Ps. 1 nominal
value each with right to one vote per share.



| | n) | Investments in debt and equity securities
| | -- | -----------------------------------------

In
accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, the Company has classified its investments in mutual funds as well as its investments in government and mortgage bonds outstanding at
June 30, 2006 and 2005 as available-for-sale securities. At June 30, 2003 certain government bonds had been classified as held-to-maturity since the Company had the intent and ability to hold such securities until maturity. The following
are additional disclosure requirements in accordance with SFAS No. 115:

Available-for-sale securities

The amortized cost, gross unrealized holding gains or losses and fair value of the available-for-sale securities by major security type at June 30,
2006 and 2005 were as follows:



|                 |  |            |  |                |   |  |            |  |            |  |                |  |             
|---------------- |  | ---------- |  | -------------- | - |  | ---------- |  | ---------- |  | -------------- |  | ------------
|                 |  | 2006       |  | 2005          
|Instrument       |  | Cost       |  | Unrealizedgain |   |  | Fair value |  | Cost       |  | Unrealizedgain |  | Market value
|Mutual funds     |  | 13,736,601 |  | 244,200        |   |  | 13,980,801 |  | 18,571,509 |  | 143,167        |  | 18,714,676  
|Mortgage bonds   |  | 2,181,322  |  | (11,064        | ) |  | 2,170,258  |  | 2,762,353  |  | 79,632         |  | 2,841,985   
|Government bonds |  | 1,221,092  |  | 33,394         |   |  | 1,254,486  |  | 3,476,659  |  | 6,378          |  | 3,483,037   

Proceeds from sales of investment securities available-for-sale during the years ended
June 30, 2006 and 2005 were Ps. 245.6 million and Ps. 202.2 million, respectively. Gross gains of Ps. 1.9 million and Ps. 0.5 million for the years ended June 30, 2006 and 2005, respectively, were realized on those
sales.



| | o) | Comprehensive income (loss)
| | -- | ---------------------------

On July 1, 1998,
the Company adopted SFAS No. 130, Reporting Comprehensive Income. SFAS No. 130 establishes guidelines for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set
of general purpose financial statements. SFAS No. 130 requires that all items that are required to be recognized under accounting



F-62



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | o) | Comprehensive income (loss) (continued)
| | -- | ---------------------------------------

standards as components of
comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Accumulated other comprehensive income is presented below, net of income tax benefit/expense:



|                                                                                                                                                                                                                                                                                                                     |  |                     |  |                 |  |               |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------- |  | --------------- |  | ------------- | -
|                                                                                                                                                                                                                                                                                                                     |  | Year ended June 30, | 
|                                                                                                                                                                                                                                                                                                                     |  | 2006                |  | 2005            |  | 2004          |  
|Net income under US GAAP                                                                                                                                                                                                                                                                                             |  | Ps. 47,007,816      |  | Ps. 36,168,969  |  | Ps. 7,251,101 |  
|Other comprehensive income:                                                                                                                                                                                                                                                                                          |  |                     |  |                 |  |               |  
|Net change in unrealized holding gain on available-for-sale securities of consolidated subsidiaries (net of minority interest and income taxes
of Ps. 29,449 and Ps. 16,812, respectively, for 2006; Ps. (5,055) and Ps. 29,771, respectively, for 2005; and Ps. 21,605 and Ps. 55,976, respectively, for 2004)      |  | 1,773               |  | 60,344          |  | (82,349       | )
|Net change in unrealized holding gain on retained interests in transferred credit card receivables (net of income taxes and minority interest
of Ps. 1,903,361 and Ps. 706,483 respectively, for 2006; Ps. 765,471 and Ps. 284,317, respectively, for 2005; and Ps. 699,993 and Ps. 259,997, respectively, for 2004) |  | 2,828,331           |  | 1,137,269       |  | 1,039,989     |  
|                                                                                                                                                                                                                                                                                                                     |  |                     |  |                 |  |               |  
|Comprehensive income                                                                                                                                                                                                                                                                                                 |  | Ps. 49,837,920      |  | Ps. 37,366,582  |  | Ps. 8,208,741 |  
|                                                                                                                                                                                                                                                                                                                     |  |                     |  |                 |  |               |  
|                                                                                                                                                                                                                                                                                                                     | 
|                                                                                                                                                                                                                                                                                                                     |  | As of June 30,      | 
|                                                                                                                                                                                                                                                                                                                     |  | 2006                |  | 2005            |  | 2004          |  
|Unrealized holding gains on available-for-sale securities of consolidated subsidiaries                                                                                                                                                                                                                               |  | 138,833             |  | 137,060         |  | 76,716        |  
|Unrealized holding gains on retained interests in transferred credit card receivables                                                                                                                                                                                                                                |  | 5,005,589           |  | 2,177,258       |  | 1,039,989     |  
|                                                                                                                                                                                                                                                                                                                     |  |                     |  |                 |  |               |  
|Accumulated other comprehensive income                                                                                                                                                                                                                                                                               |  | Ps.   5,144,422     |  | Ps.   2,314,318 |  | Ps. 1,116,705 |  
|                                                                                                                                                                                                                                                                                                                     |  |                     |  |                 |  |               |  



| | p) | Pro-rata consolidation of Metroshop S.A.
| | -- | ----------------------------------------

As
discussed in Note 2.c. under Argentine GAAP the Company consolidates the accounts of Metroshop S.A. on a pro-rata basis. Under US GAAP consolidation is not appropriate since the Company does not exercise control over the subsidiary.



F-63



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##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | p) | Pro-rata consolidation of Metroshop S.A. (continued)
| | -- | ----------------------------------------------------

Presented below is the consolidated condensed information of the Company at June 30, 2006 and 2005 considering Metroshop S.A. as an equity investee:



|                        |  |                                            |  |                                      |   |  |                                                |  |              
|----------------------- |  | ------------------------------------------ |  | ------------------------------------ | - |  | ---------------------------------------------- |  | -------------
|                        |  | As of and for the year ended June 30, 2006
|                        |  | As reported                                |  | Elimination ofMetroshopS.A. accounts |   |  | Inclusion ofMetroshop S.A.as an equityinvestee |  | As adjusted  
|Current assets          |  | 213,703,570                                |  | 1,223,554                            |   |  |                                               |  | 214,927,124  
|Non-current assets      |  | 1,141,341,918                              |  | (1,357,625                           | ) |  |                                               |  | 1,139,984,293
|                        |  |                                            |  |                                      |   |  |                                                |  |              
|Total assets            |  | 1,355,045,488                              |  | (134,071                             | ) |  |                                               |  | 1,354,911,417
|                        |  |                                            |  |                                     
|Current liabilities     |  | 293,556,844                                |  | (211,947                             | ) |  |                                               |  | 293,344,897  
|Non-current liabilities |  | 224,658,434                                |  |                                     |   |  | 77,876                                         |  | 224,736,310  
|                        |  |                                            |  |                                      |   |  |                                                |  |              
|Total liabilities       |  | 518,215,278                                |  | (211,947                             | ) |  | 77,876                                         |  | 518,081,207  
|                        |  |                                            |  |                                     
|Minority interest       |  | 29,989,705                                 |  |                                     |   |  |                                               |  | 29,989,705   
|Shareholders equity    |  | 806,840,505                                |  |                                     |   |  |                                               |  | 806,840,505  
|                        |  |                                            |  |                                     
|Revenues                |  | 361,355,913                                |  | (1,684,494                           | ) |  |                                               |  | 359,671,419  
|Gross profit            |  | 221,986,135                                |  | (926,859                             | ) |  |                                               |  | 221,059,276  
|Net income              |  | 44,679,032                                 |  |                                     |   |  |                                               |  | 44,679,032   
|                        | 
|                        |  | As of and for the year ended June 30, 2005
|                        |  | As reported                                |  | Elimination ofMetroshopS.A. accounts |   |  | Inclusion ofMetroshop S.A.as an equityinvestee |  | As adjusted  
|Current assets          |  | 155,833,107                                |  | (12,609                              | ) |  |                                               |  | 155,820,498  
|Non-current assets      |  | 1,092,061,711                              |  | (298,702                             | ) |  | 57,246                                         |  | 1,091,820,255
|                        |  |                                            |  |                                      |   |  |                                                |  |              
|Total assets            |  | 1,247,894,818                              |  | (311,311                             | ) |  | 57,246                                         |  | 1,247,640,753
|                        |  |                                            |  |                                     
|Current liabilities     |  | 178,562,077                                |  | (254,065                             | ) |  |                                               |  | 178,308,012  
|Non-current liabilities |  | 250,906,672                                |  |                                     |   |  |                                               |  | 250,906,672  
|                        |  |                                            |  |                                      |   |  |                                                |  |              
|Total liabilities       |  | 429,468,749                                |  | (254,065                             | ) |  |                                               |  | 429,214,684  
|                        |  |                                            |  |                                     
|Minority interest       |  | 27,418,496                                 |  |                                     |   |  |                                               |  | 27,418,496   
|Shareholders equity    |  | 791,007,573                                |  |                                     |   |  |                                               |  | 791,007,573  
|                        |  |                                            |  |                                     
|Revenues                |  | 230,157,321                                |  | (329,431                             | ) |  |                                               |  | 229,827,890  
|Gross profit            |  | 137,646,955                                |  | (107,030                             | ) |  |                                               |  | 137,539,925  
|Net income              |  | 33,255,400                                 |  |                                     |   |  |                                               |  | 33,255,400   



