TRADUCCION----------------------------------------------------------------------
--------------------------------------------------------------------------------
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
--------------------------------------------------------------------------------
Financial Statements------------------------------------------------------------
for the periods of six months---------------------------------------------------
ended June 30, 2002 and 2001----------------------------------------------------
--------------------------------------------------------------------------------
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-------------------------------Table of Contents--------------------------------
-----------------Financial Statements and Limited Review Report-----------------
----------For the periods of six months ended June 30, 2002 and 2001.-----------
------------------Report of the Supervisory Syndics Committee-------------------
---------------For the period of six months ended June 30, 2002.----------------
-----------------------------System established by------------------------------
-----Technical Regulations (N.T.2001) of the National Securities Commission-----
--------------------------------------------------------------------------------
Heading 1
Quarterly Consolidated Statement of Financial Condition 2
Consolidated Memorandum Accounts 5
Consolidated Income Statement 6
Consolidated Statement of Cash Flows 8
Notes to the Consolidated Financial Statements 9
Quarterly Statement of Financial Condition 45
Income Statement 46
Statement of Changes in Shareholders' Equity 47
Statement of Cash Flows 48
Notes to the Financial Statements 49
Schedules 80
Information required in addition to the Notes to the Financial Statements
by Section 68 of the Buenos Aires Stock Exchange regulations 87
Supplementary and Explanatory Statement by the Board of Directors
required by Section 2 of the Accounting Documentation Rules of the
Cordoba Stock Exchange Regulations 90
Informative Review 93
Report of the Supervisory Syndics Committee
Limited Review Report
Name:-------------------------- Grupo Financiero Xxxxxxx X.X.----------
Legal address:----------------- Tte. Gral. Xxxx X. Xxxxx N(0)456 - Piso 2(0)---
Autonomous City of Buenos Aires-----------------
--------------------------------------------------------------------------------
Principal line of business:------------- Financial and Investment activities----
4th fiscal year-----------------------------------------------------------------
For the period of six months commenced January 1, 2002--------------------------
and ended June 30, 2002---------------------------------------------------------
In comparative format with the same period of the previous year-----------------
--------------------------------------------------------------------------------
DATE OF REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE-----------------------
By-laws:---------------------------------- September 30, 1999-------------------
Date of more recent amendment to By-laws: July 3, 2001-------------------------
Registration number with the Corporation
Control Authority:------------------------ 8,569--------------------------------
Sequential Number - Corporation Control---
Authority:-------------------------------- 1,671,058----------------------------
Date of expiry of the Company's by-laws:-- June 30, 2100------------------------
Name of Controlling Company:-------------- EBA HOLDING S.A. --------------------
Principal line of business:--------------- Financial and Investment activities--
Interest held by the Controlling Company
in the Shareholders' equity as of June
30, 2002:--------------------------------- 25.74--------------------------------
Percentage of votes to which the
Controlling Company is entitled as of
June 30, 2002:---------------------------- 63.42--------------------------------
================================================================================
CAPITAL STATUS as of June 30, 2002 (Note 9 to the Financial Statements)
(figures stated in thousands of US dollars)
--------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------
Quantity Type Voting rights per Subscribed Paid up
share
--------------------------------------------------------------------------------
Ordinary class "A", face
281,221,650 value of 0.001 5 74,006 74,006
--------------------------------------------------------------------------------
Ordinary class "B", face
811,185,367 value of 0.001 1 213,470 213,470
--------------------------------------------------------------------------------
1,092,407,017 287,476 287,476
================================================================================
1
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Consolidated Statement of Financial Condition------------------
--------------------------as of June 30, 2002 and 2001--------------------------
------------------(figures stated in thousands of US dollars)-------------------
=============================================================================================================================
6.30.02 6.30.01
-------------------------------------------
ASSETS
-------------------------------------------
A. CASH AND DUE FROM BANKS 134,124 768,365
-------------------------------------------
-Cash 40,073 152,828
-Banks and correspondents 93,687 615,504
-Other 364 33
-------------------------------------------
B. GOVERNMENT AND CORPORATE SECURITIES 536,369 485,305
-------------------------------------------
-Holdings of investment account securities - 199,846
-Holdings of trading securities 80,198 108,483
-Unlisted government securities 453,755 175,024
-Investments in listed corporate securities 2,532 2,012
-Allowances (116) (60)
-------------------------------------------
C. LOANS 2,557,698 4,819,350
-------------------------------------------
-To the non-financial public sector 1,865,593 1,360,653
-To the financial sector 23,233 195,250
-To the non-financial private sector and residents abroad 985,037 3,421,157
-Overdrafts 68,535 251,351
-Notes 294,995 1,143,034
-Mortgage loans 212,429 848,072
-Pledge loans 23,236 183,905
-Consumer loans 49,289 166,535
-Credit cards 168,909 432,225
-Other 87,199 343,817
-Accrued Interest and quotation differences receivable 94,915 75,753
-Documented interest (6,472) (20,868)
-Unallocated collections (7,998) (2,667)
-Allowances for loan losses (316,165) (157,710)
-------------------------------------------
D. OTHER RECEIVABLES RESULTING FROM FINANCIAL BROKERAGE 2,835,670 1,423,504
-------------------------------------------
-Argentine Central Bank 16,532 32,700
-Amounts receivable for spot and forward sales to be settled 7,815 480,742
-Securities receivable under spot and forward purchases to be settled 9,038 328,892
-Premiums on options bought 71 120
-Unlisted negotiable obligations 4,786 50,087
-Other receivables not included in the debtor classification regulations 2,667,663 269,699
-Other receivables included in the debtor classification regulations 132,700 258,086
-Accrued interest receivable not included in the debtor classification
regulations 107 9
- Accrued interest receivable included in the debtor classification
regulations 357 8,276
-Allowances (3,399) (5,107)
=============================================================================================================================
-----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.-------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
2
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Consolidated Statement of Financial Condition------------------
--------------------------as of June 30, 2002 and 2001--------------------------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
6.30.02 6.30.01
-------------------------------------------
E. ASSETS UNDER FINANCIAL LEASES 19,554 13,139
-------------------------------------------
-Assets under financial leases 20,194 13,274
-Allowances (640) (135)
-------------------------------------------
F. EQUITY INTERESTS IN OTHER COMPANIES 21,328 49,548
-------------------------------------------
-In financial institutions 68,498 13,856
-Other 36,122 42,624
-Allowances (83,292) (6,932)
-------------------------------------------
G. MISCELLANEOUS RECEIVABLES 76,379 117,999
-------------------------------------------
-Receivables for assets sold 39 329
-Shareholders - 9
-Other 84,473 124,771
-Accrued interest on receivables for assets sold - 7
-Other accrued interest receivable 7 26
-Allowances (8,140) (7,143)
-------------------------------------------
H. FIXED ASSETS 140,913 138,559
-------------------------------------------
I. MISCELLANEOUS ASSETS 42,276 44,213
-------------------------------------------
J. INTANGIBLE ASSETS 101,158 90,744
-------------------------------------------
-Goodwill 57,175 41,457
-Organization and development expenses 43,983 49,287
-------------------------------------------
K. UNALLOCATED ITEMS 15,079 1,093
-------------------------------------------
TOTAL ASSETS 6,480,548 7,951,819
===========================================
==============================================================================================================================
------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
3
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Consolidated Statement of Financial Condition------------------
--------------------------as of June 30, 2002 and 2001--------------------------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
6.30.02 6.30.01
-------------------------------------------
LIABILITIES
-------------------------------------------
L. DEPOSITS 1,404,942 4,764,755
-------------------------------------------
-Non-financial public sector 1,251 7,640
-Financial sector 347 1,820
-Non-financial private sector and residents abroad 1,403,344 4,755,295
-Current accounts 192,912 558,105
-Savings accounts 113,544 538,414
-Time deposits 430,232 3,335,189
-Investment accounts - 162,638
-Other 540,028 117,597
-Accrued interest and quotation differences payable 126,628 43,352
-------------------------------------------
M. OTHER LIABILITIES RESULTING FROM FINANCIAL BROKERAGE 3,999,014 2,290,687
-------------------------------------------
-Argentine Central Bank 1,873,232 1,502
-Rediscounts to cover lack of liquidity 1,244,879 -
-Other 628,353 1,502
-Banks and international entities 993,753 454,273
-Unsubordinated negotiable obligations 451,301 530,063
-Amounts payable for spot and forward purchases to be settled 3,809 306,620
-Securities to be delivered under spot and forward sales to be settled 55,503 517,992
-Loans from domestic financial institutions 58,280 156,089
-Other 512,714 303,919
-Accrued interest and quotation differences payable 50,422 20,229
-------------------------------------------
N. MISCELLANEOUS LIABILITIES 61,571 100,462
-------------------------------------------
-Dividends payable 273 24
-Fees 426 12,560
-Other 60,872 87,874
-Adjustment and accrued interest payable - 4
-------------------------------------------
O. PROVISIONS 433,215 13,489
-------------------------------------------
P. UNALLOCATED ITEMS 2,702 3,807
-------------------------------------------
MINORITY INTEREST IN CONSOLIDATED ENTITIES OR COMPANIES 25,546 63,311
-------------------------------------------
TOTAL LIABILITIES 5,926,990 7,236,511
===========================================
-------------------------------------------
SHAREHOLDERS' EQUITY 553,558 715,308
-------------------------------------------
-------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,480,548 7,951,819
==============================================================================================================================
------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
4
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
------------------------Consolidated Memorandum Accounts------------------------
--------------------------as of June 30, 2002 and 2001--------------------------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
6.30.02 6.30.01
-------------------------------------------
-------------------------------------------
DEBIT 6,130,372 6,762,486
===========================================
-------------------------------------------
CONTINGENT 4,427,848 3,277,375
-------------------------------------------
Guarantees received 2,414,666 2,836,721
Contingencies re. contra items 2,013,182 440,654
-------------------------------------------
CONTROL 1,678,706 3,451,621
-------------------------------------------
Uncollectible loans 177,610 260,090
Other 1,478,754 3,125,850
Control re. contra items 22,342 65,681
-------------------------------------------
DERIVATIVES 4,270 -
-------------------------------------------
"Notional" value of put options bought 3,527
Derivatives re. contra items 743
-------------------------------------------
TRUST ACCOUNTS 19,548 33,490
-------------------------------------------
Trust funds 19,548 33,490
-------------------------------------------
CREDIT 6,130,372 6,762,486
===========================================
-------------------------------------------
CONTINGENT 4,427,848 3,277,375
-------------------------------------------
Loans granted (unused balances) 51,384 172,464
Guarantees provided to the Argentine Central Bank 1,814,294 -
Other guarantees provided included in the debtor classification regulations 102,021 197,878
Other guarantees provided not included in the debtor classification regulations 1,263 655
Other included in the debtor classification regulations 44,220 69,657
Contingencies re. contra items 2,414,666 2,836,721
-------------------------------------------
CONTROL 1,678,706 3,451,621
-------------------------------------------
Valuables to be credited 22,288 65,653
Other 54 28
Control re. contra items 1,656,364 3,385,940
-------------------------------------------
DERIVATIVES 4,270 -
-------------------------------------------
"Notional" value of call options written 743 -
Derivatives re. contra items 3,527 -
-------------------------------------------
TRUST ACCOUNTS 19,548 33,490
-------------------------------------------
Trust liabilities re. contra items 19,548 33,490
==============================================================================================================================
------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
5
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-------------------------Consolidated Income Statement--------------------------
--------------------------For the period of six months--------------------------
---------------commenced January 1, 2002 and ended June 30, 2002.---------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
6.30.02 6.30.01
--------------------------------------------
A. FINANCIAL INCOME 917,856 429,741
--------------------------------------------
Interest on cash and due from banks 137 10,861
Interest on loans to the financial sector 5,458 10,163
Interest on overdraft facilities 20,579 27,777
Interest on notes 16,129 153,209
Interest on mortgage loans 18,180 50,060
Interest on pledge loans 5,506 10,493
Interest on credit card loans 25,528 39,510
Interest on other loans 17,353 46,427
Interest on other receivables resulting from financial brokerage 25,502 11,083
Net income from government and corporate securities 93,258 42,017
Net income from secured loans - Decree 1387/01 51,241 -
Adjustment from application of adjusting index 477,214 -
Other 161,771 28,141
--------------------------------------------
B. FINANCIAL EXPENSES 650,872 229,190
--------------------------------------------
Interest on current account deposits 1,250 2,082
Interest on savings account deposits 574 5,687
Interest on time deposits 27,396 137,828
Interest on loans from financial sector 4,631 1,069
Interest on other liabilities resulting from financial brokerage 74,365 54,347
Other interest 170,237 7,631
Net loss on options - 178
Adjustment from application of adjusting index 289,176 -
Other 83,243 20,368
--------------------------------------------
GROSS BROKERAGE MARGIN 266,984 200,551
============================================
C. PROVISION FOR LOSSES ON LOANS AND OTHER RECEIVABLES 248,332 74,390
--------------------------------------------
D. INCOME FROM SERVICES 73,864 135,576
--------------------------------------------
Linked with lending transactions 21,125 38,658
Linked with borrowing transactions 20,661 29,123
Other commissions 2,092 19,051
Other 29,986 48,744
--------------------------------------------
E. EXPENSES FOR SERVICES 24,085 24,301
--------------------------------------------
Commissions 17,287 10,815
Other 6,798 13,486
==============================================================================================================================
MONETARY RESULT OF FINANCIAL BROKERAGE (252,288) -
==============================================================================================================================
------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
6
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-------------------------Consolidated Income Statement--------------------------
--------------------------For the period of six months--------------------------
---------------commenced January 1, 2002 and ended June 30, 2002.---------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
6.30.02 6.30.01
--------------------------------------------
--------------------------------------------
G. ADMINISTRATIVE EXPENSES 105,569 156,327
--------------------------------------------
Personnel expenses 50,680 81,976
Directors' and syndics' fees 522 6,668
Other fees 2,656 1,635
Advertising and publicity 1,734 6,299
Taxes 6,333 8,006
Other operating expenses 36,944 41,061
Other 6,700 10,682
--------------------------------------------
MONETARY RESULT OF OPERATING EXPENSES 4,558 -
--------------------------------------------
NET (LOSS)/ INCOME FROM FINANCIAL BROKERAGE (284,868) 81,109
============================================
RESULT OF MINORITY INTEREST 82,732 (4,713)
--------------------------------------------
H. MISCELLANEOUS INCOME 34,589 22,194
--------------------------------------------
Net income from long-term investments - 5,901
Penalty interest 636 732
Loans recovered and allowances reversed 4,667 8,541
Other 29,286 7,020
---------------------------------------------
I. MISCELLANEOUS LOSSES 238,117 16,313
---------------------------------------------
Net loss on long-term investments 16,228 -
Penalty interest and charges in favor of the Argentine Central Bank 34 13
Provision for losses on miscellaneous receivables and other provisions 172,188 7,997
Other 49,667 8,303
---------------------------------------------
MONETARY RESULT OF OTHER OPERATIONS (70,093) -
---------------------------------------------
NET (LOSS)/ INCOME BEFORE INCOME TAX (475,757) 82,277
=============================================
K. INCOME TAX 9,265 31,702
---------------------------------------------
LOSS FOR THE PERIOD BEFORE ABSORPTION (485,022) 50,575
---------------------------------------------
ABSORPTION "AD REFERENDUM" OF SHAREHOLDERS' MEETING: 311,908 -
- with Unrealized valuation difference
---------------------------------------------
NET (LOSS) / INCOME FOR THE PERIOD (173,114) 50,575
==========================================================================================================================
-------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.---------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
7
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
----------------------Consolidated Statement of Cash Flows----------------------
--------------------------For the period of six months--------------------------
---------------commenced January 1, 2002 and ended June 30, 2002.---------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
==============================================================================================================================
6.30.02 6.30.01
-------------------------------------------
Changes in cash
Cash and due from banks at beginning of fiscal year 192,811 319,908
(Decrease) / Increase in cash (58,687) 448,457
-------------------------------------------
Cash and due from banks at end of period 134,124 768,365
===========================================
Reasons for changes in cash
Financial income collected 154,611 513,994
Income from services collected 49,539 135,622
Less:
Financial expenses paid (135,626) (274,421)
Expenses for services paid (10,516) (24,301)
Administrative expenses paid (69,340) (140,175)
-------------------------------------------
Cash (used in) provided by operations (11,332) 210,719
===========================================
Other sources of cash
Net increase in deposits - 210,252
Net increase in other liabilities resulting from financial brokerage 609,874 -
Net decrease in government and corporate securities 13,700 -
Net decrease in loans 422,768 -
Net decrease in other receivables resulting from financial brokerage 31,078 1,604,578
Net decrease in other assets 37,325 -
Capital contributions - 343
Other sources of cash 294,614 33,970
-------------------------------------------
Total sources of cash 1,409,359 1,849,143
-------------------------------------------
Other uses of cash
Net increase in government and corporate securities - (442,372)
Net increase in loans - (213,240)
Net increase in other assets - (7,908)
Net decrease in deposits (1,191,617) -
Net decrease in other liabilities resulting from financial brokerage - (919,812)
Net decrease in other liabilities (15,174) (5,793)
Cash dividends paid (65) (17,537)
Other uses of cash (154,349) (4,743)
-------------------------------------------
Total uses of cash (1,361,205) (1,611,405)
-------------------------------------------
Monetary result of cash and due from banks (95,509) -
==============================================================================================================================
(Decrease) / Increase in cash (58,687) 448,457
==============================================================================================================================
------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes 1 to 20 are an integral part of these financial statements.--------------------------------------------
8
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
-----------------Notes to the Consolidated Statements Financial-----------------
--------------------------For the period of six months--------------------------
---------------commenced January 1, 2002 and ended June 30, 2002.---------------
--------In comparative format with the same period of the previous year---------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 1: ARGENTINE ECONOMIC CONTEXT--------------------------------------------
----------------------------------------------------------------------
The facts and circumstances described in Note 1 to the financial
statements of Grupo Financiero 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
June 30, 2001 have been stated in constant monetary units as of June
30, 2002.-------------------------------------------------------------
----------------------------------------------------------------------
NOTE 3: ACCOUNTING POLICIES---------------------------------------------------
----------------------------------------------------------------------
The consolidated financial statements have been prepared in line with
Argentine Central Bank rules and Technical Pronouncements No. 4, 5, 6,
10 and 12 of the F.A.C.P.C.E..----------------------------------------
Below, are the most important accounting policies used in preparing
the consolidated financial statements:--------------------------------
----------------------------------------------------------------------
9
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------Notes to the Consolidated Statements Financial (Continued)------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
a. Financial statement consolidation--------------------------------
----------------------------------------------------------------------
The statements of financial condition, income statements and
statements of cash flows of Banco 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 June 30,
2002, whereas the financial statements of Banco xx Xxxxxxx y
Buenos Aires S.A. and Net investment S.A. have been consolidated
on that basis as of June 30, 2001.-------------------------------
-----------------------------------------------------------------
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..----------------------------------
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
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
10
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-------------Notes to the Consolidated Financial Statements (Continued)---------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
Commission, the recognition of the effects of inflation has been
resumed in these financial statements since January 1, 2002. To
this end, the restatement method established by that Communique,
which is in accordance with the guidelines of Technical
Pronouncement No. 6 of the F.A.C.P.C.E. has been followed,
considering that the accounting measurements originated prior to
December 31, 2001 are stated in the currency value as of that
date.------------------------------------------------------------
-----------------------------------------------------------------
Banco 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.------------
-----------------------------------------------------------------
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 Banco de la Nacion Argentina selling rate
of exchange prevailing at the close of operations on the last
business day of each fiscal year.--------------------------------
-----------------------------------------------------------------
b.2. - Gold Bullion----------------------------------------------
This is valued at the most recent U.S. dollar closing selling
quotation for the 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.--------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
11
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
---------------Notes to Consolidated Income Statement (Continued)---------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
b.3. - Government and Corporate Securities-----------------------
-----------------------------------------------------------------
b.3.a. - Government Securities-----------------------------------
I) Holdings of investment accounts securities:-------------------
-----------------------------------------------------------------
From June 1, 2001 to the time of the exchange mentioned in point
b.4., holdings included in investment accounts were recognized at
cost, increased exponentially up to the maturity date of each
service, based on their internal rate of return and the time
elapsed since their inclusion in those accounts. This criterion
was established by Argentine Central Bank Communique "A" 3278
dated June 1, 2001.----------------------------------------------
This changed the criterion applicable at that date, by which
holdings included in investment accounts were recorded at cost,
increased up to the maturity date based on the interest arising
from the related coupon. This criterion was applied in the fiscal
year ended June 30, 2001 by Banco 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 lead to a decrease of
US$ 81,379 in the assets and shareholders' equity and to a
decrease of US$ 53,922 in the result reported for the period of
six months.------------------------------------------------------
-----------------------------------------------------------------
II) Holdings of trading securities:------------------------------
These are stated at the closing quotation for each security at
the end of the period, plus the value of matured amortization and
interest coupons receivable, less estimated selling expenses
where applicable.------------------------------------------------
-----------------------------------------------------------------
III) Others - Listed:--------------------------------------------
These have been valued at their quotation, as indicated in point
II) above.-------------------------------------------------------
-----------------------------------------------------------------
IV) Unlisted:----------------------------------------------------
These are valued at the acquisition cost plus income accrued up
to the end of the year, where applicable.------------------------
-----------------------------------------------------------------
b.3.b. - Listed Corporate Securities-----------------------------
These are valued at the quotation prevailing at the end of the
period, net of estimated selling expenses, where applicable.-----
-----------------------------------------------------------------
12
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
b.4. Secured Loans-----------------------------------------------
Within the framework of decree 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 established by Section 20 of the above mentioned
decree, the conversion was made at the nominal value, at a rate
of exchange of $ 1=US$ 1 and in the same currency as that of the
converted obligation.--------------------------------------------
The Argentine Central Bank provided that the gain arising from
the difference between the carrying value of the Secured Loans
and the book value of the securities exchanged must be recorded
in an asset adjustment account and charged to results on a
monthly basis, in proportion to the term of each of the secured
loans received.--------------------------------------------------
-----------------------------------------------------------------
As a result of the exchange transaction described above, as of
June 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A. records
Secured Loans -principal amounts- for US$ 1,330,828, which
includes the gain of US$ 18,792 resulting from the difference
between the carrying value of the Secured Loans and the book
value of the securities exchanged, which was recorded in an asset
adjustment account.----------------------------------------------
-----------------------------------------------------------------
In line with Decree 644 dated April 18, 2002, the principal
changes are as follows:------------------------------------------
- The conversion into pesos of the Secured Loans originally
denominated in US dollars at the exchange rate of $1.40 per US
dollar, as established by Section 1 of Decree No. 471/02.--------
- The new interest rates to be accrued by those secured loans, as
established by Section 3 of Decree 471/02.-----------------------
-----------------------------------------------------------------
13
-------------------------Grupo Financiero 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.---------------------------------------------
14
-------------------------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 March 31, 2002 because, at the date of these financial
statements that company does not have audited financial
statements. Furthermore, the effect of inflation has been
recognized as of June 30, 2002.----------------------------------
As a result of the application of the economic measures described
in Note 1 to the financial statements of Tarjetas Regionales
S.A., this Company reported a deficit in its equity. This effect
has been recognized in Banco 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 fiscal year ended June 30, 2001, their value was
determined using the equity method of accounting, based on
financial statements originally issued in foreign currency. For
conversion into local currency the mentioned procedure for
foreign branches and subsidiaries was used. This procedure
follows the guidelines established by the Argentine Central Bank
in this respect and is in agreement with professional accounting
standards.-------------------------------------------------------
-----------------------------------------------------------------
- Minority interests---------------------------------------------
Argentine:-------------------------------------------------------
Minority interests have been valued at cost restated as mentioned
in point a. above, plus stock dividends.-------------------------
-----------------------------------------------------------------
Foreign:---------------------------------------------------------
These are reflected at the acquisition cost, plus stock
dividends, recognized at their face value.-----------------------
The procedure mentioned in point b.1. above was followed for
conversion of foreign currency equity interests into local
currency.--------------------------------------------------------
b.7.b. - In other companies--------------------------------------
- Minority interests---------------------------------------------
Argentine:-------------------------------------------------------
These equity investments are stated at their acquisition cost
restated as mentioned in point a. above, plus stock
dividends.-------------------------------------------------------
15
-------------------------Grupo Financiero 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 March
31, 2002 and as of April 30, 2002, respectively.-----------------
-----------------------------------------------------------------
Foreign:---------------------------------------------------------
These are stated at the acquisition cost, plus stock dividends,
recognized at their face value.----------------------------------
The procedure referred to in point b.1. above has been applied to
translate foreign currency equity interests into local currency.-
-----------------------------------------------------------------
b.8. - Fixed assets and miscellaneous assets---------------------
Fixed assets and miscellaneous assets have been valued at cost
restated (see point a. above), plus the appreciation in the value
of the real estate properties which include the effect of a
technical revaluation made in 1981, less accumulated
depreciation.----------------------------------------------------
The depreciation of these assets is determined on the basis of
their estimated useful lives, expressed in months. A full month's
depreciation is recognized in the month in which an asset is
acquired, while no depreciation is recognized in the month in
which it is sold or retired, over a maximum of 600 months for
real estate properties, 120 months for furniture and fixtures and
60 months for the rest of assets.--------------------------------
The net book values of the assets, taken as a whole, are not in
excess of their value to the business.---------------------------
b.9. - Other miscellaneous assets--------------------------------
Miscellaneous assets are valued at cost restated (see point a.
