Alejandro Elsztain - IIVP Daniel Elsztain - Chief Operating Officer Matias Gaivironsky - Chief Financial Officer.

Jorel Guilloty - Morgan Stanley.

Good morning everyone, and welcome to IRSA's Fourth Quarter 2017 Results Conference Call. Today's live webcast, both audio and slide show, may be accessed through the Company’s Investor Relations website at www.irsa.com.ar/ir, by clicking the banner Conference Call.

The following presentation and the earnings release issued last week are also available for download on the Company's website. After management's remarks, there will be a question-and-answer session for analysts and investors. At that time further instructions will be given.

[Operator Instructions] Before we begin, I would like to remind you that this call is being recorded and that information discussed today may include forward-looking statements regarding the Company's financial and operating performance. All projections are subject to risks and uncertainties and actual results may differ materially.

Please refer to the detailed note in the Company's earnings release regarding forward-looking statements. I will now turn the call over to Mr. Alejandro Elsztain, Second Vice President. Please go ahead, sir..

Good morning, everybody. We are beginning our conference call of fiscal year 2017, so we are [reporting] the whole year and we can begin in Page #2, talking about the main highlights for the year. The Company has changed recently in this quarter the method of valuation and now for investment properties on the June 30 of this year.

When we think about the financial and consolidated results, we achieved revenue of ARS74 billion and from those we divided in ARS5.8 billion from Argentina operations centers and ARS68 billion from the Israel operations centers.

From the adjusted EBITDA 10 billion was the result from those ARS2.4 billion came from Argentina and ARS7.6 from Israel and our net gain is a net gain of ARS5.2 billion. And from those almost half ARS2.7 billion came from Argentina and ARS2.5 billion came from Israel. And from those attributable to the shareholders of IRSA are again of ARS3 billion.

Related to Argentina Business Centers there were very good results on the rental segment and we saw that in the presentation of IRSA Commercial Properties that we can follow on the web and the adjusted EBITDA for the rental segment grew by 27.5% compared to this year numbers. There was lower result from sales of investment properties of this year.

This year was sales too low than last year and lot of development because of that from ARS128 million this year to the last year about 900 almost ARS900 million and there is a lot of buildings under progress like the Polo Dot and Catalinas office buildings in the Company's new commercial properties level and these are two.

So related to Israel Business Center that we are going to speak more deeper in the whole presentation, we saw very strong results due to the ADAMA sale and an increase on the share of price of Clal that is value of market value, as you know having 50% of the share we are still marketing actually at the market value of the share.

And a lot of issuance of note and here we only showed one that was the IDBD level, we issued NIS1.1 billion and NIS642 million greater. So two issues at the holding level are 5.4% and 5.3% fixed rate due to 2019 up to 2022.

So we will be well financed at the whole level and we are going to expect a lot of issuance as we did at Israel level a little later. Now I will introduce Daniel Elsztain, COO..

Thank you, Alejandro. Good morning everyone. On the following page we can start with Argentina Business Centers. We are going to see the main events of 2017 at the IRSA Commercial Property levels.

Starting with the change of the valuation method, we've had to change the valuation method of the investment properties from historical cost to fair value that happened in the third quarter of fiscal 2017.

We had on the operating figures on the rental shopping mall sales grew by 19.1% on this fiscal year compared to the previous fiscal year and occupancy is at the level of 98.5%. We had good results coming from the office segment due to the evaluation and positive outlook for the triple A building office market in Buenos Aires.

This is an improvement [ph] on prices of this segment. Regarding investments during this fiscal year, we grew the GLA of the 15 shopping centers by approximately 8000 square meters due the expansion, mall expansion on different shopping centers and we plan to build it, and we acquired the Phillips building.

It’s an adjacent building to the Polo Dot Office Park. This was a building bought for $29 million and the building and also rights to build 18,000 square meters on the complex.

The CapEx for the year [in support] we plan to develop 20,000 square meters of shopping malls expansion during the fiscal year including the regular expansion of Alto Palermo and some others along our portfolio.

Based on this work in progress in our office buildings development, the Polo Dot, 1st stage building, the Catalinas that is expected to finalize by fiscal year 2020.

