TRADUCCION----------------------------------------------------------------------
--------------------------------------------------------------------------------
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
--------------------------------------------------------------------------------
Financial Statements------------------------------------------------------------
for the periods of nine months--------------------------------------------------
ended September 30, 2002 and 2001-----------------------------------------------
--------------------------------------------------------------------------------
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-------------------------------Table of Contents--------------------------------
-----------------Financial Statements and Limited Review Report-----------------
-------For the periods of nine months ended September 30, 2002 and 2001.--------
------------------Report of the Supervisory Syndics Committee-------------------
------------For the period of nine months ended September 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 81
Information required in addition to the Notes to the Financial Statements
by Section 68 of the Buenos Aires Stock Exchange regulations 88
Supplementary and Explanatory Statement by the Board of Directors required
by Section 2 of the Accounting Documentation Rules of the Cordoba Stock
Exchange Regulations 91
Informative Review 94
Report of the Supervisory Syndics Committee
Limited Review Report
Name:----------------------- Grupo Financiero Xxxxxxx X.X.----------------------
Legal domicile:------------- Tte. Gral. Xxxx X. Xxxxx No 456 - Piso 2(o)-------
Autonomous City of Buenos Aires--------------------
---------------------------- ---------------------------------------------------
Principal line of business:- Financial and Investment activities----------------
4th fiscal year-----------------------------------------------------------------
For the period of nine months commenced January 1, 2002-------------------------
and ended September 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
September 30, 2002:--------- 25.74%---------------------------------------------
Percentage of votes to which
the Controlling Company is
entitled as of September 30,
2002------------------------ 63.42%---------------------------------------------
=====================================================================================================================
CAPITAL STATUS as of September 30, 2002 (Note 9 to the Financial Statements)
(figures stated in thousands of US dollars)
---------------------------------------------------------------------------------------------------------------------
Shares
---------------------------------------------------------------------------------------------------------------------
Voting rights per
Quantity Type share Subscribed Paid up
---------------------------------------------------------------------------------------------------------------------
Ordinary class "A", face
281,221,650 value of 0.00027 5 75,193 75,193
---------------------------------------------------------------------------------------------------------------------
Ordinary class "B", face
811,185,367 value of 0.00027 1 216,894 216,894
---------------------------------------------------------------------------------------------------------------------
1,092,407,017 292,087 292,087
=====================================================================================================================
1
--------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Consolidated Statement of Financial Condition------------------
-----------------------as of September 30, 2002 and 2001------------------------
------------------(figures stated in thousands of US dollars)-------------------
=============================================================================================================================
9.30.02 9.30.01
-------------------------------------------
ASSETS
-------------------------------------------
A. CASH AND DUE FROM BANKS 124,135 610,202
-------------------------------------------
-Cash 51,713 210,492
-Banks and correspondents 72,179 399,669
-Other 243 41
-------------------------------------------
B. GOVERNMENT AND CORPORATE SECURITIES 1,165,076 491,356
-------------------------------------------
-Holdings of investment account securities 676,643 161,329
-Holdings of trading securities 3,966 97,187
-Unlisted government securities 482,593 231,547
-Investments in listed corporate securities 1,990 1,362
-Allowances (116) (69)
-------------------------------------------
C. LOANS 2,672,686 5,135,196
-------------------------------------------
-To the non-financial public sector 2,095,129 1,610,986
-To the financial sector 30,645 255,008
-To the non-financial private sector and residents abroad 908,262 3,494,005
-Overdrafts 60,524 234,019
-Notes 290,742 1,198,812
-Mortgage loans 193,947 977,188
-Pledge loans 18,143 235,342
-Consumer loans 40,734 170,227
-Credit cards 149,593 485,302
-Other 55,626 134,305
-Accrued Interest and quotation differences receivable 108,513 87,980
-Documented interest (6,311) (24,252)
-Unallocated collections (3,249) (4,918)
-Allowances for loan losses (361,350) (224,803)
-------------------------------------------
D. OTHER RECEIVABLES RESULTING FROM FINANCIAL BROKERAGE 2,166,627 1,267,565
-------------------------------------------
-Argentine Central Bank 22,878 32,485
-Amounts receivable for spot and forward sales to be settled 1,702 279,620
-Securities receivable under spot and forward purchases to be settled 228 379,310
-Premiums on options bought - 90
-Unlisted negotiable obligations 13,835 48,183
-Other receivables not included in the debtor classification regulations 1,953,392 239,102
-Other receivables included in the debtor classification regulations 175,319 289,822
-Accrued interest receivable not included in the debtor classification
regulations 2,948 10
-Accrued interest receivable included in the debtor classification
regulations 624 4,799
-Allowances (4,299) (5,856)
=============================================================================================================================
--------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
--------------------------------------------------------------------------------
2
--------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Consolidated Statement of Financial Condition------------------
-----------------------as of September 30, 2002 and 2001------------------------
------------------(figures stated in thousands of US dollars)-------------------
=============================================================================================================================
9.30.02 9.30.01
-------------------------------------------
E. ASSETS UNDER FINANCIAL LEASES 13,475 27,259
-------------------------------------------
-Assets under financial leases 15,593 27,534
-Allowances (2,118) (275)
-------------------------------------------
F. EQUITY INTERESTS IN OTHER COMPANIES 23,503 43,856
-------------------------------------------
-In financial institutions 69,576 313
-Other 40,763 52,465
-Allowances (86,836) (8,922)
-------------------------------------------
G. MISCELLANEOUS RECEIVABLES 82,610 215,763
-------------------------------------------
-Receivables for assets sold 38 439
-Other 90,786 223,827
-Accrued interest on receivables for assets sold 1 10
-Other accrued interest receivable 31 26
-Allowances (8,246) (8,539)
-------------------------------------------
H. FIXED ASSETS 155,295 159,325
-------------------------------------------
I. MISCELLANEOUS ASSETS 49,115 54,533
-------------------------------------------
J. INTANGIBLE ASSETS 92,658 107,406
-------------------------------------------
-Goodwill 47,363 50,311
-Organization and development expenses 45,295 57,095
-------------------------------------------
K. UNALLOCATED ITEMS 7,822 1,816
-------------------------------------------
TOTAL ASSETS 6,553,002 8,114,277
===========================================
==============================================================================================================================
--------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
--------------------------------------------------------------------------------
3
--------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Consolidated Statement of Financial Condition------------------
-----------------------as of September 30, 2002 and 2001------------------------
------------------(figures stated in thousands of US dollars)-------------------
=============================================================================================================================
9.30.02 9.30.01
-------------------------------------------
LIABILITIES
-------------------------------------------
L. DEPOSITS 1,500,196 5,040,362
-------------------------------------------
-Non-financial public sector 955 72,433
-Financial sector 555 2,373
-Non-financial private sector and residents abroad 1,498,686 4,965,556
-Current accounts 229,504 612,645
-Savings accounts 88,575 525,248
-Time deposits 472,409 3,488,203
-Investment accounts - 147,425
-Other 514,415 136,618
-Accrued interest and quotation differences payable 193,783 55,417
-------------------------------------------
M. OTHER LIABILITIES RESULTING FROM FINANCIAL BROKERAGE 4,065,558 2,048,910
-------------------------------------------
-Argentine Central Bank 2,085,891 981
-Rediscounts to cover lack of liquidity 1,426,801 -
-Other 659,090 981
-Banks and international entities 949,578 450,223
-Unsubordinated negotiable obligations 556,856 551,390
-Amounts payable for spot and forward purchases to be settled 250 333,789
-Securities to be delivered under spot and forward sales to be settled 38,425 273,292
-Loans from domestic financial institutions 54,668 91,279
-Other 301,074 328,285
-Accrued interest and quotation differences payable 78,816 19,671
-------------------------------------------
N. MISCELLANEOUS LIABILITIES 69,022 88,668
-------------------------------------------
-Dividends payable 12 2,194
-Fees 435 6,331
-Other 68,575 80,142
-Adjustment and accrued interest payable - 1
-------------------------------------------
O. PROVISIONS 346,580 18,383
-------------------------------------------
P. UNALLOCATED ITEMS 2,492 4,856
-------------------------------------------
MINORITY INTEREST IN CONSOLIDATED ENTITIES OR COMPANIES 24,447 70,622
-------------------------------------------
TOTAL LIABILITIES 6,008,295 7,271,801
===========================================
SHAREHOLDERS' EQUITY 544,707 842,476
-------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,553,002 8,114,277
==============================================================================================================================
--------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
--------------------------------------------------------------------------------
4
--------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
----------------------Supplementary Accounting Information----------------------
------------------------Consolidated Memorandum Accounts------------------------
-----------------------as of September 30, 2002 and 2001------------------------
------------------(figures stated in thousands of US dollars)-------------------
=============================================================================================================================
9.30.02 9.30.01
-------------------------------------------
DEBIT 5,922,267 6,502,476
===========================================
CONTINGENT 4,704,390 3,693,757
-------------------------------------------
Guarantees received 2,624,737 3,228,556
Contingencies re. contra items 2,079,653 463,301
-------------------------------------------
Loans obtained (unused balances) - 1,482
-------------------------------------------
Other not included in the debtor classification regulations - 418
-------------------------------------------
CONTROL 1,191,095 2,791,215
-------------------------------------------
Uncollectible loans 194,749 320,785
Other 972,639 2,395,748
Control re. contra items 23,707 74,682
-------------------------------------------
DERIVATIVES 4,255 2,531
-------------------------------------------
"Notional" value of put options bought 3,515 2,091
Derivatives re. contra items 740 440
-------------------------------------------
TRUST ACCOUNTS 22,527 14,973
-------------------------------------------
Trust funds 22,527 14,973
-------------------------------------------
CREDIT 5,922,266 6,502,478
===========================================
-------------------------------------------
CONTINGENT 4,704,390 3,693,758
-------------------------------------------
Loans granted (unused balances) 46,652 183,156
Guarantees provided to the Argentine Central Bank 1,903,355 -
Other guarantees provided included in the debtor classification regulations 77,987 205,571
Other guarantees provided not included in the debtor classification regulations 1,123 714
Other not included in the debtor classification regulations 50,536 9,383
Other included in the debtor classification regulations - 64,478
Contingencies re. contra items 2,624,737 3,230,456
-------------------------------------------
CONTROL 1,191,094 2,791,216
-------------------------------------------
Valuables to be credited 23,652 74,628
Other 54 55
Control re. contra items 1,167,388 2,716,533
-------------------------------------------
DERIVATIVES 4,255 2,531
-------------------------------------------
"Notional" value of call options written 740 440
Derivatives re. contra items 3,515 2,091
-------------------------------------------
TRUST ACCOUNTS 22,527 14,973
-------------------------------------------
Trust liabilities re. Contra items 22,527 14,973
==============================================================================================================================
--------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
--------------------------------------------------------------------------------
5
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-------------------------Consolidated Income Statement--------------------------
-------------------------For the period of nine months--------------------------
------------commenced January 1, 2002 and ended September 30, 2002.-------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
9.30.02 9.30.01
--------------------------------------------
A. FINANCIAL INCOME 1,360,477 778,626
--------------------------------------------
Interest on cash and due from banks 248 15,995
Interest on loans to the financial sector 15,577 20,545
Interest on overdraft facilities 12,945 49,216
Interest on notes 22,357 297,948
Interest on mortgage loans 23,868 86,648
Interest on pledge loans 6,873 18,264
Interest on credit card loans 39,699 69,680
Interest on other loans 25,949 76,611
Interest on other receivables resulting from financial brokerage 47,968 22,808
Net income from government and corporate securities 150,956 79,949
Net income from secured loans - Decree 1387/01 79,291 -
Adjustment from application of adjusting index 785,161 -
Other 149,585 40,962
--------------------------------------------
B. FINANCIAL EXPENSES 1,044,410 413,756
--------------------------------------------
Interest on current account deposits 4,067 8,346
Interest on savings account deposits 831 8,291
Interest on time deposits 51,324 252,883
Interest on loans from financial sector 3,057 2,303
Interest on other liabilities resulting from financial brokerage 103,688 89,015
Other interest 374,126 18,130
Net loss on options 71 257
Adjustment from application of adjusting index 450,685 -
Other 56,561 34,531
--------------------------------------------
GROSS BROKERAGE MARGIN 316,067 364,870
============================================
C. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES 347,863 164,352
--------------------------------------------
D. INCOME FROM SERVICES 112,661 228,501
--------------------------------------------
Linked with lending transactions 31,341 66,076
