As filed with the Securities and Exchange Commission on August 3, 2004.
Registration No. 333-
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GRUPO FINANCIERO GALICIA S.A.
(Exact name of registrant as specified in its charter)
Tte. Gral. Juan D. Peron 456
C1038 AAJ-Buenos Aires, Argentina
(Address, including zip code, and telephone number
including area code, of registrant's principal executive office)
Argentina Not Applicable
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
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Gloria Moreno
61-21 138th Street
Flushing NY 11367.
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Priscilla Almodovar, Esq.
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
(212) 819-8200
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Approximate date of commencement of proposed sale to the public: From time
to time after this registration statement becomes effective.
If only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is to be made pursuant to Rule 434, please
check the following box. |_|
CALCULATION OF REGISTRATION FEE*
============================================================================================================
Proposed
maximum Proposed
Title of each Amount offering price maximum Amount of
class of securities to be per class B aggregate registration
to be registered registered share* offering price* fee*
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Class B shares, par value Ps.1.00..... 6,025,608 $0.524 $3,157,419 $400
============================================================================================================
* Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(c), based on the market value of the American depository
shares, each representing ten class B shares, on July 30, 2004 as reported
on the Nasdaq SmallCap Market.
================================================================================
------------------------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to Section 8(a), may determine.
================================================================================
SUBJECT TO COMPLETION, DATED AUGUST 3, 2004
PROSPECTUS
GRUPO FINANCIERO GALICIA S.A.
Class B Shares
-----------------
This prospectus is part of a registration statement that covers 6,025,608
shares of our class B shares, Ps.1.00 par value. These shares may be offered and
sold from time to time by certain of the holders of our class B shares (the
"selling shareholders") who are named in this prospectus or in a prospectus
supplement to resell their class B shares. We will not receive any of the
proceeds from the sale of the class B shares by any of the selling shareholders.
We will bear the costs relating to the registration of the class B shares.
The selling shareholders may offer their class B shares through public or
private transactions, on or off the Nasdaq SmallCap Market, at prevailing market
prices, or at privately negotiated prices. They may sell in ordinary brokerage
transactions, in block transactions, in privately negotiated transactions
pursuant to Rule 144 under the Securities Act of 1933 or otherwise. If the
holders sell through brokers, they expect to pay customary brokerage commissions
and charges.
Our American depository shares, each representing ten class B shares, are
quoted on the Nasdaq SmallCap Market under the symbol "GGAL." The last reported
sales price of our ADSs on July 30, 2004 was $5.17 per ADS.
-----------------
Investing in the class B shares involves risks. See "Risk Factors"
beginning on page 2.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-----------------
The date of this prospectus is ______ __, 2004
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Table of Contents
-----------------
Page
Notice to Investors...........................................................ii
Where You Can Find More Information...........................................ii
Incorporation of Certain Documents by Reference...............................ii
Summary........................................................................1
The Company....................................................................1
Banco Galicia's Foreign Debt Restructuring.....................................1
Risk Factors...................................................................2
Use of Proceeds...............................................................14
Price Range of Common Stock and Dividends.....................................14
Description of Our ADSs.......................................................18
Selling Shareholders..........................................................24
Plan of Distribution..........................................................26
Validity of the Securities....................................................28
Experts.......................................................................28
Enforceability................................................................28
-i-
Notice to Investors
As used in this prospectus, the terms "Grupo Galicia," "Company," "we,"
"our" and "us" refer to Grupo Financiero Galicia S.A., except where the context
otherwise requires or as otherwise indicated.
We have not authorized any dealer, salesperson or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and any accompanying prospectus
supplement. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus or any accompanying
prospectus supplement as if we had authorized it.
This prospectus and any accompanying prospectus supplement do not
constitute an offer to sell or the solicitation of an offer to buy any
securities other than the registered securities to which they relate, nor does
this prospectus and any accompanying prospectus supplement constitute an offer
to sell or the solicitation of an offer to buy any securities in any
jurisdiction to any person to whom it is unlawful to make such an offer or
solicitation in such jurisdiction.
You should not assume that the information contained in this prospectus and
any accompanying prospectus supplement is correct on any date after their
respective dates, even though this prospectus or any prospectus supplement is
delivered or securities are sold on a later date.
Where You Can Find More Information
We file annual reports and other information with the SEC under the
Securities Exchange Act of 1934, as amended. The registration statement of which
this prospectus forms a part and these reports and other information can be
inspected and copied at the public reference room maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
these materials may also be obtained from the SEC at prescribed rates by writing
to the public reference room maintained by the SEC at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain
information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330.
We have filed with the SEC a registration statement on Form F-3 under the
Securities Act with respect to this offering. This prospectus, which forms a
part of the registration statement, does not contain all the information
included in the registration statement and the attached exhibits.
The SEC maintains a website on the internet at http://www.sec.gov that
contains reports and other information regarding us. The reports and other
information about us can be downloaded from the SEC's website and can also be
inspected and copied at the offices of the National Association of Securities
Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
Incorporation of Certain Documents by Reference
We are "incorporating by reference" information that we file with the SEC,
which means that we can disclose important information to investors by referring
investors to those documents. The information incorporated by reference or
deemed incorporated by reference is an important part of this prospectus and
information that we file later with the SEC will be deemed to automatically
update and supersede this incorporated information. We incorporate by reference
our annual report on Form 20-F for the year ended December 31, 2003, which
contains a description of the class B shares, our report on Form 6-K filed on
June 4, 2004, except for the Price Waterhouse & Co. report and Supervisory
Syndics Committee report, each dated May 10, 2004, which are included in such
Form 6-K, and any future filings made by us with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended,
including all future annual reports on Form 20-F filed by us, until the offering
of the class B shares by this prospectus has been completed.
-ii-
Investors can get a free copy of any of the documents incorporated by
reference by making an oral or written request directed to:
Grupo Financiero Galicia S.A.
Tte. Gral. Juan D. Peron 456
C1038 AAJ-Buenos Aires, Argentina
Attention: Enrique Pedemonte
Telephone: 011-54114-343-7528, extension 104
You should rely only on the information contained or incorporated in this
prospectus. We have not authorized anyone else to provide you with different
information. You should not rely on any other representations. Our affairs may
change after this prospectus is distributed. You should not assume that the
information in this prospectus is accurate as of any date other than the date on
the front of this prospectus. You should read all information supplementing this
prospectus.
-iii-
Summary
The Company
We are a financial services holding company whose corporate purpose is
exclusively related to financial services and investment. Banco de Galicia y
Buenos Aires S.A., which we refer to as Banco Galicia or the "Bank", our 93.6%
subsidiary, carries out substantially all of our operating activities. Under our
bylaws, we may not carry out transactions described in the Financial Entities
Law (Ley de Entidades Financieras). Therefore, it is not our intention to
compete with Banco Galicia. Rather, we seek to broaden and complement Banco
Galicia's operations and businesses through holdings in companies and
undertakings whose objectives are related to financial activities. Consequently,
we operate in financial and related activities that Banco Galicia cannot carry
out or in which it can only participate in a limited way or in those activities
that would not be profitable for Banco Galicia due to current regulations.
Our principal executive offices are located at Teniente General Juan D.
Peron 456, Second Floor, (1038) Buenos Aires, Argentina. Our telephone number is
(54-11) 4343-7528.
Banco Galicia's Foreign Debt Restructuring
On May 18, 2004, Banco Galicia successfully closed the restructuring of
$1,320.9 million of its foreign debt, representing 98.2% of the foreign debt
eligible for restructuring. As part of the restructuring, we issued in a private
placement transaction convertible preferred shares to certain creditors in the
United States of Banco Galicia who elected to exchange a portion of the
outstanding debt of Banco Galicia held by them for our convertible preferred
shares. The convertible preferred shares are mandatorily convertible into our
class B shares on a one-for-one basis on May 13, 2005, the first anniversary of
their issuance.
As part of the restructuring, we agreed with the creditors in the
United States electing to receive our convertible preferred shares to register
for public resale the class B shares into which the preferred shares will
convert. This prospectus has been prepared, and the registration statement of
which this prospectus is a part has been filed with the SEC, to satisfy our
obligations to the recipients of the convertible preferred shares in the
restructuring. Accordingly, this prospectus covers the public resale by the
selling shareholders in the United States of our class B shares issuable upon
conversion of our convertible preferred shares.
Risk Factors
You should carefully consider the risks described below in addition to the
other information contained in this prospectus and the documents incorporated by
reference in this prospectus. We also may face risks and uncertainties that are
not presently known to us or that we currently deem immaterial, which may impair
our business. In general, you take more risk when you invest in the securities
of issuers in emerging markets such as Argentina than when you invest in the
securities of issuers in the United States and certain other markets.
Risk Factors Relating to Grupo Galicia
We are a holding company, and our ability to pay cash dividends depends on the
profitability of our subsidiaries
We are a holding company, and as such we conduct all of our operations
through our subsidiaries. As a holding company, we expect dividends or other
intercompany transfers of funds from our subsidiaries to be our primary source
of funds to pay our expenses and dividends. Banco Galicia is our most
significant subsidiary. As of December 31, 2003, Banco Galicia accounted for
99.2% of our consolidated assets and 91.7% of our consolidated net loss. While
we do not anticipate conducting operations at the holding company level, any
expenses we incur, in excess of minimum levels, will reduce amounts available to
be distributed to our shareholders. The ability of our subsidiaries to pay
dividends and make other payments to us will depend on their results of
operations and financial condition and may be restricted by, among other things,
applicable corporate and other laws and regulations and agreements of our
subsidiaries. In addition, our ability to pay dividends will be subject to legal
and other requirements at the holding company level.
During 2003 and 2002, due to Banco Galicia's adverse financial condition,
we did not receive any dividends from Banco Galicia. Banco Galicia is prohibited
from paying any cash dividends or making any advances, loans or capital
contributions to us, its other affiliates or subsidiaries for so long as amounts
are due to the Argentine Central Bank for liquidity support assistance.