F-64



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | q) | Investments in real estate and accumulated depreciation
| | -- | -------------------------------------------------------

The
following is a summary of the Companys investments in real estate as of June 30, 2006 prepared in accordance with SEC S-X 12-28.



|                                     |  |              |  |      |            |                          |     |               |  |     |            |   |  |              |          |                                 |  |       |            |                         |     |                      |  |              |               |                                                                     |     |             |  |                                     |  |                                               |  |    
|------------------------------------ |  | ------------ |  | ---- | ---------- | ------------------------ | --- | ------------- |  | --- | ---------- | - |  | ------------ | -------- | ------------------------------- |  | ----- | ---------- | ----------------------- | --- | -------------------- |  | ------------ | ------------- | ------------------------------------------------------------------- | --- | ----------- |  | ----------------------------------- |  | --------------------------------------------- |  | ---
|Description                          |  | Encumbrances |  | Land |            | Buildings andimprovement |     | Impairment    |  |     | Transfers  |   |  | Improvements |          | Total buildings andimprovements |  | Total |            | Accumulateddepreciation |     | Date of construction |  | Dateacquired |               | Life on whichdepreciation in latest statementsof income is computed
|Shopping centers:                    |  |              |  |      |            |                          |     |               |  |     |            |   |  |              |          |                                 |  |       |            |                         |     |                      |  |              |               |                                                                     |     |             |  |                                     |  |                                               |  |    
|- Abasto                             |  |              |  | Ps.  | 9,752,107  |                          | Ps. | 242,070,365   |  | Ps. |           |   |  | Ps.          | (142,141 | )                               |  | Ps.   | 511,893    |                         | Ps. | 242,440,117          |  | Ps.          | 252,192,224   |                                                                     | Ps. | 63,818,261  |  | November, 1998                      |  | n/a                                           |  | 31 
|- Alto Palermo                       |  |              |  |      | 8,693,768  |                          |     | 396,969,229   |  |     |           |   |  |              |         |                                 |  |       | 1,154,700  |                         |     | 398,123,929          |  |              | 406,817,697   |                                                                     |     | 213,308,549 |  | October, 1990                       |  | November, 1997 and March, 1998                |  | 26 
|- Alto Avellaneda                    |  |              |  |      | 17,348,759 |                          |     | 146,016,597   |  |     |           |   |  |              |         |                                 |  |       | 2,962,833  |                         |     | 148,979,430          |  |              | 166,328,189   |                                                                     |     | 79,648,106  |  | October, 1995                       |  | November and December, 1997                   |  | 19 
|- Paseo Alcorta                      |  |              |  |      | 8,066,295  |                          |     | 97,484,793    |  |     |           |   |  |              |         |                                 |  |       | 422,159    |                         |     | 97,906,952           |  |              | 105,973,247   |                                                                     |     | 43,711,088  |  | June, 1992                          |  | June, 1997                                    |  | 22 
|- Alto Noa                           |  |              |  |      | 356,752    |                          |     | 42,714,140    |  |     |           |   |  |              | (1,000   | )                               |  |       | 753,440    |                         |     | 43,466,580           |  |              | 43,823,332    |                                                                     |     | 14,201,824  |  | September, 1994                     |  | March,1995, September, 1996 and January, 2000 |  | 23 
|- Patio Bullrich                     |  |              |  |      | 8,418,811  |                          |     | 151,315,576   |  |     |           |   |  |              |         |                                 |  |       | 532,141    |                         |     | 151,847,717          |  |              | 160,266,528   |                                                                     |     | 50,857,430  |  | September, 1988                     |  | October, 1998                                 |  | 23 
|- Buenos Aires Design                |  |              |  |      |           |                          |     | 48,937,339    |  |     |           |   |  |              | (6,722   | )                               |  |       | 55,518     |                         |     | 48,986,135           |  |              | 48,986,135    |                                                                     |     | 30,469,490  |  | Between November and December, 1993 |  | November, 1997                                |  | 20 
|- Alto Rosario                       |  |              |  |      | 25,686,165 |                          |     | 59,740,118    |  |     |           |   |  |              | (64,790  | )                               |  |       | 1,117,540  |                         |     | 60,792,868           |  |              | 86,479,033    |                                                                     |     | 3,307,709   |  | November, 2004                      |  | n/a                                           |  | 28 
|- Mendoza Plaza Shopping             |  |              |  |      | 10,530,066 |                          |     | 93,925,958    |  |     |           |   |  |              |         |                                 |  |       | 8,068,921  |                         |     | 101,994,879          |  |              | 112,524,945   |                                                                     |     | 23,924,146  |  | June, 1994                          |  | December, 2004                                |  | 22 
|Rosario Project (Museo de los niños) |  |              |  |      |           |                          |     |              |  |     |           |   |  |              |         |                                 |  |       | 3,990,275  |                         |     | 3,990,275            |  |              | 3,990,275     |                                                                     |     |            |  | Under construction                  |  | n/a                                           |  | n/a
|Neuquén                              |  | Mortgage     |  |      | 3,313,623  |                          |     | 8,852,212     |  |     | (2,153,984 | ) |  |              |         |                                 |  |       |           |                         |     | 6,698,228            |  |              | 10,011,851    |                                                                     |     |            |  | Under construction                  |  | September, 1999                               |  | n/a
|Other                                |  |              |  |      | 965,445    |                          |     | 9,047,757     |  |     |           |   |  |              |         |                                 |  |       |           |                         |     | 9,047,757            |  |              | 10,013,202    |                                                                     |     | 711,611     |  | n/a                                 |  | n/a                                           |  | n/a
|                                     |  |              |  |      |            |                          |     |               |  |     |            |   |  |              |          |                                 |  |       |            |                         |     |                      |  |              |               |                                                                     |     |             |  |                                     |  |                                               |  |    
|Total                                |  |              |  | Ps.  | 93,131,791 |                          | Ps. | 1,297,074,084 |  | Ps. | (2,153,984 | ) |  | Ps.          | (214,653 | )                               |  | Ps.   | 19,569,420 |                         | Ps. | 1,314,274,867        |  | Ps.          | 1,407,406,658 |                                                                     | Ps. | 523,958,214 |  |                                     |  |                                               |  |    
|                                     |  |              |  |      |            |                          |     |               |  |     |            |   |  |              |          |                                 |  |       |            |                         |     |                      |  |              |               |                                                                     |     |             |  |                                     |  |                                               |  |    



F-65



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | q) | Investments in real estate and accumulated depreciation (continued)
| | -- | -------------------------------------------------------------------



|                                                     |  |                     |               |   |      |     |               |  
|---------------------------------------------------- |  | ------------------- | ------------- | - | ---- | --- | ------------- | -
|                                                     |  | Year ended June 30, |              
|                                                     |  | 2006                |               |   | 2005 |    
|Balance, beginning of the year                       |  | Ps.                 | 1,399,133,239 |   |      | Ps. | 1,260,800,458 |  
|Additions during the year:                           |  |                     |               |   |      |     |               |  
|Improvements                                         |  |                     | 19,569,420    |   |      |     | 36,135,611    |  
|Transfers from intangible assets                     |  |                     |              |   |      |     |              |  
|Transfers from other fixed assets                    |  |                     |              |   |      |     | 13,101,775    |  
|Acquisition of Mendoza Plaza Shopping S.A. (3)       |  |                     |              |   |      |     | 82,173,858    |  
|Transfers from non-current investments (3)           |  |                     |              |   |      |     | 2,240,615     |  
|Transfers from other receivables (4)                 |  |                     |              |   |      |     | 103,318       |  
|Amortization of impairment                           |  |                     | 120,999       |   |      |     | 580,775       |  
|Recovery of impairment (1) (2)                       |  |                     | 3,311,966     |   |      |     | 9,902,046     |  
|                                                     |  |                     |               |   |      |     |               |  
|                                                     |  | Ps.                 | 1,422,135,624 |   |      | Ps. | 1,405,038,456 |  
|                                                     |  |                     |               |   |      |     |               |  
|Deductions during the year:                          |  |                     |               |   |      |     |               |  
|Transfers to other fixed assets                      |  |                     |              |   |      |     | (467,435      | )
|Damage in Alto Avellaneda Shopping                   |  |                     | (13,438,300   | ) |      |     |              |  
|Sale of real estate                                  |  |                     | (1,076,013    | ) |      |     |              |  
|Transfers from other receivables                     |  |                     | (64,790       | ) |      |     |              |  
|Transfers to work-in-progress leasehold improvements |  |                     | (6,722        | ) |      |     |              |  
|Transfers to facilities                              |  |                     | (143,141      | ) |      |     |              |  
|Transfers to inventory (2)                           |  |                     |              |   |      |     | (3,311,599    | )
|Transfers to intangible assets (2)                   |  |                     |              |   |      |     | (2,126,183    | )
|                                                     |  |                     |               |   |      |     |               |  
|                                                     |  | Ps.                 | (14,728,966   | ) |      | Ps. | (5,905,217    | )
|                                                     |  |                     |               |   |      |     |               |  
|Balance, end of the year                             |  | Ps.                 | 1,407,406,658 |   |      | Ps. | 1,399,133,239 |  
|                                                     |  |                     |               |   |      |     |               |  