above), less the corresponding accumulated depreciation.---------
-----------------------------------------------------------------
-----------------------------------------------------------------
The depreciation charges for these assets are calculated
following the same criterion as that mentioned in the preceding
section.---------------------------------------------------------
-----------------------------------------------------------------
b.10. - Intangible assets----------------------------------------
Intangible assets have been valued at their acquisition cost
restated (see point a. above), less the corresponding accumulated
amortization, calculated on the basis of their estimated useful
lives expressed in months.---------------------------------------
16
-------------------------Grupo Financiero 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.------------------------------------------------------------
-----------------------------------------------------------------
As regards debtors classified under the "B" and "C" categories
that record up to 62 and 121 days in arrears, respectively,
whether they belong to the commercial or consumer portfolios,
Comunique "A" 3630 established the possibility of financial
institutions observing the levels of allowances for the
immediately preceding category, for the period from March to June
2002. Banco xx Xxxxxxx y Buenos Aires S.A. has not exercised this
option.----------------------------------------------------------
b.12. - Shareholders' equity-------------------------------------
1)The Shareholders' Equity accounts have been restated following
the procedure mentioned in point a., except for the "Capital
Stock" and "Non-Capitalized Contributions" accounts, which have
been stated at their original values.----------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
17
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 3: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
The adjustment derived from the restatement of those accounts was
allocated to the "Equity Adjustment- Capital Adjustment" account.
-----------------------------------------------------------------
Income and expenses have been restated regardless of whether they
have been collected or paid.-------------------------------------
Pursuant to Communique "A" 3702 of the Argentine Central Bank,
monetary results of exposure to inflation were determined as
follows:---------------------------------------------------------
a. "Monetary result of financial brokerage" includes the result
of exposure to inflation generated by assets and liabilities
related to the usual period of brokerage activity between the
supply and demand of financial resources.------------------------
b. "Monetary result of operating expenses" includes the result of
exposure to inflation generated by monetary assets and
liabilities in pesos, related to administrative expenses.--------
c. "Monetary result of other operations" includes the result of
exposure to inflation generated by assets and liabilities not
related to the financial brokerage activity.---------------------
2) As called for by Communique "A" 3703, the amount of the
compensation envisaged in Decrees Nos. 214/02, 905/02 and
supplementary norms, attributable to the positive difference
between the Shareholders' Equity as of December 31, 2001 and that
resulting from adjusting the net foreign currency position at
that date converted into pesos at the exchange rate of $1.40 per
US dollar, was recorded in the "Unrealized valuation difference
arising from the compensation of the net foreign currency
position" account.-----------------------------------------------
-----------------------------------------------------------------
b.13. - Income tax and tax on minimum notional income------------
-----------------------------------------------------------------
As of June 30, 2002, the Company did not record any income tax
charge because it reported a tax loss carry-forward at that date.
-----------------------------------------------------------------
In view of the fact that Banco 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.------------------------------------------------------------
18
-------------------------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 June 30, 2002 the maximum risk faced by Banco xx Xxxxxxx y
Buenos Aires S.A. in respect of dismissal indemnities amounted to
approximately US$ 44,419. As of June 30, 2001, the total amount
in this respect was US$ 43,199. ---------------------------------
-----------------------------------------------------------------
NOTE 4: BASIC INFORMATION CONCERNING THE CONSOLIDATED CONTROLLED ENTITIES-----
----------------------------------------------------------------------
The basic information concerning the controlled entities is disclosed
in Note 12 and Schedule C to the financial statements of Grupo
Financiero 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 June 30, 2002, Net Investment S.A.
held the following percentages of equity interests:-------------------
----------------------------------------------------------------------
======================================================================
ISSUER COMPANY % OF CAPITAL % OF VOTES
----------------------------------------------------------------------
B2Agro S.A. 93.75 93.75
----------------------------------------------------------------------
Net Investment B.V. 100 100
======================================================================
----------------------------------------------------------------------
----------------------------------------------------------------------
19
-------------------------Grupo Financiero 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 six months as of March 31, 2002, for
consolidation purposes. These financial statements have in turn been
consolidated on a line by line basis with the statements of financial
condition, income statements and statements of cash flows of
Aseguradora de Personas 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 March 31, 2002, Sudamericana
Holding S.A. held the following equity percentages:-------------------
----------------------------------------------------------------------
======================================================================
ISSUER COMPANY % OF CAPITAL % OF VOTES
----------------------------------------------------------------------
Aseguradora de Personas Xxxxxxx X.X.
(former Hartford Seguros de Vida S.A.) 99.99 99.99
----------------------------------------------------------------------
Instituto de Salta Seguros de Vida S.A. 90.00 90.00
----------------------------------------------------------------------
Galicia Retiro Cia. de Seguros S.A. 99.99 99.99
----------------------------------------------------------------------
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 June 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 June 30, 2002 and
2001 include the assets, liabilities and results of the controlled
entities detailed below:----------------------------------------------
----------------------------------------------------------------------
==================================================================================================
as of June 30, 2002
------------------------------------------ --------------------------- ---------------------------
PERCENTAGE OF INTEREST
ISSUER COMPANY SHARES HELD IN
------------------------------------------ ------------- ------------- ------------- -------------
TOTAL POSSIBLE
TYPE NUMBER CAPITAL VOTES
------------------------------------------ ------------- ------------- ------------- -------------
BANCO GALICIA URUGUAY S.A. Ordinary 13,375 100.00 100.00
------------------------------------------ ------------- ------------- ------------- -------------
TARJETAS REGIONALES S.A. Ord. 70,834,138 68.218539 68.218539
Book-entry
------------------------------------------ ------------- ------------- ------------- -------------
GALICIA CAPITAL MARKETS S.A. Ord. 99,990 99.99 99.99
Book-entry
------------------------------------------ ------------- ------------- ------------- -------------
GALICIA FACTORING Y LEASING S.A. Ord. 1,889,700 99.98 99.98
Book-entry
------------------------------------------ ------------- ------------- ------------- -------------
AGRO 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
========================================== ============= ============= ============= =============
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
20
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 4: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
==================================================================================================
as of June 30, 2001
--------------------------------------------------------------------------------------------------
PERCENTAGE OF INTEREST
ISSUER COMPANY SHARES HELD IN
------------------------------------------ --------------- ------------- ----------- -------------
TOTAL POSSIBLE
TYPE NUMBER CAPITAL VOTES
------------------------------------------ --------------- ------------- ----------- -------------
BANCO GALICIA URUGUAY S.A. Ordinary 13,375 100.00 100.00
------------------------------------------ --------------- ------------- ----------- -------------
TARJETAS REGIONALES S.A. Ord. 99,990 0.30 0.30
Book-entry
------------------------------------------ --------------- ------------- ----------- -------------
GALICIA CAPITAL MARKETS S.A. Ord. 99,990 99.99 99.99
Book-entry
------------------------------------------ --------------- ------------- ----------- -------------
GALICIA FACTORING Y LEASING S.A. Ord. 1,889,700 99.98 99.98
Book-entry
------------------------------------------ --------------- ------------- ----------- -------------
AGRO 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
========================================== =============== ============= =========== =============
----------------------------------------------------------------------
=====================================================================================================
As of June 30, 2002
-----------------------------------------------------------------------------------------------------
ASSETS LIABILITIES SHAREHOLDERS' RESULTS (*)
EQUITY
------------------------------------------ ----------- ------------- ------------------ -------------
BANCO GALICIA URUGUAY S.A. - - - -
------------------------------------------ ----------- ------------- ------------------ -------------
TARJETAS REGIONALES S.A. 149,029 170,638 (21,609) (85,944)
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA CAPITAL MARKETS S.A. 9,215 4,873 4,342 (1,704)
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA FACTORING Y LEASING S.A. 2,286 608 1,678 (117)
------------------------------------------ ----------- ------------- ------------------ -------------
AGRO XXXXXXX X.X. 116 10 106 (77)
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA VALORES S.A. SOC. DE BOLSA 3,987 893 3,094 1,080
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA Y BS. AS. SECURITIES (UK) LTD. 1,304 26 1,278 627
========================================== =========== ============= ================== =============
----------------------------------------------------------------------
=====================================================================================================
as of June 30, 2001
-----------------------------------------------------------------------------------------------------
ISSUER COMPANY ASSETS LIABILITIES SHAREHOLDERS' RESULTS (*)
EQUITY
------------------------------------------ ----------- ------------- ------------------ -------------
BANCO GALICIA URUGUAY S.A. 1,180,480 1,072,903 107,577 11,083
------------------------------------------ ----------- ------------- ------------------ -------------
TARJETAS REGIONALES S.A. 291,224 260,623 30,601 545
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA CAPITAL MARKETS S.A. 9,912 4,319 5,593 628
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA FACTORING Y LEASING S.A. 1,945 339 1,606 160
------------------------------------------ ----------- ------------- ------------------ -------------
AGRO XXXXXXX X.X. 355 179 176 10
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA VALORES S.A. SOC. DE BOLSA 3,929 2,137 1,792 111
------------------------------------------ ----------- ------------- ------------------ -------------
GALICIA Y BS. AS. SECURITIES (UK) LTD. 756 121 635 124
========================================== =========== ============= ================== =============
----------------------------------------------------------------------
(**) corresponding to the period of six months ended June 30, 2001.---
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
The Financial Statements of the controlled entities have been adapted
to the valuation and disclosure standards laid down by the Argentine
Central Bank and cover the same period as that of the financial
statements of Banco xx Xxxxxxx y Buenos Aires S.A..-------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
21
-------------------------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 June 30, 2002 (see Note 1 to the financial
statements).----------------------------------------------------------
In the fiscal year ended June 30, 2001, special financial statements
of Banco Galicia Uruguay S.A. as of June 30, 2001, adapted to cover
the same period as that of Banco 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 holds a
99.7 % and 100 % equity interest, respectively. In turn, since January
1, 2000, Galicia Pension Fund Limited financial statements have been
consolidated with those of Galicia Administradora de Fondos S.A.
Sociedad Gerente de Fondos Comunes de Inversion, in which Galicia
Pension Fund Limited holds a controlling interest of 99.985%.---------
----------------------------------------------------------------------
In the current period, as a result of the new interest percentages
owned by shareholders in Tarjetas Regionales S.A., Banco 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 June 30, 2002 financial statements of Tarjetas Regionales S.A.,
which were used for consolidation purposes, have in turn been
consolidated on a line-by-line basis with those of Tarjeta Naranja
S.A., Tarjetas Cuyanas S.A., Tarjeta Comfiar S.A. and Tarjetas del Mar
S.A., in which Tarjetas Regionales S.A. holds a controlling interest.-
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
22
-------------------------Grupo Financiero 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 6.30.02 6.30.01
----------------------------------------------------------------------
Tarjetas Cuyanas S.A. 60% 60%
----------------------------------------------------------------------
Tarjetas del Mar S.A. (*) 100% 50%
----------------------------------------------------------------------
Tarjeta Naranja S.A. 80% 80%
----------------------------------------------------------------------
Tarjeta Comfiar S.A. 60% 60%
======================================================================
(*) On May 15, 2002 Tarjetas Regionales S.A. acquired the remaining
50% of the shares.----------------------------------------------------
----------------------------------------------------------------------
b) The percentages indirectly held in those companies' capital stock
through the controlled entity Tarjeta Naranja S.A. are as follows:----
----------------------------------------------------------------------
======================================================================
Company 6.30.02 6.30.01
----------------------------------------------------------------------
Tarjeta Comfiar S.A. 32% 32%
======================================================================
----------------------------------------------------------------------
Tarjeta Naranja S.A. financial statements as of June 30, 2002 and 2001
have in turn been consolidated with the financial statements of
Cobranzas Regionales S.A., in which it holds 66.4% of voting stock.---
----------------------------------------------------------------------
Furthermore, Tarjeta Comfiar S.A. and Tarjetas Cuyanas S.A. hold 21.3%
and 12.3% interests, respectively, in that company's capital stock and
voting rights.--------------------------------------------------------
----------------------------------------------------------------------
For purposes of the consolidation of those credit card management
companies, the June 30, 2002 and May 31, 2001 financial statements of
those companies have been used.---------------------------------------
----------------------------------------------------------------------
The financial statements of Galicia Capital Markets S.A. include the
statement of financial condition, income statement and statement of
cash flows of that company, whose balances have been consolidated on a
line-by-line basis, with the statement of financial condition, income
statement and statement of cash flows of Galicia Advent Corporation
Limited, in which that company holds a 57.89% equity interest and
Galicia Equity Analysis S.A., in which it holds a 99 % controlling
interest.-------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
23
-------------------------Grupo Financiero 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 June 30, 2002 and 2001, the percentages of minority interest are
as follows:-----------------------------------------------------------
----------------------------------------------------------------------
======================================================================
Company 6.30.02 6.30.01
----------------------------------------------------------------------
Banco xx Xxxxxxx y Xx.Xx. S.A. 6.41446% 6.51671%
----------------------------------------------------------------------
Net Investment S.A. 0.80181% 0.81459%
----------------------------------------------------------------------
Sudamericana Holding S.A. 0.80175% -
----------------------------------------------------------------------
Galicia Warrants S.A. 0.80181% -
----------------------------------------------------------------------
B2Agro S.A. 7.00169% 17.34549%
----------------------------------------------------------------------
Net Investment B.V. 0.80181% -
----------------------------------------------------------------------
BtoB Comercial S.A. - 0.81432%
----------------------------------------------------------------------
Aseguradora de Personas Xxxxxxx X.X.
