As filed with the Securities and
Exchange Commission on May 26, 2005. Registration No. 333-117904
=====================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No.1
to
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)
GALICIA FINANCIAL GROUP
(Translation of Registrant's name into English)
Argentina Not Applicable
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
Tte. Gral. Juan D. Peron 456
C1038 AAJ-Buenos Aires, Argentina
+ (54-11) 4343-7528
(Address and telephone number of Registrant's principal executive offices)
-------------------------------------------------
Gloria Moreno
61-21 138th Street
Flushing, NY 11367
(718) 461-7834
(Name, address, and telephone number of agent for service)
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Copies to:
Kevin Keogh, 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. /_/
-------------------------------------------------
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.
PROSPECTUS
GRUPO FINANCIERO GALICIA S.A.
1,327,496 Class B Shares
------------------------
This prospectus is part of a registration statement that covers 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 May 25, 2005 was $8.19 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 May 31, 2005
Table of Contents
Notice to Investors...........................................................ii
Where You Can Find More Information...........................................ii
Incorporation of Certain Documents by Reference..............................iii
Summary........................................................................1
The Company....................................................................1
Banco Galicia's Foreign Debt Restructuring.....................................1
Risk Factors...................................................................2
Use of Proceeds...............................................................17
Price Range of Common Stock and Dividends.....................................17
Description of Our ADSs.......................................................21
Selling Shareholders..........................................................28
Plan of Distribution..........................................................30
Validity of the Securities....................................................32
Experts.......................................................................32
Enforceability................................................................33
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.
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 U.S. Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). 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 thereto.
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.
ii
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, 2004, which
contains a description of the class B shares, our current report on Form 6-K
containing our unaudited consolidated financial results for our fiscal quarter
ended March 31, 2005, filed on May 26, 2005, and any future filings made by us
with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act,
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.
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: 011-5411-4-343-7528, 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
93.59%, as of Decemer 31, 2004, subsidiary, carries out substantially all of our
operating activities. Under our bylaws, we may not carry out transactions
described in the Ley de Entidades Financieras (Financial Entities Law).
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, (C1038AAJ) 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 converted 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 converted. 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 issued upon conversion
of our convertible preferred shares.
1
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, 2004, Banco Galicia accounted for
99.2% of our consolidated assets and 98.9% of our consolidated net loss. While
we do not anticipate conducting operations at our 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 our
level.
During 2004, 2003 and 2002 we did not receive any dividends from Banco
Galicia. In addition, 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 financial assistance previously received by Banco Galicia.
Furthermore, Banco Galicia is restricted from paying dividends as 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, 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
2
enter into businesses that have little or no regulatory supervision or that
entail greater risks than our existing businesses.
We are subject to corporate disclosure and accounting standards that 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 as amended (the "Exchange
Act"), 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.
See Item 5. "Operating and Financial Review and Prospects--Item 5A.
Operating Results--U.S. GAAP and Argentine Banking GAAP Reconciliation" and note
41 to our consolidated audited financial statements in the annual report
incorporated by reference in this prospectus for a description of the principal
differences between Argentine Banking GAAP and U.S. GAAP.
For a description of the differences between Argentine and Nasdaq corporate
governance requirements, see Item 6. "Directors, Senior Management and
Employees--Nasdaq Corporate Governance Standards" in the annual report
incorporated by reference in this prospectus.
Our shareholders may be subject to liability for certain votes of their
securities
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
3
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.
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. 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.
The current growth and stabilization may not be sustainable, which could
adversely affect the economy, the financial system and our prospects
During 2001 and 2002, Argentina went through a period of great political,
economic and social instability, which led to the early resignation of the
President in office in December 2001, a significant fall in economic activity, a
banking crisis, the default on part of Argentina's sovereign debt, the
devaluation of the Argentine peso in January 2002 and high inflation. 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 the crisis and these
measures on the Argentine economy was significant and remains uncertain in the
long run.
If the current administration is not capable of implementing economic
policies needed to turn the economic growth Argentina is experiencing into
sustainable development in the long run, or if it is not capable of keeping
inflation under control, 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, while keeping inflation under control.
Argentina's failure to reach an agreement with the IMF could prevent economic
growth, which would adversely affect the economy, the financial system and our
prospects
Although Argentina did not default on its debt with multilateral agency
creditors, during most of 2002 and 2003, numerous rounds of negotiations with
the International Monetary Fund (the "IMF") were necessary for Argentina to
reach a medium-term agreement with the IMF and the medium-term refinancing of
its debt with the IMF in 2003.
