EX-99.1 3 exh_99-1.txt FINANCIAL STATEMENTS TRADUCCION---------------------------------------------------------------------- -------------------------------------------------------------------------------- Grupo Financiero Galicia S.A.--------------------------------------------------- -------------------------------------------------------------------------------- Financial Statements------------------------------------------------------------ for the periods of six months--------------------------------------------------- ended June 30, 2002 and 2001---------------------------------------------------- -------------------------------------------------------------------------------- -------------------------Grupo Financiero Galicia S.A.-------------------------- -------------------------------Table of Contents-------------------------------- -----------------Financial Statements and Limited Review Report----------------- ----------For the periods of six months ended June 30, 2002 and 2001.----------- ------------------Report of the Supervisory Syndics Committee------------------- ---------------For the period of six months ended June 30, 2002.---------------- -----------------------------System established by------------------------------ -----Technical Regulations (N.T.2001) of the National Securities Commission----- -------------------------------------------------------------------------------- Heading 1 Quarterly Consolidated Statement of Financial Condition 2 Consolidated Memorandum Accounts 5 Consolidated Income Statement 6 Consolidated Statement of Cash Flows 8 Notes to the Consolidated Financial Statements 9 Quarterly Statement of Financial Condition 45 Income Statement 46 Statement of Changes in Shareholders' Equity 47 Statement of Cash Flows 48 Notes to the Financial Statements 49 Schedules 80 Information required in addition to the Notes to the Financial Statements by Section 68 of the Buenos Aires Stock Exchange regulations 87 Supplementary and Explanatory Statement by the Board of Directors required by Section 2 of the Accounting Documentation Rules of the Cordoba Stock Exchange Regulations 90 Informative Review 93 Report of the Supervisory Syndics Committee Limited Review Report Name:-------------------------- Grupo Financiero Galicia S.A.---------- Legal address:----------------- Tte. Gral. Juan D. Peron N(0)456 - Piso 2(0)--- Autonomous City of Buenos Aires----------------- -------------------------------------------------------------------------------- Principal line of business:------------- Financial and Investment activities---- 4th fiscal year----------------------------------------------------------------- For the period of six months commenced January 1, 2002-------------------------- and ended June 30, 2002--------------------------------------------------------- In comparative format with the same period of the previous year----------------- -------------------------------------------------------------------------------- DATE OF REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE----------------------- By-laws:---------------------------------- September 30, 1999------------------- Date of more recent amendment to By-laws: July 3, 2001------------------------- Registration number with the Corporation Control Authority:------------------------ 8,569-------------------------------- Sequential Number - Corporation Control--- Authority:-------------------------------- 1,671,058---------------------------- Date of expiry of the Company's by-laws:-- June 30, 2100------------------------ Name of Controlling Company:-------------- EBA HOLDING S.A. -------------------- Principal line of business:--------------- Financial and Investment activities-- Interest held by the Controlling Company in the Shareholders' equity as of June 30, 2002:--------------------------------- 25.74-------------------------------- Percentage of votes to which the Controlling Company is entitled as of June 30, 2002:---------------------------- 63.42-------------------------------- ================================================================================ CAPITAL STATUS as of June 30, 2002 (Note 9 to the Financial Statements) (figures stated in thousands of US dollars) -------------------------------------------------------------------------------- Shares -------------------------------------------------------------------------------- Quantity Type Voting rights per Subscribed Paid up share -------------------------------------------------------------------------------- Ordinary class "A", face 281,221,650 value of 0.001 5 74,006 74,006 -------------------------------------------------------------------------------- Ordinary class "B", face 811,185,367 value of 0.001 1 213,470 213,470 -------------------------------------------------------------------------------- 1,092,407,017 287,476 287,476 ================================================================================ 1 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- -----------------Consolidated Statement of Financial Condition------------------ --------------------------as of June 30, 2002 and 2001-------------------------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================= 6.30.02 6.30.01 ------------------------------------------- ASSETS ------------------------------------------- A. CASH AND DUE FROM BANKS 134,124 768,365 ------------------------------------------- -Cash 40,073 152,828 -Banks and correspondents 93,687 615,504 -Other 364 33 ------------------------------------------- B. GOVERNMENT AND CORPORATE SECURITIES 536,369 485,305 ------------------------------------------- -Holdings of investment account securities - 199,846 -Holdings of trading securities 80,198 108,483 -Unlisted government securities 453,755 175,024 -Investments in listed corporate securities 2,532 2,012 -Allowances (116) (60) ------------------------------------------- C. LOANS 2,557,698 4,819,350 ------------------------------------------- -To the non-financial public sector 1,865,593 1,360,653 -To the financial sector 23,233 195,250 -To the non-financial private sector and residents abroad 985,037 3,421,157 -Overdrafts 68,535 251,351 -Notes 294,995 1,143,034 -Mortgage loans 212,429 848,072 -Pledge loans 23,236 183,905 -Consumer loans 49,289 166,535 -Credit cards 168,909 432,225 -Other 87,199 343,817 -Accrued Interest and quotation differences receivable 94,915 75,753 -Documented interest (6,472) (20,868) -Unallocated collections (7,998) (2,667) -Allowances for loan losses (316,165) (157,710) ------------------------------------------- D. OTHER RECEIVABLES RESULTING FROM FINANCIAL BROKERAGE 2,835,670 1,423,504 ------------------------------------------- -Argentine Central Bank 16,532 32,700 -Amounts receivable for spot and forward sales to be settled 7,815 480,742 -Securities receivable under spot and forward purchases to be settled 9,038 328,892 -Premiums on options bought 71 120 -Unlisted negotiable obligations 4,786 50,087 -Other receivables not included in the debtor classification regulations 2,667,663 269,699 -Other receivables included in the debtor classification regulations 132,700 258,086 -Accrued interest receivable not included in the debtor classification regulations 107 9 - Accrued interest receivable included in the debtor classification regulations 357 8,276 -Allowances (3,399) (5,107) ============================================================================================================================= ----------------------------------------------------------------------------------------------------------------------------- The accompanying Notes 1 to 20 are an integral part of these financial statements.------------------------------------------- -----------------------------------------------------------------------------------------------------------------------------
2 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- -----------------Consolidated Statement of Financial Condition------------------ --------------------------as of June 30, 2002 and 2001-------------------------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================== 6.30.02 6.30.01 ------------------------------------------- E. ASSETS UNDER FINANCIAL LEASES 19,554 13,139 ------------------------------------------- -Assets under financial leases 20,194 13,274 -Allowances (640) (135) ------------------------------------------- F. EQUITY INTERESTS IN OTHER COMPANIES 21,328 49,548 ------------------------------------------- -In financial institutions 68,498 13,856 -Other 36,122 42,624 -Allowances (83,292) (6,932) ------------------------------------------- G. MISCELLANEOUS RECEIVABLES 76,379 117,999 ------------------------------------------- -Receivables for assets sold 39 329 -Shareholders - 9 -Other 84,473 124,771 -Accrued interest on receivables for assets sold - 7 -Other accrued interest receivable 7 26 -Allowances (8,140) (7,143) ------------------------------------------- H. FIXED ASSETS 140,913 138,559 ------------------------------------------- I. MISCELLANEOUS ASSETS 42,276 44,213 ------------------------------------------- J. INTANGIBLE ASSETS 101,158 90,744 ------------------------------------------- -Goodwill 57,175 41,457 -Organization and development expenses 43,983 49,287 ------------------------------------------- K. UNALLOCATED ITEMS 15,079 1,093 ------------------------------------------- TOTAL ASSETS 6,480,548 7,951,819 =========================================== ============================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes 1 to 20 are an integral part of these financial statements.-------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------
3 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- -----------------Consolidated Statement of Financial Condition------------------ --------------------------as of June 30, 2002 and 2001-------------------------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================== 6.30.02 6.30.01 ------------------------------------------- LIABILITIES ------------------------------------------- L. DEPOSITS 1,404,942 4,764,755 ------------------------------------------- -Non-financial public sector 1,251 7,640 -Financial sector 347 1,820 -Non-financial private sector and residents abroad 1,403,344 4,755,295 -Current accounts 192,912 558,105 -Savings accounts 113,544 538,414 -Time deposits 430,232 3,335,189 -Investment accounts - 162,638 -Other 540,028 117,597 -Accrued interest and quotation differences payable 126,628 43,352 ------------------------------------------- M. OTHER LIABILITIES RESULTING FROM FINANCIAL BROKERAGE 3,999,014 2,290,687 ------------------------------------------- -Argentine Central Bank 1,873,232 1,502 -Rediscounts to cover lack of liquidity 1,244,879 - -Other 628,353 1,502 -Banks and international entities 993,753 454,273 -Unsubordinated negotiable obligations 451,301 530,063 -Amounts payable for spot and forward purchases to be settled 3,809 306,620 -Securities to be delivered under spot and forward sales to be settled 55,503 517,992 -Loans from domestic financial institutions 58,280 156,089 -Other 512,714 303,919 -Accrued interest and quotation differences payable 50,422 20,229 ------------------------------------------- N. MISCELLANEOUS LIABILITIES 61,571 100,462 ------------------------------------------- -Dividends payable 273 24 -Fees 426 12,560 -Other 60,872 87,874 -Adjustment and accrued interest payable - 4 ------------------------------------------- O. PROVISIONS 433,215 13,489 ------------------------------------------- P. UNALLOCATED ITEMS 2,702 3,807 ------------------------------------------- MINORITY INTEREST IN CONSOLIDATED ENTITIES OR COMPANIES 25,546 63,311 ------------------------------------------- TOTAL LIABILITIES 5,926,990 7,236,511 =========================================== ------------------------------------------- SHAREHOLDERS' EQUITY 553,558 715,308 ------------------------------------------- ------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,480,548 7,951,819 ============================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes 1 to 20 are an integral part of these financial statements.-------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------
4 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- ------------------------Consolidated Memorandum Accounts------------------------ --------------------------as of June 30, 2002 and 2001-------------------------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================== 6.30.02 6.30.01 ------------------------------------------- ------------------------------------------- DEBIT 6,130,372 6,762,486 =========================================== ------------------------------------------- CONTINGENT 4,427,848 3,277,375 ------------------------------------------- Guarantees received 2,414,666 2,836,721 Contingencies re. contra items 2,013,182 440,654 ------------------------------------------- CONTROL 1,678,706 3,451,621 ------------------------------------------- Uncollectible loans 177,610 260,090 Other 1,478,754 3,125,850 Control re. contra items 22,342 65,681 ------------------------------------------- DERIVATIVES 4,270 - ------------------------------------------- "Notional" value of put options bought 3,527 Derivatives re. contra items 743 ------------------------------------------- TRUST ACCOUNTS 19,548 33,490 ------------------------------------------- Trust funds 19,548 33,490 ------------------------------------------- CREDIT 6,130,372 6,762,486 =========================================== ------------------------------------------- CONTINGENT 4,427,848 3,277,375 ------------------------------------------- Loans granted (unused balances) 51,384 172,464 Guarantees provided to the Argentine Central Bank 1,814,294 - Other guarantees provided included in the debtor classification regulations 102,021 197,878 Other guarantees provided not included in the debtor classification regulations 1,263 655 Other included in the debtor classification regulations 44,220 69,657 Contingencies re. contra items 2,414,666 2,836,721 ------------------------------------------- CONTROL 1,678,706 3,451,621 ------------------------------------------- Valuables to be credited 22,288 65,653 Other 54 28 Control re. contra items 1,656,364 3,385,940 ------------------------------------------- DERIVATIVES 4,270 - ------------------------------------------- "Notional" value of call options written 743 - Derivatives re. contra items 3,527 - ------------------------------------------- TRUST ACCOUNTS 19,548 33,490 ------------------------------------------- Trust liabilities re. contra items 19,548 33,490 ============================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes 1 to 20 are an integral part of these financial statements.-------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------
5 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- -------------------------Consolidated Income Statement-------------------------- --------------------------For the period of six months-------------------------- ---------------commenced January 1, 2002 and ended June 30, 2002.--------------- --------In comparative format with the same period of the previous year--------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================== 6.30.02 6.30.01 -------------------------------------------- A. FINANCIAL INCOME 917,856 429,741 -------------------------------------------- Interest on cash and due from banks 137 10,861 Interest on loans to the financial sector 5,458 10,163 Interest on overdraft facilities 20,579 27,777 Interest on notes 16,129 153,209 Interest on mortgage loans 18,180 50,060 Interest on pledge loans 5,506 10,493 Interest on credit card loans 25,528 39,510 Interest on other loans 17,353 46,427 Interest on other receivables resulting from financial brokerage 25,502 11,083 Net income from government and corporate securities 93,258 42,017 Net income from secured loans - Decree 1387/01 51,241 - Adjustment from application of adjusting index 477,214 - Other 161,771 28,141 -------------------------------------------- B. FINANCIAL EXPENSES 650,872 229,190 -------------------------------------------- Interest on current account deposits 1,250 2,082 Interest on savings account deposits 574 5,687 Interest on time deposits 27,396 137,828 Interest on loans from financial sector 4,631 1,069 Interest on other liabilities resulting from financial brokerage 74,365 54,347 Other interest 170,237 7,631 Net loss on options - 178 Adjustment from application of adjusting index 289,176 - Other 83,243 20,368 -------------------------------------------- GROSS BROKERAGE MARGIN 266,984 200,551 ============================================ C. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES 248,332 74,390 -------------------------------------------- D. INCOME FROM SERVICES 73,864 135,576 -------------------------------------------- Linked with lending transactions 21,125 38,658 Linked with borrowing transactions 20,661 29,123 Other commissions 2,092 19,051 Other 29,986 48,744 -------------------------------------------- E. EXPENSES FOR SERVICES 24,085 24,301 -------------------------------------------- Commissions 17,287 10,815 Other 6,798 13,486 ============================================================================================================================== MONETARY RESULT OF FINANCIAL BROKERAGE (252,288) - ============================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes 1 to 20 are an integral part of these financial statements.-------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------
6 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- -------------------------Consolidated Income Statement-------------------------- --------------------------For the period of six months-------------------------- ---------------commenced January 1, 2002 and ended June 30, 2002.--------------- --------In comparative format with the same period of the previous year--------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================== 6.30.02 6.30.01 -------------------------------------------- -------------------------------------------- G. ADMINISTRATIVE EXPENSES 105,569 156,327 -------------------------------------------- Personnel expenses 50,680 81,976 Directors' and syndics' fees 522 6,668 Other fees 2,656 1,635 Advertising and publicity 1,734 6,299 Taxes 6,333 8,006 Other operating expenses 36,944 41,061 Other 6,700 10,682 -------------------------------------------- MONETARY RESULT OF OPERATING EXPENSES 4,558 - -------------------------------------------- NET (LOSS)/ INCOME FROM FINANCIAL BROKERAGE (284,868) 81,109 ============================================ RESULT OF MINORITY INTEREST 82,732 (4,713) -------------------------------------------- H. MISCELLANEOUS INCOME 34,589 22,194 -------------------------------------------- Net income from long-term investments - 5,901 Penalty interest 636 732 Loans recovered and allowances reversed 4,667 8,541 Other 29,286 7,020 --------------------------------------------- I. MISCELLANEOUS LOSSES 238,117 16,313 --------------------------------------------- Net loss on long-term investments 16,228 - Penalty interest and charges in favor of the Argentine Central Bank 34 13 Provision for losses on miscellaneous receivables and other provisions 172,188 7,997 Other 49,667 8,303 --------------------------------------------- MONETARY RESULT OF OTHER OPERATIONS (70,093) - --------------------------------------------- NET (LOSS)/ INCOME BEFORE INCOME TAX (475,757) 82,277 ============================================= K. INCOME TAX 9,265 31,702 --------------------------------------------- LOSS FOR THE PERIOD BEFORE ABSORPTION (485,022) 50,575 --------------------------------------------- ABSORPTION "AD REFERENDUM" OF SHAREHOLDERS' MEETING: 311,908 - - with Unrealized valuation difference --------------------------------------------- NET (LOSS) / INCOME FOR THE PERIOD (173,114) 50,575 ========================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------- The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------
7 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- ----------------------Consolidated Statement of Cash Flows---------------------- --------------------------For the period of six months-------------------------- ---------------commenced January 1, 2002 and ended June 30, 2002.--------------- --------In comparative format with the same period of the previous year--------- ------------------(figures stated in thousands of US dollars)-------------------
============================================================================================================================== 6.30.02 6.30.01 ------------------------------------------- Changes in cash Cash and due from banks at beginning of fiscal year 192,811 319,908 (Decrease) / Increase in cash (58,687) 448,457 ------------------------------------------- Cash and due from banks at end of period 134,124 768,365 =========================================== Reasons for changes in cash Financial income collected 154,611 513,994 Income from services collected 49,539 135,622 Less: Financial expenses paid (135,626) (274,421) Expenses for services paid (10,516) (24,301) Administrative expenses paid (69,340) (140,175) ------------------------------------------- Cash (used in) provided by operations (11,332) 210,719 =========================================== Other sources of cash Net increase in deposits - 210,252 Net increase in other liabilities resulting from financial brokerage 609,874 - Net decrease in government and corporate securities 13,700 - Net decrease in loans 422,768 - Net decrease in other receivables resulting from financial brokerage 31,078 1,604,578 Net decrease in other assets 37,325 - Capital contributions - 343 Other sources of cash 294,614 33,970 ------------------------------------------- Total sources of cash 1,409,359 1,849,143 ------------------------------------------- Other uses of cash Net increase in government and corporate securities - (442,372) Net increase in loans - (213,240) Net increase in other assets - (7,908) Net decrease in deposits (1,191,617) - Net decrease in other liabilities resulting from financial brokerage - (919,812) Net decrease in other liabilities (15,174) (5,793) Cash dividends paid (65) (17,537) Other uses of cash (154,349) (4,743) ------------------------------------------- Total uses of cash (1,361,205) (1,611,405) ------------------------------------------- Monetary result of cash and due from banks (95,509) - ============================================================================================================================== (Decrease) / Increase in cash (58,687) 448,457 ============================================================================================================================== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------
8 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- -----------------Notes to the Consolidated Statements Financial----------------- --------------------------For the period of six months-------------------------- ---------------commenced January 1, 2002 and ended June 30, 2002.--------------- --------In comparative format with the same period of the previous year--------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 1: ARGENTINE ECONOMIC CONTEXT-------------------------------------------- ---------------------------------------------------------------------- The facts and circumstances described in Note 1 to the financial statements of Grupo Financiero Galicia S.A. are also applicable to these consolidated financial statements and, therefore, are subject to the same restrictions as those mentioned in that note.---------------- ---------------------------------------------------------------------- NOTE 2: FINANCIAL STATEMENT PRESENTATION-------------------------------------- ---------------------------------------------------------------------- The consolidated financial statements are disclosed in line with the provisions of Argentine Central Bank Communique "A" 3147 and supplementary rules regarding financial reporting requirements for the publication of quarterly and annual financial statements, observing the guidelines of Technical Pronouncement No. 8 of the Argentine Federation of Professional Councils in Economic Sciences (F.A.C.P.C.E.).------------------------------------------------------- In line with professional accounting standards and the requirements of the control bodies, these financial statements have been prepared without recognizing the changes in the purchasing power of the currency until December 31, 2001. In line with Argentine Central Bank Communique "A" 3702, Resolution 240/02 of the F.A.C.P.C.E. and Resolution 415/02 of the National Securities Commission, recognition of the effects of inflation has been resumed in these financial statements since January 1, 2002.------------------------------------- To this end, the restatement method established by Technical Pronouncement No. 6 of the F.A.C.P.C.E. has been followed, restating the non-monetary items by applying the general level domestic wholesale price index (W.P.I.) published by the National Institute of Statistics and Census (I.N.D.E.C.), and considering that the accounting measurements originated prior to December 31, 2001 are stated in the currency value as of that date.------------------------- It should be noted that for comparative purposes, the balances as of June 30, 2001 have been stated in constant monetary units as of June 30, 2002.------------------------------------------------------------- ---------------------------------------------------------------------- NOTE 3: ACCOUNTING POLICIES--------------------------------------------------- ---------------------------------------------------------------------- The consolidated financial statements have been prepared in line with Argentine Central Bank rules and Technical Pronouncements No. 4, 5, 6, 10 and 12 of the F.A.C.P.C.E..---------------------------------------- Below, are the most important accounting policies used in preparing the consolidated financial statements:-------------------------------- ---------------------------------------------------------------------- 9 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------Notes to the Consolidated Statements Financial (Continued)------------ ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- a. Financial statement consolidation-------------------------------- ---------------------------------------------------------------------- The statements of financial condition, income statements and statements of cash flows of Banco de Galicia y Buenos Aires S.A., Net Investment S.A., Galicia Warrants S.A. and Sudamericana Holding S.A. have been consolidated with those of Grupo Financiero Galicia S.A. on a line by line basis as of June 30, 2002, whereas the financial statements of Banco de Galicia y Buenos Aires S.A. and Net investment S.A. have been consolidated on that basis as of June 30, 2001.------------------------------- ----------------------------------------------------------------- Grupo Financiero Galicia S.A. obtained the controlling interest in Banco de Galicia y Buenos Aires S.A. and Net investment S.A. during the quarter ended September 30, 2000, and the controlling interest in Galicia Warrants S.A. and Sudamericana Holding S.A.., during the quarter ended September 30, 2001.--------------------- ----------------------------------------------------------------- The principal investment of the Company is its equity interest in Banco de Galicia y Buenos Aires S.A., a financial institution subject to Argentine Central Bank regulations. For this reason the Company has adopted the disclosure criteria followed by Banco de Galicia y Buenos Aires S.A..---------------------------------- Banco de Galicia y Buenos Aires S.A. financial statements include the figures corresponding to the operations of its foreign branches and subsidiaries in Argentina and abroad, as reported in their special financial statements, which have been adapted to the valuation and disclosure standards laid down by the Argentine Central Bank and professional accounting standards prevailing in Argentina. The foreign branches' and subsidiaries' financial statements originally issued in foreign currency have been converted into pesos in line with Argentine Central Bank rules and the provisions of Technical Pronouncement No. 13 of the F.A.C.P.C.E..---------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- The financial statements of Banco de Galicia y Buenos Aires S.A. corresponding to Argentine operations have been adjusted for inflation up to August 31, 1995. As from that date, in line with professional accounting standards and the requirements of the control bodies, the financial statements of that Bank have been prepared without recognizing the changes in the purchasing power of the currency until December 31, 2001. In line with Argentine Central Bank Communique "A" 3702, Resolution 240/02 of the F.A.C.P.C.E. and Resolution 415/02 of the National Securities 10 -------------------------Grupo Financiero Galicia S.A.-------------------------- -------------Notes to the Consolidated Financial Statements (Continued)--------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- Commission, the recognition of the effects of inflation has been resumed in these financial statements since January 1, 2002. To this end, the restatement method established by that Communique, which is in accordance with the guidelines of Technical Pronouncement No. 6 of the F.A.C.P.C.E. has been followed, considering that the accounting measurements originated prior to December 31, 2001 are stated in the currency value as of that date.------------------------------------------------------------ ----------------------------------------------------------------- Banco de Galicia y Buenos Aires S.A.'s income statement and statement of changes in shareholders' equity have been disclosed as established by Communique "A" 3800 of the Argentine Central Bank so, ad referendum of the shareholders' meeting, the Bank has absorbed the loss for the period in advance, up to the limit of the balances recorded in retained earnings and unrealized valuation difference arising from the net foreign currency position. It should be noted that for purposes of disclosing the consolidated financial statements of the Company the early absorption of the loss for the period with the balances recorded in retained earnings has not been taken into account.------------ ----------------------------------------------------------------- b. Consistency of accounting policies------------------------------- ----------------------------------------------------------------- The accounting policies used for preparing Galicia Warrants S.A., Net Investment S.A. and Sudamericana Holding S.A. financial statements are similar to those followed by its controlling company.--------------------------------------------------------- ----------------------------------------------------------------- The principal valuation criteria observed by Banco de Galicia y Buenos Aires S.A. were as follows:------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- b.1. - Foreign currency Assets and Liabilities------------------- These are stated at the Banco de la Nacion Argentina selling rate of exchange prevailing at the close of operations on the last business day of each fiscal year.-------------------------------- ----------------------------------------------------------------- b.2. - Gold Bullion---------------------------------------------- This is valued at the most recent U.S. dollar closing selling quotation for the troy ounce on the London Market, net of estimated direct selling expenses.------------------------------- The procedure described in item b.1. was followed for translating it into Argentine currency.-------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 11 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- ---------------Notes to Consolidated Income Statement (Continued)--------------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- b.3. - Government and Corporate Securities----------------------- ----------------------------------------------------------------- b.3.a. - Government Securities----------------------------------- I) Holdings of investment accounts securities:------------------- ----------------------------------------------------------------- From June 1, 2001 to the time of the exchange mentioned in point b.4., holdings included in investment accounts were recognized at cost, increased exponentially up to the maturity date of each service, based on their internal rate of return and the time elapsed since their inclusion in those accounts. This criterion was established by Argentine Central Bank Communique "A" 3278 dated June 1, 2001.---------------------------------------------- This changed the criterion applicable at that date, by which holdings included in investment accounts were recorded at cost, increased up to the maturity date based on the interest arising from the related coupon. This criterion was applied in the fiscal year ended June 30, 2001 by Banco de Galicia y Buenos Aires S.A.. At that date, the use of the net realizable value criterion for the position in investment accounts would lead to a decrease of US$ 81,379 in the assets and shareholders' equity and to a decrease of US$ 53,922 in the result reported for the period of six months.------------------------------------------------------ ----------------------------------------------------------------- II) Holdings of trading securities:------------------------------ These are stated at the closing quotation for each security at the end of the period, plus the value of matured amortization and interest coupons receivable, less estimated selling expenses where applicable.------------------------------------------------ ----------------------------------------------------------------- III) Others - Listed:-------------------------------------------- These have been valued at their quotation, as indicated in point II) above.------------------------------------------------------- ----------------------------------------------------------------- IV) Unlisted:---------------------------------------------------- These are valued at the acquisition cost plus income accrued up to the end of the year, where applicable.------------------------ ----------------------------------------------------------------- b.3.b. - Listed Corporate Securities----------------------------- These are valued at the quotation prevailing at the end of the period, net of estimated selling expenses, where applicable.----- ----------------------------------------------------------------- 12 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- b.4. Secured Loans----------------------------------------------- Within the framework of decree 1387/01, Banco de Galicia y Buenos Aires S.A. has participated in the exchange of Argentine public debt securities and loans under the Promissory Note/Bond program for new loans called Secured Loans. The main differences between the instruments received and those exchanged consisted of an extension of the amortization term which was 3 years for securities originally maturing up to December 31, 2010 and a reduction of the interest rate, which was set at 70% of the contractual rate, with a maximum rate of 7% per annum for fixed-rate transactions and a Libor rate plus 3% for floating rate loans. As established by Section 20 of the above mentioned decree, the conversion was made at the nominal value, at a rate of exchange of $ 1=US$ 1 and in the same currency as that of the converted obligation.-------------------------------------------- The Argentine Central Bank provided that the gain arising from the difference between the carrying value of the Secured Loans and the book value of the securities exchanged must be recorded in an asset adjustment account and charged to results on a monthly basis, in proportion to the term of each of the secured loans received.-------------------------------------------------- ----------------------------------------------------------------- As a result of the exchange transaction described above, as of June 30, 2002, Banco de Galicia y Buenos Aires S.A. records Secured Loans -principal amounts- for US$ 1,330,828, which includes the gain of US$ 18,792 resulting from the difference between the carrying value of the Secured Loans and the book value of the securities exchanged, which was recorded in an asset adjustment account.---------------------------------------------- ----------------------------------------------------------------- In line with Decree 644 dated April 18, 2002, the principal changes are as follows:------------------------------------------ - The conversion into pesos of the Secured Loans originally denominated in US dollars at the exchange rate of $1.40 per US dollar, as established by Section 1 of Decree No. 471/02.-------- - The new interest rates to be accrued by those secured loans, as established by Section 3 of Decree 471/02.----------------------- ----------------------------------------------------------------- 13 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- b.5. - Accrual of adjustments, interest, exchange rate differences, premiums on future transactions and variable returns ----------------------------------------------------------------- For foreign currency transactions and local currency transactions with a principal adjustment clause valid through April 1, 1991, as well as those with prearranged rates for less than 92 days, the accrual has been recognized on a linear basis.