---

|(1) | As of June 30, 2005 includes Ps. 3,042,502 related to Alto Noa, Ps. 4,304 related to Neuquén, Ps. 6,579,450 related to Mendoza Plaza Shopping and Ps. 275,790 related to
other properties.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | As of June 30, 2006 includes Ps. 24,832 related to Neuquén and Ps. 3,287,134 related to Alto Rosario.
|--- | -----------------------------------------------------------------------------------------------------

|(3) | Related to the acquisition of Mendoza Plaza Shopping.
|--- | -----------------------------------------------------

|(4) | Reclassified from other receivables.
|--- | ------------------------------------



F-66



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | r) | Mortgage receivable on real estate
| | -- | ----------------------------------

The following
is a summary of the Companys mortgage receivable on real estate as of June 30, 2006 prepared in accordance with SEC S-X 12-29.



|                                            |  |              |  |                                             |  |                      |  |             |  |                          |  |                             |  |                                                                             |  |         |  |     
|------------------------------------------- |  | ------------ |  | ------------------------------------------- |  | -------------------- |  | ----------- |  | ------------------------ |  | --------------------------- |  | --------------------------------------------------------------------------- |  | ------- |  | ----
|                                            |  | Col. B.      |  | Col. C.                                     |  | Col. D.              |  | Col. E.     |  | Col. F.                  |  | Col. G.                     |  | Col. H.                                                                    
|Description                                 |  | InterestRate |  | Final maturity date                         |  | Periodic paymentterm |  | Prior liens |  | Face amount of mortgages |  | Carrying amount ofmortgages |  | Principal amount of receivables subject to delinquent principal or interest
|Customer A                                  |  | 14%          |  | June 2014                                   |  | Monthly              |  | None        |  |                          |  | 127,676                     |  |                                                                             |  | 80,189  |  | None
|Customer B                                  |  | 16%          |  | December 2014                               |  | Monthly              |  | None        |  |                          |  | 79,960                      |  |                                                                             |  | 65,268  |  | None
|Customer C                                  |  | 14%          |  | May 2014                                    |  | Monthly              |  | None        |  |                          |  | 77,163                      |  |                                                                             |  | 104,318 |  | None
|Customer D                                  |  | 12%          |  | September 2009                              |  | Monthly              |  | None        |  |                          |  | 76,000                      |  |                                                                             |  | 35,802  |  | None
|Customer E                                  |  | 12%          |  | April 2015                                  |  | Monthly              |  | None        |  |                          |  | 72,801                      |  |                                                                             |  | 58,438  |  | None
|Customer F                                  |  | 14%          |  | June 2014                                   |  | Monthly              |  | None        |  |                          |  | 70,165                      |  |                                                                             |  | 98,819  |  | None
|Customer G                                  |  | 14%          |  | June 2009                                   |  | Monthly              |  | None        |  |                          |  | 70,000                      |  |                                                                             |  | 110,246 |  | None
|Customer H                                  |  | 14%          |  | July 2009                                   |  | Monthly              |  | None        |  |                          |  | 60,368                      |  |                                                                             |  | 97,117  |  | None
|Customer I                                  |  | 15%          |  | May 2009                                    |  | Monthly              |  | None        |  |                          |  | 59,200                      |  |                                                                             |  | 30,708  |  | None
|Customer J                                  |  | 14%          |  | April 2014                                  |  | Monthly              |  | None        |  |                          |  | 57,802                      |  |                                                                             |  | 44,879  |  | None
|Customer K                                  |  | 16%          |  | February 2010                               |  | Monthly              |  | None        |  |                          |  | 57,539                      |  |                                                                             |  | 34,536  |  | None
|Customer L                                  |  | 12%          |  | April 2015                                  |  | Monthly              |  | None        |  |                          |  | 53,173                      |  |                                                                             |  | 42,082  |  | None
|Customer M                                  |  | 14%          |  | February 2014                               |  | Monthly              |  | None        |  |                          |  | 49,908                      |  |                                                                             |  | 61,564  |  | None
|Mortgage Receivables under Ps. 30,000       |  | 16%          |  | September 2009                              |  | Monthly              |  | None        |  |                          |  | 20,000                      |  |                                                                             |  | 16,846  |  | None
|Mortgages Receivables Ps. 30,000-Ps. 49,999 |  | 14-17%       |  | September 2007-September 2009 -January 2011 |  | Monthly              |  | None        |  |                          |  | 124,226                     |  |                                                                             |  | 53,373  |  | None
|Mortgages Receivables Ps. 50,000-Ps. 69,999 |  | 14%          |  | July 2014                                   |  | Monthly              |  | None        |  |                          |  | 52,000                      |  |                                                                             |  | 14,815  |  | None
|Mortgages receivables Ps.70,000-Ps.89,999   |  | 16%          |  | December 2006                               |  | Monthly              |  | None        |  |                          |  | 84,750                      |  |                                                                             |  | 9,645   |  | None
|                                            |  |              |  |                                             |  |                      |  |             |  |                          |  |                             |  |                                                                            
|                                            |  |              |  |                                             |  |                      |  |             |  | Ps.                      |  | 1,192,731                   |  | Ps.                                                                         |  | 958,645 |  |     
|                                            |  |              |  |                                             |  |                      |  |             |  |                          |  |                             |  |                                                                            



F-67



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statements (continued)

(In Argentine Pesos,
except as otherwise indicated)



|19. | Differences between Argentine GAAP and US GAAP (continued)
|--- | ----------------------------------------------------------



| | r) | Mortgage receivable on real estate (continued)
| | -- | ----------------------------------------------

The summary of activity in mortgage receivable is as follows:



|                               |  |                      |           |   |      |               |  
|------------------------------ |  | -------------------- | --------- | - | ---- | ------------- | -
|                               |  | Years ended June 30, |          
|                               |  | 2006                 |           |   | 2005 |              
|Balance, beginning of the year |  | Ps.                  | 1,122,500 |   |      | Ps. 1,166,708 |  
|Deductions during the year:    |  |                      |           |   |      |               |  
|Collections of principal       |  |                      | (163,855  | ) |      | (44,208       | )
|                               |  |                      |           |   |      |               |  
|Balance, end of year           |  | Ps.                  | 958,645   |   |      | Ps. 1,122,500 |  
|                               |  |                      |           |   |      |               |  



|20. | Other financial statement information
|--- | -------------------------------------

The
following tables present additional consolidated financial statement disclosures required under Argentine GAAP:



| | a. | Fixed assets, net
| | -- | -----------------



| | b. | Intangible assets, net
| | -- | ----------------------



| | c. | Goodwill, net
| | -- | -------------



| | d. | Allowances and provisions
| | -- | -------------------------



| | e. | Cost of leases and services, credit card operations and others
| | -- | --------------------------------------------------------------



| | f. | Foreign currency assets and liabilities
| | -- | ---------------------------------------



| | g. | Other expenses
| | -- | --------------



F-68



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | a. | Fixed assets, net
| | -- | -----------------