(former Hartford Seguros de Vida
S.A.) 0.80234% -
----------------------------------------------------------------------
Medigap Salud S.A. (former
Hartford Sallud S.A.) 0.81002% -
----------------------------------------------------------------------
Instituto de Salta Seguros
de Vida S.A. 10.72158% -
----------------------------------------------------------------------
Galicia Retiro Xxx.xx Seguros
S.A. 0.80188% -
----------------------------------------------------------------------
Xxxxxxx Xxxx Cia. de
Seguros S.A. 0.80190% -
======================================================================
----------------------------------------------------------------------
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 6.30.02 6.30.01
------------------------------------------------------------- ----------------- ------------------
Galicia Valores S.A. Sociedad de Bolsa 0.01% 0.01%
------------------------------------------------------------- ----------------- ------------------
Galicia Capital Markets S.A. 0.01% 0.01%
------------------------------------------------------------- ----------------- ------------------
Galicia Factoring y Leasing S.A. 0.02% 0.02%
------------------------------------------------------------- ----------------- ------------------
Galicia Administradora de Fondos S.A. Soc. Gerente 0.015% 0.015%
------------------------------------------------------------- ----------------- ------------------
Agro 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%
============================================================= ================= ==================
24
-------------------------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 June 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$ 5,063 in escrow
as a guarantee towards third parties in respect of its own
transactions. Also, US$ 3,731 have been deposited to guarantee repo
transactions with banks located abroad.-------------------------------
----------------------------------------------------------------------
Within the framework of Decree 979/2001 of the National Executive
Branch, Banco 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$ 24,539, which have been recognized
in Government Securities. These certificates may be used for settling
taxes, under the conditions set out in that Decree, effective January
2003.-----------------------------------------------------------------
----------------------------------------------------------------------
b. Guarantee for Galtrust II, III, IV and V Financial Trusts----------
Mortgage Bills for US$ 896 have been deposited in escrow as collateral
for the contracts of the Individual Galtrust II, III, IV and V
Financial Trusts, in respect of an Initial Minimum Amount of the
Reserve Investments, according to contracts signed on December 17,
2001.-----------------------------------------------------------------
----------------------------------------------------------------------
c. Special Accounts as Collateral for Transactions--------------------
Banco 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 June 30, 2002 amounted to US$
11,911.---------------------------------------------------------------
----------------------------------------------------------------------
d. Deposits in favor of the Argentine Central Bank--------------------
These have been set up in line with Argentine Central Bank
regulations:----------------------------------------------------------
----------------------------------------------------------------------
- Communique "A" 1190 US$ 140----------------
- Communique "A" 2923 US$ 1,230---------------
----------------------------------------------------------------------
e. Fund for assistance to financial institutions----------------------
As of June 30, 2002 Banco xx Xxxxxxx y Buenos Aires S.A. had deposited
secured loans for US$ 32,895 in guarantee towards the Fund for
assistance to Financial Institutions.---------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
25
-------------------------Grupo Financiero 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 June 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$ 1,814,294 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.----------------------------------------------
26
-------------------------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-trans-
ferable shares.-------------------------------------------------------
- Electrigal S.A.: 1,222,406.50 ordinary registered non-endorsable
non-transferable shares.----------------------------------------------
- Aguas Cordobesas S.A.: 900,000 ordinary class E shares.-------------
- Correo Argentino S.A.: 12,462,021 ordinary non-transferable class B
shares.---------------------------------------------------------------
----------------------------------------------------------------------
As a shareholder of the concessionaires of the water supply services,
Aguas Argentinas S.A., Aguas Provinciales de Santa Fe S.A. and Aguas
Cordobesas S.A., Banco 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 to postpone the providing of credit assistance
to Aguas Argentinas S.A. were still under way, while the obligation to
provide assistance to Aguas Provinciales de Santa Fe S.A. is not
deemed to exist.------------------------------------------------------
Furthermore, the ability to dispose of government agency and treasury
bills belonging to the foreign branches for an amount of US$ 70,416 is
restricted, as they have been earmarked to comply with the
requirements of the regulatory body of the country where they do
business.-------------------------------------------------------------
As of June 30, 2001, the total amount of restricted assets earmarked
to cover the mentioned items was US$ 127,985.-------------------------
----------------------------------------------------------------------
In addition, as of June 30, 2002 and 2001 the ability of Banco 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 June 30, 2002 this company held three shares of Xxxxxxx de
Valores de Buenos Aires S.A. securing an insurance covering its
transactions for US$ 1,263.-------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
27
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 6: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As of June 30, 2001, that company's total restricted assets amounted
to US$ 488.-----------------------------------------------------------
b. Agro Xxxxxxx X.X.:-------------------------------------------------
As of June 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$ 9.-----------------------------------------------
----------------------------------------------------------------------
Furthermore, third party guarantees provided to Xxxxxxx a Termino de
Buenos Aires S.A. to secure transactions on this market amounted to
US$ 74.---------------------------------------------------------------
As of June 30, 2001, the restricted assets totalled US$ 313.----------
----------------------------------------------------------------------
NOTE 7: TRUST ACTIVITIES-------------------------------------------------------
----------------------------------------------------------------------
In order to guarantee compliance with the obligations arising from
contracts, the parties thereto have agreed to deliver in trust to
Banco xx Xxxxxxx y Buenos Aires S.A. certain amounts of money, to be
invested in time deposits, according to the following detail:---------
----------------------------------------------------------------------
1) US$ 21,450, in order to guarantee compliance with the obligations
arising from the Musimundo S.A. share purchase agreement.-------------
----------------------------------------------------------------------
2) US$ 15, in order to guarantee compliance with the obligations
arising from the trust agreement signed by Xxxxxxx Xxxxx and Ericides
Xxxxx.----------------------------------------------------------------
----------------------------------------------------------------------
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.----------------------------
NOTE 8: NEGOTIABLE OBLIGATIONS AND OTHER DEBT SECURITIES-----------------------
----------------------------------------------------------------------
a) Banco xx Xxxxxxx y Buenos Aires S.A. - Ordinary Negotiable
Obligations-----------------------------------------------------------
----------------------------------------------------------------------
a.1) As of June 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
=================== ================== =================== ================ ==================
----------------------------------------------------------------------
28
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
a.2) Under the global program for issuing ordinary negotiable
obligations approved by the Shareholders' Meeting held on March 3,
1993, as of June 30, 2002, Banco 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%---------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
a.3) The Shareholders' Meeting held on September 30, 1997 authorized
the creation of a Global Program for a maximum total amount equivalent
to US$ 500,000.-------------------------------------------------------
As of June 30, 2002 Banco 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.-----------------------------------------------------
As of June 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
ISSUE DATE FACE VALUE TERM RATE AUTHORIZED BY
(in thousands) THE NATIONAL
SECURITIES
COMMISSION
------------------- ------------------ ------------------ ----------------- ------------------
12.20.00 44,444(*) 1,825 days Libor plus 2% 04.22.98
------------------- ------------------ ------------------ ----------------- ------------------
06.11.01 10,667(*) 1,653 days Libor plus 2% 04.22.98
=================== ================== ================== ================= ==================
(*) On December 20, 2001, the first installment was amortized for a
face value of 5,556 and 1,333, respectively.--------------------------
----------------------------------------------------------------------
The Meeting of Shareholders held on September 26, 2001 ratified the
powers previously vested in the Board of Directors in connection with
the programs referred to in sections a.3) and a.4) above.-------------
----------------------------------------------------------------------
29
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
a.5) The Meeting of Shareholders held on September 26, 2001 approved
the issue of subordinated negotiable obligations, convertible into
ordinary, book-entry, class "B" shares, with a face value of $ 0.001
each and entitled to one vote per share, for a total amount of up to
US$ 200,000.----------------------------------------------------------
----------------------------------------------------------------------
That meeting of shareholders vested the Board of Directors of Banco 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.------------------------------
----------------------------------------------------------------------
b) In addition, the New York branch launched a medium-term debt
securities program for up to US$ 500,000, of which US$ 200,000 were
outstanding at the end of the period. After the end of the period,
those debt securities were exchanged for securities issued by Banco xx
Xxxxxxx y Buenos Aires S.A., under the liability restructuring plan
involving the Branch (see Note 1 to the financial statements).--------
----------------------------------------------------------------------
As of June 30, 2002 and 2001, the amount of the negotiable obligations
in respect of principal and interest, net of discounts, was US$
419,976 and US$ 439,710, respectively, and was used in accordance with
the provisions of Communique "A" 1907 of the Argentine Central Bank
for providing financing to domestic companies with regard to
investments in physical assets in Argentina, providing working capital
or refinancing liabilities, granting consumer and mortgage loans for
financing housing construction, investments in the share capital of
domestic companies and other purposes envisaged in the above mentioned
Communique.-----------------------------------------------------------
----------------------------------------------------------------------
30
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
c) 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 June 30, 2002, and the valuation
criteria followed:----------------------------------------------------
Tarjetas Cuyanas S.A.:------------------------------------------------
----------------------------------------------------------------------
On May 23, 2002, that company entered into an agreement with
Administraciones Fiduciarias S.A. for the redemption of its Negotiable
Obligations through the issue of debt certificates.-------------------
----------------------------------------------------------------------
As of June 30, 2002, holders of negotiable obligations adhered to the
exchange of negotiable obligations for debt certificates in the amount
of approximately US$5,000. At that date, the Company has valued this
debt at approximately US$3,816, a figure obtained by applying the
present value method to the future discounted cash flows. Should this
debt have been valued at period end free US dollar exchange rate, an
additional loss of approximately US$ 1,184 would have been generated.
----------------------------------------------------------------------
For purposes of applying the valuation method mentioned above,
Tarjetas Cuyanas S.A. has taken as a premise a nominal annual discount
rate of 11% and a cash flow made up of 5% of the monthly collections
of receivables derived from the use of credit cards for a term of 8
years counted as from the earlier of June 1, 2002 or until the full
amortization of the subscribed certificates.--------------------------
----------------------------------------------------------------------
As a result of this transaction and of certain payments made, the
Company records due and payable negotiable obligations amounting to
approximately US$5,600 as of June 30, 2002. As of June 30, 2002,
31
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
Tarjetas Cuyanas S.A. had valued this debt by approximately US$3,158,
which represent the redemption value estimated by the management of
Tarjetas Cuyanas S.A. on the basis of the negotiations carried out so
far. If this debt were to be valued at the free US dollar exchange
rate, an additional loss of approximately US$ 2,421 would be generated
as of the end of the six-month period.--------------------------------
----------------------------------------------------------------------
Tarjetas del Mar S.A.:------------------------------------------------
----------------------------------------------------------------------
On June 18, 2002, Tarjetas del Mar S.A. informed the Buenos Aires
Stock Exchange and Caja de Valores S.A. that as it had been unable to
make a payment proposal to the holders of the negotiable obligations,
due to the lack of a definition of the legal and economic framework
that is essential to confront the economic and financial crisis
Argentina is enduring, Tarjetas del Mar S.A. would not call a meeting
of holders of negotiable obligations until 120 days have passed from
the last presentation of that proposal on March 4, 2002. Tarjetas del
Mar S.A. continues to pay interest until it is able to make the
proposal.-------------------------------------------------------------
----------------------------------------------------------------------
So far, the instability of financial markets has not enabled the Board
of Directors of Tarjetas del Mar S.A. to set a reasonable estimate of
the expected cash flow for the next few years, to be able to make an
equitable proposal for the payment of the principal amount due to the
holders of negotiable obligations.------------------------------------
----------------------------------------------------------------------
The payment alternative that the Board of Directors is currently
analyzing consists in acknowledging a debt payable in US dollars
within a term that enables the Company to make payment in such
currency. The Board of Directors considers that it will be in a
position to make such proposal within the next 60 days, including the
amount, payment term, interest rate and method of payment.------------
32
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As of June 30, 2002, the balance of the Global Negotiable Obligation
Program issued by Tarjetas del Mar S.A., which continue to be due and
payable is equivalent to an amount of US$ 15,595. If all the due and
payable negotiable obligations as of June 30, 2002 were to be valued
at the free US dollar exchange rate, an additional loss of
approximately US$ 11,491 would be generated as of period end.-----
The maximum risk attaching to the situations described above, which
could have an impact on the financial statements of Tarjetas
Regionales S.A., amounts to US$11,491.------------------------------
Tarjeta Comfiar S.A.:-------------------------------------------------
----------------------------------------------------------------------
In view of the operating impossibility of this company fully redeeming
Series IX of Negotiable Obligations that fell due on January 15, 2002,
a debt of US$2,265 thousand (nominal value) has been included in this
respect in the Bank and financial loans caption, at a rate of exchange
of US$1=$1, plus CER, which as of June30, 2002 was equivalent to US$
149.------------------------------------------------------------------
As established by current public order regulations on this matter,
Tarjeta Comfiar S.A. considers that in all cases the criterion
applicable would be the redemption of those negotiable obligations at
the exchange rate of US$1=$1, plus CER, because that Series was issued
prior to January 6, 2002.---------------------------------------------
If all the due and payable negotiable obligations which as of June 30,
2002 amounted to US$ 2,265 were to be valued at the free US dollar
exchange rate, an additional loss of approximately US$1,520 would be
generated at the end of the six-month period.-------------------------
The maximum risk attaching to the situations described, which could
have an impact on the financial statements of Tarjetas Regionales
S.A., amounts to US$ 1,399.-------------------------------------------
Tarjeta Naranja S.A.:-------------------------------------------------
On May 23, 2002 Tarjeta Naranja S.A. executed an agreement for the
redemption of negotiable obligations and the issuance of debt
certificates in US dollars secured by a trust. As of June 30, 2002,
holders of negotiable obligations had adhered to this agreement in the
amount of US$ 56,706.-------------------------------------------------
The debt certificates have been valued by determining the present
value of the cash flow involved, converted at the exchange rate
prevailing on the transaction date. The application of the present
value method to this financial debt, recommended by Technical
Pronouncement No. 17 of the Argentine Federation of Professional
Councils in Economic Sciences and approved by the Professional Council
in Economic Sciences of the Province of Cordoba, results in US$
42,152. If the debt certificates for a
33
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 8: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
total of US$ 56,706 were to be valued at the free US dollar exchange
rate, an additional loss of approximately US$ 14,554 would be
generated at period end.----------------------------------------------
----------------------------------------------------------------------
As of June 30, 2002, the overdue balance of the Global Negotiable
Obligation Program not yet exchanged amounts to US$ 20,871.
----------------------------------------------------------------------
At period end those holders of negotiable obligations continued to be
invited to exchange their obligations for the above-mentioned debt
certificates. For those holders who have not adhered to the agreement,
and under current public order regulations on this matter, Tarjeta
Naranja S.A. considers that in all cases the criterion applicable for
the redemption of those negotiable obligations would be the exchange
rate of US$1=$1, plus CER, because even the most recently issued
Series involved renewals of series issued under Programs predating
January 6, 2002.------------------------------------------------------
In view of Tarjeta Naranja S.A.'s expectations for the method of
redemption of these obligations, either by means of the adherence to
the agreement or by redeeming them in cash, such obligations have been
valued as follows: 50%, that is US$ 10,436, are expected to be
redeemed in cash applying the US$1=$1 exchange rate, plus CER, and the
remaining 50% is expected to be exchanged for debt securities, so they
were valued applying the same procedure as that described above for
debt certificates. If all the due and payable negotiable obligations
amounting to US$ 20,871 rate, an additional loss of approximately US$
9,678 would be generated at period end.-------------------------------
The maximum risk attaching to the situations described, which could
have an impact on the financial statements of Tarjetas Regionales
S.A., amounts to US$ 19,386.------------------------------------------
In addition, Negotiable Obligation Series XXVII issued on January 18,
2002 for a face value of US$ 28,000 has been valued applying the free
US dollar parity at period end.---------------------------------------
The maximum risk attaching to the situations described, which could
have an impact on the financial statements of Grupo Financiero Xxxxxxx
X.X., would amount to approximately US$ 21,986.-----------------------
----------------------------------------------------------------------
NOTE 9: DEPOSIT INSURANCE SYSTEM-----------------------------------------------
----------------------------------------------------------------------
Law 24485 and Decree 540/95 established the creation of the Deposit
Insurance System to cover the risk attached to bank deposits, beyond
the system of privileges and safeguards envisaged in the Financial
Institutions Law.-----------------------------------------------------
Pursuant to Communique "A" 2337, the Argentine Central Bank
established rules for applying the deposit insurance and the way of
settling the related contributions.-----------------------------------
34
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 9: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
The National Executive Power through Decree 1127/98 dated September
24, 1998 extended this insurance system to demand deposits and time
deposits of up to US$ 8 denominated either in pesos or in foreign
currency.-------------------------------------------------------------
This System does not cover the deposits made by other financial
institutions (including the time deposit certificates acquired through
a secondary transaction), the deposits made by persons related to
Banco 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 at an interest rate exceeding the one that the
Argentine Central Bank regularly establishes based on a daily survey
conducted by it.------------------------------------------------------
Nor does this System cover deposits whose ownership has been acquired
through endorsement and placements which offer incentives in addition
to the interest rate. The System has been implemented through the
creation of the Deposit Insurance Fund, which is managed by a company
called Seguros de Depositos S.A. (SE.DE.S.A.). The shareholders of
SE.DE.S.A. are the Argentine Central Bank and the financial
institutions in the proportion determined for each one by the
Argentine Central Bank based on the contributions made to the said
fund.-----------------------------------------------------------------
Through Communique "A" 3068, the Argentine Central Bank reduced the
normal contribution to the said Fund, which amounted to 0.03%, to
half, provided that the financial institution arranges with SEDESA
36-month loans, to be earmarked for the Deposit Insurance Fund.
Interest on these loans has been determined on the basis of the yield
obtained by the mentioned Fund on its placements.---------------------
----------------------------------------------------------------------
As from September 2000, Argentine Central Bank Communique "A" 3153
eliminated the above mentioned loan and the normal contribution of
0.015% on items comprised in the calculation basis remained in force.-
----------------------------------------------------------------------
As from December 2001, Argentine Central Bank Communique "A" 3358
resolved to increase the contribution to 0.03%. As of June 30, 2002
the normal contribution to the Deposit Insurance Fund amounted to US$
60,319, of which US$ 3,557 correspond to the current period.----------
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 10: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF PROFITS------------------
----------------------------------------------------------------------
The Argentine Central Bank regulations establish that 20% of the
profits shown in the Income Statement at the end of the fiscal year,
plus (less) prior year adjustments must be allocated to the legal
reserve.--------------------------------------------------------------
This proportion is applicable regardless of the ratio of the legal
reserve fund to the capital stock.------------------------------------
35
--------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 10: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF PROFITS-------------------
----------------------------------------------------------------------
As a result of the facts described in Note 1 to these financial
statements, through resolution 81 dated February 8, 2002, the
Argentine Central Bank established that while the assistance received
from that Entity is in force, Banco 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.-----------------------------------------------------------
----------------------------------------------------------------------
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 181,705,418 units under custody for a market value of US$ 20,095 ,
which is included in the "Depositors of Securities in Custody"
account.--------------------------------------------------------------
----------------------------------------------------------------------
36
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 11: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
As of June 30, 2001, the securities held in custody by Banco xx
Xxxxxxx y Buenos Aires S.A. totalled 754,394,625 units and their
market value amounted to US$ 324,346.---------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 12: CONTRIBUTIONS TO THE BANK EMPLOYEES' SOCIAL SERVICES INSTITUTE (the
"ISSB")---------------------------------------------------------------
----------------------------------------------------------------------
Effective July 1, 1996, Decree No. 263/96 of the National Executive
Power reduced to 1% and effective July 1, 1997 Decree No. 915/96
eliminated the 2% contribution on interest and fees that banks
previously had to make to the ISSB, pursuant to Section 17 of Law No.
19322. Banco 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.------------------------------------------------------
37
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 12: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
This resolution was confirmed by the National Social Security Court
(Panel II). In this connection, OSBA filed an extraordinary appeal
with the National Supreme Court of Justice, which was dismissed by the
Court on November 21, 2000.-------------------------------------------
Furthermore, OSBA has brought a legal action against all institutions
in the financial system, before the Federal Court dealing with
Administrative Litigation Matters, and the complaint has already been
answered. The trial of the case has been ordered.---------------------
----------------------------------------------------------------------
In addition, the AFIP issued Order No. 6/99 ratifying Resolution No.