--------------- ----------------------------------------------------------------- For local currency transactions at rates arranged for longer periods, the interest has been accrued on an exponential basis. ----------------------------------------------------------------- ----------------------------------------------------------------- Since January 1997 Banco de Galicia y Buenos Aires S.A. has been receiving placements subject to variable returns in line with the system envisaged by Argentine Central Bank Communique "A" 2482. The fixed return for each transaction is accrued in the manner mentioned in the first paragraph, while the variable return is accrued at the pro rata rate of return agreed upon based on the improvement in the price of the financial asset or financial asset indicator, between the time the transaction is arranged and the end of the month.-------------------------------------------- ----------------------------------------------------------------- For the lending and borrowing transactions originally carried out in foreign currency and converted into pesos in accordance with Decree 214/02, the adjustment from the application of the CER was accrued at period end, where applicable.------------------------- b.6. - Assets Under Financial Leases----------------------------- These are stated at the acquisition cost less accumulated depreciation.---------------------------------------------------- ----------------------------------------------------------------- b.7. - Equity interests in other companies----------------------- ----------------------------------------------------------------- b.7.a. - In financial institutions and supplementary and authorized activities-------------------------------------------- - Controlled companies------------------------------------------- Argentine:------------------------------------------------------- The equity investments in controlled companies are stated at their equity values.--------------------------------------------- 14 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- The interest in Banelco S.A. has been valued according to the equity method of accounting, on the basis of financial statements as of March 31, 2002 because, at the date of these financial statements that company does not have audited financial statements. Furthermore, the effect of inflation has been recognized as of June 30, 2002.---------------------------------- As a result of the application of the economic measures described in Note 1 to the financial statements of Tarjetas Regionales S.A., this Company reported a deficit in its equity. This effect has been recognized in Banco de Galicia y Buenos Aires S.A.'s financial statements by recording a provision under liabilities. ----------------------------------------------------------------- Foreign:--------------------------------------------------------- As regards the interests in Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Limited, the statement made in Note 1 to these financial statements under section entitled "Situation of Banco de Galicia y Buenos Aires S.A. and its subsidiaries" has been applied.---------------------------------------------------- In the fiscal year ended June 30, 2001, their value was determined using the equity method of accounting, based on financial statements originally issued in foreign currency. For conversion into local currency the mentioned procedure for foreign branches and subsidiaries was used. This procedure follows the guidelines established by the Argentine Central Bank in this respect and is in agreement with professional accounting standards.------------------------------------------------------- ----------------------------------------------------------------- - Minority interests--------------------------------------------- Argentine:------------------------------------------------------- Minority interests have been valued at cost restated as mentioned in point a. above, plus stock dividends.------------------------- ----------------------------------------------------------------- Foreign:--------------------------------------------------------- These are reflected at the acquisition cost, plus stock dividends, recognized at their face value.----------------------- The procedure mentioned in point b.1. above was followed for conversion of foreign currency equity interests into local currency.-------------------------------------------------------- b.7.b. - In other companies-------------------------------------- - Minority interests--------------------------------------------- Argentine:------------------------------------------------------- These equity investments are stated at their acquisition cost restated as mentioned in point a. above, plus stock dividends.------------------------------------------------------- 15 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- The equity interests in Net Investment S.A., Sudamericana Holding S.A. and Galicia Warrants S.A. have been valued according to the equity method of accounting. In addition, the Company has valued its equity interests in Sudamericana Holding S.A. and Galicia Warrants S.A. based on financial statements prepared as of March 31, 2002 and as of April 30, 2002, respectively.----------------- ----------------------------------------------------------------- Foreign:--------------------------------------------------------- These are stated at the acquisition cost, plus stock dividends, recognized at their face value.---------------------------------- The procedure referred to in point b.1. above has been applied to translate foreign currency equity interests into local currency.- ----------------------------------------------------------------- b.8. - Fixed assets and miscellaneous assets--------------------- Fixed assets and miscellaneous assets have been valued at cost restated (see point a. above), plus the appreciation in the value of the real estate properties which include the effect of a technical revaluation made in 1981, less accumulated depreciation.---------------------------------------------------- The depreciation of these assets is determined on the basis of their estimated useful lives, expressed in months. A full month's depreciation is recognized in the month in which an asset is acquired, while no depreciation is recognized in the month in which it is sold or retired, over a maximum of 600 months for real estate properties, 120 months for furniture and fixtures and 60 months for the rest of assets.-------------------------------- The net book values of the assets, taken as a whole, are not in excess of their value to the business.--------------------------- b.9. - Other miscellaneous assets-------------------------------- Miscellaneous assets are valued at cost restated (see point a. above), less the corresponding accumulated depreciation.--------- ----------------------------------------------------------------- ----------------------------------------------------------------- The depreciation charges for these assets are calculated following the same criterion as that mentioned in the preceding section.--------------------------------------------------------- ----------------------------------------------------------------- b.10. - Intangible assets---------------------------------------- Intangible assets have been valued at their acquisition cost restated (see point a. above), less the corresponding accumulated amortization, calculated on the basis of their estimated useful lives expressed in months.--------------------------------------- 16 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- Amortization has been recognized on a straight-line basis in equal monthly installments, over a maximum of 120 months for "Goodwill" capitalized and over a maximum of 60 months for "Organization and Development Expenses".------------------------- ----------------------------------------------------------------- b.11. - Allowance for loan losses and provision for contingencies ----------------------------------------------------------------- The aforementioned allowance and provision have been set up to cover Banco de Galicia y Buenos Aires S.A.'s estimated loan uncollectibility risk, based on an evaluation of the debtors' degree of compliance with their payment obligations, their economic and financial condition and the guarantees supporting the related transactions, in line with the provisions of Argentine Central Bank Communique "A" 2216 and supplementary ones.------------------------------------------------------------ ----------------------------------------------------------------- As regards debtors classified under the "B" and "C" categories that record up to 62 and 121 days in arrears, respectively, whether they belong to the commercial or consumer portfolios, Comunique "A" 3630 established the possibility of financial institutions observing the levels of allowances for the immediately preceding category, for the period from March to June 2002. Banco de Galicia y Buenos Aires S.A. has not exercised this option.---------------------------------------------------------- b.12. - Shareholders' equity------------------------------------- 1)The Shareholders' Equity accounts have been restated following the procedure mentioned in point a., except for the "Capital Stock" and "Non-Capitalized Contributions" accounts, which have been stated at their original values.---------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 17 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- The adjustment derived from the restatement of those accounts was allocated to the "Equity Adjustment- Capital Adjustment" account. ----------------------------------------------------------------- Income and expenses have been restated regardless of whether they have been collected or paid.------------------------------------- Pursuant to Communique "A" 3702 of the Argentine Central Bank, monetary results of exposure to inflation were determined as follows:--------------------------------------------------------- a. "Monetary result of financial brokerage" includes the result of exposure to inflation generated by assets and liabilities related to the usual period of brokerage activity between the supply and demand of financial resources.------------------------ b. "Monetary result of operating expenses" includes the result of exposure to inflation generated by monetary assets and liabilities in pesos, related to administrative expenses.-------- c. "Monetary result of other operations" includes the result of exposure to inflation generated by assets and liabilities not related to the financial brokerage activity.--------------------- 2) As called for by Communique "A" 3703, the amount of the compensation envisaged in Decrees Nos. 214/02, 905/02 and supplementary norms, attributable to the positive difference between the Shareholders' Equity as of December 31, 2001 and that resulting from adjusting the net foreign currency position at that date converted into pesos at the exchange rate of $1.40 per US dollar, was recorded in the "Unrealized valuation difference arising from the compensation of the net foreign currency position" account.----------------------------------------------- ----------------------------------------------------------------- b.13. - Income tax and tax on minimum notional income------------ ----------------------------------------------------------------- As of June 30, 2002, the Company did not record any income tax charge because it reported a tax loss carry-forward at that date. ----------------------------------------------------------------- In view of the fact that Banco de Galicia y Buenos Aires S.A. determined an income tax loss carry forward in the fiscal year ended December 31, 2001, it is required to pay the tax on minimum notional income.------------------------------------------------- Notwithstanding this, no tax charge has been expensed because the amounts that are ultimately paid may be computed, until they are fully used up, as a payment on account of income tax to be determined within the next ten fiscal years following the payment date.------------------------------------------------------------ 18 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 3: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- b.14. - Dismissal Indemnities------------------------------------ Banco de Galicia y Buenos Aires S.A. directly expenses the dismissal indemnities.------------------------------------------- The amounts that Banco de Galicia y Buenos Aires S.A. may possibly have to pay in respect of labor lawsuits are covered by a provision, which is recorded under "Liabilities - Provisions for Dismissal Indemnities".-------------------------------------- ----------------------------------------------------------------- As of June 30, 2002 the maximum risk faced by Banco de Galicia y Buenos Aires S.A. in respect of dismissal indemnities amounted to approximately US$ 44,419. As of June 30, 2001, the total amount in this respect was US$ 43,199. --------------------------------- ----------------------------------------------------------------- NOTE 4: BASIC INFORMATION CONCERNING THE CONSOLIDATED CONTROLLED ENTITIES----- ---------------------------------------------------------------------- The basic information concerning the controlled entities is disclosed in Note 12 and Schedule C to the financial statements of Grupo Financiero Galicia S.A..---------------------------------------------- ---------------------------------------------------------------------- Grupo Financiero Galicia S.A. directly holds 87.50% of the capital stock and voting rights of Net Investment S.A., Galicia Warrants S.A. and Sudamericana Holding S.A. and its controlled entity Banco de Galicia y Buenos Aires S.A., the remaining 12.50% of the capital stock and voting rights of those companies.--------------------------------- ---------------------------------------------------------------------- The financial statements of Net Investment S.A. have in turn been consolidated on a line-by-line basis with the statements of financial condition, statements of income and statements of cash flows of B2Agro S.A. and Net Investment B.V.. As of June 30, 2002, Net Investment S.A. held the following percentages of equity interests:------------------- ---------------------------------------------------------------------- ====================================================================== ISSUER COMPANY % OF CAPITAL % OF VOTES ---------------------------------------------------------------------- B2Agro S.A. 93.75 93.75 ---------------------------------------------------------------------- Net Investment B.V. 100 100 ====================================================================== ---------------------------------------------------------------------- ---------------------------------------------------------------------- 19 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 4: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- The financial statements of Sudamericana Holding S.A. have been adapted to cover a period of six months as of March 31, 2002, for consolidation purposes. These financial statements have in turn been consolidated on a line by line basis with the statements of financial condition, income statements and statements of cash flows of Aseguradora de Personas Galicia S.A. (former Hartford Seguros de Vida S.A.), Instituto de Salta Seguros de Vida S.A., Galicia Retiro Cia. de Seguros S.A., Galicia Vida Cia. de Seguros S.A. and Medigap Salud S.A. (former Hartford Salud S.A.). As of March 31, 2002, Sudamericana Holding S.A. held the following equity percentages:------------------- ---------------------------------------------------------------------- ====================================================================== ISSUER COMPANY % OF CAPITAL % OF VOTES ---------------------------------------------------------------------- Aseguradora de Personas Galicia S.A. (former Hartford Seguros de Vida S.A.) 99.99 99.99 ---------------------------------------------------------------------- Instituto de Salta Seguros de Vida S.A. 90.00 90.00 ---------------------------------------------------------------------- Galicia Retiro Cia. de Seguros S.A. 99.99 99.99 ---------------------------------------------------------------------- Galicia Vida Cia. de Seguros S.A. 99.99 99.99 ---------------------------------------------------------------------- Medigap Salud S.A. (former Hartford Salud S.A.) 99.99 99.99 ====================================================================== ---------------------------------------------------------------------- ---------------------------------------------------------------------- For consolidation purposes, as of June 30, 2001 the Consolidated Financial Statements of Banco de Galicia y Buenos Aires S.A. have been adapted to cover the same period as that of Grupo Financiero Galicia S.A. the financial statements of that entity as of June 30, 2002 and 2001 include the assets, liabilities and results of the controlled entities detailed below:---------------------------------------------- ----------------------------------------------------------------------
================================================================================================== as of June 30, 2002 ------------------------------------------ --------------------------- --------------------------- PERCENTAGE OF INTEREST ISSUER COMPANY SHARES HELD IN ------------------------------------------ ------------- ------------- ------------- ------------- TOTAL POSSIBLE TYPE NUMBER CAPITAL VOTES ------------------------------------------ ------------- ------------- ------------- ------------- BANCO GALICIA URUGUAY S.A. Ordinary 13,375 100.00 100.00 ------------------------------------------ ------------- ------------- ------------- ------------- TARJETAS REGIONALES S.A. Ord. 70,834,138 68.218539 68.218539 Book-entry ------------------------------------------ ------------- ------------- ------------- ------------- GALICIA CAPITAL MARKETS S.A. Ord. 99,990 99.99 99.99 Book-entry ------------------------------------------ ------------- ------------- ------------- ------------- GALICIA FACTORING Y LEASING S.A. Ord. 1,889,700 99.98 99.98 Book-entry ------------------------------------------ ------------- ------------- ------------- ------------- AGRO GALICIA S.A. Ord. 247,500 99.00 99.00 Book-entry ------------------------------------------ ------------- ------------- ------------- ------------- GALICIA VALORES S.A. SOC. DE BOLSA Ord. 999,996 99.99 99.99 Book-entry ------------------------------------------ ------------- ------------- ------------- ------------- GALICIA Y BS. AS. SECURITIES (UK) LTD. Ordinary 500,000 100.00 100.00 ========================================== ============= ============= ============= =============
---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 20 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 4: (Continued)----------------------------------------------------------- ----------------------------------------------------------------------
================================================================================================== as of June 30, 2001 -------------------------------------------------------------------------------------------------- PERCENTAGE OF INTEREST ISSUER COMPANY SHARES HELD IN ------------------------------------------ --------------- ------------- ----------- ------------- TOTAL POSSIBLE TYPE NUMBER CAPITAL VOTES ------------------------------------------ --------------- ------------- ----------- ------------- BANCO GALICIA URUGUAY S.A. Ordinary 13,375 100.00 100.00 ------------------------------------------ --------------- ------------- ----------- ------------- TARJETAS REGIONALES S.A. Ord. 99,990 0.30 0.30 Book-entry ------------------------------------------ --------------- ------------- ----------- ------------- GALICIA CAPITAL MARKETS S.A. Ord. 99,990 99.99 99.99 Book-entry ------------------------------------------ --------------- ------------- ----------- ------------- GALICIA FACTORING Y LEASING S.A. Ord. 1,889,700 99.98 99.98 Book-entry ------------------------------------------ --------------- ------------- ----------- ------------- AGRO GALICIA S.A. Ord. 247,500 99.00 99.00 Book-entry ------------------------------------------ --------------- ------------- ----------- ------------- GALICIA VALORES S.A. SOC. DE BOLSA Ord. 999,996 99.99 99.99 Book-entry ------------------------------------------ --------------- ------------- ----------- ------------- GALICIA Y BS. AS. SECURITIES (UK) LTD. Ordinary 500,000 100.00 100.00 ========================================== =============== ============= =========== =============
---------------------------------------------------------------------- ===================================================================================================== As of June 30, 2002 ----------------------------------------------------------------------------------------------------- ASSETS LIABILITIES SHAREHOLDERS' RESULTS (*) EQUITY ------------------------------------------ ----------- ------------- ------------------ ------------- BANCO GALICIA URUGUAY S.A. - - - - ------------------------------------------ ----------- ------------- ------------------ ------------- TARJETAS REGIONALES S.A. 149,029 170,638 (21,609) (85,944) ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA CAPITAL MARKETS S.A. 9,215 4,873 4,342 (1,704) ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA FACTORING Y LEASING S.A. 2,286 608 1,678 (117) ------------------------------------------ ----------- ------------- ------------------ ------------- AGRO GALICIA S.A. 116 10 106 (77) ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA VALORES S.A. SOC. DE BOLSA 3,987 893 3,094 1,080 ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA Y BS. AS. SECURITIES (UK) LTD. 1,304 26 1,278 627 ========================================== =========== ============= ================== ============= ---------------------------------------------------------------------- ===================================================================================================== as of June 30, 2001 ----------------------------------------------------------------------------------------------------- ISSUER COMPANY ASSETS LIABILITIES SHAREHOLDERS' RESULTS (*) EQUITY ------------------------------------------ ----------- ------------- ------------------ ------------- BANCO GALICIA URUGUAY S.A. 1,180,480 1,072,903 107,577 11,083 ------------------------------------------ ----------- ------------- ------------------ ------------- TARJETAS REGIONALES S.A. 291,224 260,623 30,601 545 ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA CAPITAL MARKETS S.A. 9,912 4,319 5,593 628 ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA FACTORING Y LEASING S.A. 1,945 339 1,606 160 ------------------------------------------ ----------- ------------- ------------------ ------------- AGRO GALICIA S.A. 355 179 176 10 ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA VALORES S.A. SOC. DE BOLSA 3,929 2,137 1,792 111 ------------------------------------------ ----------- ------------- ------------------ ------------- GALICIA Y BS. AS. SECURITIES (UK) LTD. 756 121 635 124 ========================================== =========== ============= ================== =============
---------------------------------------------------------------------- (**) corresponding to the period of six months ended June 30, 2001.--- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- The Financial Statements of the controlled entities have been adapted to the valuation and disclosure standards laid down by the Argentine Central Bank and cover the same period as that of the financial statements of Banco de Galicia y Buenos Aires S.A..------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 21 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 4: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- Banco Galicia Uruguay S.A. and Banco Galicia (Cayman) Limited have not been consolidated as of June 30, 2002 (see Note 1 to the financial statements).---------------------------------------------------------- In the fiscal year ended June 30, 2001, special financial statements of Banco Galicia Uruguay S.A. as of June 30, 2001, adapted to cover the same period as that of Banco de Galicia y Buenos Aires S.A. were used. These financial statements include the special statement of financial condition, income statement and statement of cash flows of Banco Galicia Uruguay S.A., the balances of which have been consolidated on a line-by-line basis with the special statement of financial condition, income statement and statement of cash flows of Banco de Galicia (Cayman) Limited, in which Banco Galicia Uruguay S.A. has a 65.3405 % equity interest and Banco de Galicia y Buenos Aires S.A., the remaining 34.6595%. Furthermore, the latter statements have been consolidated with those of Tarjetas Regionales S.A. and Galicia Pension Fund Limited, in which Banco Galicia (Cayman) Limited holds a 99.7 % and 100 % equity interest, respectively. In turn, since January 1, 2000, Galicia Pension Fund Limited financial statements have been consolidated with those of Galicia Administradora de Fondos S.A. Sociedad Gerente de Fondos Comunes de Inversion, in which Galicia Pension Fund Limited holds a controlling interest of 99.985%.--------- ---------------------------------------------------------------------- In the current period, as a result of the new interest percentages owned by shareholders in Tarjetas Regionales S.A., Banco de Galicia y Buenos Aires S.A. holds 68.218539% of the capital stock and voting rights and Banco de Galicia (Cayman) Limited, the remaining 31.781461%.----------------------------------------------------------- ---------------------------------------------------------------------- The financial statements of Banco de Galicia y Buenos Aires S.A. have been consolidated on a line-by-line basis with those of that company.- ---------------------------------------------------------------------- The June 30, 2002 financial statements of Tarjetas Regionales S.A., which were used for consolidation purposes, have in turn been consolidated on a line-by-line basis with those of Tarjeta Naranja S.A., Tarjetas Cuyanas S.A., Tarjeta Comfiar S.A. and Tarjetas del Mar S.A., in which Tarjetas Regionales S.A. holds a controlling interest.- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 22 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 4: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- a) The percentages directly held in those companies' capital stock are as follows:----------------------------------------------------------- ---------------------------------------------------------------------- ====================================================================== Company 6.30.02 6.30.01 ---------------------------------------------------------------------- Tarjetas Cuyanas S.A. 60% 60% ---------------------------------------------------------------------- Tarjetas del Mar S.A. (*) 100% 50% ---------------------------------------------------------------------- Tarjeta Naranja S.A. 80% 80% ---------------------------------------------------------------------- Tarjeta Comfiar S.A. 60% 60% ====================================================================== (*) On May 15, 2002 Tarjetas Regionales S.A. acquired the remaining 50% of the shares.---------------------------------------------------- ---------------------------------------------------------------------- b) The percentages indirectly held in those companies' capital stock through the controlled entity Tarjeta Naranja S.A. are as follows:---- ---------------------------------------------------------------------- ====================================================================== Company 6.30.02 6.30.01 ---------------------------------------------------------------------- Tarjeta Comfiar S.A. 32% 32% ====================================================================== ---------------------------------------------------------------------- Tarjeta Naranja S.A. financial statements as of June 30, 2002 and 2001 have in turn been consolidated with the financial statements of Cobranzas Regionales S.A., in which it holds 66.4% of voting stock.--- ---------------------------------------------------------------------- Furthermore, Tarjeta Comfiar S.A. and Tarjetas Cuyanas S.A. hold 21.3% and 12.3% interests, respectively, in that company's capital stock and voting rights.-------------------------------------------------------- ---------------------------------------------------------------------- For purposes of the consolidation of those credit card management companies, the June 30, 2002 and May 31, 2001 financial statements of those companies have been used.--------------------------------------- ---------------------------------------------------------------------- The financial statements of Galicia Capital Markets S.A. include the statement of financial condition, income statement and statement of cash flows of that company, whose balances have been consolidated on a line-by-line basis, with the statement of financial condition, income statement and statement of cash flows of Galicia Advent Corporation Limited, in which that company holds a 57.89% equity interest and Galicia Equity Analysis S.A., in which it holds a 99 % controlling interest.------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 23 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 5: MINORITY INTEREST IN CONSOLIDATED INSTITUTIONS OR COMPANIES----------- ---------------------------------------------------------------------- The portion of the net worth of the controlled investees owned by third parties has been disclosed in the Statement of Financial Condition, under the "Minority interest in consolidated institutions or companies" caption.------------------------------------------------ ---------------------------------------------------------------------- The result of minority interests is disclosed in the Income Statement under "Result of Minority Interest".---------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2002 and 2001, the percentages of minority interest are as follows:----------------------------------------------------------- ---------------------------------------------------------------------- ====================================================================== Company 6.30.02 6.30.01 ---------------------------------------------------------------------- Banco de Galicia y Bs.As. S.A. 6.41446% 6.51671% ---------------------------------------------------------------------- Net Investment S.A. 0.80181% 0.81459% ---------------------------------------------------------------------- Sudamericana Holding S.A. 0.80175% - ---------------------------------------------------------------------- Galicia Warrants S.A. 0.80181% - ---------------------------------------------------------------------- B2Agro S.A. 7.00169% 17.34549% ---------------------------------------------------------------------- Net Investment B.V. 0.80181% - ---------------------------------------------------------------------- BtoB Comercial S.A. - 0.81432% ---------------------------------------------------------------------- Aseguradora de Personas Galicia S.A. (former Hartford Seguros de Vida S.A.) 0.80234% - ---------------------------------------------------------------------- Medigap Salud S.A. (former Hartford Sallud S.A.) 0.81002% - ---------------------------------------------------------------------- Instituto de Salta Seguros de Vida S.A. 10.72158% - ---------------------------------------------------------------------- Galicia Retiro Cia.de Seguros S.A. 0.80188% - ---------------------------------------------------------------------- Galicia Vida Cia. de Seguros S.A. 0.80190% - ====================================================================== ---------------------------------------------------------------------- In the case of Banco de Galicia y Buenos Aires S.A., the breakdown of supplementary equity interests included in the "Minority Interests" caption is as follows:------------------------------------------------ ----------------------------------------------------------------------
============================================================= ================= ================== Company 6.30.02 6.30.01 ------------------------------------------------------------- ----------------- ------------------ Galicia Valores S.A. Sociedad de Bolsa 0.01% 0.01% ------------------------------------------------------------- ----------------- ------------------ Galicia Capital Markets S.A. 0.01% 0.01% ------------------------------------------------------------- ----------------- ------------------ Galicia Factoring y Leasing S.A. 0.02% 0.02% ------------------------------------------------------------- ----------------- ------------------ Galicia Administradora de Fondos S.A. Soc. Gerente 0.015% 0.015% ------------------------------------------------------------- ----------------- ------------------ Agro Galicia S.A. 1.00% 1.00% ------------------------------------------------------------- ----------------- ------------------ Tarjeta Comfiar S.A. 8.00% 8.00% ------------------------------------------------------------- ----------------- ------------------ Tarjetas Cuyanas S.A. 40.00% 40.00% ------------------------------------------------------------- ----------------- ------------------ Tarjetas del Mar S.A. - 50.00% ------------------------------------------------------------- ----------------- ------------------ Tarjeta Naranja S.A. 20.00% 20.00% ------------------------------------------------------------- ----------------- ------------------ Galicia Advent Corporation Limited 42.11% 42.11% ------------------------------------------------------------- ----------------- ------------------ Galicia Equity Analysis S.A. 1.00% 1.00% ------------------------------------------------------------- ----------------- ------------------ Cobranzas Regionales S.A. 19.904% 19.904% ============================================================= ================= ==================