Furthermore, Banco Galicia is restricted in paying dividends since under
Argentine Central Bank regulations it must reduce its retained earnings
available to be distributed as cash dividends by the difference between the
market value and the carrying value of the compensatory and hedge bonds (BODEN
2012 received or to be received by the Bank in accordance with applicable
regulations as compensation for asymmetric pesification), after netting the
legal reserve and other reserves established by Banco Galicia's bylaws.
Consequently, our ability to distribute cash dividends to our shareholders has
been, and continues to be, materially and adversely affected.
Last, the loan agreements entered into by Banco Galicia as part of its
foreign debt restructuring limit its ability to pay dividends on its capital
stock. See Item 8. "Financial Information--Dividend Policy and
Dividends--Dividend Policy in the annual report incorporated by reference in
this prospectus."
We may operate finance-related businesses that have little or no regulatory
supervision
We may operate finance-related businesses outside of Banco Galicia that are
not regulated by the Argentine Central Bank. These businesses will be subject
only to those regulatory limitations that may be applicable to them. We cannot
assure you that we will not enter into businesses that have little or no
regulatory supervision or that entail greater risks than our existing
businesses.
2
Galicia Retiro Compania de Seguros S.A., our indirect subsidiary, could face
adverse financial consequences in the event that some of its customers seek and
subsequently obtain disadvantageous judicial relief
Our indirect insurance subsidiary, Galicia Retiro Compania de Seguros S.A.
("Galicia Retiro"), could face adverse financial consequences if some of its
customers who did not participate in its restructuring plan described below seek
and subsequently obtain disadvantageous judicial relief.
In order to address the adverse financial consequences caused by asymmetric
pesification of the dollar-denominated liabilities and assets of Galicia Retiro
and, in particular, in order to avoid a potential liquidity shortfall in the
repayment of its affected dollar-denominated liabilities, Galicia Retiro
submitted to the Argentine Superintendency of Insurance a plan to reprogram the
repayment schedule of its dollar-denominated annuities. The Argentine
Superintendency of Insurance approved this plan on June 12, 2003. On June 30,
2003, Galicia Retiro launched an exchange offer for the reprogramming of these
dollar-denominated annuities. The exchange offer expired on August 31, 2003, and
resulted in 69% of its customers participating in the voluntary reprogramming
(31% of its customers did not participate).
We cannot assure you that a significant number of the customers that
abstained from the reprogramming plan will not initiate legal actions and obtain
subsequent judgments that could result in adverse financial consequences to
Galicia Retiro. Sudamericana Holding S.A., one of our subsidiaries and the
controlling shareholder of Galicia Retiro, has committed to make capital
contributions to Galicia Retiro of up to Ps. 6.2 million in the event that
Galicia Retiro experiences liquidity shortfalls in connection with the
satisfaction of its payment obligations under the plan.
Adverse market conditions are also having a negative impact on our nonbanking
businesses
In addition to the negative impact that the package of economic measures
adopted during 2002 has had on Banco Galicia, such measures have profoundly
affected the general business environment in Argentina and its level of
activity. Although each of our subsidiaries has been affected differently by the
difficult financial conditions in Argentina (and the region as a whole),
depending on its particular business activity, some effects have been
experienced by all and all of these effects have been adverse. For a discussion
on the negative impact of these economic measures on Banco Galicia, see " --Risk
Factors Relating to the Bank."
We may limit the information available to our shareholders
A principal objective of the securities laws of the United States,
Argentina and other countries is to promote full and fair disclosure of all
material information of companies issuing securities. However, there may be less
publicly available information about us than is regularly published by or about
listed companies in certain countries with highly developed capital markets,
such as the United States. While we are subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, the periodic disclosure
required of non-U.S. issuers under the U.S. Exchange Act is more limited than
the periodic disclosure required of U.S. issuers. Furthermore, Grupo Galicia is
not required to comply with the U.S. Securities and Exchange Commission ("SEC")
proxy rules in connection with shareholders' meetings.
We maintain our financial books and records in pesos and prepare our
financial statements in conformity with Argentine Banking GAAP, which differs in
certain respects from Argentine GAAP and U.S. GAAP.
3
Our shareholders may be subject to liability for certain votes of their
securities
Our shareholders are not liable for our obligations. Instead, shareholders
are generally liable only for the payment of the shares they subscribe. However,
shareholders who have a conflict of interest with us and who do not abstain from
voting may be held liable for damages to us. Also, shareholders who willfully or
negligently vote in favor of a resolution that is subsequently declared void by
a court as contrary to Argentine law or our bylaws may be held liable for
damages to us or to other third parties, including other shareholders.
U.S. holders of our class B shares may not be able to exercise preemptive and
accretion rights
Under Argentine law, holders of our class B shares have preemptive and
accretion rights with respect to those shares (including shares underlying our
ADSs). United States holders of our class B shares may not be able to exercise
those rights unless a registration statement under the Securities Act of 1933 is
effective with respect to those rights or an exemption from the registration
requirements of the Securities Act is available. We are not obligated to file a
registration statement with respect to those rights or the shares related to
those rights. We cannot assure you that we will file such a registration
statement or that an exemption from registration will be available. Unless those
shares are registered or an exemption from registration applies, a United States
holder of class B shares (including those underlying our ADSs) may receive only
the net proceeds from those preemptive rights if those rights can be sold.
An active public market for our class B shares may not continue to exist
Although our class B shares are currently traded on the Buenos Aires Stock
Exchange, the Cordoba Stock Exchange and the Nasdaq SmallCap Market (in the case
of our ADSs), we cannot assure you that these public markets for our shares will
continue to exist in the future.
Risk Factors Relating to Argentina
Substantially all of our operations, property and customers are located in
Argentina. Accordingly, the quality of our loan portfolio and our financial
condition and results of operations depend to a significant extent on
macroeconomic and political conditions prevailing from time to time in
Argentina. The political and economic crisis of late 2001 and early 2002 in
Argentina and the Argentine government's actions to address this crisis, which
are described in greater detail below and under Item 4. "Information on the
Company--Main Regulatory Changes in 2002 and 2003" in the annual report
incorporated by reference in this prospectus, have had and could continue to
have a material adverse effect on our business, financial condition and results
of operations.
The current growth and stabilization may not be sustainable, which could
adversely affect the economy and the financial system
During 2001 and 2002, Argentina went through a period of great political,
economic and social instability, leading to the early resignation of President
de la Rua in December 2001, the default on part of Argentina's sovereign debt
and the devaluation of the Argentine peso in January 2002 after more than 10
years of fixed exchange-rate parity with the U.S. dollar. Following the
appointment of Eduardo Duhalde as president in early 2002, the Argentine
government undertook a number of far-reaching initiatives that radically changed
the monetary and foreign exchange regime of the country and the regulatory
environment for doing business in Argentina for all sectors of activity,
including the financial sector. The impact of these measures on the Argentine
economy was significant and remains uncertain in the long run.
4
The Duhalde administration succeeded in stabilizing the main macroeconomic
variables in the second half of 2002. After a virtual collapse as a result of
the crisis, Argentina's gross domestic product ("GDP") has grown substantially
since the second half of 2002, in the broader context of a favorable world
economy. The current president, Nestor Kirchner, while highly critical of
certain policies followed in the 1990s, has not yet unveiled a comprehensive
economic program. The economic policy of the government has consisted mainly of
administering the crisis through monetary and fiscal policies and has not
included structural reforms considered necessary to support long-term economic
growth. In addition, while in September 2003 and June 2004, the government made
public announcements regarding possible terms for a restructuring of its foreign
debt with private creditors, the final terms of the restructuring and the timing
of that restructuring remain uncertain.
If the Kirchner administration is not capable of implementing economic
policies needed to turn the economic growth Argentina is experiencing into
sustainable development in the long run, there is considerable risk that
political and economic instability will increase. This would likely have a
negative impact on the Argentine economy and on the financial system, including
us and Banco Galicia. In addition, we cannot assure you that the economy will
not suffer additional shocks, especially if political pressure in Argentina
inhibits the implementation of economic policies designed to generate growth and
enhance consumer and investor confidence.
Argentina's insolvency and failure to restructure its sovereign debt could
prevent economic growth
On December 23, 2001, Argentina declared the suspension of payments on its
sovereign debt, except for debt owed to multilateral credit agencies. Although
Argentina did not default on its debt with multilateral agency creditors, during
most of 2002 and the beginning of 2003, it had numerous rounds of negotiations
with the International Monetary Fund (the "IMF") regarding Argentina's economic
program and the medium-term refinancing of its debt with the IMF. In spite of
the medium-term agreement reached by the Argentine government with the IMF in
September 2003, the lack of a strong IMF program may adversely affect
Argentina's ability to restructure its approximately US$100 billion of defaulted
debt with private creditors. Argentina's access to the voluntary international
credit market is generally viewed as dependent on the satisfactory resolution of
this restructuring.
Uncertainties regarding the government's debt restructuring and the
adoption of certain measures affecting key sectors of the economy such as the
utility companies and the financial system have a significant impact on the
private sector's ability to grow and invest. If the inability of the Argentine
government and the private sector to complete the restructuring of outstanding
claims and to access foreign financing continues, the fiscal situation of the
country could be severely affected, undermining the ability of the government to
implement adequate economic policies (including structural reforms) and
preventing the private sector from reembarking on a positive investment cycle.
If economic growth fails to materialize in the medium and long term, political
and economic volatility are likely to recur. This would most likely negatively
and materially impact the different entities operating in Argentina, including
the financial system, us and Banco Galicia.
Volatility of the regulatory environment could continue to be high and future
Argentine governmental policies could affect the economy as a whole as well as
financial institutions and Banco Galicia
The Argentine government has historically exercised significant
influence over the economy, and financial institutions in particular have
operated in a highly regulated environment for extended periods of time. Since
December 2001, the Argentine government has promulgated numerous, far-reaching
and not always consistent laws and regulations affecting the economy in general
as well as financial institutions in particular. Laws and regulations currently
governing the economy or the financial sector may continue to change in the
future, particularly given that important structural reforms have not been
undertaken. We
5
cannot assure you that future changes in the regulatory environment and
government policies will not adversely affect financial institutions in
Argentina, including Banco Galicia, as well as its business, financial condition
or results of operations or its ability to honor its
foreign-currency--denominated debt obligations. The lack of a clear and stable
regulatory environment imposes significant limitations on the operation of the
banking system, including Banco Galicia, and creates uncertainties as to our
future financial condition and results of operations.