Conversations between Argentina and the IMF to review the country's
performance and set new performance criteria for the next years were suspended
in the second half of 2004, until the completion of the foreign debt
restructuring. The exchange offer to restructure Argentina's defaulted sovereign
foreign debt closed in February 25, 2005, with a 76% creditor participation, but
settlement of the offer did not commence until May 24, 2005 and is currently
pending due to
4
legal actions raised by creditors that did not participate in the offer. And,
while the IMF has seen the 76% creditor participation as an important step, it
has expressed the view that Argentina should now formulate a strategy to address
the issue of remaining arrears. There are other issues such as the renegotiation
of utility tariffs and the monetary and fiscal policy targets, among others,
upon which the IMF and the Argentine government do not or may not agree.
Currently Argentina has limited access to the foreign capital markets and
depends on the IMF and other multilateral lending as its main source of foreign
capital. Consequently, if Argentina fails to reach an agreement with the IMF,
the IMF could decrease its lending to Argentina while other multilateral
financial institutions lending is conditioned to the reaching of an agreement
with the former. This would have a negative impact on Argentina's economic
prospects and on our and Banco Galicia's prospects.
In addition, Argentina's economic growth in the long run is dependent,
among others, on it regaining access to the voluntary international capital
markets and to foreign direct investment. In general, Argentina's access to the
voluntary international capital markets and to foreign direct investment are
viewed as dependent on the satisfactory resolution of pending issues with the
IMF. If such issues are not resolved, there is considerable risk that Argentina
would lack the sources of capital needed to sustain economic growth and poor
economic growth would likely trigger political and economic instability. This
would negatively affect our and Banco Galicia's prospects.
If the inability of the Argentine government and the private sector 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.
Inflation may rise from current levels and undermine the economy
In the first four months of 2005 consumer prices increased 4.53% and
wholesale prices increased 3.61%.
In the past, inflation has materially undermined the Argentine economy and
the government's ability to create conditions that would permit economic 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 positive effects of the peso devaluation, with
the same negative effects on the level of economic activity and employment. All
these effects would have a negative impact on our business. We cannot assure you
that higher rates of inflation will not negatively affect the Argentine economy
in the future.
5
Argentina's economy and its real, financial and securities market remain
vulnerable to external shocks which could have an adverse effect on the
country's economic growth and on our prospects
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 capital flows
into and securities from issuers in other similar countries, including
Argentina. Lower capital inflows and falling securities prices negatively affect
the real economy through higher interest rates or currency volatility.
In the past, Argentina's economy has been adversely affected by economic
developments in other emerging market countries. Among others, 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 emerging market
downturns of the 1990s, adversely impacted the Argentine economy. These and
similar developments can be expected to affect the Argentine economy in the
future. We cannot assure you that Argentina's economy will not be adversely
impacted by events affecting other emerging markets.
In addition, Argentina may also be affected by economic conditions of major
trade partners, such as Brazil, or countries with developed economies, such as
the United States, that are significant trade partners and/or have influence
over world economic cycles. For instance, if interest rates rise significantly
in developed economies, including the United States, Argentina and other
emerging market economies could find it more difficult and expensive to borrow
capital and refinance existing debt, which would negatively affect their
economic growth. If these countries are also Argentina's trade partners, the
negative effect would be increased, through a decrease in Argentine exports. We
cannot assure you that events affecting other markets will not have an adverse
effect on Argentina's growth.
A decline in international prices for Argentina's main commodity exports could
have an adverse effect on Argentina's economic growth and on our prospects
Argentina's financial recovery from the 2001-2002 crisis has been
significantly assisted by the increase in prices for Argentina's main commodity
exports, such as soy. These high commodity prices have contributed to the
increase in Argentine exports since the third quarter of 2002 and to high
government revenues from taxes on exports which were introduced in 2002. While
still historically at high levels, certain international commodity prices have
begun to decrease recently. If international commodity prices decrease
significantly, the growth of the Argentine economy could be adversely affected
and government revenues which became highly dependent on taxes on exports after
the 2001-2002 crisis, would decrease. This would have a negative impact on
public finances and the Argentine government's ability to service its debt and
could either generate recessionary or inflationary pressures depending on the
government's reaction. Either of these results would negatively impact our and
Banco Galicia's prospects.
6
A further significant devaluation of the peso would adversely affect the
Argentine economy
Despite the positive effects of the real depreciation of the peso on the
competitiveness of certain sectors of the Argentine economy, it 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, has
led to very high inflation in 2002, it 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
Argentine government's ability to honor its foreign debt obligations.