24 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 6: RESTRICTED ASSETS----------------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2002, Banco de Galicia y Buenos Aires S.A.'s ability to dispose of the following assets pertaining to local branches was restricted as mentioned below:---------------------------------------- ---------------------------------------------------------------------- a. Funds and Government Securities------------------------------------ Banco de Galicia y Buenos Aires S.A. has deposited US$ 5,063 in escrow as a guarantee towards third parties in respect of its own transactions. Also, US$ 3,731 have been deposited to guarantee repo transactions with banks located abroad.------------------------------- ---------------------------------------------------------------------- Within the framework of Decree 979/2001 of the National Executive Branch, Banco de Galicia y Buenos Aires S.A. has advanced the National State funds on account of tax obligations and received in exchange Fiscal Credit Certificates for US$ 24,539, which have been recognized in Government Securities. These certificates may be used for settling taxes, under the conditions set out in that Decree, effective January 2003.----------------------------------------------------------------- ---------------------------------------------------------------------- b. Guarantee for Galtrust II, III, IV and V Financial Trusts---------- Mortgage Bills for US$ 896 have been deposited in escrow as collateral for the contracts of the Individual Galtrust II, III, IV and V Financial Trusts, in respect of an Initial Minimum Amount of the Reserve Investments, according to contracts signed on December 17, 2001.----------------------------------------------------------------- ---------------------------------------------------------------------- c. Special Accounts as Collateral for Transactions-------------------- Banco de Galicia y Buenos Aires S.A. has opened special accounts with the Argentine Central Bank as collateral for transactions involving electronic clearing houses, checks for settling debts and other similar transactions which, as of June 30, 2002 amounted to US$ 11,911.--------------------------------------------------------------- ---------------------------------------------------------------------- d. Deposits in favor of the Argentine Central Bank-------------------- These have been set up in line with Argentine Central Bank regulations:---------------------------------------------------------- ---------------------------------------------------------------------- - Communique "A" 1190 US$ 140---------------- - Communique "A" 2923 US$ 1,230--------------- ---------------------------------------------------------------------- e. Fund for assistance to financial institutions---------------------- As of June 30, 2002 Banco de Galicia y Buenos Aires S.A. had deposited secured loans for US$ 32,895 in guarantee towards the Fund for assistance to Financial Institutions.--------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 25 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 6: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- f. Guarantees provided to the Argentine Central Bank------------------ As of June 30, 2002, Banco de Galicia y Buenos Aires S.A. has transferred loans to the public sector in favor of the Argentine Central Bank, as collateral for advances of US$ 1,814,294 for assistance received to cover temporary lack of liquidity.------------- ---------------------------------------------------------------------- g. Equity interests in Other Companies-------------------------------- Banco de Galicia y Buenos Aires S.A. has granted a senior pledge on all its shares in Correo Argentino S.A., in favour of the International Finance Corporation, Inter American Development Bank and a syndicate of domestic institutions, as collateral for financing granted to that company. This transaction was authorized by the Argentine Central Bank through resolution No. 408 dated September 9, 1999.----------------------------------------------------------------- ---------------------------------------------------------------------- According to the contract signed, in the event of a deficit in funds, Banco de Galicia y Buenos Aires S.A. and the majority shareholder of Correo Argentino S.A. should hold the financial creditors harmless from any non-compliance as a result of such deficit. Under the terms of the contract, Correo Argentino should inform Banco de Galicia y Buenos Aires S.A. and Socma Americana S.A. of the existence of any deficit. At the date of these financial statements, Banco de Galicia y Buenos Aires S.A. had not been notified of any requirement in this connection.----------------------------------------------------------- ---------------------------------------------------------------------- "Equity interests in Other Companies" includes shares whose transferability is subject to the prior approval of the National or Provincial authorities, as applicable, under the terms of the concession contracts signed:------------------------------------------ - Aguas Argentinas S.A.: 3,236,879 book-entry class F shares and 522,887 book-entry class E shares.------------------------------------ - Aguas Provinciales de Santa Fe S.A.: 3,600,000 book-entry class F shares and 62,500 book-entry class D shares--------------------------- - Inversora Diamante S.A.: 1,606,117 ordinary book-entry non-transferable shares.---------------------------------------------- 26 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 6: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- - Inversora Nihuiles S.A.: 1,184,093 ordinary book-entry non-trans- ferable shares.------------------------------------------------------- - Electrigal S.A.: 1,222,406.50 ordinary registered non-endorsable non-transferable shares.---------------------------------------------- - Aguas Cordobesas S.A.: 900,000 ordinary class E shares.------------- - Correo Argentino S.A.: 12,462,021 ordinary non-transferable class B shares.--------------------------------------------------------------- ---------------------------------------------------------------------- As a shareholder of the concessionaires of the water supply services, Aguas Argentinas S.A., Aguas Provinciales de Santa Fe S.A. and Aguas Cordobesas S.A., Banco de Galicia y Buenos Aires S.A. and the other shareholders have committed to provide financial support to those companies if they were unable to fulfill the commitments they have undertaken with international financial bodies.----------------------- ---------------------------------------------------------------------- The Inter American Development Bank (IDB) requested that the shareholders of Aguas Argentinas S.A. and Aguas Provinciales de Santa Fe S.A. grant loans to those companies. At the date of these financial statements negotiations to postpone the providing of credit assistance to Aguas Argentinas S.A. were still under way, while the obligation to provide assistance to Aguas Provinciales de Santa Fe S.A. is not deemed to exist.------------------------------------------------------ Furthermore, the ability to dispose of government agency and treasury bills belonging to the foreign branches for an amount of US$ 70,416 is restricted, as they have been earmarked to comply with the requirements of the regulatory body of the country where they do business.------------------------------------------------------------- As of June 30, 2001, the total amount of restricted assets earmarked to cover the mentioned items was US$ 127,985.------------------------- ---------------------------------------------------------------------- In addition, as of June 30, 2002 and 2001 the ability of Banco de Galicia y Buenos Aires S.A. to dispose of the assets existing at its controlled entities subject to consolidation is restricted as follows: ---------------------------------------------------------------------- a. Galicia Valores S.A. Sociedad de Bolsa:---------------------------- As of June 30, 2002 this company held three shares of Mercado de Valores de Buenos Aires S.A. securing an insurance covering its transactions for US$ 1,263.------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 27 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 6: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2001, that company's total restricted assets amounted to US$ 488.----------------------------------------------------------- b. Agro Galicia S.A.:------------------------------------------------- As of June 30, 2002 Agro Galicia S.A. had one share of Mercado a Termino de Buenos Aires S.A. securing an insurance covering its transactions for US$ 9.----------------------------------------------- ---------------------------------------------------------------------- Furthermore, third party guarantees provided to Mercado a Termino de Buenos Aires S.A. to secure transactions on this market amounted to US$ 74.--------------------------------------------------------------- As of June 30, 2001, the restricted assets totalled US$ 313.---------- ---------------------------------------------------------------------- NOTE 7: TRUST ACTIVITIES------------------------------------------------------- ---------------------------------------------------------------------- In order to guarantee compliance with the obligations arising from contracts, the parties thereto have agreed to deliver in trust to Banco de Galicia y Buenos Aires S.A. certain amounts of money, to be invested in time deposits, according to the following detail:--------- ---------------------------------------------------------------------- 1) US$ 21,450, in order to guarantee compliance with the obligations arising from the Musimundo S.A. share purchase agreement.------------- ---------------------------------------------------------------------- 2) US$ 15, in order to guarantee compliance with the obligations arising from the trust agreement signed by Eduardo Sumic and Ericides Ciani.---------------------------------------------------------------- ---------------------------------------------------------------------- The above-mentioned amounts will be released upon maturity or when Banco de Galicia y Buenos Aires S.A. receives instructions in accordance with the contract stipulations.---------------------------- NOTE 8: NEGOTIABLE OBLIGATIONS AND OTHER DEBT SECURITIES----------------------- ---------------------------------------------------------------------- a) Banco de Galicia y Buenos Aires S.A. - Ordinary Negotiable Obligations----------------------------------------------------------- ---------------------------------------------------------------------- a.1) As of June 30, 2002, Banco de Galicia y Buenos Aires S.A. had the following negotiable obligation issues outstanding:------------------- ----------------------------------------------------------------------
=================== ================== =================== ================ ================== ISSUE ISSUE DATE FACE VALUE TERM RATE AUTHORIZED BY (in thousands) THE NATIONAL SECURITIES COMMISSION ------------------- ------------------ ------------------- ---------------- ------------------ 11.08.93 200,000 10 years 9.00 % 10.08.93 =================== ================== =================== ================ ==================
---------------------------------------------------------------------- 28 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 8: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- a.2) Under the global program for issuing ordinary negotiable obligations approved by the Shareholders' Meeting held on March 3, 1993, as of June 30, 2002, Banco de Galicia y Buenos Aires S.A. had the following negotiable obligation issue outstanding:---------------- ----------------------------------------------------------------------
=================== ================== ================== ================= ================== ISSUE ISSUE DATE FACE VALUE TERM RATE AUTHORIZED BY (in thousands) THE NATIONAL SECURITIES COMMISSION ------------------- ------------------ ------------------ ----------------- ------------------ 08.07.97 150,000 1,825 days (1) 08.02.93 and 12.20.94 =================== ================== ================== ================= ==================
---------------------------------------------------------------------- (1) On the interest payment dates falling due in August 2001 or before, Libor plus 1.625%--------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- a.3) The Shareholders' Meeting held on September 30, 1997 authorized the creation of a Global Program for a maximum total amount equivalent to US$ 500,000.------------------------------------------------------- As of June 30, 2002 Banco de Galicia y Buenos Aires S.A. had no negotiable obligation issues outstanding under this program.---------- --------------------------------------------------------------------- a.4) The Ordinary Shareholders' Meeting held on September 30, 1997, authorized the creation of a Global Program for a maximum total amount of US$ 1,000,000 for issuing ordinary negotiable obligations, not convertible into shares which may be issued in pesos, US dollars or other currencies.----------------------------------------------------- As of June 30, 2002, Banco de Galicia y Buenos Aires S.A. had the following short and medium-term negotiable obligation issues outstanding under the above program:---------------------------------- ----------------------------------------------------------------------
=================== ================== ================== ================= ================== ISSUE ISSUE DATE FACE VALUE TERM RATE AUTHORIZED BY (in thousands) THE NATIONAL SECURITIES COMMISSION ------------------- ------------------ ------------------ ----------------- ------------------ 12.20.00 44,444(*) 1,825 days Libor plus 2% 04.22.98 ------------------- ------------------ ------------------ ----------------- ------------------ 06.11.01 10,667(*) 1,653 days Libor plus 2% 04.22.98 =================== ================== ================== ================= ==================
(*) On December 20, 2001, the first installment was amortized for a face value of 5,556 and 1,333, respectively.-------------------------- ---------------------------------------------------------------------- The Meeting of Shareholders held on September 26, 2001 ratified the powers previously vested in the Board of Directors in connection with the programs referred to in sections a.3) and a.4) above.------------- ---------------------------------------------------------------------- 29 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 8: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- a.5) The Meeting of Shareholders held on September 26, 2001 approved the issue of subordinated negotiable obligations, convertible into ordinary, book-entry, class "B" shares, with a face value of $ 0.001 each and entitled to one vote per share, for a total amount of up to US$ 200,000.---------------------------------------------------------- ---------------------------------------------------------------------- That meeting of shareholders vested the Board of Directors of Banco de Galicia y Buenos Aires S.A. with the powers to set the issue terms and conditions, including the amount and date of issue. That Board of Directors has not resolved this issue so far. An objection to this Meeting of Shareholders has been filed before the court by the minority shareholders of that Entity, Theseus S.A. and Lagarcue S.A., which represent 2.07% and 3.35% of the capital stock and are controlled by Ms. Maria Isabel Escasany.------------------------------ ---------------------------------------------------------------------- b) In addition, the New York branch launched a medium-term debt securities program for up to US$ 500,000, of which US$ 200,000 were outstanding at the end of the period. After the end of the period, those debt securities were exchanged for securities issued by Banco de Galicia y Buenos Aires S.A., under the liability restructuring plan involving the Branch (see Note 1 to the financial statements).-------- ---------------------------------------------------------------------- As of June 30, 2002 and 2001, the amount of the negotiable obligations in respect of principal and interest, net of discounts, was US$ 419,976 and US$ 439,710, respectively, and was used in accordance with the provisions of Communique "A" 1907 of the Argentine Central Bank for providing financing to domestic companies with regard to investments in physical assets in Argentina, providing working capital or refinancing liabilities, granting consumer and mortgage loans for financing housing construction, investments in the share capital of domestic companies and other purposes envisaged in the above mentioned Communique.----------------------------------------------------------- ---------------------------------------------------------------------- 30 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 8: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- c) Banco de Galicia y Buenos Aires S.A.'s controlled companies - Issue of negotiable obligations and other debt securities------------------- ---------------------------------------------------------------------- During the period, various Series of short and medium-term Negotiable Obligations issued by Tarjetas Cuyanas S.A., Tarjetas del Mar S.A., Tarjeta Comfiar S.A. and Tarjeta Naranja S.A. fell due. The difficult situation affecting the Argentine economy and particularly the financial system, the devaluation of the peso and the difficulties in accessing credit on the domestic and foreign markets have had an adverse effect on the ability of those companies to meet their payment obligations.---------------------------------------------------------- ---------------------------------------------------------------------- Within that environment, each of those companies have undertaken a process for the renegotiation of their debts for negotiable obligations, which has presented different characteristics and different degrees of progress and/or definitions so far. As a result, the criteria used for valuing these debts varied according to the facts and judgmental elements each company had in relation to those debts when they issued their respective financial statements.--------- Below is disclosed the situation of each of those companies in relation to these debts as of June 30, 2002, and the valuation criteria followed:---------------------------------------------------- Tarjetas Cuyanas S.A.:------------------------------------------------ ---------------------------------------------------------------------- On May 23, 2002, that company entered into an agreement with Administraciones Fiduciarias S.A. for the redemption of its Negotiable Obligations through the issue of debt certificates.------------------- ---------------------------------------------------------------------- As of June 30, 2002, holders of negotiable obligations adhered to the exchange of negotiable obligations for debt certificates in the amount of approximately US$5,000. At that date, the Company has valued this debt at approximately US$3,816, a figure obtained by applying the present value method to the future discounted cash flows. Should this debt have been valued at period end free US dollar exchange rate, an additional loss of approximately US$ 1,184 would have been generated. ---------------------------------------------------------------------- For purposes of applying the valuation method mentioned above, Tarjetas Cuyanas S.A. has taken as a premise a nominal annual discount rate of 11% and a cash flow made up of 5% of the monthly collections of receivables derived from the use of credit cards for a term of 8 years counted as from the earlier of June 1, 2002 or until the full amortization of the subscribed certificates.-------------------------- ---------------------------------------------------------------------- As a result of this transaction and of certain payments made, the Company records due and payable negotiable obligations amounting to approximately US$5,600 as of June 30, 2002. As of June 30, 2002, 31 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 8: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- Tarjetas Cuyanas S.A. had valued this debt by approximately US$3,158, which represent the redemption value estimated by the management of Tarjetas Cuyanas S.A. on the basis of the negotiations carried out so far. If this debt were to be valued at the free US dollar exchange rate, an additional loss of approximately US$ 2,421 would be generated as of the end of the six-month period.-------------------------------- ---------------------------------------------------------------------- Tarjetas del Mar S.A.:------------------------------------------------ ---------------------------------------------------------------------- On June 18, 2002, Tarjetas del Mar S.A. informed the Buenos Aires Stock Exchange and Caja de Valores S.A. that as it had been unable to make a payment proposal to the holders of the negotiable obligations, due to the lack of a definition of the legal and economic framework that is essential to confront the economic and financial crisis Argentina is enduring, Tarjetas del Mar S.A. would not call a meeting of holders of negotiable obligations until 120 days have passed from the last presentation of that proposal on March 4, 2002. Tarjetas del Mar S.A. continues to pay interest until it is able to make the proposal.------------------------------------------------------------- ---------------------------------------------------------------------- So far, the instability of financial markets has not enabled the Board of Directors of Tarjetas del Mar S.A. to set a reasonable estimate of the expected cash flow for the next few years, to be able to make an equitable proposal for the payment of the principal amount due to the holders of negotiable obligations.------------------------------------ ---------------------------------------------------------------------- The payment alternative that the Board of Directors is currently analyzing consists in acknowledging a debt payable in US dollars within a term that enables the Company to make payment in such currency. The Board of Directors considers that it will be in a position to make such proposal within the next 60 days, including the amount, payment term, interest rate and method of payment.------------ 32 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 8: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2002, the balance of the Global Negotiable Obligation Program issued by Tarjetas del Mar S.A., which continue to be due and payable is equivalent to an amount of US$ 15,595. If all the due and payable negotiable obligations as of June 30, 2002 were to be valued at the free US dollar exchange rate, an additional loss of approximately US$ 11,491 would be generated as of period end.----- The maximum risk attaching to the situations described above, which could have an impact on the financial statements of Tarjetas Regionales S.A., amounts to US$11,491.------------------------------ Tarjeta Comfiar S.A.:------------------------------------------------- ---------------------------------------------------------------------- In view of the operating impossibility of this company fully redeeming Series IX of Negotiable Obligations that fell due on January 15, 2002, a debt of US$2,265 thousand (nominal value) has been included in this respect in the Bank and financial loans caption, at a rate of exchange of US$1=$1, plus CER, which as of June30, 2002 was equivalent to US$ 149.------------------------------------------------------------------ As established by current public order regulations on this matter, Tarjeta Comfiar S.A. considers that in all cases the criterion applicable would be the redemption of those negotiable obligations at the exchange rate of US$1=$1, plus CER, because that Series was issued prior to January 6, 2002.--------------------------------------------- If all the due and payable negotiable obligations which as of June 30, 2002 amounted to US$ 2,265 were to be valued at the free US dollar exchange rate, an additional loss of approximately US$1,520 would be generated at the end of the six-month period.------------------------- The maximum risk attaching to the situations described, which could have an impact on the financial statements of Tarjetas Regionales S.A., amounts to US$ 1,399.------------------------------------------- Tarjeta Naranja S.A.:------------------------------------------------- On May 23, 2002 Tarjeta Naranja S.A. executed an agreement for the redemption of negotiable obligations and the issuance of debt certificates in US dollars secured by a trust. As of June 30, 2002, holders of negotiable obligations had adhered to this agreement in the amount of US$ 56,706.------------------------------------------------- The debt certificates have been valued by determining the present value of the cash flow involved, converted at the exchange rate prevailing on the transaction date. The application of the present value method to this financial debt, recommended by Technical Pronouncement No. 17 of the Argentine Federation of Professional Councils in Economic Sciences and approved by the Professional Council in Economic Sciences of the Province of Cordoba, results in US$ 42,152. If the debt certificates for a 33 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 8: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- total of US$ 56,706 were to be valued at the free US dollar exchange rate, an additional loss of approximately US$ 14,554 would be generated at period end.---------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2002, the overdue balance of the Global Negotiable Obligation Program not yet exchanged amounts to US$ 20,871. ---------------------------------------------------------------------- At period end those holders of negotiable obligations continued to be invited to exchange their obligations for the above-mentioned debt certificates. For those holders who have not adhered to the agreement, and under current public order regulations on this matter, Tarjeta Naranja S.A. considers that in all cases the criterion applicable for the redemption of those negotiable obligations would be the exchange rate of US$1=$1, plus CER, because even the most recently issued Series involved renewals of series issued under Programs predating January 6, 2002.------------------------------------------------------ In view of Tarjeta Naranja S.A.'s expectations for the method of redemption of these obligations, either by means of the adherence to the agreement or by redeeming them in cash, such obligations have been valued as follows: 50%, that is US$ 10,436, are expected to be redeemed in cash applying the US$1=$1 exchange rate, plus CER, and the remaining 50% is expected to be exchanged for debt securities, so they were valued applying the same procedure as that described above for debt certificates. If all the due and payable negotiable obligations amounting to US$ 20,871 rate, an additional loss of approximately US$ 9,678 would be generated at period end.------------------------------- The maximum risk attaching to the situations described, which could have an impact on the financial statements of Tarjetas Regionales S.A., amounts to US$ 19,386.------------------------------------------ In addition, Negotiable Obligation Series XXVII issued on January 18, 2002 for a face value of US$ 28,000 has been valued applying the free US dollar parity at period end.--------------------------------------- The maximum risk attaching to the situations described, which could have an impact on the financial statements of Grupo Financiero Galicia S.A., would amount to approximately US$ 21,986.----------------------- ---------------------------------------------------------------------- NOTE 9: DEPOSIT INSURANCE SYSTEM----------------------------------------------- ---------------------------------------------------------------------- Law 24485 and Decree 540/95 established the creation of the Deposit Insurance System to cover the risk attached to bank deposits, beyond the system of privileges and safeguards envisaged in the Financial Institutions Law.----------------------------------------------------- Pursuant to Communique "A" 2337, the Argentine Central Bank established rules for applying the deposit insurance and the way of settling the related contributions.----------------------------------- 34 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 9: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- The National Executive Power through Decree 1127/98 dated September 24, 1998 extended this insurance system to demand deposits and time deposits of up to US$ 8 denominated either in pesos or in foreign currency.------------------------------------------------------------- This System does not cover the deposits made by other financial institutions (including the time deposit certificates acquired through a secondary transaction), the deposits made by persons related to Banco de Galicia y Buenos Aires S.A., either directly or indirectly, deposits of securities, acceptances or guarantees and those set up after July 1, 1995 at an interest rate exceeding the one that the Argentine Central Bank regularly establishes based on a daily survey conducted by it.------------------------------------------------------ Nor does this System cover deposits whose ownership has been acquired through endorsement and placements which offer incentives in addition to the interest rate. The System has been implemented through the creation of the Deposit Insurance Fund, which is managed by a company called Seguros de Depositos S.A. (SE.DE.S.A.). The shareholders of SE.DE.S.A. are the Argentine Central Bank and the financial institutions in the proportion determined for each one by the Argentine Central Bank based on the contributions made to the said fund.----------------------------------------------------------------- Through Communique "A" 3068, the Argentine Central Bank reduced the normal contribution to the said Fund, which amounted to 0.03%, to half, provided that the financial institution arranges with SEDESA 36-month loans, to be earmarked for the Deposit Insurance Fund. Interest on these loans has been determined on the basis of the yield obtained by the mentioned Fund on its placements.--------------------- ---------------------------------------------------------------------- As from September 2000, Argentine Central Bank Communique "A" 3153 eliminated the above mentioned loan and the normal contribution of 0.015% on items comprised in the calculation basis remained in force.- ---------------------------------------------------------------------- As from December 2001, Argentine Central Bank Communique "A" 3358 resolved to increase the contribution to 0.03%. As of June 30, 2002 the normal contribution to the Deposit Insurance Fund amounted to US$ 60,319, of which US$ 3,557 correspond to the current period.---------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- NOTE 10: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF PROFITS------------------ ---------------------------------------------------------------------- The Argentine Central Bank regulations establish that 20% of the profits shown in the Income Statement at the end of the fiscal year, plus (less) prior year adjustments must be allocated to the legal reserve.-------------------------------------------------------------- This proportion is applicable regardless of the ratio of the legal reserve fund to the capital stock.------------------------------------ 35 --------------------------Grupo Financiero Galicia S.A.------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 10: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF PROFITS------------------- ---------------------------------------------------------------------- As a result of the facts described in Note 1 to these financial statements, through resolution 81 dated February 8, 2002, the Argentine Central Bank established that while the assistance received from that Entity is in force, Banco de Galicia y Buenos Aires S.A. may not distribute dividends or any other return on capital in cash, remit profits or make payments for fees, interests or compensation related to results.----------------------------------------------------------- ---------------------------------------------------------------------- Furthermore, Argentine Central Bank Communique "A" 3574 provided for the suspension of the distribution of profits until the criteria for valuing the shareholders' equity of Banco de Galicia y Buenos Aires S.A. are defined, which include the known effects of Law 25561 and supplementary provisions.--------------------------------------------- ---------------------------------------------------------------------- Communique "A" 3785 provides that financial institutions which receive in compensation National Government bonds within the framework of Sections 28 and 29 of Decree 905/02, may record them at their technical value; while using this procedure, financial institutions may not distribute cash dividends and the same treatment will be given to those institutions which decide to exchange the compensating bonds for promissory notes issued by the National Government.--------------- ---------------------------------------------------------------------- NOTE 11: NATIONAL SECURITIES COMMISSION (Comision Nacional de Valores)-------------------------------------------------------------- ---------------------------------------------------------------------- a) Resolutions No. 147/90, 178/91 and 252/94-------------------------- In line with the requirements of those resolutions, concerning the "Minimum Equity" that Banco de Galicia y Buenos Aires S.A. is required to have under Argentine Central Bank rules, we confirm that Banco de Galicia y Buenos Aires S.A. fulfilled these requirements in excess, and that such equity was fully paid up at the end of the fiscal period.--------------------------------------------------------------- ---------------------------------------------------------------------- b) Resolution No. 161/90---------------------------------------------- As depository of the mutual funds "Fima Acciones", "Fima P.B. Acciones", "Fima Renta en Pesos", "Fima Renta en Dolares", "Fima Mix Plus", "Fima Mix", "Fima Renta Corto Plazo", "Fima Money Market en Pesos", "Fima Money Market en Dolares", "Fima Global Assets" and "Fima Renta Latinoamericana" and in compliance with Section 3 of the mentioned Resolution, Banco de Galicia y Buenos Aires S.A. has a total of 181,705,418 units under custody for a market value of US$ 20,095 , which is included in the "Depositors of Securities in Custody" account.-------------------------------------------------------------- ---------------------------------------------------------------------- 36 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 11: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2001, the securities held in custody by Banco de Galicia y Buenos Aires S.A. totalled 754,394,625 units and their market value amounted to US$ 324,346.--------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- NOTE 12: CONTRIBUTIONS TO THE BANK EMPLOYEES' SOCIAL SERVICES INSTITUTE (the "ISSB")--------------------------------------------------------------- ---------------------------------------------------------------------- Effective July 1, 1996, Decree No. 263/96 of the National Executive Power reduced to 1% and effective July 1, 1997 Decree No. 915/96 eliminated the 2% contribution on interest and fees that banks previously had to make to the ISSB, pursuant to Section 17 of Law No. 19322. Banco de Galicia y Buenos Aires S.A. has determined the aforementioned contributions in accordance with these regulations. The bank employee union (the "Banking Association") brought legal action calling for a stay against the National Executive Power - Ministry of Public Works and Services, with a view to having Section 1 of Decree 263/96 declared null and unconstitutional, and got a favorable ruling from the Federal Court dealing with Administrative Litigation Matters, Panel I.-------------------------------------------------------------- ---------------------------------------------------------------------- The National Supreme Court of Justice declared out of order an extraordinary appeal made by the National Executive Branch on November 4, 1997. Therefore, the ruling in favor of the Banking Association became firm----------------------------------------------------------- Although in the opinion of the legal counsel of the financial institutions this ruling is not opposable against the banks because they were not a party to the aforementioned legal action, the juridical uncertainty still persists. In April 1998, the Bank Employees' Health Care System (OSBA) made a final claim, which was refuted from the administrative angle before OSBA, the Federal Public Revenue Authority (AFIP) and the National Social Security Administration.------------------------------------------------------- Furthermore, the Banking Association brought legal action calling for a stay before the First Instance No. 5 Federal Social Security Court, requesting a precautionary measure ordering the OSBA not to bring legal actions for tax collection until the definitive judgment is issued about whether this supposed claim is applicable---------------- ---------------------------------------------------------------------- This latter measure is firm. Concerning the matters at issue stated in the claim for a temporary restraining order filed, such claim has been sustained and it was resolved that OSBA does not have any legal authority to make verifications, assess possible debts or bring legal actions for tax collection, on the grounds of Section 17, subsection f) of Law 19322.------------------------------------------------------ 37 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 12: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- This resolution was confirmed by the National Social Security Court (Panel II). In this connection, OSBA filed an extraordinary appeal with the National Supreme Court of Justice, which was dismissed by the Court on November 21, 2000.------------------------------------------- Furthermore, OSBA has brought a legal action against all institutions in the financial system, before the Federal Court dealing with Administrative Litigation Matters, and the complaint has already been answered. The trial of the case has been ordered.--------------------- ---------------------------------------------------------------------- In addition, the AFIP issued Order No. 6/99 ratifying Resolution No. 9/99, which holds that OSBA is a legal entity other than the ISSB, and therefore not having any legal authority to claim the contribution set by Section 17, subsection f) of Law 19322.---------------------------- ---------------------------------------------------------------------- Banco de Galicia y Buenos Aires S.A. considers that this matter is not likely to affect its net worth significantly-------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 38 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 13: REGULATIONS ON BANK CURRENT ACCOUNTS---------------------------------- ---------------------------------------------------------------------- On March 24, 2001, the Competitiveness Law No. 25413 was enacted and promulgated. This norm repeals the system of fines and penalties for current account holders and financial institutions established by Laws No. 24452 and 24760.-------------------------------------------------- ---------------------------------------------------------------------- In the case of the latter, effective January 13, 1997, the law that was repealed provided a system of fines for financial institutions which would have kept current accounts open when they should have been closed, or would have opened current accounts to current account holders who had been disqualified.------------------------------------ In view of the above, on April 16, 1999, Section 3 of Decree 347/99 of the National Executive Power established that:------------------------ "In the case of the fines resulting from applying Section 62, last paragraph ..., as amended by Law No. 24,760, accumulated by each financial institution at the effective date of this decree, the Argentine Central Bank is empowered to set the amount of the fines between a minimum of fifteen thousand pesos (US$ 4) and a maximum of two million pesos (US$ 526) for each institution, based on the number of non-compliances by each one".