Inflation may rise from current levels and further undermine the economy
Following the decision in January 2002 to abandon the fixed exchange rate
regime set forth in the Convertibility Law, the devaluation of the peso created
pressure on the domestic price system and generated inflation in 2002 after
several years of price stability and, in prior years, price deflation. During
2002, wholesale inflation reached a rate of approximately 118.4% and consumer
prices rose 40.95%, although the rate of inflation decreased during the second
half of the year. In 2003, consumer prices increased 3.7%, and wholesale prices
increased 2.0%. In the first five months of 2004, consumer prices increased 2.7%
and wholesale prices increased 3.9%.
Given the uncertainties regarding the government's future policies, we can
give no assurance that the value of the peso will remain stable or that
inflation will not recur. In the past, inflation has materially undermined the
Argentine economy and the government's ability to create conditions that would
permit growth. In addition, high inflation or high volatility in inflation rates
would negatively and materially affect the business volume of the financial
system and preclude it from resuming financial intermediation activities. This
could be expected in turn to negatively affect the level of economic activity
and employment. High inflation would also undermine Argentina's foreign
competitiveness by diluting the effects of peso devaluation, with the same
negative effects on the level of economic activity and employment. We cannot
assure you that higher rates of inflation will not negatively affect the
Argentine economy in the future.
Significant fluctuation in the value of the peso would adversely affect the
Argentine economy
The devaluation of the peso on January 7, 2002, resulted in a 240% increase
in the nominal exchange rate of the peso versus the U.S. dollar during 2002. In
2003, the peso appreciated and the exchange rate decreased 12.8%. Despite the
positive effects of the real depreciation of the peso on the competitiveness of
certain sectors of the Argentine economy, the depreciation has had far-reaching
negative impacts on the Argentine economy and on businesses, and individuals'
financial condition. The devaluation of the peso has had a negative impact on
the ability of Argentine businesses to honor their foreign debt, led to very
high inflation in 2002, strongly reduced real wages, had a negative impact on
businesses whose activity is dependent on the domestic market demand, such as
utilities and the financial industry and adversely affected the government's
ability to honor its foreign debt obligations.
During 2003 and 2004, the peso recovered a part of its value versus the
dollar. Among other reasons, this appreciation was the result of reduced imports
and the lack of local demand for dollars resulting in the government's continued
default on part of its foreign debt as well as the default by numerous
private-sector companies on their payments to foreign creditors. If imports were
to remain low and the restructuring of the Argentine sovereign and
private-sector debt currently in default were not to occur or were substantially
delayed, the combination of a strong trade surplus and controls over the foreign
exchange market (still outstanding even if substantially relaxed) could result
in a further real appreciation of the peso. In the short term, a significant
real appreciation of the peso would adversely affect exports and reduce the
Argentine public sector's revenues by reducing tax collection in real terms,
given the strong reliance of the public sector on taxes on exports. The
government would have to identify other sources of revenues or reduce spending
to close the fiscal gap resulting from decreasing export tax
6
receipts and could turn to printing money. Tax increases and/or inflation could
prompt recessionary pressures. See "--Inflation may rise from current levels and
further undermine the economy."
In addition, the appreciation of the peso against the U.S. dollar
negatively impacts the financial condition of entities with long foreign
currency positions (i.e., where the amount of foreign currency-denominated
assets exceeds foreign currency-denominated liabilities), such as Banco Galicia.
See "--Risk Factors Relating to the Bank--For the foreseeable future, the Bank
could have limitations on its ability to manage effectively its assets and
liabilities so as to minimize risks resulting from mismatches in terms of
currencies, maturities and yields."
Therefore, significant fluctuations in the value of the peso would have
significant adverse effects on the Argentine economy and on our financial
condition and results of operations. We cannot assure you that future policies
of the Argentine government will be successful in stabilizing the value of the
peso.
The foreign exchange market is subject to controls that could prevent certain
financial institutions from honoring their debt with foreign creditors
On December 3, 2001, most transfers of funds abroad to effect payment of
financial indebtedness began to require the prior authorization of the Argentine
Central Bank. Foreign exchange controls, which were maintained with certain
variations throughout all of 2002, were tightened at the beginning of the second
semester of 2002. The existence of such controls and the prevailing significant
surplus in the country's trade balance (which resulted in greater availability
of foreign currency) contributed to the appreciation of the peso. Beginning in
November 2002 and throughout 2003, the Argentine Central Bank progressively
eased most of the restrictions imposed on the foreign exchange market.
We cannot assure you that the Argentine Central Bank will continue to ease
restrictions on the foreign exchange market or that it will not implement more
restrictive rules in the future. If the Argentine Central Bank maintains the
current restrictions or if it reinstates more restrictive rules, financial
institutions, including the Bank, may face difficulties in making transfers of
U.S. dollars abroad for payment of their financial obligations.
Due to the current social and political crisis, investing in Argentina entails
many other risks
Investing in Argentina also involves the following risks:
o civil unrest, rioting, looting, nationwide protests, widespread social
unrest and strikes;
o expropriation, nationalization and forced renegotiation or
modification of existing contracts;
o taxation policies, including royalty and tax increases and retroactive
tax claims; and
o changes in laws and policies of the United States affecting foreign
trade, taxation and investment.
Financial markets in Argentina could be adversely affected by developments in
other emerging markets
Financial and securities markets in Argentina are influenced, to varying
degrees, by economic and market conditions in other emerging market countries.
Although economic conditions vary from country to country, investors' reactions
to the events occurring in one country may substantially affect securities from
issuers in other countries, including Argentina. We cannot assure you that
Argentina's
7
economy will not be adversely impacted by events affecting other emerging
markets. The political and economic events that occurred in Mexico in 1994 and
the collapse of several Asian economies between 1997 and 1998, to cite two
well-known downturns of the 1990s, both adversely impacted the Argentine
economy. These and similar developments can be expected to affect the Argentine
economy in the future.
Risk Factors Relating to the Argentine Financial System
The recovery of the financial system is dependent upon the ability of financial
institutions to regain the confidence of depositors
The massive withdrawal of deposits experienced by the Argentine financial
system and the Bank during 2001 and the first half of 2002 were largely due to
the lack of confidence of depositors in the Argentine government's ability to
repay its debt (including its debt within the financial system) and to maintain
peso-dollar parity in the context of its solvency crisis. The range of measures
implemented by the Argentine government in the last quarter of 2001 and during
the first half of 2002 further undermined the confidence of depositors and
investors in the Argentine financial system and in all financial institutions.
In addition, the measures taken by the government to protect the solvency of the
banking system generated significant opposition among depositors frustrated by
losses incurred on their savings.
The recovery of the financial system and the Bank depends in part on the
ability of Argentine financial institutions to regain the confidence of
depositors. Although the financial system as a whole has seen a substantial
recovery in deposits (mostly transactional deposits) in 2002 and 2003, we cannot
assure you that this trend will continue or that the deposit base of the
Argentine financial system, including the Bank's, will not be affected in the
future by adverse economic, social and political events. Such volatility will
have a direct impact on the manner in which financial institutions within the
financial system, including the Bank, conduct their business and on their
ability to operate as financial intermediaries.
Recent Argentine economic policies create uncertainty as to the future profile
and activities of the banking system
As a result of the 2001 and 2002 crisis, the financial system practically
ceased acting as an intermediary between savings and credit. The depth of the
crisis and the effect of the crisis on depositors' confidence in the financial
system create significant uncertainties as to the likelihood that the financial
system will fully recover its ability to act as an intermediary between savings
and credit in the short or medium term. Despite certain signs that loan
origination has begun to resume, the period of time in which banking activity in
Argentina will most likely be limited to providing a narrow range of commercial
banking services remains uncertain.
Even though deposits in the financial system and with the Bank resumed
growth in mid-2002, most of these new deposits are either short or very
short-term time deposits. The increase in deposits, particularly longer term
time deposits, would have to persist over time to allow financial institutions
to rely on deposits as a source of funding capable of supporting an adequate
level of financial intermediation activity. This would require the public to
regain confidence in the Argentine financial system. At the same time, it would
also require an increase in the public's demand for credit, which is in turn
dependent on the removal of uncertainty regarding Argentina's economic future.
We cannot assure you that these trends will materialize (or, if they do, that
these developments will occur at the requisite pace) so as to allow financial
intermediation activities to resume and attain the volume necessary to improve
the income generation capacity of Argentine financial institutions, including
the Bank.
8
Under these circumstances, for an undetermined period of time, the scale of
operations of Argentine-based financial institutions, including the Bank, their
business volume, the amount of their assets and liabilities and their income
generation capacity will be much lower than precrisis levels. We cannot assure
you that this will change in the future.
Deterioration of financial institutions' asset quality due to the economic
crisis may affect their financial condition and their income generation capacity
The capacity of Argentine public- and private-sector debtors to repay their
loans, already impaired by the deep and persistent recession that began in the
second half of 1998, deteriorated significantly in 2002 as a result of the
economic crisis. The Bank established allowances for loan losses for significant
amounts in 2002 to cover the risks inherent to its portfolio of loans to the
private sector. In 2003, the quality of the Bank's loan portfolio improved from
2002 levels as a result of high GDP growth and a better overall economic
environment. However, this improvement did not fully offset the deterioration
caused by the crisis in the quality of the assets of financial institutions with
a significant exposure to Argentine debtors. We cannot assure you that the
current improvement of the quality of the financial system's private-sector loan
portfolio will continue.