Linked with borrowing transactions 32,887 51,159
Other commissions 3,234 24,948
Other 45,199 86,318
--------------------------------------------
E. EXPENSES FOR SERVICES 33,438 40,827
--------------------------------------------
Commissions 24,986 17,880
Other 8,452 22,947
==============================================================================================================================
MONETARY RESULT OF FINANCIAL BROKERAGE (423,285) -
==============================================================================================================================
--------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
--------------------------------------------------------------------------------
6
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-------------------------Consolidated Income Statement--------------------------
-------------------------For the period of nine months--------------------------
------------commenced January 1, 2002 and ended September 30, 2002.-------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
9.30.02 9.30.01
--------------------------------------------
G. ADMINISTRATIVE EXPENSES 178,717 268,950
--------------------------------------------
Personnel expenses 90,991 140,003
Directors' and syndics' fees 694 10,211
Other fees 4,285 3,759
Advertising and publicity 2,635 10,311
Taxes 9,457 13,793
Other operating expenses 61,202 71,770
Other 9,453 19,103
--------------------------------------------
MONETARY RESULT OF OPERATING EXPENSES 5,733 -
--------------------------------------------
NET (LOSS)/ INCOME FROM FINANCIAL BROKERAGE (548,842) 119,242
============================================
RESULT OF MINORITY INTEREST 100,224 (7,379)
--------------------------------------------
H. MISCELLANEOUS INCOME 70,953 35,453
--------------------------------------------
Net income from long-term investments - 5,470
Penalty interest 984 1,322
Loans recovered and allowances reversed 7,617 14,711
Adjustment from application of adjusting index 22 -
Other 62,330 13,950
--------------------------------------------
I. MISCELLANEOUS LOSSES 252,270 28,164
--------------------------------------------
Net loss on long-term investments 18,911 -
Penalty interest and charges in favor of the Argentine Central Bank 40 20
Provision for losses on miscellaneous receivables and other provisions 150,654 14,419
Adjustment from application of adjusting index 5 -
Other 82,660 13,725
--------------------------------------------
MONETARY RESULT OF OTHER OPERATIONS (23,274) -
--------------------------------------------
NET (LOSS)/ INCOME BEFORE INCOME TAX (653,209) 119,152
============================================
K. INCOME TAX 5,541 40,406
--------------------------------------------
LOSS FOR THE PERIOD BEFORE ABSORPTION (658,750) -
--------------------------------------------
ABSORPTION "AD REFERENDUM" OF SHAREHOLDERS' MEETING:
- With unrealized valuation difference 368,566 -
--------------------------------------------
NET (LOSS) / INCOME FOR THE PERIOD (290,184) 78,746
==============================================================================================================================
-------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
--------------------------------------------------------------------------------
7
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
----------------------Consolidated Statement of Cash Flows----------------------
-------------------------For the period of nine months--------------------------
------------commenced January 1, 2002 and ended September 30, 2002.-------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
9.30.02 9.30.01
--------------------------------------------
Changes in cash
Cash and due from banks at beginning of fiscal year 221,516 367,549
(Decrease) / Increase in cash (97,381) 242,653
-------------------------------------------
Cash and due from banks at end of period 124,135 610,202
===========================================
Reasons for changes in cash
Financial income collected 243,519 863,247
Income from services collected 76,326 228,637
Less:
Financial expenses paid (223,130) (462,515)
Expenses for services paid (15,272) (40,803)
Administrative expenses paid (121,138) (240,770)
-------------------------------------------
Cash (used in) provided by operations (39,695) 347,796
===========================================
Other sources of cash
Net increase in other liabilities resulting from financial brokerage 746,057 -
Net decrease in government and corporate securities 48,611 -
Net decrease in loans 471,468 91,830
Net decrease in other receivables resulting from financial brokerage - 2,208,224
Net decrease in other assets 63,510 -
Capital contributions - 1,440
Other sources of cash 341,006 68,114
-------------------------------------------
Total sources of cash 1,670,652 2,369,608
-------------------------------------------
Other uses of cash
Net increase in government and corporate securities - (442,030)
Net increase in other receivables resulting from financial brokerage (25,805) -
Net increase in other assets - (127,025)
Net decrease in deposits (1,342,508) (198,273)
Net decrease in other liabilities resulting from financial brokerage - (1,636,098)
Net decrease in other liabilities (46,781) (39,901)
Cash dividends paid (99) (20,790)
Other uses of cash (185,628) (10,634)
-------------------------------------------
Total uses of cash (1,600,821) (2,474,751)
-------------------------------------------
Monetary result of cash and due from banks (127,517) -
==============================================================================================================================
(Decrease) / Increase in cash (97,381) 242,653
==============================================================================================================================
--------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial
statements.---------------------------------------------------------------------
8
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Notes to the Consolidated Financial Statements-----------------
-------------------------For the period of nine months--------------------------
------------commenced January 1, 2002 and ended September 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 Xxxxxxx X.X. 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
September 30, 2001 have been stated in constant monetary units as of
September 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 Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (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 xx Xxxxxxx 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 Xxxxxxx X.X. on a line by line basis as of September
30, 2002, whereas the financial statements of Banco xx Xxxxxxx y
Buenos Aires S.A., Net investment S.A. and Galicia Warrants S.A.
have been consolidated on that basis as of September 30, 2001.---
-----------------------------------------------------------------
The investment in Sudamericana Holding S.A. as of September 30,
2001 has been included in only one line.-------------------------
Below is a summary of the consolidated balance sheet figures and
consolidated results of Sudamericana Holding S.A. stated in
September 30, 2002 constant monetary units.----------------------
Consolidated balance sheet figures.------------------------------
06.30.01
---------------
Total Assets 54,500
===============
Total Liabilities 47,868
Minority interests in controlled companies 64
Shareholders' equity 6,568
---------------
Total 54,500
===============
Consolidated results.
06.30.01
---------------
Result of ordinary operations (7,024)
Result of minority interest (622)
Income tax (149)
---------------
Net loss for the year (7,795)
===============
Grupo Financiero Xxxxxxx X.X. obtained the controlling interest
in Banco xx Xxxxxxx 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 xx Xxxxxxx 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
xx Xxxxxxx y Buenos Aires S.A..----------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
10
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
Banco xx Xxxxxxx 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,
as indicated in point b.1., and the provisions of Technical
Pronouncement No. 13 of the F.A.C.P.C.E..------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
The financial statements of Banco xx Xxxxxxx 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
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 xx Xxxxxxx 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.------------
-----------------------------------------------------------------
-----------------------------------------------------------------
11
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx y
Buenos Aires S.A. were as follows:-------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
b.1. - Foreign currency Assets and Liabilities-------------------
These are stated at the US dollar rate of exchange set by the
Argentine Central Bank, prevailing at the close of operations on
the last business day of each month.-----------------------------
Assets and liabilities valued in foreign currencies other than
the US dollar will be converted into the latter currency using
the swap rates communicated by the Argentine Central Bank's
operations desk.-------------------------------------------------
As established by professional standards and regulations
prevailing in Argentina, the Bank recognized the effects of the
devaluation of the Argentine peso as from January 1, 2002.-------
-----------------------------------------------------------------
b.2. - Gold Bullion----------------------------------------------
This is valued at the most recent U.S. dollar closing selling
quotation for the xxxx 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.--------------------------------------
-----------------------------------------------------------------
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.----------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
12
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 period of three months ended
September 30, 2001 by Banco xx Xxxxxxx y Buenos Aires S.A.. At
that date, the use of the net realizable value criterion for the
position in investment accounts would have led to a decrease of
US$ 186,182 in the assets and shareholders' equity and to a
decrease of US$ 154,639 in the result reported for the period of
nine months.-----------------------------------------------------
As of September 30,2002 National Government Bonds accruing
interest at Libor and due 2012 have been recognized at their
technical value.-------------------------------------------------
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.-----
-----------------------------------------------------------------
b.4. Secured Loans-----------------------------------------------
Within the framework of decree 0000/00, Xxxxx xx Xxxxxxx x Xxxxxx
Xxxxx X.X. 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
13
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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
September 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A. records
Secured Loans -principal amounts- for US$ 1,352,526, which
includes the gain of US$ 18,410 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 (See Note 1 to the
financial statements under "Public Debt").-----------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
14
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 xx Xxxxxxx 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.---------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
15
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 June 30, 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 September 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 xx Xxxxxxx 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
xx Xxxxxxx (Cayman) Limited, the statement made in Note 1 to
these financial statements under section entitled "Situation of
Banco xx Xxxxxxx y Buenos Aires S.A. and its subsidiaries" has
been applied.----------------------------------------------------
In the period of three months ended September 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.---
-----------------------------------------------------------------
-----------------------------------------------------------------
16
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 June
30, 2002 and as of July 31, 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 their restated acquisition
cost (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.---------------------------------------
17
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 xx Xxxxxxx 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.------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
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.----------------------------
-----------------------------------------------------------------
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:---------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
18
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
-----------------------------------------------------------------
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 September 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 xx Xxxxxxx 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.------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
19
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
-----------------------------------------------------------------
b.14. - Dismissal Indemnities------------------------------------
Banco xx Xxxxxxx y Buenos Aires S.A. directly expenses the
dismissal indemnities.-------------------------------------------
The amounts that Banco xx Xxxxxxx 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 September 30, 2002 the maximum risk faced by Banco xx
Xxxxxxx y Buenos Aires S.A. in respect of dismissal indemnities
amounted to approximately US$ 28,460. As of September 30, 2001,
the total amount in this respect was US$ 49,642.-----------------
-----------------------------------------------------------------
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 Xxxxxxx X.X..----------------------------------------------
----------------------------------------------------------------------
Grupo Financiero Xxxxxxx X.X. 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 xx
Xxxxxxx 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 September 30, 2002, Net Investment
S.A. held the following percentages of equity interests:--------------
----------------------------------------------------------------------
=========================================================== ================= ================
ISSUER COMPANY % OF CAPITAL % OF VOTES
----------------------------------------------------------- ----------------- ----------------
B2Agro S.A. 99.99 99.99
----------------------------------------------------------- ----------------- ----------------
Net Investment B.V. 100 100
=========================================================== ================= ================
----------------------------------------------------------------------
----------------------------------------------------------------------
20
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 nine months as of June 30, 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 Xxxxxxx X.X. (former Hartford Seguros de Vida
S.A.), Instituto de Salta Seguros de Vida S.A., Galicia Retiro Cia. de
Seguros S.A., Xxxxxxx Xxxx Cia. de Seguros S.A. and Medigap Salud S.A.
(former Hartford Salud S.A.). As of June 30, 2002, Sudamericana
Holding S.A. held the following equity percentages:-------------------
----------------------------------------------------------------------
=========================================================== ================= ================
ISSUER COMPANY % OF CAPITAL % OF VOTES
----------------------------------------------------------- ----------------- ----------------
Aseguradora de Personas Xxxxxxx X.X. (former Hartford 99.99 99.99
Seguros de Vida S.A.)
