Treasury activities was restructured by uniting the Natixis and BPCE teams within Natixis. This aim of this new structure is to lock in and optimize access to liquidity for the entire group and all its business lines.
Investment Solutions strengthened the synergies between its three business lines (Global Asset Management, Insurance and Private Banking) and the Groupe BPCE networks.
In 2011, the Natixis Global Asset Management (NGAM) distribution platform strengthened its multi-boutique approach in Europe and Asia: • during the second quarter, NGAM completed the acquisition of a 60% stake in Darius Capital Partners, an alternative investment advisory firm for institutional investors, based in Paris; • in late 2011, NGAM acquired a 25% stake in IDFC Asset Management Company. IDFC AMC is IDFC Mutual Fund’s asset management company and the platform dedicated to individual and institutional investors of IDFC Group, an Indian financial services group. With this deal, NGAM increased its international presence in Asia.
Within the Private Equity for third parties business line, the merger with GCE Capital (a member of Groupe BPCE) was completed in 2011: the asset management companies Masseran Gestion and Alliance Entreprendre, as well as the company BDR Invest, were incorporated into the Private Equity scope of the Investment Solutions division, with an impact of €287 million on assets under management but having no direct impact on income (non-consolidated entities). Furthermore, as a result of the July 2011 capital increase carried out by BP Développement, a fully-consolidated entity, the share of ownership decreased from 43.01% to 37.82%.
Lastly, from a financial standpoint, Natixis repurchased €800 million in deeply subordinated notes held by BPCE in March 2011. Outstanding hybrid Tier 1 issues totaled €4.3 billion at December 31, 2011.
(1) Basel 2.5 – CRD3 regulatory changes mainly had an impact on market risk, stress VaR and the review of the handling of securitization operations and resulted in an increase of €1.6 billion in GAPC risk-weighted assets at December 31, 2011.
5 FINANCIAL DATA Management Report for the year ended December 31, 2011 5.1.3 CONSOLIDATED RESULTS
Workout portfolio management (GAPC), net income from discontinued operations and net restructuring costs were transferred to Net income (group share). This presentation facilitates comparisons between reporting periods and makes it easier to interpret business performances.
Natixis’ net revenues stood at €6,717 million at December 31, 2011, i.e. stable relative to December 31, 2010 (up 2.5% at constant exchange rates). This change includes the revaluation of its own senior debt (1) in the amount of €239 million.
Despite a particularly adverse market climate, Natixis continued to implement the New Deal strategic plan, with the reduction of risk-weighted assets and adjustment of its CIB business model (accelerated refocusing on clients). At December 31, 2011, riskweighted assets (RWA) measured at the end of the period and after recognition of the impact of the BPCE guarantee stood at €145.6 billion compared to €147.9 billion at the end of 2010. Excluding the regulatory impact of Basel 2.5 - CRD3, RWA came out at €139.4 billion, down €8.5 billion compared to the end of 2010. This change was due primarily to optimization efforts led throughout 2011, a relative decline in business activity in a deteriorated economic climate and the impact of CIB and GAPC disposal plans.
At €4,701 million, expenses (excluding GAPC and restructuring costs) were up 5.4% compared with 2010 at constant exchange rates, i.e. an increase in line with the increase in headcount, concentrated for the most part in the Investment Solutions
5FINANCIAL DATA Management Report for the year ended December 31, 2011 division and the CIB businesses. Non-recurring items, mainly including prorata VAT adjustments (income in 2010 and expense in 2011), also accounted for this change.
Change in value of goodwill refl ected a loss of €43 million resulting from the write-down of the non-core COFACE CGU.
Pre-tax profit was €2,241 million in 2011 compared with €2,291 million in 2010.
Consolidated post-tax ROE was 7.4% in 2011 after recognizing a DSN interest expense booked to equity for a net total after tax of €261 million.
5 FINANCIAL DATA Management Report for the year ended December 31, 2011 5.1.4 ANALYSIS BY NATIXIS BUSINESS
Corporate and Investment Banking’s net revenues for 2011 stood at €2,760 million, down 8.8% compared with 2010 (down 7.5% at constant exchange rates). This unfavorable development was mostly concentrated in the second half of the year in connection with the European sovereign debt crisis and investors’ wait-and-see attitude in the equity markets. In 2011’s particularly adverse economic environment, CIB reduced its risk exposure by ramping up the implementation of its business adjustments under the New Deal Strategic Plan while optimizing its consumption of scarce resources, cash and capital. The impact of asset disposals carried out in the last quarter of 2011, i.e. €1.6 billion, was limited and accounted for -€22 million in net revenues.
In 2011, average trading VaR was limited to €9.8 million compared to €9 million in 2010 (excluding GAPC). At the end of the year, it stood at €10.1 million, compared with €5.8 million at the end of 2010. VaR was up year-on-year due to the increase in the volatility of market data in connection with the European sovereign debt crisis, despite reduced exposure.
Revenue s posted by Commercial Banking fell 23.5% year-onyear, as average outstanding loans were down 11%. This change was due to a drop in new production caused by the unfavorable economic environment and the rising cost of liquidity. Net margin rates on average outstandings declined by 23 bp year-on-year, with a sharper drop in France Corporate activities. Finally, at 17%, the drawdown rate on credit lines was again very low in 2011. In one of the biggest deals of the year, Natixis was the MLA/Bookrunner for a €2.5 billion debt refi nancing operation for PPR and the MLA/ Bookrunner for a €6 billion facility granted to France Télécom.
Debt and Financing posted stable revenue s year-on-year (up 0.8% at constant exchange rates), chalking up real performance despite the dollar liquidity crisis and rising costs of liquidity, with 2010 standing out as a record year. An adverse foreign exchange effect of €29 million and higher refi nancing costs had a negative impact on the net revenues of the Debt and Financing businesses in 2011. Net margin rates on average oustandings fell 14 bp yearon -year. Global Energy & Commodities, Aviation, Real Estate and Equity-Linked Finance drove performance in 2011; new production was up 9.5% relative to 2010 and totaled €13.8 billion. This business line stood out in sector rankings: Debt and Financing was No. 2 fi nancial advisor in the EMEA area and No. 5 worldwide in project fi nancing. Among the defi ning transactions of the year, Natixis, as MLA, bookrunner and underwriter, arranged €7.5 billion in fi nancing for the acquisition of Parmalat by Lactalis. Natixis also supported the consortium led by Bouygues Bâtiment Ile-de-France as a fi nancial advisor, arranger and hedging bank for the Balard Project to fund construction of the future French Ministry of Defense and the offi ces of the Joint Chiefs of Staff, representing an investment of more than €1 billion.
Revenue s from Capital Markets activities declined by 17% versus 2010, due to the impacts of the challenging market environment in the second half of the year. However, sales revenue s (1) for 2011 were up 4% compared to 2010, driven by the activities of the Debt and Foreign Exchange Platform. Sales generated by the Equities division were stable year-on-year, refl ecting decreased investor interest in equity products.
Natixis was ranked No. 1 bookrunner on the euro-denominated covered bond market in terms of number of transactions and No. 2 in terms of volume (source: Dealogic and IFR/Thomson Reuters), and was voted the best bank in 2011 on the covered bond market (source: The Cover EuroWeek, Best Overall Bank for Covered Bonds - Covered Bond Awards 2011).
• The sovereign debt crisis severely impacted the Fixed Income business ( sovereign issues activities and diversified arbitrage) during the third quarter.
Net revenues contributed by the Equities division were down 27% year-on-year, posting a sharp decline in equity derivatives .
Net revenues from CPM and Other activities varies signifi cantly from one year to the next. In 2011, CPM continued to reduce the exposure of its hedging portfolio, resulting in decreased volatility in its results. Furthermore, as credit spreads widened, revenue s were generated on hedging instruments for the Loans and Receivables portfolios.
In 2011, CIB’s expenses amounted to €1,675 million, up 1.5% compared with 2010 (up 2.4% at constant exchange rates). Fixed payroll costs increased year-on-year due to the 4% rise in average headcount. Variable payroll expenses, measured pursuant to the CRD3 Regulatory Framework for market professionals, fell 24% year-on-year, matching the trend in revenue s .
This led to a negative scissor effect on gross operating income, which came out at €1,085 million, down 21.2% year-on-year (down 19.5% at constant exchange rates). The cost/income ratio stood at 60.7% for 2011 despite a very adverse economic environment.
5 FINANCIAL DATA Management Report for the year ended December 31, 2011 5.1.4.2 Investment Solutions
Investment Solutions posted revenue s that was up 5.3% yearon -year to €1,884 million (+7.9% at constant exchange rates).
Expenses were up 5.9% (+8.6% at constant exchange rates). Asset management expenses were higher due to the implementation of new projects. In the Insurance business, the go-live phase of major IT projects marked the beginning of their amortisation.
The change in ROE after tax generated by Investment Solutions can be primarily attributed to the increase in the division’s tax expense. Due to the impacts of the crisis, the Insurance business posted a tax loss in 2011, which was not recognized as a deferred tax asset for the business, but rather managed at the parent company level.
Assets under Management at the end of December 2011 were stable at €544 billion , undermined by an adverse market effect in both Europe (-€4.4 billion) and in the United States (-€4.8 billion). AUM factors in the scope effects associated with the acquisition of a 25% stake in IDFC (+€3.7 billion) and Banque privée 1818 funds (+€1.4 billion).
Exchange rate Net inflows Market effect Others AUM as of 12/31/2011
In all regions, the product mix confi rmed the predominance of insurance products at December 31, 2011 (28% of AUM compared to 29% in 2010) as well as bond products (27% of AUM, up 2 points in constant euros year-on-year). The share represented by equity products was down 1.3 percentage points to 15.3%, while money market products were stable at 12.5% of total AUM at the end of December (at constant exchange rates).
At €1,436 million year-on-year, net revenues generated by the Asset Management business rose 1.6% (+4.8% at constant exchange rates) versus 2010, driven by management and distribution fees related to the change in average AUM . The business’s GOI was stable at constant exchange rates.
In 2011, the fi nancial climate was less than buoyant for the Insurance division’s Investment Solutions business (with clients shifting back to on-balance sheet savings and adopting a waitand -see attitude due to uncertainty on the tax treatment of life insurance products, in particular). Against this backdrop, revenues from life insurance fell 19% year-on-year, with a pronounced decline in the second half of the year. Net infl ows were positive at €583 million, despite the depressed market. Infl ows from euro-denominated insurance policies dropped by 26% compared to 2010, which recorded exceptional infl ows in Natixis Life guaranteed invesment contracts contracts, while infl ows to unitlinked life insurance policies climbed 36%. This trend was due to the business strategy implemented by Natixis Insurance in 2011.
In 2011, net inflows totaled €1,888 million, versus €1,076 million in 2010, i.e. an increase of 75.5%. Infl ows in France were up 44.4% year-on-year, driven by direct customers and the Luxembourg setting-up . The consolidation scope was expanded through the consolidation of the Sélection R platform beginning on March 31, 2011.
Assets under management at year-end stood at €18.9 billion, up 23% year-on-year (+€3.5 billion), but were adversely impacted by a negative market effect in the second half of the year (AUM down 6%). Excluding scope effects (inclusion of Sélection R assets under management, i.e. €4.0 billion, and transfer of €0.8 billion in money market funds to Natixis Asset Management), AUM increased by 1.7% compared with end- December 2010.
5 FINANCIAL DATA Management Report for the year ended December 31, 2011 5.1.4.3 Specialized Financial Services
The implementation of the New Deal strategic plan in the SFS division continued in 2011, with: • the strengthening of Natixis Lease’s positioning as a leading player on the French leasing market through the acquisition of Cicobail, Océor Lease and GCE Car Lease in 2010 and early 2011; • the development of the Specialized Financing product range available through the Groupe BPCE networks: deployment of consumer credit (personal loans) throughout the Banques Populaires network and factoring solutions for Caisses d’Epargne business clients; • further development of Groupe BPCE’s Single Paying Agent following the merger of GCE Paiements and Natixis Paiements in 2010; • completion of the Caisses d’Epargne switchover to the unified Securities platform, with Natixis becoming the custodian for all clients of Groupe BPCE’s two retail banking networks; • the disposal of the 33.2% stake in SLIB (publisher of innovative software solutions for optimized transaction processing) to BNP Paribas, with Natixis maintaining a non-controlling interest of 33%.
Specialized Financial Services posted strong sales in 2011, drawing on the momentum achieved with the networks. Consumer Finance continued to expand its revolving credit products sold through Banques Populaires and Caisses d’Epargne (outstanding loans of €1.6 billion at end-2011, i.e. an increase of 11% over the previous year driven by the launch of the debit/ credit card in 2010). Outstanding personal loans, mostly carried by the Caisses d’Epargne network, stood at €9.7 billion at end2011, up 13% on December 2010. The Factoring business also posted strong growth: factoring revenues rose 17.7% year-onyear, driven by Natixis client development (up 43%) and banking network client development (up 10%). Finally, the Leasing business enjoyed strong sales driven by gains in Equipment Leasing (new production was up 18% year-on-year) linked with network synergies.
Gross operating income rose 16.7% to €338 million, benefi ting from a positive scissor effect thanks to effective cost control.
Six international credit insurance companies were added to the scope of consolidation at end-2011: these companies are located in Turkey, Romania, South Africa, Chile and Mexico. The overall impact on the 2011 fi nancial statements was €22.9 million in net revenues and €20.8 million in payroll expenses for 277 FTEs (fulltime equivalents). This consolidation was not stated pro forma in the 2010 fi nancial statements.
Coface posted turnover of €1,714 million for fi scal year 2011, up 5.7% over 2010 (up 3.8% at constant exchange rates and scope of consolidation). Credit insurance revenues increased by 4.8% in 2011 (at constant consolidation scope and exchange rates), boosted by brisk sales despite the weak economic environment. Furthermore, the factoring business posted growth in revenues of 7.6% for the year (at constant consolidation scope and exchange rates), while the services business line (business information and receivables management) slid 5.9% (at constant consolidation scope and exchange rates) due to the gradual run-off of some of these activities.