In addition, currently, the financial system's assets, as well as those of
the Bank, include a substantial exposure to debt instruments of the Argentine
public sector. The Argentine public sector is currently in default on part of
its foreign debt, including the Argentine Republic External Notes held by the
Bank. Argentine public-sector solvency in the long run is today uncertain, given
that its defaulted foreign debt has not yet been restructured and that an
economic policy with long-term objectives has not yet been defined. Although the
Argentine government is current on the Bonos del Gobierno Nacional due August 3,
2012, issued by the Republic of Argentina ("BODEN 2012") and promissory notes
secured by tax collections known as prestamos garantizados ("secured loans")
held by banks, we cannot assure you that the Argentine government will be able
to service its internal and external debt over the medium and long terms. See
Item 5. "Operating and Financial Review and Prospects--Item 5A. Operating
Results--Consolidated Assets" in the annual report incorporated by reference in
this prospectus.
Currently, to a large extent, the value of a large portion of the assets
held by Argentine banks, as well as those banks' income generation capacity, is
dependent on the Argentine public sector's repayment capacity, which is
currently dependent on the Argentine government's ability to restructure its
foreign debt and to establish an economic policy that is successful in promoting
sustainable economic growth in the long run. See " --Risk Factors Relating to
Argentina--Argentina's insolvency and failure to restructure its sovereign debt
could prevent economic growth."
An increasing number of judgments against financial institutions, in connection
with the corralon, may result in further deterioration of financial
institutions' deposit base and liquidity, including those of the Bank
As a consequence of measures adopted by the government in connection with
the pesification of deposits originally denominated in dollars and the
restructuring of bank deposits, since the beginning of 2002, individuals and
legal entities have initiated a significant number of legal actions against
financial institutions, including the Bank, on the basis that these measures
violated constitutional and other rights. These actions ("amparo claims")
resulted in a significant withdrawal of deposits from the financial system and
the Bank. Amparo claims have also resulted in significant losses for financial
institutions, including the Bank, because financial institutions have had to
reimburse restructured deposits (mostly dollar-denominated deposits before
pesification) at the market exchange rate rather than at the Ps. 1.40 per U.S.
dollar exchange rate (plus the CER adjustment, which is the coeficiente de
estabilizacion de referencia, an adjustment coefficient based on changes in the
consumer price index, which became
9
effective February 3, 2002, and interest accrued) at which deposits were
pesified and booked. These losses have been deferred, but Argentine Central Bank
Communique "A" 3916 established that the deferred asset must be amortized. In
addition, the government has not provided compensation for these losses, no
regulations have been issued regarding such compensation and the Supreme Court
has not yet resolved the constitutionality of the pesification measures.
Although restructured deposits have decreased significantly as depositors
have exchanged restructured deposits for government bonds and although the peso
has appreciated significantly in the recent months, we cannot assure you that an
increasing number of judgments against financial institutions, including the
Bank, will not be obtained, leading to additional erosion of the deposit base
and imposing a further demand on the liquidity of financial institutions,
including the Bank.
The lack of compensation to financial institutions for certain losses generated
by the government's economic policy could be detrimental to their financial
condition, including that of the Bank
Certain measures taken by the Argentine government to address the economic
crisis in 2002 resulted in significant losses to the financial system. In
response, the Argentine authorities have provided that financial institutions
can seek compensation from the government for some but not all of those losses.
In fact, to date, the government has not recognized claims brought by financial
institutions for losses resulting from amparo claims or for the effects of
asymmetric pesification on the balance sheet of nonbanking subsidiaries with
activities complementary to those of the parent financial institution (such as
the regional credit card companies in which the Bank holds a controlling
interest). See Item 4. "Information on the Company--Main Regulatory Changes in
2002 and 2003" in the annual report incorporated by reference in this
prospectus.
With respect to the differences generated by the payments by the Bank
pursuant to amparo claims, as of December 31, 2003, the Bank had recorded an
intangible asset amounting to Ps. 487.0 million, net of the amortization
mandated by the Argentine Central Bank, on account of its right to receive
compensation for having had to make payments pursuant to judicial orders
relating to the amparo claims for amounts higher than those provided for by the
pesification decrees. The decision by the government to provide compensation is
still pending.
With respect to measures establishing the use of different indexes (the CER
and the CVS, which is the coeficiente de variacion salarial, an adjustment
coefficient based on the variation of salaries, which became effective October
1, 2002) to adjust the principal of certain assets and liabilities of financial
institutions ("asymmetric indexation"), on November 14, 2003, the Argentine
government enacted Law No. 25,796, providing compensation for the negative
effects on financial institutions' financial condition arising from these
measures. Subsequently, through the issuance of different rules, including
Resolution No. 302/04 of the Ministry of Economy, the Ministry of Economy and
the Argentine Central Bank have administered Law No. 25,796, in a way that, in
the Bank's opinion, is contrary to its provisions. On May 6, 2004, the Bank
presented a letter to the executive branch, the Ministry of Economy and the
Argentine Central Bank reiterating the claim for compensation that it had made
on December 30, 2003. On May 18, 2004, the deadline for financial institutions
to opt into the compensation regime established by the government, the Bank did
not request to do so but rather restated its right to be compensated for the
negative effects of asymmetric indexation, formally challenging Resolution No.
302/04 of the Ministry of Economy. Based on the provisions of Law No. 25,769, as
of December 31, 2003, the Bank had recorded Ps. 102.7 million under "Other
Receivables Resulting from Financial Intermediation" on account of its right to
receive compensation from the government for asymmetric indexation.
See Item 4. "Information on the Company--Main Regulatory Changes in 2002
and 2003--Compensation to Financial Institutions--For Asymmetric Indexation and
for Differences Related to
10
Amparo Claims" and Item 4. "Information on the Company--Argentine Banking System
and Regulation--Argentine Banking Regulation--Treatment of Losses in Connection
with Amparo Claims" in the annual report incorporated by reference in this
prospectus.
We cannot assure you that the government will provide compensation to
financial institutions, such as the Bank, for any such potential losses. The
failure of the government to compensate these potential losses would have a
negative effect on our financial condition.
New limitations to creditors' rights in Argentina and to the ability to
foreclose on certain guarantees and collateral may adversely impact financial
institutions
In 2002, the Argentine government passed various laws and regulations
limiting the ability of creditors to foreclose on collateral and to exercise
their rights pursuant to guarantees and similar instruments upon the occurrence
of a default by a debtor under a financing agreement. Such limitations have
restricted Argentine creditors, such as the Bank, from initiating collection
actions or lawsuits to recover on defaulted loans. Even if these rules ceased to
be applicable, we cannot assure you that the Argentine government will not pass
new rules and regulations restricting the ability of creditors to enforce their
rights pursuant to debt agreements, guarantees and similar instruments.
Risk Factors Relating to the Bank
For the foreseeable future, the Bank could have limitations on its ability to
manage effectively its assets and liabilities so as to minimize risks resulting
from mismatches in terms of currencies, maturities and yields
In the course of implementing asymmetric pesification, the government
modified the yields of the assets and the cost of the liabilities that were
pesified. Fixed maximum and minimum interest rates were established for pesified
assets and liabilities, respectively. In addition, the principal of those assets
and liabilities was tied to either the CER or the CVS, and, in most cases,
maturities were extended. The terms and conditions of peso-denominated assets
with the public sector and certain peso-denominated deposits were also modified.
The amendments and modifications of the Bank's assets and liabilities
resulting from the government measures to address the economic crisis have
created mismatches between its assets and liabilities in terms of currency,
maturity and yield. Even though the Bank has been successful in the
restructuring of its foreign debt and its debt with the Argentine Central Bank,
for the foreseeable future, it will have limitations on its ability to manage
effectively its assets and liabilities so as to minimize risks resulting from
mismatches in terms of currencies and yields. See Item 5. "Operating and
Financial Review and Prospects--Item 5A. Operating Results--Currency Composition
of Our Balance Sheet" and Item 4. "Information on the Company--Main Regulatory
Changes in 2002 and 2003" in the annual report incorporated by reference in this
prospectus.
The Bank's new debt agreements restrict its ability to take some actions
The new loan agreements and indenture entered into by the Bank as part of
its foreign debt restructuring include a number of significant covenants that,
among other things, will restrict the Bank's ability to:
o pay dividends on stock or purchase its stock or the stock of its
subsidiaries;
o make certain types of investments;
11
o use the proceeds of the sale of certain assets or the issuance of debt
or equity securities;
o engage in certain transactions with affiliates; and
o engage in nonfinancial business activities.
Some of these agreements also require the Bank to maintain specified financial
ratios. A breach of any of these covenants or the Bank's inability to maintain
the required ratios could result in a default in respect of the related
indebtedness. In the event of a default, the relevant lenders could elect, among
other options, to declare the indebtedness, together with accrued interest and
other fees, to be immediately due and payable.
A majority of the Bank's assets are concentrated in Argentine public-sector debt
instruments
As of December 31, 2003, the Bank's exposure to the Argentine public
sector, including the compensatory and hedge bonds amounted to Ps. 17,175.9
million, representing approximately 75.6% of total assets. See Item 5.
"Operating and Financial Review and Prospects--Item 5A. Operating
Results--Exposure to the Argentine Public Sector" and Item 4. "Information on
the Company--Main Regulatory Changes in 2002 and 2003--Compensation to Financial
Institutions" in the annual report incorporated by reference in this prospectus.
Consequently, the value of the Bank's assets, its income and cash flow
generation capacity and future financial condition are heavily dependent on the
Argentine government's ability to comply with its payment obligations. In turn,
the ability of the Argentine government to comply with its payment obligations
is dependent on, among other things, the successful outcome of the restructuring
of the Argentine government's foreign debt, the result of which remains
uncertain, and its ability to establish an economic policy that is successful in
promoting sustainable economic growth in the long run.
In addition, although there is a trading market for the BODEN 2012, the
Bank may be limited in its ability to dispose of many of its government assets.
The Bank has recorded BODEN 2012 and its rights to receive or acquire future
BODEN 2012 as assets having a value equal to the face amount of the BODEN 2012
received or to be received and acquired, which does not reflect its actual
market value
Although, in accordance with Argentine Central Bank accounting rules, the
Bank has recorded the BODEN 2012 already received and its right to acquire BODEN
2012 in the future as assets having a value equal to 100% of the face value of
such BODEN 2012, the market value of these assets is significantly lower. The
BODEN 2012 are unsecured debt obligations of the Argentine government, which is
currently in payment default on a substantial portion of its indebtedness. As of
June 25, 2004, the BODEN 2012 were not rated and were trading in the secondary
market at a price of approximately US$66.90 for every US$100 of face value.