A further significant devaluation of the peso would have the same negative
impacts on the Argentine government, businesses and financial institutions
operating in Argentina and individuals, as explained above, and would have a
negative impact on us and on Banco Galicia.
A significant appreciation of the peso could adversely affect Argentina's
foreign competitiveness and its economic growth
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, increasing exports and the lack of local demand for dollars resulting
from the Argentine government's default on part of its foreign debt as well as
the default by numerous private-sector companies on their payments to foreign
creditors. The Argentine Central Bank prevented the peso from appreciating
further through the purchase of the foreign exchange market surplus. Such policy
did not translate into high inflation due to a strong demand for pesos from the
public.
The emergence of inflationary pressures in early 2005 would prevent the
Argentine Central Bank from continuing to intervene in the foreign exchange
market. As a result, a significant real appreciation of the peso could take
place, due to the need to control inflation. A significant real appreciation of
the peso would adversely affect Argentina's competitiveness and 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 receipts. This
would have a negative impact on economic growth. Alternatively, the government
could turn to printing money, which would result in high inflation. Tax
increases and/or inflation could prompt further recessionary pressures. See
"--Inflation may rise from current levels and undermine the economy" herein.
Therefore, a significant appreciation in the value of the peso could 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.
7
The foreign exchange market is subject to controls and the Argentine Central
Bank could implement more restrictive measures 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 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
and to the increased availability of foreign currency. As a result, beginning in
November 2002 and throughout 2003 and 2004, the Argentine Central Bank
progressively eased most of the restrictions imposed on the foreign exchange
market.
However, certain restrictions still exist that limit access to the foreign
exchange market by residents and non-residents and their ability to make
transfers of foreign currency abroad. For more information on these
restrictions, see Item 4."Information on the Company--Main Regulatory Changes in
2002, 2003, and 2004--Foreign Exchange Market" in the annual report incorporated
by reference in this prospectus.
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 implements or
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.
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 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. We 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.
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;
8
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.
Such events would have a negative impact on the operations of companies and
financial institutions in Argentina and on the market value of the securities
issued by these companies and financial institutions, including us.
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 range of measures implemented by the Argentine government in the last
quarter of 2001 and during the first half of 2002 undermined the confidence of
depositors and investors in the Argentine financial system and in all financial
institutions. In addition, the measures taken by the Argentine 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) since 2002, 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
Immediately after 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 the fact that
loan origination has resumed in 2004, the period of time necessary for the
Argentine financial system's credit activity to return to its pre-crisis levels
remains uncertain and so remains the period of time it will be limited to mostly
providing a narrow range of commercial banking services.
Even though deposits in the financial system and with the Bank resumed
growth in mid-2002, most of these new deposits are either sight 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
9
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 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.
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, even if growing could remain lower than pre-crisis levels.
Financial institutions' asset quality deteriorated significantly after the
2001-2002 economic crisis, and the current improvement is highly dependent on
the overall Argentine economy's performance
The capacity of Argentine 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 2001 and in 2002, as a result of the
economic crisis and the virtual paralysis in economic activity in late 2001 and
early 2002. Many private sector companies ceased operations or filed for some
form of bankruptcy or reorganization proceeding. In 2003 and 2004, the private
sector recovered and the quality of bank loan portfolios improved significantly.
This was a result of high GDP growth and a better overall economic environment
together with the restructuring of many private sector companies local or
foreign debt. However, in general, this improvement did not fully offset the
deterioration caused by the crisis in the asset quality of financial
institutions with a significant exposure to Argentine debtors and, also, certain
sectors of activity were more favored by the post-crisis relative prices than
others. We cannot assure you that the current improvement of the quality of the
financial system's private-sector loan portfolio will continue or that the
Argentine private sector has fully recovered from the crisis, while full
recovery and future performance remains highly tied to that of the country.
In addition, currently, as a result of the crisis, certain financial
institutions' assets, as well as those of the Bank, include a substantial
exposure to debt instruments of the Argentine public sector. Argentine
public-sector solvency in the long run is uncertain. 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 and
bonds secured by tax collections known as prestamos garantizados ("secured
loans") and Bonos Garantizados ("secured bonds" or "Bogar") respectively, held
by banks, including the Bank, we cannot assure you that the Argentine government
will be able to service its internal and external debt over the medium and long
terms.