|                            |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            
|--------------------------- |  | ----------------------------- | ------------- | ------------ | --- | --------------- | ------------------ | --- | ----------- | --------- |  | ----------------------- | -------------- | ---------------------------------- |  | ------------ | ------------- | ---------------------------- | --- | ----------- |  | --- | -------------- | - |  | --- | ------------- |  | --- | ------------------ |  | --- | -----------
|                            |  | Original value                |               | Depreciation
|Principal account           |  | Value as of beginning of year |               | Additions    |     | Deductions      |                    |     | Transfers   |           |  | Value as of end of year |                | Accumulatedas of beginning of year |  | Current year |               | Accumulatedas of end of year
|                            |  |                               |               |              |     |                 | Increase(Decrease) |     |             | Transfers |  | Amount                  |               
|Properties:                 |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            
|Shopping Centers:           |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            
|-Abasto                     |  | Ps.                           | 251,822,472   |              | Ps. | 276,974         |                    | Ps. |            |           |  | Ps.                     | 78,518         |                                    |  | Ps.          | 252,177,964   |                              | Ps. | 56,023,232  |  | Ps. |               |   |  | Ps. |              |  | Ps. | 7,795,029          |  | Ps. | 63,818,261 
|-Alto Palermo               |  |                               | 405,662,997   |              |     | 1,158,361       |                    |     |            |           |  |                         |               |                                    |  |              | 406,821,358   |                              |     | 194,840,745 |  |     |               |   |  |     |              |  |     | 18,467,804         |  |     | 213,308,549
|-Alto Avellaneda            |  |                               | 176,803,656   |              |     | 2,571,410       |                    |     | (13,438,300 | )         |  |                         |               |                                    |  |              | 165,936,766   |                              |     | 78,054,108  |  |     | (7,044,621     | ) |  |     |              |  |     | 8,638,619          |  |     | 79,648,106 
|-Paseo Alcorta              |  |                               | 105,551,088   |              |     | 419,879         |                    |     |            |           |  |                         |               |                                    |  |              | 105,970,967   |                              |     | 39,735,136  |  |     |               |   |  |     |              |  |     | 3,975,952          |  |     | 43,711,088 
|-Alto NOA                   |  |                               | 43,070,892    |              |     | 49,887          |                    |     |            |           |  |                         | 97,525         |                                    |  |              | 43,218,304    |                              |     | 12,187,543  |  |     |               |   |  |     |              |  |     | 2,014,281          |  |     | 14,201,824 
|-Buenos Aires Design        |  |                               | 48,937,339    |              |     | 55,518          |                    |     |            |           |  |                         | (6,722         | )                                  |  |              | 48,986,135    |                              |     | 28,002,088  |  |     |               |   |  |     |              |  |     | 2,467,402          |  |     | 30,469,490 
|-Patio Bullrich             |  |                               | 159,476,014   |              |     | 582,076         |                    |     |            |           |  |                         |               |                                    |  |              | 160,058,090   |                              |     | 44,132,039  |  |     |               |   |  |     |              |  |     | 6,725,391          |  |     | 50,857,430 
|-Alto Rosario               |  |                               | 85,426,283    |              |     | 1,145,121       |                    |     | (27,581     | )         |  |                         | (64,790        | )                                  |  |              | 86,479,033    |                              |     | 1,191,475   |  |     |               |   |  |     |              |  |     | 2,116,234          |  |     | 3,307,709  
|-Mendoza Plaza Shopping     |  |                               | 104,456,024   |              |     | 8,068,921       |                    |     |            |           |  |                         |               |                                    |  |              | 112,524,945   |                              |     | 20,750,204  |  |     |               |   |  |     |              |  |     | 3,173,942          |  |     | 23,924,146 
|-Neuquén                    |  |                               | 10,321,414    |              |     |                |                    |     |            |           |  |                         |               |                                    |  |              | 10,321,414    |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|Other                       |  |                               | 11,089,213    |              |     |                |                    |     | (1,076,011  | )         |  |                         |               |                                    |  |              | 10,013,202    |                              |     | 799,634     |  |     | (172,178       | ) |  |     |              |  |     | 84,155             |  |     | 711,611    
|Leasehold improvements      |  |                               | 6,087,074     |              |     | 1,618,516       |                    |     | (11,234     | )         |  |                         | 756,542        |                                    |  |              | 8,450,898     |                              |     | 4,657,942   |  |     | (13,468        | ) |  |     |              |  |     | 797,896            |  |     | 5,442,370  
|Facilities                  |  |                               | 34,828,293    |              |     | 2,201,857       |                    |     | (66,208     | )         |  |                         | 143,141        |                                    |  |              | 37,107,083    |                              |     | 20,801,919  |  |     | (30,747        | ) |  |     |              |  |     | 2,166,527          |  |     | 22,937,699 
|Furniture and fixtures      |  |                               | 16,658,755    |              |     | 1,613,367       |                    |     | (2,841      | )         |  |                         | 1,795          |                                    |  |              | 18,271,076    |                              |     | 11,929,857  |  |     | (2,004         | ) |  |     |              |  |     | 1,200,556          |  |     | 13,128,409 
|Vehicles                    |  |                               | 205,933       |              |     |                |                    |     |            |           |  |                         |               |                                    |  |              | 205,933       |                              |     | 104,970     |  |     |               |   |  |     |              |  |     | 25,241             |  |     | 130,211    
|Computer equipment          |  |                               | 19,913,535    |              |     | 2,736,587       |                    |     | (16,936     | )         |  |                         |               |                                    |  |              | 22,633,186    |                              |     | 16,004,606  |  |     | (13,735        | ) |  |     |              |  |     | 2,379,402          |  |     | 18,370,273 
|Software                    |  |                               | 5,467,442     |              |     | 2,439,451       |                    |     |            |           |  |                         |               |                                    |  |              | 7,906,893     |                              |     | 4,691,481   |  |     |               |   |  |     |              |  |     | 527,930            |  |     | 5,219,411  
|Work-in-progress:           |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            
|-Leasehold improvements     |  |                               |              |              |     | 1,328,514       |                    |     |            |           |  |                         | (319,184       | )                                  |  |              | 1,009,330     |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|-Rosario                    |  |                               |              |              |     | 2,767,603       |                    |     |            |           |  |                         |               |                                    |  |              | 2,767,603     |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|-Neuquén                    |  |                               | 1,844,421     |              |     |                |                    |     |            |           |  |                         |               |                                    |  |              | 1,844,421     |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|-Patio Bullrich             |  |                               | 258,373       |              |     | 4,684           |                    |     | (54,619     | )         |  |                         |               |                                    |  |              | 208,438       |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|-Tarshop                    |  |                               | 749,820       |              |     |                |                    |     |            |           |  |                         | (749,820       | )                                  |  |              |              |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|Other                       |  |                               | 1,572         |              |     |                |                    |     |            |           |  |                         |               |                                    |  |              | 1,572         |                              |     | 1,572       |  |     |               |   |  |     |              |  |     |                   |  |     | 1,572      
|-Suppliers advances-Rosario |  |                               |              |              |     | 1,222,672       |                    |     |            |           |  |                         |               |                                    |  |              | 1,222,672     |                              |     |            |  |     |               |   |  |     |              |  |     |                   |  |     |           
|                            |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            
|Total as of June 30, 2006   |  | Ps.                           | 1,488,632,610 |              | Ps. | 30,261,398      |                    | Ps. | (14,693,730 | )         |  | Ps.                     | (1)   (62,995) |                                    |  | Ps.          | 1,504,137,283 |                              | Ps. | 533,908,551 |  | Ps. | (7,276,753     | ) |  | Ps. |              |  |     | Ps. (5) 62,556,361 |  | Ps. | 589,188,159
|                            |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            
|Total as of June 30, 2005   |  | Ps.                           | 1,318,745,059 |              | Ps. | (4) 166,084,010 |                    | Ps. |            |           |  | Ps.                     | (7) 3,803,541  |                                    |  | Ps.          | 1,488,632,610 |                              | Ps. | 445,123,585 |  | Ps. | (2) 28,875,471 |   |  | Ps. | (3) 1,644,539 |  |     | Ps. (6) 58,264,956 |  | Ps. | 533,908,551
|                            |  |                               |               |              |     |                 |                    |     |             |           |  |                         |                |                                    |  |              |               |                              |     |             |  |     |                |   |  |     |               |  |     |                    |  |     |            





|                            |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|--------------------------- |  | ---------- | ----------------- | -------------------------------- | --- | ----------- |  | --- | ----------- |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                            |  |            |                   |                                  |     |             |  |     |            
|                            |  |            |                   | Net carrying value as ofJune 30, |     |             |  |     |             |  |  |  |  |  |  |  |  | 
|Principal account           |  | Impairment |                   | 2006                             |     | 2005        |  |     |             |  |  |  |  |  |  |  |  |  |  | 
|                            |  |            |                   |                                  |     |             |  |     |            
|Properties:                 |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Shopping Centers:           |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Abasto                     |  | Ps.        |                  |                                  | Ps. | 188,359,703 |  | Ps. | 195,799,240 |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Alto Palermo               |  |            |                  |                                  |     | 193,512,809 |  |     | 210,822,250 |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Alto Avellaneda            |  |            |                  |                                  |     | 86,288,660  |  |     | 98,749,548  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Paseo Alcorta              |  |            |                  |                                  |     | 62,259,879  |  |     | 65,815,952  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Alto NOA                   |  |            |                  |                                  |     | 29,016,480  |  |     | 30,883,349  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Buenos Aires Design        |  |            |                  |                                  |     | 18,516,645  |  |     | 20,935,251  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Patio Bullrich             |  |            |                  |                                  |     | 109,200,660 |  |     | 115,343,975 |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Alto Rosario               |  |            |                  |                                  |     | 83,171,324  |  |     | 80,826,675  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Mendoza Plaza Shopping     |  |            |                  |                                  |     | 88,600,799  |  |     | 83,705,820  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Neuquén                    |  |            | 2,153,984         |                                  |     | 8,167,430   |  |     | 8,142,598   |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Other                       |  |            |                  |                                  |     | 9,301,591   |  |     | 10,289,581  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Leasehold improvements      |  |            |                  |                                  |     | 3,008,528   |  |     | 1,429,132   |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Facilities                  |  |            |                  |                                  |     | 14,169,384  |  |     | 14,026,374  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Furniture and fixtures      |  |            |                  |                                  |     | 5,142,667   |  |     | 4,728,898   |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Vehicles                    |  |            |                  |                                  |     | 75,722      |  |     | 100,963     |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Computer equipment          |  |            |                  |                                  |     | 4,262,913   |  |     | 3,908,929   |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Software                    |  |            |                  |                                  |     | 2,687,482   |  |     | 775,961     |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Work-in-progress:           |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Leasehold improvements     |  |            |                  |                                  |     | 1,009,330   |  |     |            |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Rosario                    |  |            |                  |                                  |     | 2,767,603   |  |     |            |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Neuquén                    |  |            |                  |                                  |     | 1,844,421   |  |     | 1,844,421   |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Patio Bullrich             |  |            |                  |                                  |     | 208,438     |  |     | 258,373     |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Tarshop                    |  |            |                  |                                  |     |            |  |     | 749,820     |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Other                       |  |            |                  |                                  |     |            |  |     |            |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|-Suppliers advances-Rosario |  |            |                  |                                  |     | 1,222,672   |  |     |            |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                            |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Total as of June 30, 2006   |  |            | Ps. (8) 2,153,984 |                                  | Ps. | 912,795,140 |  | Ps. |            |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                            |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Total as of June 30, 2005   |  |            | Ps. (9) 5,586,949 |                                  | Ps. |            |  | Ps. | 949,137,110 |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                            |  |            |                   |                                  |     |             |  |     |             |  |  |  |  |  |  |  |  |  |  |  |  |  | 