Other investments, we increased our stake in La Rural, it is the fair & convention center and by this increase we now have control of the managing company of the La Rural, also we increased our stake in Avenida. It is an e-commerce company that is headed here in Argentina.

And subsequent event we have acquired convertible notes of TGLT for a total value of $22.2 million.

Regarding the debt, and this is a subsequent event after the closing of the fiscal year we issued notes in the local capital markets for $140 million at a 5% fixed rate due in 2020 and that is to use this money to keep investing in the real estate in Argentina.

Our consolidated fiscal statements, our adjusted EBITDA for this fiscal year reached ARS2.581 billion, this is an increase of 20.5% compared to last year and excluding the sales of investment properties as Alejandro mentioned, we used as much as that year, this grew I mean, low of 27.8%.

If we split the adjusted EBITDA in the malls segment it will be ARS2.2 billion and in the office segment ARS303 million. It will be respective increase of 23.1% and 35.2% on the office.

Net income for 2017 reached ARS3.3 billion compared to a gain of ARS12 billion in the last year and mainly is explained by lower results in the change of the fair value investment properties. On Page #4 we can see some pictures of the construction progress and the Catalinas buildings.

Remember this is certain investment of approximately $101 million, total GLA is 35,000 square meters. The construction is in progress on that share [ph] and on time. On Page #5 we can see our hotel segment we consider about 3.3 went up a little bit from 65 to 67, but the rate, the average price went down a little bit.

This is because of that increase of the value, but the business is doing well and you can see on the bottom right side, revenues went up 35.7% compared to last year which is ARS725 million and EBITDA went up to ARS20 million this is 100% increase from the previous year. This segment is doing better.

We are receiving more and we expect this to keep for the near future. On Page #6, we can see here the Greenvielle Closed Community. This is a neighborhood that we used to - we had the land, we gave the land to a developer and we received in barter agreement 52 lots. We have started the sale of these lots.

We have six that are signed and four that are under execution as of June 30 and we believe we are going to keep selling these units at a good stead. The infrastructure is fully completed and the hotel inside is ready to be open.

And also during this fiscal year, we can sell the Caballito, we had an agreement on Caballito and after this there was the developer that had this land and we had a barter, after they stopped construction and several unfavorable judicial sentences, we decided along with the developer to grant deed of distraction from the barter agreement.

This mandates the dissolution of the agreement, so we will receive again the land and we believe we can have a good use of the [indiscernible] to receive it and the balance will be registered or de-registered at a loss of approximately ARS27 million.

On Page #7 we can see that the building, the Lipstick building, our asset in New York occupancy is at the level of 95%. We had one tenant left building we had that in account. The price per square meter is going up from $67 fair per foot a year to $69 square foot per year. The building is doing very well.

We kind of very happy still with that building on 3rd Avenue. It is an iconic building and NOI is at $26 million per year. Currently we are working to restructure the debt with the lender. It is a debt of $113 million that is maturing on September 15 and we are working on restructuring that debt with the lender.

Also on our net rents in the USA, Condor, remember we have a percentage, a 28% of the Condor Hospitality Trust on March 2017. Condor issued $4.7 million in shares at the price of $10.5. So now that is FLOAT of 46% of the company approximately. We have 28% and STEPSTONE have 25%.

On May 2017 there was an extension of the credit line for $90 to $150 million and all the EBITDA are basically to keep buying hotels. And there was a refinance on short term on acquiring of hotels. This was big, big transformation on the company.

They used to have very low income hotels like motels and now the company has select service hotel serving in good cities and getting very good results in terms of REVPAR and growth in the company. So now it’s my pleasure to introduce Matias Gaivironsky, the CFO of our company..

Thank you, Daniel. Turning to Page 9, here we have the evolution of our investment in Banco Hipotecario. So we received again this fiscal year of ARS83 million again in the last year of ARS259 million, basically the Bank had lower result, financial result this year when you compare it with the previous year.

So in terms of the value, the Bank reached ARS6.7 billion and its consolidated asset around ARS55.3 billion. So the Bank has continued developing sustainable solutions for housing deficit in Argentina. Prospects in Argentina started recovery in mortgage industry. So we hope that the Bank can take part of that evolution.

It is increasing also the share in the financial consumer market and trying to boost corporate products businesses. You will remember that the last year the Banco Hipotecario started to convert in a more commercial bank after being 100% of mortgage bank.