----------------------------------------------------------- ----------------- ----------------
Instituto de Salta Seguros de Vida S.A. 90.00 90.00
----------------------------------------------------------- ----------------- ----------------
Galicia Retiro Cia. de Seguros S.A. 99.99 99.99
----------------------------------------------------------- ----------------- ----------------
Xxxxxxx Xxxx 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 September 30, 2001 the Consolidated
Financial Statements of Banco xx Xxxxxxx y Buenos Aires S.A. have been
adapted to cover the same period as that of Grupo Financiero Xxxxxxx
X.X. the financial statements of that entity as of September 30, 2002
and 2001 include the assets, liabilities and results of the controlled
entities detailed below:----------------------------------------------
----------------------------------------------------------------------
==================================================================================================
as of September 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 XXXXXXX X.X. 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
==================================================================================================
* Stated at a face value of 1,000 Uruguayan pesos.--------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
21
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 4: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
==================================================================================================
as of September 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 XXXXXXX X.X. 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
==================================================================================================
* Stated at a face value of 1,000 Uruguayan pesos.--------------------
----------------------------------------------------------------------
=====================================================================================================
As of September 30, 2002
-----------------------------------------------------------------------------------------------------
ASSETS LIABILITIES SHAREHOLDERS' RESULTS
EQUITY (**)
------------------------------------------ ----------- ------------- ------------------ -------------
BANCO GALICIA URUGUAY S.A. - - - -
------------------------------------------------------------------------------------------------------
TARJETAS REGIONALES S.A. 144,613 172,889 (26,276) (100,191)
------------------------------------------------------------------------------------------------------
GALICIA CAPITAL MARKETS S.A. 9,665 5,581 4,084 (2,862)
------------------------------------------------------------------------------------------------------
GALICIA FACTORING Y LEASING S.A. 2,011 314 1,697 (366)
------------------------------------------------------------------------------------------------------
AGRO XXXXXXX X.X. 103 7 96 (114)
------------------------------------------------------------------------------------------------------
GALICIA VALORES S.A. SOC. DE BOLSA 4,134 939 3,195 880
------------------------------------------------------------------------------------------------------
GALICIA Y BS. AS. SECURITIES (UK) LTD. 1,073 39 1,034 224
======================================================================================================
----------------------------------------------------------------------
=====================================================================================================
as of September 30, 2001
-----------------------------------------------------------------------------------------------------
ISSUER COMPANY ASSETS LIABILITIES SHAREHOLDERS' RESULTS
EQUITY (**)
------------------------------------------ ----------- ------------- ------------------ -------------
BANCO GALICIA URUGUAY S.A. 1,395,298 1,264,037 131,261 20,398
-----------------------------------------------------------------------------------------------------
TARJETAS REGIONALES S.A. 326,292 291,969 34,323 0
-----------------------------------------------------------------------------------------------------
GALICIA CAPITAL MARKETS S.A. 8,411 3,972 4,439 1,694
-----------------------------------------------------------------------------------------------------
GALICIA FACTORING Y LEASING S.A. 2,248 313 1,935 273
-----------------------------------------------------------------------------------------------------
AGRO XXXXXXX X.X. 323 108 215 24
-----------------------------------------------------------------------------------------------------
GALICIA VALORES S.A. SOC. DE BOLSA 4,139 2,009 2,130 204
-----------------------------------------------------------------------------------------------------
GALICIA Y BS. AS. SECURITIES (UK) LTD. 893 167 726 139S
=====================================================================================================
----------------------------------------------------------------------
(**) corresponding to the period of nine months ended September 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 xx Xxxxxxx y Buenos Aires S.A..-------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
22
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 September 30, 2002 (see Note 1 to the
financial statements).------------------------------------------------
In the period of three months ended September 30, 2001, special
financial statements of Banco Galicia Uruguay S.A. as of September 30,
2001, adapted to cover the same period as that of Banco xx Xxxxxxx 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 xx Xxxxxxx (Cayman) Limited, in which Banco
Galicia Uruguay S.A. has a 65.3405 % equity interest and Banco xx
Xxxxxxx 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 held 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 xx Xxxxxxx y
Buenos Aires S.A. holds 68.218539% of the capital stock and voting
rights and Banco xx Xxxxxxx (Cayman) Limited, the remaining
31.781461%.-----------------------------------------------------------
----------------------------------------------------------------------
The financial statements of Banco xx Xxxxxxx y Buenos Aires S.A. have
been consolidated on a line-by-line basis with those of that company.-
----------------------------------------------------------------------
The September 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.-
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
23
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 9.30.02 9.30.01
---------------------------------------------- ------------------------- -------------------------
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 9.30.02 9.30.01
-------------------------------------------- ------------------------- ---------------------------
Tarjeta Comfiar S.A. 32% 32%
==================================================================================================
----------------------------------------------------------------------
Tarjeta Naranja S.A. financial statements as of September 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 September 30, 2002 and August 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.-------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
24
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 September 30, 2002 and 2001, the percentages of minority
interest are as follows:----------------------------------------------
----------------------------------------------------------------------
============================================== ========================= =========================
Company 9.30.02 9.30.01
---------------------------------------------- ------------------------- -------------------------
Banco xx Xxxxxxx y Bs. As. S.A. 6.41446% 6.41446%
--------------------------------------------------------------------------------------------------
Net Investment S.A. 0.80181% 0.80181%
--------------------------------------------------------------------------------------------------
Sudamericana Holding S.A. 0.80175% 0.80175%
--------------------------------------------------------------------------------------------------
Galicia Warrants S.A. 0.80181% 0.80181%
--------------------------------------------------------------------------------------------------
B2Agro S.A. 0.81007% 17.33484%
--------------------------------------------------------------------------------------------------
Net Investment B.V. 0.80181% -
--------------------------------------------------------------------------------------------------
BtoB Comercial S.A. - 0.80154%
--------------------------------------------------------------------------------------------------
Aseguradora de Personas Xxxxxxx X.X. (former
Hartford Seguros de Vida S.A.) 0.80234% 0.80127%
--------------------------------------------------------------------------------------------------
Medigap Salud S.A. (former Hartford Salud
S.A.) 0.81002% 0.80168%
--------------------------------------------------------------------------------------------------
Instituto de Salta Seguros de Vida S.A. 10.72158% 10.75158%
--------------------------------------------------------------------------------------------------
Galicia Retiro Cia. De Seguros S.A. 0.80188% 0.801749%
--------------------------------------------------------------------------------------------------
Xxxxxxx Xxxx Cia. de Seguros S.A. 0.80190% 0.801749%
==================================================================================================
----------------------------------------------------------------------
In the case of Banco xx Xxxxxxx y Buenos Aires S.A., the breakdown of
supplementary equity interests included in the "Minority Interests"
caption is as follows:------------------------------------------------
----------------------------------------------------------------------
============================================================= ================= ==================
Company 9.30.02 9.30.01
------------------------------------------------------------- ----------------- ------------------
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 Xxxxxxx X.X. 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%
==================================================================================================
25
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 6: RESTRICTED ASSETS-----------------------------------------------------
----------------------------------------------------------------------
As of September 30, 2002, Banco xx Xxxxxxx 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 xx Xxxxxxx y Buenos Aires S.A. has deposited US$ 5,636 in escrow
as a guarantee towards third parties in respect of its own
transactions. Also, US$ 3,778 have been deposited to guarantee repo
transactions with banks located abroad.-------------------------------
----------------------------------------------------------------------
Within the framework of Decree 979/2001 of the National Executive
Branch, Banco xx Xxxxxxx 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$ 27,404, 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$ 911 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 xx Xxxxxxx 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 September 30, 2002 amounted to US$
12,151.---------------------------------------------------------------
----------------------------------------------------------------------
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$ 143--------------
- Communique "A" 2923 US$ 1,221--------------
----------------------------------------------------------------------
e. Fund for assistance to financial institutions----------------------
As of September 30, 2002 Banco xx Xxxxxxx y Buenos Aires S.A. had
deposited secured loans for US$ 33,422 in guarantee towards the Fund
for assistance to Financial Institutions.-----------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
26
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 September 30, 2002, Banco xx Xxxxxxx 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$ 1,903,322 for
assistance received to cover temporary lack of liquidity.-------------
----------------------------------------------------------------------
g. Equity interests in Other Companies--------------------------------
Banco xx Xxxxxxx 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 xx Xxxxxxx 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 xx Xxxxxxx y
Buenos Aires S.A. and Socma Americana S.A. of the existence of any
deficit. At the date of these financial statements, Banco xx Xxxxxxx 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.----------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
27
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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-transferable 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 xx Xxxxxxx 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 X.X. xxxxx loans to those companies. At the date of these financial
statements negotiations relating to the 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$ 3,068 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 September 30, 2001, the total amount of restricted assets
earmarked to cover the mentioned items was US$ 233,113.---------------
----------------------------------------------------------------------
In addition, as of September 30, 2002 and 2001 the ability of Banco xx
Xxxxxxx y Buenos Aires S.A. to dispose of the assets existing at its
controlled entities subject to consolidation is restricted as follows:
----------------------------------------------------------------------
x. Xxxxxxx Valores S.A. Sociedad de Bolsa:----------------------------
As of September 30, 2002 this company held three shares of Xxxxxxx de
Valores de Buenos Aires S.A. securing an insurance covering its
transactions for US$ 1,123.-------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
28
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 6: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As of September 30, 2001, that company's total restricted assets
amounted to US$ 559.--------------------------------------------------
b. Agro Xxxxxxx X.X.:-------------------------------------------------
As of September 30, 2002 Agro Xxxxxxx X.X. had one share of Xxxxxxx a
Termino de Buenos Aires S.A. securing an insurance covering its
transactions for US$ 10.----------------------------------------------
----------------------------------------------------------------------
Furthermore, third party guarantees provided to Xxxxxxx a Termino de
Buenos Aires S.A. to secure transactions on this market amounted to
US$ 21.---------------------------------------------------------------
As of September 30, 2001, that company's restricted assets totalled
US$ 386.--------------------------------------------------------------
----------------------------------------------------------------------
c. Tarjetas Cuyanas S.A.----------------------------------------------
As of September 30, 2002, the Bank's ability to dispose of time
deposits for US$ 29 was restricted because this amount was earmarked
to secure a Collection Agreement signed with the Revenue Board of the
Province of Xxxxxxx.--------------------------------------------------
----------------------------------------------------------------------
d. Tarjeta Naranja S.A.-----------------------------------------------
On September 23, 2002 an attachment was levied on funds deposited in a
current account for US$ 63 that this company holds with Banco xx
Xxxxxxx y Buenos Aires S.A.. After the end of the current period, on
October 25, 2002 two attachments were levied on a current account held
by Tarjeta Naranja for a total amount of US$ 322.---------------------
----------------------------------------------------------------------
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 xx Xxxxxxx y Buenos Aires S.A. certain amounts of money, to be
invested according to the following detail:---------------------------
----------------------------------------------------------------------
1) Musimundo S.A. Trust for US$21,554.--------------------------------
2) Xxxxxxx Xxxxx and Ericides Xxxxx Trust for US$ 36.-----------------
3) Tarjeta Naranja S.A. Trust for US$ 903.----------------------------
4) Cuyanas S.A. Trust for US$ 110.------------------------------------
----------------------------------------------------------------------
The above-mentioned amounts will be released upon maturity or when
Banco xx Xxxxxxx y Buenos Aires S.A. receives instructions in
accordance with the contract stipulations.----------------------------
----------------------------------------------------------------------
29
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: NEGOTIABLE OBLIGATIONS AND OTHER DEBT SECURITIES----------------------
----------------------------------------------------------------------
a) Banco xx Xxxxxxx y Buenos Aires S.A. - Ordinary Negotiable
Obligations------------------------------------------------------
----------------------------------------------------------------------
a.1) As of September 30, 2002, Banco xx Xxxxxxx 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
==============================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
a.2) Under the global program for issuing ordinary negotiable
obligations approved by the Shareholders' Meeting held on March 3,
1993, as of September 30, 2002, Banco xx Xxxxxxx 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%---------------------------------------------
(*) This issue has fallen due.----------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
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 September 30, 2002 Banco xx Xxxxxxx 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.-----------------------------------------------------
30
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As of September 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A. had the
following short and medium-term negotiable obligation issues
outstanding under the above program:----------------------------------
----------------------------------------------------------------------
==================================================================================================
ISSUE AUTHORIZED
ISSUE DATE FACE VALUE TERM RATE BY THE NATIONAL
(in thousands) 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
--------------------------------------------------------------------------------------------------
07.19.02 72,635 1,840 days 7.875% 04.22.98
--------------------------------------------------------------------------------------------------
07.19.02 43,161 1,840 days Libor - 6 months 04.22.98
plus 4%
==================================================================================================
(*) 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.-------------
----------------------------------------------------------------------
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 US$
0.00027 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 xx
Xxxxxxx 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 Xx. Xxxxx Xxxxxx Xxxxxxxx.------------------------------
----------------------------------------------------------------------
As of September 30, 2002 and 2001, the amount of the negotiable
obligations in respect of principal and interest, net of discounts,
was US$ 542,599 and US$ 443,624, 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.-------------------------------------------
31
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
b) Banco xx Xxxxxxx 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 September 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 September 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$ 3,626, 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$ 997 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.--------------------------
----------------------------------------------------------------------
32
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As a result of this transaction and of certain payments made, the
Company records due and payable negotiable obligations amounting to
approximately US$ 5,180 as of September 30, 2002. As of September 30,
2002, Tarjetas Cuyanas S.A. had valued this debt by approximately US$
3,048, 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$ 2,139
would be generated as of the end of the period, the consolidated
impact of which amounting to approximately US$ 1,968.-----------------
----------------------------------------------------------------------
The maximum risk associated with the situations described in relation
to the financial statements of Tarjetas Regionales S.A. amounts to US$
1,882.----------------------------------------------------------------
----------------------------------------------------------------------
Tarjetas del Mar S.A.:------------------------------------------------
In view of the lack of a definition of the legal and economic
framework that is essential to confront the economic and financial
crisis Argentina is enduring, on June 18, 2002, Tarjetas del Mar S.A.