---

|(1) | Includes Ps. (71,092) reclassified to Other receivables and Ps. 8,097 reclassified from Other investments.
|--- | ----------------------------------------------------------------------------------------------------------

|(2) | Related to the acquisition of Mendoza Plaza Shopping.
|--- | -----------------------------------------------------

|(3) | Reclassified from non-Current investment.
|--- | -----------------------------------------

|(4) | Includes Ps. 114,550,434 related to the acquisition of Mendoza Plaza Shopping.
|--- | ------------------------------------------------------------------------------

|(5) | The allocation of annual depreciation charges in the statements of income is included in Other expenses (Note 20.g), except for Ps. 301,312 passed-through to tenants.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | The allocation of annual depreciation charges in the statements of income is included in Other expenses (Note 20.g), except for Ps. 234,488 passed-through to tenants.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes Ps. 2,126,183 reclassified to Intangible assets, Ps. 3,311,599 reclassified to Inventory, Ps. 103,318 reclassified from Other receivables and Ps. 9,138,005 reclassified
from non-Current investment.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Net of the depreciation of the year of Ps. 120,999. See Note 20.d.
|--- | ------------------------------------------------------------------

|(9) | Net of the depreciation of the year of Ps. 580,775.
|--- | ---------------------------------------------------



F-69



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | b. | Intangible assets, net
| | -- | ----------------------



|                          |  |                              |            |              |     |               |  |                                  |           |   |  |                         |                 |                                  |  |                    |            |            |     |                              |  |            |               |      |     |               |  |     |            |  |     |                |  |     |           |  |     |          
|------------------------- |  | ---------------------------- | ---------- | ------------ | --- | ------------- |  | -------------------------------- | --------- | - |  | ----------------------- | --------------- | -------------------------------- |  | ------------------ | ---------- | ---------- | --- | ---------------------------- |  | ---------- | ------------- | ---- | --- | ------------- |  | --- | ---------- |  | --- | -------------- |  | --- | --------- |  | --- | ---------
|                          |  | Original value               |            | Amortization |     |               |  | Net carrying value as ofJune 30,
|                          |  |                              |            |              |     |               |  |                                  |           |   |  |                         |                 |                                  |  | Current year       |            |            |     |                              |  |            |               |     
|Principal account         |  | Value as ofbeginning of year |            | Additions    |     | Deductions    |  |                                  | Transfers |   |  | Value as of end of year |                 | Accumulatedas ofbeginning ofyear |  | Increase(Decrease) |            | Amount (1) |     | Accumulatedas of end of year |  | Impairment |               | 2006 |     | 2005         
|Trademarks                |  | Ps.                          | 586,002    |              | Ps. |              |  | Ps.                              |          |   |  | Ps.                     |                |                                  |  | Ps.                | 586,002    |            | Ps. | 359,161                      |  | Ps.        |              |      | Ps. | 49,988        |  | Ps. | 409,149    |  | Ps. | 362            |  | Ps. | 176,491   |  | Ps. | 226,841  
|Preoperating expenses     |  |                              | 14,620,344 |              |     | 50,000        |  |                                  | (4,833    | ) |  |                         | (11,800         | )                                |  |                    | 14,653,711 |            |     | 10,106,909                   |  |            |              |      |     | 1,501,017     |  |     | 11,607,926 |  |     |               |  |     | 3,045,785 |  |     | 4,158,388
|                          |  |                              |            |              |     |               |  |                                  |           |   |  |                         |                 |                                  |  |                    |            |            |     |                              |  |            |               |      |     |               |  |     |            |  |     |                |  |     |           |  |     |          
|Total as of June 30, 2006 |  | Ps.                          | 15,206,346 |              | Ps. | 50,000        |  | Ps.                              | (4,833    | ) |  | Ps.                     | (3)     (11,800 | )                                |  | Ps.                | 15,239,713 |            | Ps. | 10,466,070                   |  | Ps.        |              |      | Ps. | 1,551,005     |  | Ps. | 12,017,075 |  | Ps. | (8)        362 |  | Ps. | 3,222,276 |  | Ps. |         
|                          |  |                              |            |              |     |               |  |                                  |           |   |  |                         |                 |                                  |  |                    |            |            |     |                              |  |            |               |      |     |               |  |     |            |  |     |                |  |     |           |  |     |          
|Total as of June 30, 2005 |  | Ps.                          | 5,884,265  |              | Ps. | (6) 8,104,924 |  | Ps.                              | (319,581  | ) |  | Ps.                     | (2) 1,536,738   |                                  |  | Ps.                | 15,206,346 |            | Ps. | 3,670,157                    |  | Ps.        | (7) 5,750,191 |      | Ps. | (4) 1,045,722 |  | Ps. | 10,466,070 |  | Ps. | (5) 355,047    |  | Ps. |          |  | Ps. | 4,385,229
|                          |  |                              |            |              |     |               |  |                                  |           |   |  |                         |                 |                                  |  |                    |            |            |     |                              |  |            |               |      |     |               |  |     |            |  |     |                |  |     |           |  |     |          

---

|(1) | The allocation of annual amortization charges in the statements of income is included in Other expenses (Note 20.g).
|--- | ----------------------------------------------------------------------------------------------------------------------

|(2) | Includes Ps. 1,555,070 reclassified from fixed assets and Ps. 18,332 reclassified to Inventory.
|--- | -----------------------------------------------------------------------------------------------

|(3) | Reclassified to Other receivables.
|--- | ----------------------------------

|(4) | Includes Ps. 4,582 allocated in Net income (loss) in credit card trust.
|--- | -------------------------------------------------------------------------

|(5) | Net of the amortization of the year of Ps. 123,160.
|--- | ---------------------------------------------------

|(6) | Includes Ps. 6,081,806 related to the acquisition of Mendoza Plaza Shopping.
|--- | ----------------------------------------------------------------------------

|(7) | Includes Ps. 6,069,772 related to the acquisition of Mendoza Plaza Shopping.
|--- | ----------------------------------------------------------------------------

|(8) | Net of the amortization of the year of Ps. 152,163. See Note 20.d.
|--- | ------------------------------------------------------------------



F-70



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | c. | Goodwill, net
| | -- | -------------



|                          |  |                              |            |           |              |          |                        |                                   |     |                                   |   |            |     |            |                              |     |           |      |  |     |            |   |  |     |            |   |  |     |           
|------------------------- |  | ---------------------------- | ---------- | --------- | ------------ | -------- | ---------------------- | --------------------------------- | --- | --------------------------------- | - | ---------- | --- | ---------- | ---------------------------- | --- | --------- | ---- |  | --- | ---------- | - |  | --- | ---------- | - |  | --- | ----------
|                          |  | Original value               |            |           | Amortization |          |                        | Net carrying value as of June 30,
|Principal account         |  | Value as ofbeginning of year |            | Additions |              |          | Value as of endof year |                                   |     | Accumulatedas of beginningof year |   | Amount (1) |     |            | Accumulated asof end of year |     |           | 2006 |  |     | 2005      
|- Old Alto Palermo        |  | Ps.                          | 24,628,438 |           | Ps.          |         |                        |                                   | Ps. | 24,628,438                        |   |            | Ps. | 19,087,041 |                              | Ps. | 2,462,843 |      |  | Ps. | 21,549,884 |   |  | Ps. | 3,078,554  |   |  | Ps. | 5,541,397 
|- Tarshop S.A.            |  |                              | 2,422,536  |           |              |         |                        |                                   |     | 2,422,536                         |   |            |     | 1,695,776  |                              |     | 242,253   |      |  |     | 1,938,029  |   |  |     | 484,507    |   |  |     | 726,760   
|- Fibesa S.A.             |  |                              | 21,217,024 |           |              |         |                        |                                   |     | 21,217,024                        |   |            |     | 10,608,511 |                              |     | 2,053,259 |      |  |     | 12,661,770 |   |  |     | 8,555,254  |   |  |     | 10,608,513
|- Ersa S.A.               |  |                              |           |           |              | (579,074 | )                      |                                   |     | (579,074                          | ) |            |     |           |                              |     | (18,680   | )    |  |     | (18,680    | ) |  |     | (560,394   | ) |  |     |          
|                          |  |                              |            |           |              |          |                        |                                   |     |                                   |   |            |     |            |                              |     |           |      |  |     |            |   |  |     |            |   |  |     |           
|Total as of June 30, 2006 |  | Ps.                          | 48,267,998 |           | Ps.          | (579,074 | )                      |                                   | Ps. | 47,688,924                        |   |            | Ps. | 31,391,328 |                              | Ps. | 4,739,675 |      |  | Ps. | 36,131,003 |   |  | Ps. | 11,557,921 |   |  | Ps. |          
|                          |  |                              |            |           |              |          |                        |                                   |     |                                   |   |            |     |            |                              |     |           |      |  |     |            |   |  |     |            |   |  |     |           
|Total as of June 30, 2005 |  | Ps.                          | 48,267,998 |           | Ps.          |         |                        |                                   | Ps. | 48,267,998                        |   |            | Ps. | 26,564,530 |                              | Ps. | 4,826,798 |      |  | Ps. | 31,391,328 |   |  | Ps. |           |   |  | Ps. | 16,876,670
|                          |  |                              |            |           |              |          |                        |                                   |     |                                   |   |            |     |            |                              |     |           |      |  |     |            |   |  |     |            |   |  |     |           