Currently, to a large extent, the value of a large portion of the assets
held by certain Argentine banks, as well as those banks' income generation
capacity, is dependent on the Argentine public sector's repayment capacity,
which is tied, among others on the continuity of economic growth. In addition,
the quality of the portfolio with the private sector is also highly dependent on
the continuity of economic growth. Among others, Argentine economic growth
10
depends on the Argentine government's ability to establish an economic policy
that is successful in promoting sustainable economic growth in the long run. We
cannot assure you that economic growth will continue.
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 Argentine 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. 1.4 per U.S.
dollar exchange rate (plus the CER adjustment 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. The Argentine government has not provided compensation for
these losses and has expressed that it does not intend to do so.
Although restructured deposits have decreased significantly as depositors
have exchanged restructured deposits for government bonds and although the peso
has appreciated 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.
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.
11
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 and yields
In the course of implementing the asymmetric pesification, the Argentine
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 Argentine government measures to address the economic crisis
have created mismatches between its assets and liabilities in terms of currency
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,
2003 and 2004" in the annual report incorporated by reference in this
prospectus.
A majority of the Bank's assets are concentrated in Argentine public-sector debt
instruments making the Bank's future financial condition strongly dependent on
the Argentine Government credit quality
As of December 31, 2004, the Bank's exposure to the Argentine public
sector, including the Compensatory and Hedge Bonds (Boden 2012 received or to be
received by the Bank in accordance with applicable regulations as compensation
for the asymmetric pesification) amounted to Ps. 16,790.6 million, representing
71.6% of its total assets. 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 with respect to such public-sector instruments is
dependent on, among other things, 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 public-sector
assets.
12
Argentine Central Bank rules limiting the amount of a bank's exposure to
Argentine public-sector debt to a percentage of its assets as of January 1,
2006, could force the Bank to dispose of certain of such instruments and/or
significantly increase its capitalization
Argentine Central Bank's Communique "A" 3911, dated March 28, 2003,
established, among others, that a bank's total exposure to Argentine
public-sector debt instruments as of January 1, 2006 must not exceed 40% of its
total assets as of such date. Any excess over the established limit requires an
additional minimum capital requirement for an amount equal to the excess. The
Communique does not specify which assets are included in determining compliance
with the rule.
Certain sections of Communique "A" 3911 and other Argentine Central Bank
regulations take into account the effects of the 2001-2002 crisis on banks
exposure to public-sector assets and therefore exclude certain of these assets
for compliance with different prudential regulatory requirements, in recognition
of the fact that most Argentine public-sector assets held by banks are (i)
either assets acquired prior to the 2001-2002 crisis which have been
restructured or continue to be in payment default; or (ii) assets that have been
recorded by financial institutions as compensation for the negative effects of
certain government measures taken to mitigate the 2001-2002 crisis.
Currently, the Bank's exposure to Argentine public-sector assets exceeds
the maximum percentage established for a bank's total exposure to such risk as
of January 1, 2006, under the general guidance of Communique "A" 3911. Once the
Argentine Central Bank sets specific guidelines for determining compliance with
the rule, it is possible that the Bank's excess over 40% may be even greater and
the Bank could be forced to dispose of certain of its public-sector assets or
significantly increase its capitalization, in order to comply with such rule by
January 1, 2006.
The Bank has recorded Boden 2012 and its rights to receive or acquire 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 has
recently restructured a substantial portion of its indebtedness. As of May 20,
2005, the Boden 2012 were not rated and were trading in the secondary market at
a price of approximately US$ 87.18 for every US$ 100 of face value.
The Boden 2012 may be subject to subsequent renegotiation
The Argentine government completed the offer to restructure most of its
foreign debt on February 25, 2005 with a 76% participation rate from creditors.
We cannot assure you that its financial resources will be sufficient to fulfill
its payment obligations associated with the new debt to be issued as a
consequence of such foreign debt restructuring as well as with current
outstanding Argentine government debt, especially in the absence of an agreement
with the IMF
13
that contemplates the refinancing of Argentina's debt with such institution.
Therefore, we cannot assure you that such a situation 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.
The value at which the Bank has recorded Discount Bonds in pesos, which it
elected to receive in exchange of its holdings of Argentine Republic External
Notes, does not reflect the reduction in principal established by the terms and
conditions of the Argentine Government's exchange offer
The Argentine Republic External Notes (the "External Notes") were eligible
for the debt exchange carried out by the Argentine Government to restructure its
defaulted foreign debt, which closed on February 25, 2005. As of December 31,
2004, and as a consequence of the Bank's decision in January 2005, to tender its
holdings of External Notes (US$ 280.5 million of face value), the External Notes
were recorded, in accordance with Argentine Central Bank's valuation rules, for
Ps. 749.7 million. The Bank opted to exchange its External Notes for
Peso-Denominated Discount Bonds and GDP-Linked Units in an offer not subject to
proration. As part of the terms of this exchange option, we will receive new
debt instruments for a principal amount equal to 33.7% of the eligible debt. The
settlement of the exchange offer has been postponed due to an attachment by a
New York court on the old debt tendered by participant creditors at the request
of non-participating creditors. A New York appeals court overruled the
attachment on May 13, 2005 and remanded to the lower court, which removed the
last pending legal obstacle to completion of the deal. The settlement process
commenced on May 24, 2005, the completion of which is pending.