There is a possibility that the Bank will receive less BODEN 2012 from the
Argentine government than it believes it is entitled to receive
As of December 31, 2003, the Bank had recorded Ps. 1,610.0 million on
account of that part of the compensatory bond that was actually received from
the Argentine Central Bank. In addition, in accordance with applicable rules,
the Bank determined that it is entitled to receive Ps. 1,013.9 million of
additional compensatory bond and Ps. 3,615.7 million of a hedge bond it is also
entitled to acquire from the government with Argentine Central Bank financing.
The amount of compensatory and hedge bonds represented, as of December 31, 2003,
27.5% of the Bank's assets.
12
The Argentine Central Bank is required to approve the Bank's claim for
compensatory and hedge bonds prior to their full delivery to the Bank. In 2003,
the Argentine Central Bank reviewed the Bank's application for both compensatory
and hedge bonds, and the Bank has made adjustments to the carrying value of its
receivables for bonds to be received.
The actual amount of BODEN 2012 the Bank ultimately receives as
compensation for the effects of asymmetric pesification and the actual amount of
debt it ultimately incurs from the Argentine Central Bank to purchase the hedge
bond remain subject to negotiation with the Argentine Central Bank. As a result,
the amount of compensation the Bank ultimately receives and the related
liabilities it incurs may differ from the amounts recorded on its balance sheet,
and these differences could adversely affect our financial condition.
The BODEN 2012 may be subject to subsequent renegotiation
The Argentine government is in the process of restructuring most of its
foreign debt. We cannot assure you that this process will not ultimately result
in a requirement or decision by the Argentine government to restructure the
BODEN 2012 on terms less favorable than those currently in place.
Failure by Galicia Uruguay to repay deposits restructured in 2002 in accordance
with their terms could adversely affect the confidence of our depositors
Galicia Uruguay completed the restructuring of its deposits during 2002. It
expects to satisfy its obligations arising from the restructuring of its
deposits with funds provided by payments in respect of its loan portfolio,
repayment by the Bank of its debt with Galicia Uruguay and the BODEN 2012
pertaining to Galicia Uruguay on account of the pesification of some of its
loans and recorded by the Bank in Argentina.
In early January 2003 and in September 2003, Galicia Uruguay paid the first
and second installments, respectively, contemplated in its deposit restructuring
agreement, and in September 2003 and March 2004, Galicia Uruguay completed two
offers to exchange restructured deposits for cash, new negotiable obligations it
issued and BODEN 2012. As a result, the amount of Galicia Uruguay's indebtedness
to its depositors has declined substantially. In addition, Galicia Uruguay has
received authorization from the Central Bank of Uruguay to create a trust that
will receive its assets, including the BODEN 2012 referred to above, to secure
the repayment of its indebtedness to its depositors.
The failure by Galicia Uruguay to honor its restructured liabilities on a
timely basis would likely have a significant negative impact on the Bank's
operations in Argentina, with a loss of reputation, customers and deposits,
given that the two banks share their customer base to a large extent. In such an
event, our financial condition and results of operations would likely be
materially and adversely affected. See Item 4. "Information on the
Company--Business Overview--Banco Galicia--Galicia Capitalization and Liquidity
Plan," Item 4. "Information on the Company--Selected Statistical
Information--Composition of Deposits," and Item 5. "Operating and Financial
Review and Prospects--Item 5A. Operating Results--Contractual Obligations" in
the annual report incorporated by reference in this prospectus.
The Bank's future business activities may be substantially different than those
undertaken by the Bank historically
As a result of the political and economic crisis in Argentina that began in
late 2001 and the significant adverse effects that that crisis has had on the
Bank and other financial institutions operating in Argentina, we cannot assure
you that the Bank will be able to undertake the same type of business
13
activities in the future or maintain the same level of market activity that it
enjoyed in periods prior to December 2001. Therefore, the Bank's future business
activities, as well as the levels of those business activities, and the Bank's
market share may differ substantially from its business and levels at December
31, 2001, or in precrisis periods.
It may be difficult for the Bank to implement its business strategy successfully
The current economic situation in Argentina makes it difficult to predict
whether the Bank will be able to implement successfully its business strategy,
including increasing fee income and loan origination so as to generate
sufficient revenue to cover expenses. See Item 4. "Information on the
Company--Business Overview--Banco Galicia--Banco Galicia's Strategy" in the
annual report incorporated by reference in this prospectus. Demand for
fee-related products and services as well as credit demand is increasing in
Argentina, together with the improved situation of the economy, but the economy
as a whole and the relevant markets have not stabilized enough to be certain
that demand will continue to grow. Therefore, we cannot assure you that the
Bank's business strategy will in fact be successful or that continuing or new
events in Argentina will not adversely affect the Argentine economy so as to
call into question the Bank's ability to implement its business strategy
successfully and to regain full financial stability.
Use of Proceeds
We will not receive any proceeds from the sale by any selling shareholder
of the class B shares.
Price Range of Common Stock and Dividends
Market Information
Our class B shares are listed on the Buenos Aires Stock Exchange and
the Cordoba Stock Exchange under the symbol "GGAL." Our ADSs, each representing
ten class B shares, are listed on the Nasdaq SmallCap Market, under the symbol
"GGAL." Our ADSs have been listed on Nasdaq SmallCap Market since August 2002.
Previously, our ADSs were listed on the Nasdaq National Market since July 24,
2000.
The following tables present for the periods indicated the high and low
prices and the average trading volume of our class B shares on the Buenos Aires
Stock Exchange as reported by the Buenos Aires Stock Exchange and the high and
low prices and the average trading volume of our ADSs on Nasdaq as reported by
the Nasdaq National Market and the Nasdaq SmallCap market. There has been low
trading volume of our class B shares on the Cordoba Stock Exchange. The
following prices have not been adjusted for any stock dividends and/or stock
splits.
14
Grupo Galicia - Class B Shares - Buenos Aires Stock Exchange (in Pesos)
-----------------------------------------------------------------------
Average daily
volume in thousands of
Calendar Year High Low class B shares
2000 (from July 24)................................ 1.78 1.15 940.6
2001(1)............................. 2.19 0.40 2,908.7
2002................................ 0.74 0.12 3,358.0
2003................................ 2.02 0.69 4,175.3
Two Most Recent Fiscal Years and Last Two Quarters
2002
First Quarter................... 0.74 0.26 3,828.2
Second Quarter.................. 0.44 0.12 1,724.4
Third Quarter................... 0.29 0.20 2,431.5
Fourth Quarter.................. 0.71 0.30 5,396.5
2003
First Quarter................... 0.84 0.69 3,003.0
Second Quarter.................. 1.36 0.76 4,310.7
Third Quarter................... 1.49 1.10 4,634.3
Fourth Quarter.................. 2.02 1.45 4,740.7
2004
First Quarter................... 2.61 1.96 5,199.9
Second Quarter.................. 2.39 1.42 4,413.9
Most Recent Six Months
February 2004............................................. 2.50 1.96 5,931.3
March 2004................................................ 2.55 2.33 4,375.0
April 2004 (2)............................................ 2.39 1.98 3,855.9
May 2004.................................................. 1.94 1.42 8,596.2
June 2004................................................. 1.74 1.42 5,698.9
July 2004................................................. 1.67 1.52 4,414.0
-------------------
(1) On March 23, 2001, our class B shares began trading ex-dividend. The value
of each class B share was reduced by the amount of the stock dividend of Ps.
0.0296 per class B share.
(2) On April 28, 2004, our class B shares began
trading ex-coupon; the coupon related to the right to subscribe for the
preferred shares as part of the preemptive rights offering. The value of each
class B share was reduced by the value of the coupon of Ps. 0.101 per class B
share.
15
Grupo Galicia - ADSs - Nasdaq National Market / Nasdaq SmallCap Market (in US$)
--------------------------------------------------------------------------------
Average daily
volume in thousands of
Calendar Year High Low ADSs
2000 (from July 24)............................. 17.69 11.88 192.7
2001 (1)............................. 22.00 3.13 672.9
2002............................. 3.45 0.22 242.8
2003............................. 6.73 2.05 238.1
Two Most Recent Fiscal Years and Last Two Quarters
--------------------------------------------------
2002
First Quarter................ 3.45 1.03 398.6
Second Quarter............... 1.50 0.22 243.0
Third Quarter................ 0.76 0.26 172.9
Fourth Quarter............... 2.07 0.70 166.3
2003
First Quarter................ 2.90 2.05 110.3
Second Quarter............... 4.90 2.51 339.4
Third Quarter................ 5.08 3.84 231.4
Fourth Quarter............... 6.73 5.00 266.7
2004
First Quarter................ 8.85 6.81 294.6
Second Quarter............... 8.51 4.83 303.6
Most Recent Six Months
February 2004........................................... 8.44 6.81 316.5
March 2004.............................................. 8.83 7.76 215.9
April 2004.............................................. 8.51 7.11 223.7
May 2004................................................ 7.14 4.95 508.3
June 2004............................................... 5.84 4.83 188.5
July 2004............................................... 5.59 5.09 248.8
-------------------
(1) On March 27, 2001, our ADSs began trading ex-dividend. The value of
each ADS was reduced by the amount of the stock dividend of US$0.2835 per ADS.
Dividend Policy and Dividends
Dividend Policy
We may only declare and pay dividends out of our retained earnings
representing the profit realized on our operations and investments. The
Argentine Commercial Companies Law and our bylaws state that no profits may be
distributed until prior losses are covered. Dividends paid on our class A
shares, class B shares and preferred shares will equal one another on a
per-share basis.
16
As required by the Argentine Commercial Companies Law, 5% of our net income
is allocated to a legal reserve until the reserve equals 20% of our outstanding
capital. The payment of cash dividends will not be affected by the legal reserve
as long as such reserve is covered by our subsidiaries' retained earnings.