So, in terms of our investment today at market value our investment is around $180 million against the last year that was $220 million. If we move to Page #10 and we begin the explanation of what happened in Israel this year, we can talk about the main events. One was the sale of Adama.

DIC sold its 40% stake in Adama to ChemChina and that stake to $230 million in excess of the total loan cancelation of $1.17 billion. So this is a big situation for DIC and this gain recognizes target ARS4.2 billion.

After that there was a signing of Israir, the airline company, that the company had in the past and that transaction was the sale of Israir within the framework of which a net amount of approximately $42 million to $45 million will be received in cash and 20% of the shares of Sun D’or subject to some approvals and that that had to happen so it didn’t finish up to now.

If you think of the debt, there was a lot of rising and the rising of the rating, the strengthening of the liquidity and the continuation of the lowering of the yield we are going to see little later lot of acceptance of that, there were issue of any level from the holding to the subsidiary and there was something good very important with the IDBD loan and that led to the removal of the going concern clause and covenants at that company.

In the IDBD, there was a refinance of short term debt to 2019 at 5.4% fixed rate. There was dividend of DIC the first time in years they paid dividends for the first time since 2014 for the total amount of NIS694 million.

In Clal Insurance Company, there was a continuation of the legal process in the matter of the outline for the sale of the company holdings in Clal and as today IDBD sold 10% of Clal Insurance through two swaps, one was last week one and few months before, so that was recently discount 10% by swaps.

And about the Concentration Law I will bring [indiscernible] up and he will be able to explain or the ability in respect of that..

Okay, so if you're going to Page 11 you know that in Israel there is a law that established how many layers of family companies we can control in Israel. So basically they established that we can't have more than three public layers by the end of 2017 and as of today the company controls four layers.

So what we propose to do is to create a new vehicle and on the Page 11 you have a graph of the proposed transaction where Dolphin will create a new vehicle that will acquire all the shares of DIC and we will pay that acquisition through a non-recourse loan guaranteed by the DIC share.

So we are negotiating with IDB terms and conditions of each transaction, but basically if we are able to fulfil the transaction, after that we will be in compliance with the law. So DIC will be the first layer, PBC will be the second layer and some of the subsidiaries of PBC will be the third layer. So we won’t have any fourth layer.

It’s important to mention that this transaction is subject to approval. The IDBD&IRSA and the permanent members should approve the transaction because it is related by transaction and also there is some regulator in Israel that have to give the green light of it, so we can comment that finally we will execute this transaction.

If you move to Page number 12, we can see the impact that the Clal insurance market value share change from last year to this year 52% in Shekels and this made a gain in our balance sheet of ARS2.5 billion versus loss of last year of ARS1.8 billion.

The two third of the 5% stake of market price through the swap transactions were done through balance sheet, but there was a subsequent event came to the company a non-binding offer from IDB to buy the stake in Clal, we received an non-binding offer from Huabang Financial Holdings Limited to acquire our entire stake in Clal.

And the amount to be paid will be equivalent to equity that today is about ARS4.88 billion, much higher the Israeli Shekels much higher than the price that we are showing in our results, that is the market value and this transaction is subject to certain conditions including regulatory approvals. So that was very recent last week.

We can look to next page #13, we can see the evolution of the dividend payment, there was like cancelations in the year of 2014 and 2015, but from our entrance to the company in 2016, the company began to pay again and we see here PBC and Shufersal in 2016 paid and in 2017, the two PBC and Shufersal the real estate and the supermarket company and recently DIC paid a big dividend of NIS694 million and from those IRSA received ARS165 million for our 6.07% after dilution we have in DIC and we received that payment of the dividend recently.

If we may go to the next page #14, we can see the big achievement of the ERP [ph] I think one of the major cost decreasing on the debt of the company. The first two graphs shows the IDBD decreasing from 2012 when we entered the company from NIS4.8 billion to now NIS2.7 billion, so a decrease of NIS2.1 billion of decrease.

And we can see that in DIC, now we are holding the decrease from the NIS9.6 million to almost NIS3.1 million, now a decrease of NIS6.6 billion a big decrease too, and a lot of insurance. And so we can see in the case of Gav Yam last week we were able to close a bond of NIS424 million at 2.55% fixed growth in Shekels due 2034.