-------------------------------------- In line with Argentine Central Bank Communique "A" 2909 Banco de Galicia y Buenos Aires S.A. has reported to the aforementioned body the current accounts kept open when they should have been closed and paid the corresponding fines, taking the aforementioned caps into consideration. Subsequently, Banco de Galicia y Buenos Aires S.A. received a communication from the Argentine Central Bank addressed to all financial institutions, calling upon them to pay the corresponding amount, pursuant to Section 62 of the Law Governing Checks. In view of this Banco de Galicia y Buenos Aires S.A. filed a claim for a temporary restraining order with the Federal Court of First Instance dealing with Administrative Litigation Matters No. 4, Clerk's Office No. 7, in the event that said communication might prove detrimental to its vested rights.---------------------------------------------------- ---------------------------------------------------------------------- Banco de Galicia y Buenos Aires S.A. considers that this matter is not likely to affect its net worth significantly.------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 39 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 14: SETTING UP OF THE "GALTRUST I" INDIVIDUAL FINANCIAL TRUST------------- ---------------------------------------------------------------------- At the meeting held on March 15, 2000, the Board of Directors of Banco de Galicia y Buenos Aires S.A. approved Banco de Galicia y Buenos Aires S.A.'s participation as originator, trustor and manager in a global program for setting up financial trusts for up to US$ 1,000,000. The creation of this program was approved by the National Securities Commission through resolution No. 13334 dated April 6, 2000.----------------------------------------------------------------- ---------------------------------------------------------------------- The trustee of those trusts will be First Trust of New York, National Association, through its permanent representation in Argentina.------- ---------------------------------------------------------------------- Under this global program, on October 20, 2000, Banco de Galicia y Buenos Aires S.A. transferred the trust ownership of loans amounting to US$ 490,224 granted to Argentine Provinces collateralized by the federal tax sharing corresponding to those Provinces, and reserve investments for US$ 7,761, to the GalTrust I Financial Trust.--------- ---------------------------------------------------------------------- As a counterpart, Banco de Galicia y Buenos Aires S.A. received Class A Debt Securities for a face value of US$ 100,000, Class B Debt Securities for a face value of US$ 200,000 and Certificates of Participation for a face value of US$ 200,000.------------------------ ---------------------------------------------------------------------- As of June 30, 2002, Banco de Galicia y Buenos Aires S.A. held debt securities and certificates of participation in its portfolio for US$ 157,954.-------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- NOTE 15: SETTING UP OF THE "GALTRUST II, III, IV and V" INDIVIDUAL FINANCIAL TRUSTS---------------------------------------------------------------- ---------------------------------------------------------------------- At the meeting held on December 6, 2001, the Board of Directors of Banco de Galicia y Buenos Aires S.A. approved the creation of the Universal Program for the Securitization of Loans for the issue of debt securities and/or certificates of participation in Galtrust Financial Trusts. This program was approved by the National Securities Commission resolution No. 13334 dated April 6, 2000, for a face value of up to US$ 1,000,000 (the "Program") and authorized Banco de Galicia y Buenos Aires S.A.'s participation as originator, trustor and manager of that program.------------------------------------------------------ ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 40 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 15: (Continued)----------------------------------------------------------- ---------------------------------------------------------------------- The trustee of the those trusts will be First Trust of New York, National Association, through its permanent representation in Argentina------------------------------------------------------------- Four financial trusts, Galtrust II, III, IV and V - Mortgage bills, were set up under the above-mentioned program, and Certificates of Participation and Debt Securities were issued.------------------------ Banco de Galicia y Buenos Aires S.A. subscribed 100% of the certificates of participation and the Class A and Class B Debt Securities were subscribed by the New York Branch, Banco de Galicia Uruguay S.A. and Aseguradora de Personas Galicia S.A. (former Hartford Seguros de Vida S.A.-------------------------------------------------- As of June 30, 2002, Banco de Galicia y Buenos Aires S.A. the New York Branch and Banco de Galicia Uruguay S.A. held in their portfolio US$ 25,848, US$ 19,470 and US$ 14,050, respectively.---------------------- ---------------------------------------------------------------------- NOTE 16: GALICIA 2004 AND 2005 TRUSTS------------------------------------------ ---------------------------------------------------------------------- On November 19, 2001, the beneficiaries of the Galicia 2004 Trust were designated, as stipulated in the "Framework Trust Agreement" signed on November 4, 1999, to implement an incentive program in favor of certain executives of Banco de Galicia y Buenos Aires S.A.. The total amount of US$ 4,000 transferred to the trustee by the Galicia 2004 Trust was used for the purchase of 855,442 shares and 189,116 ADS in Grupo Financiero Galicia S.A..---------------------------------------- Specific beneficiaries were awarded 855,442 shares and 28,046.60 ADS, and 3,400 ADS that were not awarded were returned to the trustor. The balance of 157,669.40 ADS formed the Galicia 2005 Trust.-------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- NOTE 17: MUTUAL FUND ADMINISTRATION AND MANAGEMENT ACTIVITIES----------------- ---------------------------------------------------------------------- Galicia Administradora de Fondos S.A. Sociedad Gerente manages and administers eleven mutual funds, for which Banco de Galicia y Buenos Aires S.A. is the depository bank (see Note 11 b)).------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 41 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 18: CHANGES IN SIGNIFICANT ASSETS AND LIABILITIES------------------------- ---------------------------------------------------------------------- The breakdown of the most significant assets and liabilities shown in these consolidated financial statements, presented in comparative format with those as of June 30, 2001, the previous financial closing date, in order to disclose the changes in those assets and liabilities during the period commenced January 1, 2002 and ended June 30, 2002 is as follows:----------------------------------------------------------- ----------------------------------------------------------------------
=================================================================================================== 6.30.02 6.30.01 ---------------------------------- ASSETS ---------------------------------- LOANS 2,557,698 4,819,350 ---------------------------------- -To the non-financial public sector 1,865,593 1,360,653 -To the financial sector 23,233 195,250 -To the non-financial private sector and residents abroad 985,037 3,421,157 -Overdraft facilities 68,535 251,351 -Notes 294,995 1,143,034 -Mortgage loans 212,429 848,072 -Pledge loans 23,236 183,905 -Consumer loans 49,289 166,535 -Credit card loans 168,909 432,225 -Other 87,199 343,817 -Accrued interest and quotation differences receivable 94,915 75,753 -Documented interest (6,472) (20,868) -Unallocated collections (7,998) (2,667) -Allowances for loan losses (316,165) (157,710) ---------------------------------- OTHER RECEIVABLES RESULTING FROM FINANCIAL BROKERAGE 2,835,670 1,423,504 ---------------------------------- -Argentine Central Bank 16,532 32,700 -Amounts receivable for spot and forward sales to be settled 7,815 480,742 - Securities receivable under spot and forward purchases to be settled 9,038 328,892 -Premiums on options bought 71 120 -Unlisted negotiable obligations 4,786 50,087 -Other not included in the debtor classification regulations 2,667,663 269,699 -Other included in the debtor classification regulations 132,700 258,086 -Accrued interest receivable not included in the debtor classification regulations 107 9 - Accrued interest receivable included in the debtor classification regulations 357 8,276 -Allowances (3,399) (5,107) ==============================================================================================
----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 42 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------Supplementary Accounting Information---------------------- ---------------Notes to Consolidated Income Statement (Continued)--------------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 18: (Continued)----------------------------------------------------------- ----------------------------------------------------------------------
================================================================================================== 6.30.02 6.30.01 ----------------------------------- LIABILITIES ----------------------------------- DEPOSITS 1,404,942 4,764,755 ----------------------------------- -Non-financial public sector 1,251 7,640 -Financial sector 347 1,820 -Non-financial private sector and residents abroad 1,403,344 4,755,295 -Current accounts 192,912 558,105 -Savings accounts 113,544 538,414 -Time deposits 430,232 3,335,189 -Investment accounts - 162,638 -Other 540,028 117,597 -Accrued interest and quotation differences payable 126,628 43,352 ----------------------------------- OTHER LIABILITIES RESULTING FROM FINANCIAL BROKERAGE 3,999,014 2,290,687 ----------------------------------- -Argentine Central Bank 1,873,232 1,502 -Rediscounts to cover lack of liquidity 1,244,879 - -Other 628,353 1,502 -Banks and international entities 993,753 454,273 -Unsubordinated negotiable obligations 451,301 530,063 -Amounts payable for spot and forward purchases to be settled 3,809 306,620 -Securities to be delivered under spot and forward sales to be settled 55,503 517,992 -Loans from domestic financial institutions 58,280 156,089 -Other 512,714 303,919 -Accrued interest and quotation differences payable 50,422 20,229 ===============================================================================================
------------------------------------------------------------------- NOTE 19: SITUATION OF CERTAIN COMPANIES CONSOLIDATED WITH BANCO DE GALICIA Y BUENOS AIRES S.A.----------------------------------------------------- As of June 30, 2002, Tarjeta Naranja S.A., Tarjeta Comfiar S.A., Tarjetas del Mar S.A. and Tarjetas Regionales S.A. reported shortfalls of US$ 14,559, US$ 17,605, US$ 3,754 and US$ 2,303 and US$ 21,609, respectively, in their equity, and this situation is subject to the provisions of Section 94, subsection 5) of the Corporations Law. Tarjetas Cuyanas S.A. records a deficit of US$ 491 in its equity at that date.------------------------------------------------------------ Accumulated losses of US$ 22,504 reported by Tarjeta Comfiar S.A. and US$ 5,088, reported by Tarjeta del Mar S.A. are in excess of 50% of their corporate capital and irrevocable capital contributions made by their shareholders, according to the computation established by Section 206 of that Law. It should be noted that Decree 1269/02 suspended until December 10, 2003 the application of Section 94, subsection 5) of Law 19550, which establishes that companies must be dissolved when their losses exceed their corporate capital and of Section 206, which establishes mandatory capital reduction when losses are in excess of reserves and 50% of capital.------------------------- 43 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------Notes to the Consolidated Financial Statements (Continued)---------- ------------------(figures stated in thousands of US dollars)------------------- -------------------------------------------------------------------------------- NOTE 20: GALICIA MORTGAGE LOANS AND SECURED LOANS TRUSTS----------------------- ---------------------------------------------------------------------- As part of the implementation of the Galicia Capitalization and Liquidity Plan, during May 2002, "Galicia Mortgage Loans Financial Trust" was created, by which mortgage loans for US$ 82,309 were transferred, receiving in exchange US$ 61,732 in cash and certificates of participation for US$ 20,577. The trustee is ABN AMRO Bank Argentine Branch, with various domestic financial institutions acting as subscribers.------------------------------------------------------- The Secured Loans Trust has been created and the parties to it are Banco de la Provincia de Buenos Aires as beneficiary and BAPRO Mandatos y Negocios S.A., as trustee. Under this Trust, secured loans for US$ 28,421 were transferred and US$ 21,316 in cash and certificates of participation for US$ 7,105 were received in exchange. ---------------------------------------------------------------------- Banco de Galicia y Buenos Aires S.A. will act as administrator in both cases.---------------------------------------------------------------- ---------------------------------------------------------------------- As of June 30, 2002, the amounts of the participation certificates was US$ 21,435 and US$ 7,105, respectively. ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- 44 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----Quarterly Statement of Financial Condition as of June 30, 2002 and 2001----- ------------------(figures stated in thousands of US dollars)------------------- ------------------------------------(Note 2)------------------------------------ ====================================================================== 6.30.02 6.30.01 ----------------------------- ASSETS CURRENT ASSETS Cash and due from banks (Notes 3 and 13 and Schedule G) 383 9 Investments (Notes 11 and 13 and Schedules C and G) 6,520 15,198 Fiscal credits (Notes 4 and 11) 20 112 Other receivables (Notes 5 and 11 and Schedule G) 935 37 ----------------------------- Total Current Assets 7,858 15,356 ----------------------------- NON-CURRENT ASSETS Fiscal credits (Notes 4 and 11) 1 57 Other receivables - 1 Investments (Notes 11, 12, 13, 15 and 16 and Schedules C, E and G) 551,877 697,731 Fixed assets and investments in assets of a similar nature (Schedule A) 895 319 Intangible assets (Schedule B) 3,702 2,086 ----------------------------- Total Non-current Assets 556,475 700,194 ----------------------------- Total Assets 564,333 715,550 ====================================================================== 6.30.02 6.30.01 ----------------------------- LIABILITIES CURRENT LIABILITIES Social security liabilities (Notes 6 and 11) 30 78 Tax liabilities (Notes 7 and 11) 9 7 Other liabilities (Notes 8, 11 and 13 and Schedules E and G) 10,735 155 ----------------------------- Total Current Liabilities 10,774 240 ----------------------------- NON-CURRENT LIABILITIES Other liabilities (Notes 8 and 11) 1 2 ----------------------------- Total Non-current Liabilities 1 2 ----------------------------- Total Liabilities 10,775 242 ----------------------------- SHAREHOLDERS' EQUITY (per related statement) 553,558 715,308 ----------------------------- Total Liabilities and Shareholders' Equity 564,333 715,550 ====================================================================== The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral part of these financial statements. 45 -------------------------Grupo Financiero Galicia S.A.-------------------------- --------------------------------Income Statement-------------------------------- --------------For the period of six months commenced January 1, 2002------------ ----------------------------and ended June 30, 2002----------------------------- ----In comparative format with the same period of the previous year------------- ------------------(figures stated in thousands of US dollars)------------------- ------------------------------------(Note 2)------------------------------------ ================================================================================ 6.30.02 6.30.01 ---------------------------- Net (loss)/ income from long-term investments (180,390) 51,423 Administrative expenses (Note 13 and Schedule H) (1,360) (922) Other income and expenses (loss) (Schedule E) (10,454) (16) Financial gain (Notes 10 and 13) 19,239 90 Income tax (149) - ---------------------------- Net (loss)/ income for the period (173,114) 50,575 ================================================================================ The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral part of these financial statements. 46 -------------------------Grupo Financiero Galicia S.A.-------------------------- -----------------Statement of Changes in Shareholders'Equity-------------------- -------------For the period of six months commenced January 1,2002-------------- ----------------------------and ended June 30, 2002.---------------------------- ---------In comparative format with the same period of the previous year-------- -------------------(figures stated in thousands of US dollars)------------------ --------------------------------(Note 2)----------------------------------------
============================================================================================ Shareholders' contributions (Note 9) -------------------------------------------------------------------------------------------- Non-capitalized Subscribed Capital contributions and adjustment ----------------------- paid-up Issuance Irrevocable Total capital premiums contributions --------------------------------- ----------- ----------- --------- ------------- ---------- Historical balances at beginning of year 287,476 - 20,856 - 308,332 Adjustments to historical balances at beginning of year - 276,120 20,032 - 296,152 Historical balances at beginning of year, adjusted 287,476 276,120 40,888 - 604,484 Distribution approved by the ordinary shareholders' meeting held on March 15, 2001: - - - - - - Cash dividends - - - - - Distribution approved by the ordinary shareholders' meeting held on June 3, 2002 - Legal reserve - Discretionary reserve Net (loss)/ income for the period - - - - - --------------------------------- ----------- ----------- --------- ------------- ---------- Balances as of 6.30.02 287,476 276,120 40,088 - 604,484 ================================= =========== =========== ========= ============= ==========
=================================================================================================================================== Retained earnings (Note 14) ----------------------------------------------------------------- Reserved profits Total Unappropriated Total Total -------------------------------------- retained shareholders' shareholders' Legal Discretionary Other earnings equity as of equity as of Reserve reserve reserves 6.30.02 6.30.01 (*) -------- -------------- ------------ ----------- ------------- ------------ ------------- Historical balances at beginning of year 1,943 28,537 - 30,480 31,846 370,658 347,587 Adjustments to historical balances at beginning of year 1,866 27,409 - 29,275 30,587 356,014 333,857 Historical balances at 3,809 55,946 - 59,755 62,433 726,672 681,444 beginning of year, adjusted Distribution approved by the ordinary shareholders' meeting held on March 15, 2001: - - - - - - (16,711) - Cash dividends - - - - - Distribution approved by the ordinary shareholders' meeting held on June 3, 2002 - Legal reserve 3,097 3,097 (3,097) - - Discretionary reserve 59,331 59,331 (59,331) - Net (loss)/income for the period - - - - (173,114) (173,114) 50,575 --------- ---------- --------- ---------- ------------ ----------- --------- Balances as of 6.30.02 6,906 115,277 - 122,183 (173,109) 553,558 715,308 ========= ========== ========= ========== ============ =========== =========
The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral part of these financial statements. 47 -------------------------Grupo Financiero Galicia S.A.-------------------------- ----------------------------Statement of Cash Flows----------------------------- -------------For the period of six months commenced January 1,2002-------------- ----------------------------and ended June 30, 2002.---------------------------- ---------In comparative format with the same period of the previous year-------- -------------------(figures stated in thousands of US dollars)------------------ --------------------------------(Note 2)---------------------------------------- ================================================================================ 6.30.02 6.30.01 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CHANGES IN CASH Cash at beginning of year 84 57 Increase /(decrease) in cash 299 (48) ------------------------------------- Cash at end of period 383 9 ===================================== REASONS FOR CHANGES IN CASH Less: Ordinary expenses paid (863) (718) Plus: Other ordinary income collected 728 1,141 ------------------------------------- Cash (used in)/provided by ordinary operations (135) 423 ------------------------------------- Decrease in short-term investments 33,787 - Other sources of cash 586 19,956 ------------------------------------- Total sources of cash 34,373 19,956 ------------------------------------- Increase in short-term receivables (425) - Increase in long-term investments (457) (3,381) Increase in fixed assets - (34) Decrease in short-term debts (322) (264) Dividends paid - (16,711) Other uses of cash (32,735) (37) ------------------------------------- Total uses of cash (33,939) (20,427) ------------------------------------- Increase/(decrease) in cash 299 (48) ================================================================================ The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral part of these financial statements. 48 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: ARGENTINE ECONOMIC SITUATION------------------------------------- ----------------------------------------------------------------- Argentina is immersed in a critical economic situation. The main features of the current economic context are a major external debt burden, a financial system in crisis, country risk indicators far above normal average and an economic recession that has already lasted more than four years. This situation has led to a significant decrease in the demand for goods and services and a large rise in the level of unemployment.---------- ----------------------------------------------------------------- Furthermore, the Government's ability to comply with its commitments has been impaired, as has access to bank financing.------------------------------------------------------- ----------------------------------------------------------------- As from December 3, 2001 measures were issued to restrict the free availability and circulation of cash and the transfer of foreign currency abroad. Subsequently, the Government declared default on the external debt.------------------------------------ ----------------------------------------------------------------- On January 6, 2002, after a political crisis that resulted in the resignation of two presidents, the Government enacted Law 25561 (Law on public emergency and exchange system reform) that involved profound changes to the prevailing economic model and the amendment of the Convertibility Law in force since March 1991. On February 3, 2002, the Government announced new economic measures through Decree 214 (Restructuring of the financial system) dated February 3, 2002, complemented by Decree 410 dated March 1, 2002, Decree 260 (Exchange Regime) dated February 8, 2002 and Decree 905/02 dated May 31, 2002, substantially modifying some of the measures implemented by the Public Emergency Law. These decrees are being complemented by other regulations being issued by the various control agencies, some of which may be pending at the date on which these financial statements were prepared. In addition, on April 24, 2002 the Government signed an agreement with provincial governors, which, together with other changes to the National Administration, will lay down the basis for further measures that have yet to be issued or fully implemented.------------------------------------- ----------------------------------------------------------------- Listed below are some of the measures adopted by the Government that are in force at the date of filing these financial statements and have been affecting the economic and financial situation of the Company and/or its controlled entities:--------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 49 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- Exchange system-------------------------------------------------- On February 8, 2002 the Government establishing a single free exchange market system, through which all transactions involving the exchange of currency are to be traded and which is regulated and controlled by the Argentine Central Bank. At present certain transfers abroad of a financial nature require the prior approval of the Central Bank and certain requirements must be met for the settlement and collection of foreign currency arising from exports. Effective September 3, 2002, certain payments related to the servicing of principal and interest of obligations with foreign entities have been excluded from the requirement for prior approval of the Argentine Central Bank, provided that those obligations are debts refinanced for average terms of not less than four years.------------------------------------------------- ----------------------------------------------------------------- Loans from the non-financial private sector and assets under financial leases------------------------------------------------- ----------------------------------------------------------------- a) Pursuant to the above mentioned Decree No 214, as from February 3, 2002, all debts denominated in US dollars or any other currency with the financial system, except as mentioned in subsection b) below, whatever their amount and nature, will be converted into pesos at the exchange rate of $ 1 per U$S 1 or its equivalent in other currency. Furthermore, as from February 3, 2002 a reference stabilization index (CER) and a maximum interest rate to be determined by the Argentine Central Bank will be applied to these debts.------------------------------------------ Subsequently, Decrees 762/02 and 1242/02 excluded from the application of the CER those loans secured by mortgages on the only family dwelling of debtors, regardless of their amounts, consumer loans for up to twelve thousand pesos and pledge consumer loans for up to thirty thousand pesos. Those loans will be adjusted as from October 1, 2002 by applying an adjustment salary variation index (CVS), maintaining the conditions prevailing at that date.------------------------------------- Law 25642 of September 11, 2002 postponed until September 30, 2002 the application of the CER to all obligations to give sums of money of less than four hundred thousand pesos. In the case of debtors of financial institutions, this amount will be considered on the basis of indebtedness in financial system as a whole.----------------------------------------------------------- In addition, at the date of these financial statements, amendments and complementary norms for the application of CER might be pending issuance.--------------------------------------- ----------------------------------------------------------------- 50 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- b) As established by Decree 410 issued by the Argentine Government, loans related to foreign trade transactions granted by financial institutions, credit card balances for consumption made outside Argentina and contracts governed by foreign law are not included in the conversion into pesos at the rate of $ 1 per U$S 1 established by Section 1 of the mentioned Decree 214.------------------------------------------------------------- As a result of the measures adopted by the Argentine Government and the crisis affecting Argentina, Banco de Galicia y Buenos Aires has started a restructuring of its commercial loan portfolio according to the new repayment potential of customers which, at the date of these financial statements, was still under way. ----------------------------------------------------------------- Loans and obligations of the financial sector-------------------- ----------------------------------------------------------------- As established by Decree 410, interbank loans in foreign currency in force at February 3, 2002 will be converted into pesos at a rate of $ 1.40 per U$S 1 or its equivalent in other currencies, or at the single and free market exchange rate, as determined by the Argentine Central Bank according to the type of operations.------------------------------------------------------ ----------------------------------------------------------------- Deferral of the deduction of the exchange difference for income tax purposes----------------------------------------------------- ----------------------------------------------------------------- Exchange losses caused by devaluation on foreign currency assets and liabilities existing at the date of enactment of the public emergency Law (January 6, 2002) shall only be deductible from income tax in the proportion of 20% per annum in each of the first five fiscal years ending after the effective date of the law.------------------------------------------------------------- ----------------------------------------------------------------- Deposits and obligations with the public and private sectors----- ----------------------------------------------------------------- Under the terms of Decree 214, as from February 3, 2002 deposits and obligations in U.S. dollars or other foreign currencies in financial institutions were converted into pesos at the exchange rate of $ 1.40 per US$ 1 or its equivalent in such other currency.-------------------------------------------------------- ----------------------------------------------------------------- Furthermore, there are restrictions on the availability of certain balances in current accounts and savings accounts in dollars and time deposits in pesos or dollars, which will be returned to their owners in installments and the amounts and due dates will depend on the balances recorded. As from February 3, 2002 a reference stabilization index (CER) and an interest rate will be applied to these rescheduled deposits. The CER is an index that measures the daily rate of change derived from the monthly change in the Consumer Price Index (CPI) published by the I.N.D.E.C. ------------------------------------------------------ 51 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- Pursuant to Decree 905/02, depositors were allowed to opt to receive National Government Bonds in pesos accruing interest at a 2% rate and falling due in 2007 in substitution for their deposits, or National Government Bonds in US dollars, accruing interest at Libor and falling due in 2012, if deposits were originally made in foreign currency, regardless of their amounts.--------------------------------------------------------- Under the conditions of Section 4 of Decree 905/02, depositors were allowed to opt to receive in exchange for their receivables National Government Bonds in US dollars, accruing interest at Libor and falling due in 2005.----------------------------------- Furthermore, Decree 905/02 established that financial institutions must register rescheduled deposits for which no option has been exercised in a "Notarial Record of Rescheduled Deposits" to be kept by Caja de Valores S.A. The rescheduled deposits included in that Record (CEDROS) will be negotiable securities to that effect, listed on stock exchanges and may be negotiated on self-regulating markets in Argentina.-------------- Owners of those deposits may apply them to the subscription of new share issuances and/or listed negotiable obligations and to the repayment of loans at the financial institutions where those funds are deposited.--------------------------------------------- On September 16, 2002, Decree 1836/02 established a second exchange of deposits with the financial system, by which all owners of rescheduled deposits, whether they have exercised the mentioned option or not, may opt to receive National Government Bonds in US dollars due 2013 until December 12, 2002, together with a put option to be delivered by the depository entity as collateral for the payment of the original coupon adjusted by applying the CER, or to transform the rescheduled balance into Time Deposit Bills in pesos, with a guarantee to be provided by the National State consisting in contributing the difference between the value of each installment in pesos adjusted by applying the CER and the free US dollar exchange rate at the payment date.--------------------------------------------------- Financial institutions may also offer National Government Bonds in US dollars accruing interest at Libor and falling due in 2006 to depositors who have brought legal actions that are pending resolution.------------------------------------------------------ ----------------------------------------------------------------- Financial institutions bound to depositors that opt to deliver the mentioned government securities must transfer to the National State sufficient assets to pay those securities.------------- Decree 1836/02 also provides that "in view of the increase determined in deposits with the financial system and given the special situation of small savers, owners of rescheduled deposits for amounts of up to pesos seven thousand will be able to collect that amount in cash ", each financial institution being entitled to increase that limit to ten thousand pesos, 52 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- according to their possibilities. Banco de Galicia y Buenos Aires S.A. can offer the latter possibility to its customers.---------- There is also a possibility of subscribing National Government Securities in US dollars due 2013 with CEDROS.------------------- As of June 30, 2002, the amount of rescheduled deposits (CEDROS) was US$ 286,130, while the amount of rescheduled deposits exchanged for National government Bonds was US$ 182,049 at that date.------------------------------------------------------------ ----------------------------------------------------------------- b) Decree 410 provides that deposits made by foreign banks or financial institutions with domestic financial institutions will not be converted into pesos at the $1=US$1 exchange rate, as established by Section 1 of Decree 214, provided they are transformed into lines of credit that are effectively maintained and used for at least four years, in conformity with Argentine Central Bank regulations. Nor will the conversion into pesos include those obligations of the public and private sectors to give sums of money in foreign currency which are governed by foreign laws.---------------------------------------------------- ----------------------------------------------------------------- Public debt------------------------------------------------------ ----------------------------------------------------------------- Decree 471 dated March 8, 2002 established that the obligations of the National, Provincial and Municipal Public Sectors outstanding as of February 3, 2002 denominated in US dollars or any other currency, governed only by the Argentine law, were converted at an exchange rate of $1.40 per US dollar or its equivalent in other foreign currency and adjusted applying a reference stabilization index (CER).----------------------------- In addition, the obligations of the National Public Sector converted into pesos as explained earlier will accrue interest at an annual 2% rate as from February 3, 2002, while the obligations of the Provincial and Municipal Public Sectors will accrue interest at an annual 4% rate as from that date.----------------- ----------------------------------------------------------------- Other assets and liabilities------------------------------------- ----------------------------------------------------------------- As established by Decree 410 and complementary rules, futures and option contracts, including those recorded in self-regulating markets and the accounts exclusively earmarked for the operations of those markets will not be converted into pesos at the $ 1 = US$ 1 exchange rate as established by Section 1 of Decree 214, except for those governed by Argentine legislation agreed before January 5, 2002, where at least one of the parties must be a financial institution and are settled as from June 12, 2002, which will be converted into pesos at $1.40 per US dollar.---------------------------------------------------------- Decree 410 also established that:-------------------------------- a) Fiscal credit certificates issued in US dollars or any other foreign currency within the framework of Decrees 979/01, 1005/01 and 1226/01 and in force 53 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- at February 3, 2002, will be converted into pesos at the exchange rate of $ 1.40 per US$ 1 or its equivalent in any other foreign currency.