---

|(1) | The allocation of annual amortization charges in the statements of income is included in Amortization of goodwill.
|--- | --------------------------------------------------------------------------------------------------------------------



F-71



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | d. | Allowances and provisions
| | -- | -------------------------



|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|------------------------------------------ |  | ------------------------------- | ---------- | --------- | ---- | ---------- | --------- |  | ---------- | --------------- |  | ----------------------------- | ------------------ | - |  | --- | ---------- |  | --- | ---------- |  | --- | ----------
|Item                                       |  | Balances as ofbeginning of year |            | Transfers |      |            | Additions |  | Deductions |                 |  | Carrying value as of June 30,
|                                           |  |                                 |            |           | 2006 |            | 2005      |  | 2004      
|Deducted from current assets:              |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Allowance for doubtful accounts            |  | Ps.                             | 37,367,227 |           | Ps.  |           |           |  | Ps.        | (1) 13,173,326  |  | Ps.                           | (8)     (7,105,360 | ) |  | Ps. | 43,435,193 |  | Ps. | 37,367,227 |  | Ps. | 34,061,561
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2006                  |  | Ps.                             | 37,367,227 |           | Ps.  |           |           |  | Ps.        | 13,173,326      |  | Ps.                           | (7,105,360         | ) |  | Ps. | 43,435,193 |  | Ps. |           |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2005                  |  | Ps.                             | 34,061,561 |           | Ps.  | 4,478,645  |           |  | Ps.        | 6,590,250       |  | Ps.                           | (7,763,229         | ) |  | Ps. |           |  | Ps. | 37,367,227 |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2004                  |  | Ps.                             | 45,332,888 |           | Ps.  |           |           |  | Ps.        | 233,751         |  | Ps.                           | (11,505,078        | ) |  | Ps. |           |  | Ps. |           |  | Ps. | 34,061,561
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Deducted from non-current assets:          |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Allowance for doubtful accounts            |  | Ps.                             | 969,219    |           | Ps.  |           |           |  | Ps.        | (1)     363,599 |  | Ps.                           |                   |   |  | Ps. | 1,332,818  |  | Ps. | 969,219    |  | Ps. | 44,964    
|Allowance for doubtful mortgage receivable |  |                                 | 2,208,275  |           |      |           |           |  |            |                |  |                               |                   |   |  |     | 2,208,275  |  |     | 2,208,275  |  |     | 2,208,275 
|Impairment of inventory                    |  |                                 |           |           |      |           |           |  |            | 205,599         |  |                               |                   |   |  |     | 205,599    |  |     |           |  |     | 500,134   
|Impairment of fixed assets                 |  |                                 | 5,586,949  |           |      |           |           |  |            |                |  |                               | (7)    (3,432,965  | ) |  |     | 2,153,984  |  |     | 5,586,949  |  |     | 9,262,308 
|Impairment of intangible assets            |  |                                 | 355,047    |           |      |           |           |  |            | 362             |  |                               | (6)       (355,047 | ) |  |     | 362        |  |     | 355,047    |  |     | 478,206   
|Impairment of non-current investments      |  |                                 | 7,983,469  |           |      |           |           |  |            | 190,000         |  |                               | (5)    (7,983,469  | ) |  |     | 190,000    |  |     | 7,983,469  |  |     | 17,481,868
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2006                  |  | Ps.                             | 17,102,959 |           | Ps.  |           |           |  | Ps.        | 759,560         |  | Ps.                           | (11,771,481        | ) |  | Ps. | 6,091,038  |  | Ps. |           |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2005                  |  | Ps.                             | 29,975,755 |           | Ps.  |           |           |  | Ps.        | 924,256         |  | Ps.                           | (13,797,052        | ) |  | Ps. |           |  | Ps. | 17,102,959 |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2004                  |  | Ps.                             | 59,165,065 |           | Ps.  |           |           |  | Ps.        |                |  | Ps.                           | (29,189,310        | ) |  | Ps. |           |  | Ps. |           |  | Ps. | 29,975,755
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Included in current liabilities:           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Provision for contingencies                |  | Ps.                             | 2,032,500  |           | Ps.  |           |           |  | Ps.        | (3)     506,714 |  | Ps.                           | (2)   (2,032,500   | ) |  | Ps. | 506,714    |  | Ps. | 2,032,500  |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2006                  |  | Ps.                             | 2,032,500  |           | Ps.  |           |           |  | Ps.        | 506,714         |  | Ps.                           | (2,032,500         | ) |  | Ps. | 506,714    |  | Ps. |           |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2005                  |  | Ps.                             |           |           | Ps.  | 2,032,500  |           |  | Ps.        |                |  | Ps.                           |                   |   |  | Ps. |           |  | Ps. | 2,032,500  |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2004                  |  | Ps.                             |           |           | Ps.  |           |           |  | Ps.        |                |  | Ps.                           |                   |   |  | Ps. |           |  | Ps. |           |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Included in non-current liabilities:       |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Provision for contingencies                |  | Ps.                             | 10,606,121 |           | Ps.  |           |           |  | Ps.        | (3)     791,469 |  | Ps.                           | (4)      (730,281  | ) |  | Ps. | 10,667,309 |  | Ps. | 10,606,121 |  | Ps. | 5,995,698 
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2006                  |  | Ps.                             | 10,606,121 |           | Ps.  |           |           |  | Ps.        | 791,469         |  | Ps.                           | (730,281           | ) |  | Ps. | 10,667,309 |  | Ps. |           |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2005                  |  | Ps.                             | 5,995,698  |           | Ps.  | (2,032,500 | )         |  | Ps.        | 6,879,052       |  | Ps.                           | (236,129           | ) |  | Ps. |           |  | Ps. | 10,606,121 |  | Ps. |          
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           
|Total as of June 30, 2004                  |  | Ps.                             | 3,927,125  |           | Ps.  |           |           |  | Ps.        | 2,174,327       |  | Ps.                           | (105,754           | ) |  | Ps. |           |  | Ps. |           |  | Ps. | 5,995,698 
|                                           |  |                                 |            |           |      |            |           |  |            |                 |  |                               |                    |   |  |     |            |  |     |            |  |     |           

---

|(1) | Includes Ps. 13,536,925 allocated in Selling Expenses and Ps. 2,639,569 related to the allowance of the cancelled trusts in the period (Series VI, VII, IX, XII y XIII).
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Corresponds to payments made during the year.
|--- | ---------------------------------------------

|(3) | Includes Ps. 236,945 shown in Note 8 Other expenses, net and 964,514 shown in Note 20.g. Other expenses.
|--- | ----------------------------------------------------------------------------------------------------------

|(4) | Includes utilization of the year of Ps. 633,557 and recovery of provision of Ps. 96,724.
|--- | ----------------------------------------------------------------------------------------

|(5) | Includes utilization of the year of Ps. 1,603,963 and recovery of impairment of Ps. 6,379,506.
|--- | ----------------------------------------------------------------------------------------------

|(6) | Includes amortization of the year of Ps. 152,163 and recovery of impairment of Ps. 202,884.
|--- | -------------------------------------------------------------------------------------------

|(7) | Includes Ps. 3,311,966 related to recovery of impairment and Ps. 120,999 related to amortization of the year.
|--- | -------------------------------------------------------------------------------------------------------------

|(8) | Related to off set of the year.
|--- | -------------------------------



F-72



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | e. | Cost of leases and services, credit card operations and others
| | -- | --------------------------------------------------------------