informed the Buenos Aires Stock Exchange and Caja de Valores S.A. that
it was unable to make a payment proposal to the holders of the
negotiable obligations, so it would continue to pay interest until it
is able to make such proposal.----------------------------------------
----------------------------------------------------------------------
On November 18, 2002, this company submitted a letter to the National
Securities Commission in which the Board of Directors of the company
states that it has carried out negotiations with its shareholders to
reach an agreement to enable the company to pay the debts it currently
has with the holders of obligations in equitable terms for all the
parties involved.-----------------------------------------------------
As of September 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 September 30, 2002
were to be valued at the free US dollar exchange rate, an additional
loss of approximately US$ 9,874 would be generated as of period end.--
----------------------------------------------------------------------
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$ 511 (face value) has been recognized in its financial
statements at a rate of exchange of US$1=$1, plus CER, which as of
September 30, 2002 was equivalent to US$ 51.--------------------------
33
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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=$1, plus CER, because that Series was issued
prior to January 6, 2002.---------------------------------------------
If all the due and payable negotiable obligations, which as of
September 30, 2002 amounted to US$ 511, were to be valued at the free
US dollar exchange rate, an additional loss of approximately US$ 324
would be generated at the end of the period, the consolidated impact
of which amounting to approximately $ 298.----------------------------
----------------------------------------------------------------------
The overdue balance of the Global Negotiable Obligation Program at the
time the financial statements of Tarjeta Comfiar S.A were prepared had
been reduced to the amount of US$ 391.--------------------------------
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 September 30,
2002, holders of negotiable obligations had adhered to this agreement
in the amount of US$ 62,926, the residual value of those negotiable
obligations amounting to U$S 61,145 at closing date.------------------
The debt certificates have been valued by determining the present
value of the cash flow involved, converted at the exchange rate
prevailing on the transaction date. The application of the present
value method to this financial debt, recommended by Technical
Pronouncement No. 17 of the Argentine Federation of Professional
Councils in Economic Sciences and approved by the Professional Council
in Economic Sciences of the Province of Cordoba, results in US$
46,348. If the debt certificates for a total of US$ 61,145 thousand
were to be valued at the free US dollar exchange rate, an additional
loss of approximately US$ 15,167 would be generated at period end.----
----------------------------------------------------------------------
As of September 30, 2002, the overdue balance of the Global Negotiable
Obligation Program not yet exchanged amounts to US$ 5,533 .-----------
----------------------------------------------------------------------
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=$1, plus CER, because even the most recently issued
Series involved renewals of series issued under Programs predating
January 6, 2002.------------------------------------------------------
34
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
In view of Tarjeta Naranja S.A.'s expectations for the method of
redemption of these obligations, either by means of the adherence to
the agreement or by redeeming them in cash, such obligations have been
valued as follows: 50%, that is US$ 2,766, are expected to be redeemed
in cash applying the US$1=$1 exchange rate, plus CER, and the
remaining 50% is expected to be exchanged for debt securities, so they
were valued applying the same procedure as that described above for
debt certificates. If all the due and payable negotiable obligations
amounting to US$ 5,533 rate, an additional loss of approximately US$
2,142 would be generated at the end of the period of nine months.-----
The maximum risk attaching to the situations described, which could
have an impact on the consolidated financial statements amounts to US$
14,063.---------------------------------------------------------------
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.---------------------------------------
At the time these consolidated financial statements were issued,
negotiable obligations due continued to be redeemed at the rate of
exchange of US$1 = $1 plus CER, while other holders opted to exchange
them for Debt Certificates. As of November 30, 2002 US$ 62,564 had
been exchanged and US$ 5,268 are yet to be exchanged.-----------------
The maximum risk attaching to the situations described, which could
have an impact on the financial statements of Grupo Financiero Xxxxxxx
X.X. would amount to approximately US$ 16,674.------------------------
----------------------------------------------------------------------
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.-----------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx y Buenos Aires S.A., either directly or indirectly,
deposits of securities, acceptances or guarantees and those set up
after July 1, 1995----------------------------------------------------
35
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 9: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 September 30,
2002 the normal contribution to the Deposit Insurance Fund amounted to
US$ 70,102, of which US$ 4,886 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.------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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.-----------------------------------------------------------
----------------------------------------------------------------------
36
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 10: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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 xx Xxxxxxx y Buenos Aires S.A. is required
to have under Argentine Central Bank rules, we confirm that Banco xx
Xxxxxxx 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", "Xxxx Xxxxx en Pesos", "Xxxx Xxxxx en Dolares", "Fima Mix
Plus", "Fima Mix", "Xxxx Xxxxx Corto Plazo", "Fima Money Market en
Pesos", "Fima Money Market en Dolares", "Fima Global Assets" and "Xxxx
Xxxxx Latinoamericana" and in compliance with Section 3 of the
mentioned Resolution, Banco xx Xxxxxxx y Buenos Aires S.A. has a total
of 165,008,025 units under custody for a market value of US$ 17,424 ,
which is included in the "Depositors of Securities in Custody"
account.--------------------------------------------------------------
----------------------------------------------------------------------
In the period ended September 30, 2001, the securities held in custody
by Banco xx Xxxxxxx y Buenos Aires S.A. totalled 728,687,022 units and
their market value amounted to US$ 353,279.---------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
37
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
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 xx Xxxxxxx 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.------------------------------------------------------
----------------------------------------------------------------------
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.-------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
38
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 12: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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.----------------------------
Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X. considers that this matter is not
likely to affect its net worth significantly.-------------------------
----------------------------------------------------------------------
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$ 535) for each institution, based on the number
of non-compliances by each one".--------------------------------------
In line with Argentine Central Bank Communique "A" 2909 Banco xx
Xxxxxxx 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 xx Xxxxxxx 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 xx Xxxxxxx 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.----------------------------------------------------
39
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 13: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
Banco xx Xxxxxxx y Buenos Aires S.A. considers that this matter is not
likely to affect its net worth significantly.-------------------------
----------------------------------------------------------------------
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
xx Xxxxxxx y Buenos Aires S.A. approved Banco xx Xxxxxxx 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 xx Xxxxxxx 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 xx Xxxxxxx 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 September 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A. held
debt securities and certificates of participation in its portfolio for
US$ 176,128.----------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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 xx Xxxxxxx
y Buenos Aires S.A.'s participation as originator, trustor and manager
of that program.------------------------------------------------------
----------------------------------------------------------------------
40
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 xx Xxxxxxx 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 xx Xxxxxxx
Uruguay S.A. and Aseguradora de Personas Xxxxxxx X.X. (former Hartford
Seguros de Vida S.A.--------------------------------------------------
As of September 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A. the New
York Branch and Banco xx Xxxxxxx Uruguay S.A. held in their portfolio
US$ 11,485, US$ 20,243 and US$ 12,997, 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 xx Xxxxxxx 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 Xxxxxxx X.X..----------------------------------------
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 xx Xxxxxxx y Buenos
Aires S.A. is the depository bank (see Note 11 b)).-------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
41
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------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 September 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
September 30, 2002 is as follows:-------------------------------------
----------------------------------------------------------------------
==================================================================================================
9.30.02 9.30.01
----------------------------------
ASSETS
LOANS 2,672,686 5,135,196
----------------------------------
-To the non-financial public sector 2,095,129 1,610,986
-To the financial sector 30,645 255,008
-To the non-financial private sector and residents abroad 908,262 3,494,005
-Overdraft facilities 60,524 234,019
-Notes 290,742 1,198,812
-Mortgage loans 193,947 977,188
-Pledge loans 18,143 235,342
-Consumer loans 40,734 170,227
-Credit card loans 149,593 485,302
-Other 55,626 134,305
-Accrued interest and quotation differences receivable 108,513 87,980
-Documented interest (6,311) (24,252)
-Unallocated collections (3,249) (4,918)
-Allowances for loan losses (361,350) (224,803)
----------------------------------
OTHER RECEIVABLES RESULTING FROM FINANCIAL BROKERAGE 2,166,627 1,267,565
----------------------------------
-Argentine Central Bank 22,878 32,485
-Amounts receivable for spot and forward sales to be
settled 1,702 279,620
-Securities receivable under spot and forward purchases
to be settled 228 379,310
-Premiums on options bought - 90
-Unlisted negotiable obligations 13,835 48,183
-Other not included in the debtor classification
regulations 1,953,392 239,102
-Other included in the debtor classification regulations 175,319 289,822
-Accrued interest receivable not included in the debtor
classification regulations 2,948 10
-Accrued interest receivable included in the debtor
classification regulations 624 4,799
-Allowances (4,299) (5,856)
==================================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
42
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------Notes to the Consolidated Financial Statements (Continued)-----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 18: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
==================================================================================================
9.30.02 9.30.01
-----------------------------------
LIABILITIES
DEPOSITS 1,500,196 5,040,362
-----------------------------------
-Non-financial public sector 955 72,433
-Financial sector 555 2,373
-Non-financial private sector and residents abroad 1,498,686 4,965,556
-Current accounts 229,504 612,645
-Savings accounts 88,575 525,248
-Time deposits 472,409 3,488,203
-Investment accounts - 147,425
-Other 514,415 136,618
-Accrued interest and quotation differences payable 193,783 55,417
-----------------------------------
OTHER LIABILITIES RESULTING FROM FINANCIAL BROKERAGE 4,065,558 2,048,910
-----------------------------------
-Argentine Central Bank 2,085,891 981
-Rediscounts to cover lack of liquidity 1,426,801 -
-Other 659,090 981
-Banks and international entities 949,578 450,223
-Unsubordinated negotiable obligations 556,856 551,390
-Amounts payable for spot and forward purchases to be
settled 250 333,789
-Securities to be delivered under spot and forward sales
to be settled 38,425 273,292
-Loans from domestic financial institutions 54,668 91,279
-Other 301,074 328,285
-Accrued interest and quotation differences payable 78,816 19,671
==================================================================================================
----------------------------------------------------------------------
NOTE 19: SITUATION OF CERTAIN COMPANIES CONSOLIDATED WITH BANCO XX XXXXXXX Y
BUENOS AIRES S.A.-----------------------------------------------------
As of September 30, 2002, Tarjeta Naranja S.A., Tarjeta Comfiar S.A.,
Tarjetas del Mar S.A. and Tarjetas Regionales S.A. reported shortfalls
of US$ 4,823, US$ 18,703, US$ 5,418 and US$ 41,433 respectively, in
their working capital, and shortfalls of US$ 33,368, U$S 14,989, U$S
4,183 and U$S 26,276 respectively, in their equity, and this situation
is subject to the provisions of Section 94, subsection 5) of the
Corporations Law. Tarjetas Cuyanas S.A. records a deficit of US$ 178
in its equity at that date.-------------------------------------------
Accumulated losses of US$ 24,540 reported by Tarjeta Comfiar S.A., US$
7,383, reported by Tarjeta del Mar S.A. and US$ 46,524 reported by
Tarjeta Naranja 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 Xxxxxxx X.X.--------------------------
-----------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$ 83,629 were
transferred, receiving in exchange US$ 62,722 in cash and certificates
of participation for US$ 20,907. 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$ 28,877 were transferred and US$ 21,658 in cash and
certificates of participation for US$ 7,219 were received in exchange.
Banco xx Xxxxxxx y Buenos Aires S.A. will act as administrator in both
cases.----------------------------------------------------------------
----------------------------------------------------------------------
As of September 30, 2002, the amounts of the participation
certificates was US$ 22,703 and US$ 7,219, respectively.--------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
44
----------------------------Grupo Financiero Xxxxxxx X.X.----------------------------
-----Quarterly Statement of Financial Condition as of September 30, 2002 and 2001----
---------------------(figures stated in thousands of US dollars)---------------------
---------------------------------------(Note 2)--------------------------------------
=====================================================================================
9.30.02 9.30.01
-----------------------------------
ASSETS
CURRENT ASSETS
Cash and due from banks (Notes 3 and 13 and
Schedule G) 329 14
Investments (Notes 11 and 13 and Schedules C and
G) 8,817 7,316
Fiscal credits (Notes 4 and 11) 7 145
Other receivables (Notes 5 and 11 and Schedule G) 1,107 31,641
-----------------------------------
Total Current Assets 10,260 39,116
-----------------------------------
NON-CURRENT ASSETS
Fiscal credits (Notes 4 and 11) 1 96
Other receivables (Note 11) - 1
Investments (Notes 11, 12, 13, 15 and 16 and
Schedules C, E and G) 540,756 796,499
Fixed assets and investments in assets of a
similar nature (Schedule A) 1,006 383
Intangible assets (Schedule B) 3,970 6,548
-----------------------------------
Total Non-current Assets 545,733 803,527
-----------------------------------
Total Assets 555,993 842,643
=====================================================================================
==================================================================================
9.30.02 9.30.01
-----------------------------------
LIABILITIES
CURRENT LIABILITIES
Social security liabilities (Notes 6 and 11) 29 53
Tax liabilities (Notes 7 and 11) 385 7
Other liabilities (Notes 8, 11 and 13 and
Schedule G) 176 105
-----------------------------------
Total Current Liabilities 590 165
-----------------------------------
NON-CURRENT LIABILITIES
Other liabilities (Notes 8 and 11 and
Schedule E) 10,696 2
-----------------------------------
Total Non-current Liabilities 10,696 2
-----------------------------------
Total Liabilities 11,286 167
-----------------------------------
SHAREHOLDERS' EQUITY
(per related statement) 544,707 842,476
-----------------------------------
Total Liabilities and Shareholders' Equity 555,993 842,643
==================================================================================
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 Xxxxxxx X.X.--------------------------
--------------------------------Income Statement--------------------------------
------------For the period of nine months commenced January 1, 2002-------------
-------------------------and ended September 30, 2002.--------------------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
------------------------------------(Note 2)------------------------------------
========================================================================================================================
9.30.02 9.30.01
----------------------------------
Net (loss)/ income from long-term investments (291,839) 80,253
Administrative expenses (Note 13 and Schedule H) (2,213) (1,829)
Other income and expenses (loss) / income (Schedule E) (11,955) 177
Financial gain (Notes 10 and 13) 16,408 145
Income tax (585) -
----------------------------------
Net (loss)/ income for the period (290,184) 78,746
========================================================================================================================
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 Xxxxxxx X.X.---------------------------
------------------Statement of Changes in Shareholders' Equity------------------
------------For the period of nine months commenced January 1, 2002-------------
-------------------------and ended September 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
Item capital premiums contributions
--------------------------------- ----------- ----------- --------- ------------- ----------
Historical balances at
beginning of year 292,087 - 21,190 - 313,277
Adjustments to historical
balances at beginning of year - 355,441 25,786 - 381,227
Historical balances at
beginning of year, adjusted 292,087 355,441 46,976 - 694,504
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 9.30.02 292,087 355,441 46,976 - 694,504
================================= =========== =========== ========= ============= ==========
=================================================================================================================================
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 9.30.02 9.30.01
Item (*)
------------------------------------ -------- -------------- ------------ ----------- ------------- ------------ -------------
Historical balances at
beginning of year 1,974 28,994 - 30,968 32,358 376,603 353,163
Adjustments to historical
balances at beginning of year 2,402 35,283 - 37,685 39,376 458,288 429,766
Historical balances at 4,376 64,277 - 68,653 71,734 834,891 782,929
beginning of year, adjusted
Distribution approved by the
ordinary shareholders' meeting
held on March 15, 2001:
- Cash dividends - - - - - - (19,199)
Distribution approved by the
ordinary shareholders' meeting
held on June 3, 2002
- Legal reserve 3,558 - 3,558 (3,558) - -
- Discretionary reserve - 68,167 68,167 (68,167) - -
Net (loss)/income for the period - - - - (290,184) (290,184) 78,746
--------- ---------- --------- ---------- ------------ ----------- ---------
Balances as of 9.30.02 7,934 132,444 - 140,378 (290,175) 544,707 842,476
========= ========== ========= ========== ============ =========== =========
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 Xxxxxxx X.X.--------------------------
----------------------------Statement of Cash Flows-----------------------------
------------For the period of nine months commenced January 1, 2002-------------
-------------------------and ended September 30, 2002.--------------------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
------------------------------------(Note 2)------------------------------------
==================================================================================================================================
9.30.02 9.30.01
----------------------------------------------------------------------------------------------------------------------------------
CHANGES IN CASH
Cash at beginning of year 96 65
Increase /(decrease) in cash 233 (51)
-------------------------------------
Cash at end of period 329 14
=====================================
REASONS FOR CHANGES IN CASH
Less: (1,701) (1,446)
Ordinary expenses paid
Plus:
Other ordinary income collected 1,496 1,966
-------------------------------------
Cash (used in) / provided by ordinary operations (205) 520
-------------------------------------
Decrease in short-term investments 44,482 -
Other sources of cash 931 33,067
-------------------------------------
Total sources of cash 45,413 33,067
-------------------------------------
Increase in short-term receivables (474) -
Increase in long-term investments (742) (13,920)
Increase in fixed assets (5) (69)
Decrease in short-term debts (62) (359)
Dividends paid - (19,199)
Other uses of cash (43,692) (91)
-------------------------------------
Total uses of cash (44,975) (33,638)
-------------------------------------
Increase / (decrease) in cash 233 (51)
=======================================================================================================================
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 Xxxxxxx X.X.--------------------------
----------------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 alreathe
amount ody 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 Xxxxxxx X.X.--------------------------
----------------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 N(0) 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, the National
Congress had passed a xxxx, which has not yet been promulgated. This
xxxx introduces modifications to the application of the CER and CVS
adjustment indexes, as follows: --------------------------------------
----------------------------------------------------------------------
50
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
--------------------------------------------------------------------------------
Mortgage loans for family dwellings for up to two hundred and fifty
thousand pesos (US$ 67) will be adjusted as from October 1, 2002,
while those loans exceeding this amount will be adjusted applying the
CER. Loans of whatever nature which do not meet the conditions
mentioned above will be adjusted as
follows:--------------------------------------------------------------
Loans for up to one hundred thousand pesos (US$ 27) will not be
adjusted until September 30,
2002.-----------------------------------------------------------------
Loans between one hundred thousand pesos (US$ 27) and four hundred
thousand pesos (US$ 107): the adjustment will be capitalized from
February to September 30, 2002 and the payment term will be
extended.-------------------------------------------------------------
Loans in excess of four hundred thousand pesos (US$ 107) in the
financial system as a whole: CER will be applied as from August 2002.