Dividends may not be paid if the legal reserve has been impaired until it
reaches the required level. The legal reserve is not available for distribution
to shareholders.
As a holding company, we obtain our principal source of cash for the
payment of dividends on our shares from dividends or other intercompany
transfers from our subsidiaries, primarily Banco Galicia. Due to the Argentine
crisis described in our annual report and the impact on our subsidiaries, as
well as the dividend restrictions contained in the Bank's loan agreements
described below, our ability to distribute cash dividends to our shareholders
has been materially and adversely affected.
Our ability to pay dividends to our shareholders in the future will
principally depend on (1) our net income (on a consolidated basis), (2)
availability of cash and (3) applicable legal requirements. Holders of our ADSs
will be entitled to receive any dividends payable in respect of our underlying
class B shares. We will pay cash dividends to the depositary in pesos, although
we reserve the right to pay cash dividends in any other currency, including
dollars. The deposit agreement provides that the depositary will convert cash
dividends it receives in pesos to dollars and, after deduction or upon payment
of its fees and expenses, will make payment to holders of our ADSs in dollars.
Under the loan agreements entered into by Banco Galicia in connection with
its foreign debt restructuring, the Bank may only pay dividends on its capital
stock if there is no event of default under the loan agreements and only after
the aggregate principal amount of the long term instruments and medium term
instruments (together, the "senior debt") issued in its foreign debt
restructuring is equal to or less than 50% of the originally issued senior debt.
If the Bank is able to pay dividends, it is required to repay US$2 of the long
term instruments issued in its foreign debt restructuring for each US$1 of
dividends paid on its capital stock.
In light of the restrictions on Banco Galicia's ability to make
distributions and the Argentine economic situation, our current policy is to
retain our earnings to pay for our operating expenses and to support the growth
of our businesses. Accordingly, our board of directors does not plan to pay
dividends in the foreseeable future.
Dividends
We did not pay any dividends in fiscal years 2002 and 2003 since Banco
Galicia did not post any income that could be distributed and since the Bank is
prohibited from paying any cash dividends or making any capital contributions to
its affiliates or subsidiaries for as long as the Argentine Central Bank's
financial assistance is outstanding. Furthermore, Argentine Central Bank
Communique "A" 3785 further restricts the distribution of cash dividends by
requiring the Bank to adjust its earnings to be distributed as cash dividends by
the difference between the market value and the carrying value of the
compensatory and hedge bonds after netting the legal reserve and other reserves
established by the Bank's bylaws.
In addition, cash and deposits we maintained on deposit at Galicia Uruguay
that may have otherwise been available for distribution or to pay our operating
expenses were restructured and converted into (i) subordinated negotiable
obligations for US$43 million, (ii) negotiable obligations for US$2.5 million
and (iii) a savings account available on demand for US$1.4 million. In September
2003, we exchanged US$1.26 million of the US$2.5 million negotiable obligations
for BODEN 2012 under an exchange offer made by Galicia Uruguay. The remaining
position of $US1.24 million was finally converted into BODEN 2012 during March
2004 due to a new offering exchange initiated by Galicia Uruguay in late 2003.
17
Net loss per class B share and per ADS was Ps. 0.199 and Ps. 1.99,
respectively, for the year ending December 31, 2003. Each ADS represents ten
class B shares.
We did not pay dividends for the fiscal year ended December 31, 2001. The
last cash dividend we received from Banco Galicia was in October 2001 for Ps.
116.4 million.
Description of Our ADSs
General
ADRs are certificates that evidence our ADSs, just as a stock certificate
evidences a holding of shares. Each of our ADSs represents ownership interests
in ten class B shares (or the right to receive class B shares), which we have
deposited with Banco de Galicia y Buenos Aires S.A., as custodian in Argentina
(the "custodian"). Each of our ADSs also represents securities, cash or other
property deposited with The Bank of New York but not distributed to ADS holders.
The Bank of New York's office is located at 101 Barclay Street, New York, NY
10286. Its principal executive office is located at One Wall Street, NY, NY
10286. The summary below provides a description of our ADSs and the deposit
agreement that we have entered into with The Bank of New York, which acts as the
depositary for the ADSs (as described below). This summary is applicable to
persons who elect to deposit their class B shares with the depositary in
exchange for our ADSs. See "--Deposit, Withdrawal and Cancellation" below for a
summary of the procedures for depositing class B shares with The Bank of New
York in exchange for our ADSs. For a description of our bylaws and our capital
stock, including the class B shares, see Item 10. Additional
Information--Description of Our Bylaws" in our annual report on Form 20-F for
the year ended December 31, 2003, which is incorporated by reference into this
prospectus.
You may hold ADSs either directly or indirectly through your broker or
other financial institution. If you hold ADSs directly, you are an ADS holder
and, accordingly, The Bank of New York will deliver your ADSs represented by
ADRs to you. This description assumes you hold your ADSs directly. If you hold
ADSs indirectly, you must rely on the procedures of your broker or other
financial institution to assert the rights of ADS holders described in this
section. You should consult with your broker or financial institution to find
out what those procedures are.
Because The Bank of New York actually holds the class B shares, you must
rely on it to exercise the rights of a shareholder. The obligations of The Bank
of New York are set out in a deposit agreement among Grupo Galicia, The Bank of
New York and ADS holders. The deposit agreement and the ADSs are generally
governed by New York law.
The following is a summary of the material terms of the deposit agreement.
Because it is a summary, it does not contain all the information that may be
important to you. For more complete information, you should read the entire
deposit agreement and the form of ADR, both of which are exhibits to the
registration statement to which this prospectus is a part.
Share Dividends and Other Distributions
The Bank of New York has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on class B shares or other deposited
securities after deducting its fees and expenses. You will receive distributions
in proportion to the number of class B shares your ADSs represent.
Cash
18
The Bank of New York will convert any cash dividend or other cash
distribution we pay on the class B shares into U.S. dollars if it can do so on a
reasonable basis and can transfer the U.S. dollars to the United States. If that
is not possible or if any approval from the Argentine government is needed and
cannot be obtained, the deposit agreement allows The Bank of New York to
distribute the dividend or distribution in pesos only to those ADS holders to
whom it is possible to do so. The Bank of New York will hold the pesos it cannot
convert for the account of the ADS holders who have not yet been paid. It will
not invest the pesos and it will not be liable for any interest.
Before a distribution is made, any withholding taxes that must be paid
under Argentine law will be deducted. See "Item 10--Additional
Information--Taxation" in the annual report incorporated by reference into this
prospectus. The Bank of New York will distribute only whole U.S. dollars and
cents and will round fractional cents to the nearest whole cent. If exchange
rates fluctuate during a time when The Bank of New York cannot convert the peso,
you may lose some or all of the value of the distribution.
Shares
The Bank of New York may, after consultation with us, distribute new ADSs
representing any shares we may distribute as a dividend or free distribution, if
we promptly provide it with satisfactory evidence that it is legal to do so. The
Bank of New York will only distribute whole ADSs. It will sell shares which
would require it to issue a fractional ADS and distribute the net proceeds in
the same way as it distributes cash. If The Bank of New York does not distribute
additional ADSs, each ADS will also represent the new shares.
Rights to Receive Additional Shares
If we offer holders of our class B shares any rights to subscribe for
additional shares or any other rights, The Bank of New York may, after
consultation with us, make these rights available to you. We must first instruct
The Bank of New York to do so and furnish it with satisfactory evidence that it
is legal to do so. If we do not furnish this evidence and/or give these
instructions, and The Bank of New York decides it is legal and practical to sell
the rights, The Bank of New York will sell the rights and distribute the
proceeds in the same way as it distributes cash. The Bank of New York may allow
rights that are not distributed or sold to lapse. In that case, you will receive
no value for them.
If The Bank of New York makes rights available to you, it will exercise the
rights, upon instruction from you, and purchase shares on your behalf. The Bank
of New York will then deposit those shares and issue ADSs to you. It will only
exercise rights if you pay it the exercise price and any other charges the
rights and the deposit agreement require you to pay.
U.S. securities laws may restrict the sale, deposit, cancellation and
transfer of ADSs issued upon exercise of rights. For example, you may not be
able to trade our ADRs freely in the United States. In such a case, The Bank of
New York may issue the ADSs under a separate restricted deposit agreement which
will contain the same conditions as the deposit agreement, except for changes
needed to put the restrictions in place.
Other Distributions
The Bank of New York will send to you anything else we distribute on the
deposited securities by any means it thinks are legal, fair and practical. If it
cannot make the distribution in that way, The Bank of New York has a choice: it
may decide to sell what we distributed and distribute the proceeds in the same
way as it distributes cash, or it may decide to hold what we distributed in
which case ADSs will also represent the newly distributed property.
19
The Bank of New York is not responsible if it decides that it is unlawful
or impractical to make a distribution available to any ADS holders. We have no
obligation to register under the Securities Act our ADSs, shares, rights or
other securities that may be distributed to holders of class B shares and ADSs.
We also have no obligation to take any other action to permit the distribution
of ADSs, shares, rights or anything else to ADS holders. This means that you may
not receive distributions that we make on our shares or any value for them if it
is illegal or impractical for us to make them available to you.
Deposit, Withdrawal and Cancellation
The Bank of New York will deliver ADSs if you or your broker deposits
shares or evidence of rights to receive class B shares with the custodian. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp
taxes or stock transfer taxes or fees, The Bank of New York will register the
appropriate number of ADSs in the names you request and will deliver the ADSs at
its office to the persons you request.
You may turn in your ADRs at The Bank of New York's office. Upon payment of
its fees and expenses and of any taxes or charges, such as stamp taxes or stock
transfer taxes or fees, The Bank of New York will deliver:
o the underlying class B shares to an account designated by you, and
o any other deposited securities underlying the ADSs at the office of
the custodian.
As an alternative, at your request, risk and expense, The Bank of New York will
deliver the deposited securities at its office.