9/99, which holds that OSBA is a legal entity other than the ISSB, and
therefore not having any legal authority to claim the contribution set
by Section 17, subsection f) of Law 19322.----------------------------
----------------------------------------------------------------------
Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X. considers that this matter is not
likely to affect its net worth significantly--------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
38
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 13: REGULATIONS ON BANK CURRENT ACCOUNTS----------------------------------
----------------------------------------------------------------------
On March 24, 2001, the Competitiveness Law No. 25413 was enacted and
promulgated. This norm repeals the system of fines and penalties for
current account holders and financial institutions established by Laws
No. 24452 and 24760.--------------------------------------------------
----------------------------------------------------------------------
In the case of the latter, effective January 13, 1997, the law that
was repealed provided a system of fines for financial institutions
which would have kept current accounts open when they should have been
closed, or would have opened current accounts to current account
holders who had been disqualified.------------------------------------
In view of the above, on April 16, 1999, Section 3 of Decree 347/99 of
the National Executive Power established that:------------------------
"In the case of the fines resulting from applying Section 62, last
paragraph ..., as amended by Law No. 24,760, accumulated by each
financial institution at the effective date of this decree, the
Argentine Central Bank is empowered to set the amount of the fines
between a minimum of fifteen thousand pesos (US$ 4) and a maximum of
two million pesos (US$ 526) for each institution, based on the number
of non-compliances by each one".--------------------------------------
In line with Argentine Central Bank Communique "A" 2909 Banco 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.----------------------------------------------------
----------------------------------------------------------------------
Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X. considers that this matter is not
likely to affect its net worth significantly.-------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
39
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------Notes to the Consolidated Financial Statements (Continued)----------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 14: SETTING UP OF THE "GALTRUST I" INDIVIDUAL FINANCIAL TRUST-------------
----------------------------------------------------------------------
At the meeting held on March 15, 2000, the Board of Directors of Banco
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 June 30, 2002, Banco xx Xxxxxxx y Buenos Aires S.A. held debt
securities and certificates of participation in its portfolio for US$
157,954.--------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
NOTE 15: SETTING UP OF THE "GALTRUST II, III, IV and V" INDIVIDUAL FINANCIAL
TRUSTS----------------------------------------------------------------
----------------------------------------------------------------------
At the meeting held on December 6, 2001, the Board of Directors of
Banco 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 June 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$
25,848, US$ 19,470 and US$ 14,050, respectively.----------------------
----------------------------------------------------------------------
NOTE 16: GALICIA 2004 AND 2005 TRUSTS------------------------------------------
----------------------------------------------------------------------
On November 19, 2001, the beneficiaries of the Galicia 2004 Trust were
designated, as stipulated in the "Framework Trust Agreement" signed on
November 4, 1999, to implement an incentive program in favor of
certain executives of Banco 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 June 30, 2001, the previous financial closing
date, in order to disclose the changes in those assets and liabilities
during the period commenced January 1, 2002 and ended June 30, 2002 is
as follows:-----------------------------------------------------------
----------------------------------------------------------------------
===================================================================================================
6.30.02 6.30.01
----------------------------------
ASSETS
----------------------------------
LOANS 2,557,698 4,819,350
----------------------------------
-To the non-financial public sector 1,865,593 1,360,653
-To the financial sector 23,233 195,250
-To the non-financial private sector and residents abroad 985,037 3,421,157
-Overdraft facilities 68,535 251,351
-Notes 294,995 1,143,034
-Mortgage loans 212,429 848,072
-Pledge loans 23,236 183,905
-Consumer loans 49,289 166,535
-Credit card loans 168,909 432,225
-Other 87,199 343,817
-Accrued interest and quotation differences receivable 94,915 75,753
-Documented interest (6,472) (20,868)
-Unallocated collections (7,998) (2,667)
-Allowances for loan losses (316,165) (157,710)
----------------------------------
OTHER RECEIVABLES RESULTING FROM FINANCIAL BROKERAGE 2,835,670 1,423,504
----------------------------------
-Argentine Central Bank 16,532 32,700
-Amounts receivable for spot and forward sales to be
settled 7,815 480,742
- Securities receivable under spot and forward purchases
to be settled 9,038 328,892
-Premiums on options bought 71 120
-Unlisted negotiable obligations 4,786 50,087
-Other not included in the debtor classification
regulations 2,667,663 269,699
-Other included in the debtor classification regulations 132,700 258,086
-Accrued interest receivable not included in the debtor
classification regulations 107 9
- Accrued interest receivable included in the debtor
classification regulations 357 8,276
-Allowances (3,399) (5,107)
==============================================================================================
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
42
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------Supplementary Accounting Information----------------------
---------------Notes to Consolidated Income Statement (Continued)---------------
------------------(figures stated in thousands of US dollars)-------------------
--------------------------------------------------------------------------------
NOTE 18: (Continued)-----------------------------------------------------------
----------------------------------------------------------------------
==================================================================================================
6.30.02 6.30.01
-----------------------------------
LIABILITIES
-----------------------------------
DEPOSITS 1,404,942 4,764,755
-----------------------------------
-Non-financial public sector 1,251 7,640
-Financial sector 347 1,820
-Non-financial private sector and residents abroad 1,403,344 4,755,295
-Current accounts 192,912 558,105
-Savings accounts 113,544 538,414
-Time deposits 430,232 3,335,189
-Investment accounts - 162,638
-Other 540,028 117,597
-Accrued interest and quotation differences payable 126,628 43,352
-----------------------------------
OTHER LIABILITIES RESULTING FROM FINANCIAL BROKERAGE 3,999,014 2,290,687
-----------------------------------
-Argentine Central Bank 1,873,232 1,502
-Rediscounts to cover lack of liquidity 1,244,879 -
-Other 628,353 1,502
-Banks and international entities 993,753 454,273
-Unsubordinated negotiable obligations 451,301 530,063
-Amounts payable for spot and forward purchases to be
settled 3,809 306,620
-Securities to be delivered under spot and forward sales
to be settled 55,503 517,992
-Loans from domestic financial institutions 58,280 156,089
-Other 512,714 303,919
-Accrued interest and quotation differences payable 50,422 20,229
===============================================================================================
-------------------------------------------------------------------
NOTE 19: SITUATION OF CERTAIN COMPANIES CONSOLIDATED WITH BANCO XX XXXXXXX Y
BUENOS AIRES S.A.-----------------------------------------------------
As of June 30, 2002, Tarjeta Naranja S.A., Tarjeta Comfiar S.A.,
Tarjetas del Mar S.A. and Tarjetas Regionales S.A. reported shortfalls
of US$ 14,559, US$ 17,605, US$ 3,754 and US$ 2,303 and US$ 21,609,
respectively, in their equity, and this situation is subject to the
provisions of Section 94, subsection 5) of the Corporations Law.
Tarjetas Cuyanas S.A. records a deficit of US$ 491 in its equity at
that date.------------------------------------------------------------
Accumulated losses of US$ 22,504 reported by Tarjeta Comfiar S.A. and
US$ 5,088, reported by Tarjeta del Mar S.A. are in excess of 50% of
their corporate capital and irrevocable capital contributions made by
their shareholders, according to the computation established by
Section 206 of that Law. It should be noted that Decree 1269/02
suspended until December 10, 2003 the application of Section 94,
subsection 5) of Law 19550, which establishes that companies must be
dissolved when their losses exceed their corporate capital and of
Section 206, which establishes mandatory capital reduction when losses
are in excess of reserves and 50% of capital.-------------------------
43
-------------------------Grupo Financiero 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$ 82,309 were
transferred, receiving in exchange US$ 61,732 in cash and certificates
of participation for US$ 20,577. The trustee is ABN AMRO Bank
Argentine Branch, with various domestic financial institutions acting
as subscribers.-------------------------------------------------------
The Secured Loans Trust has been created and the parties to it are
Banco de la Provincia de Buenos Aires as beneficiary and BAPRO
Mandatos y Negocios S.A., as trustee. Under this Trust, secured loans
for US$ 28,421 were transferred and US$ 21,316 in cash and
certificates of participation for US$ 7,105 were received in exchange.
----------------------------------------------------------------------
Banco xx Xxxxxxx y Buenos Aires S.A. will act as administrator in both
cases.----------------------------------------------------------------
----------------------------------------------------------------------
As of June 30, 2002, the amounts of the participation certificates was
US$ 21,435 and US$ 7,105, respectively.
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
44
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----Quarterly Statement of Financial Condition as of June 30, 2002 and 2001-----
------------------(figures stated in thousands of US dollars)-------------------
------------------------------------(Note 2)------------------------------------
======================================================================
6.30.02 6.30.01
-----------------------------
ASSETS
CURRENT ASSETS
Cash and due from banks (Notes 3 and 13
and Schedule G) 383 9
Investments (Notes 11 and 13 and
Schedules C and G) 6,520 15,198
Fiscal credits (Notes 4 and 11) 20 112
Other receivables (Notes 5 and 11 and
Schedule G) 935 37
-----------------------------
Total Current Assets 7,858 15,356
-----------------------------
NON-CURRENT ASSETS
Fiscal credits (Notes 4 and 11) 1 57
Other receivables - 1
Investments (Notes 11, 12, 13, 15 and
16 and Schedules C, E and G) 551,877 697,731
Fixed assets and investments in assets
of a similar nature (Schedule A) 895 319
Intangible assets (Schedule B) 3,702 2,086
-----------------------------
Total Non-current Assets 556,475 700,194
-----------------------------
Total Assets 564,333 715,550
======================================================================
6.30.02 6.30.01
-----------------------------
LIABILITIES
CURRENT LIABILITIES
Social security liabilities (Notes 6
and 11) 30 78
Tax liabilities (Notes 7 and 11) 9 7
Other liabilities (Notes 8, 11 and
13 and Schedules E and G) 10,735 155
-----------------------------
Total Current Liabilities 10,774 240
-----------------------------
NON-CURRENT LIABILITIES
Other liabilities (Notes 8 and 11) 1 2
-----------------------------
Total Non-current Liabilities 1 2
-----------------------------
Total Liabilities 10,775 242
-----------------------------
SHAREHOLDERS' EQUITY
(per related statement) 553,558 715,308
-----------------------------
Total Liabilities and Shareholders'
Equity 564,333 715,550
======================================================================
The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral
part of these financial statements.
45
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
--------------------------------Income Statement--------------------------------
--------------For the period of six months commenced January 1, 2002------------
----------------------------and ended June 30, 2002-----------------------------
----In comparative format with the same period of the previous year-------------
------------------(figures stated in thousands of US dollars)-------------------
------------------------------------(Note 2)------------------------------------
================================================================================
6.30.02 6.30.01
----------------------------
Net (loss)/ income from long-term investments (180,390) 51,423
Administrative expenses (Note 13 and Schedule H) (1,360) (922)
Other income and expenses (loss) (Schedule E) (10,454) (16)
Financial gain (Notes 10 and 13) 19,239 90
Income tax (149) -
----------------------------
Net (loss)/ income for the period (173,114) 50,575
================================================================================
The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral
part of these financial statements.
46
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
-----------------Statement of Changes in Shareholders'Equity--------------------
-------------For the period of six months commenced January 1,2002--------------
----------------------------and ended June 30, 2002.----------------------------
---------In comparative format with the same period of the previous year--------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------(Note 2)----------------------------------------
============================================================================================
Shareholders' contributions (Note 9)
--------------------------------------------------------------------------------------------
Non-capitalized
Subscribed Capital contributions
and adjustment -----------------------
paid-up Issuance Irrevocable Total
capital premiums contributions
--------------------------------- ----------- ----------- --------- ------------- ----------
Historical balances at
beginning of year 287,476 - 20,856 - 308,332
Adjustments to historical
balances at beginning of year - 276,120 20,032 - 296,152
Historical balances at
beginning of year, adjusted 287,476 276,120 40,888 - 604,484
Distribution approved by the
ordinary shareholders' meeting
held on March 15, 2001: - - - - -
- Cash dividends - - - - -
Distribution approved by the
ordinary shareholders' meeting
held on June 3, 2002
- Legal reserve
- Discretionary reserve
Net (loss)/ income for the
period - - - - -
--------------------------------- ----------- ----------- --------- ------------- ----------
Balances as of 6.30.02 287,476 276,120 40,088 - 604,484
================================= =========== =========== ========= ============= ==========
===================================================================================================================================
Retained earnings (Note 14)
-----------------------------------------------------------------
Reserved profits Total Unappropriated Total Total
-------------------------------------- retained shareholders' shareholders'
Legal Discretionary Other earnings equity as of equity as of
Reserve reserve reserves 6.30.02 6.30.01
(*)
-------- -------------- ------------ ----------- ------------- ------------ -------------
Historical balances at
beginning of year 1,943 28,537 - 30,480 31,846 370,658 347,587
Adjustments to historical
balances at beginning of year 1,866 27,409 - 29,275 30,587 356,014 333,857
Historical balances at 3,809 55,946 - 59,755 62,433 726,672 681,444
beginning of year, adjusted
Distribution approved by the
ordinary shareholders' meeting
held on March 15, 2001: - - - - - - (16,711)
- Cash dividends - - - - -
Distribution approved by the
ordinary shareholders' meeting
held on June 3, 2002
- Legal reserve 3,097 3,097 (3,097) -
- Discretionary reserve 59,331 59,331 (59,331) -
Net (loss)/income for the
period - - - - (173,114) (173,114) 50,575
--------- ---------- --------- ---------- ------------ ----------- ---------
Balances as of 6.30.02 6,906 115,277 - 122,183 (173,109) 553,558 715,308
========= ========== ========= ========== ============ =========== =========
The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral
part of these financial statements.
47
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
----------------------------Statement of Cash Flows-----------------------------
-------------For the period of six months commenced January 1,2002--------------
----------------------------and ended June 30, 2002.----------------------------
---------In comparative format with the same period of the previous year--------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------(Note 2)----------------------------------------
================================================================================
6.30.02 6.30.01
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CHANGES IN CASH
Cash at beginning of year 84 57
Increase /(decrease) in cash 299 (48)
-------------------------------------
Cash at end of period 383 9
=====================================
REASONS FOR CHANGES IN CASH
Less:
Ordinary expenses paid (863) (718)
Plus:
Other ordinary income collected 728 1,141
-------------------------------------
Cash (used in)/provided by ordinary
operations (135) 423
-------------------------------------
Decrease in short-term investments 33,787 -
Other sources of cash 586 19,956
-------------------------------------
Total sources of cash 34,373 19,956
-------------------------------------
Increase in short-term receivables (425) -
Increase in long-term investments (457) (3,381)
Increase in fixed assets - (34)
Decrease in short-term debts (322) (264)
Dividends paid - (16,711)
Other uses of cash (32,735) (37)
-------------------------------------
Total uses of cash (33,939) (20,427)
-------------------------------------
Increase/(decrease) in cash 299 (48)
================================================================================
The accompanying Notes 1 to 16 and Schedules A, B, C, E, G and H are an integral
part of these financial statements.
48
-------------------------Grupo Financiero 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 already lasted more than four years. This situation has
led to a significant decrease in the demand for goods and
services and a large rise in the level of unemployment.----------
-----------------------------------------------------------------
Furthermore, the Government's ability to comply with its
commitments has been impaired, as has access to bank
financing.-------------------------------------------------------
-----------------------------------------------------------------
As from December 3, 2001 measures were issued to restrict the
free availability and circulation of cash and the transfer of
foreign currency abroad. Subsequently, the Government declared
default on the external debt.------------------------------------
-----------------------------------------------------------------
On January 6, 2002, after a political crisis that resulted in the
resignation of two presidents, the Government enacted Law 25561
(Law on public emergency and exchange system reform) that
involved profound changes to the prevailing economic model and
the amendment of the Convertibility Law in force since March
1991. On February 3, 2002, the Government announced new economic
measures through Decree 214 (Restructuring of the financial
system) dated February 3, 2002, complemented by Decree 410 dated
March 1, 2002, Decree 260 (Exchange Regime) dated February 8,
2002 and Decree 905/02 dated May 31, 2002, substantially
modifying some of the measures implemented by the Public
Emergency Law. These decrees are being complemented by other
regulations being issued by the various control agencies, some of
which may be pending at the date on which these financial
statements were prepared. In addition, on April 24, 2002 the
Government signed an agreement with provincial governors, which,
together with other changes to the National Administration, will
lay down the basis for further measures that have yet to be
issued or fully implemented.-------------------------------------
-----------------------------------------------------------------
Listed below are some of the measures adopted by the Government
that are in force at the date of filing these financial
statements and have been affecting the economic and financial
situation of the Company and/or its controlled entities:---------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
49
-------------------------Grupo Financiero 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 No 214, as from
February 3, 2002, all debts denominated in US dollars or any
other currency with the financial system, except as mentioned in
subsection b) below, whatever their amount and nature, will be
converted into pesos at the exchange rate of $ 1 per U$S 1 or its
equivalent in other currency. Furthermore, as from February 3,
2002 a reference stabilization index (CER) and a maximum interest
rate to be determined by the Argentine Central Bank will be
applied to these debts.------------------------------------------
Subsequently, Decrees 762/02 and 1242/02 excluded from the
application of the CER those loans secured by mortgages on the
only family dwelling of debtors, regardless of their amounts,
consumer loans for up to twelve thousand pesos and pledge
consumer loans for up to thirty thousand pesos. Those loans will
be adjusted as from October 1, 2002 by applying an adjustment
salary variation index (CVS), maintaining the conditions
prevailing at that date.-------------------------------------
Law 25642 of September 11, 2002 postponed until September 30,
2002 the application of the CER to all obligations to give sums
of money of less than four hundred thousand pesos. In the case of
debtors of financial institutions, this amount will be considered
on the basis of indebtedness in financial system as a
whole.-----------------------------------------------------------
In addition, at the date of these financial statements,
amendments and complementary norms for the application of CER
might be pending issuance.---------------------------------------
-----------------------------------------------------------------
50
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
b) As established by Decree 410 issued by the Argentine
Government, loans related to foreign trade transactions granted
by financial institutions, credit card balances for consumption
made outside Argentina and contracts governed by foreign law are
not included in the conversion into pesos at the rate of $ 1 per
U$S 1 established by Section 1 of the mentioned Decree
214.-------------------------------------------------------------
As a result of the measures adopted by the Argentine Government
and the crisis affecting Argentina, Banco 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 of 20% per annum in each of the
first five fiscal years ending after the effective date of the
law.-------------------------------------------------------------
-----------------------------------------------------------------
Deposits and obligations with the public and private sectors-----
-----------------------------------------------------------------
Under the terms of Decree 214, as from February 3, 2002 deposits
and obligations in U.S. dollars or other foreign currencies in
financial institutions were converted into pesos at the exchange
rate of $ 1.40 per US$ 1 or its equivalent in such other
currency.--------------------------------------------------------
-----------------------------------------------------------------
Furthermore, there are restrictions on the availability of
certain balances in current accounts and savings accounts in
dollars and time deposits in pesos or dollars, which will be
returned to their owners in installments and the amounts and due
dates will depend on the balances recorded. As from February 3,
2002 a reference stabilization index (CER) and an interest rate
will be applied to these rescheduled deposits. The CER is an
index that measures the daily rate of change derived from the
monthly change in the Consumer Price Index (CPI) published by the
I.N.D.E.C. ------------------------------------------------------
51
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
Pursuant to Decree 905/02, depositors were allowed to opt to
receive National Government Bonds in pesos accruing interest at a
2% rate and falling due in 2007 in substitution for their
deposits, or National Government Bonds in US dollars, accruing
interest at Libor and falling due in 2012, if deposits were
originally made in foreign currency, regardless of their
amounts.---------------------------------------------------------
Under the conditions of Section 4 of Decree 905/02, depositors
were allowed to opt to receive in exchange for their receivables
National Government Bonds in US dollars, accruing interest at
Libor and falling due in 2005.-----------------------------------
Furthermore, Decree 905/02 established that financial
institutions must register rescheduled deposits for which no
option has been exercised in a "Notarial Record of Rescheduled
Deposits" to be kept by Caja de Valores S.A. The rescheduled
deposits included in that Record (CEDROS) will be negotiable
securities to that effect, listed on stock exchanges and may be
negotiated on self-regulating markets in Argentina.--------------
Owners of those deposits may apply them to the subscription of
new share issuances and/or listed negotiable obligations and to
the repayment of loans at the financial institutions where those
funds are deposited.---------------------------------------------
On September 16, 2002, Decree 1836/02 established a second
exchange of deposits with the financial system, by which all
owners of rescheduled deposits, whether they have exercised the
mentioned option or not, may opt to receive National Government
Bonds in US dollars due 2013 until December 12, 2002, together