|                                                            |  |                     |   |  |                  |   |  |                   |  
|----------------------------------------------------------- |  | ------------------- | - |  | ---------------- | - |  | ----------------- | -
|                                                            |  | Year ended June 30, |  
|                                                            |  | 2006                |   |  | 2005             |   |  | 2004              |  
|I.      Cost of leases and services                         |  |                     |   |  |                  |   |  |                   |  
|Expenses (Note 20.g)                                        |  | 76,634,274          |   |  | 69,203,912       |   |  | 61,406,872        |  
|                                                            |  |                     |   |  |                  |   |  |                   |  
|Cost of leases and services                                 |  | Ps.   76,634,274    |   |  | Ps. 69,203,912   |   |  | Ps. 61,406,872    |  
|                                                            |  |                     |   |  |                  |   |  |                   |  
|II.     Cost of credit card operations                      |  |                     |   |  |                  |   |  |                   |  
|Expenses (Note 20.g)                                        |  | 43,933,220          |   |  | 23,101,868       |   |  | 11,965,061        |  
|                                                            |  |                     |   |  |                  |   |  |                   |  
|Cost of credit card operations                              |  | Ps.   43,933,220    |   |  | Ps. 23,101,868   |   |  | Ps. 11,965,061    |  
|                                                            |  |                     |   |  |                  |   |  |                   |  
|III.   Cost of others                                       |  |                     |   |  |                  |   |  |                   |  
|Inventory as of the beginning of the years                  |  | Ps.   18,936,565    |   |  | Ps. 18,325,323   |   |  | Ps. 16,709,201    |  
|Plus:                                                       |  |                     |   |  |                  |   |  |                   |  
|Purchases of the years                                      |  | 1,497,876           |   |  | 1,536,418        |   |  | 24,928            |  
|Expenses (Note 20.g)                                        |  | 753,752             |   |  | 127,510          |   |  | 28,440            |  
|(Increase) / Recovery of impairment of inventory            |  | (205,599            | ) |  | 500,134          |   |  | 1,591,194         |  
|Transfers (1)                                               |  | 2,311,304           |   |  | (1,348,234       | ) |  |                  |  
|Gains from valuation of inventories at net realizable value |  | 3,497,632           |   |  |                 |   |  |                  |  
|Less:                                                       |  |                     |   |  |                  |   |  |                   |  
|                                                            |  |                     |  
|Inventory as of the end of the years                        |  | (7,989,246          | ) |  | (18,936,565      | ) |  | (18,325,323       | )
|                                                            |  |                     |   |  |                  |   |  |                   |  
|Cost of others                                              |  | Ps.   18,802,284    |   |  | Ps.      204,586 |   |  | Ps.        28,440 |  
|                                                            |  |                     |   |  |                  |   |  |                   |  
|Total cost                                                  |  | Ps. 139,369,778     |   |  | Ps. 92,510,366   |   |  | Ps. 73,400,373    |  
|                                                            |  |                     |   |  |                  |   |  |                   |  

---

|(1) | For the year ended June 30, 2006, includes Ps. (1,516,129) related to transfers of the cost of marketing merchandise shown in Note 4.d. and Ps. 3,827,433 reclassified to
other investments. For the year ended June 30, 2005, includes Ps. (1,348,234) related to transfers of the cost of marketing merchandise shown in Note 4.d.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-73



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | f. | Foreign currency assets and liabilities
| | -- | ---------------------------------------



|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|-------------------------------------- |  | -------- |  | ------------------------ |  | -------------------- |  | -------------------- | ----------- | ---- | --- | -----------
|                                       |  |          |  |                          |  |                      |  | Total as of June 30,
|Captions                               |  | Currency |  | Amount offoreigncurrency |  | Currentexchange rate |  | 2006                 |             | 2005
|Assets                                 |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Current assets                         |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Cash and banks                         |  | US$      |  | 8,960,823                |  | 3.0460               |  | Ps.                  | 27,294,672  |      | Ps. | 13,483,928 
|Cash and banks                         |  | EURO     |  | 303,632                  |  | 3.8916               |  |                      | 1,181,616   |      |     | 1,057,423  
|Other investments, net                 |  | US$      |  | 45,000                   |  | (1)                  |  |                      | 41,850      |      |     | 38,478     
|Accounts receivable, net               |  | US$      |  | 2,097,000                |  | 3.0460               |  |                      | 6,387,462   |      |     |           
|Other receivables and prepaid expenses |  | US$      |  | 3,015,000                |  | 3.0460               |  |                      | 9,183,690   |      |     |           
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total current assets                   |  |          |  | 14,421,455               |  |                      |  | Ps.                  | 44,089,290  |      | Ps. | 14,579,829 
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Accounts receivable, net               |  | U$S      |  | 3,992,573                |  | 3.0460               |  |                      | 12,161,380  |      |     |           
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total non-current assets.              |  |          |  | 3,992,573                |  |                      |  |                      | 12,161,380  |      |     |           
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total assets as of June 30, 2006       |  |          |  | 18,414,028               |  |                      |  | Ps.                  | 56,250,670  |      | Ps. |           
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total assets as of June 30, 2005.      |  |          |  | 5,057,121                |  |                      |  | Ps.                  |            |      | Ps. | 14,579,829 
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Liabilities                            |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Current liabilities                    |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Trade accounts payable                 |  | US$      |  | 331,808                  |  | 3.0860               |  | Ps.                  | 1,023,961   |      | Ps. | 971,616    
|Customer advances                      |  | EURO     |  | 600,000                  |  | 3.9430               |  |                      | 2,365,800   |      |     | 1,046,520  
|Short-term debt                        |  | US$      |  | 7,009,794                |  | 3.0860               |  |                      | 21,632,224  |      |     | 20,028,675 
|Related parties                        |  | US$      |  | 320,369                  |  | 3.0860               |  |                      | 988,660     |      |     | 773,410    
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total current liabilities              |  |          |  | 8,261,971                |  |                      |  | Ps.                  | 26,010,645  |      | Ps. | 22,820,221 
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Non current liabilities                |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Trade accounts payable                 |  | US$      |  | 327,333                  |  | 3.0860               |  | Ps.                  | 1,010,150   |      | Ps. | 1,870,602  
|Long-term debt                         |  | US$      |  | 47,262,526               |  | 3.0860               |  |                      | 145,852,155 |      |     | 150,191,464
|Related parties                        |  | US$      |  | 300,000                  |  | 3.0860               |  |                      | 925,800     |      |     | 1,732,200  
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total non-current liabilities          |  |          |  | 47,889,859               |  |                      |  | Ps.                  | 147,788,105 |      | Ps. | 153,794,266
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total liabilities as of June 30, 2006  |  |          |  | 56,151,830               |  |                      |  | Ps.                  | 173,798,750 |      | Ps. |           
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            
|Total liabilities as of June 30, 2005  |  |          |  | 61,113,290               |  |                      |  | Ps.                  |            |      | Ps. | 176,614,487
|                                       |  |          |  |                          |  |                      |  |                      |             |      |     |            

---

|(1) | Valuated at fair market value.
|--- | ------------------------------



F-74



---

##### Table of Contents

Alto Palermo S.A. (APSA)

Notes to the Consolidated Financial Statement (continued)



|20. | Other financial statement information (continued)
|--- | -------------------------------------------------