-------------------------------------------------------- b) The balances of the financial institution accounts in US dollars or any other currencies at the close of operations at February 1, 2002, which may be computed to comply with liquidity reserve requirements, except for legal tender currency available and the amount equivalent to the balances of accounts earmarked exclusively to the operations on self-regulating futures and options markets, will be converted into pesos at the exchange rate of $ 1.40 per US$ 1.---------------------------------------- The same treatment will be accorded to the amounts contributed by financial institutions to the Bank Liquidity Fund established by Decree 32/01 and to the debts institutions have with that Fund.------------------------------------------------------------ ----------------------------------------------------------------- Reorganization and bankruptcy proceedings------------------------ ----------------------------------------------------------------- On January 30, 2002, Law 25563 on reorganization and bankruptcy proceedings was enacted, which declared a production and credit emergency generated by the crisis affecting Argentina, to last until December 10, 2003. Below is a detail of some of the measures adopted:----------------------------------------------- a) Suspension for one hundred and eighty days as from the effective date of that Law, of all mortgage, pledge and other foreclosures of whatever origin ordered in reorganization proceedings, whether they be made extrajudicially or in execution of judgment (Section 9 of Law 25563).--------------------------- b) Suspension for one hundred and eighty days of the expedition of petitions in bankruptcy filed, without prejudice to the possibility of applying the measures envisaged in Section 85 of Law 24522 (Section 11 of Law 25563).----------------------------- ----------------------------------------------------------------- c) Access to credit by insolvent individuals and/or legal entities, for which the Argentine Central Bank will proceed to regulate the elimination of all restrictions which otherwise hinder such access to credit or make it more expensive, and implement a rediscount line intended for those financial institutions that provide credit assistance to insolvent companies that are in the stage envisaged in Section 43 of Law 24522 (Section 12 of Law 25563).-------------------------------- d) Financial institutions governed by Law 21526 (Financial Institutions Law) and supplementary rules may proceed within a term of 90 days to the rescheduling of their receivables from debtors of the financial system existing as of November 30, 2001 through an agreement to be reached with each of them (Section 15 of Law 25563).--------------------------------------------------- e) Suspension for one hundred and eighty days of the precautionary measures awarded and prohibition for the same term of new precautionary measures requested on those assets that are essential for the continuity of activities related to debtors' normal course of business. All extraordinary acts of disposition of property on the part of debtors will be null and void 54 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- during the suspension period envisaged in this Section, unless there is an express agreement by creditors (Section 16 of Law 25563).---------------------------------------------------------- On May 15, 2002, Law 25589 was enacted, which amended Laws 24522 and 25563. This Law introduced the following amendments:-------- a) Section 9 of Law 25563 has been repealed.--------------------- b) Section 11 of Law 25563 has been repealed.-------------------- c) Section 15 of Law 25563 has been repealed.-------------------- d) Section 16 of Law 25563 has been amended. In this connection, auctions of property that is the only dwelling of debtors or of assets used by them in the production and sale of goods or providing of services, decreed in executory proceedings, extrajudicially or in execution of judgment, shall be suspended for one hundred and eighty calendar days, counted as from the effective date of this Law. This Law shall not apply to court-ordered alimony payments, receivables derived from the responsibility for the commission of crimes, those arising in labor lawsuits, as a result of third party liability and from insurance companies that have underwritten third party civil liability policies, receivables arising after the effective date of this Law and the liquidation of assets under bankruptcy proceedings. The application of restitutional remedies that lead to the dispossession of assets earmarked for the activity of commercial, manufacture or other establishments, which are required for their functioning shall also be suspended.------------------------------------------------------- e) It is established that this Law will have legal effects on the date of its publication and applies to pending reorganization proceedings.----------------------------------------------------- ----------------------------------------------------------------- Suspension of the application of Section 94, subsection 5 and Section 206 of Law 19550 on Corporations------------------------- Decree 1269/02 has suspended until December 10, 2003 the application of Section 94, subsection 5 of Law 19550 which establishes that a company must be dissolved due to the loss of its corporate capital. Section 206, which establishes the mandatory capital reduction when losses exceed reserves and 50% of the capital has been suspended until that date ----------------------------------------------------------------- Legal actions requesting protection of constitutional guarantees- As a result of the measures adopted by the Government, a significant number of complaints have been filed against the National State and/or institutions comprised in the financial system by individuals and legal entities, as they understand that those measures are in breach of constitutional and other rights. At the date of issue of these financial statements the final outcome of those complaints was still unknown. As of October 31, 2002, the court orders received by Banco de Galicia y Buenos Aires S.A. decreeing the reimbursement of deposits in their original currency or at the free exchange rate amounted to US$ 3,354 and US$ 377,431. In compliance with court orders requiring the reimbursement of deposits under 55 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- penalty of search and/or seizure and/or crimes involving illegal retention of deposits and/or contempt, Banco de Galicia y Buenos Aires S.A. paid the amounts of US$ 129,094 and US$ 61,116 in respect of reimbursement of deposits in pesos and foreign currency.-------------------------------------------------------- The method of proceeding in those lawsuits and the admission and execution of provisional remedies that decree, for any reason or title, the material delivery of the pledged assets to the petitioner have been regulated by the above mentioned Decree 214, as amended by Decree 320/02, in turn amended and complemented by the Public Emergency and Exchange System Reform Law 25587 and Decree 676/02 (both of them published in the Official Gazette on April 26, 2002), which are applicable to all pending lawsuits and precautionary measures pending execution, whatever the date of the related court order may be, issued in judicial proceedings of whatever nature in relation to credits, debts, obligations, deposits or rescheduling of financial debts which may be deemed to be affected by the regulations of Law 25561 and regulatory and complementary rules.--------------------------------------------- ----------------------------------------------------------------- On July 23, 2002, Decree 1316/02 suspended for one hundred and twenty working days, compliance with and execution of all precautionary measures and final judgments issued in the legal actions referred to by Section 1 of Law 25587, except for those cases where life, health or physical integrity of individuals are at risk, or if the claimant were to be an individual of 75 years old or more. In the latter cases, requests for the execution of precautionary measures or judgments that estimate the amount of the claim must be submitted to the Argentine Central Bank. It should be noted that this Decree has been declared unconstitutional by most courts, so the application of penalties of search and/or seizure to seek payment of deposits has not been completely suspended.-------------------------------------------- Lastly, on September 16, 2002 Decree 1836/02 was issued, Section 17 of which provides that financial institutions may offer the total or partial reimbursement of deposits with "National Government bonds in US dollars accruing interest at Libor and due 2006" in lieu of payment to the holders of rescheduled deposits covered by Section 4 of Decree 905/02, who have brought legal actions questioning the current legislation applicable to deposits with the financial system, that are pending resolution at the effective date of this Decree and for which precautionary measures are ordered. The issue terms and conditions of the above-mentioned bonds are detailed in Section 12 of Decree 905/02, except for the issue and due dates, which will be October 30, 2002 and January 30, 2006, respectively.--------------------- Depositors who have brought legal actions may opt to accept those bonds.----------------------------------------------------------- ----------------------------------------------------------------- 56 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- The difference of US$ 51,458 between the amount paid and the amount resulting from converting deposits at $1.40 per US dollar has been recorded in "Other receivables resulting from financial brokerage".------------------------------------------------------ ----------------------------------------------------------------- Banco de Galicia y Buenos Aires S.A. has reserved its right to claim compensation for damages caused by the reimbursement of deposits in US dollars or their equivalent in pesos at the free exchange rate, decreed under precautionary measures or judgments issued by courts, and which have not been included by the National State in the calculation of the compensation to Financial Institutions.------------------------------------------ ----------------------------------------------------------------- Compensation to be granted to financial institutions------------- ----------------------------------------------------------------- Decree No. 214/02 provides for the issue of a Bond payable with the funds of the National Treasury to cover the deficit in the financial system arising from the imbalance generated by the application of the measures mentioned above, that is, from the devaluation and the asymmetric conversion into pesos of assets and liabilities. In fact, in accordance with the provisions of Law 25561 and Decrees Nos. 214/02, 320/02, 410/02, 471/02, 704/02, 905/02, 992/02 and their amendments and complementary rules, and of Argentine Central Bank Communiques "A" 3467, 3507, 3561, 3648 and their amendments and complementary rules, a significant portion of foreign currency assets and liabilities that formed part of the net foreign currency position, were converted into pesos at different exchange rates.---------------- ----------------------------------------------------------------- In June 2002, Decree 905/02 established the method of calculating the amount of the compensation to be received by financial institutions, which replaced Decree 494/02 that had previously established such method.----------------------------------------- ----------------------------------------------------------------- Sections 28 and 29 of that Decree established the restoration of financial institutions' equity ratios at the time of the conversion into pesos, by compensating them for:----------------- ----------------------------------------------------------------- a) The losses arising from the conversion into pesos of a large portion of their obligations at the exchange rate of $1.40 per US dollar, which is higher than the exchange rate of $1 per US dollar applied for the conversion into pesos of certain receivables in foreign currency, by means of the delivery of a Compensating Bond, for which the issuance of National Government Bonds in pesos, due 2007, was established;----------------------- ----------------------------------------------------------------- b) The mismatching of their foreign currency positions after the mandatory conversion into pesos of a portion of their loan and deposit portfolios, by transforming the Compensating Bond originally issued in pesos into a bond 57 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- in US dollars and, if necessary, through the subscription of a Coverage Bond in US dollars. To this end, the issuance of National Government Bonds in US dollars, accruing interest at Libor and falling due in 2012 has been established.-------------- Argentine Central Bank Communique "A" 3650 and complementary rules established the procedure that financial institutions were to carry out for calculating the Compensating and Coverage Bonds, the amounts of which must be calculated taking into account the foreign currency balances as of December 31, 2001, as shown in the statement of financial condition of the parent company and subsidiaries in Argentina audited at that date; however, insofar as concerns foreign branches and subsidiaries and subsidiaries engaged in supplementary activities, this compensation has been restricted to the negative effects of the mandatory conversion into pesos of the credit assistance granted to the National State under Secured Loans. Therefore, the impact on the remaining foreign currency position subject to Argentine legislation, of the application of the mentioned economic measures has not been compensated so far.---------------------------------------------- ----------------------------------------------------------------- This method of determining the amount of the Compensating and Coverage Bonds, which does not contemplate certain assets and liabilities converted into pesos due to the application of Decree 214/02, corresponding to foreign branches and subsidiaries and controlled entities engaged in supplementary activities, is not only in disagreement with the objectives established by Decrees 214 and 905/02, and is therefore detrimental to Banco de Galicia y Buenos Aires S.A.'s assets, but is also an essentially arbitrary act in the light of the fact that identical economic acts are included or excluded from the compensation, depending on whether they were performed directly by Banco de Galicia y Buenos Aires S.A. or through a subsidiary, or whether the receivable originated abroad is of a public or private origin.-------------- ----------------------------------------------------------------- Through a letter dated September 16, 2002 sent to the Ministry of Economy of the Nation and to the Argentine Central Bank, Banco de Galicia y Buenos Aires S.A. formally stated its claim against the procedure used, reiterating prior presentations, and left express evidence that "it will not accept or approve the validity of any system that may lead to losses of its assets, which are not fully compensated, or to the exclusion from the compensation of assets and liabilities corresponding to branches, subsidiaries and controlled entities engaged in supplementary activities that form part of the consolidated assets of Banco de Galicia y Buenos Aires S.A.". The Bank also reserved its right to appeal to a federal court for damages caused by those measures and by the facts or omissions that may be attributable to the National State which may affect the guarantees of inviolability of private property and tax equality.--------------------------------------- 58 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- The Argentine Central Bank Communiques mentioned above set July 29, 2002 as the deadline for complying with the reporting requirements, so that each institution could report the amount in bonds to which it was to become entitled. Banco de Galicia y Buenos Aires S.A. has complied with this requirement but, during September 2002, the Argentine Central Bank released Communique "A" 3716, which established changes in the method. This led to a new presentation being made on September 16, 2002. The amount determined in line with current regulations was US$ 787,541 in respect of compensation and US$ 618,229, in respect of the coverage of the negative foreign currency position.-------------- On October 28, 2002, National Executive Branch Decree 2167/02 amended Section 29 of Decree 905/02, including in the calculation of the compensation the assets recorded at foreign branches and subsidiaries covered by Decree 214/02 and supplementary rules. Furthermore, on November 15, 2002, through Communique "A" 3805 the Argentine Central Bank added the amendments to that decree.---------------------------------------------------------- Variations in the above-mentioned amounts due to the application of Decree 2167/02 and Argentine Central Bank Communique "A" 3805 have been recognized in these financial statements, according to the estimates made by Banco de Galicia y Buenos Aires S.A.------- The estimated effect of the addition of the assets mentioned above is an increase of US$ 230,182 thousand and US$ 660,523 thousand in compensating and coverage bonds, respectively.------- ----------------------------------------------------------------- As of June 30, 2002 the total amount was recorded by Banco de Galicia y Buenos Aires S.A. in Other receivables resulting from financial brokerage - In foreign currency - Compensation receivable from the National Government, for US$ 2,315,676 while the advance to be requested from the Argentine Central Bank for the subscription of the Coverage Bond, was recorded in Other liabilities resulting from financial brokerage - In pesos - Advances for the acquisition of National Government Bonds in US dollars, accruing interest at the Libor rate and falling due in 2012, for US$ 471,119. The compensation received to cover the positive difference between the Shareholders' Equity as of December 31, 2001 and that resulting from adjusting the net foreign currency position at that date converted into pesos at the exchange rate of $1.40 per US dollar, for US$ 333,287, stated in the period-end currency value, was reflected in the "Unrealized valuation difference arising from the compensation of the net foreign currency position" account, in the Shareholders' Equity of Banco de Galicia y Buenos Aires S.A., as provided for by Argentine Central Bank Communique "A" 3703. This criterion differs from professional accounting standards. Therefore, should the latter have been applied, the loss for the period reported by Banco de Galicia y Buenos 59 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ Aires S.A. (before the absorption envisaged in Communique "A" 3802) would have decreased by that amount.----------------------- ----------------------------------------------------------------- The terms and conditions for financing the subscription of the National Government Bonds in US dollars accruing interest at Libor and falling due in 2012 have been stipulated in Section 29, subsection g) of Decree 905/02 and contemplate the delivery by financial institutions of assets as collateral for at least 100% of the advance received.----------------------------------------- ----------------------------------------------------------------- Valuation of balances in foreign currency - Capitalization of exchange differences--------------------------------------------- As established by the Argentine Federation of Professional Councils in Economic Sciences, Resolution 1/02 of the Professional Council in Economic Sciences of the Autonomous City of Buenos Aires, Resolution No. 392 of the National Securities Commission and Resolution 2/02 of the Superintendency of Corporations, the Company has given recognition to the effects of the devaluation as from January 1, 2002.------------------------- ----------------------------------------------------------------- Situation of Banco de Galicia y Buenos Aires S.A. and its subsidiaries----------------------------------------------------- ----------------------------------------------------------------- The situation described above affected Banco de Galicia y Buenos Aires S.A. in the form of a lack of liquidity as a result of the drop in deposits that was so significant that it made it necessary for the bank to request financial assistance from the Argentine Central Bank.------------------------------------------ ----------------------------------------------------------------- At the date of preparing these financial statements, the amount of deposits with Banco de Galicia y Buenos Aires S.A. in Argentina was approximately US$ 951,941, whereas the assistance received from the Argentine Central Bank to cover temporary lack of liquidity amounted to US$ 1,404,273.-------------------------- ----------------------------------------------------------------- Within this context, on March 21, 2002, Banco de Galicia y Buenos Aires S.A. submitted to the Argentine Central Bank a regularization and rehabilitation plan called "Galicia Capitalization and Liquidity Plan" which mainly contemplates:---- a. the immediate restoring of its liquidity levels, the supply of the necessary resources to achieve a solid position which enables Banco de Galicia y Buenos Aires S.A. to reimburse a significant portion of its deposits; and b. a subsequent significant increase in its capitalization levels.------------------------------------ This Plan also includes the negotiation with foreign creditors of the restructuring of the debt that Banco de Galicia y Buenos Aires S.A. carries with them and the orderly closing-down of the operating branches abroad.--------------------------------------- ----------------------------------------------------------------- The strengthening of liquidity is achieved as follows:----------- 60 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- o Securitization (and/or sale) of its mortgage and commercial loan portfolio through trusts or assignment of credits for a total amount of US$ 105,263 , which were subscribed by financial institutions during April 2002.------------------- o Loan from Seguros de Depositos S.A. (SE.DE.S.A.) for US dollars equivalent to US$ 52,632, converted at the exchange rate prevailing on the day prior to that of the disbursement, for a term of five years and at the 180-day LIBOR rate plus 300 basis points, which was subscribed on March 21, 2002.--------------------------------------------- o Loan from the Trust Fund for the Assistance to Financial Institutions and Insurance companies for US dollars equivalent to US$ 26,316, converted at the exchange rate prevailing on the day prior to that of the disbursement, for a term of three years and at Libor plus 400 basis points, with a floor of 8.07%, which was subscribed on April 30, 2002.------------------------------------------------------- In addition, the bank has refinanced a debt of US$ 151,053 with the Bank Liquidity Fund for three years, which was settled with the assistance provided by the Argentine Central Bank under the same conditions as those of the original debt on May 9, 2002.------------------------------------------------------------ As regards capitalization, within the framework of the global renegotiation of its foreign debt, the addition of basic and/or complementary capital is expected to take place through the subscription by foreign creditor banks, in exchange for their original debts, of ordinary shares or subordinated debt whether convertible or not into ordinary shares, at the option of the participating banks.--------------------------------------------- Banco de Galicia y Buenos Aires S.A. has formally started negotiations with a committee that is composed of the most important creditors. This committee was recently created and is currently making progress in the negotiations for obtaining a debt restructuring.---------------------------------------------- The plan for redefining the foreign branches includes the Restructuring Plan involving the New York Branch, submitted to the Office of the Comptroller of the U.S. Treasury ("OCC") on March 22, 2002, which contemplates the voluntary and orderly termination of the operations carried out by the Branch and its subsequent closing-down. This Plan requires the payment of smaller deposits, the renegotiation of the obligations with third parties and, regarding the latter, it contemplates principal amount reductions, an offer to exchange existing securities for other securities payable within longer terms and the transfer of the renegotiated debts to the Parent Company. As of June 30, 2002, the New York Branch had obligations with third parties for a total amount of approximately US$ 331,000, of which approximately US$ 311,000 had already been restructured at the date these financial statements were prepared.------------------- 61 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- At present, the New York Branch and the representation offices in Sao Paulo (Brazil) and London (UK) are in the process of being closed down.----------------------------------------------------- The Plan also contemplates the corporate restructuring of Banco de Galicia y Buenos Aires S.A., with a significant reduction in administrative expenses, to adapt it to the lower levels of activity. After the close of the fiscal period and at the date of these financial statements, approximately US$ 20,503 were paid in respect of employee voluntary retirement.------------------------ ----------------------------------------------------------------- Furthermore, the Bank has requested temporary exemption from compliance with the corresponding technical ratios and the reduction of the charges or fines arising from any non-compliance incurred or to be incurred, before implementing the plan and during its implementation, pursuant to the Law on financial Institutions No. 21526.------------------------------------------ The plan was approved by the Board of Directors of the Argentine Central Bank on May 3, 2002 through Resolution No. 281.---------- ----------------------------------------------------------------- The situation described above also affected Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd., entities controlled by Banco de Galicia y Buenos Aires S.A..---------------------------- On February 6, 2002, Banco Galicia Uruguay S.A. submitted a letter to the Central Bank of Uruguay in order to: (i) inform it of its temporary lack of liquidity, which prevented it from continuing to face the withdrawal of deposits; (ii) request financial assistance from that entity to be able to preserve its ability to reimburse all deposits in an orderly manner and face the withdrawal of funds generated by the developments that took place in Argentina, and (iii) request the authorization of that entity to temporarily suspend its operations.-------------------- ----------------------------------------------------------------- On February 13, 2002 the Central Bank of Uruguay resolved to preventively intervene in Banco Galicia Uruguay S.A. and temporarily suspend all its activities for a term of 90 days, which was subsequently extended until December 20, 2002.------------------------------------------------------------ ----------------------------------------------------------------- On June 10, 2002, Banco de Galicia Uruguay S.A. submitted to the Central Bank of Uruguay a proposal for the restructuring of its debt in respect of deposits. The proposal consists in an initial cash payment in US dollars equivalent to 3% of the amounts receivable by each depositor, and for the remaining amount, in a time deposit or negotiable obligations issued by Banco de Galicia Uruguay S.A., at the customers' option, all of them falling due in September 2011, to be amortized in nine annual and consecutive installments, the first two installments for 15% of the balance, and the following ones, for 10%, at a fixed interest rate of 2% per annum.------------------------------------------------------- 62 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- On June 20, 2002, a letter was presented before the Central Bank of Uruguay offering a pledge on Banco de Galicia Uruguay S.A.'s commercial receivables as collateral for the proposal.----------- On July 18, 2002, the Central Bank of Uruguay informed Banco de Galicia Uruguay S.A. that it would not object to any proposal the latter could make to its depositors provided at least a 75% adherence is obtained. This percentage represents the majority legally required to achieve an out-of-court reorganization plan, pursuant to Uruguayan legislation (Section 29 and subsequent sections of Law 2230 of June 2, 1893).--------------------------- ----------------------------------------------------------------- Acceptance by depositors represented deposits for US$ 930,000, out of a total amount of US$ 1,176,000, corresponding to the holders of 7.067 accounts over a total of 12,271 accounts. This is equivalent to 79% of total deposits, which shows the confidence customers have in the bank.--------------------------- ----------------------------------------------------------------- On August 26, 2002, the Court of Montevideo hearing the case, accepted the out-of-court reorganization plan achieved by Banco de Galicia Uruguay S.A., granting it a temporary moratorium until the end of the reorganizacion process. The Central Bank of Uruguay was appointed by the Court to verify the majority obtained in the reorganization plan, which it concluded satisfactorily. At the date of preparing these financial statements, as envisaged by the Uruguayan legislation, the proposal for a reorganization plan had been published, and negotiations for obtaining its approval were under way.---------- ----------------------------------------------------------------- The situation of Banco de Galicia Uruguay S.A. affected its subsidiary, Banco de Galicia (Cayman) Limited and, consequently, on July 19, 2002 the authorities in the Cayman Islands appointed a provisional liquidator at the request of Banco de Galicia Uruguay S.A., in order to reach a voluntary restructuring agreement between that entity and its creditors, adopting the corresponding measures to preserve the assets of Banco de Galicia Uruguay S.A.. The restructuring of the liabilities of Banco de Galicia (Cayman) Limited is currently under way. The proposal to be made to creditors is to be submitted to the competent authorities in due course. Such proposal may only materialize once the agreement has been reached with the creditors of Banco de Galicia Uruguay S.A..----------------------------------------- ----------------------------------------------------------------- The developments described in the section entitled "Compensation to be granted to financial institutions" proved financially detrimental to Banco de Galicia Uruguay S.A., due to the devaluation of the Argentine currency and the mandatory conversion into pesos, at different exchange rates, of a portion of its receivables in foreign currency subject to Argentine legislation.----------------------------------------------------- ----------------------------------------------------------------- 63 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- Such losses have been generated by the fact that, as mentioned earlier, Decree 905/02 excluded from the calculation of the Compensating and Coverage Bonds the assets converted into pesos owned by companies engaged in supplementary activities and controlled by Banco de Galicia y Buenos Aires S.A., and by foreign branches and subsidiaries. In other words, the objective envisaged in Section 7 of Decree No. 214/02, which consists in "establishing the issuance of a Bond to cover the imbalance in the financial system", has only been partially met in the case of Banco de Galicia y Buenos Aires S.A. under that decree. Subsequently, Decree 2167/02 and Argentine Central Bank Communique "A" 3805 corrected that omission by complementing the calculation of the compensation including in it the assets recorded at foreign branches or subsidiaries subject to Decree 214/02 (see section entitled "Compensation to be granted to financial institutions").---------------------------------------- ----------------------------------------------------------------- Within this context, Banco de Galicia y Buenos Aires S.A. agreed with Banco Galicia Uruguay S.A. to perform the necessary acts to provide the latter company, where applicable and subject to the prior authorization of the Argentine Central Bank, with the necessary funds for it to be able to reimburse all rescheduled deposits.-------------------------------------------------------- ----------------------------------------------------------------- Subsequently, the two financial institutions complemented that agreement through another agreement which explained that the legal effects, whether direct or indirect, of the declarations and covenants contained in the agreement, and the fulfillment of the commitments undertaken are subject to the normalization of the economic and financial situation of Banco de Galicia y Buenos Aires S.A. and to the repayment of the financial assistance granted to it by the Argentine Central Bank. These circumstances are mentioned in point 52 of Resolution No. 281 issued by that body. Furthermore, as a result of the intervention of the Central Bank of Uruguay in Banco Galicia Uruguay S.A., it is not possible to obtain financial statements prepared in accordance with Argentine accounting standards. In view of this, and in compliance with the Galicia Capitalization and Liquidity Plan, Banco de Galicia y Buenos S.A. has decided to record a provision to fully cover the value of its investments in Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Limited in the amounts recorded as of December 31, 2001. Furthermore, if the circumstances described still persist, the valuation of those investments under the equity method of accounting and the consolidation of the financial statements of the two subsidiaries with those of Banco de Galicia y Buenos Aires S.A. should be discontinued. --------------------------------------------------- ----------------------------------------------------------------- 64 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- According to the estimates made by Banco de Galicia y Buenos Aires S.A. on the basis of documentation and unaudited information held by it, a provision of US$ 268,894 has been recorded in Provisions - Other contingencies, under liabilities, which is equivalent to the negative consolidated equity of the two subsidiaries estimated as of June 30, 2002.------------------ ----------------------------------------------------------------- Should the two companies have been included in the consolidated financial statements of Grupo Financiero Galicia S.A., the main consolidated statement of financial condition figures would have been approximately as follows:----------------------------------- -----------------------------------------------------------------
ASSETS US$ LIABILITIES US$ Cash and due from banks 138,062 Deposits 2,069,143 Government and corporate 536,583 Other liabilities resulting 3,999,317 securities from financial brokerage Loans 2,953,440 Other liabilities 270,998 Other receivables resulting from 2,837,691 Shareholders' equity 553,558 financial brokerage Other assets 427,240 -----------------------------------------------------------------