In order to reduce the impact on bank balance sheets of participating in
the exchange offer, the Argentine Central Bank, through Communique "A" 4270,
allowed the aforementioned Peso-denominated Discount Bonds and the GDP-Linked
Units to be recorded at the lowest of : (i) the carrying value in accordance
with the prevailing valuation rules; and (ii) the total future nominal cash
payments up to maturity specified by the terms and conditions of the new
securities. This valuation will be reduced in the amount of the perceived
service payments and accrued interest will not be recognized.
After the close of fiscal year 2004, in accordance with Communique "A"
4270, the Peso-denominated Discount Bonds and the GDP-Linked Units to be
received by the Bank when and if the exchange is settled, have been recorded by
the Bank at their carrying value, substantially the same as of December 31,
2004, which valuation does not reflect the abovementioned 66.3% debt reduction.
The new bonds have not yet been issued and a formal secondary market for these
securities does not currently exist. Trading of the new securities has not been
allowed in the local market since March 2005, but certain trading took place
before that date and in foreign markets, at prices between 90% and 95% of face
value.
The lack of compensation to financial institutions for certain losses generated
by the Argentine government's economic policy has been and will continue to 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
14
allowed financial institutions to seek compensation from the government for some
but not all of those losses. To date, the Argentine government has not
recognized claims brought by financial institutions for losses resulting from
amparo claims and has enacted regulations under Law N(degree)25,796, which
provide compensation for the negative effects on financial institutions'
financial condition arising from the asymmetric indexation which, in the Bank's
opinion, are contrary to such law's provisions.
With respect to the differences generated by the payments by the Bank
pursuant to amparo claims, as of December 31, 2004, the Bank had recorded an
intangible asset amounting to Ps. 451.4 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 Argentine government has not provided compensation for
these losses and has expressed that it does not intend to do so. The accumulated
amortization of the difference for amparo claims in 2004 and 2003 totaled Ps.
198.9 million.
In respect of the compensation for the asymmetric indexation, based on the
provisions of Law N(degree) 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
Argentine government. Given that (i) the Argentine government enacted
regulations under Law N(degree)25,796 which, in the Bank's opinion, are contrary
to such law's provisions; (ii) no resolution was taken regarding the Bank
reiteration in May 2004 of its claim for compensation made on December 30, 2003;
and (iii) the Bank did not participate in the compensation system as established
by the Argentine government, this asset was written off in 2004.
See Item 4. "Information on the Company--Main Regulatory Changes in 2002,
2003 and 2004--Compensation to Financial Institutions--For the Asymmetric
Indexation and for Differences Related to 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 Argentine government will provide
compensation to financial institutions, such as the Bank, for any such losses.
The failure of the Argentine government to compensate for these losses has had
and will continue to have a negative effect on our financial condition.
The covenants under 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 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;
15
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 non-financial 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.
Failure by Galicia Uruguay to repay deposits restructured in 2002 in accordance
with their terms could adversely affect the confidence of our depositors
Since January 2003, Banco Galicia Uruguay S.A., or Galicia Uruguay (a
wholly-owned subsidiary of the Bank) has paid all of the installments
contemplated in the deposit restructuring agreement reached with its creditors
in December 2002, 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 consolidated indebtedness to its depositors had declined as of
December 31, 2004, by approximately 60% of the original restructured amount.
A third exchange, that is currently in progress, of restructured deposits
(including those restructured as negotiable obligations) for cash and Boden 2012
has been offered by Galicia Uruguay to its depositors. The transfer of these
Boden 2012 held by the Bank in Argentina to Galicia Uruguay to settle the
exchange is subject to the prior approval of the Argentine Central Bank.
The failure by Galicia Uruguay to honor its remaining 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 certain
extent. In such an event, our financial condition and results of operations
would likely be materially and adversely affected.
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 such crisis 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 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 pre-crisis periods.