----------------------------------------------------------------------
The difference between the adjusted amounts collected under applicable
regulations prior to the passing of the mentioned xxxx and the amounts
resulting from the adjustment established by that xxxx is to be
reimbursed to customers.---------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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
51
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
--------------------------------------------------------------------------------
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.------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
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 exchange those deposits for National Government Bonds in US
dollars due 2013 until March 12, 2003, as established by Resolution
743/2002 and
52
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
--------------------------------------------------------------------------------
Communique "A" 3833 of the Argentine Central Bank. This option may be
exercised 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 (US$ 2) will be able to collect that amount in
cash", each financial institution being entitled to increase that
limit to ten thousand pesos (US$3). Banco xx Xxxxxxx y Buenos Aires
S.A. offered the latter possibility to its
customers.------------------------------------------------------------
On November 22, 2002, through Resolution 668/2002, restrictions on
withdrawals of funds from demand accounts as determined in the annex
to Resolution 6/2002 were eliminated, those accounts having been added
to the free account system established by Section 26 of Decree 905/02.
There is also a possibility of subscribing National Government
Securities in US dollars due 2013 with
CEDROS.---------------------------------------------------------------
At the date these financial statements were prepared, the amount of
rescheduled deposits (CEDROS) was US$ 203,296, while the amount of
rescheduled deposits exchanged for National government Bonds was US$
202,882 at that date, without interest and/or adjustments from
application of CER.--------------------------------------------------
----------------------------------------------------------------------
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.---------------------------------------------
53
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 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-----------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
54
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 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
55
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
--------------------------------------------------------------------------------
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 November 30, 2002, the court orders received by Banco
xx Xxxxxxx y Buenos Aires S.A. decreeing the reimbursement of deposits
in their original currency or at the free exchange rate amounted to
US$ 3,317 and US$ 404,321 In compliance with court orders requiring
the reimbursement of deposits under penalty of search and/or seizure
and/or crimes involving illegal retention of deposits and/or contempt,
Banco xx Xxxxxxx y Buenos Aires S.A. paid the amounts of US$ 142,965
and US$ 68,299 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
56
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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.----------------------------------------------------------------
----------------------------------------------------------------------
The difference of US$ 96,901 between the amount paid and the amount
resulting from converting deposits at $1.40 per US dollar as of
September 30, 2002 has been recorded in "Other receivables resulting
from financial brokerage".-----------------------------------
----------------------------------------------------------------------
Banco xx Xxxxxxx 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----------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
57
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 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------------------------------
58
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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 xx Xxxxxxx 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 xx
Xxxxxxx 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 xx Xxxxxxx 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.-------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
59
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------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 xx Xxxxxxx 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 at
that date 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, but did not
contemplate any modification regarding assets and liabilities recorded
at controlled companies engaged in supplementary activities, which
were also affected by the regulations of that decree and still
continue to be excluded from such compensation. For this reason, the
statements made in connection with these companies are still valid.
Through Communiques "A" 3805 and "A" 3825, the Argentine Central Bank
ruled the amendments established by Decree 2167/02, establishing a new
reporting requirement, the deadline of which will be December 23,
2002.-----------------------------------------------------------------
Variations in those amounts due to the application of Decree 2167/02
and the above-mentioned Communiques have been recognized in these
financial statements, the total amount of bonds to be received being
determined at approximately US$ 2,254,027. This amount, calculated by
Banco xx Xxxxxxx y Buenos Aires S.A., may be subject to changes
arising from amendments to regulations or from presentations by
customers under the terms of Communique "A" 3561 and supplementary
rules. --------------------------------------------------------------
As of September 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A.
recognized that amount according to the following
detail:---------------------------------------------------------------
The amount of US$ 676,344 for the compensation received was recorded
in Government securities -in foreign currency- Holdings in investment
accounts, and the amount receivable of US$ 1,599,411 in Other
receivables resulting from financial brokerage - In foreign currency -
Compensation to be received from the National Government.-------------
The advance to be requested from the Argentine Central Bank for the
subscription of the Coverage Bond, including the effect of Decree
2167/02, was recorded in Other liabilities resulting from financial
brokerage - In pesos--------------------------------------------------
60
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
--------------------------------------------------------------------------------
- Advances for the acquisition of National Government Bonds in US
dollars, accruing interest at Libor and falling due in 2012, for US$
461,249 --------------------------------------------------------------
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 $1.40 per US dollar, for US$
393,827, 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 xx Xxxxxxx 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 xx Xxxxxxx y
Buenos Aires S.A. (before the absorption envisaged in Communique "A"
3800) would have decreased by that amount. This effect was included in
the Company's results for the period and in the consolidated income
statement.------------------------------------------------------------
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 xx Xxxxxxx y Buenos Aires S.A. and its subsidiaries
The situation described above affected Banco xx Xxxxxxx 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.-
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
61
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As of November 30, 2002, the amount of deposits with Banco xx Xxxxxxx
y Buenos Aires S.A. in Argentina was approximately US$ 1,142,392,
whereas the assistance received from the Argentine Central Bank to
cover temporary lack of liquidity amounted to US$
1,426,801.------------------------------------------------------------
----------------------------------------------------------------------
Within this context, on March 21, 2002, Banco xx Xxxxxxx 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 xx
Xxxxxxx 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 xx Xxxxxxx 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:--------------------------------------------------------------
----------------------------------------------------------------------
o Securitization (and/or sale) of its mortgage and commercial
loan portfolio through trusts or assignment of credits for a
total amount of US$ 106,952 , 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$ 53,476, 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 Fondo Fiduciario de Assistencia a Entidades
Financieras y de Seguros (F.F.A.E.F.y S.) (Trust Fund for
the Assistance to Financial Institutions and Insurance
Companies) for the amount in US dollars equivalent to US$
26,738, 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$ 153,476 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
62
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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 Restructuring Plan required the payment of smaller deposits by
the Branch, the renegotiation of its obligations with third parties
and the transfer of the renegotiated debts to the Head Office. As of
March 31, 2002, the New York Branch had obligations with third parties
for a total amount of approximately US$ 331,000. Most of that debt was
restructured between that date and the middle of
2002.-----------------------------------------------------------------
----------------------------------------------------------------------
At the date of these financial statements, the New York Branch had
concluded the restructuring of all its obligations with third parties
and is about to close its operations.---------------------------------
----------------------------------------------------------------------
The restructuring of the New York Branch's debt consisted in
rescheduling its commercial debt amounting to US$ 51,000 in the short
term paying 20% of it in cash and transferring the remaining 80% to
Banco xx Xxxxxxx y Buenos Aires S.A., its Head Office in Argentina. At
the date of these financial statements the total amount of that debt
had been settled. Also, of the total financial debt of approximately
US$ 237,000, of which US$ 200,000 had been instrumented as two bonds
of US$ 100,000 each, US$ 125,500 were rescheduled at the Head Office
for a term of 5 years, with a grace period of 2 years, US$ 68,900 were
paid in cash and a debt reduction of US$ 42,600 was granted. Of total
deposits of US$ 30,000, the Branch paid in cash deposits for lower
amounts totaling US$ 12,500, and rescheduled US$ 17,000 at the Head
Office. The rest of obligations and contingencies for letters of
credit were transferred to the Head Office.
----------------------------------------------------------------------
Furthermore, within the framework of this Plan, the representation
offices at Sao Paolo (Brazil) and London (United Kingdom), as well as
Galicia y Buenos Aires Securities (UK) Ltd., the company controlled by
the Bank and organized in the United Kingdom, have been closed
down.-----------------------------------------------------------------
----------------------------------------------------------------------
The Plan also contemplates the corporate restructuring of Banco xx
Xxxxxxx 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----------------------------------
63
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
and at the date of these financial statements, approximately US$
29,803 were paid in respect of employee voluntary
retirement.-----------------------------------------------------------
----------------------------------------------------------------------
Furthermore, under the terms of Law No. 21526 on financial
Institutions, the Bank has requested exemption from compliance with
the pertinent technical ratios and the reduction of the charges or
fines arising from any temporary non-compliance incurred until the
plan is implemented.--------------------------------------------------
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 xx Xxxxxxx (Cayman) Ltd., entities controlled by Banco xx
Xxxxxxx 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 February 28, 2003.------------------------
On Xxxx 00, 0000, Xxxxx xx Xxxxxxx Xxxxxxx 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 xx Xxxxxxx 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.-----------------------------
64
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------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 xx Xxxxxxx Uruguay S.A.'s
commercial receivables as collateral for the
proposal.-------------------------------------------------------------
On July 18, 2002, the Central Bank of Uruguay informed Banco xx
Xxxxxxx 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 December 23, 2002, the Court of Montevideo hearing the case,
approved the reorganization plan requested by Banco xx Xxxxxxx Uruguay
S.A..-----------------------------------------------------------------
The situation of Banco xx Xxxxxxx Uruguay S.A. affected its
subsidiary, Banco xx Xxxxxxx (Cayman) Limited and, consequently, on
July 19, 2002 the authorities in the Cayman Islands appointed a
provisional liquidator at the request of Banco xx Xxxxxxx (Cayman)
Limited, in order to reach a voluntary restructuring agreement between
that entity and its creditors, adopting the corresponding measures to
preserve that company's assets. The restructuring of the liabilities
of Banco xx Xxxxxxx (Cayman) Limited is currently under way. The
proposal to be made to creditors is to be submitted to the competent
authorities in due course.-----------------------
----------------------------------------------------------------------
The developments described in the section entitled "Compensation to be
granted to financial institutions" proved financially detrimental to
Banco xx Xxxxxxx 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.-------------------------------------
----------------------------------------------------------------------
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 xx Xxxxxxx 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---------------------------------
65
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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, Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X. 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 xx Xxxxxxx 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 xx Xxxxxxx 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 xx Xxxxxxx (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 xx Xxxxxxx y Buenos Aires
S.A. should be discontinued.------------------------------------------
----------------------------------------------------------------------
According to the estimates made by Banco xx Xxxxxxx y Buenos Aires
S.A. on the basis of documentation and unaudited information held by
it, a provision of US$ 248,947 has been recorded in Provisions - Other
contingencies, under liabilities, which is equivalent to the negative
consolidated equity of the two subsidiaries estimated as of September
30, 2002.-------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
66
-----------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
Should the two companies have been included in the consolidated
financial statements of Grupo Financiero Xxxxxxx X.X., the main
consolidated statement of financial condition figures would have been
approximately as follows:-------------------------------------------
ASSETS US$ LIABILITIES US$
Cash and due from banks 125,994 Deposits 2,129,350
Government and corporate securities Other liabilities resulting
1,165,405 from financial brokerage 4,065,807
Loans 3,050,476 Other liabilities 207,287
Other receivables resulting from Shareholders' equity 544,707
financial brokerage 2,171,502
Other assets 433,774
---------------------------------------------------------------------------------------------------------
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 xx Xxxxxxx 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 xx Xxxxxxx 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. ------------------------------------------
In view of the above, the return of the difference of US$ 43,850 to
Banco xx Xxxxxxx y Buenos Aires or the restoration of its equity for
an equivalent amount should be considered.----------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
67
-----------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
In view of the situation described, Banco xx Xxxxxxx 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 Xxxxxxx X.X. and its
controlled entities as of September 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 Xxxxxxx X.X. 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 Xxxxxxx X.X. 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.-----------------------------------------------------------------
68
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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
September 30, 2001 have been stated in constant monetary units as of
September 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 (US dollars)-------------
---------------------------------------------------------------------
Foreign currency assets and liabilities (in US dollars) have been
stated at Banco de la Nacion Argentina buying and selling rates
of exchange, respectively, in force at the close of operations on
the last working day of each period. Interest receivable or
payable has been accrued, where applicable.----------------------
-----------------------------------------------------------------
c. Investments------------------------------------------------------
c.1. Current-----------------------------------------------------
-----------------------------------------------------------------
Time and special current account deposits have been valued
at their face value, plus interest accrued at end of period.