Claims due to exchange differences arising from the repayment of financial assistance during the exchange holidays that took place in January 2002 During December 2001, Banco de Galicia y Buenos Aires S.A. received assistance in pesos from the Argentine Central Bank to cover temporary lack of liquidity. This assistance was repaid applying resources in US dollars granted by the Bank Liquidity Fund (BLF) on January 2 and 4, 2002.----------------------------- At the date those funds were credited, the Argentine Central Bank had declared exchange holidays.---------------------------------- Before the markets were reopened, Law 25561 was enacted on January 6, 2002, which repealed the convertibility system and fixed the new exchange rate of $1.40 per US dollar.-------------- As a result of the mentioned norms, during the exchange holidays the Bank was unable to perform exchange operations.-------------- Accordingly, the funds in US dollars credited by the BLF on January 2 and 4, 2002 had to remain in US dollars until the markets were reopened.------------------------------------------- At the date markets were reopened, in view of the terms and conditions of the norms in force, the US dollar was sold at $1.40.----------------------------------------------------------- For this reason, when the Argentine Central Bank allocated US$ 410,000 for Banco de Galicia y Buenos Aires to repay the financial assistance provided to it, should have allocated US$ 410,000 at $1.40, that is, the amount of $574,000.--------------- This has affected the guarantees of inviolability of private property and equality under the law.----------------------------- 65 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 1: (Continued)------------------------------------------------------ ----------------------------------------------------------------- In view of the above, the return of the difference of US$ 43,158 to Banco de Galicia y Buenos Aires or the restoration of its equity for an equivalent amount should be considered.------------ ----------------------------------------------------------------- In view of the situation described, Banco de Galicia y Buenos Aires S.A. ratified its intention to continue with the business of its Uruguayan subsidiary and comply with the commitments previously undertaken, subject to the authorizations which may be required.-------------------------------------------------------- ----------------------------------------------------------------- The impact generated by all these measures adopted to date by the Government on the financial statements of Grupo Financiero Galicia S.A. and its controlled entities as of June 30, 2002 was recognized according to evaluations and estimates made at the date of preparing them. Future actual results might differ from those evaluations and estimates and those differences could be significant. Therefore, the financial statements of Grupo Financiero Galicia S.A. may not report all the adjustments that could result from these adverse conditions or from any future amendments that could be made to legal and regulatory norms in force. Furthermore, at this time it is not possible to foresee the effect of future development of the country's economy or its consequences on the economic and financial position of Grupo Financiero Galicia S.A. and its controlled entities.------------- ----------------------------------------------------------------- Thus, any decision that must be made on the basis of these financial statements must take into account the future development of these measures and the financial statements must be considered in the light of these uncertain circumstances.----- NOTE 2: FINANCIAL STATEMENT PRESENTATION BASIS--------------------------- ----------------------------------------------------------------- In compliance with the provisions of General Resolution No. 368/2001 of the National Securities Commission, these financial statements are presented in line with the disclosure and valuation standards contained in Technical Pronouncements Nos. 5, 8, 9, 10 and 12 of the Argentine Federation of Professional Councils in Economic Sciences.----------------------------------- ----------------------------------------------------------------- In line with professional accounting standards and the requirements of the control bodies, these financial statements have been prepared without recognizing the changes in the purchasing power of the currency until December 31, 2001. In line with Resolution 3/02 of the C.P.C.E.C.A.B.A. and Resolution 415/02 of the National Securities Commission, recognition of the effects of inflation has been resumed in these financial statements since January 1, 2002.-------------------------------- 66 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 2: (Continued)------------------------------------------------------ ----------------------------------------------------------------- To this end, the restatement method established by Technical Pronouncement No. 6 of the FACPCE has been followed, restating the non-monetary items by applying the general level domestic wholesale price index (WPI) published by the National Institute of Statistics and Census (INDEC), considering that the accounting measurements originated prior to December 31, 2001 are stated in the currency value as of that date.------------------------------ ----------------------------------------------------------------- It should be noted that for comparative purposes, the balances as of June 30, 2001 have been stated in constant monetary units as of June 30, 2002.------------------------------------------------ These financial statements, together with notes and schedules are presented in pesos, and are in compliance with the provisions of Resolutions Nos. 8/95 and 11/02 of the Superintendency of Corporations.---------------------------------------------------- ----------------------------------------------------------------- The principal accounting policies used for preparing the financial statements are described below.------------------------ ----------------------------------------------------------------- a. Assets and Liabilities in local currency-------------------- ----------------------------------------------------------------- Monetary assets and liabilities which include, where applicable, the interest accrued up to the closing date, are stated at period end currency value, so they do not require any adjustment whatsoever.---------------------------------- ------------------------------------------------------------ ------------------------------------------------------------ b. Foreign currency Assets and Liabilities--------------------- ----------------------------------------------------------------- Foreign currency assets and liabilities (in US dollars) have been stated at period-end exchange rate. Interest receivable or payable has been accrued, where applicable.-------------- ----------------------------------------------------------------- c. Investments------------------------------------------------- c.1. Current------------------------------------------------ ------------------------------------------------------------ Time deposits have been valued at their face value, plus interest accrued at end of period.---------------- ------------------------------------------------------------ Treasury Bills have been valued at cost, plus interest accrued at end of period.----------------------------- ------------------------------------------------------------ 67 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 2: (Continued)------------------------------------------------------ ------------------------------------------------------------ c.2. Non-current-------------------------------------------- ------------------------------------------------------- Time deposits and special current account deposits have been valued at their face value, plus interest accrued as of end of period.----------------------------------- ------------------------------------------------------- The equity interests in Banco de Galicia y Buenos Aires S.A. and Net Investment S.A. have been accounted for under the equity method as of June 30, 2002. ------ ------------------------------------------------------- The equity interests in Sudamericana Holding S.A. and Galicia Warrants S.A. have been accounted for April 30, under the equity method, on the basis of March 31, 2002 and 2002 financial statements, respectively , and considering the significant movements occurred from that date to the closing date of these financial statements, in accordance with the guidelines of Technical Pronouncement No. 5 of the F.A.C.P.C.E.------ ------------------------------------------------------------ d. Fixed assets and investments in assets of a similar nature-- ------------------------------------------------------------ Fixed assets have been valued at their acquisition cost, restated in constant monetary units as from January 1, 2002, net of the corresponding accumulated depreciation.---------- ------------------------------------------------------------ Depreciation charges are calculated following the straight-line method, at rates determined based on the useful life assigned to the assets, which is 60 months for hardware and software, furniture and fixtures and vehicles and 600 months for real estate property.-------------------- ------------------------------------------------------------ The index-adjusted net book values of the assets, taken as a whole, do not exceed their estimated recoverable value.------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------ 68 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 2: (Continued)------------------------------------------------------ ----------------------------------------------------------------- e. Intangible assets------------------------------------------- ------------------------------------------------------------ Intangible assets have been valued at their acquisition cost, restated in constant monetary units as of January 1, 2002, net of the corresponding accumulated amortization, calculated based on their estimated useful life.------------ Amortization charges are calculated on a straight-line basis in equal monthly installments over 60 months.--------------- ------------------------------------------------------------ f. Shareholders' Equity---------------------------------------- ------------------------------------------------------------ f.1. Activity in the shareholders' equity accounts has been restated following the guidelines detailed in the second paragraph of this Note.------------------------- The "Subscribed and paid-up capital" account has been stated at its face value and at the value of the contributions, in the currency value of the period in which those contributions were actually made. The adjustment derived from the restatement of that account in constant monetary units has been allocated to the Capital Adjustment account. The Subscribed and paid-up Capital account has been stated at its face value.----- f.2. Income and expense accounts---------------------------- ------------------------------------------------------- The results for the period have been stated in constant monetary units.---------------------------------------- ------------------------------------------------------- g. Statement of cash flows------------------------------------- ------------------------------------------------------------ Cash and due from banks are considered to be cash.---------- NOTE 3: CASH AND DUE FROM BANKS----------------------------------------------- ---------------------------------------------------------------------- The breakdown of this caption was as follows:------------------------- ---------------------------------------------------------------------- 6.30.02 6.30.01 --------------------- ------------------- Cash (Schedule G) 3 3 Banks - current accounts (Note 13 369 6 and Schedule G) Checks for deposit (Note 13) 11 - --------------------- ------------------- Total 383 9 ===================== =================== -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 69 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 4: FISCAL CREDITS--------------------------------------------------- ----------------------------------------------------------------- The breakdown of this caption was as follows:-------------------- -----------------------------------------------------------------
Current 6.30.02 6.30.01 --------------------- --------------------- VAT credit 13 - Tax on minimum notional income 3 78 Credit - Law 25413 1 1 Freely available balance - General Resolution 4297/97 1 - Income tax return balance 2 - Income tax withholdings - 33 --------------------- -------------------- Total 20 112 ===================== =====================
Non-current 6.30.02 6.30.01 --------------------- --------------------- Minimum notional income tax credit - 32 Income tax credit - 18 Assets tax prepayment - 1 Assets tax credit - 2 Freely available balance - General Resolution 4297/97 - 2 Credit - Law 23549 mandatory savings 1 2 --------------------- --------------------- Total 1 57 ===================== =====================
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTE 5: OTHER RECEIVABLES------------------------------------------------ ----------------------------------------------------------------- The breakdown of this caption was as follows:-------------------- -----------------------------------------------------------------
6.30.02 6.30.01 --------------------- --------------------- Notes receivable 827 - Prepaid insurance 12 31 Prepaid expenses (Schedule G) 5 6 Sundry debtors 80 - Salary advances 11 - --------------------- --------------------- Total 935 37 ===================== =====================
----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 70 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 6: SOCIAL SECURITY LIABILITIES-------------------------------------- ----------------------------------------------------------------- The breakdown of this caption was as follows:-------------------- -----------------------------------------------------------------
6.30.02 6.30.01 --------------------- --------------------- Integrated Pension and Survivors' Benefit System 3 5 Contributions to the Family Subsidy Fund payable - 1 Health care plans 1 2 Salaries payable - - Provision for bonuses 10 48 Directors' and syndics' fees accrual 16 22 --------------------- --------------------- Total 30 78 ===================== =====================
NOTE 7: TAX LIABILITIES-------------------------------------------------- ----------------------------------------------------------------- The breakdown of this caption was as follows:-------------------- -----------------------------------------------------------------
6.30.02 6.30.01 --------------------- --------------------- Income tax withholdings to be deposited 8 7 Provision for turnover tax 1 - --------------------- --------------------- Total 9 7 ===================== =====================
----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- 71 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 8: OTHER DEBTS ----------------------------------------------------- ----------------------------------------------------------------- The breakdown of this caption was as follows:-------------------- -----------------------------------------------------------------
Current 6.30.02 6.30.01 --------------------- --------------------- Sundry creditors (Schedule G) 8 6 Expense accrual (Note 13 and Schedule G) 200 147 Directors' qualification bond 1 2 Provision for other contingencies 10,526 - (Schedule E) --------------------- -------------------- Total 10,735 155 ===================== ===================== Non-current 6.30.02 6.30.01 --------------------- --------------------- Directors' qualification bond 1 2 --------------------- --------------------- Total 1 2 ===================== =====================
----------------------------------------------------------------------- ----------------------------------------------------------------------- NOTE 9: CAPITAL STATUS -------------------------------------------------------- ----------------------------------------------------------------------- As of June 30, 2002, the capital status of the Company was as follows:- -----------------------------------------------------------------------
===================================================================================================== Restated Approved by Date of registration Face in --------------------------------- with the Public Registry Capital value constant Body Date of Commerce monetary units ----------------------------------------------------------------------------------------------------- Subscribed, Extraordinary 05.16.00 issued, 287,476 604,484 shareholders' 07.24.00 and 08.09.00 paid-in and meeting 07.26.00 registered Board of Directors -------------------- Total 287,476 604,484 =====================================================================================================
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 72 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 10: FINANCIAL AND HOLDING GAINS/(LOSSES)----------------------------- ----------------------------------------------------------------- The breakdown of this caption was as follows:-------------------- -----------------------------------------------------------------
6.30.02 6.30.01 --------------------- -------------------- Generated by assets: Interest On time deposits (*) 789 76 On special current account deposits (*) 36 3 On government securities 1 - On notes receivable 3 - Other 13 - Mutual Fund yield - 11 Index-adjustment of notes receivable 20 - Exchange difference 51,628 - Loss on exposure to inflation (33,390) - Generated by liabilities: Exchange difference (206) - Result of exposure to inflation 345 --------------------- -------------------- Total financial gains 19,239 90 ===================== ==================== ---------------------------------------------------------------------------------------------------------------------- (*) Balances net of eliminations corresponding to intercompany transactions (per Section 33 of Law 19550). See Note 13.-----------------------------------------------------------
-------------------------------------------------------------- NOTE 11: ESTIMATED COLLECTION OR PAYMENT TERMS OF RECEIVABLES, INVESTMENTS AND DEBTS----------------------------------------- As of June 30, 2002 the breakdown of receivables, investments and debts according to their estimated collection or payment terms was as follows:-----------------------------------------
==================================================================================================== Social Fiscal Other security Tax Other credits receivables Investments liabilities liabilities liabilities ---------------------------------------------------------------------------------------------------- Falling due within: 1st Quarter 13 14 6,520 14 9 95 2nd Quarter - 919 - - - 2 3rd Quarter - - - 16 - 1 4th Quarter 7 2 - - - 10,526 After one year - - 45,218 - - 1 -------------------------------------------------------------------------- Subtotal falling due 20 935 51,738 30 9 10,625 -------------------------------------------------------------------------- Without any set due date 1 - 506,659 - - 111 Past due - - - - - - -------------------------------------------------------------------------- Total 21 935 558,397 30 9 10,736 -------------------------------------------------------------------------- Non-interest bearing 21 28 506,659 30 9 10,736 At a fixed rate - 907 51,738 - - - ---------------------------------------------------------------------------------------------------- Total 21 935 558,397 30 9 10,736 ==================================================================================================== ----------------------------------------------------------------------------------------------------
73 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 12: EQUITY INTERESTS IN OTHER COMPANIES ----------------------------- ----------------------------------------------------------------- The breakdown of long-term investments was as follows:----------- ----------------------------------------------------------------- ===================================================================================================== as of 6.30.02 ----------------------------------------------------------------------------------------------------- Shares Percentage of interest held in Face -------------------------------------------------- Principal value Issuer company lne of per business share Possible Type Number Total Capital votes ------------------------------------------------------------------------------------------------------ Ordinary Banco de Galicia y class "A" 101 Financial 0.001 Buenos Aires S.A. Ordinary activities class "B" 438,599,602 0.001 --------------------------------------------------------- Total 438,599,703 93.585537% 93.585542% ------------------------------------------------------------------------------------------------------ Financial and investment Net Investment S.A. Ordinary 10,500 87.50% 87.50% activities 0.001 ---------------------------------------------------------------------------------------------------- Ordinary Sudamericana class "A" 31,302 0.001 Holding S.A. Ordinary Investment class "B" 41,735 activities 0.001 --------------------------------------------------------- Total 73,037 87.500899% 87.500899% ---------------------------------------------------------------------------------------------------- Issuer of warehouse receipts and Galicia Warrants S.A. Ordinary 175,000 87.50% 87.50% warrants 0.001 ====================================================================================================
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ==================================================================================================== as of 6.30.01 ---------------------------------------------------------------------------------------------------- Shares Percentage of interest held in Principal Face Issuer company line of value --------------------------------------------------------- business per share Possible Type Number Total Capital votes ------------------------------------------------------------------------------- Ordinary Banco de Galicia y class "A" 101 0.001 Buenos Aires S.A. Ordinary Financial class "B" 438,120,409 activities 0.001 --------------------------------------------------------- Total 438.120.510 93,48329% 93,48330% ---------------------------------------------------------------------------------------------------- Financial and investment Net Investment S.A. Ordinary 10.500 87,50% 87,50% activities 0.001 ---------------------------------------------------------------------------------------------------- Sudamericana Holding Investment S.A. Ordinary 31.302 37,500899% 37,500899% activities 0.001 ---------------------------------------------------------------------------------------------------- BtoB Comercial S.A. Ordinary 3.000 25% 25% Services 0.001 ====================================================================================================
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 74 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 12: (Continued) ----------------------------------------------------- ----------------------------------------------------------------- The financial condition and results of controlled companies were as follows:------------------------------------------------------ -----------------------------------------------------------------
==================================================================================================== Issuing company ------------------------------------- Banco de Galicia Financial condition y Buenos Aires Net Investment as of 6.30.02 S.A. S.A. ---------------------------------------------------------------------------------------------------- Assets 6,312,035 1,979 Liabilities 5,781,838 11 Shareholders' equity 530,197 1,968 Result for the period of six months ended 6.30.02 (193,404) (1,226) ==================================================================================================== ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------
==================================================================================================== Issuer company ------------------- Financial condition Galicia Warrants as of 4.30.02(*) S.A. ---------------------------------------------------------------------------------------------------- Assets 1,440 Liabilities 258 Shareholders' equity 1,182 Result for the period of six months ended 4.30.02 (43) ==================================================================================================== ---------------------------------------------------------------------------------------------------- (*) See Note 2.c.2.--------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ==================================================================================================== Issuer company ------------------- Financial condition Sudamericana as of 3.31.02(*) Holding S.A. ---------------------------------------------------------------------------------------------------- Assets 9,083 Liabilities 308 Shareholders' equity 8,775 Result for the period of six months ended 3.31.02 827 ==================================================================================================== ----------------------------------------------------------------------------------------------------
(*) See Note 2.c.2.------------------------------------------------------------- -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
==================================================================================================== Issuer company ------------------------------------ Banco de Galicia Financial condition y Buenos Aires Net Investment as of 6.30.01 S.A. S.A. ---------------------------------------------------------------------------------------------------- Assets 7,221,580 1,794 Liabilities 6,479,830 7 Shareholders' equity 741,750 1,787 Result for the period of six months ended 6.30.01 55,024 (438) ==================================================================================================== ---------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------
75 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 12: (Continued) ----------------------------------------------------- ----------------------------------------------------------------- The financial condition and results of related companies were as follows:---------------------------------------------------------
=============================================================================== Issuing company -------------------- Financial condition BtoB Comercial as of 6.30.01 S.A. ------------------------------------------------------------------------------- Assets 1,160 Liabilities 47 Shareholders' equity 1,113 Result for the period of six months ended 6.30.01 (18) ===============================================================================
================================================================================= Issuing company -------------------- Financial condition Sudamericana as of 3.31.01 Holding S.A. -------------------------------------------------------------------------------- Assets 10,684 Liabilities 3,288 Shareholders' equity 7,396 Result for the period of three months ended 3.31.01 (509) ================================================================================
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTE 13 INTERCOMPANY BALANCES AND TRANSACTIONS - SECTION 33 OF LAW 19550 ---------------------------------------------------------------- The financial statements include the following significant balances of the transactions carried out with Banco de Galicia y Buenos Aires S.A. and its subsidiaries:------------------------- -----------------------------------------------------------------
Banco de Galicia y Buenos Aires S.A. 6.30.02 6.30.01 ----------------------- --------------------- ASSETS Cash and due from banks - checks for deposit 11 - (Note 3) Cash and due from banks - current accounts (Note 3 369 5 and Schedule G) Investments - time deposits (Schedules C) 5,078 15,163 Investments - special current account deposits - 34 (Schedules C and G) ----------------------- --------------------- Total 5,458 15,202 ======================= ===================== LIABILITIES Other liabilities - expense accrual (Note 8) 46 62 ----------------------- --------------------- Total 46 62 ======================= =====================
76 -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the FInancial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 13: (Continued) ----------------------------------------------------- ----------------------------------------------------------------- INCOME Financial income - interest on time deposits (Note 10) 1,048 1,165 Financial income - interest on special current 111 42 account deposits (Note 10) ----------------------- --------------------- Total 1,159 1,207 ======================= ===================== EXPENSES Administrative expenses (Schedule H) Fees for services - 88 Leasing of brand 91 129 Bank charges - 1 General expenses 7 78 ----------------------- --------------------- Total 98 296 ======================= =====================
-------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Banco Galicia Uruguay S.A. 6.30.02 6.30.01 ----------------------- --------------------- ASSETS Investments - time deposits (Schedules C and G) 42,308 - Investments - special current account deposits 2,910 (Schedules C and G) - ----------------------- --------------------- Total 45,218 - ======================= ===================== INCOME Financial income - interest on time deposits (Note - 10) 467 Financial income - interest on special current - account deposits (Note 10) 29 ----------------------- --------------------- Total 496 - ======================= ===================== Galicia Warrants S.A. 6.30.02 6.30.01 ----------------------- --------------------- INCOME Financial income - Interest earned 1 - ----------------------- --------------------- Total 1 - ======================= ===================== ---------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------
NOTE 14: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF PROFITS----------------------------------------------------- ------------------------------------------------------------ At June 30, 2002 there are no restrictions on the distribution of the Company's retained earnings except for those established by the Argentine Commercial Companies Law and Resolution Nro. 368/2001 of the National Securities Commission insofar as concerns the setting up of the Legal Reserve with 5% of the net income for the year until 20% of the capital stock is reached. See Note 10 to the consolidated financial statements.-------------------------- ------------------------------------------------------------ -------------------------Grupo Financiero Galicia S.A.-------------------------- ------------------Notes to the Financial Statements (Continued)----------------- -------------------(figures stated in thousands of US dollars)------------------ -------------------------------------------------------------------------------- NOTE 15: ACQUISITION OF LONG-TERM INVESTMENTS--------------------------------- --------------------------------------------------------------------- On December 27, 2000, the Unanimous Ordinary Meeting of Shareholders of Sudamericana Holding S.A. resolved to increase the company's capital, which was fully subscribed by Grupo Financiero Galicia S.A. and Banco de Galicia y Buenos Aires S.A..----------------------------- As a result, Grupo Financiero Galicia S.A. holds 37.50% and Banco de Galicia y Buenos Aires S.A. holds 12.50% of the shares and voting rights of Sudamericana Holding S.A..---------------------------------- This subscription of shares was approved by the National Commission for the Defense of Competition on August 21, 2001.-------------------- In September 2001, Grupo Financiero Galicia S.A. acquired from Hartford Life International Ltd. (USA) and Hartford Life Ltd. (Bermuda) 50% of the capital stock and voting rights of Sudamericana Holding S.A., so the equity interest held by Grupo Financiero Galicia in that company is now 87.50%. ---------------------------------------------------------------------- On December 10, 2001, the National Commission for the Defense of Competition issued a resolution stating that no further notice of the above acquisition is required within the terms of Section 8 of Law 25156.---------------------------------------------------------------- On August 30, 2001, Grupo Financiero Galicia S.A. also purchased 175,000 ordinary, book-entry shares representing 87.50% of the capital stock and voting rights of Galicia Warrants S.A., and the remaining 12.50% belongs to Banco de Galicia y Buenos Aires S.A..---------------------------------------------------------------- --------------------------------------------------------------------- NOTE 16: SUBSEQUENT EVENTS---------------------------------------------------- ---------------------------------------------------------------------- As mentioned in Note 1 to these financial statements, Banco Galicia Uruguay S.A. is currently rescheduling its deposits. This rescheduling consists in returning to each of the savers a sum in cash equal to 3% of the respective total deposit amount, and the remaining balance will be returned by way of transferrable time deposit certificates or ordinary negotiable obligations to be issued by Banco Galicia Uruguay S.A.------------------------------------------------------------------ ---------------------------------------------------------------------- As a result, on July 4, 2002 the Company approved a proposal by which it will receive US$ 1,391 in cash and US$ 44,975 in ordinary negotiable obligations, in exchange for investments totalling US$ 46,366 it held in that entity as of May 31, 2002.--------------------- ---------------------------------------------------------------------- On July 26, 2002, the Company entered into an agreement with Banco Galicia Uruguay S.A. by which it undertook to irrevocably exchange ordinary negotiable obligations for US$ 43,000 for subordinated negotiable obligations to those ordinary negotiable obligations for the same amount.----------------------------------------------------- ---------------------------------------------------------------------- In July 2002, the Company received a letter from NASDAQ stating that the NASDAQ Staff Determination had noted the lack of an opinion in the 78 NOTE 16: (Continued) ---------------------------------------------------------- ---------------------------------------------------------------------- Auditors' Report on the financial statements for the fiscal year ended December 31, 2001 added to the F-20 Form of the Securities & Exchange Commission, and that the financial statements had not been prepared observing the Generally Accepted Accounting Principles in the United States of America (US GAAP). In view of this, in order to prevent the American Depositary Shares (ADR) from being delisted from the NASDAQ National Market, Grupo Financiero Galicia S.A., enforcing its right as envisaged by the NASDAQ Market Regulations, requested a hearing before the NASDAQ Listing Qualifications Panel to review the decision issued by the NASDAQ Staff Determination. This automatically suspended the delisting from the NASDAQ National Market until a final decision is issued. As envisaged by NASDAQ regulations, the mentioned hearing took place on August 8, 2002, at which the representatives of the Company stated that the difficulties caused by the economic crisis affecting Argentina had prevented the Company from preparing the information required by current regulations, so they requested that an extension be granted to be able to comply with all the listing requirements. Subsequently, the representatives requested that the Company's listed ADRs be transferred to NASDAQ SmallCap Market, which operates according to the same regulations and uses the same electronic market makers system.-------------------------------------------------------- On September 9, 2002, the Company received an answer from NASDAQ, informing the Company that the extension to present the Opinion of the External Auditors on the financial statements prepared in accordance with local accounting standards, requested at the hearing, had been granted until September 20, 2002, such Opinion having been presented on September 18, 2002, and to present those financial statements reconciled to US GAAP, until December 2, 2002. NASDAQ also informed the Company that as from September 13, 2002, the ADRs would be listed on the NASDAQ SmallCap Market, bearing the GGAEC symbol.-------------- On October 10, 2002, the Company received US$ 1,001 thousand in settlement of notes receivable it held as of June 30, 2002.---------- ---------------------------------------------------------------------- Between July 1 and November 8, 2002, the Company made new irrevocable cash contributions of US$ 443 in Net Investment S.A..----------------- 79 Grupo Financiero Galicia S.A.------------------------------------------------------------------------------------------------------ Fixed assets and investments in assets of a similar nature------------------------------------------------------------------------- For the period of six months------------------------------------------------------------------------------------------------------- commenced January 1, 2002 and ended June 30, 2002.--------------------------------------------------------------------------------- In comparative format with the same period of the previous year.------------------------------------------------------------------- (figures stated in thousands of US dollars)---------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------Schedule A
=================================================================================================================================== ORIGINAL VALUES DEPRECIATION ----------------------------------------------------------------------------------------------------------------------------------- For the period ----------------- At Accumulated Accumulated beginning At end of at beginning Deletions Rate Amount at end of Principal account of year Increases Deletions period of year % period ---------------------------------------------------------------------------------------------------------------------------------- Real estate 171 592 - 763 4 - 2 4 8 ---------------------------------------------------------------------------------------------------------------------------------- Vehicles 28 - - 28 4 - 20 3 7 ---------------------------------------------------------------------------------------------------------------------------------- Hardware and software 120 4 4 120 24 1 20 12 35 ---------------------------------------------------------------------------------------------------------------------------------- Furniture and facilities 47 1 - 48 9 - 20 5 14 ---------------------------------------------------------------------------------------------------------------------------------- Total as of 6.30.02 366 597 4 959 41 1 24 64 ==================================================================================================================================