with a put option to be delivered by the depository entity as
collateral for the payment of the original coupon adjusted by
applying the CER, or to transform the rescheduled balance into
Time Deposit Bills in pesos, with a guarantee to be provided by
the National State consisting in contributing the difference
between the value of each installment in pesos adjusted by
applying the CER and the free US dollar exchange rate at the
payment date.---------------------------------------------------
Financial institutions may also offer National Government Bonds
in US dollars accruing interest at Libor and falling due in 2006
to depositors who have brought legal actions that are pending
resolution.------------------------------------------------------
-----------------------------------------------------------------
Financial institutions bound to depositors that opt to deliver
the mentioned government securities must transfer to the National
State sufficient assets to pay those securities.-------------
Decree 1836/02 also provides that "in view of the increase
determined in deposits with the financial system and given the
special situation of small savers, owners of rescheduled deposits
for amounts of up to pesos seven thousand will be able to collect
that amount in cash ", each financial institution being entitled
to increase that limit to ten thousand pesos,
52
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
according to their possibilities. Banco xx Xxxxxxx y Buenos Aires
S.A. can offer the latter possibility to its customers.----------
There is also a possibility of subscribing National Government
Securities in US dollars due 2013 with CEDROS.-------------------
As of June 30, 2002, the amount of rescheduled deposits (CEDROS)
was US$ 286,130, while the amount of rescheduled deposits
exchanged for National government Bonds was US$ 182,049 at that
date.------------------------------------------------------------
-----------------------------------------------------------------
b) Decree 410 provides that deposits made by foreign banks or
financial institutions with domestic financial institutions will
not be converted into pesos at the $1=US$1 exchange rate, as
established by Section 1 of Decree 214, provided they are
transformed into lines of credit that are effectively maintained
and used for at least four years, in conformity with Argentine
Central Bank regulations. Nor will the conversion into pesos
include those obligations of the public and private sectors to
give sums of money in foreign currency which are governed by
foreign laws.----------------------------------------------------
-----------------------------------------------------------------
Public debt------------------------------------------------------
-----------------------------------------------------------------
Decree 471 dated March 8, 2002 established that the obligations
of the National, Provincial and Municipal Public Sectors
outstanding as of February 3, 2002 denominated in US dollars or
any other currency, governed only by the Argentine law, were
converted at an exchange rate of $1.40 per US dollar or its
equivalent in other foreign currency and adjusted applying a
reference stabilization index (CER).-----------------------------
In addition, the obligations of the National Public Sector
converted into pesos as explained earlier will accrue interest at
an annual 2% rate as from February 3, 2002, while the obligations
of the Provincial and Municipal Public Sectors will accrue
interest at an annual 4% rate as from that date.-----------------
-----------------------------------------------------------------
Other assets and liabilities-------------------------------------
-----------------------------------------------------------------
As established by Decree 410 and complementary rules, futures and
option contracts, including those recorded in self-regulating
markets and the accounts exclusively earmarked for the operations
of those markets will not be converted into pesos at the $ 1 =
US$ 1 exchange rate as established by Section 1 of Decree 214,
except for those governed by Argentine legislation agreed before
January 5, 2002, where at least one of the parties must be a
financial institution and are settled as from June 12, 2002,
which will be converted into pesos at $1.40 per US
dollar.----------------------------------------------------------
Decree 410 also established that:--------------------------------
a) Fiscal credit certificates issued in US dollars or any other
foreign currency within the framework of Decrees 979/01, 1005/01
and 1226/01 and in force
53
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
at February 3, 2002, will be converted into pesos at the exchange
rate of $ 1.40 per US$ 1 or its equivalent in any other foreign
currency.--------------------------------------------------------
b) The balances of the financial institution accounts in US
dollars or any other currencies at the close of operations at
February 1, 2002, which may be computed to comply with liquidity
reserve requirements, except for legal tender currency available
and the amount equivalent to the balances of accounts earmarked
exclusively to the operations on self-regulating futures and
options markets, will be converted into pesos at the exchange
rate of $ 1.40 per US$ 1.----------------------------------------
The same treatment will be accorded to the amounts contributed by
financial institutions to the Bank Liquidity Fund established by
Decree 32/01 and to the debts institutions have with that
Fund.------------------------------------------------------------
-----------------------------------------------------------------
Reorganization and bankruptcy proceedings------------------------
-----------------------------------------------------------------
On January 30, 2002, Law 25563 on reorganization and bankruptcy
proceedings was enacted, which declared a production and credit
emergency generated by the crisis affecting Argentina, to last
until December 10, 2003. Below is a detail of some of the
measures adopted:-----------------------------------------------
a) Suspension for one hundred and eighty days as from the
effective date of that Law, of all mortgage, pledge and other
foreclosures of whatever origin ordered in reorganization
proceedings, whether they be made extrajudicially or in execution
of judgment (Section 9 of Law 25563).---------------------------
b) Suspension for one hundred and eighty days of the expedition
of petitions in bankruptcy filed, without prejudice to the
possibility of applying the measures envisaged in Section 85 of
Law 24522 (Section 11 of Law 25563).-----------------------------
-----------------------------------------------------------------
c) Access to credit by insolvent individuals and/or legal
entities, for which the Argentine Central Bank will proceed to
regulate the elimination of all restrictions which otherwise
hinder such access to credit or make it more expensive, and
implement a rediscount line intended for those financial
institutions that provide credit assistance to insolvent
companies that are in the stage envisaged in Section 43 of Law
24522 (Section 12 of Law 25563).--------------------------------
d) Financial institutions governed by Law 21526 (Financial
Institutions Law) and supplementary rules may proceed within a
term of 90 days to the rescheduling of their receivables from
debtors of the financial system existing as of November 30, 2001
through an agreement to be reached with each of them (Section 15
of Law 25563).---------------------------------------------------
e) Suspension for one hundred and eighty days of the
precautionary measures awarded and prohibition for the same term
of new precautionary measures requested on those assets that are
essential for the continuity of activities related to debtors'
normal course of business. All extraordinary acts of disposition
of property on the part of debtors will be null and void
54
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
during the suspension period envisaged in this Section, unless
there is an express agreement by creditors (Section 16 of Law
25563).----------------------------------------------------------
On May 15, 2002, Law 25589 was enacted, which amended Laws 24522
and 25563. This Law introduced the following amendments:--------
a) Section 9 of Law 25563 has been repealed.---------------------
b) Section 11 of Law 25563 has been repealed.--------------------
c) Section 15 of Law 25563 has been repealed.--------------------
d) Section 16 of Law 25563 has been amended. In this connection,
auctions of property that is the only dwelling of debtors or of
assets used by them in the production and sale of goods or
providing of services, decreed in executory proceedings,
extrajudicially or in execution of judgment, shall be suspended
for one hundred and eighty calendar days, counted as from the
effective date of this Law. This Law shall not apply to
court-ordered alimony payments, receivables derived from the
responsibility for the commission of crimes, those arising in
labor lawsuits, as a result of third party liability and from
insurance companies that have underwritten third party civil
liability policies, receivables arising after the effective date
of this Law and the liquidation of assets under bankruptcy
proceedings. The application of restitutional remedies that lead
to the dispossession of assets earmarked for the activity of
commercial, manufacture or other establishments, which are
required for their functioning shall also be
suspended.-------------------------------------------------------
e) It is established that this Law will have legal effects on the
date of its publication and applies to pending reorganization
proceedings.-----------------------------------------------------
-----------------------------------------------------------------
Suspension of the application of Section 94, subsection 5 and
Section 206 of Law 19550 on Corporations-------------------------
Decree 1269/02 has suspended until December 10, 2003 the
application of Section 94, subsection 5 of Law 19550 which
establishes that a company must be dissolved due to the loss of
its corporate capital. Section 206, which establishes the
mandatory capital reduction when losses exceed reserves and 50%
of the capital has been suspended until that date
-----------------------------------------------------------------
Legal actions requesting protection of constitutional guarantees-
As a result of the measures adopted by the Government, a
significant number of complaints have been filed against the
National State and/or institutions comprised in the financial
system by individuals and legal entities, as they understand that
those measures are in breach of constitutional and other rights.
At the date of issue of these financial statements the final
outcome of those complaints was still unknown. As of October 31,
2002, the court orders received by Banco 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$
3,354 and US$ 377,431. In compliance with court orders requiring
the reimbursement of deposits under
55
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
penalty of search and/or seizure and/or crimes involving illegal
retention of deposits and/or contempt, Banco xx Xxxxxxx y Buenos
Aires S.A. paid the amounts of US$ 129,094 and US$ 61,116 in
respect of reimbursement of deposits in pesos and foreign
currency.--------------------------------------------------------
The method of proceeding in those lawsuits and the admission and
execution of provisional remedies that decree, for any reason or
title, the material delivery of the pledged assets to the
petitioner have been regulated by the above mentioned Decree 214,
as amended by Decree 320/02, in turn amended and complemented by
the Public Emergency and Exchange System Reform Law 25587 and
Decree 676/02 (both of them published in the Official Gazette on
April 26, 2002), which are applicable to all pending lawsuits and
precautionary measures pending execution, whatever the date of
the related court order may be, issued in judicial proceedings of
whatever nature in relation to credits, debts, obligations,
deposits or rescheduling of financial debts which may be deemed
to be affected by the regulations of Law 25561 and regulatory and
complementary rules.---------------------------------------------
-----------------------------------------------------------------
On July 23, 2002, Decree 1316/02 suspended for one hundred and
twenty working days, compliance with and execution of all
precautionary measures and final judgments issued in the legal
actions referred to by Section 1 of Law 25587, except for those
cases where life, health or physical integrity of individuals are
at risk, or if the claimant were to be an individual of 75 years
old or more. In the latter cases, requests for the execution of
precautionary measures or judgments that estimate the amount of
the claim must be submitted to the Argentine Central Bank. It
should be noted that this Decree has been declared
unconstitutional by most courts, so the application of penalties
of search and/or seizure to seek payment of deposits has not been
completely suspended.--------------------------------------------
Lastly, on September 16, 2002 Decree 1836/02 was issued, Section
17 of which provides that financial institutions may offer the
total or partial reimbursement of deposits with "National
Government bonds in US dollars accruing interest at Libor and due
2006" in lieu of payment to the holders of rescheduled deposits
covered by Section 4 of Decree 905/02, who have brought legal
actions questioning the current legislation applicable to
deposits with the financial system, that are pending resolution
at the effective date of this Decree and for which precautionary
measures are ordered. The issue terms and conditions of the
above-mentioned bonds are detailed in Section 12 of Decree
905/02, except for the issue and due dates, which will be October
30, 2002 and January 30, 2006, respectively.---------------------
Depositors who have brought legal actions may opt to accept those
bonds.-----------------------------------------------------------
-----------------------------------------------------------------
56
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
The difference of US$ 51,458 between the amount paid and the
amount resulting from converting deposits at $1.40 per US dollar
has been recorded in "Other receivables resulting from financial
brokerage".------------------------------------------------------
-----------------------------------------------------------------
Banco 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-------------
-----------------------------------------------------------------
Decree No. 214/02 provides for the issue of a Bond payable with
the funds of the National Treasury to cover the deficit in the
financial system arising from the imbalance generated by the
application of the measures mentioned above, that is, from the
devaluation and the asymmetric conversion into pesos of assets
and liabilities. In fact, in accordance with the provisions of
Law 25561 and Decrees Nos. 214/02, 320/02, 410/02, 471/02,
704/02, 905/02, 992/02 and their amendments and complementary
rules, and of Argentine Central Bank Communiques "A" 3467, 3507,
3561, 3648 and their amendments and complementary rules, a
significant portion of foreign currency assets and liabilities
that formed part of the net foreign currency position, were
converted into pesos at different exchange rates.----------------
-----------------------------------------------------------------
In June 2002, Decree 905/02 established the method of calculating
the amount of the compensation to be received by financial
institutions, which replaced Decree 494/02 that had previously
established such method.-----------------------------------------
-----------------------------------------------------------------
Sections 28 and 29 of that Decree established the restoration of
financial institutions' equity ratios at the time of the
conversion into pesos, by compensating them for:-----------------
-----------------------------------------------------------------
a) The losses arising from the conversion into pesos of a large
portion of their obligations at the exchange rate of $1.40 per US
dollar, which is higher than the exchange rate of $1 per US
dollar applied for the conversion into pesos of certain
receivables in foreign currency, by means of the delivery of a
Compensating Bond, for which the issuance of National Government
Bonds in pesos, due 2007, was established;-----------------------
-----------------------------------------------------------------
b) The mismatching of their foreign currency positions after the
mandatory conversion into pesos of a portion of their loan and
deposit portfolios, by transforming the Compensating Bond
originally issued in pesos into a bond
57
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
in US dollars and, if necessary, through the subscription of a
Coverage Bond in US dollars. To this end, the issuance of
National Government Bonds in US dollars, accruing interest at
Libor and falling due in 2012 has been established.--------------
Argentine Central Bank Communique "A" 3650 and complementary
rules established the procedure that financial institutions were
to carry out for calculating the Compensating and Coverage Bonds,
the amounts of which must be calculated taking into account the
foreign currency balances as of December 31, 2001, as shown in
the statement of financial condition of the parent company and
subsidiaries in Argentina audited at that date; however, insofar
as concerns foreign branches and subsidiaries and subsidiaries
engaged in supplementary activities, this compensation has been
restricted to the negative effects of the mandatory conversion
into pesos of the credit assistance granted to the National State
under Secured Loans. Therefore, the impact on the remaining
foreign currency position subject to Argentine legislation, of
the application of the mentioned economic measures has not been
compensated so far.----------------------------------------------
-----------------------------------------------------------------
This method of determining the amount of the Compensating and
Coverage Bonds, which does not contemplate certain assets and
liabilities converted into pesos due to the application of Decree
214/02, corresponding to foreign branches and subsidiaries and
controlled entities engaged in supplementary activities, is not
only in disagreement with the objectives established by Decrees
214 and 905/02, and is therefore detrimental to Banco 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.---------------------------------------
58
-------------------------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 was US$ 787,541 in
respect of compensation and US$ 618,229, in respect of the
coverage of the negative foreign currency position.--------------
On October 28, 2002, National Executive Branch Decree 2167/02
amended Section 29 of Decree 905/02, including in the calculation
of the compensation the assets recorded at foreign branches and
subsidiaries covered by Decree 214/02 and supplementary rules.
Furthermore, on November 15, 2002, through Communique "A" 3805
the Argentine Central Bank added the amendments to that
decree.----------------------------------------------------------
Variations in the above-mentioned amounts due to the application
of Decree 2167/02 and Argentine Central Bank Communique "A" 3805
have been recognized in these financial statements, according to
the estimates made by Banco xx Xxxxxxx y Buenos Aires S.A.-------
The estimated effect of the addition of the assets mentioned
above is an increase of US$ 230,182 thousand and US$ 660,523
thousand in compensating and coverage bonds, respectively.-------
-----------------------------------------------------------------
As of June 30, 2002 the total amount was recorded by Banco xx
Xxxxxxx y Buenos Aires S.A. in Other receivables resulting from
financial brokerage - In foreign currency - Compensation
receivable from the National Government, for US$ 2,315,676 while
the advance to be requested from the Argentine Central Bank for
the subscription of the Coverage Bond, was recorded in Other
liabilities resulting from financial brokerage - In pesos -
Advances for the acquisition of National Government Bonds in US
dollars, accruing interest at the Libor rate and falling due in
2012, for US$ 471,119. The compensation received to cover the
positive difference between the Shareholders' Equity as of
December 31, 2001 and that resulting from adjusting the net
foreign currency position at that date converted into pesos at
the exchange rate of $1.40 per US dollar, for US$ 333,287, stated
in the period-end currency value, was reflected in the
"Unrealized valuation difference arising from the compensation of
the net foreign currency position" account, in the Shareholders'
Equity of Banco 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
59
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
Aires S.A. (before the absorption envisaged in Communique "A"
3802) would have decreased by that amount.-----------------------
-----------------------------------------------------------------
The terms and conditions for financing the subscription of the
National Government Bonds in US dollars accruing interest at
Libor and falling due in 2012 have been stipulated in Section 29,
subsection g) of Decree 905/02 and contemplate the delivery by
financial institutions of assets as collateral for at least 100%
of the advance received.-----------------------------------------
-----------------------------------------------------------------
Valuation of balances in foreign currency - Capitalization of
exchange differences---------------------------------------------
As established by the Argentine Federation of Professional
Councils in Economic Sciences, Resolution 1/02 of the
Professional Council in Economic Sciences of the Autonomous City
of Buenos Aires, Resolution No. 392 of the National Securities
Commission and Resolution 2/02 of the Superintendency of
Corporations, the Company has given recognition to the effects of
the devaluation as from January 1, 2002.-------------------------
-----------------------------------------------------------------
Situation of Banco 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.------------------------------------------
-----------------------------------------------------------------
At the date of preparing these financial statements, the amount
of deposits with Banco xx Xxxxxxx y Buenos Aires S.A. in
Argentina was approximately US$ 951,941, whereas the assistance
received from the Argentine Central Bank to cover temporary lack
of liquidity amounted to US$ 1,404,273.--------------------------
-----------------------------------------------------------------
Within this context, on March 21, 2002, Banco 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:-----------
60
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
o Securitization (and/or sale) of its mortgage and commercial
loan portfolio through trusts or assignment of credits for a
total amount of US$ 105,263 , which were subscribed by
financial institutions during April 2002.-------------------
o Loan from Seguros de Depositos S.A. (SE.DE.S.A.) for US
dollars equivalent to US$ 52,632, converted at the exchange
rate prevailing on the day prior to that of the
disbursement, for a term of five years and at the 180-day
LIBOR rate plus 300 basis points, which was subscribed on
March 21, 2002.---------------------------------------------
o Loan from the Trust Fund for the Assistance to Financial
Institutions and Insurance companies for US dollars
equivalent to US$ 26,316, converted at the exchange rate
prevailing on the day prior to that of the disbursement, for
a term of three years and at Libor plus 400 basis points,
with a floor of 8.07%, which was subscribed on April 30,
2002.-------------------------------------------------------
In addition, the bank has refinanced a debt of US$ 151,053 with
the Bank Liquidity Fund for three years, which was settled with
the assistance provided by the Argentine Central Bank under the
same conditions as those of the original debt on May 9,
2002.------------------------------------------------------------
As regards capitalization, within the framework of the global
renegotiation of its foreign debt, the addition of basic and/or
complementary capital is expected to take place through the
subscription by foreign creditor banks, in exchange for their
original debts, of ordinary shares or subordinated debt whether
convertible or not into ordinary shares, at the option of the
participating banks.---------------------------------------------
Banco 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 Plan requires the payment of
smaller deposits, the renegotiation of the obligations with third
parties and, regarding the latter, it contemplates principal
amount reductions, an offer to exchange existing securities for
other securities payable within longer terms and the transfer of
the renegotiated debts to the Parent Company. As of June 30,
2002, the New York Branch had obligations with third parties for
a total amount of approximately US$ 331,000, of which
approximately US$ 311,000 had already been restructured at the
date these financial statements were prepared.-------------------
61
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
At present, the New York Branch and the representation offices in
Sao Paulo (Brazil) and London (UK) are in the process of being
closed down.-----------------------------------------------------
The Plan also contemplates the corporate restructuring of Banco
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 and at the date of
these financial statements, approximately US$ 20,503 were paid in
respect of employee voluntary retirement.------------------------
-----------------------------------------------------------------
Furthermore, the Bank has requested temporary exemption from
compliance with the corresponding technical ratios and the
reduction of the charges or fines arising from any non-compliance
incurred or to be incurred, before implementing the plan and
during its implementation, pursuant to the Law on financial
Institutions No. 21526.------------------------------------------
The plan was approved by the Board of Directors of the Argentine
Central Bank on May 3, 2002 through Resolution No. 281.----------
-----------------------------------------------------------------
The situation described above also affected Banco Galicia Uruguay