Growth was strong in Northern Europe (up 7.8%), particularly in Germany, which is a growth driver in the factoring business. The Mediterranean & Africa platform, which includes Italy, Turkey and South Africa, grew 9.6% at constant exchange rates, driven by the credit insurance business. Finally, outside of Europe, 2011 business rebounded sharply, with strong growth in Asia (up 10.4% at constant exchange rates) and in the United States (up 9.7% at constant exchange rates).
A number of transactions were carried out over the course of the year with a view to scale down the portfolios and the related risks. Risk-weighted assets (RWA), after the guarantee, fell 26% year-on-year, excluding the regulatory impact of Basel 2.5 which totaled €1.6 billion after the guarantee.
Regarding credit assets, GAPC carried out a series of disposals and restructured its portfolios, in particular in the CLO and RMBS asset classes, which resulted in a €4.9 billion reduction in outstandings covered by the BPCE guarantee. GAPC also benefi ted from the positive impact of commutations with monoline issuers.
Corporate Center’s net revenues stood at €78 million at December 31, 2011. This result includes a positive fair value adjustment on own senior debt measured at fair value for €239 million versus a gain of €46 million in 2010. This change was partially offset by the decline in income from issue replacement, taking account of the redemption of a portion of hybrid issues for which the interest expense was taken to equity, and represents a net tax expense of €261 million in 2011 versus €381 million in 2010.
The combined net income of the two networks was €2.5 billion at the end of December 2011, up 12.4% on 2010.
The equity method contribution totaled €576 million, up 21.4% relative to 2010. This change resulted from increased earnings by the networks and the positive trend in accretion profi t (1) (higher CCI distribution) and revaluation differences (2).
(1) Accretion profi t is the difference between the remuneration collected by Natixis (via CCIs) and 20% of the total remuneration paid by the BPs or the CEs (ownership shares + CCIs). It embodies the fact that the distribution of remuneration does not refl ect the distribution of capital rights.
• Banques Populaires posted a rise in net income at December 31, 2011, and confirmed its predominant position in financing the French economy. The network’s customer base expanded, with the number of clients increasing by 1% (+63,000 customers, of which +43,200 are individual customers) from December 31, 2010 to December 31, 2011. The number of business customers grew by 1,100 since the start of the year (up 1.3%). The cooperative shareholder base grew modestly (up 1.8% year-on-year).
• Furthermore, to meet the challenges posed by Basel 3 and the resulting new liquidity requirements, the network is focused on shifting to on-balance sheet s avings, which increased 10% from December 31, 2010 to December 31, 2011. Savings by
• To illustrate employee’s strong support of the program to attract new customers and provide them with long-term support, the network’s outstanding loans rose by 5.9% from end-2010 to end-2011, boosted by property loans to individual customers
• Despite the developments in the economic environment, the provision for credit losses contracted by 12%.
• Despite the sovereign debt crisis gripping the euro zone and the increasingly stringent oversight of the banking system (related to access to financing and regulatory requirements), the Caisse d’Epargne network continued to rally around its customer-centric strategy, actively committed to its role of financing the national and regional economies.
• Net revenues stood at €6,848 million in 2011, dipping slightly by 0.8%. Adjusted for PEL/CEL effects, the decrease in the Livret A commission rate in 2011, and central dividends received in 2010, net revenues were up 3.8% year-on-year. The interest margin, pushed higher by the increase in volumes and benefiting from a positive rate effect on certificates of deposit and time deposits, posted an increase of 1.5% (adjusted for PEL/CEL effects) and central dividends paid in 2010.
• Management expenses edged down 1.6% relative to 2010 as the result of a strict cost control policy, thus improving the cost/income ratio by 0.5 percentage points for the period.
• Aggregate net income for the Caisse d’Epargne network stood at €1,386 million in 2011, up 13% year-on-year.
The provision for credit losses (excluding GAPC) was -€335 million at December 31, 2011, which included -€613 million in individual risks and +€278 million for portfolio-based provisions. At December 31, 2010, the provision for credit losses (excluding GAPC) totaled -€321 million.
OVERALL PROVISION FOR CREDIT LOSSES FOR THE CIB BUSINESS (106) (203)
5 FINANCIAL DATA Management Report for the year ended December 31, 2011
INDIVIDUAL PROVISION FOR CREDIT LOSSES FOR THE CIB BUSINESS (382) (240)
Liquidity markets were particularly tense during 2011. Mounting national defi cits throughout the euro zone affected banks’ funding. Funding in USD from the United States was the worst hit, along with the long-term resource market.
Finally, the European Central Bank’s practical and well-adapted solutions boosted market confi dence at the end of year, notably with the organization of a VLTRO (Very Long Term Refi nancing Operation).
Investor interest in this type of operation helped extend the life of Natixis’ short-term liabilities.
Early in the second quarter, Natixis, like all other French banks, was able to take advantage of pronounced interest in US moneymarket funds, which also extended their investment period.
At the end of the second quarter, Natixis implemented an active management policy for its US dollar requirements via foreign exchange transactions.
The loss of US funding was offset by reinforced relations with business customers and a broadening of its geographic reach (Scandinavia, Persian Gulf, Asia).
Against this extremely diffi cult backdrop, the various measures announced by the European Central Bank during the fi nal quarter gradually allowed banks to secure their long-term liquidity under better pricing conditions.
The success of the three-year monetary policy operation, implemented by the European Central Bank at the end of December 2011, forced investors to seek yielding investments and reignited interest in unsecured operations.
(in millions of euros or euro equivalents) Certifi cates of Deposit Commercial Paper
Through its EMTN program, Natixis raised the equivalent of €2.4 billion, exclusively in a structured form.
On January 1, 2011, Natixis received €800 million under the French government’s regulatory capital support program for French banks (SPPE), in the form of undated Deeply Subordinated Notes subscribed to by BPCE. In March, Natixis acquired the remaining securities issued under this program.
Excluding the depreciation/amortization of assets, operating expenses increased by €99 million. When the depreciation/ amortization of assets is added back in, the increase in operating expenses reaches €134 million.
5 FINANCIAL DATA Management Report for the year ended December 31, 2011 5.1.7.2 Proposed allocation of earnings
Natixis’ fi nancial statements as of December 31, 2011 show net income of €873,436,574.80 and, taking into account retained earnings of €979,977.33, distributable profi ts of €874,416,552.13.
In the management presentation, the net income from the workout portfolio (GAPC), resulting from discontinued operations and net restructuring costs, was reported under the net income (group share). This made it easier to compare data from one fi scal year to the next. The following table sets out the reconciliation and consolidated net income.
Change in value of goodwill (43) 0 0 0 (43) (43)
❚ 2 - MANAGEMENT RESULTS RECLASSIFIED AS CONSOLIDATED RESULTS IN 2010
Change in value of goodwill 0 0 0 0 0 0
Net income (group share), excl. discontinued operations and restructuring costs 1,953 (127) (9) (71) 1,745 (13) 1,732
Due to banks 6.12 108,630 106,616 o/w institutional operations 46 46 o/w institutional operations 655 854
Accruals and other liabilities 6.8 24,803 21,515 o/w institutional operations 1 3
Net gains or losses on available-for-sale fi nancial assets 7.4 233 (43)
Net income/(loss) for the period 1,601 1,769 of which: ● Attributable to equity holders of the parent 1,562 1,732
STATEMENT OF NET INCOME/(LOSS), GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY
Share of gains or losses from equity affi liates recorded directly in equity 8.1 (606) 35
Equity as of December 31, 2009 after appropriation of income 4,653 5,382 500 6,221 (19)
Equity component of share-based payment plans 2009 dividend paid in 2010
Equity component of share-based payment plans 2010 dividend paid in 2011
Total activity related to relations with shareholders 279 289 0 0 (5)
Changes in cash related to investment operations result from cash fl ows related to acquisitions and disposals of investments in consolidated and non-consolidated affi liates, tangible and intangible fi xed assets, and acquisitions and disposals of investment property, property provided under operating leases and fi nancial assets held to maturity.
+/- Net charge to other provisions (including insurance companies’ technical reserves) 1,696 3,397
= Total non-cash items included in income/(loss) before tax and other adjustments 1,980 3,459
The fi nancial statements presented for comparative purposes were published by Natixis in the 2010 registration document fi led with the Autorité des Marchés Financiers (AMF – French Financial Markets Authority) on April 5, 2011.
In accordance with European regulation 809/2004 relating to information contained in prospectuses, the fi nancial statements for the year ended December 31, 2009, that were published in the 2009 registration document fi led with the AMF on April 30, 2010, are incorporated for reference into this registration document.
The following standards, amendments and interpretations were applicable for the fi rst time as of January 1, 2011: • amendment to IFRS 1 (“Limited exemption from capital comparative IFRS 7 ‘Disclosures for first-time adopters’”), adopted by the European Commission on June 30, 2010, and subject to mandatory application for accounting periods beginning on or after July 1, 2010. This amendment exempts first-time adopters of IFRS from the obligation to make the additional disclosures stipulated by the amendments published in March 2009 enhancing financial instrument disclosures (amendments to IFRS 7 “Financial instruments: Disclosures”). This amendment has no impact on Natixis’ financial statements; • amendment to IAS 32 on the “Classification of rights issues”, adopted by the European Commission on December 23, 2009, and subject to mandatory application for annual accounting periods beginning on or after February 1, 2010. This amendment modifies the accounting treatment of subscription rights issued in a currency other than the issuer’s functional currency. When certain conditions are met, these rights will no longer be recorded as derivatives but as equity instruments. This amendment has no impact on Natixis’ consolidated financial statements; • IAS 24, as revised (“Related party disclosures”), adopted by the European Commission on July 19, 2010, and subject to mandatory application for annual accounting periods beginning on or after January 1, 2011. The changes implemented by the revised standard mainly include simplifications of the provisions concerning disclosures on entities related to government administrations and a clarification of the definition of a related party. This amendment has no impact on Natixis’ consolidated financial statements; • amendment to IFRIC 14 entitled “Prepayments of a minimum funding requirement”, adopted by the European Commission on July 19, 2010. According to the changes made to IFRIC 14, when an employee savings scheme requires minimum contributions, such prepayments must be booked to assets, as do any other prepayments. This amendment is subject to mandatory application for accounting periods beginning on or after January 1, 2011. This amendment has no impact on Natixis’ financial statements; • the amendment entitled “Improvements to IFRSs”, adopted by the European Commission on February 18, 2011. This amendment is part of the annual improvements project aimed at simplifying and clarifying International Financial Reporting Standards. The following standards and interpretations have been modified: IFRS 1 “First-time adoption of IFRS”, IFRS 3 “Business combinations” (and the resulting amendments to IAS 32, IAS 39 and IFRS 7), IFRS 7 “Financial instruments: Disclosures”, IAS 1 “Presentation of financial statements”, IAS 34 “Interim financial reporting”, IAS 21, 28 and 31 in accordance with the amendments to IAS 27 “Consolidated and separate financial statements” and IFRIC 13 “Customer loyalty programs”. These amendments have no impact on Natixis’ consolidated financial statements at December 31, 2011. However, the amendment to IFRS 7 affects the notes to Natixis’ consolidated financial statements at December 31, 2011 because: – information on restructured loans is no longer provided, – information on the fi nancial impact of guarantees received is now disclosed; • IFRIC 19 (“Extinguishing Financial Liabilities with Equity Instruments”), adopted by the European Commission on July 23, 2010, and subject to mandatory application for annual accounting periods beginning on or after July 1, 2010. This interpretation clarifies the accounting treatment, on the debtor’s books, of transactions carried out for the purpose of extinguishing financial liabilities with equity instruments. This interpretation had no impact on Natixis’ consolidated financial statements at December 31, 2011.
• with regard to financial reporting on risk exposure, the recommendations applicable in France resulting from the Financial Stability Forum (FSF). Details of risk exposure, presented in the format recommended by the Commission bancaire in its May 29, 2008, statement “Presentation note regarding the French application of the FSF’s recommendations for financial transparency”, have been incorporated in section 4.7 of the “Risk management” chapter of the registration document.
POTENTIAL VOTING RIGHTS: In determining whether it exercises control or signifi cant infl uence, Natixis considers all current voting rights and any potential voting rights to the extent that they are currently exercisable or convertible. Potential voting rights arise from stock options on ordinary shares or from the conversion of bonds into new ordinary shares. However, potential voting rights are not taken into account to calculate the percentage of ownership.
Companies controlled exclusively by Natixis are fully consolidated. Under IAS 27 (revised), control is presumed to exist when the parent has: • ownership, directly or indirectly through subsidiaries, of more than half of the voting rights of an entity; • power to govern the financial and operating policies of the entity under the by-laws or an agreement; • power to appoint or remove the majority of the members of the Board of Directors or equivalent governing body; • power to assemble the majority of voting rights at meetings of the Board of Directors or an equivalent governing body.
Under IAS 28 and IAS 31, Private Equity investments do not have to be accounted for using the equity method or be proportionally consolidated if they are designated at inception as at fair value through profi t and loss. Natixis has opted for the latter method, which it believes provides investors with more relevant information.
Since the Banques Populaires CCIs and the Caisses d’Epargne CCIs do not carry any voting rights, Natixis’ signifi cant infl uence over the issuers results from (i) de jure infl uence arising from its involvement in the operational and fi nancial management of the Banques Populaires and Caisses d’Epargne networks, and (ii) de facto infl uence deriving from operational and technical cooperation by the Banques Populaires and Caisses d’Epargne banks with Natixis.
Natixis’ signifi cant de jure infl uence over the Banques Populaires and Caisses d’Epargne banks derives from the following rights conferred on Natixis by certain corporate documents relating to BPCE and by the memorandum of understanding relating to the CCIs issued by Banque Populaire and Caisse d’Epargne: • participation in certain Committees of Groupe BPCE; • right regarding certain decisions made within BPCE (Natixis’ opinion must be sought and Natixis must be consulted in its capacity as a non-voting member; rights to a second deliberation regarding certain matters); • right to receive information (information relating to the CCIs); • delegation of powers concerning the risk management function (definition of risk standards and risk assessment methods).
Natixis and the Banques Populaires banks have also agreed to maintain any existing industry and commercial relationships for a minimum period of 10 years as from the 2006 subscription date for the Banques Populaires CCIs: • provision of IT infrastructure; • supply of industry services (custodial services, payment systems, operational management of foreign currency accounting); • design and management of customer products on behalf of the Banques Populaires (asset management, insurance products, factoring, lease financing, financial engineering, expansion capital, employee benefits planning, international operations, credit insurance and business information).