============================== Net book Net book value at value at 6.30.02 6.30.01 ------------------------------- 755 167 ------------------------------- 21 9 ------------------------------- 85 102 ------------------------------- 34 41 ------------------------------- 895 319 =============================== 80 Grupo Financiero Galicia S.A.------------------------------------------------------------------------------------------------------ Intangible assets------------------------------------------------------------------------------------------------------------------ Fixed assets and investments in assets of a similar nature------------------------------------------------------------------------- For the period of six months------------------------------------------------------------------------------------------------------- commenced January 1, 2002 and ended June 30, 2002.--------------------------------------------------------------------------------- In comparative format with the same period of the previous year.------------------------------------------------------------------- (figures stated in thousands of US dollars)---------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------Schedule B
=================================================================================================================================== ORIGINAL VALUES AMORTIZATION ----------------------------------------------------------------------------------------------------------------------------------- For the period ----------------- At Accumulated Accumulated beginning At end of at beginning Rate at end of Principal account of year Increases Deletions period of year Deletions % Amount period ---------------------------------------------------------------------------------------------------------------------------------- Logotype 13 - - 13 3 - 20 1 4 ---------------------------------------------------------------------------------------------------------------------------------- Goodwill 5,483 - 580 4,903 759 39 20 490 1,210 ---------------------------------------------------------------------------------------------------------------------------------- Balance at 6.30.02 5,496 - 580 4,916 762 39 491 1,214 ==================================================================================================================================
============================== Net book Net book value at value at 6.30.02 6.30.01 ------------------------------- 9 2 ------------------------------- 3,693 2,074 ------------------------------- 3,702 2,076 =============================== 81 Grupo Financiero Galicia S.A.------------------------------------------------------------------------------------------------------ Investments------------------------------------------------------------------------------------------------------------------------ Equity Interests in Other Companies and Other Investments-------------------------------------------------------------------------- Quarterly Statement of Financial Condition as of June 30, 2002 and 2001------------------------------------------------------------ (figures stated in thousands of US dollars)---------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------------------------Schedule C-------------- ================================================================= Issuance and characteristics of the Book Value Book Value securities as of as of 6.30.02 6.30.01 ----------------------------------------------------------------- Current investments (*) Special current account deposits (Note - 34 13 and Schedule G) Time deposits (Note 13 and (Schedule G) 6,520 15,163 ------------------------ Total current investments 6,520 15,197 ================================================================= ----------------------------------------------------------------------------------------------------------------------------------- (*) include accrued interest.------------------------------------------------------------------------------------------------------ -----------------------------------------------------------------------------------------------------------------------------------
82 Grupo Financiero Galicia S.A.--------------------------------------------------- Investments--------------------------------------------------------------------- Equity Interests in Other Companies and Other Investments----------------------- Quarterly Statement of Financial Condition as of June 30, 2002 and 2001--------- (figures stated in thousands of US dollars)------------------------------------- -------------------------------------------------------------Schedule C (contd.) ==================================================================================================================================== Issuance and Class Face Number Acquisition Quotation Equity value Book Value Book Value characteristics of the Value cost per share as of as of as of 6.30.01 securities as of 6.30.02 6.30.02 6.30.02 ----------------------------------------------------------------------------------------------------------------------------------- Non-current investments Special current account 2,910 deposits (Schedules E and G) Time deposits (Schedules E and G) 42,308 Banco de Galicia y Buenos Ordinary class 0.001 101 Aires S.A. "A" Ordinary class 0.001 438,599,602 0.000118 "B" -------------------- 438,599,703 602,064 496,163 496,163 693,412 Net Investment S.A. Ordinary 0.001 10,500 5 - Irrevocable 3,099 1,779 1,779 1,564 contributions BtoB Comercial S.A. - - 278 Sudamericana Holding S.A. Ordinary class 0.001 31,302 - "A" Ordinary class 0.001 41,735 - "B" -------------------- 73,037 7,727 Irrevocable contributions 2,322 7,679 7,679 2,476 Galicia Warrants S.A. Ordinary 0.001 175,000 2,770 - 1,038 1,038 - --------------------------------------------------------------------------------------------------------- Total Non-current investments 617,987 506,659 551,877 697,730 ==================================================================================================================================== Table (cont'd) ==================================================================================================================================== INFORMATION ON THE ISSUER -------------------------------------------------------------- LATEST FINANCIAL STATEMENTS (Note 12) -------------------------------------------------------------- Issuance and Principal line of Date Capital Net Shareholders' % characteristics of the business Stock income/(loss) equity of equity held securities in the capital stock ------------------------------------------------------------------------------------------------------------------------------------ Non-current investments Special current account deposits (Schedules E and G) Time deposits (Schedules E and G) Banco de Galicia y Buenos Financial activities 6.30.02 123,332 (110,579)(**) 530,197 93.585537% Aires S.A. Net Investment S.A. Financial and investment 6.30.02 3 (1,226)(**) 1,968 87.50% activities BtoB Comercial S.A. Sudamericana Holding S.A. Investment activities 12.31.01 22 3,007(***) 5,923 87.500899% Galicia Warrants S.A. Issuer of 01.31.02 53 148(#) 974 87.50% Warehouse receipts and warrants Total Non-current ------------------------------------------------------------------------------------------------------------------------------------ (*) includes accrued interest.------------------------------------------------------------------------------------------------------ (**) for the period of six months ended June 30, 2002.------------------------------------------------------------------------------ (***) for the period of nine months ended March 31, 2002.--------------------------------------------------------------------------- (#) for the fiscal year ended April 30, 2002.--------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------
83 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------------------Allowances and Provisions--------------------------- --------------commenced January 1, 2001 and ended June 30, 2002---------------- -------------------(figures stated in thousands of US dollars)----------------- -------In comparative format with the same period of the previous year.-------- ------------------------------------------------------------------------------- ---------------------------------------------------------------------Schedule E
==================================================================================================================== Balance at Increases Decreases Balance at end of Captions beginning of year period -------------------------------------------------------------------------------------------------------------------- Allowances: Valuation allowance - Investments - 38,912 (38,912) - Total as of 6.30.02 - 38,912 (38,912) - Total as of 6.30.01 - 297 - 297 Provisions - - - - For other contingencies - 10,526 - 10,526 -------------------------------------------------------------------------------------------------------------------- Total as of 6.30.02 - 10,526 - 10,526 -------------------------------------------------------------------------------------------------------------------- Total as of 6.30.01 - - - - ====================================================================================================================
------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 84 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------------Foreign Currency Assets and Liabilities------------------- -------Statement of Financial Condition as of June 30, 2002 and 2001----------- -------------------(figures stated in thousands of US dollars)----------------- ------------------------------------------------------------------------------- ---------------------------------------------------------------------Schedule E
======================================================================================================================= Amount in Amount in Amount and type Argentine Amount and type Argentine of foreign currency of foreign currency Captions currency Quotation at 6.30.02 currency at 6.30.01 ----------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS Cash and due from banks Current Account US$ 132.7 3.80 504 US$ - - Investments Special current account deposits US$ - - US$ 67 131 Time deposits US$ - - US$ 29,391 57,621 Other receivables Prepaid expenses US$ - - US$ 8 16 ------------- ----------------- Total Current Assets 504 57,768 ------------- ----------------- NON-CURRENT ASSETS Investments Special current account deposits US$ 2,988.65 3.80 11,357 - Time deposits US$ 43,451.48 3.80 165,116 - ------------- ----------------- Total Non-current Assets 176,473 - ------------ ----------------- Total Assets 176,977 57,768 ============= ================= LIABILITIES CURRENT LIABILITIES Other debts Sundry creditors US$ - - - US$ 11 22 Expense accrual US$ 83.50 3.80 317 US$ 4 8 ----------------- ----------------- Total Current Liabilities 317 30 ----------------- ----------------- ----------------- Total Liabilities 317 30 =======================================================================================================================
85 -------------------------Grupo Financiero Galicia S.A.------------------------- --------Information required by Section 64, subsection b) of Law 19550--------- -----------------------For the period of six months---------------------------- --------------commenced January 1, 2002 and ended June 30, 2002.--------------- -------In comparative format with the same period of the previous year.-------- -------------------(figures stated in thousands of US dollars)----------------- ------------------------------------------------------------------------------- ---------------------------------------------------------------------Schedule H
======================================================================================================================= Total as of Administrative Total as of Captions 6.30.02 expenses 6.30.01 ----------------------------------------------------------------------------------------------------------------------- Salaries and social security charges 134 134 170 Bonuses - - 29 Services to the staff 3 3 - Directors' and syndics' fees 22 22 23 Fees for services 500 500 250 Fixed asset depreciation 24 24 17 Intangible asset amortization 492 492 251 Leasing of brand (*) 6 6 8 Stationery and office supplies 2 2 4 Advertising expenses - - 1 Condominium Expenses 8 8 4 Entertainment, transportation and per diem 3 3 19 Vehicles expenses 2 2 3 Insurance 14 14 33 Electricity and communications 10 10 6 Taxes, rates and assessments and contributions 98 98 3 Bank charges (*) - - 1 General expenses (*) 42 42 100 ------------------------------------------------------ Total 1,360 1,360 922 ======================================================================================================================= -------------------------------------------------------------------------------------------------------------------- (*) Balances net of eliminations corresponding to intercompany transactions(per Section 33 of Law 19550). See Note 13 to the financial statements.--------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------
86 -------------------------Grupo Financiero Galicia S.A.------------------------- ---Information required in addition to the Notes to the Financial Statements--- -----------------------For the period of six months---------------------------- --------------commenced January 1, 2002 and ended June 30, 2002.--------------- -------In comparative format with the same period of the previous year.-------- -------------------(figures stated in thousands of US dollars)----------------- ------------------------------------------------------------------------------- NOTE 1: LEGAL SYSTEMS------------------------------------------------ ------------------------------------------------------------------------------- There are no significant specific legal systems entailing the lapsing of contingent benefits envisaged by those regulations or their rebirth.-------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 2: CLASSIFICATION OF RECEIVABLES AND DEBTS---------------------- ------------------------------------------------------------------------------- 2.1. Receivables: See Note 11 to the financial statements.--- ------------------------------------------------------------------------------- 2.2. Debts: See Note 11 to the financial statements.--------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 3: CLASSIFICATION OF RECEIVABLES AND DEBTS ACCORDING TO THEIR FINANCIAL EFFECTS ------------------------------------- ------------------------------------------------------------------------------- 3.1. Receivables: See Notes 2.a., 2.b. and 11 and Schedule G to the financial statements.--------------------------------- ------------------------------------------------------------------------------- 3.2. Debts: See Notes 2.a., 2.b. and 11 and Schedule G to the financial statements.---------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 4: EQUITY INTERESTS IN OTHER COMPANIES - SECTION 33 OF LAW 19550-------------------------------------------------------- ------------------------------------------------------------------------------- See Notes 11, 12, 13, 15 and 16 and Schedule C to the financial statements.---------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 5: RECEIVABLES FROM OR LOANS GRANTED TO DIRECTORS OR SYNDICS---- ------------------------------------------------------------------------------- As of June 30, 2002 and 2001 there were no receivables from or loans granted to directors or syndics or their relatives up to the second degree inclusive.--------------------------- ------------------------------------------------------------- ------------------------------------------------------------- ------------------------------------------------------------- 87 -------------------------Grupo Financiero Galicia S.A.------------------------- ---Information required in addition to the Notes to the Financial Statements--- --------------------------------(Continued)------------------------------------ ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- NOTE 6: PHYSICAL INVENTORY OF INVENTORIES---------------------------- ------------------------------------------------------------------------------- As of June 30, 2002 and 2001 the Company did not have any inventories.------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 7: FIXED ASSETS------------------------------------------------- ------------------------------------------------------------------------------- See Schedule A to the financial statements.------------------ ------------------------------------------------------------- a) As of June 30, 2002 and 2001 the Company did not have any technically appraised fixed assets.-------------------------- ------------------------------------------------------------- b) As of June 30, 2002 and 2001 the Company did not have any obsolete fixed assets which have a carrying value.-------- -------------------------------------------------------------- c) As of June 30, 2002 and 2001, the criterion followed by the Company for determining the recoverable value of its fixed assets consisted of using their value to the business, based on the possibility of absorbing future depreciation charges with the profits reported by it.------------------ ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 8: INSURANCE---------------------------------------------------- ------------------------------------------------------------------------------- As of June 30, 2002 and 2001, the breakdown of insurance policies taken out by the Company for its fixed assets was as follows: ---------------------------------------------------- -------------------------------------------------------------------------------
================ ========================================= ============ ============ ============= Insured assets Risks covered Insured Book Value Book Value amount as of as of 6.30.02 6.30.01 --------------- ---------------------------------------- -------- ---------- ----------- Vehicles Third party liability, fire, theft and total loss. 20 21 9 ================ ========================================= ============ ============ =============
------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 9: ALLOWANCES AND PROVISIONS------------------------------------ ------------------------------------------------------------------------------- See Note 8 and Schedule E to the financial statements.------ ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 88 -------------------------Grupo Financiero Galicia S.A.------------------------- ---Information required in addition to the Notes to the Financial Statements--- --------------------------------(Continued)------------------------------------ ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 10: CONTINGENCIES------------------------------------------------ ------------------------------------------------------------------------------- As of June 30, 2002 and 2001, there were no contingencies highly likely to occur which have not been given accounting recognition.------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 11: IRREVOCABLE ADVANCES TOWARDS FUTURE SHARE SUBSCRIPTIONS------ ------------------------------------------------------------------------------- As of June 30, 2002 and 2001, there were no irrevocable contributions towards future share subscriptions.----------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 12: DIVIDENDS ON PREFERRED SHARES-------------------------------- ------------------------------------------------------------------------------- As of June 30, 2002 and 2001, there were no cumulative unpaid dividends on preferred shares.------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- NOTE 13: LEGAL RESERVE------------------------------------------------ ------------------------------------------------------------------------------- See Note 14 to the financial statements.-------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 89 -------------------------Grupo Financiero Galicia S.A.------------------------- -------Supplementary and Explanatory Statement by the Board of Directors------- ------------For the period of six months commenced January 1, 2002------------- -------------------------and ended June 30, 2002------------------------------- -------In comparative format with the same period of the previous year.-------- -------------------(figures stated in thousands of US dollars)----------------- ------------------------------------------------------------------------------- As called for by the norms regarding accounting documentation of the Cordoba Stock Exchange Regulations, the Board of Directors takes pleasure in submitting the following supplementary and explanatory information.----------------------- ------------------------------------------------------------------------------- A. Current Assets:------------------------------------------------------------- ------------------------------------------------------------------------------- a) Receivables:--------------------------------------------------------- 1) See Note 11 to the financial statements.-------------------------- 2) See Notes 4, 5 and 11 to the financial statements.---------------- 3) As of June 30, 2002 and 2001 the Company had not set up any allowances or provisions.----------------------------------------- ------------------------------------------------------------------------------- b) Inventories:--------------------------------------------------------- As of June 30, 2002 and 2001, the Company did not have any inventories.--------------------------------------------------------- ------------------------------------------------------------------------------- B. Non- Current Assets:-------------------------------------------------------- ------------------------------------------------------------------------------- a) Receivables:--------------------------------------------------------- As of June 30, 2002 and 2001 the Company had not set up any allowances or provisions.------------------------------------------------------- ------------------------------------------------------------------------------- b) Inventories:--------------------------------------------------------- As of June 30, 2002 and 2001, the Company did not have any inventories.--------------------------------------------------------- ------------------------------------------------------------------------------- c) Investments:--------------------------------------------------------- See Note 12 and Schedule C to the financial statements.---------------------------------------------------------- ------------------------------------------------------------------------------- d) Fixed assets:-------------------------------------------------------- ------------------------------------------------------------------------------- 1) As of June 30, 2002 and 2001, the Company did not have any technically appraised fixed assets. ------------------------------ 2) As of June 30, 2002 and 2001, the Company did not have any obsolete fixed assets which have a carrying value.---------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 90 -------------------------Grupo Financiero Galicia S.A.------------------------- ------Supplementary and Explanatory Statement by the Board of Directors-------- --------------------------------(Continued)------------------------------------ ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- e) Intangible assets: ----------------------------------------------------- 1) See Note 2.e. and Schedule B to the financial statements.--------------------------------------------------------- 2) As of June 30, 2002 and 2001, there were no deferred charges.--------------------------------------------------- ------------------------------------------------------------------------------- C. Current Liabilities:-------------------------------------------------------- ------------------------------------------------------------------------------- a) Debts:------------------------------------------------------------ 1) See Note 11 to the financial statements.-------------------- 2) See Note 11 to the financial statements.-------------------- ------------------------------------------------------------------------------- D. Allowances and provisions:-------------------------------------------------- ------------------------------------------------------------------------------- See Note 8 and Schedule E to the financial statements.-------------- -------------------------------------------------------------------- E. Foreign Currency Assets and Liabilities:------------------------------------ ------------------------------------------------------------------------------- See Note 2.b. and Schedule G to the financial statements.----------- ------------------------------------------------------------------------------- F. Shareholders' Equity:------------------------------------------------------- ------------------------------------------------------------------------------- 1) As of June 30, 2002 and 2001, the Shareholders' Equity did not include the Irrevocable Advances towards Future Share Issues account.-------------------------------------------- 2) As of June 30, 2002 and 2001, the Company had not set up any technical appraisal reserve; nor has it reversed any reserve of that kind.---------------------------------------------- ------------------------------------------------------------------------------- G. Miscellaneous:-------------------------------------------------------------- ------------------------------------------------------------------------------- 1) The Company is engaged in financial and investment activities, so the restrictions of Section 31 of Law 19550 do not apply to its equity interests in other companies.--- 2) As of June 30, 2002, and as of June 30, 2001, the Company did not have any receivables for transactions conducted with controlled or related companies.--------------------------- 3) As of June 30, 2002 and 2001 there were no receivables due from or loans granted to directors or syndics or members of the surveillance committee or their relatives up to the second degree inclusive.----------------------------------- 4) See Notes 11 and 13 to the financial statements.------------------------------------------------ ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 91 -------------------------Grupo Financiero Galicia S.A.------------------------- ------Supplementary and Explanatory Statement by the Board of Directors-------- --------------------------------(Continued)------------------------------------ ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 5) As of June 30, 2002 and 2001, the breakdown of insurance policies taken out by the Company for its fixed assets was as follows:------------------------------------------------ ---------------------------------------------------------------------- ----------------------------------------------------------------------
================ ========================================= ============ ============ ============= Insured assets Insured Book Value Book Value Risks covered amount as of as of 6.30.02 6.30.01 ---------------- ----------------------------------------- ------------ ------------ ------------- Vehicles Third party liability, fire, theft and total loss. 20 21 9 ================ ========================================= ============ ============ ============= --------------------------------------------------------------------------------------------------------
6) As of June 30, 2002 and 2001, there were no contingencies highly likely to occur which have not been given accounting recognition.----------------------------------------------- 7) As of June 30, 2002 and 2001, the Company did not have any receivables or debts including implicit interest----------- or index adjustments. ------------------------------------- ------------------------------------------------------------------------------- The Company has complied with the requirements of Section 65 of Law 19550 in these financial statements.---------------------------------------------------- ------------------------------------------------------------------------------- Autonomous City of Buenos Aires, November 18, 2002.---------------------------- ------------------------------------------------------------------------------- (signed) Federico Braun-------------------------------------------------------- Vice President----------------------------------------------------------------- Acting as Chairman------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- 92 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------Informative Review as of June 30, 2002 and 2001----------------- ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- The loss for the period of six months ended June 30, 2002 reported by the Company amounts to US$ 173,114; it was generated by the valuation of the equity interest in Banco de Galicia y Buenos Aires S.A., which is Grupo Financiero Galicia S.A.'s principal source of income, as shown in its Income Statement.--- ------------------------------------------------------------------------------- Grupo Financiero Galicia S.A.'s strategy is to become a leading company engaged in providing comprehensive financial services and, at the same time, continue to strengthen Banco de Galicia y Buenos Aires S.A.'s position as one of the leading companies in Argentina. This strategy will be carried out by supplementing the operations and business conducted by Banco de Galicia through equity interests in companies and undertakings, either existing or to be created, engaged in financial activities as they are understood in the modern economy.------------- ------------------------------------------------------------------------------- The Ordinary Meeting of Shareholders held on June 3, 2002 resolved to allocate US$ 3,097 to the Legal Reserve, US$ 59,331, to the Discretionary Reserve and to carry forward US$ 7.----------------------------------------------------------- ------------------------------------------------------------------------------- In July 2002, the Company received a letter from NASDAQ stating that the NASDAQ Staff Determination had noted the lack of an opinion in the Auditors' Report on the financial statements for the fiscal year ended December 31, 2001 added to the F-20 Form of the Securities & Exchange Commission, and that the financial statements had not been prepared observing the Generally Accepted Accounting Principles in the United States of America (US GAAP). In view of this, in order to prevent the American Depositary Shares (ADR) from being delisted from the NASDAQ National Market, Grupo Financiero Galicia S.A., enforcing its right as envisaged by the NASDAQ Market Regulations, requested a hearing before the NASDAQ Listing Qualifications Panel to review the decision issued by the NASDAQ Staff Determination. This automatically suspended the delisting from the NASDAQ National Market until a final decision is issued. As envisaged by NASDAQ regulations, the mentioned hearing took place on August 8, 2002, at which the representatives of the Company stated that the difficulties caused by the economic crisis affecting Argentina had prevented the Company from preparing the information required by current regulations, so they requested that an extension be granted to be able to comply with all the listing requirements. Subsequently, the representatives requested that the Company's listed ADRs be transferred to NASDAQ SmallCap Market, which operates according to the same regulations and uses the same electronic market makers system.--------------------------------- ------------------------------------------------------------------------------- On September 9, 2002, the Company received an answer from NASDAQ, informing the Company that the extension to present the Opinion of the External Auditors on the financial statements prepared in accordance with local accounting standards, requested at the hearing, had been granted until September 20, 2002, such Opinion having been presented on September 18, 2002, and to present those financial statements reconciled to US GAAP, until December 2, 2002. NASDAQ 93 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------Informative Review as of June 30, 2002 and 2001----------------- ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- also informed the Company that as from September 13, 2002, the ADRs would be listed on the NASDAQ SmallCap Market, bearing the GGAEC symbol.----------------- On July 4, 2002 the Company approved a proposal by which it will receive US$ 1,391 in cash and US$ 44,975 in ordinary negotiable obligations, in exchange for investments totalling US$ 46,366 it held in that entity as of May 31, 2002.----- On July 26, 2002, the Company entered into an agreement with Banco Galicia Uruguay S.A. by which it undertook to irrevocably exchange ordinary negotiable obligations for US$ 43,000 for subordinated negotiable obligations to those ordinary negotiable obligations for the same amount.---------------------------- -------------------------------------------------------------------------------- For the sake of brevity, we refer to the economic context within which the Company operated in Note 1 to these financial statements.----------------------- -------------------------------------------------------------------------------- KEY STATEMENT OF FINANCIAL CONDITION FIGURES------------------------------------ -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
6.30.02 6.30.01 6.30.00 ----------------- ------------------ ------------------ Current Assets 7,858 15,356 2,184 Non-current Assets 556,475 700,194 318,594 ----------------- ------------------ ------------------ Total Assets 564,333 715,550 320,778 ================= ================== ================== Current Liabilities 10,774 240 2,189 Non-current liabilities 1 2 2 ----------------- ------------------ ------------------ Subtotal 10,775 242 2,191 ----------------- ------------------ ------------------ Shareholders' Equity 553,558 715,308 318,587 ----------------- ------------------ ------------------ Total 564,333 715,550 320,778 ================= ================== ==================
-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 94 -------------------------Grupo Financiero Galicia S.A.-------------------------- ---------------Informative Review as of June 30, 2002 and 2001------------------ ----------------(figures stated in thousands of US dollars)--------------------- -------------------------------------------------------------------------------- KEY INCOME STATEMENT FIGURES---------------------------------------------------- --------------------------------------------------------------------------------
6.30.02 6.30.01 6.30.00 ------------------ ----------------- ---------------- Ordinary operating result (181,899) 50,501 20,464 Financial results 19,239 90 (10) Other income and expenses (10,454) (16) 148 ------------------ ----------------- ---------------- Ordinary net (loss)/ income (173,114) 50,575 20,602 ------------------ ----------------- ---------------- Net (loss) / income (173,114) 50,575 20,602 ================== ================= ================
-------------------------------------------------------------------------------- RATIOS-------------------------------------------------------------------------- --------------------------------------------------------------------------------