This is the maturity of 7.67 years but arise to 2034 at a fixed rate of 2.55. At IDBD 642 at 5.36 up to 222 at PBC 446 at 3.58 fixed 2029.

At Gav Yam linked to the CPI NIS430 million, 1.69%, so DIC at 4%, at IDBD at 5.4%, so a lot of issuance very deep, so the capital market is very, very, very deep today there and we are seeing that at the holding level and continue at the very – and we think that 2.65 fixed in the case of the Gav Yam shows we are developing buildings at 9% or 10% capital across the money at 2.55 and that is the reason we are doing five buildings at the same time.

So this is the how the companies are behaving. And finally to explain where Israel is here we brought what we delivered on the balance sheet, the IDBD net asset value at 30 of June.

And here we see the valuation of DIC, IDBD Tourism, IDBD, Clal and others and we can see up to the left the net financial debts, the valuation at the 30 of June was total net asset value of NIS800 million and shows a leverage of 77% loan to book the LTV for the company.

So these and showing the Clal here still at market value, the only thing we are here not showing value to book, value, the case of Clal we are still showing much lower than the book that is not allowing us to put our majority on the book and we are still taking in the numbers at market value.

So now, I will introduce Matias to talk about our financial results..

So if we go to Page #17, here we can see what we did regarding our investment properties. So we started to release or change the valuation method of all our investment properties from book value to fair value.

So we did it in all the segments in shopping centers, in offices, in land resorts [ph] and all the investment properties from IDB that we put it across since our acquisition. All the assets that remain are at historical book value was all related to property plan and equipment that is basically our hotels.

To understand how we changed the valuation method, we restate all the financial statement for the last five years. So what we did is to give the impact since 2011.

So, we revalue all the assets in each of the year and so the first impact was that was in 2011went to our reserve in our network and then in 2011 each of the year there we saw the change in the valuation went to the line of accumulated earnings.

And in this year starting in and you will see when you see the financial statement of this year in 2016 and 2017 you will have the impact directly in the P&L line, in the line that is the name is Changing the Evaluate in the valuation of investment property.

So every year or every quarter you will see from now our results are and the change in evaluate in the fair value for our property directly in the P&L. When you go to Page 18 you can see the impact. There is a huge impact when in each of the lines.

The investment properties of IDBD changes from $3.2 is almost $3.3 billion to $3.6 billion, remember that we have to consolidate IDBD last year. So on last year we put it at fair value and then it started to amortize those properties, so that they have that – information in dollar term.

So, the change was only 1.1 time, but you can see in malls what happened is an increase of 12 times our book value from $140 billion to $1.7 billion of this same the from $52 million to $380 million, land reserves from $18 million to $325 million.

And there is still some land balances that since we don’t have the approval we are not considering the full value of the property.

So going to Page 19 when you have to understand our P&L figures we separated in operating income without the fact of the change in the fair value to understand the real performance of the segment that you can see in the rental segment an increase up 24.4% compared with the previous year in sales of development have increased from 92 million negative so, is there some evolution from ARS92 million last year to ARS28 million this year.

Here we are including also cost of the, of our structure to that with the sales of the year. And in financials another an evolution from ARS98 million negative to ARS258 million negative and this year we have basically the same effects from our international segment and lower results from Banco Hipotecario.

In Page 20 you can see the same evolution in Israel. So we can see the real estate, we are not including comparative figures here because in Israel we are consolidating 12 months and in the previous year only six months. So we have not included the comparative figure to compare apples-with-apples.

So real estate was this year ARS2.2 billion, supermarket ARS1.6, telecommunication negative 253 and here basically it’s an effect of higher amortization.

When you see this information directly in the financial statement of IDBD this information is positive, but in Argentina since the – that we have to performed our PPA, purchase price allocation analysis and there some assets by our higher in our books than in Israel.

The amortizations are higher as well, so that is generating a negative result for the telecommunications segment and in the other the negative 759 is basically all the G&A and interest payments of IDB and DIC and not on any income.

So finally in Page 21 you can see the gross profit increasing from ARS10 billion to ARS22.7 billion that we showed in the fair value that was much higher in the previous year than in this year basically because of higher devaluation in last year and a review in the weighted average cost of capital of the company that generate net results in all the investment properties in the previous year.