S.A. and Banco 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 December 20,
2002.------------------------------------------------------------
-----------------------------------------------------------------
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.-------------------------------------------------------
62
-------------------------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 August 26, 2002, the Court of Montevideo hearing the case,
accepted the out-of-court reorganization plan achieved by Banco
xx Xxxxxxx Uruguay S.A., granting it a temporary moratorium until
the end of the reorganizacion process. The Central Bank of
Uruguay was appointed by the Court to verify the majority
obtained in the reorganization plan, which it concluded
satisfactorily. At the date of preparing these financial
statements, as envisaged by the Uruguayan legislation, the
proposal for a reorganization plan had been published, and
negotiations for obtaining its approval were under way.----------
-----------------------------------------------------------------
The situation of Banco 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
Uruguay S.A., in order to reach a voluntary restructuring
agreement between that entity and its creditors, adopting the
corresponding measures to preserve the assets of Banco xx Xxxxxxx
Uruguay S.A.. 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. Such proposal may only materialize
once the agreement has been reached with the creditors of Banco
xx Xxxxxxx Uruguay S.A..-----------------------------------------
-----------------------------------------------------------------
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.-----------------------------------------------------
-----------------------------------------------------------------
63
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
Such losses have been generated by the fact that, as mentioned
earlier, Decree 905/02 excluded from the calculation of the
Compensating and Coverage Bonds the assets converted into pesos
owned by companies engaged in supplementary activities and
controlled by Banco 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 xx Xxxxxxx 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. ---------------------------------------------------
-----------------------------------------------------------------
64
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
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$ 268,894 has been
recorded in Provisions - Other contingencies, under liabilities,
which is equivalent to the negative consolidated equity of the
two subsidiaries estimated as of June 30, 2002.------------------
-----------------------------------------------------------------
Should the two companies have been included in the consolidated
financial statements of Grupo Financiero 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 138,062 Deposits 2,069,143
Government and corporate 536,583 Other liabilities resulting 3,999,317
securities from financial brokerage
Loans 2,953,440 Other liabilities 270,998
Other receivables resulting from 2,837,691 Shareholders' equity 553,558
financial brokerage
Other assets 427,240
-----------------------------------------------------------------
Claims due to exchange differences arising from the repayment of
financial assistance during the exchange holidays that took place
in January 2002
During December 2001, Banco 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 $574,000.---------------
This has affected the guarantees of inviolability of private
property and equality under the law.-----------------------------
65
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 1: (Continued)------------------------------------------------------
-----------------------------------------------------------------
In view of the above, the return of the difference of US$ 43,158
to Banco xx Xxxxxxx y Buenos Aires or the restoration of its
equity for an equivalent amount should be considered.------------
-----------------------------------------------------------------
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 June 30, 2002 was
recognized according to evaluations and estimates made at the
date of preparing them. Future actual results might differ from
those evaluations and estimates and those differences could be
significant. Therefore, the financial statements of Grupo
Financiero 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.--------------------------------
66
-------------------------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 June 30, 2001 have been stated in constant monetary units as
of June 30, 2002.------------------------------------------------
These financial statements, together with notes and schedules are
presented in pesos, and are in compliance with the provisions of
Resolutions Nos. 8/95 and 11/02 of the Superintendency of
Corporations.----------------------------------------------------
-----------------------------------------------------------------
The principal accounting policies used for preparing the
financial statements are described below.------------------------
-----------------------------------------------------------------
a. Assets and Liabilities in local currency--------------------
-----------------------------------------------------------------
Monetary assets and liabilities which include, where
applicable, the interest accrued up to the closing date, are
stated at period end currency value, so they do not require
any adjustment whatsoever.----------------------------------
------------------------------------------------------------
------------------------------------------------------------
b. Foreign currency Assets and Liabilities---------------------
-----------------------------------------------------------------
Foreign currency assets and liabilities (in US dollars) have
been stated at period-end exchange rate. Interest receivable
or payable has been accrued, where applicable.--------------
-----------------------------------------------------------------
c. Investments-------------------------------------------------
c.1. Current------------------------------------------------
------------------------------------------------------------
Time deposits have been valued at their face value,
plus interest accrued at end of period.----------------
------------------------------------------------------------
Treasury Bills have been valued at cost, plus interest
accrued at end of period.-----------------------------
------------------------------------------------------------
67
-------------------------Grupo Financiero 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 June 30, 2002. ------
-------------------------------------------------------
The equity interests in Sudamericana Holding S.A. and
Galicia Warrants S.A. have been accounted for April 30,
under the equity method, on the basis of March 31, 2002
and 2002 financial statements, respectively , and
considering the significant movements occurred from
that date to the closing date of these financial
statements, in accordance with the guidelines of
Technical Pronouncement No. 5 of the F.A.C.P.C.E.------
------------------------------------------------------------
d. Fixed assets and investments in assets of a similar nature--
------------------------------------------------------------
Fixed assets have been valued at their acquisition cost,
restated in constant monetary units as from January 1, 2002,
net of the corresponding accumulated depreciation.----------
------------------------------------------------------------
Depreciation charges are calculated following the
straight-line method, at rates determined based on the
useful life assigned to the assets, which is 60 months for
hardware and software, furniture and fixtures and vehicles
and 600 months for real estate property.--------------------
------------------------------------------------------------
The index-adjusted net book values of the assets, taken as a
whole, do not exceed their estimated recoverable
value.------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
68
-------------------------Grupo Financiero 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
second paragraph of this Note.-------------------------
The "Subscribed and paid-up capital" account has been
stated at its face value and at the value of the
contributions, in the currency value of the period in
which those contributions were actually made. The
adjustment derived from the restatement of that account
in constant monetary units has been allocated to the
Capital Adjustment account. The Subscribed and paid-up
Capital account has been stated at its face value.-----
f.2. Income and expense accounts----------------------------
-------------------------------------------------------
The results for the period have been stated in constant
monetary units.----------------------------------------
-------------------------------------------------------
g. Statement of cash flows-------------------------------------
------------------------------------------------------------
Cash and due from banks are considered to be cash.----------
NOTE 3: CASH AND DUE FROM BANKS-----------------------------------------------
----------------------------------------------------------------------
The breakdown of this caption was as follows:-------------------------
----------------------------------------------------------------------
6.30.02 6.30.01
--------------------- -------------------
Cash (Schedule G) 3 3
Banks - current accounts (Note 13 369 6
and Schedule G)
Checks for deposit (Note 13) 11 -
--------------------- -------------------
Total 383 9
===================== ===================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
69
-------------------------Grupo Financiero 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 6.30.02 6.30.01
--------------------- ---------------------
VAT credit 13 -
Tax on minimum notional income 3 78
Credit - Law 25413 1 1
Freely available balance - General Resolution 4297/97 1 -
Income tax return balance 2 -
Income tax withholdings - 33
--------------------- --------------------
Total 20 112
===================== =====================
Non-current 6.30.02 6.30.01
--------------------- ---------------------
Minimum notional income tax credit - 32
Income tax credit - 18
Assets tax prepayment - 1
Assets tax credit - 2
Freely available balance - General Resolution 4297/97 - 2
Credit - Law 23549 mandatory savings 1 2
--------------------- ---------------------
Total 1 57
===================== =====================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 5: OTHER RECEIVABLES------------------------------------------------
-----------------------------------------------------------------
The breakdown of this caption was as follows:--------------------
-----------------------------------------------------------------
6.30.02 6.30.01
--------------------- ---------------------
Notes receivable 827 -
Prepaid insurance 12 31
Prepaid expenses (Schedule G) 5 6
Sundry debtors 80 -
Salary advances 11 -
--------------------- ---------------------
Total 935 37
===================== =====================
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
70
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 6: SOCIAL SECURITY LIABILITIES--------------------------------------
-----------------------------------------------------------------
The breakdown of this caption was as follows:--------------------
-----------------------------------------------------------------
6.30.02 6.30.01
--------------------- ---------------------
Integrated Pension and Survivors' Benefit System 3 5
Contributions to the Family Subsidy Fund payable - 1
Health care plans 1 2
Salaries payable - -
Provision for bonuses 10 48
Directors' and syndics' fees accrual 16 22
--------------------- ---------------------
Total 30 78
===================== =====================
NOTE 7: TAX LIABILITIES--------------------------------------------------
-----------------------------------------------------------------
The breakdown of this caption was as follows:--------------------
-----------------------------------------------------------------
6.30.02 6.30.01
--------------------- ---------------------
Income tax withholdings to be deposited 8 7
Provision for turnover tax 1 -
--------------------- ---------------------
Total 9 7
===================== =====================
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
71
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the Financial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 8: OTHER DEBTS -----------------------------------------------------
-----------------------------------------------------------------
The breakdown of this caption was as follows:--------------------
-----------------------------------------------------------------
Current 6.30.02 6.30.01
--------------------- ---------------------
Sundry creditors (Schedule G) 8 6
Expense accrual (Note 13 and Schedule G) 200 147
Directors' qualification bond 1 2
Provision for other contingencies 10,526 -
(Schedule E)
--------------------- --------------------
Total 10,735 155
===================== =====================
Non-current 6.30.02 6.30.01
--------------------- ---------------------
Directors' qualification bond 1 2
--------------------- ---------------------
Total 1 2
===================== =====================
-----------------------------------------------------------------------
-----------------------------------------------------------------------
NOTE 9: CAPITAL STATUS --------------------------------------------------------
-----------------------------------------------------------------------
As of June 30, 2002, the capital status of the Company was as follows:-
-----------------------------------------------------------------------
=====================================================================================================
Restated Approved by Date of registration
Face in --------------------------------- with the Public Registry
Capital value constant Body Date of Commerce
monetary
units
-----------------------------------------------------------------------------------------------------
Subscribed, Extraordinary 05.16.00
issued, 287,476 604,484 shareholders' 07.24.00 and 08.09.00
paid-in and meeting 07.26.00
registered Board of Directors
--------------------
Total 287,476 604,484
=====================================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
72
-------------------------Grupo Financiero 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:--------------------
-----------------------------------------------------------------
6.30.02 6.30.01
--------------------- --------------------
Generated by assets:
Interest
On time deposits (*) 789 76
On special current account deposits (*) 36 3
On government securities 1 -
On notes receivable 3 -
Other 13 -
Mutual Fund yield - 11
Index-adjustment of notes receivable 20 -
Exchange difference 51,628 -
Loss on exposure to inflation (33,390) -
Generated by liabilities:
Exchange difference (206) -
Result of exposure to inflation 345
--------------------- --------------------
Total financial gains 19,239 90
===================== ====================
----------------------------------------------------------------------------------------------------------------------
(*) Balances net of eliminations corresponding to intercompany
transactions (per Section 33 of Law 19550). See Note
13.-----------------------------------------------------------
--------------------------------------------------------------
NOTE 11: ESTIMATED COLLECTION OR PAYMENT TERMS OF RECEIVABLES,
INVESTMENTS AND DEBTS-----------------------------------------
As of June 30, 2002 the breakdown of receivables, investments
and debts according to their estimated collection or payment
terms was as follows:-----------------------------------------
====================================================================================================
Social
Fiscal Other security Tax Other
credits receivables Investments liabilities liabilities liabilities
----------------------------------------------------------------------------------------------------
Falling due within:
1st Quarter 13 14 6,520 14 9 95
2nd Quarter - 919 - - - 2
3rd Quarter - - - 16 - 1
4th Quarter 7 2 - - - 10,526
After one year - - 45,218 - - 1
--------------------------------------------------------------------------
Subtotal falling due 20 935 51,738 30 9 10,625
--------------------------------------------------------------------------
Without any set due date 1 - 506,659 - - 111
Past due - - - - - -
--------------------------------------------------------------------------
Total 21 935 558,397 30 9 10,736
--------------------------------------------------------------------------
Non-interest bearing 21 28 506,659 30 9 10,736
At a fixed rate - 907 51,738 - - -
----------------------------------------------------------------------------------------------------
Total 21 935 558,397 30 9 10,736
====================================================================================================
----------------------------------------------------------------------------------------------------
73
-------------------------Grupo Financiero 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 6.30.02
-----------------------------------------------------------------------------------------------------
Shares Percentage of interest held in Face
-------------------------------------------------- Principal value
Issuer company lne of per
business share
Possible
Type Number Total Capital votes
------------------------------------------------------------------------------------------------------
Ordinary
Banco xx Xxxxxxx y class "A" 101 Financial 0.001
Buenos Aires S.A. Ordinary activities
class "B" 438,599,602 0.001
---------------------------------------------------------
Total 438,599,703 93.585537% 93.585542%
------------------------------------------------------------------------------------------------------
Financial
and
investment
Net Investment S.A. Ordinary 10,500 87.50% 87.50% activities 0.001
----------------------------------------------------------------------------------------------------
Ordinary
Sudamericana class "A" 31,302 0.001
Holding S.A. Ordinary Investment
class "B" 41,735 activities 0.001
---------------------------------------------------------
Total 73,037 87.500899% 87.500899%
----------------------------------------------------------------------------------------------------
Issuer of
warehouse
receipts
and
Galicia Warrants S.A. Ordinary 175,000 87.50% 87.50% warrants 0.001
====================================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
====================================================================================================
as of 6.30.01
----------------------------------------------------------------------------------------------------
Shares Percentage of interest held in Principal Face
Issuer company line of value
--------------------------------------------------------- business per share
Possible
Type Number Total Capital votes
-------------------------------------------------------------------------------
Ordinary
Banco xx Xxxxxxx y class "A" 101 0.001
Buenos Aires S.A. Ordinary Financial
class "B" 438,120,409 activities 0.001
---------------------------------------------------------
Total 438.120.510 93,48329% 93,48330%
----------------------------------------------------------------------------------------------------
Financial
and
investment
Net Investment S.A. Ordinary 10.500 87,50% 87,50% activities 0.001
----------------------------------------------------------------------------------------------------
Sudamericana Holding Investment
S.A. Ordinary 31.302 37,500899% 37,500899% activities 0.001
----------------------------------------------------------------------------------------------------
BtoB Comercial S.A. Ordinary 3.000 25% 25% Services 0.001
====================================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
74
-------------------------Grupo Financiero 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:------------------------------------------------------
-----------------------------------------------------------------
====================================================================================================
Issuing company
-------------------------------------
Banco xx Xxxxxxx
Financial condition y Buenos Aires Net Investment
as of 6.30.02 S.A. S.A.
----------------------------------------------------------------------------------------------------
Assets 6,312,035 1,979
Liabilities 5,781,838 11
Shareholders' equity 530,197 1,968
Result for the period of six months ended 6.30.02 (193,404) (1,226)
====================================================================================================
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
====================================================================================================
Issuer company
-------------------
Financial condition Galicia Warrants
as of 4.30.02(*) S.A.
----------------------------------------------------------------------------------------------------
Assets 1,440
Liabilities 258
Shareholders' equity 1,182
Result for the period of six months ended 4.30.02 (43)
====================================================================================================
----------------------------------------------------------------------------------------------------
(*) See Note 2.c.2.---------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
====================================================================================================
Issuer company
-------------------
Financial condition Sudamericana
as of 3.31.02(*) Holding S.A.
----------------------------------------------------------------------------------------------------
Assets 9,083
Liabilities 308
Shareholders' equity 8,775
Result for the period of six months ended 3.31.02 827
====================================================================================================
----------------------------------------------------------------------------------------------------
(*) See Note 2.c.2.-------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
====================================================================================================
Issuer company
------------------------------------
Banco xx Xxxxxxx
Financial condition y Buenos Aires Net Investment
as of 6.30.01 S.A. S.A.
----------------------------------------------------------------------------------------------------
Assets 7,221,580 1,794
Liabilities 6,479,830 7
Shareholders' equity 741,750 1,787
Result for the period of six months ended 6.30.01 55,024 (438)
====================================================================================================
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
75
-------------------------Grupo Financiero 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 related companies were as
follows:---------------------------------------------------------
===============================================================================
Issuing company
--------------------
Financial condition BtoB Comercial
as of 6.30.01 S.A.
-------------------------------------------------------------------------------
Assets 1,160
Liabilities 47
Shareholders' equity 1,113
Result for the period of six months ended 6.30.01 (18)
===============================================================================
=================================================================================
Issuing company
--------------------
Financial condition Sudamericana
as of 3.31.01 Holding S.A.
--------------------------------------------------------------------------------
Assets 10,684
Liabilities 3,288
Shareholders' equity 7,396
Result for the period of three months ended 3.31.01 (509)
================================================================================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTE 13 INTERCOMPANY BALANCES AND TRANSACTIONS - SECTION 33 OF
LAW 19550
----------------------------------------------------------------
The financial statements include the following significant
balances of the transactions carried out with Banco xx Xxxxxxx y
Buenos Aires S.A. and its subsidiaries:-------------------------
-----------------------------------------------------------------
Banco xx Xxxxxxx y Buenos Aires S.A.
6.30.02 6.30.01
----------------------- ---------------------
ASSETS
Cash and due from banks - checks for deposit 11 -
(Note 3)
Cash and due from banks - current accounts (Note 3 369 5
and Schedule G)
Investments - time deposits (Schedules C) 5,078 15,163
Investments - special current account deposits - 34
(Schedules C and G)
----------------------- ---------------------
Total 5,458 15,202
======================= =====================
LIABILITIES
Other liabilities - expense accrual (Note 8) 46 62
----------------------- ---------------------
Total 46 62
======================= =====================
76
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
------------------Notes to the FInancial Statements (Continued)-----------------
-------------------(figures stated in thousands of US dollars)------------------
--------------------------------------------------------------------------------
NOTE 13: (Continued) -----------------------------------------------------
-----------------------------------------------------------------
INCOME
Financial income - interest on time deposits (Note 10) 1,048 1,165
Financial income - interest on special current 111 42
account deposits (Note 10)
----------------------- ---------------------
Total 1,159 1,207
======================= =====================
EXPENSES
Administrative expenses (Schedule H)
Fees for services - 88
Leasing of brand 91 129
Bank charges - 1
General expenses 7 78
----------------------- ---------------------
Total 98 296
======================= =====================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Banco Galicia Uruguay S.A.
6.30.02 6.30.01
----------------------- ---------------------
ASSETS
Investments - time deposits (Schedules C and G) 42,308 -
Investments - special current account deposits 2,910
(Schedules C and G) -
----------------------- ---------------------
Total 45,218 -
======================= =====================
INCOME
Financial income - interest on time deposits (Note -
10) 467
Financial income - interest on special current -
account deposits (Note 10) 29
----------------------- ---------------------
Total 496 -
======================= =====================
Galicia Warrants S.A.