6.30.02 6.30.01 6.30.00 -------------------------------------------------------------------------------------------------------------- Liquidity 0,7294 63,9146 0,9975 -------------------------------------------------------------------------------------------------------------- Indebtedness 0,0195 0,0003 0,0069 -------------------------------------------------------------------------------------------------------------- Return on equity (0,2382) 0,0761 0,0691 --------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- The Company's individual financial statements have been considered to disclose the key balance sheet figures and key income statement figures, as its consolidated financial statements are disclosed in line with the provisions of Argentine Central Bank Communique "A" 3147 and supplementary rules regarding financial reporting requirements for the publication of quarterly and annual financial statements and observing the guidelines of Technical Pronouncement No. 8 of the Argentine Federation of Professional Councils in Economic Sciences.---- -------------------------------------------------------------------------------- For comparative purposes, the balances as of June 30, 2001 and 2000 have been stated in constant monetary units as of June 30, 2002.-------------------------- -------------------------------------------------------------------------------- Equity interests in other companies--------------------------------------------- -------------------------------------------------------------------------------- o Banco de Galicia y Buenos Aires S.A.------------------------------------ See section entitled "Situation of Banco de Galicia y Buenos Aires S.A. and its subsidiaries", in Note 1 to the financial statements.--------------------------- -------------------------------------------------------------------------------- o Net Investment S.A.----------------------------------------------------- -------------------------------------------------------------------------------- Net Investment S.A. is a holding company, which is engaged in investing and developing technology business and it provides communications, internet, connectivity and contents services, in order to create value for its shareholders. Grupo Financiero Galicia S.A. holds an 87.50% equity interest in this company and Banco de Galicia y Buenos Aires S.A., owns the remaining 12.50% of its capital stock.----------------------------------------------------------- -------------------------------------------------------------------------------- 95 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------Informative Review as of June 30, 2002 and 2001----------------- ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- Irrevocable cash contributions made as of June 30, 2002 amounted to US$ 457. Between July 1 and November 8, 2002, the Company made a new irrevocable cash contribution of US$ 443.-------------------------------------------------------- -------------------------------------------------------------------------------- The investments in Net Investment S.A. budgeted by the Company for the current year amount to approximately US$ 1,053.----------------------------------------- -------------------------------------------------------------------------------- Net Investment S.A. holds 30% of the capital stock of Dueno Vende S.A., a company that is mainly engaged in offering property for sale directly by owners through a web site called Soloduenos.com. Since the beginning of 2002, the macroeconomic situation and the measures implemented had a significant impact on the business involving the granting of mortgage loans, which led to a significant decrease in this source of income.---------------------------------- -------------------------------------------------------------------------------- Net Investment S.A. also holds an interest in B2Agro S.A. This project is addressed to the agricultural industry, one of the most significant in the Argentine economy, and aims to attract part of the flow of business carried out within this industry, for the purchase of inputs and the sale of production.---- As from the current year, it will add products and services intended for the livestock industry, focusing on agriculture. This company will operate under the trade name Red de Campo and its principal source of income will be the collection of commissions on transactions. Red de Campo operates as a business channel for previously selected producers to and from the workstations installed. These workstations provide easy to use planning and management tools, access to specialized and value added information, and access to business proposals designed for producers.----------------------------------------------- In a first stage, this company is to target individual producers operating in areas of more than 500 hectares. The geographical regions chosen for the development of the product in this first stage have been those of the western and southeastern areas of the province of Buenos Aires and the center, western and southern areas of the province of Cordoba.---------------------------------- -------------------------------------------------------------------------------- As of June 30, 2002, Net Investment S.A.'s interest in the capital stock of B2Agro was 93.75%. On July 16, 2002, Net Investment S.A. acquired 749 shares which represent 6.2416% of the capital stock of B2Agro S.A., taking its interest to 99.99166%.------------------------------------------------------------------- Net Investment S.A. is currently evaluating various other types of new business, including other internet projects, broadband communications and contents for wireless services. In all these projects, the company is seeking to make use of the synergies with the operations carried out by Grupo Financiero Galicia S.A. and Banco de Galicia y Buenos Aires S.A..--------------------------------------- -------------------------------------------------------------------------------- o Sudamericana Holding S.A.----------------------------------------------- -------------------------------------------------------------------------------- Sudamericana Holding S.A. is a group of life and retirement insurance companies. 96 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------Informative Review as of June 30, 2002 and 2001----------------- ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- In September 2001, Grupo Financiero Galicia S.A. made a new investment in the insurance business by acquiring from Hartford Life International Ltd. (U.S.A.) and Hartford Life Ltd. (Bermuda), 50% of the capital stock and voting rights of Sudamericana Holding S.A.. As a result of this transaction, Grupo Financiero Galicia S.A. took its interest in that company to 87.50%, while the remaining 12.50% continues to belong to Banco de Galicia y Buenos Aires S.A..--------------------------------------------------------------------------- -------------------------------------------------------------------------------- The insurance business undertaken by the Company through its interest in Sudamericana Holding S.A. is part of Grupo Financiero Galicia S.A.'s strategy to strengthen its positioning as a leading financial service provider, thus supplementing those businesses which Banco de Galicia y Buenos Aires S.A. may only conduct to a limited extent, in line with prevailing regulations.-------------------------------------------------------------------- -------------------------------------------------------------------------------- In view of the economic and financial developments occurred after the closing date of these financial statements, as established by Decree 214/02, the necessary steps were taken to preserve the income obtained by the life insurance companies, which were less affected than their competitors, due to their 90% market share of the issuance of pure risk insurance policies.------------------- -------------------------------------------------------------------------------- In April 2002, Grupo Financiero Galicia S.A. purchased 8 functional units of the building located at Maipu 241, in the amount of US$ 478, through the release of the guarantees provided by Hartford Life International Ltd. and Hartford Life Ltd. in favor of Grupo Financiero Galicia S.A., as stipulated in the contract for the purchase of shares in Sudamericana Holding S.A. executed on September 7, 2001.--------------------------------------------------------------------------- -------------------------------------------------------------------------------- o Galicia Warrants S.A.--------------------------------------------------- -------------------------------------------------------------------------------- On August 30, 2001, Grupo Financiero Galicia S.A. acquired 87.50% of the capital stock and voting rights of Galicia Warrants S.A., a company in which Banco de Galicia y Buenos Aires S.A. holds the remaining 12.50% interest.---------------- -------------------------------------------------------------------------------- Galicia Warrants S.A. was established in April 1993, and is authorized to store goods and issue Warehouse Receipts and Warrants, in line with the provisions of Law 9643.----------------------------------------------------------------------- -------------------------------------------------------------------------------- The corporate purpose of Galicia Warrants is to facilitate access to credit and financing, secured by goods that remain under its custody. Its principal customers belong to the agricultural, industrial and agroindustrial sectors, as well as exporters and retailers. As of June 30, 2002, 80% of total income obtained by this company stems from the agricultural sector. At that date, Galicia Warrants had a 35% market share of this business.----------------------- -------------------------------------------------------------------------------- 97 -------------------------Grupo Financiero Galicia S.A.------------------------- ---------------Informative Review as of June 30, 2002 and 2001----------------- ----------------(figures stated in thousands of US dollars)-------------------- ------------------------------------------------------------------------------- As mentioned in Note 1 to the financial statements, the impact generated by all these measures adopted to date by the Government on the financial statements of Grupo Financiero Galicia S.A. and its controlled entities as of June 30, 2002 was recognized according to evaluations and estimates made at the date of preparing them. Future actual results might differ from those evaluations and estimates and those differences could be significant. Therefore, the financial statements of Grupo Financiero Galicia S.A. may not report all the adjustments that could result from these adverse conditions or from any future amendments that could be made to legal and regulatory norms in force.---------------------- -------------------------------------------------------------------------------- At this time it is not possible to foresee the effect of future development of the country's economy or its consequences on the economic and financial position of Grupo Financiero Galicia S.A. The Company's outlook for the current year is basically linked with the development of the Argentine economy, and particularly of the financial system.-------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Autonomous City of Buenos Aires, November 18, 2002.----------------------------- -------------------------------------------------------------------------------- (Signed) Federico Braun--------------------------------------------------------- Vice President------------------------------------------------------------------ Acting as Chairman.------------------------------------------------------------- -------------------------------------------------------------------------------- I, Silvia Cristina Bolzon, a Public Translator duly registered and sworn and licensed to issue translations from English to Spanish and vice versa in the City of Buenos Aires, hereby attest that the foregoing is a true and fair translation into English of the attached financial statements, notes and schedules, as well as the information required in addition to the notes to the financial statements by Section 68 of the Buenos Aires Stock Exchange regulations, supplementary and explanatory statement by the Board of Directors required by the Cordoba Stock Exchange regulations and the informative review corresponding to Grupo Financiero Galicia S.A. for the period of six months ended June 30, 2002, produced in Spanish, a copy of which I have had before me.- -------------------------------------------------------------------------------- Given and signed in Buenos Aires, Argentina on December 11, 2002.--------------- Es traduccion fiel al ingles de los estados contables, notas y anexos, informacion adicional requerida por el Articulo 68 del reglamento de la Bolsa de Comercio de Buenos Aires, declaracion del Directorio complementaria y aclaratoria requerida por el reglamento de la Bolsa de Comercio de Cordoba y la resena informativa correspondientes a Grupo Financiero Galicia S.A. por el periodo de seis meses terminado el 30 de junio de 2002, redactados en idioma castellano que se acompanan en primer termino y que he tenido a la vista, de lo cual doy fe en Buenos Aires el dia 11 de diciembre de 2002. 98 TRADUCCION---------------------------------------------------------------------- Report of the Supervisory Syndics Committee------------------------------------- To the Shareholders of---------------------------------------------------------- Grupo Financiero Galicia S.A.--------------------------------------------------- In our capacity as Syndics of Grupo Financiero Galicia S.A., we have performed a limited review of the documents detailed in section I. below. Such documents are the responsibility of the Board of Directors of the Company.-------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- I. DOCUMENTS REVIEWED--------------------------------------------------------- We have performed a limited review of the Statement of Financial Condition of Grupo Financiero Galicia S.A. as of June 30, 2002, and the related Income Statement, Statement of Changes in Shareholders' Equity and Statement of Cash Flows for the period of six months then ended, as well as Notes 1 to 16, Schedules A, B, C, E, G and H, Informative Review, the Information required in addition to the Notes to the Financial Statements by Section 68 of the Buenos Aires Stock Exchange regulations and the Supplementary and Explanatory Statement by the Board of Directors, as required by the Norms concerning Accounting Documentation of the Cordoba Stock Exchange Regulations, which supplement them. Furthermore, we have performed a limited review of the Consolidated Statement of Financial Condition of Grupo Financiero Galicia S.A. as of June 30, 2002 and the Consolidated Income Statement and Consolidated Statement of Cash Flows for the period of six months then ended, as well as Notes 1 to 20, which are presented as supplementary information.------------------------------------ --------------------------------------------------------------------------- --------------------------------------------------------------------------- II. SCOPE OF THE LIMITED REVIEW------------------------------------------------ We performed our work in accordance with standards applicable to syndics. These standards require syndics to review the documents detailed in section I. observing prevailing auditing standards for the limited review of financial statements for interim periods, and verify the consistency of the documents reviewed with the information concerning corporate decisions, as disclosed in minutes, and evaluate the conformity of those decisions with the law and the by-laws insofar as concerns formal and documentary aspects. --------------------------------------------------------------------------- For purposes of our professional work in relation to the documents detailed in section I., we reviewed the work performed by the external auditors, who issued their report on November 18, 2002 in accordance with prevailing auditing standards for the limited review of financial statements for interim periods.----------------------------------------------------------- Such review included verifying the planning of the work, as well as the nature, scope and timing of the procedures applied and the results of the limited review performed by those professionals. A limited review mainly consists in applying analytical procedures to the accounting information and making inquiries of the staff responsible for accounting and financial issues. This review is substantially less in scope than that of an audit of financial statements, the objective of which is to issue an opinion on the financial statements taken as a whole. Therefore, we do not express such an opinion. It is not our responsibility to perform any control over the management, so our review did not cover the business decisions and criteria regarding the different areas of the Company, as such matters are the exclusive responsibility of the Board of Directors.------------------------ --------------------------------------------------------------------------- In addition, we have verified that the Informative Review, the Information required in addition to the Notes to the Financial Statements and the Supplementary and Explanatory Statement by the Board of Directors for the period of six months ended June 30, 2002, contain the information required by Technical Regulations 2001 of the National Securities Commission, Section 68 of the Buenos Aires Stock Exchange regulations and Section 2 of the Norms concerning Accounting Documentation of the Cordoba Stock Exchange Regulations, respectively, and insofar as concerns our field of competence, that the numerical data contained therein are in agreement with the Company's accounting records and other relevant documentation. Assumptions and projections on future events contained in that documentation are the exclusive responsibility of the Board of Directors.------------------------ --------------------------------------------------------------------------- --------------------------------------------------------------------------- III. PRELIMINARY EXPLANATIONS--------------------------------------------------- The Board of Directors has evaluated in Note 1 to the financial statements the conditions existing in relation to the economic measures adopted by the Government to confront the crisis affecting Argentina, a process that has not yet been concluded. The impact generated by those measures on the economic and financial situation of the Company and its controlled entities has been recognized in the financial statements according to the evaluations and estimates made by Management. Future actual results could differ with various degrees of significance from those evaluations and estimates. The existence of processes for restructuring the commercial portfolio and renegotiating liabilities not yet defined at the controlled entities generates uncertainty as to their final outcome and their impact on the financial position and future development of those companies and, consequently, of the Company. In notes to its financial statements, the Company discloses assets and liabilities for the valuation of which it has applied the criteria established by the Argentine Central Bank, or based on premises on future events, which differ from professional accounting standards. Sections 4 to 7 of the report issued by the auditors show situations related to those items, so no opinion is issued on the net worth and financial effects they could have on the Company and its controlled entities. Furthermore, the equity interest held by the Company in Banco de Galicia y Buenos Aires S.A. represents approximately 88% of its Assets and 90% of its Shareholders' Equity.------- The situation of that Entity and its controlled entities produced by the crisis affecting the Argentine financial sector, as well as the situation of the Company in particular, has given rise to the situations that have been disclosed by the Company in Note 1 to the financial statements and Note 3 to the consolidated financial statements, and by the external auditors in sections 8. to 12. of their report, the development and resolution of which will have a significant effect on the normal conduct of the Company's operations in the future. This Supervisory Syndics' Committee concurs with those statements. Consequently, the financial statements should be considered in the light of these uncertain circumstances.-------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- IV. OPINION-------------------------------------------------------------------- In our opinion, based on the examination performed with the scope mentioned in section II., the accompanying financial statements have been prepared in accordance with professional accounting standards prevailing in the Autonomous City of Buenos Aires, except for the application of valuation, disclosure and revenue recognition criteria relating to directly and indirectly controlled companies, as disclosed in the notes to financial statements and to consolidated financial statements, which differ from those standards. Therefore, the financial condition, results of operations and changes in shareholders' equity disclosed have been determined on the basis of the application of those standards.------------------------------- --------------------------------------------------------------------------- Nevertheless, in view of the effect on the above financial statements that could derive from possible adjustments and reclassifications that might be required following resolution of the situation described in the Preliminary Explanations in section III. above, we understand that the financial statements referred to above, as well as the financial condition, results of operations and changes in shareholders' equity disclosed in them, should be read and construed in the light of the uncertain conditions generated by subsequent economic developments, the impact of which on the Company's economic and financial position cannot be evaluated with reasonable certainty. Therefore, we do not issue any opinion in this connection.------ --------------------------------------------------------------------------- As regards the Informative Review, the Information required in addition to the Notes to the Financial Statements and the Supplementary and Explanatory Statement by the Board of Directors for the period of six months ended June 30, 2002, we have no observations to make insofar as concerns our field of competence, and the assertions on future events are the exclusive responsibility of the Board of Directors of the Company. --------------------------------------------------------------------------- Furthermore, we report that the financial statements stem from accounting records kept, in all formal respects, in compliance with prevailing legal rules.--------------------------------------------------------------------- --------------------------------------------------------------------------- --------------------------------------------------------------------------- Buenos Aires, November 20, 2002------------------------------------------------- -------------------------------------------------------------------------------- (Signed) LUIS O. ODDONE, ADOLFO HECTOR MELIAN and MIGUEL CARLOS MAXWELL, Syndics, for the Syndics' Committee.-------------------------------------------- -------------------------------------------------------------------------------- I, Silvia Cristina Bolzon, a Public Translator duly registered and sworn and licensed to issue translations from English to Spanish and vice versa in the City of Buenos Aires, hereby attest that the foregoing is a true and fair translation into English of the attached Report of the Supervisory Syndics Committee corresponding to Grupo Financiero Galicia S.A. for the period of six months ended June 30, 2002, produced in Spanish, a copy of which I have had before me.---------------------------------------------------------------------- Given and signed in Buenos Aires, Argentina on December 11, 2002.--------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Es traduccion fiel al ingles del Informe de la Comision Fiscalizadora correspondiente a Grupo Financiero Galicia S.A. por el periodo de seis meses terminado el 30 de junio de 2002, redactado en idioma castellano cuya copia se acompana en primer termino y que he tenido a la vista, de lo cual doy fe en Buenos Aires el dia 11 de diciembre de 2002.------------------------------------ -------------------------------------------------------------------------------- LIMITED REVIEW REPORT To the Chairman and Directors of Grupo Financiero Galicia S.A. Tte. Gral. Juan D. Peron 456, Piso 2(0) Autonomous City of Buenos Aires 1. We have performed a limited review of the statements of financial condition of Grupo Financiero Galicia S.A. as of June 30, 2002 and 2001 and the related income statement, statement of changes in shareholders' equity and statement of cash flows for the periods of six months then ended, as well as Notes 1 to 16, Schedules A, B, C, E, G and H, Informative Review, the Information required in addition to the Notes to the Financial Statement by Section 68 of the Buenos Aires Stock Exchange regulations, and the Supplementary and Explanatory Statement by the Board of Directors, as required by the rules regarding accounting documentation of the Cordoba Stock Exchange regulations, which supplement them. Furthermore, we have performed a limited review of the consolidated statements of financial condition of Grupo Financiero Galicia S.A. as of June 30, 2002 and 2001, and the consolidated income statement and consolidated statement of cash flows for the periods of six months then ended, together with Notes 1 to 20, which are presented as supplementary information. The preparation and issuance of these financial statements are the responsibility of the Company's Board of Directors in the exercise of its exclusive functions. Our responsibility is to issue a limited review report on those financial statements, based on the review we performed with the scope mentioned in section 2. below. 2. Our review, except as mentioned in sections 5. and 6. below, was limited to the application of the procedures set forth by Technical Pronouncement No. 7 of the Argentine Federation of Professional Councils in Economic Sciences for limited reviews of financial statements for interim periods and, therefore, did not include all the necessary auditing procedures to issue an opinion on the financial statements being examined. These limited reviews are substantially less in scope than that of an audit examination. Accordingly, we do not express an opinion on the Company's financial position, the results of its operations, changes in its shareholders' equity and cash flows as of June 30, 2002 and 2001, or on its consolidated financial position, the consolidated results of its operations and consolidated cash flows as of June 30, 2002 and 2001. 3. In line with regulations and professional accounting standards prevailing in Argentina, as explained in Note 1 to the financial statements, the Company has recognized the effects of the devaluation of the Argentine peso since January 1, 2002. 4. As mentioned in Note 3.a. to the consolidated financial statements, and as established by Argentine Central Bank Communique "A" 3800, Banco de Galicia y Buenos Aires S.A. has absorbed the losses for the current period in advance up to the limit of the balances recorded in the retained earnings and unrealized valuation difference accounts, in the shareholders' equity, ad referendum of the decision to be made in due course at the meeting of shareholders of Banco de Galicia y Buenos Aires S.A. 5. As described in Note 1 to the financial statements, Banco de Galicia y Buenos Aires S.A. has started a restructuring of its commercial portfolio. At the date of issue of this report, such restructuring, and its possible impact on the classification of debtors and the levels of allowances set up, as well as our review procedures involving those issues, had not been concluded. 6. As mentioned in Note 8 to the consolidated financial statements, certain companies controlled by Banco de Galicia y Buenos Aires S.A. are in the process of renegotiating their debts in respect of Negotiable Obligations, with different degrees of progress and definitions according to each company, in view of the impact of the measures adopted by the Argentine Government, as mentioned in Note 1 to the financial statements and section 7 below on their financial position and ability to meet their obligations by the relevant due dates. At the date of issue of these financial statements, this process had not been concluded and there is uncertainty as to its final outcome, so we were unable to obtain, as external auditors of those companies, all the necessary documentary evidence which enables us to have sufficient judgmental elements on its effects on the financial position of those companies as of June 30, 2002 and on the financial position of Grupo Financiero Galicia S.A. and/or other effects that could derive from that process. Furthermore, as mentioned in Note 8 to the consolidated financial statements, some of those companies have valued those debts in foreign currency as of June 30, 2002 according to the method of the present value of future discounted cash flows, which means the assumption of premises on future events. Future actual results could differ from the estimates made by the Board of Directors of those companies. The estimated impact on the financial statements of those companies and Grupo Financiero Galicia S.A., if it had been valued at period-end exchange rate, has been described in Note 8. 7. Note 1 to the financial statements details the situation existing at the end of the period in relation to the economic measures issued by the Government to confront the crisis affecting the country, some of which may not have been issued at the time these financial statements were prepared. The impact on the financial situation of the Company as of June 30, 2002 derived from the various measures adopted to date by the Government was recognized on the basis of evaluations and estimates made by the Management of the Company at the date of preparing them. Future actual results could differ from the evaluations and estimates made at the date of preparing these financial statements and those differences could be significant. Therefore, the Company's financial statements may not report all the adjustments that could result from these adverse conditions. At this time it is not possible to foresee the effect of the future development of the country's economy or its consequences on the economic and financial position of the Company and its controlled entities. Therefore, the Company's financial statements must be considered in the light of these uncertain circumstances. 8. The equity interest held by the Company in Banco de Galicia y Buenos Aires S.A. as of June 30, 2002 represents approximately 88% and 90% of the Company's assets and shareholders' equity, respectively. The possibility of recovering that investment has been affected by the uncertain circumstances detailed in sections 9. and 10. below. 9. The situation of Banco de Galicia y Buenos Aires S.A. and its controlled entities, derived from the liquidity crisis affecting the Argentine financial system and worsened by the effects of the measures and economic context mentioned above and its possible impact on: a) the recoverability of the government securities included in Schedule A to the financial statements of Banco de Galicia y Buenos Aires S.A., the portfolio of total credit to the public and private sectors included in Schedule D to the financial statements of Banco de Galicia y Buenos Aires S.A., the goodwill related to the acquisition of investments and other intangible assets included in Schedule G to the financial statements of Banco de Galicia y Buenos Aires S.A., and the goodwill related to the acquisition of investments included in Schedule B to the Company's financial statements; b) the final resolution of the processes involving the intervention, restructuring and/or termination of operations of the equity interests held by Banco de Galicia y Buenos Aires S.A. in Banco Galicia Uruguay S.A., Banco de Galicia (Cayman) Limited and Banco de Galicia y Buenos Aires - New York Branch, mentioned in Note 1 to the financial statements; c) the method and value of the final settlement of deposits affected by the outcome of the situations described in Note 1 to the financial statements, d) the value of the final compensation to be received as a result of the conversion into pesos, including the effect estimated on the basis of Decree No. 2167/02, and the claims made by Banco de Galicia y Buenos Aires S.A., mentioned in Note 1 to the financial statements, and their recoverability, including the amounts related to the legal actions filed for the protection of constitutional rights, all of them capitalized as mentioned in that Note; e) the final settlement of the contingent liabilities undertaken as described in Note 1 to the financial statements and in Note 6.g. to the consolidated financial statements, f) the possibility of recovering Grupo Financiero S.A.'s restructured investment in Banco Galicia Uruguay S.A., mentioned in Note 16 to the financial statements, as well as compliance by Banco de Galicia y Buenos Aires S.A. with the "Galicia Capitalization and Liquidity Plan" detailed in Note 1 to the financial statements, which mainly contemplates keeping the liquidity levels of that Entity, the restructuring and/or capitalization of its financial obligations and the reduction of charges for the mismatching of technical ratios. These factors raise doubts about the normal course of business of Banco de Galicia y Buenos Aires S.A.. The Company has prepared the accompanying financial statements following the accounting principles described in Note 2 to the financial statements and in Note 3 to the consolidated financial statements, which are applicable to a going concern. Therefore, those financial statements do not include the effects of possible adjustments and reclassifications, if any, that might be required following resolution of the situations described above if Banco de Galicia y Buenos Aires S.A. and Grupo Financiero Galicia S.A were obliged to sell their assets and settle their liabilities, including contingencies, in conditions other than those prevailing at the date of issue of the financial statements. 10. The criteria for consolidating the equity interests held by Banco de Galicia y Buenos Aires S.A in Banco Galicia Uruguay S.A. and Banco de Galicia (Cayman) Ltd., described in Note 4 to the consolidated financial statements, are not in accordance with professional accounting standards. The estimated effect derived from the addition of the assets and liabilities of those entities on the financial statements of Grupo Financiero Galicia S.A. has been described in Note 1 to the financial statements. 11. As mentioned in Note 1 to the financial statements and Note 3.b.12.2) to the consolidated financial statements, the criterion for recognizing in the shareholders' equity and results the amount of the compensation of the net foreign currency position and the amount resulting from the conversion into pesos, followed by Banco de Galicia y Buenos Aires S.A. in conformity with Argentine Central Bank regulations, is not in accordance with professional accounting standards, under which those effects should be fully charged to the results for the period. That effect was included in the Company's results for the period and in the consolidated income statement. 12. Although the valuation and revenue recognition criteria relating to the position of Government Securities held in investment accounts and presented in exchange for secured loans, as mentioned in Note 3.b.4. to the consolidated financial statements, are in accordance with Argentine Central Bank regulations, they are not in conformity with professional accounting standards in force in Argentina. Under those standards, the secured loans should have been added to the assets of Banco de Galicia y Buenos Aires S.A. at the market value of the above mentioned Government Securities. 13. The Company carries its accounting records and reports its net worth and financial position, results of operations, changes in shareholders' equity and cash flows in Argentine currency, as required by existing legal rules. Nevertheless, the financial statements mentioned in section 1. have been translated to U.S. dollars at the exchange rate of US$ 1 = $ 3.8 prevailing as of June 30, 2002, in connection with their presentation to the National Securities Commission and in compliance with the provisions of General Resolution No. 368/2001. 14. In view of the effect on the financial statements of the Company that could derive from the adjustments or reclassifications, if any, that might be required following resolution of the situations described in sections 5 to 9 above, and considering the observations made in sections 10. to 12. above, we are not in a position to make any statement on the financial statements and consolidated financial statements of Grupo Financiero Galicia S.A. as of June 30, 2002 and 2001 taken as a whole, prepared in accordance with accounting standards in force in the Autonomous City of Buenos Aires. 15. As called for by the regulations in force, we report that: a) The financial statements referred to in section 1. stem from accounting records kept in all formal respects as called for by legal rules prevailing in Argentina. Those financial statements have been transcribed to the Inventory and Balance Sheet book and prepared in line with the provisions of Law 19550 and the National Securities Commission regulations. b) We have read the Informative Review and the Information required in addition to the Notes to the Financial Statements by Section 68 of the Buenos Aires Stock Exchange regulations, as well as the Supplementary and Explanatory Statement by the Board of Directors, as required by the rules regarding accounting documentation of the Cordoba Stock Exchange regulations, and insofar as concerns our field of competence, we have no significant observations to make concerning them. The projections on future events stated in that documentation are the exclusive responsibility of the Company's Board of Directors. c) As of June 30, 2002, the liabilities accrued in respect of employee withholdings and employer contributions towards the Integrated Pension and Survivors' Benefit System, according to the accounting records, amounted to $ 7,659.07 (US$ 2,016), which were not yet due at that date. d) The financial statements mentioned in section 1. have been restated in constant monetary units as from January 1, 2002, in line with Resolution No. 240/02 of the Argentine Federation of Professional Councils in Economic Sciences and General Resolution No. 415/02 of the National Securities Commission. Autonomous City of Buenos Aires, November 18, 2002 PRICE WATERHOUSE & CO. (Partner) -------------------------------------- Professional Registration of the Firm: C.P.C.E.C.A.B.A. To. 1 Fo. 1 Ignacio Javier Casas Rua Public Accountant (U.B.A.) C.P.C.E. C.A.B.A. To. 121 Fo. 94