And finally the operating income of the company decreased from ARS20.8 billion to ARS9.7 billion or ARS9.8 billion as a result of all the changes that I mentioned.

So finally in Page 22 you have the rest of our financial statement starting with operating income, then we have the mainline that was the net financial result that was close to the result of the previous year ARS4.8 billion against ARS4.6 billion negative in this year and the net income that decreased from ARS9.4 billion to ARS5.2 billion attributable to our controlling shareholders is ARS3 billion.

Also on Page 23 you can see the impact in our consolidated balance sheet that you can see the evolution of our assets an increase from ARS166 billion to ARS231 billion. Liabilities that also increased from ARS147 billion to ARS183.

The liabilities include the referred tax that we are recognizing when we value for fair value we automatically generate a deferred tax of 25% of the increase in the value of the property that we are recognizing, but it is more an accounting effect, because it will be almost impossible that the company will sell all the assets at the same time, but that will establish that we have to recognize the deferred tax from that appreciation.

And finally you can see the equity then our net worth related to the controlling shareholders that increased from ARS3.6 billion to ARS25.8 billion so it is a big shunt in our net worth and related to book value per share now is ARS44.7 per share. Our share today actually is not ARS43.5 per share, so it is close to valuation in the market.

But remember that there is still some properties that is still at book and Land Bank that is still at lower value than the full potential. Page 24 regarding our debt, we are mainly stable compared with the previous quarters. Our net debt remains at $328 million. The amortization is clearly, basically we have the main amortization in 2019 and then 2020.

So with this, we finished the presentation. Now, we’re open to receive your questions..

Thank you. [Operator Instructions] And your first question will be from Jorel Guilloty of Morgan Stanley. Please go ahead..

Good morning gentlemen. I have a few questions on the fair market value adjustments, so first off according to this online presentation land reserves have a value of $325 million.

What we were wondering is, what is the value of Solares de Santa María in there? And the second, why are the hotels still valued at cost? And the third question is, when you say that IDBD properties are worth $3.6 billion, what exactly are you referring to, are these only the – only rent paying real estate meaning excluding Clal, supermarkets, et cetera? Thank you..

Thank you, Jorel. Good morning. So regarding Solares de Santa María the value according to appraisal is to have that $214 million that is value that is reflected in the 300 that we have in the presentation. So basically the main number that we have in that field.

Regarding the hotels the categories of our hotels we decided to value all investment properties, so the category of the hotels is properties plant and equipment, so we haven’t evaluated that line item.

So it’s true that they will allow us to value also properties plant and equipment, but since the results that will be generated by the change in valuation one is due to shareholders because they allow, don’t allow that, the rule that don’t allow us, that we decided to maintain at book value.

And finally, the Israel property, the investment property that is the value of all the properties, investment properties of Israel that are basically the assets that are under PBC, all the PBC offices are income producing assets and there are some that are [indiscernible] levels as well that basically remain are the PBC.

Sorry and Clal, remember that we are not consolidating Clal. Clal, we are maintaining everything at market value of our shares. So we are not recognizing any results from Clal in the property..

Thanks..

[Operator Instructions] And I’m showing no additional questions. We will conclude the question-and-answer session. At this time, I would like to turn the floor back to Mr. Alejandro Elsztain for any closing remarks..

To finalize our presentation, we were seeing all of the past, and saw a very good recovery in the Israel story and the issuance and refinancing of this financial situation in Israel and the sale of [indiscernible] things.

We saw a very good evolution on the rental in Argentina as the development, which development in Argentina in the shopping and the office.

Refinancing in Argentina like the bond of [last week], so we have the company is at very good situation having Argentina in a very strong market, a lot of capital coming to the country and the company having a lot of capital to do that and a lot of land plan to do that. And the ability to do it internationally using the capital markets of both.

So we are seeing the company is closing a very good year and we expect the company to keep doing the job that it is doing, doing more office everywhere, doing more shopping and doing things, developing the real estate business in the world. So thank you very much and have a very good day. Bye..

Thank you. Ladies and gentlemen, this concludes today’s presentation. You may disconnect your line at this time and have a nice day. Thank you..