-----------------------------------------------------------------
-----------------------------------------------------------------
69
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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 xx Xxxxxxx y Buenos Aires S.A.
and Net Investment S.A. have been accounted for under the
equity method as of September 30, 2002.---------------------
------------------------------------------------------------
The equity interests in Sudamericana Holding S.A. and
Galicia Warrants S.A. have been accounted for under the
equity method, on the basis of June 30, 2002 and July 31,
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.-----
------------------------------------------------------------
------------------------------------------------------------
70
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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 third
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:-------------------------
---------------------------------------------------------------------
9.30.02 9.30.01
------------------ --------------------
Cash (Schedule G) 105 3
Banks - current accounts
(Note 13 and Schedule G) 224 11
------------------ -------------------
Total 329 14
================== ===================
71
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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 9.30.02 9.30.01
-------------- ----------------
VAT credit 7 -
Tax on minimum notional income - 60
Credit - Law 25413 - 27
Income tax withholdings - 58
-------------- ----------------
Total 7 145
============== =================
Non-current
9.30.02 9.30.01
--------------- -----------------
Minimum notional income tax credit - 36
Income tax credit - 53
Assets tax prepayment - 1
Assets tax credit - 2
Freely available balance - General
Resolution 4297/97 - 1
Credit - Law 23.549 mandatory savings 1 3
-------------- -----------------
Total 1 96
============== =================
-----------------------------------------------------------------------------------------------
NOTE 5: OTHER RECEIVABLES--------------------------------------------------------------------
-------------------------------------------------------------------------------------
The breakdown of this caption was as follows:----------------------------------------
-------------------------------------------------------------------------------------
9.30.02 9.30.01
-------------- ----------------
Notes receivable 987 -
Prepaid insurance 6 18
Prepaid expenses (Schedule G) 4 3
Dividends receivable - 31.620
Sundry debtors 110 -
------------- ----------------
Total 1,107 31,641
============= ================
----------------------------------------------------------------------------------------------
NOTE 6: SOCIAL SECURITY LIABILITIES---------------------------------------------------------
------------------------------------------------------------------------------------
The breakdown of this caption was as follows:---------------------------------------
9.30.02 9.30.01
-------------- ----------------
Integrated Pension and Survivors' Benefit
System 2 2
Health care plans 1 1
Directors' and syndics' fees accrual 24 41
Accrual for legal bonus and social security
contributions on legal bonus 2 9
--------------- -----------------
Total 29 53
=============== =================
72
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 7: TAX LIABILITIES-------------------------------------------------------
---------------------------------------------------------------------
The breakdown of this caption was as follows:------------------------
----------------------------------------------------------------------
9.30.02 9.30.01
-------------- ----------------
Income tax withholdings to be deposited 1 7
Provision for turnover tax 1 -
Provision for income tax net of prepayments 383 -
-------------- ----------------
Total 385 7
============== ================
----------------------------------------------------------------------------------------------
NOTE 8: OTHER DEBTS-----------------------------------------------------------
----------------------------------------------------------------------
The breakdown of this caption was as follows:-------------------------
----------------------------------------------------------------------
Current 9.30.02 9.30.01
--------------------- ---------------------
Sundry creditors (Schedule G) 27 5
Expense accrual (Note 13 and Schedule G) 148 98
Directors' qualification bond 1 2
--------------------- ---------------------
Total 176 105
===================== =====================
Non-current 9.30.02 9.30.01
--------------------- ---------------------
Directors' qualification bond 1 2
Provision for other contingencies (Schedule E) 10,695 -
--------------------- ---------------------
Total 10,696 2
===================== =====================
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 9: CAPITAL STATUS--------------------------------------------------------
----------------------------------------------------------------------
As of September 30, 2002, the capital status of the Company was as
follows:--------------------------------------------------------------
----------------------------------------------------------------------
==================================================================================================
Restated Approved by Date of registration
in with the Public Registry
Capital Face constant Body Date of Commerce
value monetary
units
--------------------------------------------------------------------------------------------------
Subscribed, Extraordinary 05.16.00
issued, 292,087 647,528 shareholders' 07.24.00 and 08.09.00
paid-in and meeting 07.26.00
registered Board of Directors
-------------------
Total 292,087 647,528
==================================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
73
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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:-------------------------
----------------------------------------------------------------------
9.30.02 9.30.01
--------------------- --------------------
Generated by assets:
Interest
On time deposits (*) 1,513 129
On special current account deposits (*) 49 4
On government securities 1 -
On notes receivable 18 -
Other 37 -
Mutual Fund yield - 12
Result of purchase and sale of government securities (2) -
Index-adjustment of notes receivable 114 -
Exchange difference 58,451 -
Loss on exposure to inflation (45,369) -
Generated by liabilities:
Exchange difference (234) -
Result of exposure to inflation 1,830 -
--------------------- --------------------
Total financial gains 16,408 145
===================== ====================
----------------------------------------------------------------------
(*) 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 September 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 7 1,106 8,817 5 2 175
2nd Quarter - - - 24 - 1
3rd Quarter - 1 - - 383 -
4th Quarter - - - - - -
After one year - - 44,054 - - 10,696
--------------------------------------------------------------------------
Subtotal falling due 7 1,107 52,871 29 385 10,872
--------------------------------------------------------------------------
Without any set due date 1 - 496,702 - - -
Past due - - - - - -
--------------------------------------------------------------------------
Total 8 1,107 549,573 29 385 10,872
--------------------------------------------------------------------------
Non-interest bearing 8 17 496,702 29 385 10,872
At a fixed rate - 1,090 52,871 - - -
----------------------------------------------------------------------------------------------------
Total 8 1,107 549,573 29 385 10,872
====================================================================================================
74
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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 9.30.02
----------------------------------------------------------------------------------------------------
Issuing company Shares Percentage of interest Principal Face
held in line of value
business per share
--------------------------------------------------------
Possible
Type Number Total Capital votes
----------------------------------------------------------------------------------------------------
Banco xx Xxxxxxx y Ordinary
class "A" 101 0.00027
Buenos Aires S.A. Ordinary Financial
class "B" 438,599,602 activities 0.00027
-----------------------------------------------------------------
Total 438,599,703 93.585537% 93.585542%
-----------------------------------------------------------------------------------------
Financial
and
investment
Net Investment S.A. Ordinary 10,500 87.50% 87.50% activities 0.00027
----------------------------------------------------------------------------------------------------
Sudamericana Holding Ordinary
S.A. class "A" 31,302 0.00027
Ordinary Investment
class "B" 41,735 activities 0.00027
--------------------------------------------------------
Total 73,037 87.500899% 87.500899%
----------------------------------------------------------------------------------------------------
Issuer of
warehouse
receipts
and
Galicia Warrants S.A. Ordinary 175,000 87.50% 87.50% warrants 0.00027
====================================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
====================================================================================================
As of 9.30.01
----------------------------------------------------------------------------------------------------
Shares Percentage of interest held in Principal Face
Issuing company line of value
business per share
--------------------------------------------------------
Total Possible
Type Number Capital votes
----------------------------------------------------------------------------------------------------
Ordinary
Banco xx Xxxxxxx y class "A" 101 0.00027
Buenos Aires S.A. Ordinary Financial
class "B" 438,120,409 activities 0.00027
--------------------------------------------------------
Total 438,120,510 93.48329% 93.48330%
----------------------------------------------------------------------------------------------------
Financial
and
investment
Net Investment S.A. Ordinary 10,500 87.50% 87.50% activities 0.00027
----------------------------------------------------------------------------------------------------
Ordinary
Sudamericana Holding Class "A" 31,302 0.00027
S.A. Ordinary Investment
Class "B" 41,735 activities 0.00027
--------------------------------------------------------
Total 73,037 87.500899% 87.500899%
----------------------------------------------------------------------------------------------------
Issuer of
warehouse
receipts
and
Galicia Warrants S.A. Ordinary 175,000 87.50% 87.50% warrants 0.00027
----------------------------------------------------------------------------------------------------
BtoB Comercial S.A. Ordinary 3,000 25% 25% Services 0.00027
====================================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
75
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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:--------------------------------------------------------------
----------------------------------------------------------------------
====================================================================================================
Financial condition Issuing company
as of 9.30.02
-------------------------------------
Banco xx Xxxxxxx
y Buenos Aires Net Investment
S.A. S.A.
----------------------------------------------------------------------------------------------------
Assets 6,416,551 2,340
Liabilities 5,898,102 19
Shareholders' equity 518,449 2,321
Result for the period of nine months ended 9.30.02 (312,907) (1,564)
====================================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
====================================================================================================
Issuing company
-------------------
Financial condition Galicia Warrants
as of 7.31.02(*) S.A.
----------------------------------------------------------------------------------------------------
Assets 1,634
Liabilities 236
Shareholders' equity 1,398
Result for the period of nine months ended 7.31.02 (11)
====================================================================================================
----------------------------------------------------------------------
(*) See Note 2.c.2.---------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
====================================================================================================
Issuing company
-------------------
Financial condition Sudamericana
as of 6.30.02(*) Holding S.A.
----------------------------------------------------------------------------------------------------
Assets 9,572
Liabilities 242
Shareholders' equity 9,330
Result for the period of nine months ended 6.30.02 218
====================================================================================================
----------------------------------------------------------------------
(*) See Note 2.c.2.-------------------------------------------
----------------------------------------------------------------------
====================================================================================================
Issuing company
------------------------------------
Banco xx Xxxxxxx
Financial condition y Buenos Aires Net Investment
as of 9.30.01 S.A. S.A.
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Assets 7,355,020 2,488
Liabilities 6,513,883 186
Shareholders' equity 841,137 2,302
Result for the period of nine months ended 9.30.01 85,931 (737)
====================================================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
76
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 12: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
==================================================================================================
Issuing company
-------------------
Financial condition Sudamericana
as of 6.30.01 Holding S.A.
----------------------------------------------------------------------------------------------------
Assets 11,729
Liabilities 5,161
Shareholders' equity 6,568
Result for the period of six months ended 6.30.01 (2,514)
====================================================================================================
----------------------------------------------------------------------
====================================================================================================
Issuing company
-------------------
Financial condition Galicia Warrants
as of 7.31.02 S.A.
----------------------------------------------------------------------------------------------------
Assets 1,889
Liabilities 553
Shareholders' equity 1,336
Result for the period of three months ended 7.31.01 139
====================================================================================================
----------------------------------------------------------------------------------------------------------------------
The financial condition and results of related companies were as
follows:--------------------------------------------------------------
====================================================================================================
Issuing company
--------------------
Financial condition BtoB Comercial S.A.
as of 9.30.01
---------------------------------------------------------------------------------------------------
Assets 1,651
Liabilities 106
Shareholders' equity 1,545
Result for the period of nine months ended 9.30.01 (35)
===================================================================================================
----------------------------------------------------------------------
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 xx Xxxxxxx y Buenos Aires S.A.
and its subsidiaries:-------------------------------------------------
----------------------------------------------------------------------
Banco xx Xxxxxxx y Buenos Aires S.A.
9.30.02 9.30.01
----------------------- ---------------------
ASSETS
Cash and due from banks - current accounts (Note 3
and Schedule G) 223 10
Investments - time deposits (Schedules C and G) 5,693 7,259
Investments - special current account deposits
(Schedules C and G) - 57
----------------------- ---------------------
Total 5,916 7,326
======================= =====================
77
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 13: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
LIABILITIES
Other liabilities - expense accrual (Note 8) 47 7
----------------------- ---------------------
Total 47 7
======================= =====================
----------------------------------------------------------------------------------------------------
INCOME
Financial income - interest on time deposits (Note 10) 3,087 1,971
Financial income - interest on special current
account deposits (Note 10) - 61
Financial income - interest on overnight funds - 2
----------------------- ---------------------
Total 3,087 2,034
======================= =====================
EXPENSES
Administrative expenses (Schedule H)
Leasing of brand - 222
Bank charges 1 1
General expenses 151 203
----------------------- ---------------------
Total 152 426
======================= =====================
----------------------------------------------------------------------------------------------------
Banco Galicia Uruguay S.A.
9.30.02 9.30.01
----------------------- ---------------------
ASSETS
Investments - time deposits (Schedules C and G) 42,500 -
Investments - special current account deposits
(Schedules C and G) 2,916 -
----------------------- ---------------------
Total 45,416 -
======================= =====================
INCOME
Financial income - interest on time deposits (Note
10) 751 -
Financial income - interest on special current
account deposits (Note 10) 41 -
----------------------- ---------------------
Total 792 -
======================= =====================
----------------------------------------------------------------------------------------------------
Galicia Warrants S.A.