Natixis elected to use the option available under IFRS 1 on fi rst-time adoption, namely to transfer the cumulative balance of translation adjustments existing at January 1, 2004, to consolidated reserves. If a foreign entity is subsequently sold, the gain or loss on the disposal will include only those translation gains or losses arising after January 1, 2004.
• Application of IFRS 3 to business combinations carried out before January 1, 2010: – minority interests are determined based on their share in the identifi able net assets of the acquired entity, measured at their fair value at the purchase date (partial goodwill method),
– goodwill is the difference between the cost of the business combination and the share of the purchasing entity’s interest in the net fair value of identifi able assets, liabilities and contingent liabilities.
• Application of IFRS 3R to business combinations carried out after January 1, 2010: – for each business combination, Natixis chose to determine minority interests: – either based on their share in the identifiable net assets of the acquired entity, measured at their fair value at the purchase date, and therefore without recognizing goodwill on the minority interests (partial goodwill method),
PRINCIPLES ADOPTED FOR MEASURING CONTRIBUTIONS BY GROUPE CAISSE D’EPARGNE TO NATIXIS IN 2006: The assets contributed by the CNCE to Natixis fall into two different categories: • shares in the Corporate and Investment Banking and services subsidiaries; • a portion of the Cooperative Investment Certificates (CCIs) conferring entitlement to the share capital of the Caisses d’Epargne banks.
PRINCIPLE ADOPTED FOR MEASURING OTHER TRANSACTIONS AFFECTING THE STRUCTURE OF THE GROUP THAT LED TO THE CREATION OF NATIXIS: In accordance with IFRS 3, other transactions affecting the structure of the Group – contribution of the remaining Caisses d’Epargne CCIs, 1.23% of the share capital of IXIS CIB, and 4.63% of the share capital of IXIS AMG; subscription for the Banques Populaires CCIs, and acquisition of Novacrédit – have been accounted for by the purchase method for consolidation purposes.
GOODWILL ARISING IN CONNECTION WITH THE BUSINESS COMBINATION ON DECEMBER 31, 2006: Goodwill on contributed entities
The goodwill arising from business combinations amounted to €484 million, which breaks down as follows: €229 million on Ixis AMG, €21 million on IXIS CIB and €8 million on Novacrédit, plus the goodwill recorded in “Investments in associates” relating to the Caisses d’Epargne CCIs (€190 million) and the Banques Populaires CCIs (€36 million).
The main changes are described below: • Within Asset Management in the US, the acquisition of Double Rock’s activities by Reich & Tang and Darius Capital Partners by NGAM generated reported goodwill of €3.6 million and €5.5 million, respectively, as at December 31, 2011. The remaining goodwill also increased, to €40.9 million, due to the acquisition of 25% of the Indian company IDFC. This company was accounted for using the equity method at December 31, 2011.
• In Private Banking, the acquisition of 66% of Sélection R, a subsidiary of the Rothschild group, by Banque Privée 1818 in the first quarter of 2011 led to goodwill of €37.6 million being reported.
Value in use is determined principally by discounting the expected future cash fl ows from the CGU on the basis of the fi ve-year medium-term business plans drawn up by Natixis.
The following assumptions have been used: • estimated future cash flows: forecast data drawn from Natixis’ medium-term business plans, established in conjunction with the businesses; • perpetual growth rate: 2.5%
• discount rate: use of a specific rate for each CGU: 9.8% for Investment Solutions, 11.0% for Specialized Financial Services, 10.0% for Coface and 10.9% for Corporate and Investment Banking.
Note that Natixis impaired goodwill allocated to the CIB business and the GAPC portfolio at the end of 2008, and the Private Equity goodwill at the end of 2009.
A 20-bp increase in the discount rate combined with a 50-bp drop in the perpetual growth rate would have an average impact of -5.4% on the value in use of CGUs (Investment Solutions, Specialized Financial Services, “core” Coface and Corporate and Investment Banking) and would not result in Natixis recording impairment for these CGUs.
Similarly, the sensitivity of future business-plan cash fl ows to variations in key assumptions does not signifi cantly affect the recoverable amount of CGUs.
The main identifi ed areas of sensitivity are: • for Investment Solutions, changes in the equity market and short-term rates; • for Specialized Financial Services, variations in the three-month Euribor rate and powerful contagion from the crisis to the real economy, like a repeat of a “2008-2009 crisis” scenario (drop in production and increase in the cost of risk); • for “core” Coface, the loss ratio level.
The assets and liabilities of subsidiaries which Natixis intends to sell within a maximum period of 12 months, and for which it is actively seeking a buyer, are identifi ed separately on two specifi c lines of the consolidated balance sheet as non-current assets and liabilities.
CHI MINH as fully consolidated in the consolidated statements for the year ended December 31, 2011 and grouped Natixis HO CHI MINH’s assets and liabilities in two separate places on the balance sheet: “Non-current Assets Held for Sale” and “Noncurrent Liabilities Held for Sale”.
The change in the deferred participation asset and liability is recognized: • in equity when it relates to changes in the value of assets classified as “available-for-sale”; • in income when it relates to changes in the value of assets “at fair value through profit and loss” or investment property held to cover insurance policies, as well as changes in provisions for prolonged declines in value in “Assets available-for-sale”: Against a backdrop of steeply falling markets, application of the shadow accounting mechanism resulted in the recognition of a deferred participation asset on December 31, 2011.
Up to a third of the total change in deferred participation between 2010 and 2011 is due to a sharp drop in equity markets, while around two-thirds is due to the change in credit spreads observed on debt instruments.
In accordance with a recommendation from the Conseil National de la Comptabilité dated December 19, 2008, the amount of the deferred participation asset was recorded at its recoverable value (under “Accruals and other assets” in the consolidated balance sheet). For the most part, it has been noted for Assurances Banque Populaire Vie and the investment vehicles it holds, which carry most of the life insurance assets within the scope of Natixis Assurances. The recoverability test has been performed on this same scope.
Prospective analysis of the deferred participation asset’s recoverability was therefore carried out. It showed the ability and intention of companies to meet liquidity requirements over the remaining recoverability period without selling investments in unrealized losses. This process corresponds to a forwardlooking view of future cash fl ows, built following regulatory and contractual conditions applied to contracts and with the help of economic scenarios based on historic probability.
In practice, a recoverability test was carried out by drawing on the calculation engine of the liability adequacy test. This test consists in performing the liability adequacy test with an infl ow over four consecutive years. In order to have a truly forward-looking approach and promote implicit options, the fair value of contract liabilities is calculated stochastically as the average of cash fl ows in different fi nancial scenarios. This calculation requires: • the generation of several hundred financial scenarios (longterm rates, equity, etc.); • asset-liability modeling that particularly depends on: – the behavior of policyholders: surrenders based on competitiveness of offered rates,
A sensitivity study has also been carried out to measure the impact of a 10% distortion in the law governing structural surrenders.
It resulted that the average of results produced by stochastic scenarios does not challenge the recoverability of the deferred participation asset. The net deferred participation amount recognized as assets on Natixis’ balance sheet as at December 31, 2011, is €830 million.
For the purposes of creating a distribution platform for Independent Wealth Management Advisors (IWMAs), in the fi rst quarter of 2011 Banque Privée 1818 acquired 66% of Sélection R, a subsidiary of Rothschild group, renaming it Sélection 1818.
North America Holding LLC, which was created during the fourth quarter of 2011 and is also wholly owned by Natixis S.A.
The main changes in scope since January 1, 2011 were as follows: 3.2.1 CORPORATE AND INVESTMENT BANKING & GAPC
• Total transfer of Dupont Denant Contrepartie’s assets and liabilities to Natixis S.A. on March 31, 2011; • Total transfer of Natixis Finance’s assets and liabilities to Natixis S.A. on September 30, 2011; • Sale to Natixis North America LLC by Natixis S.A. of its American subsidiary Natixis Bleichroder, Inc., which was then merged with Natixis Securities Americas LLC.
• For the purposes of the above-mentioned transaction, Sélection 1818 was acquired through the tendering of 1818 Partenaires’ shares, resulting in a 34% dilution effect.
• Following the sale of Axeltis S.A. securities to NGAM by Natixis Participation 1, Axeltis S.A. is now consolidated at the NGAM level; • Total transfer of Natixis Epargne Financière Services’ assets and liabilities to Natixis Asset Management.
• Acquisition of 100% of subsidiary GCE Car Lease by Natixis Lease on April 1, 2011, from Caisse d’Epargne Midi-Pyrénées. This acquisition generated goodwill of €8.2 million, deducted from equity; Internal restructuring
• Total transfer of Financière 5-7’s assets and liabilities to Natixis Private Equity.
• Consolidation of Natixis HCP (formerly Investima 72), wholly owned by Natixis S.A. following the acquisition of shares from Coface Finans A/S Danmark, Coface Services, Kompass International, Graydon, Coface Services Belgium, Coface Servicios Portugal and TKB; • Creation of Coface Collection North America Holding LLC, wholly owned by Natixis following the acquisition of shares from Coface Collection North America.
• Total transfer of Natixis Participation 1’s assets and liabilities to Natixis S.A. on September 30, 2011.
• Advantages: the right to obtain a majority of the benefits of the SPE’s activities; the right to a majority of any economic benefits distributed in the form of future net cash flows, earnings, net assets or other economic benefits, or rights to the majority of residual interests.
In the course of its business, Natixis has dealings with many SPEs on whose behalf it acts as, depending on the situation: lender, investor, guarantor, manager, sponsor or arranger.
An analysis of the characteristics of these entities and of their potential for consolidation is presented below by business and major categories of entities: 4.2.1 SPEs INVOLVED IN ASSET MANAGEMENT BUSINESS LINES (MUTUAL FUNDS, CDOS, REAL ESTATE FUNDS)
2. Guaranteed mutual funds: Natixis guarantees the capital and/or performance of certain Mutual Funds. An analysis of the risks incurred by Natixis as a result of such guarantees shows that such risks are controlled, either via the management policies and control procedures applied, via the composition of the funds (money market assets), via rigorous monitoring of counterparty risk, or via systematic hedging of swaps in the market (when Natixis is the counterparty to the performance swap set up by the fund). Accordingly, these mutual funds are not consolidated.
The NGAM sub-group is involved in such funds as manager of the underlying portfolio for third-party investors. Its role is strictly defi ned by the portfolio management agreement, which never provides it with effective control of the structure. Neither NGAM nor any other Natixis entity holds a majority interest in these funds. Natixis thus does not retain a majority of the benefi ts or incur a majority of risks. Consequently, no such fund was consolidated as of December 31, 2011.
On this basis, only two real estate funds managed by the NGAM sub-group were consolidated as of December 31, 2011: • the EPI SLP fund; • the EPI SO SLP fund.
The following US funds were consolidated with respect to this principle as at December 31, 2011: • Dynamic Equity Fund – 40 Act Fund; • Loomis Sayles Trust Company, LLC (the “LLC”); • Natixis Caspian Private Equity, LLC (NCPE); • NPE Caspian IA, LP; • NPE Caspian IB, LP; • Westpeak ActiveBeta Equity Fund.
For risk analysis purposes, a distinction must be made between the policies taken out by the German subsidiary Coface Kredit and those taken out by Coface in France: • under the German policies, the credit insurer is only liable for losses in excess of a deductible termed the Aggregate First Loss. This first loss contractually defines the amount of first losses that are not covered by the credit insurer. The coverage provided by Coface Kredit via these policies is similar to “Natural disaster” type coverage. An analysis of these structures shows that the amount of the first loss is systematically higher than the expected loss, namely the average losses expected over the year. Accordingly, the “majority of risks” criterion is deemed not to be satisfied. The SPEs involved in these structures are accordingly not consolidated; • the French policies taken out by Coface rarely include noncovered “first losses”. But the policies only cover a small portion of the receivables held by the SPE. Furthermore, the quality of portfolio risk covered by Coface, compared to that borne by the other stakeholders (other insurers, sponsors, sellers) is not such as to transfer the majority of the structure’s risks to Coface. Such entities are accordingly not consolidated.
• As part of its Private Equity operations, Natixis makes equity investments in unlisted companies via venture capital vehicles (Fonds Communs de Placement à Risque – FCPRs – venture capital funds and SICARs – Sociétés d’Investissement à Capital Risque – venture capital companies) and limited partnerships. All SIC 12 criteria (“Activities”, “Decision-making powers”, “Majority of Benefits” and “Majority of Risks”) are assessed on the basis of the level of Natixis’ interest in each investment tranche, and on the basis of any guarantees provided to these entities.
• Based on these factors, three entities were consolidated as of December 31, 2011: – DAHLIA SICAR A, – NPE Caspian IA, LP (also held by NGAM), – NPE Caspian IB, LP (also held by NGAM); • Natexis Investment Corp., a wholly-owned Natixis subsidiary, holds a series of interests in Private Equity funds. The vehicles are not consolidated given that they represent marginal interests (generally under 1%) in each fund and thus do not meet all the SIC 12 criteria (activities, decision-making powers, majority of benefits and majority of risks).
Such entities do not meet any of the SIC 12 consolidation criteria because: • the SPE s activities are conducted first and foremost on behalf of the customer; • Natixis is rarely a shareholder in such entities and when it is, it generally holds a minority interest. Auto-pilot mechanisms are generally in place and Natixis has not structured them for its benefit; • Natixis merely acts as a lender to such structures; most credit facilities are syndicated and the risks are equitably shared between the lenders in proportion to the amounts they have lent.
• SPEs may be used to hold securities on behalf of a customer.
• SPEs may be used to transform a debt type instrument (on the asset side of their balance sheet) into a more equity type instrument (on the liability side of their balance sheet), through the issue of preference shares for example. Within the scope consolidated and controlled by Natixis, the following two material entities were consolidated as of December 31, 2011. These are: – Natexis Banque Populaire Preferred Capital 2; – Natexis Banque Populaire Preferred Capital 3.