Voting Rights
In order to vote class B shares underlying ADSs, you must either withdraw
the shares from our ADR facility or ask the depositary to vote the shares
according to your instructions. You may not receive notice of a shareholders'
meeting in sufficient time to instruct the depositary or to withdraw your
shares. If you do not vote directly or instruct the depositary, the depositary
will give a proxy to vote your class B shares to a person designated by us.
If we ask for your instructions, The Bank of New York will notify you of
the upcoming vote and arrange to deliver our voting materials to you. The
materials will:
o describe the matters to be voted on, and
o explain how you, on a specified date, may instruct The Bank of New
York to vote the shares or other deposited securities underlying your
ADSs as you direct.
For instructions to be valid, The Bank of New York must receive them on or
before the date specified. If you give valid instructions, The Bank of New York
will try, as far as is practical and in conformity with Argentine law and the
provisions of our bylaws, to vote or to have its agents vote the shares or other
deposited securities as you instruct. The Bank of New York will only vote or
attempt to vote as you instruct.
We cannot assure you that you will receive the voting materials in time to
ensure that you can instruct The Bank of New York to vote your shares. In
addition, The Bank of New York and its agents are not responsible for failing to
carry out voting instructions or for the manner of carrying out voting
20
instructions. This means that you may not be able to exercise your right to vote
and there may be nothing you can do if your shares are not voted as you
requested.
Fees and Expenses
ADS holders must pay: For:
--------------------------------------------------------------------------------
o $5.00 (or less) per 100 ADSs o Each issuance of an ADS, including as
a result of a distribution of shares
or rights or other property.
o Each cancellation of an ADS,
including upon termination of the
deposit agreement.
--------------------------------------------------------------------------------
o $0.02 (or less) per ADS o Any cash payment.
--------------------------------------------------------------------------------
o Registration or transfer fees o Transfer and registration of shares
on the share register of the foreign
registrar from your name to the name
of The Bank of New York or its agent
when you deposit or withdraw shares.
--------------------------------------------------------------------------------
o Expenses of The Bank of New York o Conversion of pesos to U.S. dollars.
o Certain cable, telex and facsimile
transmission expenses as provided in
the deposit agreement.
--------------------------------------------------------------------------------
o Taxes and other governmental o As necessary.
charges The Bank of New York or
the custodian have to pay on
any ADS or share underlying an
ADS (e.g., stock transfer taxes,
stamp duty or withholding taxes)
--------------------------------------------------------------------------------
21
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable
on your ADRs. The Bank of New York may refuse to transfer your ADRs or allow you
to withdraw the deposited securities until such taxes are paid. The Bank of New
York may deduct the amount of any taxes owed from any payments to you. It may
also sell deposited securities, by public or private sale, to pay any taxes
owed. You will remain liable if the proceeds of the sale are not enough to pay
the taxes. If The Bank of New York sells deposited securities, it will, if
appropriate, reduce the number of ADSs to reflect the sale and pay to you any
proceeds, or send to you any property, remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
If we:
o change the nominal or par value of our deposited securities;
o reclassify, split up or consolidate any of the deposited securities;
or
o recapitalize, reorganize, merge, liquidate, sell all or substantially
all of our assets, or take any similar action; then
the cash, shares or other securities received by The Bank of New York will
become deposited securities. In addition, the Bank of New York may, and will if
we ask it to, distribute some or all of the cash, shares or other securities it
received. It may also issue new ADRs or ask you to surrender your outstanding
ADRs in exchange for new ADRs identifying the new deposited securities.
Amendment and Termination
We may agree with The Bank of New York to amend the deposit agreement and
the form of the ADRs without your consent for any reason. If the amendment adds
or increases fees or charges, except for taxes and other governmental charges or
certain expenses of The Bank of New York, or prejudices an important right of
ADS holders, it will only become effective 30 days after The Bank of New York
notifies you of the amendment. At the time an amendment becomes effective, you
are considered, by continuing to hold your ADSs, to agree to the amendment and
to be bound by the ADSs and the deposit agreement as amended.
The Bank of New York will terminate the deposit agreement if we ask it to
do so, upon 30 days' notice thereof. The Bank of New York may also terminate the
deposit agreement if The Bank of New York has told us that it would like to
resign, upon 30 days' notice thereof, and we have not appointed a new depositary
bank within 90 days after notice has been given to us and the ADS holders. In
cases described in the immediately preceding sentence, The Bank of New York must
notify you at least 90 days before termination. In cases where we have requested
termination of the deposit agreement, The Bank of New York must notify you at
least 30 days prior to termination.
After termination, The Bank of New York and its agents will only be
required under the deposit agreement to do only the following: collect and
deliver any distributions on the deposited securities and other shares and
deposited securities upon cancellation of ADSs. At any time after the expiration
of one year
22
after termination, The Bank of New York will, if practical, sell any
remaining deposited securities by public or private sale. After that, the Bank
of New York will hold the money it received on the sale, as well as any other
cash it is holding under the deposit agreement for the pro rata benefit of the
ADS holders that have not surrendered their ADRs. It will not invest the money
and will have no liability for interest. The Bank of New York's only obligations
will be to account for the money and other property and with respect to
indemnification. After termination, our only obligations will be with respect to
indemnification and to pay certain amounts to The Bank of New York.
Limitation on Obligations and Liability to ADS Holders
The deposit agreement expressly limits our obligations and the obligations
of The Bank of New York. This limits our liability and the liability of The Bank
of New York. We and The Bank of New York:
o are only obligated to take the actions specifically described in the
deposit agreement without negligence or bad faith,
o are not liable if either is prevented or delayed by law or
circumstances beyond its control from performing its obligations under
the deposit agreement,
o are not liable if either exercises discretion permitted under the
deposit agreement,
o have no obligations to become involved in a lawsuit or other
proceeding related to the ADSs or the deposit agreement on your behalf
or on behalf of any other party, and
o may rely upon any documents they believe in good faith to be genuine
and to have been signed or presented by the proper party.
In the deposit agreement, we and The Bank of New York agree to indemnify
each other under certain circumstances.
Requirements for Depositary Actions
Before it will issue or register the transfer of an ADS, make a
distribution on an ADS or permit the withdrawal of class B shares, The Bank of
New York may require:
o payment of stock transfer or other taxes or other governmental charges
and transfer or registration fees charged by third parties for the
transfer of any shares or other deposited securities,
o production of satisfactory proof of the identity and genuineness of
any signature or other information it deems necessary, and
o compliance with regulations it may establish, from time to time,
consistent with the deposit agreement, including presentation of
transfer documents.
The Bank of New York may refuse to deliver, transfer or register transfers
of ADSs generally when its transfer books or our transfer books are closed or at
any other time that it or we think it advisable to do so.
You have the right to cancel your ADSs and withdraw the underlying class B
shares at any time except:
23
o when temporary delays arise because The Bank of New York has closed
its books or we have closed our transfer books or the deposit of
shares in connection with voting at a shareholders' meeting, or the
payment of dividends on the shares,
o when you or other ADS holders seeking to withdraw shares owe money to
pay fees, taxes and similar charges, or
o when it is necessary to prohibit withdrawals in order to comply with
any laws or governmental regulations that apply to ADSs or to the
withdrawal of shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the
deposit agreement.
Pre-Release of ADRs
In certain circumstances, subject to the provisions of the deposit
agreement, The Bank of New York may issue ADRs before deposit of the underlying
class B shares. This is called a pre-release of the ADRs. The Bank of New York
may also deliver shares upon cancellation of pre-released ADRs even if the ADRs
are canceled before the pre-release transaction has been closed out. A
pre-release is closed out as soon as the underlying shares are delivered to The
Bank of New York. The Bank of New York may receive ADRs instead of shares to
close out a pre-release. The Bank of New York may pre-release ADRs only under
the following conditions:
o before or at the time of the pre-release, the person to whom the
pre-release is being made must represent to The Bank of New York in
writing that it or its customer beneficially owns the shares or ADRs
to be deposited,
o the pre-release must be fully collateralized with cash or other
collateral that The Bank of New York considers appropriate, and
o The Bank of New York must be able to close out the pre-release on not
more than five business days' notice.
In addition, The Bank of New York will limit the number of ADRs that may be
outstanding at any time as a result of pre-release although The Bank of New York
may disregard the limit from time to time to time.
Selling Shareholders
We originally issued the class B shares in transactions exempt from the
registration requirements of the Securities Act. Selling shareholders may from
time to time offer and sell the class B shares pursuant to this prospectus. When
we refer to the "selling shareholders" in this prospectus, we mean those persons
listed in the table below, as well as the pledgees, donees, assignees,
transferees, successors and others who later hold any of the selling
shareholders' interests.
The following table contains information as of the date of this prospectus,
with respect to the selling shareholders and the class B shares beneficially
owned by each selling shareholder that may be offered using this prospectus. We
have prepared this table based on the information supplied to us by the selling
shareholders named in the table.
24
The selling shareholders listed in the table below may have sold or
transferred, in transactions exempt from the registration requirements of the
Securities Act, some or all of their class B shares since the date on which the
information in the table is presented. Information about the selling
shareholders may change over time. Any changed information will be set forth in
prospectus supplements.
Because the selling shareholders may offer all or some of their class B
shares from time to time, we cannot estimate the amount of the class B shares
that will be held by the selling shareholders upon the termination of any
particular offering. See "Plan of Distribution."
Unless set forth below, to our knowledge, none of the selling shareholders
has, or within the past three years has had, any material relationship with us
or any of our predecessors or affiliates or beneficially owns in excess 1.0% of
our outstanding class B shares.
Percent of
Shares of
Number of Class B Shares
Name Class B Shares Outstanding
25
Plan of Distribution
We will not receive any of the proceeds of the sale of the class B shares
offered by this prospectus. The class B shares may be sold from time to time to
purchasers:
o directly by the selling shareholders; or
o through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from
the selling shareholders or the purchasers of the class B shares
(which compensation as to a particular broker-dealer might be in
excess of customary commissions).
If the class B shares are sold through underwriters or broker-dealers, the
selling shareholders will be responsible for underwriting discounts or
commissions or agent's commissions.