16
It may be difficult for the Bank to fully overcome all of the residual negative
effects of the 2001-2002 crisis
The current economic situation in Argentina makes it difficult to predict
whether the Bank will be able to increase fee income and loan origination to the
private sector so as to generate sufficient increased financial revenue and
income from services in order for operating results to more than offset its
losses from the valuation of public sector assets in accordance with Argentine
Central Bank rules and the amortization of amparo claims. Demand for fee-related
products and services as well as for credit is increasing in Argentina, together
with the improved situation of the economy and the Argentine private sector, but
the economy as a whole and the relevant markets have not stabilized enough to be
certain that demand will continue to grow or will grow at the necessary pace.
Therefore, we cannot assure you that the Bank will in fact be able to increase
its operating results in the required amount or at the required pace 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 continue to improve
its financial conditions and results of operations.
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.
Prior to listing on the Nasdaq SmallCap Market , 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.
17
Grupo Galicia - Class B Shares - Buenos Aires Stock Exchange (in Pesos)
-----------------------------------------------------------------------
Average daily
volume in thousands
Calendar Year High Low of class B shares
2000 (from July 24).................................... Ps. 1.78 Ps. 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
2004 (2).................................. 2.61 1.42 5,571.5
Two Most Recent Fiscal Years
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).................. 2.39 1.42 5,887.6
Third Quarter...................... 1.96 1.42 4,667.6
Fourth Quarter..................... 2.57 1.94 6,534.0
2005
First Quarter...................... 2.81 2.13 6,232.6
Second Quarter (through May 20).... 2.40 2.06 6,107.1
Most Recent Six Months
November 2004................................................. 2.55 2.03 6,199.2
December 2004................................................... 2.57 2.12 5,536.4
January 2005.................................................... 2.55 2.35 3,927.8
February 2005................................................... 2.77 2.49 6,881.5
March 2005 ..................................................... 2.81 2.13 7,842.8
April 2005 ..................................................... 2.31 2.06 6,178.4
May 2005 (through May 20)....................................... 2.40 2.17 6,007.2
--------------------
(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.
18
Grupo Galicia - ADSs - Nasdaq National Market / Nasdaq SmallCap Market (in US$)
-------------------------------------------------------------------------------
Average daily
volume in thousands
Calendar Year High Low of ADSs
2000 (from July 24)....................................... US$17.69 US$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
2004........................................... 8.85 4.65 324.2
Two Most Recent Fiscal Years
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
Third Quarter............................. 6.59 4.65 273.6
Fourth Quarter............................ 8.78 6.52 423.5
2005
First Quarter............................. 9.62 7.28 518.5
Second Quarter (through May 20)........... 8.29 6.99 311.4
Most Recent Six Months
November 2004...................................................... 8.68 7.00 435.7
December 2004...................................................... 8.78 7.00 225.5
January 2005....................................................... 8.73 7.96 221.6
February 2005...................................................... 9.49 8.49 598.3
March 2005......................................................... 9.62 7.28 719.5
April 2005......................................................... 7.95 6.99 258.2
May 2005 (through May 20).......................................... 8.29 7.45 385.8
--------------------
(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 Corporations' Law and our bylaws state that no profits may be
distributed until prior losses are covered. Dividends paid on our class A shares
and class B shares will equal one another on a per share basis.
As required by the Argentine Corporations' 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
19
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, our principal source of cash from which to pay
dividends on our shares is dividends or other intercompany transfers from our
subsidiaries, primarily Banco Galicia. Due to the Argentine crisis described in
the annual report incorporated by reference in this prospectus and the impact on
our subsidiaries, as well as the dividend restrictions contained in Banco
Galicia's loan agreements as 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 (i) our net income (on a consolidated basis), (ii)
availability of cash and (iii) 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 ADS depositary in
pesos, although we reserve the right to pay cash dividends in any other
currency, including dollars. The ADS deposit agreement provides that the
depositary will convert cash dividends received by the ADS depositary in pesos
to dollars and, after deduction or upon payment of fees and expenses of the ADS
depositary and deduction of other amounts permitted to be deducted from such
cash payments in accordance with the ADS deposit agreement (such as for unpaid
taxes by the ADS holders (in connection with personal asset taxes or
otherwise)), 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, Banco Galicia 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 Banco Galicia 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$1 of
dividends paid on its capital stock.
In light of the restrictions on Banco Galicia's ability to make
distributions, our current policy is to retain earnings and cash flows to pay
for our operating expenses and to support the growth of our business.