• Natixis Garanties owns three SCIs that hold the business line’s operating property. All three were included in Natixis’ scope of consolidation as of December 31, 2011: They are: – SCI Champs-Élysées, – SCI La Boétie, – SCI SACCEF.
Natixis is mainly involved in structures employing securitization entities in its capacity as: • structurer of securitization transactions; • originator of securities or loans held as assets and pending securitization; • credit risk intermediary between the market and the securitization entity.
Natixis is also the sponsor of two ABCP conduits: Magenta and Versailles.
Given the segregation of risk and their aim of spreading credit risk for investors other than Natixis, securitization conduits do not generally require consolidation under IFRS: • the activities have been principally conducted on behalf of third party investors so as to provide them with access to diversified portfolios; • a third party entity manages the assets to the extent required. Natixis has no decision-making or management powers within such entities; • in comparison to third party investors, Natixis never derives the majority of the benefits; • Natixis only holds the most senior shares in these structures and is thus not exposed to the majority of risks.
It should be noted that at December 31, 2011, one entity was implicitly de facto consolidated, with Natixis remaining the main investor and the risks associated with the underlying assets being factored in via the valuation of the Natixis interest classifi ed under “Instruments at fair value through profi t and loss – Trading” and in respect of which provisions have been fully funded.
Securities valued under this option fall into one of the following three categories: • hybrid instruments that contain one or more significant and separable embedded derivative features;
• instruments belonging to a group of financial assets valued and managed on a fair value basis; • instruments that present an inconsistency in accounting treatment with a related financial liability.
The fair value of these assets on initial recognition is determined based on the bid price. Fair value is reviewed at each subsequent reporting date. Any changes including accrued interest are recorded in “Net gains or losses on fi nancial instruments at fair value through profi t and loss” in the consolidated income statement.
On initial recognition, available-for-sale fi nancial assets are measured at fair value including transaction costs. After initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method, and tested for impairment at each reporting date. Where necessary, an impairment charge is recorded in income under “Provision for credit losses”. An impairment charge was recorded for Greek securities held in the portfolio using the methods described in Note 10.4.2.1. Transactions intended to hedge interest rate risk on these securities are not permitted under IFRS.
Available-for-sale fi nancial assets are non-derivative fi nancial assets that are not classifi ed as loans and receivables, held-tomaturity investments or fi nancial assets at fair value through profi t and loss. Assets in this category include Natixis’ investments in non-consolidated companies. They are initially classifi ed at fair value. Subsequently, and at each reporting date, the assets are remeasured to fair value based on the bid price for listed instruments.
– if this is not the case, the business plan must be revised in order to determine whether or not the securities should be impaired.
If the fair value of an available-for-sale fi nancial asset increases during a subsequent period, and this increase can be objectively linked to an event occurring after the impairment loss was charged to income: • reversals of impairment losses on equity instruments are recorded in equity rather than in the income statement,
• reversals of impairment losses on debt instruments are recorded in the amount of the previously recorded impairment loss.
IAS 17, which sets forth the accounting treatment of leases, gives fi ve examples of situations where substantially all of the risks and rewards incidental to ownership are transferred to the lessee: • the lease transfers ownership of the asset to the lessee by the end of the lease term; • the lessee has the option to purchase the asset at a price that is expected to be sufficiently below the fair value at the date the option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be exercised; • the lease term is for the major part of the economic life of the asset; • at the inception of the lease, the present value of the minimum lease payments amounts to at least substantially all of the fair value of the leased asset; • the leased assets are of such a specialized nature that only the lessee can use them without major modifications.
At inception, assets held under a fi nance lease are recognized in the lessor’s balance sheet and presented as a receivable at an amount equal to the net investment in the lease, corresponding to the present value of minimum lease payments due from the lessee discounted at the rate of return implicit in the lease, plus any non-guaranteed residual value accruing to the lessor.
IAS 17 requires that non-guaranteed residual value be reviewed on a regular basis. If there has been a reduction in the estimated nonguaranteed residual value, the income allocation over the lease term is revised (revised depreciation schedule) and any reduction in respect of amounts accrued is recognized immediately.
For the other two risk classes (industry and geographic risk), objective evidence of impairment is based on in-depth analysis and monitoring of business sectors and countries. Such evidence typically arises from a combination of micro or macroeconomic factors specifi c to the industry or country concerned.
Derivatives held for trading purposes are recorded in the balance sheet under “Financial assets at fair value through profi t and loss” when their market value is positive, and under “Financial liabilities at fair value through profi t and loss” when their market value is negative.
At each such date, changes in the fair value of hedging instruments (excluding accrued interest) are compared with changes in the fair value of the hypothetical assets and liabilities hedged (synthetic instruments representative of hedged assets or liabilities). To be effective, changes in the fair value of hedging instruments must offset changes in the fair value of hedged items in a range of 80%-125%.
The following criteria are used to determine whether or not a market is active: • a significant drop in market activity; • the length of historical data of prices observed in similar market transactions; • scarcity of prices recovered by a service provider; • disappearance of the primary market; • sharp bid-ask price spread; • steep price volatility over time or between different market participants.
For fi nancial reporting purposes, IFRS 7 as amended requires fair value measurements applied to fi nancial instruments recognized on the balance sheet to be allocated to one of three levels: a) Level 1: instruments quoted on an active market
Certain hybrid and/or long-maturity fi nancial instruments are measured using a recognized internal model on the basis of market inputs derived from observable data such as yield curves, implied volatility layers of options, market consensus data or active over-the-counter markets.
c) Level 3: instruments measured using models that are not commonly used and/or that draw on non-observable inputs
Level 3 comprises instruments measured using unrecognized models and/or models based on non-observable market data, where they are liable to materially impact the valuation. This mainly includes: • unlisted shares whose fair value could not be determined using observable inputs; • instruments with a deferred one-day margin; • shares of UCITS for which the fund has not published a recent NAV at the valuation date, or for which there is a lock-up period or any other constraint calling for a significant adjustment to available market prices (NAV, etc.) in respect of the low liquidity observed for such shares;
The valuation model used to determine the fair value of nonagency US RMBS (with or without a subprime component) held by Natixis is based on fi nal loss levels for each structure, estimated using a formula taking into account cumulative losses at maturity and defaults recognized. Unrealized losses are determined by projecting fi nal losses based on estimated losses to date, as calculated by the “delinquency pipeline”, the severity of loss given default and the losses already incurred based on assets and pool vintages.
Commercial Mortgage Backed Securities (CREs, CDOs and CMBS): These instruments are valued using a credit stress approach based on a valuation model drawing on projected future cash fl ows and cumulative loss rates per structure. Cumulative loss rates per structure are established based on loss rates for the underlying loans, differentiated by vintage. Coupons per tranche are set as a group at 3% for AAA-rated CRE CDOs in relation to estimated interest fl ows, given the current ratings of the structures.
CLOs: The same model was applied as in previous years, based on detailed knowledge of the characteristics of transactions and an assessment of credit risk using several inputs, including a benchmark average cumulative default rate of 30%, a recovery rate of 65% for senior underlyings, and a correlation rate of 43.6%, replacing the default distribution parameter used in previous years.
The valuation method for US RMBS including subprime RMBS, European RMBS, CMBS, and CLOs reclassifi ed to “Loans and receivables” is the same as that used for identical instruments classifi ed as “Instruments at fair value through profi t and loss” and “available-for-sale assets”.
The fair value of variable-rate borrowings and debt securities is considered to be their net carrying amount on the balance sheet. Fixed-rate borrowings and debt securities are discounted based on the fi xed rates available on the market at the reporting date for a debt with a similar term to maturity. Where fl uctuations in the issuer spread are not material, the valuation does not take this effect into account. This is generally the case for issues with an initial maturity of less than one year.
Instead, the premium is initially recognized on the accruals line and taken to income over the same period, in the same amount and on the same line as: • reversals of provisions for impairment (in Provision for credit losses); • the deferred recognition of the discount (under net revenues) arising on October 1, 2008 on assets reclassified within “Loans and receivables” at that date pursuant to the amendment to IAS 39 and IFRS 7 published on October 13, 2008.
5.8 Property, plant and equipment, intangible assets (excluding goodwill) and investment property
Investment property, shown separately from other property, plant and equipment on the balance sheet, consists of property held with the aim of generating rental income rather than for operating purposes.
Other intangible assets primarily comprise: • purchased goodwill with an indefinite useful life, which is not amortized but tested for impairment at least annually; • components of the Coface portfolio, which are amortized over the term of the contracts (eight to ten years for France).
Non-current assets that Natixis intends to sell within a period not exceeding twelve months and for which it is actively seeking a buyer are identifi ed separately in the balance sheet under “noncurrent assets held for sale”. Assets reclassifi ed to this category are no longer depreciated or amortized as from the reclassifi cation date. An impairment loss is recognized if their carrying amount is higher than their fair value less costs to sell. Associated liabilities are also identifi ed on a separate line of the balance sheet.
A discontinued operation is a clearly identifi able component of an entity that either has been disposed of, or is classifi ed as held for sale, and: • represents a separate major line of business or geographic area of operations; • is part of a single coordinated plan to dispose of a separate major line of business or geographic area of operations; or
Continuing involvement is evidenced by the existence of contractual conditions such as: • an option or obligation to repurchase the assets transferred; • collection of financial compensation linked to the performance of the asset transferred.
A fi nancial liability is derecognized when it is settled, canceled or expires.
Securities lending/borrowing transactions do not involve the transfer of a fi nancial asset within the meaning of IFRS. Consequently, these transactions do not lead to the derecognition of the securities loaned. Loaned securities are not identifi ed under IFRS: the securities continue to be recorded in their original IFRS category and measured accordingly. Borrowed securities are not recognized by the borrower.
A provision for restructuring costs is recognized when the standard aforementioned criteria for recognizing provisions and the two following conditions are met: • there is a detailed formal plan for the restructuring on the closing date, identifying at least: – the operations or part of the operations concerned,
Provisions for restructuring costs include only expenditure directly related to the restructuring.
A provision of €380 million was booked at December 31, 2011, in relation to the net Madoff assets.
In accordance with IAS 19, employee benefi ts are classifi ed in one of four categories: • ”Short-term benefits”, including salaries, social security contributions, annual leave, employee profit-sharing, incentive plans, top-up contributions and variable compensation payable during the fiscal year in which they are attributed; • “Termination benefits”, which should be recognized when the entity is demonstrably committed to terminating the employment of an employee before the normal retirement date, or providing termination benefits as a result of an offer made in order to encourage voluntary redundancy; • “Post-employment benefits”, such as pensions, other supplementary retirement benefits applicable to the banking industry, end-of-career awards and other contractual benefits payable to retirees; • “Other long-term employee benefits”, including long-service awards and deferred compensation payable in cash 12 months or more after the end of the fiscal year in which the services were rendered.
In accordance with the principles of recognition set out in IAS 19, Natixis has identifi ed the following types of post-employment benefi t: • defined contribution plans, under which an entity has no obligation to pay a specified benefit amount; • defined benefit plans, under which Natixis has a legal or constructive obligation to pay a specified benefit amount.
In accordance with the “corridor” method, Natixis does not recognize the portion of net cumulative actuarial gains and losses that is lower than the greater of (i) 10% of the present value of the defi ned benefi t obligation and (ii) 10% of the fair value of any plan assets at the end of the previous reporting period. The portion of actuarial gains and losses outside the 10% “corridor” is therefore recognized over the average remaining working lives of the employees participating in the plan concerned.
Other long-term benefi ts are valued using the same actuarial method as that applied to post-employment benefi ts under defi ned benefi t plans, except that actuarial gains and losses are not subject to the corridor method and past service costs are recognized directly as an expense. The estimated amount of the expense for cash-settled compensation, subject to presence conditions as part of loyalty and performance plans, is recognized over the vesting period.
• Deeply Subordinated Notes and preference shares are classified in equity in light of the 2009 renegotiation of a clause making the payment of interest non-optional in the event of positive consolidated income and which has since become discretionary.
The change over the fiscal year is presented in Note 6.16, “Changes in subordinated debt”, and in Note 12, “Capital management”; • the share of third party investors in the net assets of dedicated mutual funds included in Natixis’ consolidation scope comprises a financial liability recorded on the balance sheet under “Financial liabilities at fair value through profit and loss”. The share of third party investors in the profits of the mutual funds is recorded in “Net gains or losses on financial instruments at fair value through profit and loss” in the consolidated income statement; • the units held by third party investors in dated funds, which are fully consolidated by Natixis, entitling the unit-holders to the repayment of a share of the fund’s net assets upon its liquidation, are classified in liabilities on the balance sheet under “Accruals and other liabilities”. The share of third party investors in the fund’s profits is recorded under “Interest and similar expenses” on the consolidated income statement.
5 FINANCIAL DATA Consolidated fi nancial statements and notes 5.17 French State support
The receivables provided as security have been maintained in Natixis’ consolidated balance sheet with their original classification, since the criteria for derecognition defined by IAS 39 are not met. They are included in the “loans and receivables” line item of the table entitled “Financial assets provided as security” presented in Note 6.6.3; • undated Deeply Subordinated Notes. These issues mirror those subscribed by Groupe BPCE with Société de Prise de Participation de l’État. These instruments are recognized as equity instruments barring any contractual obligation to pay interest. They were fully repaid in the 2011 fiscal year.
Financing obtained indirectly from SFEF and the undated Deeply Subordinated Notes subscribed by SPPE are detailed in Note 6.17 “French State support”.
Cash-settled loyalty and performance plans indexed to the value of the Natixis share
Allocations to the capitalization reserve and reversals as from January 1, 2010 are no longer used to determine taxable income.
5 FINANCIAL DATA Consolidated fi nancial statements and notes 5.22 Financing and guarantee commitments
In accordance with paragraph 43 of the amendment to IAS 39 and IFRS 4 (published by the IASB in August 2005 and adopted by the European Union), fi nancial guarantees given are carried at their fair value plus any transaction costs directly attributable to the issuance of the guarantees. For independent agreements entered into at market rates, fair value at the inception of the agreement is equal in theory to the amount of premium(s) received. All fi nancial guarantees issued within Natixis Group are entered into at market rates.