9.30.02 9.30.01
----------------------- ---------------------
INCOME
Financial income - Interest earned 1 -
----------------------- ---------------------
Total 1 -
======================= =====================
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 14: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF PROFITS-------------------
----------------------------------------------------------------------
At September 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.-------------------------------------------------
78
-----------------------Grupo Financiero Xxxxxxx X.X.----------------------------
----------------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 Xxxxxxx X.X.
and Banco xx Xxxxxxx y Buenos Aires S.A..-----------------------------
As a result, Grupo Financiero Xxxxxxx X.X. holds 37.50% and Banco xx
Xxxxxxx 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 Xxxxxxx X.X. 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 Xxxxxxx X.X. 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 xx Xxxxxxx 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.------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
79
-----------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------Notes to the Financial Statements (Continued)-------------------
-----------------(figures stated in thousands of US dollars)--------------------
--------------------------------------------------------------------------------
NOTE 16: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
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 Xxxxxxx X.X., 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 December 10, 2002, the NASDAQ informed the Company that all listing
requirements for the compliance of which the latter had requested an
extension were deemed to have been met by it. The Company decided to
keep its listing on the NASDAQ SmallCap Market and recover its GGAL
symbol, which took place as from December 11, 2002.-------------------
----------------------------------------------------------------------
On October 10, 2002, the Company received US$ 1,001 in settlement of
notes receivable it held as of September 30, 2002.--------------------
----------------------------------------------------------------------
Between July 1 and December 27, 2002, the Company made new irrevocable
cash contributions of US$ 392 in Net Investment S.A..-----------------
80
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
Fixed assets and investments in assets of a similarnature-----------------------
For the period of nine months---------------------------------------------------
commenced January 1, 2002 and ended September 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
------------
Accumu- Accumu-
At At end lated at lated at Net book Net book
Principal beginning of beginning Dele- Rate end of value at value at
account of year Increases Deletions period of year tions % Amount period 9.30.02 9.30.01
------------------------------------------------------------------------------------------------------------------------------
Real estate 196 680 - 876 5 - 2 10 15 861 192
------------------------------------------------------------------------------------------------------------------------------
Vehicles 32 - 12 20 4 4 20 4 4 16 29
------------------------------------------------------------------------------------------------------------------------------
Hardware and
software 138 5 4 139 27 1 20 21 47 92 117
------------------------------------------------------------------------------------------------------------------------------
Furniture and
facilities 54 1 - 55 10 - 20 8 18 37 45
------------------------------------------------------------------------------------------------------------------------------
Total as of
9.30.02 420 686 16 1,090 46 5 43 84 1,006 383
==============================================================================================================================
81
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
Intangible assets---------------------------------------------------------------
For the period of nine months---------------------------------------------------
commenced January 1, 2002 and ended September 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
------------
Accumu- Accumu-
At At end lated at lated at Net book Net book
PriNcipal beginning of beginning Dele- Rate end of value at value at
account of year Increases Deletions period of year tions % Amount period 9.30.02 9.30.01
------------------------------------------------------------------------------------------------------------------------------
Logotype 15 - - 15 4 - 20 2 6 9 13
------------------------------------------------------------------------------------------------------------------------------------
Goodwill 6,300 - 667 5,633 872 44 20 844 1,672 3,961 6,535
------------------------------------------------------------------------------------------------------------------------------------
Balance at
9.30.02 6,315 - 667 5,648 876 44 846 1,678 3,970 6,548
====================================================================================================================================
82
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
Investments---------------------------------------------------------------------
Equity Interests in Other Companies and Other Investments-----------------------
Quarterly Statement of Financial Condition as of September 30, 2002 and 2001----
(figures stated in thousands of US dollars)-------------------------------------
------------------------------------------------------Schedule C----------------
==================================================================
Issuance and characteristics Book Value Book Value
of the securities as of 9.30.02 as of 9.30.01
------------------------------------------------------------------
Current investments (*)
Special current account
deposits (Note
13 and Schedule G) 87 57
Time deposits (Note 13 and
Schedule G) 8,730 7,259
---------------------------------
Total current investments 8,817 7,316
==================================================================
--------------------------------------------------------------------------------
(*) include accrued interest.---------------------------------------------------
--------------------------------------------------------------------------------
83
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
Investments---------------------------------------------------------------------
Equity Interests in Other Companies and Other Investments-----------------------
Quarterly Statement of Financial Condition as of September 30, 2002 and 2001----
(figures stated in thousands of US dollars)-------------------------------------
-------------------------------------------------------------Schedule C (contd.)
====================================================================================================================================
Quotation Equity Book Book
Issuance and per share Value Value Value
characteristics Face Acquisition as of as of as of as of
of the securities Class Value Number cost 9.30.02 9.30.02 9.30.02 9.30.01
------------------------------------------------------------------------------------------------------------------------------------
Non-current investments
Special current account
deposits (Note 13 and 2,829 -
Schedule G)
Time deposits (Note 13
and Schedule G) 41,225 -
Banco xx Xxxxxxx y Ordinary class "A" 0.00027 101
Buenos Aires S.A. Ordinary class "B" 0.00027 438,599,602 0,000120
---------------------------
438,599,703 691,726 485,171 485,171 787,183
Net Investment S.A. Ordinary 0.00027 10,500 6
Irrevocable
contributions 2,997 2,124 2,124 2,014
BtoB Comercial S.A. - - 386
Sudamericana Holding S.A. Ordinary class "A" 0.00027 31,302
Ordinary class "B" 0.00027 41,735
---------------------------
73,037 8,878
Irrevocable
contributions 2,667 8,182 8,182 5,747
Galicia Warrants S.A. Ordinary 0.00027 175,000 3,182 1,225 1,225 1,169
---------------------------------------------------------------------------------------------------------
Total Non-current
investments 709,456 496,702 540,756 796,499
====================================================================================================================================
======================================================================================================================
INFORMATION ON THE ISSUER
-----------------------------------------------------------------------------------------
LATEST FINANCIAL STATEMENTS (Note 12)
-----------------------------------------------------------------------------------------
% of
Issuance and Principal Net equity held
characteristics line of Capital income/ Shareholders' in the
of the securities Business Date Stock loss equity capital stock
----------------------------------------------------------------------------------------------------------------------
Non-current investments
Special current account
deposits (Note 13 and
Schedule G)
Time deposits (Note 13
and Schedule G)
Banco xx Xxxxxxx y
Buenos Aires S.A.
Financial activities 9.30.02 125.311 (312.907) 518,449 93.585537%
Net Investment S.A. Financial
and
investment
activities 9.30.02 3 (1,564) 2,321 87,50%
BtoB Comercial S.A.
Sudamericana Holding S.A.
Investment
activities 6.30.02 22 2,463 8,279 87,500899%
Galicia Warrants S.A. Issuer of
warehouse
receipts and
warrants 7.31.02 53 38 1,301 87.50%
-------------------------------------------------------------------------------------------
Total Non-current
investments
======================================================================================================================
--------------------------------------------------------------------------------
(*) includes accrued interest.--------------------------------------------------
(**) for the period of nine months ended September 30, 2002.--------------------
(***) for the fiscal year ended June 30, 2002.----------------------------------
(#) for the period of three months ended July 31, 2002.-------------------------
--------------------------------------------------------------------------------
84
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
---------------------------Allowances and Provisions----------------------------
--------------------------For the period of nine months-------------------------
------------commenced January 1, 2001 and ended September 30, 2002.-------------
--------In comparative format with the same period of the previous year.--------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
----------------------------------------------------------------------Schedule E
====================================================================================================================
Captions Balance at Increases Decreases Balance at end of
beginning of year period
--------------------------------------------------------------------------------------------------------------------
Allowances:
Valuation allowance - Investments - 44,707 (44,707) -
--------------------------------------------------------------------------------------------------------------------
Total as of 9.30.02 - 44,707 (44,707) -
--------------------------------------------------------------------------------------------------------------------
Total as of 9.30.01 - 341 (341) -
--------------------------------------------------------------------------------------------------------------------
For other contingencies - 10,695 - 10,695
--------------------------------------------------------------------------------------------------------------------
Total as of 9.30.02 - 10,695 - 10,695
--------------------------------------------------------------------------------------------------------------------
Total as of 9.30.01 - - - -
====================================================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
85
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------------Foreign Currency Assets and Liabilities---------------------
-------Statement of Financial Condition as of September 30, 2002 and 2001-------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
----------------------------------------------------------------------Schedule G
=======================================================================================================================
Captions Quotation Amount in Amount in
Amount and type Argentine Amount and type Argentine
of foreign currency of foreign currency
currency at 9.30.02 currency at 9.30.01
-----------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and due from banks
Cash US$ 105.33 3,74 394 US$ - -
Current Account US$ 131.80 3.74 493 US$ 7 16
Investments
Special current account deposits US$ 89.88 3.74 336 US$ 97 215
Time deposits US$ 1,310.03 3.74 4,900 US$ 12,246 27,148
Other receivables
Prepaid expenses US$ - 3.74 - US$ 5 11
----------------- -----------------
Total Current Assets 6,123 27,390
----------------- -----------------
NON-CURRENT ASSETS
Investments
Special current account deposits US$ 2,906.25 3.74 10,869 US$ - -
Time deposits US$ 42,357.62 3.74 158,417 US$ - -
----------------- -----------------
Total Non-current Assets 169,286 -
----------------- -----------------
Total Assets 175,409 27,390
================= =================
LIABILITIES
CURRENT LIABILITIES
Other debts
Sundry creditors US$ 4.45 3.74 17 US$ 4 9
Expense accrual US$ 60.20 3.74 225 US$ 67 149
----------------- -----------------
Total Current Liabilities 242 158
----------------- -----------------
Total Liabilities 242 158
=======================================================================================================================
86
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
---------Information required by Section 64, subsection b) of Law 19550---------
-------------------------For the period of nine months--------------------------
------------commenced January 1, 2002 and ended September 30, 2002.-------------
--------In comparative format with the same period of the previous year.--------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
----------------------------------------------------------------------Schedule H
=======================================================================================================================
Captions Total as of Administrative Total as of
9.30.02 expenses 9.30.01
-----------------------------------------------------------------------------------------------------------------------
Salaries and social security charges 195 195 291
Bonuses 51 51 93
Services to the staff 5 5 9
Directors' and syndics' fees 33 33 42
Fees for services 666 666 486
Fixed asset depreciation 43 43 31
Intangible asset amortization 846 846 533
Leasing of brand (*) 9 9 14
Stationery and office supplies 3 3 7
Advertising expenses - - 1
Condominium Expenses 16 16 6
Entertainment, transportation and per diem 10 10 36
Vehicles expenses 5 5 4
Insurance 23 23 57
Electricity and communications 16 16 22
Taxes, rates and assessments and contributions 142 142 30
Bank charges (*) - - 1
General expenses (*) 150 150 166
------------------------------------------------------
Total 2,213 2,213 1,829
=======================================================================================================================
--------------------------------------------------------------------------------
(*) Balances net of eliminations corresponding to intercompany transactions (per
Section 33 of Law 19550). See Note 13 to the financial statements.
--------------------------------------------------------------------------------
87
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
---Information required in addition to the Notes to the Financial Statements----
-------------------------For the period of nine months--------------------------
------------commenced January 1, 2002 and ended September 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 September 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.----------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
88
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
---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 September 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 September 30, 2002 and 2001 the Company did not have any
technically appraised fixed assets.-----------------------------------
----------------------------------------------------------------------
b) As of September 30, 2002 and 2001 the Company did not have any
obsolete fixed assets which have a carrying value.--------------------
----------------------------------------------------------------------
c) As of September 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 September 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
9.30.02 9.30.01
---------------- ----------------------------------------- ------------ ------------ -------------
Vehicles Third party liability, fire, theft and
total loss. 18 16 29
================ ========================================= ============ ============ =============
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 9: ALLOWANCES AND PROVISIONS---------------------------------------------
----------------------------------------------------------------------
See Note 8 and Schedule E to the financial statements.----------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
89
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
---Information required in addition to the Notes to the Financial Statements----
----------------------------------(Continued)-----------------------------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 10: CONTINGENCIES---------------------------------------------------------
----------------------------------------------------------------------
As of September 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 September 30, 2002 and 2001, there were no irrevocable
contributions towards future share subscriptions.---------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 12: DIVIDENDS ON PREFERRED SHARES-----------------------------------------
----------------------------------------------------------------------
As of September 30, 2002 and 2001, there were no cumulative unpaid
dividends on preferred shares.----------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 13: LEGAL RESERVE---------------------------------------------------------
----------------------------------------------------------------------
See Note 14 to the financial statements.------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
90
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-------Supplementary and Explanatory Statement by the Board of Directors--------
------------For the period of nine months commenced January 1, 2002-------------
-------------------------and ended September 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 September 30, 2002 and 2001 the Company had not set up any
allowances or provisions.----------------------------------------
---------------------------------------------------------------------------
b) Inventories:
As of September 30, 2002 and 2001, the Company did not have any
inventories.----------------------------------------------------------
---------------------------------------------------------------------------
B. Non- Current Assets:-------------------------------------------------------
---------------------------------------------------------------------------
a) Receivables:----------------------------------------------------------
As of September 30, 2002 and 2001 the Company had not set up any
allowances or provisions.----------------------------------------
-----------------------------------------------------------------
b) Inventories:----------------------------------------------------------
As of September 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 September 30, 2002 and 2001, the Company did not have any
technically appraised fixed assets.------------------------------
2) As of September 30, 2002 and 2001, the Company did not have any
obsolete fixed assets which have a carrying value.---------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
91
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-------Supplementary and Explanatory Statement by the Board of Directors--------
----------------------------------(Continued)-----------------------------------
--------In comparative format with the same period of the previous year.--------
------------------(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 September 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 September 30, 2002 and 2001, the Shareholders' Equity did not
include the Irrevocable Advances towards Future Share Issues account.