| | g. | Other expenses
| | -- | --------------



|                                            |  |                |         |                               |     |                            |  |                              |            |  |                                 |             |   |                          |     |             |               |  |                |             |         |  |                          |             |                          |     |                          |  |     |            |  |     |             |  |     |             |  |     |             |  
|------------------------------------------- |  | -------------- | ------- | ----------------------------- | --- | -------------------------- |  | ---------------------------- | ---------- |  | ------------------------------- | ----------- | - | ------------------------ | --- | ----------- | ------------- |  | -------------- | ----------- | ------- |  | ------------------------ | ----------- | ------------------------ | --- | ------------------------ |  | --- | ---------- |  | --- | ----------- |  | --- | ----------- |  | --- | ----------- | -
|                                            |  | Expenses       |         |                               |     |                            |  |                              |           
|Items                                       |  | Cost of others |         | Cost of credit cardoperations |     | Cost of leases andservices |  | Cost of pass-throughexpenses |            |  | Cost ofcollectivepromotion fund |             |   | Cost of expensesrecovery |     |             | Subtotal cost |  | Administrative |             | Selling |  | Total as ofJune 30, 2006 |             | Total as ofJune 30, 2005 |     | Total as ofJune 30, 2004 | 
|Depreciation and amortization               |  | Ps.            |        |                               | Ps. | 824,606                    |  | Ps.                          | 61,893,436 |  | Ps.                             |            |   |                          | Ps. |            |               |  | Ps.            |            |         |  | Ps.                      | 62,718,042  |                          | Ps. | 814,850                  |  | Ps. |           |  | Ps. | 63,532,892  |  | Ps. | 58,367,673  |  | Ps. | 52,927,956  |  
|Salaries and bonuses                        |  |                |        |                               |     | 13,773,347                 |  |                              |           |  |                                 | 20,115,260  |   |                          |     | 3,939,316   |               |  |                | (24,054,576 | )       |  |                          | 13,773,347  |                          |     | 17,812,376               |  |     | 2,240,129  |  |     | 33,825,852  |  |     | 19,336,293  |  |     | 10,757,139  |  
|Taxes, rates, contributions and services    |  |                | 237     |                               |     | 8,599,591                  |  |                              | 39,428     |  |                                 | 11,742,286  |   |                          |     | 962,734     |               |  |                | (12,705,020 | )       |  |                          | 8,639,256   |                          |     | 6,548,809                |  |     | 16,171,003 |  |     | 31,359,068  |  |     | 18,839,950  |  |     | 11,268,666  |  
|Advertising                                 |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     | 24,991,769  |               |  |                | (24,991,769 | )       |  |                          |            |                          |     |                         |  |     | 16,507,341 |  |     | 16,507,341  |  |     | 9,193,235   |  |     | 2,621,194   |  
|Fees for directors                          |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          |            |                          |     | 8,883,474                |  |     |           |  |     | 8,883,474   |  |     | 8,950,771   |  |     | 4,300,763   |  
|Common area maintenance expenses            |  |                |        |                               |     |                           |  |                              | 9,786,049  |  |                                 | 280,333     |   |                          |     |            |               |  |                | (280,333    | )       |  |                          | 9,786,049   |                          |     |                         |  |     |           |  |     | 9,786,049   |  |     | 7,156,728   |  |     | 4,856,216   |  
|Fees and payments for services              |  |                | 367,306 |                               |     | 5,492,089                  |  |                              |           |  |                                 | 3,407,993   |   |                          |     |            |               |  |                | (3,407,993  | )       |  |                          | 5,859,395   |                          |     | 11,499,056               |  |     | 5,643      |  |     | 17,364,094  |  |     | 5,786,237   |  |     | 5,468,877   |  
|Commissions                                 |  |                |        |                               |     | 10,743,807                 |  |                              |           |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          | 10,743,807  |                          |     |                         |  |     |           |  |     | 10,743,807  |  |     | 5,191,555   |  |     | 2,668,222   |  
|Parking                                     |  |                |        |                               |     |                           |  |                              | 3,738,333  |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          | 3,738,333   |                          |     |                         |  |     |           |  |     | 3,738,333   |  |     | 3,260,781   |  |     | 3,206,290   |  
|Allowance for doubtful accounts             |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          |            |                          |     |                         |  |     | 10,897,356 |  |     | 10,897,356  |  |     | 2,883,259   |  |     | (1,045,008  | )
|Rental                                      |  |                |        |                               |     | 1,547,429                  |  |                              | 42,064     |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          | 1,589,493   |                          |     | 2,007,009                |  |     |           |  |     | 3,596,502   |  |     | 2,293,814   |  |     | 793,070     |  
|Maintenance, repairs, cleaning and security |  |                | 81,465  |                               |     | 348,495                    |  |                              | 435,146    |  |                                 | 24,604,879  |   |                          |     | 22,555      |               |  |                | (24,627,434 | )       |  |                          | 865,106     |                          |     | 679,602                  |  |     |           |  |     | 1,544,708   |  |     | 1,131,586   |  |     | 695,201     |  
|Insurance                                   |  |                |        |                               |     | 656,876                    |  |                              |           |  |                                 | 488,646     |   |                          |     |            |               |  |                | (488,646    | )       |  |                          | 656,876     |                          |     | 940,432                  |  |     |           |  |     | 1,597,308   |  |     | 962,008     |  |     | 802,041     |  
|Stationery                                  |  |                |        |                               |     | 738,791                    |  |                              |           |  |                                 | 610,509     |   |                          |     |            |               |  |                | (610,509    | )       |  |                          | 738,791     |                          |     | 916,170                  |  |     |           |  |     | 1,654,961   |  |     | 908,597     |  |     | 497,000     |  
|Personnel                                   |  |                |        |                               |     | 388,560                    |  |                              |           |  |                                 | 1,253,401   |   |                          |     | 1,644       |               |  |                | (1,255,045  | )       |  |                          | 388,560     |                          |     | 705,476                  |  |     |           |  |     | 1,094,036   |  |     | 753,069     |  |     | 490,498     |  
|Social security contributions               |  |                |        |                               |     |                           |  |                              |           |  |                                 | 2,281,166   |   |                          |     | 793,695     |               |  |                | (3,074,861  | )       |  |                          |            |                          |     | 559,757                  |  |     | 363,853    |  |     | 923,610     |  |     | 599,814     |  |     | 554,071     |  
|Freight and transportation                  |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     | 3,505       |               |  |                | (3,505      | )       |  |                          |            |                          |     | 90,743                   |  |     |           |  |     | 90,743      |  |     | 297,579     |  |     | 133,479     |  
|Regulatory Authority expenses               |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          |            |                          |     | 137,145                  |  |     |           |  |     | 137,145     |  |     | 152,031     |  |     | 369,321     |  
|Bank charges                                |  |                |        |                               |     |                           |  |                              |           |  |                                 | 648,235     |   |                          |     |            |               |  |                | (648,235    | )       |  |                          |            |                          |     | 366,426                  |  |     |           |  |     | 366,426     |  |     | 133,470     |  |     | 308,664     |  
|Courses to tenants                          |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          |            |                          |     |                         |  |     |           |  |     |            |  |     | 127,510     |  |     |            |  
|Contingencies (1)                           |  |                |        |                               |     | 506,714                    |  |                              | 457,800    |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          | 964,514     |                          |     |                         |  |     |           |  |     | 964,514     |  |     | 665,764     |  |     | 1,402,201   |  
|Training expenses                           |  |                | 304,401 |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     | 10,301      |               |  |                | (10,301     | )       |  |                          | 304,401     |                          |     |                         |  |     |           |  |     | 304,401     |  |     | 131,397     |  |     |            |  
|Other services                              |  |                | 343     |                               |     |                           |  |                              | 242,018    |  |                                 | 1,815,416   |   |                          |     | 723         |               |  |                | (1,816,139  | )       |  |                          | 242,361     |                          |     |                         |  |     |           |  |     | 242,361     |  |     | 242,019     |  |     | 250,019     |  
|Indemnity                                   |  |                |        |                               |     |                           |  |                              |           |  |                                 |            |   |                          |     |            |               |  |                |            |         |  |                          |            |                          |     |                         |  |     | 212,406    |  |     | 212,406     |  |     |            |  |     |            |  
|Expenses recovery                           |  |                |        |                               |     |                           |  |                              |           |  |                                 | (67,462,566 | ) |                          |     | (30,751,756 | )             |  |                | 98,214,322  |         |  |                          |            |                          |     |                         |  |     |           |  |     |            |  |     |            |  |     |            |  
|Other                                       |  |                |        |                               |     | 312,915                    |  |                              |           |  |                                 | 214,442     |   |                          |     | 25,514      |               |  |                | (239,956    | )       |  |                          | 312,915     |                          |     | 811,745                  |  |     | 203,195    |  |     | 1,327,855   |  |     | 1,717,806   |  |     | 622,266     |  
|                                            |  |                |         |                               |     |                            |  |                              |            |  |                                 |             |   |                          |     |             |               |  |                |             |         |  |                          |             |                          |     |                          |  |     |            |  |     |             |  |     |             |  |     |             |  
|Total as of June 30, 2006                   |  | Ps.            | 753,752 |                               | Ps. | 43,933,220                 |  | Ps.                          | 76,634,274 |  | Ps.                             |            |   |                          | Ps. |            |               |  | Ps.            |            |         |  | Ps.                      | 121,321,246 |                          | Ps. | 52,773,070               |  | Ps. | 46,600,926 |  | Ps. | 220,695,242 |  | Ps. |            |  | Ps. |            |  
|                                            |  |                |         |                               |     |                            |  |                              |            |  |                                 |             |   |                          |     |             |               |  |                |             |         |  |                          |             |                          |     |                          |  |     |            |  |     |             |  |     |             |  |     |             |  
|Total as of June 30, 2005                   |  | Ps.            | 127,510 |                               | Ps. | 23,101,868                 |  | Ps.                          | 69,203,912 |  | Ps.                             |            |   |                          | Ps. |            |               |  | Ps.            |            |         |  | Ps.                      | 92,433,290  |                          | Ps. | 31,875,300               |  | Ps. | 24,774,356 |  | Ps. |            |  | Ps. | 149,082,946 |  | Ps. |            |  
|                                            |  |                |         |                               |     |                            |  |                              |            |  |                                 |             |   |                          |     |             |               |  |                |             |         |  |                          |             |                          |     |                          |  |     |            |  |     |             |  |     |             |  |     |             |  
|Total as of June 30, 2004                   |  | Ps.            | 28,440  |                               | Ps. | 11,965,061                 |  | Ps.                          | 61,406,872 |  | Ps.                             |            |   |                          | Ps. |            |               |  | Ps.            |            |         |  | Ps.                      | 73,400,373  |                          | Ps. | 20,720,934               |  | Ps. | 9,826,839  |  | Ps. |            |  | Ps. |            |  | Ps. | 103,948,146 |  
|                                            |  |                |         |                               |     |                            |  |                              |            |  |                                 |             |   |                          |     |             |               |  |                |             |         |  |                          |             |                          |     |                          |  |     |            |  |     |             |  |     |             |  |     |             |  

---

|(1) | Includes Ps. 96,724 related to a recovery of provision of contingencies.
|--- | ------------------------------------------------------------------------



F-75