Subsequently, fi nancial guarantees are stated at the higher of: • the amount initially recognized upon inception less, where appropriate, the amount of amortization recorded in line with the principles outlined in IAS 18 “Revenue”. This amortization represents the deferred recognition of the fees received over the period covered by the guarantee; • the value determined under IAS 37 “Provisions, contingent liabilities and contingent assets”, which is the amount that the entity would normally pay to settle the obligation or to transfer it to a third party.
Unlisted equity instruments classifi ed as available-for-sale fi nancial assets primarily consist of investments in non-consolidated companies. The fair value of investments in unlisted nonconsolidated companies is obtained principally by using the P/E (price/earnings ratio) and DCF (discounted cash fl ow) valuation methods. Use of these methods requires certain choices and assumptions to be made in advance (in particular, projected expected future cash fl ows and discount rates).
All goodwill is assigned to a CGU so that it may be tested for impairment. The tests conducted by Natixis consist in comparing the carrying amount of each CGU (including goodwill) with its recoverable amount. Value in use is calculated by discounting annual free cash fl ows to infi nity (excluding the Private Equity CGU and “non-core” Coface which are stated at fair value). Use of the discounted cash fl ow method involves: • estimating future cash flows. Natixis has based these estimates on forecasts included in its business units’ medium-term plans spanning five years; • projecting cash flows for the last year of the plan to infinity, at a rate reflecting the expected annual growth rate; • discounting cash flows at a specific rate for each CGU.
The fair value of loans not quoted on an active market is determined using the discounted cash fl ow method. The discount rate is based on an assessment of the rates used by the institution during the period for groups of loans with similar risk characteristics. Loans have been classifi ed into groups with similar risk characteristics based on statistical research enabling factors having an impact on credit spreads to be identifi ed. Natixis also relied on expert judgment to refi ne this segmentation.
The participation rate to be adopted for calculating deferred participation is determined by observing past pay-out ratios, but also by taking into account assumptions on projected net future cash fl ows from fi nancial products and assumptions on expected return from contracts to be granted to policyholders. In highly fragile and competitive market conditions, the sources of concern weighing on these estimates are signifi cant.
In the event of a deferred participation asset, a recoverability test is carried out to verify that liquidity requirements arising from an unfavorable economic environment does not force the sale of assets in unrealized losses. This recoverability test relies on projected future cash fl ows based on different economic assumptions about historical redemptions and infl ows.
As a precautionary measure, Natixis records a net deferred tax asset linked to its ability to generate taxable income over a given period (10 years maximum), while tax loss carry forwards are deductible with no time limitation in France and the UK or over very long periods (20 years in the US).
Net income/(loss) attributable to shareholders (in millions of euros) (a) 1,301 1,352
Average number of ordinary shares issued and outstanding over the period 2,998,344,128 2,908,137,693
Average number of treasury shares issued and outstanding over the period 4,639,042 4,238,033
(a) The difference corresponds to the interest generated on Deeply Subordinated Notes and on preference shares, i.e. -€256 million after tax savings and interest on payments of issuance fees of -€5 million.
6.1 Financial assets and liabilities at fair value through profit and loss
Securities designated at fair value through profi t and loss 6.1.1.3 81,008 26,185
Loans and receivables designated at fair value through profi t and loss 6.1.1.2 and 6.1.1.3 418 1,184
Securities designated at fair value through profi t and loss 6,776 3,205 9,981 of which: Private Equity securities 8 1,620 1,628 6.1.1.2 Loans and receivables designated at fair value through profi t and loss and credit risk
At December 31, 2011, fi nancial liabilities at fair value through profi t and loss primarily comprised derivatives not used as hedging instruments.
(a) The fair value, determined using the method described in Note 5.6, recorded in respect of internal credit risk on Natixis issues totaled €674 million at December 31, 2011 versus €437 million at December 31, 2010 (see Note 7.3). Besides changes in the outstanding amount, this difference refl ects changes in the spread since the close of the previous year’s accounts.
6.1.2.2 Conditions for classifi cation of fi nancial liabilities designated at fair value through profi t and loss
The use of the fair value option is considered to provide more pertinent information in two situations: • where there is an accounting mismatch between economically linked assets and liabilities. The fair value option is typically used when the criteria for hedge accounting are not met: in such cases, changes in the fair value of the hedged item automatically offset changes in the fair value of the hedging derivative; • where a portfolio of financial assets and liabilities is managed and recognized at fair value as part of a documented policy of asset and liability management.
(a) Natixis has contracted Total Return Swaps (TRS) with BPCE. These instruments are used to hedge changes in the fair value of GAPC instruments carried at fair value through profi t and loss since July 1, 2009 and are included on this line for an amount of €104 million in assets (versus €148 million at December 31, 2010) and €108 million in liabilities (versus €313 million at December 31, 2010).
(b) Natixis has contracted a call option with BPCE for the purpose of recovering, 10 years after its implementation, any net gains in fair value transferred to BPCE via TRS. The call option was recognized on this line in assets for €474 million (versus €507 million at December 31, 2010).
Fair value hedging is used to hedge changes in the fair value of fi xed-income securities on an individual basis, and also as a structural hedge against the interest rate risk incurred by Natixis Financial Products LLC.
(b) Including shares in mutual funds. (c) Variable-income securities presenting an unrealized capital loss at December 31, 2011 carry a gross unrealized capital loss of €69 million (excluding insurance securities given the deferred participation liability), most in respect of unlisted securities, of which €41 million in securities presenting an unrealized capital loss for a period of less than six months.
The fair value of loans and receivables due from customers totaled €112,169 million at December 31, 2011, compared with €128,175 million at December 31, 2010.
No fi nancial assets were reclassifi ed in 2011 by Natixis pursuant to the IASB’s “Reclassifi cation of fi nancial assets” amendment to IAS 39 and IFRS 7 published on October 13, 2008.
Instruments reclassifi ed within Loans and 6.6.3 FINANCIAL ASSETS PROVIDED AS SECURITY
Loans and receivables 15,300 22,410 6.6.4 FINANCIAL ASSETS RECEIVED AS SECURITY AND ABLE TO BE SOLD OR REUSED AS SECURITY
These agreements are governed by order 2005-171 of February 2, 2005. They exclude any repurchase agreements.
The age of each amount in arrears is determined according to the age of the fi rst missed payment on the balance in question. The breakdown for the period is prepared on the basis of the fi rst missed payment.
Amounts less than 90 days past due represent 50% of the total.
Loans and receivables due from customers 17 1 1 10 29
Financial assets held for trading 164,200 26,056 129,629 8,515 133,839 26,014 96,618 11,207
Available-for-sale fi nancial assets 35,143 30,353 3,584 1,206 33,938 28,266 4,234 1,438
Derivative instruments not eligible for hedge accounting (positive fair value) 2,597 548 (294)
Financial assets designated at fair value through profi t and loss 1,331 (51) 47
Sensitivity of the fair value of fi nancial instruments measured using unobservable inputs was estimated at December 31, 2011. With the aid of probable assumptions, this sensitivity was used to estimate the impacts of market fl uctuations in unstable economic environments. This estimate was performed using: • a “standardized” (1) variation in unobservable inputs for interest rate and equity instruments. The resulting sensitivity was €2.6 million.
Redemptions From level 3 (b) To level 3 Other reclassifi cations
Total deferred tax recognized 2,887 3,049 - o/w deferred tax assets 3,217 3,361 - o/w deferred tax liabilities (329) (312)
5FINANCIAL DATA Consolidated fi nancial statements and notes 6.8 Accrual accounts, other assets and liabilities
5 FINANCIAL DATA Consolidated fi nancial statements and notes 6.8.2 ACCRUAL ACCOUNTS
Other accrual accounts 2,196 4,352 6.8.2.2 Accrual accounts (excluding insurance) – Liabilities
The table below shows the deferred day-one margin on instruments priced using valuation techniques drawing on non-observable inputs or market models not commonly used classifi ed as level 3 in the fair value hierarchy, at the beginning and end of the period, along with changes during the period.
5FINANCIAL DATA Consolidated fi nancial statements and notes 6.8.3 INSURANCE ACCRUAL ACCOUNTS
(a) Life-insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred profi t-sharing reserve, equal to 100% of the related base amount on average (see Note 2.10).
In 2011, Natixis recognized no assets obtained by taking possession of guarantees (securities, buildings, etc.) or by leveraging other forms of credit enhancement (e.g. sureties). In 2010, assets obtained by taking possession of guarantees totaled €6 million.
Other technical reserves include reserves for financial contingencies and for deferred acquisition costs.
(a) At December 31, 2011, net deferred participation assets amounted to €830 million, compared with a deferred participation liability of €105 million at December 31, 2010 (see Notes 2.10 and 6.8.3.1).
5 FINANCIAL DATA Consolidated fi nancial statements and notes 6.15 Provisions and impairment 6.15.1 SUMMARY OF PROVISIONS
Provisions for impairment deducted from assets 4,987 1,721 (492) (764) 30 19 (4) 5,498
Impact on the income statement (in millions euros) Charge Reversal Net impact
Impairment and amortization of property, plant and equipment and intangible assets (2) 0 (2)
(a) No subordinated securities or loans were issued in 2011. (b) Loan repayments and securities redemptions comprised: the early redemption of an October 2005 issue for €750 million (initial maturity: January 2016), the repayment of two 1998 subordinated loans for €19.1 million and €8.7 million, the redemption of 21,000 non-voting shares issued in 1985 for a total of €16 million, and the repayment of a November 2004 issue (initial maturity November 2016) for €450 million.
(c) Other changes mainly pertained to the revaluation of debts subject to hedging and variations in intra-group securities held by Natixis Funding for the purposes of market making with respect to Natixis’ debt on the secondary market. This concerned the June 2003, November 2004, September/December 2006 and May/June 2007 issues of redeemable subordinated securities.
5FINANCIAL DATA Consolidated fi nancial statements and notes 6.17 French State support
Securities designated at fair value through profi t and loss 17,170 548 16,622 36,494 36,494
5 FINANCIAL DATA Consolidated fi nancial statements and notes 6.18.1 FINANCIAL LIABILITIES AT FAIR VALUE MEASURED USING LEVEL 3 OF THE FAIR VALUE HIERARCHY
Financial liabilities at fair value through profi t and loss – Trading 956 79
Derivative instruments not eligible for hedge accounting (negative fair value) 404 79
Financial assets designated at fair value through profi t and loss
Other fi nancial liabilities designated at fair value through profi t and loss
Total on-balance sheet exposure Less than 3 months 3 months to 1 year 1 to 5 years
Net gains/(losses) on other fi nancial assets and liabilities designated at fair value through profi t and loss (b) 415 (96)
At the same time, allocation to the portfolio-based provision amounted to €0.3 million over the year, versus a reversal of €280 million in 2010 (excluding the impact of the BPCE guarantee and exchange rate fl uctuations), bringing the cumulative balance to €155 million for an exposure of €746 million at December 31, 2011 versus €458 million at December 31, 2010.
• At December 31, 2011, the discount against fund units recognized in 2009 based on the selling prices observed on the secondary market totaled €41 million versus €70 million at December 31, 2010, i.e. a decrease of €29 million year on year.
Net gains or losses on available-for-sale fi nancial assets principally comprise: • gains or losses on sales of available-for-sale financial assets and financial assets recognized at their amortized cost; • permanent losses in value and dividends payable on variableincome securities, charged to “Available-for-sale financial assets”.
This line item also includes market discounts on syndicated loans. In fact, loans outstanding with a theoretical syndication date expired as at December 31, 2011 were analyzed on a caseby -case basis in order to take into account any market discounts observed at the end of the reporting period.
(a) “Life insurance premium income” includes a -€3.2 billion charge resulting from the increase in the reinsurance share (see Note 7.5).
Provisions for impairments of fi nancial assets (862) 553 (35) 14 (329) (687) 496 (36) 17 (210)
5FINANCIAL DATA Consolidated fi nancial statements and notes 7.9 Gains or losses on other assets
= Consolidated taxable income/(loss) 1,303 1,138 x Theoretical tax rate 33.33% 33.33%
+ Losses for the period not recognized for deferred tax purposes (189) (161)
NOTE 8 STATEMENT OF NET INCOME/(LOSS), GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY
In 2009, Natixis carried out an in-depth review of its business lines and developed the New Deal plan in response. After considering the growth potential of each business line and its strategic fi t with Natixis’ other operations and with BPCE, Executive Management identifi ed three core businesses: • Corporate and Investment Banking, representing banking services for large companies and BPCE institutional investors; • Investment Solutions, which includes Asset Management, Life Insurance, Private Banking and, since Q3 2010, the Private Equity business resulting from the spin-off of Natixis Private Equity and slated to become a third party management activity; • Specialized Financial Services, which includes Factoring, Lease Financing, Consumer Credit, Guarantees, Employee Benefits Planning, and Payment and Securities Services. These services are the key growth drivers for the retail banking business of the BPCE Group.
Coface, the Private Equity businesses (proprietary, sponsored funds and third party management slated for disposal) and Natixis Algérie are managed as fi nancial holdings due to their lower synergies with Natixis’ other businesses and with BPCE.
The Corporate and Investment Banking division offers its corporate, institutional investor, insurer and banking customers a broad spectrum of fi nancing and capital market services leveraging all its expertise in advisory, origination, structuring and placement.
• Corporate and Institutional Relations ensures that Natixis maintains close ties with its customers both in France and abroad, partnering with them over time and leveraging its robust knowledge of numerous business sectors to optimize risk management; • Debt and Financing provides a dedicated platform offering financing solutions and advisory services boosted by additional expertise in specialized origination, structured finance and distribution; • Capital markets: Natixis boasts leading expertise on interest rate, currency, commodity, credit and equity markets, which is used to develop its broad line-up of standard and bespoke products.
• Payments: provision of applications and infrastructures: electronic banking, issuance and collection of high-volume electronic transfers, check processing; • Film Industry Financing: this business line is operated via Coficiné, a subsidiary specializing in structured loans for film and audiovisual activities in France and Europe.