Dividends
We did not pay any dividends in fiscal years 2002, 2003 and 2004 since
Banco Galicia did not post any income that could be distributed and since the
Bank is prohibited from paying any cash dividends or making any capital
contributions to its affiliates or subsidiaries for so long as the Argentine
Central Bank's financial assistance is outstanding. Furthermore, Argentine
Central Bank Communique "A" 3785 further restricted the distribution of cash
dividends by establishing that the Bank should adjust its earnings to be
distributed as cash dividends with the difference between the market value and
the carrying value of the compensatory and hedge bonds after netting the legal
reserve and other reserves established by the Bank's bylaws.
20
In addition, the cash and deposits we maintained on deposit at Galicia
Uruguay that may have otherwise been available for distribution or to pay our
operating expenses, were restructured and converted into (i) subordinated
negotiable obligations for US$ 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, Grupo Galicia exchanged US$ 1.26 million of the US$ 2.5
million of negotiable obligations for Boden 2012 under an exchange offer made by
Galicia Uruguay. In March 2004, Grupo Galicia exchanged US$ 1.24 million of
negotiable obligations for Boden 2012 under another exchange offer made by
Galicia Uruguay. As of the date of this prospectus, the only credit we have
against Galicia Uruguay is the US$ 43 million subordinated negotiable
obligations.
Net loss per share and per ADS was Ps. 0.093 and Ps. 0.930, respectively,
for the year ending December 31, 2004. Each ADS represents 10 common shares.
The last cash dividend Grupo Galicia has 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. 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 the annual report
incorporated by reference in 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
21
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
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
22
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 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 may either 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.
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.
23
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. We cannot assure you that you will 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
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.
24
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)
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.
25
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 be required
under the deposit agreement to do only the following: collect and deliver any
distributions on the deposited securities and other shares upon cancellation of
ADSs. At any time after the expiration of one year 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,
26
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:
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.
27
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.
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."
28
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.
Number of
Class B
Class B Shares Owned Shares Being Class B Shares Owned After
Name of Selling Shareholder (1) Prior to Offering Offered Sale (2)
------------------------------- -------------------- -- --------- --------------------------
Number Percentage Number Percentage
------ ---------- ------ ----------
Alternative Investments Institutional L.P. 32,429 * 32,429 0 0
Alternative Investments L.P. 32,429 * 32,429 0 0
Banca del Gottardo - Lugano 12,433 * 12,433 0 0
Deltec Asset Management LLC (3) 16,216 * 16,216 0 0
Deltec Latin American Partners L.P. (4) 135,113 * 135,113 0 0
Deltec Recovery Fund L.P. (5) 151,325 * 151,325 0 0
Deme Master Fund, Ltd. 37,833 * 37,833 0 0
Frederick Clark Trust dtd 6/6/1944 54,046 * 54,046 0 0
Greenstone Financial 64,858 * 64,858 0 0
L and S Milken Foundation 27,028 * 27,028 0 0
The Milken Family Foundation 252,932 * 252,932 0 0
M.W. Global Partners L.P. 81,070 * 81,070 0 0
RNM Insurance Company 32,429 * 32,429 0 0
Root Capital Partners L.P. 16,216 * 16,216 0 0
Sangwoo Ahn 27,028 * 27,028 0 0
SanPaolo IMI S.p.A. 270,214 * 270,214 0 0
Torrey Emerging Markets Offshore Fund Ltd. 6,489 * 6,489 0 0
The Torrey Global Income Fund L.P. 37,836 * 37,836 0 0
Total 1,287,924 * 1,287,924 0 0
* Less than 1%.
(1) No unnamed holder may use this prospectus to offer or sell class B shares
until such unnamed holder is identified as a selling securityholder in an
amendment to the registration statement of which this prospectus is a part.
(2) We do not know when or in what amounts a selling securityholder may offer
the class B shares for sale. The selling securityholders might not sell any
or all of the class B shares offered by this prospectus. Because the
selling securityholders may offer all or some of the class B shares
29
pursuant to this offering, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the class
B shares, we cannot estimate the number of class B shares that will be held
by the selling securityholders after completion of the offering. However,
for purposes of this table, we have assumed that, after completion of this
offering, none of the class B shares covered by this prospectus will be
held by the selling securityholder.
(3) Deltec Asset Management LLC is a registered-broker dealer and may be deemed
to be an underwriter. The class B shares were acquired in the ordinary
course of the selling shareholder's investment business and not for the
purpose of distribution.
(4) Deltec Latin American Partners L.P. is an affiliate of Deltec Asset
Management LLC, as registered broker, and may be deemed to be an
underwriter. The class B shares were acquired in the ordinary course of the
selling shareholder's investment business and not for the purpose of
distribution.