6.30.02 6.30.01
----------------------- ---------------------
INCOME
Financial income - Interest earned 1 -
----------------------- ---------------------
Total 1 -
======================= =====================
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
NOTE 14: RESTRICTIONS IMPOSED ON THE DISTRIBUTION OF
PROFITS-----------------------------------------------------
------------------------------------------------------------
At June 30, 2002 there are no restrictions on the
distribution of the Company's retained earnings except for
those established by the Argentine Commercial Companies Law
and Resolution Nro. 368/2001 of the National Securities
Commission insofar as concerns the setting up of the Legal
Reserve with 5% of the net income for the year until 20% of
the capital stock is reached. See Note 10 to the
consolidated financial statements.--------------------------
------------------------------------------------------------
-------------------------Grupo Financiero 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.-----------------------------------------------------
----------------------------------------------------------------------
In July 2002, the Company received a letter from NASDAQ stating that
the NASDAQ Staff Determination had noted the lack of an opinion in the
78
NOTE 16: (Continued) ----------------------------------------------------------
----------------------------------------------------------------------
Auditors' Report on the financial statements for the fiscal year ended
December 31, 2001 added to the F-20 Form of the Securities & Exchange
Commission, and that the financial statements had not been prepared
observing the Generally Accepted Accounting Principles in the United
States of America (US GAAP). In view of this, in order to prevent the
American Depositary Shares (ADR) from being delisted from the NASDAQ
National Market, Grupo Financiero 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 October 10, 2002, the Company received US$ 1,001 thousand in
settlement of notes receivable it held as of June 30, 2002.----------
----------------------------------------------------------------------
Between July 1 and November 8, 2002, the Company made new irrevocable
cash contributions of US$ 443 in Net Investment S.A..-----------------
79
Grupo Financiero Xxxxxxx X.X.------------------------------------------------------------------------------------------------------
Fixed assets and investments in assets of a similar nature-------------------------------------------------------------------------
For the period of six months-------------------------------------------------------------------------------------------------------
commenced January 1, 2002 and ended June 30, 2002.---------------------------------------------------------------------------------
In comparative format with the same period of the previous year.-------------------------------------------------------------------
(figures stated in thousands of US dollars)----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------Schedule A
===================================================================================================================================
ORIGINAL VALUES DEPRECIATION
-----------------------------------------------------------------------------------------------------------------------------------
For the period
-----------------
At Accumulated Accumulated
beginning At end of at beginning Deletions Rate Amount at end of
Principal account of year Increases Deletions period of year % period
----------------------------------------------------------------------------------------------------------------------------------
Real estate 171 592 - 763 4 - 2 4 8
----------------------------------------------------------------------------------------------------------------------------------
Vehicles 28 - - 28 4 - 20 3 7
----------------------------------------------------------------------------------------------------------------------------------
Hardware and software 120 4 4 120 24 1 20 12 35
----------------------------------------------------------------------------------------------------------------------------------
Furniture and facilities 47 1 - 48 9 - 20 5 14
----------------------------------------------------------------------------------------------------------------------------------
Total as of 6.30.02 366 597 4 959 41 1 24 64
==================================================================================================================================
==============================
Net book Net book
value at value at
6.30.02 6.30.01
-------------------------------
755 167
-------------------------------
21 9
-------------------------------
85 102
-------------------------------
34 41
-------------------------------
895 319
===============================
80
Grupo Financiero Xxxxxxx X.X.------------------------------------------------------------------------------------------------------
Intangible assets------------------------------------------------------------------------------------------------------------------
Fixed assets and investments in assets of a similar nature-------------------------------------------------------------------------
For the period of six months-------------------------------------------------------------------------------------------------------
commenced January 1, 2002 and ended June 30, 2002.---------------------------------------------------------------------------------
In comparative format with the same period of the previous year.-------------------------------------------------------------------
(figures stated in thousands of US dollars)----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------Schedule B
===================================================================================================================================
ORIGINAL VALUES AMORTIZATION
-----------------------------------------------------------------------------------------------------------------------------------
For the period
-----------------
At Accumulated Accumulated
beginning At end of at beginning Rate at end of
Principal account of year Increases Deletions period of year Deletions % Amount period
----------------------------------------------------------------------------------------------------------------------------------
Logotype 13 - - 13 3 - 20 1 4
----------------------------------------------------------------------------------------------------------------------------------
Goodwill 5,483 - 580 4,903 759 39 20 490 1,210
----------------------------------------------------------------------------------------------------------------------------------
Balance at 6.30.02 5,496 - 580 4,916 762 39 491 1,214
==================================================================================================================================
==============================
Net book Net book
value at value at
6.30.02 6.30.01
-------------------------------
9 2
-------------------------------
3,693 2,074
-------------------------------
3,702 2,076
===============================
81
Grupo Financiero Xxxxxxx X.X.------------------------------------------------------------------------------------------------------
Investments------------------------------------------------------------------------------------------------------------------------
Equity Interests in Other Companies and Other Investments--------------------------------------------------------------------------
Quarterly Statement of Financial Condition as of June 30, 2002 and 2001------------------------------------------------------------
(figures stated in thousands of US dollars)----------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------Schedule C--------------
=================================================================
Issuance and characteristics of the Book Value Book Value
securities as of as of
6.30.02 6.30.01
-----------------------------------------------------------------
Current investments (*)
Special current account deposits (Note - 34
13 and Schedule G)
Time deposits (Note 13 and (Schedule G) 6,520 15,163
------------------------
Total current investments 6,520 15,197
=================================================================
-----------------------------------------------------------------------------------------------------------------------------------
(*) include accrued interest.------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
82
Grupo Financiero Xxxxxxx X.X.---------------------------------------------------
Investments---------------------------------------------------------------------
Equity Interests in Other Companies and Other Investments-----------------------
Quarterly Statement of Financial Condition as of June 30, 2002 and 2001---------
(figures stated in thousands of US dollars)-------------------------------------
-------------------------------------------------------------Schedule C (contd.)
====================================================================================================================================
Issuance and Class Face Number Acquisition Quotation Equity value Book Value Book Value
characteristics of the Value cost per share as of as of as of 6.30.01
securities as of 6.30.02 6.30.02
6.30.02
-----------------------------------------------------------------------------------------------------------------------------------
Non-current investments
Special current account 2,910
deposits (Schedules E and G)
Time deposits (Schedules E and G) 42,308
Banco xx Xxxxxxx y Buenos Ordinary class 0.001 101
Aires S.A. "A"
Ordinary class 0.001 438,599,602 0.000118
"B"
--------------------
438,599,703 602,064 496,163 496,163 693,412
Net Investment S.A. Ordinary 0.001 10,500 5 -
Irrevocable 3,099 1,779 1,779 1,564
contributions
BtoB Comercial S.A. - - 278
Sudamericana Holding S.A. Ordinary class 0.001 31,302 -
"A"
Ordinary class 0.001 41,735 -
"B"
--------------------
73,037 7,727
Irrevocable
contributions 2,322 7,679 7,679 2,476
Galicia Warrants S.A. Ordinary 0.001 175,000 2,770 - 1,038 1,038 -
---------------------------------------------------------------------------------------------------------
Total Non-current investments 617,987 506,659 551,877 697,730
====================================================================================================================================
Table (cont'd)
====================================================================================================================================
INFORMATION ON THE ISSUER
--------------------------------------------------------------
LATEST FINANCIAL STATEMENTS (Note 12)
--------------------------------------------------------------
Issuance and Principal line of Date Capital Net Shareholders' %
characteristics of the business Stock income/(loss) equity of equity held
securities in the capital
stock
------------------------------------------------------------------------------------------------------------------------------------
Non-current investments
Special current account
deposits (Schedules E and G)
Time deposits (Schedules E and G)
Banco xx Xxxxxxx y Buenos Financial activities 6.30.02 123,332 (110,579)(**) 530,197 93.585537%
Aires S.A.
Net Investment S.A. Financial and
investment 6.30.02 3 (1,226)(**) 1,968 87.50%
activities
BtoB Comercial S.A.
Sudamericana Holding S.A.
Investment
activities 12.31.01 22 3,007(***) 5,923 87.500899%
Galicia Warrants S.A. Issuer of 01.31.02 53 148(#) 974 87.50%
Warehouse
receipts and
warrants
Total Non-current
------------------------------------------------------------------------------------------------------------------------------------
(*) includes accrued interest.------------------------------------------------------------------------------------------------------
(**) for the period of six months ended June 30, 2002.------------------------------------------------------------------------------
(***) for the period of nine months ended March 31, 2002.---------------------------------------------------------------------------
(#) for the fiscal year ended April 30, 2002.---------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
83
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------------------Allowances and Provisions---------------------------
--------------commenced January 1, 2001 and ended June 30, 2002----------------
-------------------(figures stated in thousands of US dollars)-----------------
-------In comparative format with the same period of the previous year.--------
-------------------------------------------------------------------------------
---------------------------------------------------------------------Schedule E
====================================================================================================================
Balance at Increases Decreases Balance at end of
Captions beginning of year period
--------------------------------------------------------------------------------------------------------------------
Allowances:
Valuation allowance - Investments - 38,912 (38,912) -
Total as of 6.30.02 - 38,912 (38,912) -
Total as of 6.30.01 - 297 - 297
Provisions - - - -
For other contingencies - 10,526 - 10,526
--------------------------------------------------------------------------------------------------------------------
Total as of 6.30.02 - 10,526 - 10,526
--------------------------------------------------------------------------------------------------------------------
Total as of 6.30.01 - - - -
====================================================================================================================
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
84
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------------Foreign Currency Assets and Liabilities-------------------
-------Statement of Financial Condition as of June 30, 2002 and 2001-----------
-------------------(figures stated in thousands of US dollars)-----------------
-------------------------------------------------------------------------------
---------------------------------------------------------------------Schedule E
=======================================================================================================================
Amount in Amount in
Amount and type Argentine Amount and type Argentine
of foreign currency of foreign currency
Captions currency Quotation at 6.30.02 currency at 6.30.01
-----------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and due from banks
Current Account US$ 132.7 3.80 504 US$ - -
Investments
Special current account deposits US$ - - US$ 67 131
Time deposits US$ - - US$ 29,391 57,621
Other receivables
Prepaid expenses US$ - - US$ 8 16
------------- -----------------
Total Current Assets 504 57,768
------------- -----------------
NON-CURRENT ASSETS
Investments
Special current account deposits US$ 2,988.65 3.80 11,357 -
Time deposits US$ 43,451.48 3.80 165,116 -
------------- -----------------
Total Non-current Assets 176,473 -
------------ -----------------
Total Assets 176,977 57,768
============= =================
LIABILITIES
CURRENT LIABILITIES
Other debts
Sundry creditors US$ - - - US$ 11 22
Expense accrual US$ 83.50 3.80 317 US$ 4 8
----------------- -----------------
Total Current Liabilities 317 30
----------------- -----------------
-----------------
Total Liabilities 317 30
=======================================================================================================================
85
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
--------Information required by Section 64, subsection b) of Law 19550---------
-----------------------For the period of six months----------------------------
--------------commenced January 1, 2002 and ended June 30, 2002.---------------
-------In comparative format with the same period of the previous year.--------
-------------------(figures stated in thousands of US dollars)-----------------
-------------------------------------------------------------------------------
---------------------------------------------------------------------Schedule H
=======================================================================================================================
Total as of Administrative Total as of
Captions 6.30.02 expenses 6.30.01
-----------------------------------------------------------------------------------------------------------------------
Salaries and social security charges 134 134 170
Bonuses - - 29
Services to the staff 3 3 -
Directors' and syndics' fees 22 22 23
Fees for services 500 500 250
Fixed asset depreciation 24 24 17
Intangible asset amortization 492 492 251
Leasing of brand (*) 6 6 8
Stationery and office supplies 2 2 4
Advertising expenses - - 1
Condominium Expenses 8 8 4
Entertainment, transportation and per diem 3 3 19
Vehicles expenses 2 2 3
Insurance 14 14 33
Electricity and communications 10 10 6
Taxes, rates and assessments and contributions 98 98 3
Bank charges (*) - - 1
General expenses (*) 42 42 100
------------------------------------------------------
Total 1,360 1,360 922
=======================================================================================================================
--------------------------------------------------------------------------------------------------------------------
(*) Balances net of eliminations corresponding to intercompany transactions(per Section 33 of Law 19550). See Note 13 to the
financial statements.---------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
86
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---Information required in addition to the Notes to the Financial Statements---
-----------------------For the period of six months----------------------------
--------------commenced January 1, 2002 and ended June 30, 2002.---------------
-------In comparative format with the same period of the previous year.--------
-------------------(figures stated in thousands of US dollars)-----------------
-------------------------------------------------------------------------------
NOTE 1: LEGAL SYSTEMS------------------------------------------------
-------------------------------------------------------------------------------
There are no significant specific legal systems entailing the
lapsing of contingent benefits envisaged by those regulations
or their rebirth.--------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 2: CLASSIFICATION OF RECEIVABLES AND DEBTS----------------------
-------------------------------------------------------------------------------
2.1. Receivables: See Note 11 to the financial statements.---
-------------------------------------------------------------------------------
2.2. Debts: See Note 11 to the financial statements.---------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 3: CLASSIFICATION OF RECEIVABLES AND DEBTS ACCORDING TO
THEIR FINANCIAL EFFECTS -------------------------------------
-------------------------------------------------------------------------------
3.1. Receivables: See Notes 2.a., 2.b. and 11 and Schedule G
to the financial statements.---------------------------------
-------------------------------------------------------------------------------
3.2. Debts: See Notes 2.a., 2.b. and 11 and Schedule G to the
financial statements.----------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 4: EQUITY INTERESTS IN OTHER COMPANIES - SECTION 33 OF LAW
19550--------------------------------------------------------
-------------------------------------------------------------------------------
See Notes 11, 12, 13, 15 and 16 and Schedule C to the
financial statements.----------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 5: RECEIVABLES FROM OR LOANS GRANTED TO DIRECTORS OR SYNDICS----
-------------------------------------------------------------------------------
As of June 30, 2002 and 2001 there were no receivables from
or loans granted to directors or syndics or their relatives
up to the second degree inclusive.---------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
87
-------------------------Grupo Financiero 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 June 30, 2002 and 2001 the Company did not have any
inventories.-------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 7: FIXED ASSETS-------------------------------------------------
-------------------------------------------------------------------------------
See Schedule A to the financial statements.------------------
-------------------------------------------------------------
a) As of June 30, 2002 and 2001 the Company did not have any
technically appraised fixed assets.--------------------------
-------------------------------------------------------------
b) As of June 30, 2002 and 2001 the Company did not have any
obsolete fixed assets which have a carrying value.--------
--------------------------------------------------------------
c) As of June 30, 2002 and 2001, the criterion followed by the
Company for determining the recoverable value of its fixed
assets consisted of using their value to the business,
based on the possibility of absorbing future depreciation
charges with the profits reported by it.------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 8: INSURANCE----------------------------------------------------
-------------------------------------------------------------------------------
As of June 30, 2002 and 2001, the breakdown of insurance
policies taken out by the Company for its fixed assets was as
follows: ----------------------------------------------------
-------------------------------------------------------------------------------
================ ========================================= ============ ============ =============
Insured assets Risks covered Insured Book Value Book Value
amount as of as of
6.30.02 6.30.01
--------------- ---------------------------------------- -------- ---------- -----------
Vehicles Third party liability, fire, theft and
total loss. 20 21 9
================ ========================================= ============ ============ =============
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 9: ALLOWANCES AND PROVISIONS------------------------------------
-------------------------------------------------------------------------------
See Note 8 and Schedule E to the financial statements.------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
88
-------------------------Grupo Financiero 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 June 30, 2002 and 2001, there were no contingencies
highly likely to occur which have not been given accounting
recognition.-------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 11: IRREVOCABLE ADVANCES TOWARDS FUTURE SHARE SUBSCRIPTIONS------
-------------------------------------------------------------------------------
As of June 30, 2002 and 2001, there were no irrevocable
contributions towards future share
subscriptions.-----------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 12: DIVIDENDS ON PREFERRED SHARES--------------------------------
-------------------------------------------------------------------------------
As of June 30, 2002 and 2001, there were no cumulative unpaid
dividends on preferred shares.-------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
NOTE 13: LEGAL RESERVE------------------------------------------------
-------------------------------------------------------------------------------
See Note 14 to the financial statements.--------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
89
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
-------Supplementary and Explanatory Statement by the Board of Directors-------
------------For the period of six months commenced January 1, 2002-------------
-------------------------and ended June 30, 2002-------------------------------
-------In comparative format with the same period of the previous year.--------
-------------------(figures stated in thousands of US dollars)-----------------
-------------------------------------------------------------------------------
As called for by the norms regarding accounting documentation of the Cordoba
Stock Exchange Regulations, the Board of Directors takes pleasure in submitting
the following supplementary and explanatory information.-----------------------
-------------------------------------------------------------------------------
A. Current Assets:-------------------------------------------------------------
-------------------------------------------------------------------------------
a) Receivables:---------------------------------------------------------
1) See Note 11 to the financial statements.--------------------------
2) See Notes 4, 5 and 11 to the financial statements.----------------
3) As of June 30, 2002 and 2001 the Company had not set up any
allowances or provisions.-----------------------------------------
-------------------------------------------------------------------------------
b) Inventories:---------------------------------------------------------
As of June 30, 2002 and 2001, the Company did not have any
inventories.---------------------------------------------------------
-------------------------------------------------------------------------------
B. Non- Current Assets:--------------------------------------------------------
-------------------------------------------------------------------------------
a) Receivables:---------------------------------------------------------
As of June 30, 2002 and 2001 the Company had not set up any allowances
or provisions.-------------------------------------------------------
-------------------------------------------------------------------------------
b) Inventories:---------------------------------------------------------
As of June 30, 2002 and 2001, the Company did not have any
inventories.---------------------------------------------------------
-------------------------------------------------------------------------------
c) Investments:---------------------------------------------------------
See Note 12 and Schedule C to the financial
statements.----------------------------------------------------------
-------------------------------------------------------------------------------
d) Fixed assets:--------------------------------------------------------
-------------------------------------------------------------------------------
1) As of June 30, 2002 and 2001, the Company did not have any
technically appraised fixed assets. ------------------------------
2) As of June 30, 2002 and 2001, the Company did not have any
obsolete fixed assets which have a carrying value.----------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
90
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
------Supplementary and Explanatory Statement by the Board of Directors--------
--------------------------------(Continued)------------------------------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
e) Intangible assets: -----------------------------------------------------
1) See Note 2.e. and Schedule B to the financial
statements.---------------------------------------------------------
2) As of June 30, 2002 and 2001, there were no
deferred charges.---------------------------------------------------
-------------------------------------------------------------------------------
C. Current Liabilities:--------------------------------------------------------
-------------------------------------------------------------------------------
a) Debts:------------------------------------------------------------
1) See Note 11 to the financial statements.--------------------
2) See Note 11 to the financial statements.--------------------
-------------------------------------------------------------------------------
D. Allowances and provisions:--------------------------------------------------
-------------------------------------------------------------------------------
See Note 8 and Schedule E to the financial statements.--------------
--------------------------------------------------------------------
E. Foreign Currency Assets and Liabilities:------------------------------------
-------------------------------------------------------------------------------
See Note 2.b. and Schedule G to the financial statements.-----------
-------------------------------------------------------------------------------
F. Shareholders' Equity:-------------------------------------------------------
-------------------------------------------------------------------------------
1) As of June 30, 2002 and 2001, the Shareholders' Equity did
not include the Irrevocable Advances towards Future Share
Issues account.--------------------------------------------
2) As of June 30, 2002 and 2001, the Company had not set up any
technical appraisal reserve; nor has it reversed any reserve
of that kind.----------------------------------------------
-------------------------------------------------------------------------------
G. Miscellaneous:--------------------------------------------------------------
-------------------------------------------------------------------------------
1) The Company is engaged in financial and investment
activities, so the restrictions of Section 31 of Law 19550
do not apply to its equity interests in other companies.---
2) As of June 30, 2002, and as of June 30, 2001, the Company
did not have any receivables for transactions conducted with
controlled or related companies.---------------------------
3) As of June 30, 2002 and 2001 there were no receivables due
from or loans granted to directors or syndics or members of
the surveillance committee or their relatives up to the
second degree inclusive.-----------------------------------
4) See Notes 11 and 13 to the financial
statements.------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
91
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
------Supplementary and Explanatory Statement by the Board of Directors--------
--------------------------------(Continued)------------------------------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
5) As of June 30, 2002 and 2001, the breakdown of insurance
policies taken out by the Company for its fixed assets was
as follows:------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
================ ========================================= ============ ============ =============
Insured assets Insured Book Value Book Value
Risks covered amount as of as of
6.30.02 6.30.01
---------------- ----------------------------------------- ------------ ------------ -------------
Vehicles Third party liability, fire, theft and
total loss. 20 21 9
================ ========================================= ============ ============ =============
--------------------------------------------------------------------------------------------------------
6) As of June 30, 2002 and 2001, there were no contingencies
highly likely to occur which have not been given accounting
recognition.-----------------------------------------------
7) As of June 30, 2002 and 2001, the Company did not have any
receivables or debts including implicit interest-----------
or index adjustments. -------------------------------------
-------------------------------------------------------------------------------
The Company has complied with the requirements of Section 65 of Law 19550 in
these financial statements.----------------------------------------------------
-------------------------------------------------------------------------------
Autonomous City of Buenos Aires, November 18, 2002.----------------------------
-------------------------------------------------------------------------------
(signed) Xxxxxxxx Xxxxx--------------------------------------------------------
Vice President-----------------------------------------------------------------
Acting as Chairman-------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
92
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------Informative Review as of June 30, 2002 and 2001-----------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
The loss for the period of six months ended June 30, 2002 reported by the
Company amounts to US$ 173,114; it was generated by the valuation of the equity
interest in Banco 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$ 3,097 to the Legal Reserve, US$ 59,331, to the Discretionary Reserve and to
carry forward US$ 7.-----------------------------------------------------------
-------------------------------------------------------------------------------
In July 2002, the Company received a letter from NASDAQ stating that the NASDAQ
Staff Determination had noted the lack of an opinion in the Auditors' Report on
the financial statements for the fiscal year ended December 31, 2001 added to
the F-20 Form of the Securities & Exchange Commission, and that the financial
statements had not been prepared observing the Generally Accepted Accounting
Principles in the United States of America (US GAAP). In view of this, in order
to prevent the American Depositary Shares (ADR) from being delisted from the
NASDAQ National Market, Grupo Financiero 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
93
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------Informative Review as of June 30, 2002 and 2001-----------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
also informed the Company that as from September 13, 2002, the ADRs would be
listed on the NASDAQ SmallCap Market, bearing the GGAEC symbol.-----------------
On July 4, 2002 the Company approved a proposal by which it will receive US$
1,391 in cash and US$ 44,975 in ordinary negotiable obligations, in exchange for
investments totalling US$ 46,366 it held in that entity as of May 31, 2002.-----
On July 26, 2002, the Company entered into an agreement with Banco Galicia
Uruguay S.A. by which it undertook to irrevocably exchange ordinary negotiable
obligations for US$ 43,000 for subordinated negotiable obligations to those
ordinary negotiable obligations for the same amount.----------------------------
--------------------------------------------------------------------------------
For the sake of brevity, we refer to the economic context within which the
Company operated in Note 1 to these financial statements.-----------------------
--------------------------------------------------------------------------------
KEY STATEMENT OF FINANCIAL CONDITION FIGURES------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
6.30.02 6.30.01 6.30.00
----------------- ------------------ ------------------
Current Assets 7,858 15,356 2,184
Non-current Assets 556,475 700,194 318,594
----------------- ------------------ ------------------
Total Assets 564,333 715,550 320,778
================= ================== ==================
Current Liabilities 10,774 240 2,189
Non-current liabilities 1 2 2
----------------- ------------------ ------------------
Subtotal 10,775 242 2,191
----------------- ------------------ ------------------
Shareholders' Equity 553,558 715,308 318,587
----------------- ------------------ ------------------
Total 564,333 715,550 320,778
================= ================== ==================
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
94
-------------------------Grupo Financiero Xxxxxxx X.X.--------------------------
---------------Informative Review as of June 30, 2002 and 2001------------------
----------------(figures stated in thousands of US dollars)---------------------
--------------------------------------------------------------------------------
KEY INCOME STATEMENT FIGURES----------------------------------------------------
--------------------------------------------------------------------------------
6.30.02 6.30.01 6.30.00
------------------ ----------------- ----------------
Ordinary operating result (181,899) 50,501 20,464
Financial results 19,239 90 (10)
Other income and expenses (10,454) (16) 148
------------------ ----------------- ----------------
Ordinary net (loss)/ income (173,114) 50,575 20,602
------------------ ----------------- ----------------
Net (loss) / income (173,114) 50,575 20,602
================== ================= ================
--------------------------------------------------------------------------------
RATIOS--------------------------------------------------------------------------
--------------------------------------------------------------------------------
6.30.02 6.30.01 6.30.00
--------------------------------------------------------------------------------------------------------------
Liquidity 0,7294 63,9146 0,9975
--------------------------------------------------------------------------------------------------------------
Indebtedness 0,0195 0,0003 0,0069
--------------------------------------------------------------------------------------------------------------
Return on equity (0,2382) 0,0761 0,0691
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The Company's individual financial statements have been considered to disclose
the key balance sheet figures and key income statement figures, as its
consolidated financial statements are disclosed in line with the provisions of
Argentine Central Bank Communique "A" 3147 and supplementary rules regarding
financial reporting requirements for the publication of quarterly and annual
financial statements and observing the guidelines of Technical Pronouncement No.