• Asset Management: Asset management activities are grouped together within Natixis Global Asset Management. They cover all asset categories and are carried out mainly in the US and France. These activities are performed by autonomous entities (specialized management companies and specialized distribution units) coordinated by a holding company that ensures the organization’s consistency by overseeing its strategic direction. These companies are thus able to focus on their core business of achieving high performance, while retaining the option of developing their own institutional clientele and drawing on the business line’s other support functions, based on appropriate economic models. A number of them have forged a strong reputation, such as Loomis Sayles, Harris Associates, AEW and Natixis Asset Management.
Together, these specialized management companies enable the Group to provide a full range of expertise meeting demand from all customer segments. Coverage of the various customer segments is optimized by the organization of distribution around the Global Associates platform and the business franchises developed over the long term by the asset management companies, mainly with various client groups. The management companies continue to handle distribution via the shareholder retail banking networks in France.
• Insurance: Natixis Assurances is a holding company for various operating insurance subsidiaries. It offers a comprehensive range of individual and collective life insurance, personal risk insurance and property and casualty insurance solutions. These diversified, customized solutions are designed for retail and small business customers, farmers, companies and associations.
Coface reorganized its business in 2011, refocusing on core business lines (credit insurance and factoring in Germany and Poland), while the non-strategic, service activities of the non-core unit were put into run off.
Natixis consolidates these operations via its 20% ownership of the Banques Populaires and Caisses d’Epargne retail banking networks and via the business lines distributed by the networks. Both shareholder groups’ networks have distinct yet complementary market positions. The Caisses d’Epargne banks have a strong presence in the personal and small business customer segment, offering a full spectrum of products and services. They also boast robust local roots and are prime movers in regional development, offering local authorities, social housing organizations and businesses an extensive range of products and services. The Banques Populaires network focuses on professionals, SMEs and retail customers.
5FINANCIAL DATA Consolidated fi nancial statements and notes 9.7 GAPC – Workout portfolio management
At the end of 2008, Natixis ring-fenced its most illiquid and/or high-risk fi nancial markets exposures within GAPC (Gestion Active des Portefeuilles Cantonnées, or Workout Portfolio Management). Segregated assets include convertible arbitrage, complex equity and interest rate derivatives, trading correlation derivatives, structured fund-based derivatives, proprietary credit activities and residential ABS.
The GAPC 6 activity, Convertible arbitrage, was closed at the end of 2010.
(a) Variation between December 31, 2011 and December 31, 2010 (pro forma fi gures).
This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2010. It is presented in accordance with the new business structure adopted by Natixis at December 31, 2011. It notably takes into account the inclusion of Coface’s noncore activities in “Other”. This information also takes account of the addition of the following entities in the SFS division: Cicobail, Océor Lease Réunion, Océor Lease Nouméa, Océor Lease Tahiti and GCE Paiements.
5FINANCIAL DATA Consolidated fi nancial statements and notes 9.9 Other disclosures
Net income for the period (group share) 839 227 409 8 80 1,562
The following table sets out the exposure of all the Natixis’ fi nancial assets to credit risk. This exposure does not take into account guarantees, sureties, credit-default swaps, collateral OTC fi nancial instruments, the impact of netting agreements and other credit enhancements. It corresponds to the net value of the fi nancial assets on the balance sheet, after taking all impairments into account (individually or collectively assessed).
5FINANCIAL DATA Consolidated fi nancial statements and notes 10.2.3 BREAKDOWN OF INDIVIDUAL AND COLLECTIVE IMPAIRMENTS BY GEOGRAPHIC AREA
5 FINANCIAL DATA Consolidated fi nancial statements and notes 10.2.4 BREAKDOWN OF COLLECTIVE PROVISIONS BY BUSINESS SECTOR
5FINANCIAL DATA Consolidated fi nancial statements and notes 10.3 Market risk, overall interest rate risk, liquidity risk and structural foreign exchange risk
10.4 Exposure to sovereign risk on euro zone countries 10.4.1 AMOUNT OF EXPOSURES
Direct net exposure (b) Indirect net exposure (a) Total exposure 1 year 2 years 3 years 5 years 10 years >10 years
(a) Net positions on CDS including foreign exchange and interest rate transactions. (b) Fair value of long positions net of short positions.
availablefor -sale assets o.w. other fi nancial assets designated at fair value through profi t and loss
The information shown above is presented according to EBA rules applicable at December 31, 2011. It takes into account the cancellation of the fl oor by range of maturity applied to short positions in the trading book.
Furthermore, at December 31, 2011, Natixis was also exposed to sovereign risk linked to these same countries, in respect of its insurance activities, for the following amounts: (in millions of euros)
On July 21, 2011 Europe reaffi rmed its support for Greece with a rescue package including a provision whereby private sector investors in Greek sovereign debt could exchange bonds maturing between mid-2011 and the end of 2020 for new securities to be issued by the Greek government with longer maturities of up to 30 years.
As the rescue plan of July 21 was not approved by all European countries, a new package was decided on at the European summit of October 26-27, requiring an additional effort from the private sector. This new plan, which was confi rmed on February 21, 2012, provides for an additional haircut on the nominal value, with no distinction between securities maturing before or after 2020.
At December 31, 2011, in view of the above, Natixis revised the valuation of Greek sovereign debt as follows: • “ Available-for-sale financial assets” were valued using market prices at December 31, 2011. As this mark-to-market valuation gave rise to a discount of nearly 70% against the nominal portfolio value, the impairment recorded corresponded to a uniform discount of 70% asset by asset.
• For “ Held-to-maturity financial assets” , given the lack of visibility on the rescue plan referred to above, a uniform 70% haircut on the nominal value was recognized asset by asset.
The Greek securities held by Natixis, before impairment and excluding accrued interest, amounted to €293.3 million in the Available-for-sale assets category, of which €36.2 million belonging to life insurance portfolios, and €513.5 million in the Held-to-maturity fi nancial assets category, of which €502.6 million belonging to life insurance portfolios.
In light of these elements, at December 31, 2011, Natixis considers that there was no signifi cant risk of likely default by these countries.
The sovereign debt securities of these countries classifi ed in the Available-for-sale assets or Financial assets at fair value through profi t or loss categories were recorded in the year-end fi nancial statements at their market price at December 31, 2011.
(a) Without applying contractual rules governing shares of profi ts on life insurance activities.
5 FINANCIAL DATA Consolidated fi nancial statements and notes 11.2 Compensation and employee benefits
This plan is considered to fall within the scope of IAS 19 and is accounted for as a longterm benefi t. As the rights to such benefi ts vest over the period during which the related services are provided, the obligation representing the likely amount of benefi ts payable is recognized gradually over the vesting period. The calculation of the obligation takes into account actuarial assumptions regarding the likelihood that benefi ciaries will meet the presence conditions and the performance and exercise criteria. These assumptions are revised on a regular basis. The Company does not apply the “corridor” method, and all actuarial gains and losses are therefore recognized immediately in income. At the reporting date, the obligation represents an actuarial assessment carried out in the same way as for obligations under defi ned-benefi t plans. The total cost recognized in respect of the retention plan in Natixis’ fi nancial statements at December 31, 2011 amounted to €49.4 million.
The corresponding expense associated with the short-term plan, estimated based on the probability of the presence condition being met, is fully recognized in the 2011 fi nancial statements in the amount of €28.1 million.
Year of plan Grant date Initial number of shares granted Acquisition dates
Expense for the period for retention and performance plans, share-based payment
The annual defi ned-benefi t plan expense comprises: • additional entitlements vested by all employees; • interest cost (impact of unwinding the discount); • the expected return on plan assets; • amortization of actuarial gains and losses (application of the “corridor” method) and past service costs; • - the impact of any plan curtailments or settlements.
b) Impact of internal restructuring measures or other changes in the consolidation scope
As certain affected employees will not end their careers at Natixis, this measure will reduce the obligations in respect of end-of-career awards, supplementary healthcare benefi ts and long-service awards.
For end-of-career allowances and long-service awards, employee turnover is calculated by age bracket and grade based on a threeyear average. A rate of 0% is used for employees aged 55 and over.
5 FINANCIAL DATA Consolidated fi nancial statements and notes e) Employee benefi t obligations at December 31, 2011
Benefi ts vested over the period 3 10 4 85 102
Unrecognized past service cost 8 27 36 * o.w. –€36 million relating to a funding surplus in 2011 compared with –€35 million in 2010.
5 FINANCIAL DATA Consolidated fi nancial statements and notes f) Change in the fair value of assets held to fund post-employment benefi ts granted to employees
Fair value h) Experience adjustments relating to post-employment defi ned-benefi t plans and other long-term employee benefi ts
Impact on present value of gross benefi t obligations 11.2.4 STOCK OPTION PLANS
The capital increase during the 2011 fi scal year corresponds to the payment of dividends in shares.
Natixis adapts the management of its capital structure in line with changes in economic conditions and in the risk profi le of its operations. Its objectives, policies and procedures remained unchanged in 2011.
To banks 2,300 4,087 ● Confi rmation of documentary credits 1,111 1,140
The following financing commitments fall within the scope of IAS 39: • commitments classified as financial liabilities at fair value through profit and loss. If an entity has a practice of reselling or securitizing loans immediately after they are issued, these loans are accounted for in accordance with IAS 39 as from the date the loan commitment is undertaken; • those which are settled net (i.e. sold); • commitments which result in a loan granted at lower-thanmarket interest rates.
• a present obligation arising as a result of past events but not recognized because: – it is not likely that an outfl ow of economic benefi ts will be required to settle the obligation, or
– the amount of the obligation cannot be measured with suffi cient reliability.
Natixis also extended liquidity lines to several funds arranged by third parties (Landale, Northwest, Cedulas) for a total of €632 million.
The implementation of these adjustments is expected to reduce the worldwide staff headcount in the Corporate and Investment Bank by 277 jobs.
It was stated that this reduction would be managed without a labor agreement in France by drawing on the outcome of natural departures, maintaining the freeze on external recruitment and dynamic internal mobility management.
Total<1 year 1-5 years >5 years <1 year 1-5 years >5 years
5FINANCIAL DATA Consolidated fi nancial statements and notes 15.2 Related parties
Net fee and commission income (216) (262) 70 (165) (208) 40
Net gains or losses on fi nancial instruments at fair value through profi t and loss 120 19
Depreciation, amortization and impairment property, plant and equipment and intangible assets (227) (236)
Restatements on consolidation: ● Profi t from the increase in the share in income 27 56
Compensation for corporate offi cers is granted as detailed in the standardized tables compliant with AMF recommendations in parts 3.4.2 of the registration document.
Natixis’ Chief Executive Offi cer currently enjoys the retirement benefi ts plan offered to upper management offi cers (“hors classifi cation“): • Social Security System (Tranche A)*; • Mandatory ARRCO contributions in tranche A* (overall rate of 7.50%); • Additional ARRCO contributions in tranches A* (6.563%) and B* (5.625%); • AGIRC contributions in tranches B* (20.30%) and C* (20.30%).
Following changes in the law and new recommendations by AFEP-MEDEF , Groupe BPCE has also been obliged to close its retirement benefi ts plans (BP and CE) for executive offi cers.
A BPCE-Natixis working group is drawing up proposals for a new bylaw covering executive corporate offi cers’ retirement and provident insurance plans.
This new bylaw is expected to apply to Natixis’ Chief Executive Offi cer.
It also shows the consolidated contribution by insurance companies in the banking format.
Income and expenses net of reinsurance transfers 64 64 64 64
Deloitte & Associés, KPMG Audit and Mazars are registred as Statutory Auditors with the “Compagnie Régionale des Commissaires aux Comptes of Versailles” and operate under the supervision of the “Haut Conseil du Commissariat aux Comptes”.