The class B shares may be sold in one or more transactions at:
o fixed prices;
o prevailing market prices at the time of sale;
o varying prices determined at the time of sale; or
o negotiated prices.
These sales may be effected in transactions:
o on any national securities exchange or quotation service on which the
class B shares may be listed or quoted at the time of the sale,
including the Nasdaq SmallCap Market;
o in the over-the-counter market;
o in transactions otherwise than on such an exchange or service or in
the over-the-counter market;
o through the writing of put or call options relating to the class B
shares;
o through the distribution by a selling shareholder to its partners,
members or shareholders; or
o through a combination of such methods, if applicable.
The transactions may include block transactions or crosses. Crosses are
transactions in which the same broker acts as an agent on both sides of the
trade.
In connection with sales of class B shares, the selling shareholders may
enter into hedging transactions with broker-dealers. These broker-dealers may in
turn engage in short sales of class B shares in the course of hedging their
positions. The selling shareholders may also sell the class B shares short and
deliver class B shares to close out short positions, or loan or pledge class B
shares to broker-dealers that in turn may sell the class B shares. The selling
shareholders also may effect sales of class B shares by selling directly to
broker-dealers, which may act as agents or principals.
26
To our knowledge, there are currently no plans, arrangements or
undertakings between any selling shareholders and any underwriter, broker-dealer
or agent regarding the sale of the class B shares by the selling shareholders.
However, we cannot assure you that any selling shareholder will not transfer,
devise or gift the class B shares by other means not described in this
prospectus.
Under the registration rights agreement filed as an exhibit to our annual
report on Form 20-F for the year ended December 31, 2003, which is incorporated
in this prospectus by reference, we and the selling shareholders will be
indemnified by each other against certain liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection with these liabilities.
We have agreed to pay substantially all of the expenses incidental to the
registration, offering and sale of the class B shares to the public other than
commissions, fees and discounts of underwriters, brokers and agents.
The selling shareholders and any broker-dealers or agents who participate
in the distribution of the class B shares may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act. As a result, any
profits on the sale of the class B shares by selling shareholders and any
discounts, commissions or concessions received by any broker-dealers or agents
might be deemed to be underwriting discounts and commissions under the
Securities Act. If the selling shareholders were to be deemed underwriters, the
selling shareholders may be subject to statutory liability, including, but not
limited to, that specified in sections 11, 12 and 17 of the Securities Act and
Rule 10b-5 under the Exchange Act.
Because the selling shareholders may be deemed to be "underwriters," they
may be subject to the prospectus delivery requirements of the Securities Act. At
any time a particular offer of the securities is made, a revised prospectus or
prospectus supplement, if required, will be distributed that will disclose:
o the name of the selling shareholders and any participating
underwriters, broker-dealers or agents;
o the aggregate amount and type of securities being offered;
o the price at which the securities were sold and other material terms
of the offering;
o any discounts commissions, concessions or other items constituting
compensation from the selling security holders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers;
and
o that the participating broker-dealers did not conduct any
investigation to verify the information in this prospectus or
incorporated in this prospectus by reference.
We cannot assure you that any selling shareholder will sell any or all of
the class B shares pursuant to this prospectus. In addition, any class B shares
covered by this prospectus that qualify for sale pursuant to Rule 144 or Rule
144A under the Securities Act may be sold under Rule 144 or Rule 144A rather
than pursuant to this prospectus.
The selling shareholders and any other person participating in such
distribution will be subject to the Exchange Act. The rules under that Act
include, without limitation, Regulation M, which may limit the timing of
purchases and sale of any of the class B shares by the selling shareholders and
any other such person. In addition, Regulation M may restrict the ability of any
person engaged in the distribution of the class B shares to engage in
market-making activities with respect to the particular class B shares
27
being distributed for a period of up to five business days prior to the
commencement of that distribution. This may affect the marketability of the
class B shares.
Validity of the Securities
Certain legal matters with respect to the class B shares will be passed
upon for us by our legal counsel, Rafael Mariano Manovil, of M&M Bomchil, Buenos
Aires, Argentina, with respect to matters of Argentine law.
Experts
The consolidated financial statements of Grupo Galicia as of December 31,
2003 and for the three years then ended incorporated in this prospectus by
reference to the annual report on the Form 20-F for the year ended December 31,
2003 have been so incorporated in reliance on the report (which includes an
explanatory paragraph as stated below) of Price Waterhouse & Co., independent
registered accounting firm, given on the authority of said firm as experts in
auditing and accounting. Price Waterhouse & Co. is a member of the Professional
Council of Economic Sciences of the Autonomous City of Buenos Aires, Argentina.
The Price Waterhouse & Co. report referred to above contains the following
explanatory paragraph: "The quality of Grupo Galicia's financial condition and
results of operations depend to a significant extent on macroeconomic and
political conditions prevailing from time to time in Argentina. The political
and economic crisis of late 2001 and early 2002 in Argentina, and the Argentine
government's actions to address such crisis, as mentioned in notes 1 and 39 to
such financial statements, have had a significant adverse effect on Grupo
Galicia's business activity. Currently, Grupo Galicia is significantly dependent
on the Argentine Government's ability to perform on its obligations to the Bank
and to the entire financial system in Argentina, in connection with Federal
secured loans, federal government securities and on its obligation to approve
and deliver government securities under various laws and regulations."
Enforceability
You may not be able to:
o effect service of process on us or our directors and officers, or
o enforce judgments of courts outside of Argentina,
based on our civil liabilities or those of our officers or directors under the
laws of jurisdiciations other than Argentina, including any judgments based on
civil liablities under the federal securities laws of the United States. This
may occur because:
o Grupo Galcia is a sociedad anonima organized under the laws of
Argentina,
o all of our directors, members of our supervisory committee and
officers reside principally in Argentina, and
o substantially all of our assets and the assets of its officers and
directors are located in Argentina.
28
Grupo Financiero/Galicia
6,025,608 Class B Shares
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
Item 8. Indemnification of Directors and Officers
On July 3, 2002, the Board of Directors of the registrant resolved that the
registrant will indemnify and hold harmless each director of the registrant and
each director of Banco de Galicia y Buenos Aires S.A. who served in such
capacity prior to July 3, 2002 against liabilities, of whatever nature,
resulting from acts or omissions while serving in their function as director of
said companies.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore likely unenforceable.
Item 9. Exhibits
Exhibit No. Description
----------- -----------------------------------------------------------
4.1 English translation of the Articles of
Incorporation/By-laws.*
4.2 Registration Rights Agreement, dated as of May 18,
2004, of the registrant, for the benefit of the
holders of the preferred shares.*
4.3 Form of Deposit Agreement between The Bank of New York
and the registrant, including the form of American
depositary receipt.**
5.1 Opinion of Rafael Mariano Manovil of M&M Bomchil,
special counsel to the registrant, as to the validity
of the class B shares.
23.1 Consent of Rafael Mariano Manovil of M&M Bomchil
(included in Exhibit 5.1).
23.2 Consent of Price Waterhouse & Co.
24.1 Power of Attorney (included on signature page).
* Incorporated by reference from the registrant's annual report on Form 20-F
for the year ended December 31, 2003.
** Incorporated by reference from Registration Statement on Form F-4
(333-11960).
Item 10. Undertakings
a. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
i. To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement;
iii. To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
of this section do not apply if the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act
of 1934 that are incorporated by reference in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
4. To file a post-effective amendment to the registration statement
to include any financial statements required by Item 8.A. of Form
20-F at the start of any delayed offering or throughout a
continuous offering. Financial statements and information
otherwise required by section 10(a)(3) of the Securities Act need
not be furnished, provided that the registrant includes in the
prospectus, by means of a post-effective amendment, financial
statements required pursuant to this paragraph (a)(4) and other
information necessary to ensure that all other information in the
prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, a post-effective
amendment need not be filed to include financial statements and
information required by section 10(a)(3) of the Securities Act if
such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by
reference in the Form F-3.
b. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
c. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form F-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Buenos Aires, in the Republic of Argentina, on August
3, 2004.
By: /s/ Antonio Garces
----------------------------------
Name: Antonio Garces
Title: Chairman of the Board and Chief
Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Pedro Richards, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all the said attorney-in-fact and agent,
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Signature Title
======================== ============================================
/s/ Antonio Garces Principal Executive Officer, Chairman of the
------------------------- Board and Chief Executive Officer
Antonio Garces
/s/ Pedro Richards
-------------------------
Pedro Richards Chief Financial Officer
-------------------------
/s/ Jose Luis Gentile
-------------------------
Jose Luis Gentile Principal Accounting Officer
/s/ Federico Braun
-------------------------
Federico Braun Vice Chairman and Director
/s/ Abel Ayerza
-------------------------
Abel Ayerza Director
/s/ Eduardo J. Zimmermann
-------------------------
Eduardo J. Zimmermann Director
/s/ Silvestre Vila Moret
-------------------------
Silvestre Vila Moret Director
/s/ Marcelo L.S. Tonini
-------------------------
Marcelo L.S. Tonini Director
/s/ Gloria Moreno
-------------------------
Gloria Moreno Authorized Representative in the United States
EXHIBIT INDEX
Exhibit No. Description
----------- -----------------------------------------------------------
4.1 English translation of the Articles of Incorporation/By-laws.*
4.2 Registration Rights Agreement, dated as of May 18, 2004,
of the registrant, for the benefit of the holders of the
preferred shares.*
4.3 Form of Deposit Agreement between The Bank of New York and
the registrant, including the form of American depositary
receipt.**
5.1 Opinion of Rafael Mariano Manovil of M&M Bomchil, special
counsel to the registrant, as to the validity of the class
B shares.
23.1 Consent of Rafael Mariano Manovil of M&M Bomchil (included
in Exhibit 5.1).
23.2 Consent of Price Waterhouse & Co.
24.1 Power of Attorney (included on signature page).
* Incorporated by reference from the registrant's annual report on Form 20-F for
the year ended December 31, 2003.
** Incorporated by reference from Registration Statement on Form F-4
(333-11960).