8 of the Argentine Federation of Professional Councils in Economic Sciences.----
--------------------------------------------------------------------------------
For comparative purposes, the balances as of June 30, 2001 and 2000 have been
stated in constant monetary units as of June 30, 2002.--------------------------
--------------------------------------------------------------------------------
Equity interests in other companies---------------------------------------------
--------------------------------------------------------------------------------
o Banco 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.---------------------------
--------------------------------------------------------------------------------
o Net Investment S.A.-----------------------------------------------------
--------------------------------------------------------------------------------
Net Investment S.A. is a holding company, which is engaged in investing and
developing technology business and it provides communications, internet,
connectivity and contents services, in order to create value for its
shareholders. Grupo Financiero 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.-----------------------------------------------------------
--------------------------------------------------------------------------------
95
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------Informative Review as of June 30, 2002 and 2001-----------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
Irrevocable cash contributions made as of June 30, 2002 amounted to US$ 457.
Between July 1 and November 8, 2002, the Company made a new irrevocable cash
contribution of US$ 443.--------------------------------------------------------
--------------------------------------------------------------------------------
The investments in Net Investment S.A. budgeted by the Company for the current
year amount to approximately US$ 1,053.-----------------------------------------
--------------------------------------------------------------------------------
Net Investment S.A. holds 30% of the capital stock of Dueno Vende S.A., a
company that is mainly engaged in offering property for sale directly by owners
through a web site called 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.----------------------------------
--------------------------------------------------------------------------------
As of June 30, 2002, Net Investment S.A.'s interest in the capital stock of
B2Agro was 93.75%. On July 16, 2002, Net Investment S.A. acquired 749 shares
which represent 6.2416% of the capital stock of B2Agro S.A., taking its interest
to 99.99166%.-------------------------------------------------------------------
Net Investment S.A. is currently evaluating various other types of new business,
including other internet projects, broadband communications and contents for
wireless services. In all these projects, the company is seeking to make use of
the synergies with the operations carried out by Grupo Financiero 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.
96
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------Informative Review as of June 30, 2002 and 2001-----------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
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
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 after the closing
date of these financial statements, as established by Decree 214/02, the
necessary steps were taken to preserve the income obtained by the life insurance
companies, which were less affected than their competitors, due to their 90%
market share of the issuance of pure risk insurance policies.-------------------
--------------------------------------------------------------------------------
In April 2002, Grupo Financiero Xxxxxxx X.X. purchased 8 functional units of the
building located at Maipu 241, in the amount of US$ 478, through the release of
the guarantees provided by Hartford Life International Ltd. and Hartford Life
Ltd. in favor of Grupo Financiero 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 June 30, 2002, 80% of total income
obtained by this company stems from the agricultural sector. At that date,
Galicia Warrants had a 35% market share of this business.-----------------------
--------------------------------------------------------------------------------
97
-------------------------Grupo Financiero Xxxxxxx X.X.-------------------------
---------------Informative Review as of June 30, 2002 and 2001-----------------
----------------(figures stated in thousands of US dollars)--------------------
-------------------------------------------------------------------------------
As mentioned in Note 1 to the financial statements, the impact generated by all
these measures adopted to date by the Government on the financial statements of
Grupo Financiero Xxxxxxx X.X. and its controlled entities as of June 30, 2002
was recognized according to evaluations and estimates made at the date of
preparing them. Future actual results might differ from those evaluations and
estimates and those differences could be significant. Therefore, the financial
statements of Grupo Financiero 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.----------------------
--------------------------------------------------------------------------------
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, November 18, 2002.-----------------------------
--------------------------------------------------------------------------------
(Signed) Xxxxxxxx Xxxxx---------------------------------------------------------
Vice President------------------------------------------------------------------
Acting as 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 six months
ended June 30, 2002, produced in Spanish, a copy of which I have had before me.-
--------------------------------------------------------------------------------
Given and signed in Buenos Aires, Argentina on December 11, 2002.---------------
Es traduccion fiel 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 seis meses terminado el 30 de junio 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 11 de diciembre de 2002.
98
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 June 30, 2002, and the related
Income Statement, Statement of Changes in Shareholders' Equity and
Statement of Cash Flows for the period of six months then ended, as well as
Notes 1 to 16, Schedules A, B, C, E, G and H, Informative Review, the
Information required in addition to the Notes to the Financial Statements
by Section 68 of the Buenos Aires Stock Exchange regulations and the
Supplementary and Explanatory Statement by the Board of Directors, as
required by the Norms concerning Accounting Documentation of the Cordoba
Stock Exchange Regulations, which supplement them. Furthermore, we have
performed a limited review of the Consolidated Statement of Financial
Condition of Grupo Financiero Xxxxxxx X.X. as of June 30, 2002 and the
Consolidated Income Statement and Consolidated Statement of Cash Flows for
the period of six months then ended, as well as Notes 1 to 20, which are
presented as supplementary information.------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
II. SCOPE OF THE LIMITED REVIEW------------------------------------------------
We performed our work in accordance with standards applicable to syndics.
These standards require syndics to review the documents detailed in section
I. observing prevailing auditing standards for the limited review of
financial statements for interim periods, and verify the consistency of the
documents reviewed with the information concerning corporate decisions, as
disclosed in minutes, and evaluate the conformity of those decisions with
the law and the by-laws insofar as concerns formal and documentary aspects.
---------------------------------------------------------------------------
For purposes of our professional work in relation to the documents detailed
in section I., we reviewed the work performed by the external auditors, who
issued their report on November 18, 2002 in accordance with prevailing
auditing standards for the limited review of financial statements for
interim periods.-----------------------------------------------------------
Such review included verifying the planning of the work, as well as the
nature, scope and timing of the procedures applied and the results of the
limited review
performed by those professionals. A limited review mainly consists in
applying analytical procedures to the accounting information and making
inquiries of the staff responsible for accounting and financial issues.
This review is substantially less in scope than that of an audit of
financial statements, the objective of which is to issue an opinion on the
financial statements taken as a whole. Therefore, we do not express such an
opinion. It is not our responsibility to perform any control over the
management, so our review did not cover the business decisions and criteria
regarding the different areas of the Company, as such matters are the
exclusive responsibility of the Board of Directors.------------------------
---------------------------------------------------------------------------
In addition, we have verified that the Informative Review, the Information
required in addition to the Notes to the Financial Statements and the
Supplementary and Explanatory Statement by the Board of Directors for the
period of six months ended June 30, 2002, contain the information required
by Technical Regulations 2001 of the National Securities Commission,
Section 68 of the Buenos Aires Stock Exchange regulations and Section 2 of
the Norms concerning Accounting Documentation of the Cordoba Stock Exchange
Regulations, respectively, and insofar as concerns our field of competence,
that the numerical data contained therein are in agreement with the
Company's accounting records and other relevant documentation. Assumptions
and projections on future events contained in that documentation are the
exclusive responsibility of the Board of Directors.------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
III. PRELIMINARY EXPLANATIONS---------------------------------------------------
The Board of Directors has evaluated in Note 1 to the financial statements
the conditions existing in relation to the economic measures adopted by the
Government to confront the crisis affecting Argentina, a process that has
not yet been concluded. The impact generated by those measures on the
economic and financial situation of the Company and its controlled entities
has been recognized in the financial statements according to the
evaluations and estimates made by Management. Future actual results could
differ with various degrees of significance from those evaluations and
estimates. The existence of processes for restructuring the commercial
portfolio and renegotiating liabilities not yet defined at the controlled
entities generates uncertainty as to their final outcome and their impact
on the financial position and future development of those companies and,
consequently, of the Company. In notes to its financial statements, the
Company discloses assets and liabilities for the valuation of which it has
applied the criteria established by the Argentine Central Bank, or based on
premises on future events, which differ from professional accounting
standards. Sections 4 to 7 of the report issued by the auditors show
situations related to those items, so no opinion is
issued on the net worth and financial effects they could have on the
Company and its controlled entities. Furthermore, the equity interest held
by the Company in Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx X.X. represents
approximately 88% of its Assets and 90% of its Shareholders' Equity.-------
The situation of that Entity and its controlled entities produced by the
crisis affecting the Argentine financial sector, as well as the situation
of the Company in particular, has given rise to the situations that have
been disclosed by the Company in Note 1 to the financial statements and
Note 3 to the consolidated financial statements, and by the external
auditors in sections 8. to 12. of their report, the development and
resolution of which will have a significant effect on the normal conduct of
the Company's operations in the future. This Supervisory Syndics' Committee
concurs with those statements. Consequently, the financial statements
should be considered in the light of these uncertain circumstances.--------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
IV. OPINION--------------------------------------------------------------------
In our opinion, based on the examination performed with the scope mentioned
in section II., the accompanying financial statements have been prepared in
accordance with professional accounting standards prevailing in the
Autonomous City of Buenos Aires, except for the application of valuation,
disclosure and revenue recognition criteria relating to directly and
indirectly controlled companies, as disclosed in the notes to financial
statements and to consolidated financial statements, which differ from
those standards. Therefore, the financial condition, results of operations
and changes in shareholders' equity disclosed have been determined on the
basis of the application of those standards.-------------------------------
---------------------------------------------------------------------------
Nevertheless, in view of the effect on the above financial statements that
could derive from possible adjustments and reclassifications that might be
required following resolution of the situation described in the Preliminary
Explanations in section III. above, we understand that the financial
statements referred to above, as well as the financial condition, results
of operations and changes in shareholders' equity disclosed in them, should
be read and construed in the light of the uncertain conditions generated by
subsequent economic developments, the impact of which on the Company's
economic and financial position cannot be evaluated with reasonable
certainty. Therefore, we do not issue any opinion in this connection.------
---------------------------------------------------------------------------
As regards the Informative Review, the Information required in addition to
the Notes to the Financial Statements and the Supplementary and Explanatory
Statement by the Board of Directors for the period of six months ended June
30, 2002, we have no observations to make insofar as concerns our field of
competence, and the assertions on future events are the exclusive
responsibility of the Board of Directors of the Company.
---------------------------------------------------------------------------
Furthermore, we report that the financial statements stem from accounting
records kept, in all formal respects, in compliance with prevailing legal
rules.---------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Buenos Aires, November 20, 2002-------------------------------------------------
--------------------------------------------------------------------------------
(Signed) 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 six
months ended June 30, 2002, produced in Spanish, a copy of which I have had
before me.----------------------------------------------------------------------
Given and signed in Buenos Aires, Argentina on December 11, 2002.---------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Es traduccion fiel xx xxxxxx del Informe de la Comision Fiscalizadora
correspondiente a Grupo Financiero Xxxxxxx X.X. por el periodo de seis meses
terminado el 30 de junio 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 11 de diciembre de 2002.------------------------------------
--------------------------------------------------------------------------------
LIMITED REVIEW REPORT
To the Chairman and Directors of
Grupo Financiero Xxxxxxx X.X.
Tte. Gral. Xxxx X. Xxxxx 456, Piso 2(0)
Autonomous City of Buenos Aires
1. We have performed a limited review of the statements of financial condition
of Grupo Financiero Xxxxxxx X.X. as of June 30, 2002 and 2001 and the
related income statement, statement of changes in shareholders' equity and
statement of cash flows for the periods of six months then ended, as well
as Notes 1 to 16, Schedules A, B, C, E, G and H, Informative Review, the
Information required in addition to the Notes to the Financial Statement by
Section 68 of the Buenos Aires Stock Exchange regulations, and the
Supplementary and Explanatory Statement by the Board of Directors, as
required by the rules regarding accounting documentation of the Cordoba
Stock Exchange regulations, which supplement them. Furthermore, we have
performed a limited review of the consolidated statements of financial
condition of Grupo Financiero Xxxxxxx X.X. as of June 30, 2002 and 2001,
and the consolidated income statement and consolidated statement of cash
flows for the periods of six months then ended, together with Notes 1 to
20, which are presented as supplementary information. The preparation and
issuance of these financial statements are the responsibility of the
Company's Board of Directors in the exercise of its exclusive functions.
Our responsibility is to issue a limited review report on those financial
statements, based on the review we performed with the scope mentioned in
section 2. below.
2. Our review, except as mentioned in sections 5. and 6. below, was limited to
the application of the procedures set forth by Technical Pronouncement No.
7 of the Argentine Federation of Professional Councils in Economic Sciences
for limited reviews of financial statements for interim periods and,
therefore, did not include all the necessary auditing procedures to issue
an opinion on the financial statements being examined. These limited
reviews are substantially less in scope than that of an audit examination.
Accordingly, we do not express an opinion on the Company's financial
position, the results of its operations, changes in its shareholders'
equity and cash flows as of June 30, 2002 and 2001, or on its consolidated
financial position, the consolidated results of its operations and
consolidated cash flows as of June 30, 2002 and 2001.
3. In line with regulations and professional accounting standards prevailing
in Argentina, as explained in Note 1 to the financial statements, the
Company has recognized the effects of the devaluation of the Argentine peso
since January 1, 2002.
4. As mentioned in Note 3.a. to the consolidated financial statements, and as
established by Argentine Central Bank Communique "A" 3800, Banco 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 June 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 June 30, 2002 according to the method
of the present value of future discounted cash flows, which means the
assumption of premises on future events. Future actual results could differ
from the estimates made by the Board of Directors of those companies. The
estimated impact on the financial statements of those companies and Grupo
Financiero 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 June 30, 2002
derived from the various measures adopted to date by the Government was
recognized on the basis of evaluations and estimates made by the Management
of the Company at the date of preparing them. Future actual results could
differ from the evaluations and estimates made at the date of preparing
these financial statements and those differences could be significant.
Therefore, the Company's financial statements may not report all the
adjustments that could result from these adverse conditions. At this time
it is not possible to foresee the effect of the future development of the
country's economy or its consequences on the economic and financial
position of the Company and its controlled entities. Therefore, the
Company's financial statements must be considered in the light of these
uncertain circumstances.
8. The equity interest held by the Company in Xxxxx xx Xxxxxxx x Xxxxxx Xxxxx
X.X. as of June 30, 2002 represents approximately 88% and 90% of the
Company's assets and shareholders' equity, respectively. The possibility of
recovering that investment has been affected by the uncertain circumstances
detailed in sections 9. and 10. below.
9. The situation of Banco 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 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 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 = $ 3.8 prevailing
as of June 30, 2002, in connection with their presentation to the National
Securities Commission and in compliance with the provisions of General
Resolution No. 368/2001.
14. In view of the effect on the financial statements of the Company that could
derive from the adjustments or reclassifications, if any, that might be
required following resolution of the situations described in sections 5 to
9 above, and considering the observations made in sections 10. to 12.
above, we are not in a position to make any statement on the financial
statements and consolidated financial statements of Grupo Financiero
Xxxxxxx X.X. as of June 30, 2002 and 2001 taken as a whole, prepared in
accordance with accounting standards in force in the Autonomous City of
Buenos Aires.
15. As called for by the regulations in force, we report that:
a) The financial statements referred to in section 1. stem from
accounting records kept in all formal respects as called for by legal
rules prevailing in Argentina. Those financial statements have been
transcribed to the Inventory and Balance Sheet book and prepared in
line with the provisions of Law 19550 and the National Securities
Commission regulations.
b) We have read the Informative Review and the Information required in
addition to the Notes to the Financial Statements by Section 68 of the
Buenos Aires Stock Exchange regulations, as well as the Supplementary
and Explanatory Statement by the Board of Directors, as required by
the rules regarding accounting documentation of the Cordoba Stock
Exchange regulations, and insofar as concerns our field of competence,
we have no significant observations to make concerning them. The
projections on future events stated in that documentation are the
exclusive responsibility of the Company's Board of Directors.
c) As of June 30, 2002, the liabilities accrued in respect of employee
withholdings and employer contributions towards the Integrated Pension
and Survivors' Benefit System, according to the accounting records,
amounted to $ 7,659.07 (US$ 2,016), which were not yet due at that
date.
d) The financial statements mentioned in section 1. have been restated in
constant monetary units as from January 1, 2002, in line with
Resolution No. 240/02 of the Argentine Federation of Professional
Councils in Economic Sciences and General Resolution No. 415/02 of the
National Securities Commission.
Autonomous City of Buenos Aires, November 18, 2002
PRICE WATERHOUSE & CO.
(Partner)
--------------------------------------
Professional Registration of the Firm:
C.P.C.E.C.A.B.A. To. 1 Fo. 1
Xxxxxxx Xxxxxx Xxxxx Rua
Public Accountant (U.B.A.)
C.P.C.E. C.A.B.A. To. 121 Fo. 94