Audit ● Independent audit, certifi cation & examination of the separate and
SNC TOLBIAC FINANCE (1) Investment company FC 100 100 100 100 France
NATIXIS STRUCTURED PRODUCTS LTD Secondary markets fi nance FC 100 100 100 100 Jersey
NATIXIS BLEICHROEDER Inc. (19) Investment company 0 0 100 100 United States
EDF INVESTISSEMENT GROUPE Investment company Prop 7 7 7 7 Belgium
NATIXIS MALTA INVESTMENTS LIMITED Holding FC 100 100 100 100 Malta
CALIFANO INVESTMENTS LIMITED Structured fi nance FC 100 100 100 100 Malta
NATIXIS BELGIQUE INVESTISSEMENTS Investment company FC 100 100 100 100 Luxembourg
NATIXIS ALTERNATIVE ASSETS (formerly Natixis Alternative Investments International S.A.)* Holding FC 100 100 100 100 Luxembourg
LIBERTY ISLAND FUNDING 2011-1 Ltd (1) (23) Securitization vehicle FC 100 100 0 0
NATIXIS NORTH AMERICA LLC (formerly NATIXIS NORTH AMERICA INC)* Holding FC 100 100 100 100 United States
BLEACHERS FINANCE 1 Ltd (1) (28) Securitization FC 100 100 0 0 United States
NATIXIS REAL ESTATE CAPITAL LLC Real estate fi nance FC 100 100 100 100 United States
NATIXIS CAPITAL ARRANGER CORP. (3) Brokerage services 0 0 100 100 United States
IXIS LT INVESTOR LLC (1) Other fi nancial company FC 100 100 100 100 United States
PLAZA SQUARE APPARTMENTS OWNERS LLC (1) Real estate fi nance FC 100 100 100 100 United States
SUMMER COMMONS LLC (1) Real estate fi nance FC 100 100 100 100 United States
IXIS CMNA (Australia) (No. 2) LLC (1) Other fi nancial company FC 100 100 100 100 United States
NEXGEN MAURITIUS Ltd Structured fi nance FC 100 100 100 100 Mauritius
ULTIMA TRADING & GLOBAL STRATEGIES II Ltd (1) Structured fi nance FC 100 100 100 100
ULTIMA TRADING & GLOBAL STRATEGIES III Ltd (1) Structured fi nance FC 100 100 100 100
ABSOLUTE ASIA DYNAMIC EQUITIES FUND (1) (2) Asset Management 0 0 100 100 United States
ABSOLUTE ASIA DYNAMIC EQUITIES FUND- 40 Act Fund (1) Asset Management FC 93 93 100 100 United States
AEW ADVISORS, INC. Asset Management FC 100 100 100 100 United States
AEW EUROPE LLP Asset Management FC 100 60 100 60 United
AEW II CORPORATION Asset Management FC 100 100 100 100 United States
CGW GESTION D’ACTIFS Asset Management Equity 33 20 33 20 France
AEW EUROPE ADVISORY LTD Asset Management FC 100 60 100 60 United
AEW EUROPE SGP Asset Management FC 100 60 100 60 France
AEW GLOBAL LTD Asset Management FC 100 60 100 60 United
AEW EUROPE PARTNERSHIP Asset Management FC 100 60 100 60 United
AEW GLOBAL UK LTD Asset Management FC 100 60 100 60 United
EPI SLP LLC (1) Asset Management FC 100 60 100 60 United States
GATEWAY HEDGE US EQUITIES FUND (1) (2) Asset Management 0 0 53 53 United States
HANSBERGER GLOBAL (HK) Ltd Asset Management FC 100 100 100 100 United States
HARRIS ALTERNATIVES HOLDING INC Holding FC 100 100 100 100 United States
ABSOLUTE ASIA AM Asset Management FC 100 100 100 100 Singapore
KENNEDY FINANCEMENT Luxembourg 2 (23) Asset Management FC 100 100 0 0 Luxembourg
LOOMIS SAYLES ABSOLUTE STRATEGIES FUND (LUX) (1) (3) Asset Management 0 0 100 100 United States
LOOMIS SAYLES ABSOLUTE STRATEGIES FUND (US) (1) (3) Asset Management 0 0 84 84 United States
LOOMIS SAYLES SOLUTIONS, INC Asset Management FC 100 100 100 100 United States
LOOMIS SAYLES TRUST COMPANY, LLC (1) Asset Management FC 100 100 100 100 United States
MC MANAGEMENT, INC. Holding FC 100 100 100 100 United States
LOOMIS SAYLES GLOBAL EQUITIES OPPORTUNITIES FUND (1) (2) Asset Management 0 0 100 100 United States
NATIXIS ASSET MANAGEMENT Asset Management FC 100 100 100 100 France
NATIXIS FORMATION EPARGNE FINANCIÈRE (formerly Natixis Asset Management Participations 1)* Holding FC 100 100 100 100 France
NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 1 Holding FC 100 100 100 100 France
NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 3 Holding FC 100 100 100 100 France
NATIXIS GLOBAL ASSET MANAGEMENT ASIA Pte (23) Asset Management FC 100 100 0 0 Singapore
NATIXIS GLOBAL ASSET MANAGEMENT, LLC Holding FC 100 100 100 100 United States
NATIXIS GLOBAL ASSOCIATES UK Retail FC 100 100 100 100 United
NATIXIS OAKMARK GLOBAL FUND (1) (2) Asset Management 0 0 93 93 United States
NATIXIS OAKMARK INTERNATIONAL FUND (1) (2) Asset Management 0 0 82 82 United States
REICH & TANG ASSET MANAGEMENT, LLC Asset Management FC 100 100 100 100 United States
REICH & TANG DEPOSIT SOLUTIONS Asset Management FC 100 100 100 100 United States
REICH & TANG DISTRIBUTORS, INC. Retail FC 100 100 100 100 United States
REICH & TANG STABLE CUSTODY GROUP LLC. Asset Management FC 100 100 0 0 United States
REICH & TANG STABLE CUSTODY GROUP II LLC. Asset Management FC 100 100 0 0 United States
NATIXIS US HOLDINGS Inc. (formerly Natixis Global Asset Management Corporation)* Holding FC 100 100 100 100 France
BP DEVELOPPEMENT (25) Venture capital FC 37 37 42 42 France
DHALIA A SICAR SCA (1) Private Equity FC 100 100 100 100 Luxembourg
BANQUE PRIVÉE 1818* (formerly LA COMPAGNIE 1818 - BANQUIERS PRIVÉS)** Holding FC 100 100 100 100 France 1818 - GESTION (formerly LA COMPAGNIE 1818 - GESTION)*
Mutual fund holding company FC 100 100 100 100 France 1818 IMMOBILIER (formerly LA COMPAGNIE 1818 IMMOBILIER)* Real estate operations FC 100 100 100 100 France
NATIXIS ASSURANCES PARTENAIRES (formerly Assurance)* Insurance FC 100 100 100 100 France
NATIXIS CONSUMER FINANCE* (formerly Ecrinvest 11) Holding FC 100 100 100 100 France
NATIXIS CONSUMER FINANCE IT (formerly Natixis Consumer Finance) Consumer fi nance FC 100 100 100 100 France
COMPAGNIE EUROPÉENNE DE GARANTIES ET CAUTIONS Insurance FC 100 100 100 100 France
FRUCTIBAIL INVEST (1) (21) Real estate leasing 0 0 100 100 France
S.C.I. VALMY COUPOLE (1) Real estate operations FC 100 100 100 100 France
OCEOR LEASE REUNION** Equipment lease fi nancing FC 100 100 100 100 Reunion
GCE CAR LEASE (10) Equipment lease fi nancing FC 100 100 0 0 France
COFACE ASSICURAZIONI SPA Credit insurance and related services FC 100 100 100 100 Italy
COFACE AUSTRIA Credit insurance and related services FC 100 100 100 100 Austria
COFACE BELGIUM SERVICES HOLDING Business and solvency data FC 100 100 100 100 Belgium
COFACE DEBITOREN Receivables management and data FC 100 100 100 100 Germany
COFACE FACTORING ITALIA SPA Factoring FC 100 100 100 100 Italy
COFACE HOLDING AMERICA LATINA Financial data FC 100 100 100 100 Mexico
COFACE KREDIT Credit insurance and related services FC 100 100 100 100 Germany
COFACE NORTH AMERICA HOLDING COMPANY Holding FC 100 100 100 100 United States
COFACE SERVICE SPA (5) Receivables management and data 0 0 100 100 Italy
COFACE SERVICES AUSTRIA Receivables management and data FC 100 100 100 100 Austria
COFACE SERVICES NORTH AMERICA GROUP Holding FC 100 100 100 100 United States
COFACE SEGURO DE CREDITO MEXICO (28) Insurance FC 100 100 0 0 Mexico
COFACE SOUTH AFRICA (28) Insurance FC 100 100 0 0 South Africa
MSL1 FUND Insurance investment mutual fund FC 100 100 100 100 Germany
SEGURO BRASILEIRA C.E Credit insurance and related services FC 76 76 76 76 Brazil
COFACE SVERIGE (EX-AKC NORDEN) - SUCC (COFACE KREDIT) Insurance FC 100 100 100 100 Germany
COFACE IRELAND - SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Ireland
COFACE BELGIUM - SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Belgium
COFACE LUXEMBOURG (SUCC-Coface S.A.) Insurance FC 100 100 100 100 Luxembourg
COFACE IBERICA -SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Spain
COFACE SWITZERLAND - SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Switzerland
LEID - SUCC (COFACE AUSTRIA) Insurance FC 100 100 100 100 Austria
COFACE LATVIA INSURANCE -SUCC (COFACE AUSTRIA) Insurance FC 100 100 100 100 Latvia
COFACE HONG KONG -SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Hong Kong
COFACE ECUADOR (SUCC-COFACE S.A.) Insurance FC 100 100 100 100 Ecuador
NATEXIS INVESTMENT CORP. Portfolio management FC 100 100 100 100 United States
NATIXIS PRIVATE EQUITY INTERNATIONAL Luxembourg Private Equity holding FC 100 100 100 100 Luxembourg
NATIXIS VENTURE SELECTION International investment fund FC 100 100 100 100 France
COFACE FINANS A/S DANMARK (formerly MIDTFACTORING) Factoring FC 100 100 100 100 Denmark
TKB Receivables management and data FC 100 100 100 100 Netherlands
S.C.I. ALTAÏR 2 (1) Real estate operations FC 100 100 100 100 France
NATIXIS IMMO EXPLOITATION (1) Real estate operations FC 100 100 100 100 France
Lending and fi nancial institution EM 20 20 20 20 France
(4) Total asset transfer in Natixis as at March 31, 2011. (5) Take-over merger in Coface Assicurazioni.
(14) Dilution effect of 24% of Natixis Private Equity Caspian IB. (15) Transfer of Natixis Participations 1’s asset to Natixis on September 30, 2011. (16) Sale of Axeltis S.A. shares by NP 1 to NGAM on August 4, 2011. (17) Total transfer of assets to Natixis on September 30, 2011. (18) Incorporation of Natixis HCP following the acquisition of Coface Finans A/S Danmark to Coface Deutschland. (19) Merged with Natixis Securities Americas LLC on October 1, 2011. (20) Following the sale of 33.33% of shares, the company was deconsolidated, the consolidation thresholds having become non-material. (21) Total transfer of assets to Fructibail on December 31, 2011. (22) Sold to non-group entity on October 30, 2011. (23) Creation in the fourth quarter of 2011.
(28) Newly consolidated entity in the fourth quarter of 2011. (29) Created from the merger between BP Centre Atlantique and BP Sud-Ouest.
In compliance with the assignment entrusted to us by your General meeting, we hereby report to you, for the year ended 31 December 2011, on: • the audit of the accompanying consolidated financial statements of Natixis; • the justification of our assessments; • the specific verifications required by law.
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the consolidated fi nancial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the consolidated fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
The Group uses internal models and methodologies to measure fi nancial instruments that are not traded on an active market, as well as to book certain impairment losses (Notes 5.6, 6.6.7 and 6.18 to the consolidated fi nancial statements). We examined the control procedures relating to the assessment of whether a given market was inactive, to the validation of models and to the defi nition of the parameters used.
The Group recognizes impairment losses and provisions to cover the credit and counterparty risks inherent to its activities (Notes 5.1, 5.2, 5.3, 6.4, 6.15.1 and 7.7 to the consolidated fi nancial statements). We reviewed the control procedures relating to credit and counterparty risk monitoring, the assessment of risks of non-recoverability, and the calculation of the corresponding individual and collective impairment and provisions.
The Group recognized technical provisions in respect of risks related to insurance contracts (Notes 6.8.3, 6.14 and 7.5 to the consolidated fi nancial statements). We examined the methodology used to measure these insurance contracts, as well as the main assumptions and parameters used.
The Group records provisions to cover employee benefi ts (Notes 5.14, 5.15 and 11 to the consolidated fi nancial statements). We examined the methodology used to measure these benefi t obligations, as well as the main assumptions and parameters applied.
This is a free translation into English of the statutory auditors’ report on the consolidated fi nancial statements issued in French and it is provided solely for the convenience of English speaking users. The statutory auditors’ report includes information specifi cally required by French law in such reports, whether modifi ed or not. This information is presented below the audit opinion on the consolidated fi nancial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain signifi cant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated fi nancial statements taken as a whole and not to provide separate assurance on individual account balances, transactions, or disclosures. This report also includes information relating to the specifi c verifi cation of information given in the Group’s management report. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
3 Cash and balances with central banks 5,499 12,136 3,497 3 Government securities and equivalent 22,091 18,393 30,329 23 o/w institutional operations: 5 Bonds and other fi xed-income securities 30,135 28,618 31,974 5 Shares and other variable-income securities 9,246 16,090 14,196 7 Investments and other long-term securities 10,802 10,710 10,258 7 Investments in related subsidiaries and affi liates 15,849 15,402 15,279 4 Operating leases 12 Property, plant and equipment 178 159 182
See note no. Off-balance sheet items – Commitments given 2011 2010 2009
Commitments given to customers 18,750 18,407 19,618 23 o/w institutional operations:
Net gains/(losses) on transactions on securities held for sale 253 72 (6)
The fi nancial statements are presented in accordance with CRC Rule No. 2000-03 as amended for the individual summary fi nancial statements of companies coming under CRBF regulation.
The fi nancial statements of foreign subsidiaries, prepared in accordance with local rules, are restated for the purposes of the separate fi nancial statements in accordance with generally accepted accounting principles in France.
The reversal of the effect of discounting on impairments of non-performing loans associated with the passage of time is recognized under “Interest and similar expenses” on the income statement.
Financial assets that do not have individually-allocated credit risk are included in groups of assets with similar risk characteristics. The composition of these portfolios of similar assets is based on two criteria: geographic risk and sector risk.
5FINANCIAL DATA Parent company fi nancial statements and notes are subsequently specifi cally identifi ed as impaired (specifi c risk), are removed from the collective write-down calculation base.
Loans on the watch list, for which a Basel 2 default has been identifi ed, are written down collectively unless they are already subject to specifi c write-downs.
In accordance with Comité de la réglementation bancaire Regulation No. 90-01 on recognizing securities transactions, as amended, the following rules are applied regardless of the legal form of the security concerned (shares, bonds and notes, treasury bills, certifi cates of deposit, negotiable instruments, promissory notes, etc.). The buying and selling of securities are recorded in the balance sheet at the settlement-delivery date.
Instruments are assigned to one of the following categories based on type and the purpose for which they are held: securities held for trading, securities held for sale, securities held for investment, other long-term investments, investments in associates and investments in related companies.
• Securities held for trading: securities bought or sold from the start with the intention of reselling or repurchasing them in the short term, securities held as part of a market making operation, and securities bought or sold for the purposes of the specialized management of a trading portfolio. When initially recognized, these securities must be traded on an active market with easily obtainable prices representing actual and regularly occurring market transactions on an arm’s length basis. On acquisition, securities held for trading are recognized at the price paid including any accrued interest. Transaction costs are recognized in expenses. At each balance sheet date, they are measured at market value and the grand total of any valuation differences is recognized on the income statement under the heading, “Balance of transactions on securities held for trading”; • Securities held for sale: securities that are not classified as held for trading, held for investment, other long-term investments, investments in associates or investments in related companies. They are reported on the balance sheet at their purchase price, excluding acquisition costs. Any difference between the purchase price (excluding accrued interest) and the redemption price is recognized in income over the remaining life of the securities. They are valued at year end at the lower of their carrying amount or market value. Unrealized losses give rise to the recognition of an impairment loss, whose calculation factors in gains from any hedging transactions conducted. Unrealized gains are not recognized; • Securities held for investment: fixed-income dated securities acquired with the stated intention of holding them to maturity. These securities are recognized at their purchase price, excluding acquisition costs. Any difference between the purchase price and the redemption price is recorded in income over the remaining life of the securities.