----------------------------------------------------------------------
2) As of September 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 September 30, 2002 and 2001, the Company did not have any
receivables for transactions conducted with controlled or related
companies.------------------------------------------------------------
3) As of September 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.----------------------
---------------------------------------------------------------------------
92
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-------Supplementary and Explanatory Statement by the Board of Directors--------
------------For the period of nine months commenced January 1, 2002-------------
-------------------------and ended September 30, 2002.--------------------------
--------In comparative format with the same period of the previous year.--------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
5) As of September 30, 2002 and 2001, the breakdown of insurance policies
taken out by the Company for its fixed assets was as follows:---------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
================ ========================================= ============ ============ =============
Book Value Book Value
Insured as of as of
Insured assets Risks covered amount 9.30.02 9.30.01
---------------- ----------------------------------------- ------------ ------------ -------------
Vehicles Third party liability, fire, theft and
total loss. 18 16 29
================ ========================================= ============ ============ =============
---------------------------------------------------------------------------
6) As of September 30, 2002 and 2001, there were no contingencies highly
likely to occur which have not been given accounting recognition.-----
7) As of September 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, December 30, 2002.-----------------------------
--------------------------------------------------------------------------------
(signed) Xxxx Xxxxxx------------------------------------------------------------
Chairman------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
93
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------Informative Review as of September 30, 2002 and 2001--------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
The loss for the period of nine months ended September 30, 2002 reported by the
Company amounts to US$ 290,184; it was generated by the valuation of the equity
interest in Banco xx Xxxxxxx y Buenos Aires S.A., which is Grupo Financiero
Xxxxxxx X.X.'s principal source of income, as shown in its Income Statement.----
--------------------------------------------------------------------------------
Grupo Financiero Xxxxxxx X.X.'s strategy is to become a leading company engaged
in providing comprehensive financial services and, at the same time, continue to
strengthen Banco xx Xxxxxxx 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 xx Xxxxxxx 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$ 3,558 to the Legal Reserve, US$ 68,167, to the Discretionary Reserve and to
carry forward US$ 9.------------------------------------------------------------
--------------------------------------------------------------------------------
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 Xxxxxxx X.X., 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
94
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------Informative Review as of September 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 December 10, 2002, the NASDAQ informed the Company that all listing
requirements for the compliance of which the latter had requested an extension
were deemed to have been met by it. The Company decided to keep its listing on
the NASDAQ SmallCap Market and recover its GGAL symbol, which took place as from
December 11, 2002.--------------------------------------------------------------
--------------------------------------------------------------------------------
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------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9.30.02 9.30.01 9.30.00
----------------- ------------------ ------------------
Current Assets 10,260 39,116 113
Non-current Assets 545,733 803,527 761,298
----------------- ------------------ ------------------
Total Assets 555,993 842,643 761,411
================= ================== ==================
Current Liabilities 590 165 8,299
Non-current liabilities 10,696 2 2
----------------- ------------------ ------------------
Subtotal 11,286 167 8,301
----------------- ------------------ ------------------
Shareholders' Equity 544,707 842,476 753,110
----------------- ------------------ ------------------
Total 555,993 842,643 761,411
================= ================== ==================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
95
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------Informative Review as of September 30, 2002 and 2001--------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
KEY INCOME STATEMENT FIGURES----------------------------------------------------
--------------------------------------------------------------------------------
9.30.02 9.30.01 6.30.00
------------------ ----------------- ----------------
Ordinary operating result (294,637) 78,424 47,197
Financial results 16,408 145 (80)
Other income and expenses (11,955) 177 104
------------------ ----------------- ----------------
Ordinary net (loss)/ income (290,184) 78,746 47,221
------------------ ----------------- ----------------
Net (loss) / income (290,184) 78,746 47,221
================== ================= ================
--------------------------------------------------------------------------------
RATIOS--------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
9.30.02 9.30.01 9.30.00
--------------------------------------------------------------------------------
Liquidity 17,3412 236,5269 0,0136
--------------------------------------------------------------------------------
Indebtedness 0,0207 0,0002 0,0110
--------------------------------------------------------------------------------
Return on equity (0,3476) 0,1031 0,0669
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 September 30, 2001 and 2000 have
been stated in constant monetary units as of September 30, 2002.----------------
--------------------------------------------------------------------------------
Equity interests in other companies---------------------------------------------
--------------------------------------------------------------------------------
---------Banco xx Xxxxxxx y Buenos Aires S.A.-----------------------------------
See section entitled "Situation of Banco xx Xxxxxxx y Buenos Aires S.A. and its
subsidiaries", in Note 1 to the financial statements.---------------------------
--------------------------------------------------------------------------------
---------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 Xxxxxxx X.X. holds an 87.50% equity interest in
this company and Banco xx Xxxxxxx y Buenos Aires S.A., owns the remaining 12.50%
of its capital stock.-----------------------------------------------------------
--------------------------------------------------------------------------------
96
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------Informative Review as of September 30, 2002 and 2001--------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
Irrevocable cash contributions made as of September 30, 2002 amounted to US$
742. Between October 1 and December 19, 2002, the Company made a new irrevocable
cash contribution of US$ 376.---------------------------------------------------
--------------------------------------------------------------------------------
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 Xxxxxxxxxx.xxx. 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 xx Xxxxx and its principal source of income will be the
collection of commissions on transactions. Red xx Xxxxx 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.----------------------------------
--------------------------------------------------------------------------------
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 99.99167%.--
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 Xxxxxxx X.X.
and Banco xx Xxxxxxx y Buenos Aires S.A..---------------------------------------
--------------------------------------------------------------------------------
o Sudamericana Holding S.A.--------------------------------------------------
--------------------------------------------------------------------------------
Sudamericana Holding S.A. is a group of life and retirement insurance companies.
--------------------------------------------------------------------------------
In September 2001, Grupo Financiero Xxxxxxx X.X. 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
97
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------Informative Review as of September 30, 2002 and 2001--------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
Xxxxxxx X.X. took its interest in that company to 87.50%, while the remaining
12.50% continues to belong to Banco xx Xxxxxxx 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 Xxxxxxx X.X.'s strategy to
strengthen its positioning as a leading financial service provider, thus
supplementing those businesses which Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X. may
only conduct to a limited extent, in line with prevailing regulations.----------
--------------------------------------------------------------------------------
In view of the economic and financial developments occurred, 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 Xxxxxxx X.X. purchased 8 functional units of the
building located at Maipu 241, in the amount of US$ 680 through the release of
the guarantees provided by Hartford Life International Ltd. and Hartford Life
Ltd. in favor of Grupo Financiero Xxxxxxx X.X., 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 Xxxxxxx X.X. acquired 87.50% of the capital
stock and voting rights of Galicia Warrants S.A., a company in which Banco xx
Xxxxxxx 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 September 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.-----------------------
--------------------------------------------------------------------------------
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 Xxxxxxx X.X. and its controlled entities as of September 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 Xxxxxxx X.X. may not report all the adjustments
that
98
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------Informative Review as of September 30, 2002 and 2001--------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
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 Xxxxxxx X.X. 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, December 30, 2002.-----------------------------
--------------------------------------------------------------------------------
(Signed) Xxxx Xxxxxx------------------------------------------------------------
Chairman.-----------------------------------------------------------------------
--------------------------------------------------------------------------------
I, Xxxxxx Xxxxxxxx Xxxxxx, 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 Xxxxxxx X.X. for the period of nine months
ended September 30, 2002, produced in Spanish, a copy of which I have had before
me.-----------------------------------------------------------------------------
--------------------------------------------------------------------------------
Given and signed in Buenos Aires, Argentina on January 15, 2003.----------------
Es traduccion fiel xx xxxxxx de los estados contables, notas y anexos,
informacion adicional requerida por el Articulo 00 xxx xxxxxxxxxx xx xx Xxxxx xx
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 Xxxxxxx X.X. por el
periodo de nueve meses terminado el 30 de septiembre de 2002, redactados en
idioma xxxxxxxxxx que se acompanan en primer termino y que he tenido a la vista,
de lo cual doy fe en Buenos Aires el dia 15 de enero de 2003.-------------------
99
TRADUCCION----------------------------------------------------------------------
Report of the Supervisory Syndics Committee-------------------------------------
To the Shareholders of----------------------------------------------------------
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
In our capacity as Syndics of Grupo Financiero Xxxxxxx X.X., 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 Xxxxxxx X.X. as of September 30, 2002, and the related Income
Statement, Statement of Changes in Shareholders' Equity and Statement of Cash
Flows for the period of nine 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 Xxxxxxx X.X. as of September 30, 2002
and the Consolidated Income Statement and Consolidated Statement of Cash Flows
for the period of nine 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 December 30, 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 nine months ended September 30, 2002, contain the information required by
Regulations 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 credit 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 Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X.
represents approximately 87% of its Assets and 89% of its Shareholders' Equity,
therefore requiring a special mention.------------------------------------------
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 nine months ended
September 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, December 30, 2002-------------------------------------------------
--------------------------------------------------------------------------------
(Signed) XXXX X. XXXXXX, XXXXXX XXXXXX XXXXXX and XXXXXX XXXXXX XXXXXXX,
Syndics, for the Syndics' Committee.--------------------------------------------
--------------------------------------------------------------------------------
I, Xxxxxx Xxxxxxxx Xxxxxx, 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 Xxxxxxx X.X. for the period of nine
months ended September 30, 2002, produced in Spanish, a copy of which I have had
before me.----------------------------------------------------------------------
Given and signed in Buenos Aires, Argentina on January 15, 2003.----------------
--------------------------------------------------------------------------------
Es traduccion fiel xx xxxxxx del Informe de la Comision Fiscalizadora
correspondiente a Grupo Financiero Xxxxxxx X.X. por el periodo de nueve meses
terminado el 30 de septiembre de 2002, redactado en idioma xxxxxxxxxx xxxx copia
se acompana en primer termino y que he tenido a la vista, de lo cual doy fe en
Buenos Aires el dia 15 de enero de 2003.----------------------------------------
LIMITED REVIEW REPORT
To the Chairman and Directors of
Grupo Financiero Xxxxxxx X.X.
Tte. Gral. Xxxx X. Xxxxx 456, Piso 2
Autonomous City of Buenos Aires
-------------------------------
1. We have performed a limited review of the statements of financial condition
of Grupo Financiero Xxxxxxx X.X. as of September 30, 2002 and 2001 and the
related income statement, statement of changes in shareholders' equity and
statement of cash flows for the periods of nine 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 Xxxxxxx X.X. as of September 30, 2002 and
2001, and the consolidated income statement and consolidated statement of
cash flows for the periods of nine 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 September 30, 2002 and 2001, or on its
consolidated financial position, the consolidated results of its operations
and consolidated cash flows as of September 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 xx Xxxxxxx
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 xx Xxxxxxx y Buenos Aires S.A.
5. As described in Note 1 to the financial statements, Banco xx Xxxxxxx 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 xx Xxxxxxx 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 September 30, 2002 and on the financial
position of Grupo Financiero Xxxxxxx X.X. 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 September 30, 2002 according to the
method of the present value of future discounted cash flows, which means
the assumption of premises on future events. 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 Xxxxxxx X.X., 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 September 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 Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx
X.X. as of September 30, 2002 represents approximately 87% and 89% 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 xx Xxxxxxx 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 xx Xxxxxxx y Buenos Aires S.A.,
the portfolio of total credit to the public and private sectors
included in Schedule D, the certificates of participation in the
financial trusts mentioned in Notes 17, 20, 21 and 23 to the financial
statements of Banco xx Xxxxxxx 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 xx Xxxxxxx
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 xx Xxxxxxx y Buenos Aires S.A. in Banco Galicia Uruguay
S.A., Banco xx Xxxxxxx (Cayman) Limited and Banco xx Xxxxxxx 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 Communique "A" 3825 of the Argentine Central
Bank, and the claims made by Banco xx Xxxxxxx 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 xx Xxxxxxx 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 xx Xxxxxxx 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 xx Xxxxxxx y Buenos Aires S.A. and
Grupo Financiero Xxxxxxx X.X 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 xx
Xxxxxxx y Buenos Aires S.A in Banco Galicia Uruguay S.A. and Banco xx
Xxxxxxx (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 Xxxxxxx X.X. 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 xx Xxxxxxx 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 xx Xxxxxxx 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 = $ 3.74
prevailing as of September 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
Xxxxxxx X.X. as of September 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 September 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 $ 5,477.17 (US$ 1,464), 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, December 30, 2002
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PRICE WATERHOUSE & CO.
(Partner)
--------------------------------------
Professional Registration of the Firm:
C.P.C.E.C.A.B.A. To. 1 Fo. 1
Xxxxxxx Xxxxxx Xxxxx Rua
Public Accountant (U.B.A.)
C.P.C.E. C.A.B.A. To. 121 Fo. 94