(5) Deltec Recovery Fund L.P. is an affiliate of Deltec Asset Management LLC,
as registered broker, and may be deemed to be an underwriter. The class B
shares were acquired in the ordinary course of the selling shareholder's
investment business and not for the purpose of distribution.
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;
30
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.
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:
31
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 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,
2004 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,
2004 have been so incorporated in reliance on the report (which includes an
explanatory paragraph as stated below) of Price Waterhouse & Co. S.R.L.,
independent registered accounting firm, given on the authority of said firm as
experts in auditing and accounting. Price Waterhouse & Co. S.R.L. is a member of
the Professional Council of Economic Sciences of the Autonomous City of Buenos
Aires, Argentina. The Price Waterhouse & Co. S.R.L. report referred to above
contains the following explanatory paragraph: "The quality of the Grupo
Financiero Galicia S.A. financial condition and results of operations depend to
a significant extent on macroeconomic and political conditions prevailing from
time to time in Argentina and to the Argentine Government's ability to perform
on its obligations to Banco de Galicia y Buenos Aires S.A., which is the Group's
main subsidiary, 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."
32
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 jurisdictions other than Argentina, including any judgments based on
civil liabilities under the federal securities laws of the United States. This
may occur because:
o Grupo Galicia 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.
33
Grupo Financiero Galicia
1,327,496 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.
Item 9. Exhibits
Exhibit No. Description
----------- -----------
4.1 English language translation of the Articles of Incorporation/By-laws. (1)
4.2 Registration Rights Agreement, dated as of May 18, 2004, of the registrant, for the
benefit of the holders of the preferred shares. (2)
4.3 Form of Deposit Agreement between The Bank of New York and the registrant, including
the form of American depositary receipt. (3)
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. (4)
23.1 Consent of Rafael Mariano Manovil of M&M Bomchil (included in Exhibit 5.1). (4)
23.2 Consent of Price Waterhouse & Co. S.R.L.
24.1 Power of Attorney (included on signature page). (4)
(1) Incorporated by reference from the registrant's annual report on Form 20-F
for the year ended December 31, 2004.
(2) Incorporated by reference from the registrant's annual report on Form 20-F
for the year ended December 31, 2003.
(3) Incorporated by reference from Registration Statement on Form F-4
(333-11960).
(4) Previously filed.
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, as amended (the "Securities
Act");
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 Securities and
Exchange Commission (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 Exchange Act or 1934, as
amended (the "Exchange Act") that are incorporated by
reference in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act, 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
ii
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
Exchange Act 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, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange
Act) 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 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
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.
iii
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 amendment to the
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
May 26, 2005.
GRUPO FINANCIERO GALICIA S.A.
By: /S/ Pedro Richards
-------------------------------
Name: Pedro Richards
Title: Chief Financial Officer
Signature Title
--------- -----
* Principal Executive Officer, Chairman
--------------------------------- of the Board and Chief Executive
Antonio Garces Officer
/s/ Pedro Richards
---------------------------------
Pedro Richards Chief Financial Officer
*
---------------------------------
Jose Luis Gentile Principal Accounting Officer
*
---------------------------------
Federico Braun Vice Chairman and Director
*
---------------------------------
Abel Ayerza Director
*
---------------------------------
Eduardo J. Zimmermann Director
*
---------------------------------
Silvestre Vila Moret Director
*
---------------------------------
Marcelo L.S. Tonini Director
*
---------------------------------
Gloria Moreno Authorized Representative in the
United States
* By: /s/ Pedro Richards
--------------------------
Name: Pedro Richards
Title: Attorney-in-fact
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
4.1 English language translation of the Articles of Incorporation/By-laws.(1)
4.2 Registration Rights Agreement, dated as of May 18, 2004, of the registrant, for the
benefit of the holders of the preferred shares.(2)
4.3 Form of Deposit Agreement between The Bank of New York and the registrant, including
the form of American depositary receipt.(3)
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.(4)
23.1 Consent of Rafael Mariano Manovil of M&M Bomchil (included in Exhibit 5.1).(4)
23.2 Consent of Price Waterhouse & Co. S.R.L.
24.1 Power of Attorney (included on signature page).(4)
(1) Incorporated by reference from the registrant's annual report on Form 20-F
for the year ended December 31, 2004.
(2) Incorporated by reference from the registrant's annual report on Form 20-F
for the year ended December 31, 2003.
(3) Incorporated by reference from Registration Statement on Form F-4
(333-11960).
(4) Previously filed.