In line with regulatory requirements, unrealized losses are not subject to impairment unless there is a strong likelihood that the instruments will be sold before maturity due to unforeseen circumstances and without prejudice to impairments included in provisions for credit losses pursuant to CRC Regulation 2002-03 as amended, if there is a risk of default by the issuer of these instruments. Unrealized gains are not recognized; • Investment securities: investments made on a regular basis with the sole aim of generating a capital gain in the medium-term, without any intention to invest sustainably in the issuing company or to actively participate in its operational management. This business is operated within a separate, specialized and structured department of Natixis; Investment securities are recognized at their acquisition date at the purchase price excluding acquisition costs. They are included in the balance sheet at the lower of their historical cost or value in use, which is determined based on the issuer’s general development outlook and the projected holding period. In particular, for the determination of this value, Natixis refers to the International Private Equity and Venture Capital Valuation Guidelines published in September 2009 by the Association Française des Investisseurs en Capital (AFIC - French Private Equity Investors Association), the British Venture Capital Association (BVCA) and the European Private Equity and Venture Capital Association (EVCA). Unrealized loss is subject to a provision for impairment; • Other long-term securities: investments made by Natixis in the form of securities, with the intention of forging lasting professional relationships and creating a special professional relationship with the issuing company, but without any influence over the management of the corporate entities in which investments were made due to the low percentage of voting rights held. They are recognized at their acquisition date at the purchase price excluding acquisition costs. They are included in the balance sheet at the lower of historical cost or value in use. Unrealized loss is subject to a provision for impairment; • Investments in associates: investments that give Natixis significant influence over the corporate bodies of the issuing companies and strategic stakes for the development of Natixis’ operations. They are recognized at their acquisition date at the purchase price, excluding acquisition costs.
The measurement approaches used are the following, as the case may be: – the net asset value method, – the peer comparison method, – the discounted future cash fl ows (DCF) method.
Also, treasury shares held for distribution to employees are classifi ed as held for sale and follow the corresponding rules.
Income, value adjustments and proceeds on disposal of securities portfolios are recognized as follows: • Income from variable-income securities is recognized as and when received; • Income from Fixed Income securities is recognized based on the accrual method; • Value adjustments and proceeds from the disposal of securities are recognized under different headings depending on which portfolio they belong to: – under “Net revenues” for securities held for trading and securities held for investment,
– under net gains/(losses) on fi xed assets: – for adjustments in the value of securities held for investment (excluding impairment for risk exposure to a counterparty) when there is a high probability of disposal of such securities held for investment due to unforeseen circumstances,
– and for all proceeds from the disposal of securities held for investment; – under “Gains/(losses) on disposals of fi xed assets” for investments in associates and related companies and other long-term securities.
Fixed assets are recognized at acquisition cost plus directly attributable transaction costs and plus accrued borrowing costs during any phase of construction or installation before they come into service.
The notional amount of these instruments is recorded off-balance sheet for internal monitoring and regulatory purposes, but they are not included in the published statement of off-balance sheet items. Details for these instruments are provided in the notes.
Employee benefi ts fall into four categories: • “ short-term benefits”, including salaries, social security contributions, annual leave, employee profit-sharing, incentive plans, top-up contributions and bonuses payable in the twelve months following year-end; • “ termination benefits”, which should be recognized when the entity is demonstrably committed to terminating the employment of an employee before the normal retirement date, or to providing termination benefits as a result of an offer made in order to encourage voluntary redundancy; • “ post-employment benefits”, such as pensions, other supplementary retirement benefits applicable to the banking industry, end-of-career awards and other contractual benefits payable to retirees; • “ other long-term employee benefits”, including long service awards and deferred compensation payable in cash under Employee Retention and Performance Recognition Plans.
The annual payroll costs recognized in respect of defi ned benefi ts plans consist of: • rights vested by beneficiaries over the period; • the interest cost reflecting the impact of unwinding the discount on the obligation; • the expected return on plan assets; • amortization of actuarial gains and losses and past service costs; • the effects of plan curtailments and settlements.
The estimated amount of the expense related to cash-settled variable compensation, subject to the employee’s continued service in accordance with the Employee Retention and Performance Recognition Plans, is recognized over the vesting period.
All of these plans are contingent on satisfying service and performance requirements.
Off-balance sheet receivables, debts and commitments denominated in foreign currencies are converted to euros at the going exchange rate at the balance sheet date through the revaluation of foreign exchange positions. The difference between amounts resulting from the valuation of euro-denominated foreign exchange positions and amounts reported in equivalent eurodenominated foreign exchange positions is reported on the income statement.
No change in accounting method had any impact on the fi nancial statements for the 2011 fi scal year.
INTERBANK AND SIMILAR TRANSACTIONS 143,347 126,850 131,737 * o/w subordinated loans o/w reverse repurchased securities: 61,932 52,604 41,854
Current accounts overdrawn 3,223 4,042 3,963 o/w write-downs of non-performing (85) (86) (147)
Reverse repurchased securities 28,083 21,123 10,319 o/w non-performing o/w write-downs of non-performing o/w write-downs of non-performing (1,068) (1,184) (1,085)
NOTE 9 DISCLOSURES REGARDING SHAREHOLDINGS EXCEEDING THE INVESTMENT THRESHOLD IN FRENCH COMPANIES DURING THE YEAR
Article L.233-15 of the French Commercial Code (in thousands of units)
(in millions of euros) End 2010 Acquisitions Disposals Others End 2011
Special savings accounts 160 140 115 o/w other amounts due 1 13 5
(in millions of euros) Capital Issue premium Legal reserve General reserve
Under Regulation No. 2010-04 on transactions between related parties, Natixis has no additional information to disclose, since these transactions are either excluded from the reporting scope (wholly-owned subsidiaries), or entered into under normal market conditions.
NOTE 29 GAINS (LOSSES) ON SECURITIES HELD FOR SALE AND SIMILAR
Any tax savings or expense generated by consolidation is recognized by Natixis as parent company.
INTEREST RATE INSTRUMENTS 5,951,765 6,009,539 4,653,018 On organized markets 150 131 344 Swaps
EXCHANGE RATE INSTRUMENTS 241,689 198,984 154,445 On organized markets 67,085 645,233 1,075,676 Swaps
Fair value of forward financial instruments (international branches excluded from scope)
NOTE 40 ESTABLISHMENTS AND OPERATIONS IN NON-COOPERATIVES STATES OR TERRITORIES WITHIN THE MEANING OF ARTICLE 238-0A OF THE FRENCH GENERAL TAX CODE
5FINANCIAL DATA Statutory auditors’ report on the company fi nancial statements 5.5 Statutory auditors’ report on the company financial statements
We conducted our audit in accordance with professional standards applicable in France; those standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit involves performing procedures, using sampling techniques or other methods of selection, to obtain audit evidence about the amounts and disclosures in the fi nancial statements. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made, as well as the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
The accounting estimates used in the preparation of the fi nancial statements as at December 31, 2011 were made in a context of uncertainty, related to the public fi nances crises of some of the Eurozone countries and, Greece in particular, which was accompanied by an economic and liquidity crisis and a lack of visibility concerning economic prospects. Such is the context in which we made our own assessments that we bring to your attention in accordance with the requirements of article L.823-9 of the French Commercial Code (“Code de commerce”).
The Company uses internal models and methodologies to measure fi nancial instruments that are not traded on an active market, as well as to book certain impairment losses (Notes 1.6, 18, 28 and 36 to the company fi nancial statements). We examined the control procedures relating to the assessment of whether a given market was inactive, to the validation of models and to the defi nition of the parameters used.
The Company recognizes provisions to cover risks and litigations related to its activity (Notes 1.1, 1.2, 1.6 and 6 to the company fi nancial statements). We examined the methodology used to measure these provisions, as well as the main assumptions applied.
5FINANCIAL DATA Statutory auditors’ special report on related party agreements and commitments 5.6 Statutory a uditors’ s pecial r eport on r elated p arty a greements and c ommitments
Annual General Meeting to approve the fi nancial statements for the year ended 31 December 2011
In our capacity as the Company’s statutory auditors, we hereby submit our report on regulated agreements and commitments.
We are required to inform you, on the basis of the information provided to us, of the terms and conditions of the contractual agreements or commitments indicated to us or that we may have identifi ed in the performance of our engagement. It is not our role to comment as to whether they are benefi cial or to ascertain the existence of any such agreements and commitments. It is your responsibility, in accordance with Article R.225-31 of the French Commercial Code, to assess the benefi ts resulting from these agreements and commitments prior to their approval.
In addition, we are required to inform you in accordance with Article R.225-31 of the Code de commerce concerning the execution during the year of the agreements and commitments already approved by the Annual General Meeting.
We performed the procedures we considered necessary to comply with professional code of the Compagnie Nationale des Commissaires aux Comptes (France’s national association of statutory auditors) relating to this assignment. Our work consisted of verifying that the information provided to us is consistent with the underlying documents from which it was extracted.
I - AGREEMENTS AND COMMITMENTS SUBMITTED FOR APPROVAL BY THE ANNUAL GENERAL MEETING
1.1.1 AUTHORIZATION OF A RELATED PARTY AGREEMENT BETWEEN NATIXIS AND BPCE ON THE CHAPEL DEAL.
On May 11, 2011, the Board of Directors approved an agreement between Natixis and BPCE on the Chapel deal. The Chapel deal is part of GAPC (workout portfolio management), within a structured product called Sahara that better refl ects the rating of high-quality assets held by GAPC. These securities are covered by the “Neptune” guarantee entered into with BPCE in 2009. Simultaneously with Natixis’ buyback of Chapel assets previously housed in Sahara, a guarantee covering Chapel was set up between BPCE and Natixis in the form of a total return swap (TRS), in order to re-establish the equivalent of the Neptune guarantee.
Income recognized by Natixis in respect of this agreement totaled €40,090,976.55 for the fi scal year ended December 31, 2011.
On August 4, 2011, the Board of Directors approved an agreement to sell Natixis Private Equity’s stakes in the asset management companies Seventure Partners, Naxicap Partners, Dahlia Partners, Dahlia Gestion, Caspian Private Equity and Eagle Asia Management for a total of €14,302,466.
1.1.3 AUTHORIZATION OF AN AGREEMENT BETWEEN NATIXIS AND BPCE PERTAINING TO THE “COCCINELLE” PROJECT
This mechanism is based on Natixis’ issuance of a structured product (in the form of a debt security issue) subscribed for by BPCE and covering some of the prudential value of the equitymethod recognition of the cooperative investment certifi cates issued by the Caisses d’Epargne and Banques Populaires, namely the P3CIs. With a nominal value of €6,930,000,000, the P3CIs were fully subscribed for by BPCE.
Corporate offi cers concerned: • Mr. Pérol, Chairman of the BPCE Executive Board, Chairman of the Natixis Board of Directors; • Mr. Gentili, Member of the BPCE Supervisory Board, Natixis Director; • Mr. Patault, Member of the BPCE Supervisory Board, Natixis Director; • Mr. Jeannin, Member of the BPCE Supervisory Board, Natixis Director; • Mr. Klein, Member of BPCE Executive Board, Natixis Director; • Mr. Criton, Member of the BPCE Supervisory Board, Natixis Director; • Mr. Queuille, Member of BPCE Executive Board, Natixis Director; • Mr. Sueur, Vice-Chairman of the Steering and Supervisory Committee of Caisse d’Epargne Ile-de-France, Natixis Director; • BPCE, represented by Mr. Nicolas Duhamel, Chief Financial Officer and Member of the BPCE Executive Board, BPCE’s permanent representative on the Natixis Board of Directors.
On February 22, 2012, the Board of Directors approved a new invoicing agreement pertaining to Natixis’ affi liation with BPCE, replacing the current affi liation agreement (which was presented in the agreements already approved by the General Meeting in section 2.1.1). As the central institution, BPCE receives compensation for the duties completed for Natixis, including: • taking any necessary measures to guarantee its liquidity and capital adequacy; • exercising administrative, technical and financial control of its structure and management; • and ensuring compliance with the legal and regulatory provisions in force, and in particular CRBF Regulation 97.02.
5FINANCIAL DATA Statutory auditors’ special report on related party agreements and commitments
II - AGREEMENTS AND COMMITMENTS ALREADY APPROVED BY THE ANNUAL GENERAL MEETING
2.1.1 INVOICING AGREEMENT BETWEEN NATIXIS AND BPCE PERTAINING TO NATIXIS’ AFFILIATION WITH BPCE
On December 16, 2010, the Board of Directors approved the invoicing agreement between Natixis and BPCE pertaining to Natixis’ affi liation with BPCE.
Expenses recognized by Natixis in respect of this agreement totaled €18,423,231.68 for the fi scal year ended December 31, 2011.
2.1.2 AGREEMENT BETWEEN NATIXIS AND BPCE REGARDING THE PURCHASE OF SECURITIES AS WELL AS THE ISSUANCE AND SUBSCRIPTION OF UNDATED DEEPLY SUBORDINATED NOTES
2.1.3 PRELIMINARY AGREEMENT BETWEEN NATIXIS AND BPCE REGARDING THE GUARANTEE MECHANISM COVERING CERTAIN GAPC ASSETS AND THE AGREEMENTS PERTAINING TO THE GUARANTEE
On November 12, 2009, the Board of Directors approved a number of agreements regarding the guarantee covering certain GAPC assets: • the Financial Guarantee agreement, under which BPCE agrees to grant Natixis a financial guarantee; • the ISDA Master Agreement and appendix, between BPCE and Natixis; • total return swap agreements between Natixis and BPCE, one of which relates to euro-denominated assets and the other to US dollar-denominated assets; • the call option granted by BPCE to Natixis; • the “Miroir NLI” Financial Guarantee between Natixis and Natixis Luxembourg Investissements; • the “Miroir NFP” Financial Guarantee between Natixis and Natixis Financial Products Inc.; • the “Miroir NFUSA” Financial Guarantee between Natixis and Natixis Funding USA, LLC; • the “Miroir Ixis CMNA Australia” Financial Guarantee between Natixis and Ixis CMNA Australia No2 SCA; • the “Miroir NFP” Total Return Swap agreement between Natixis and Natixis Financial Products Inc.; • the “Miroir NREC” Total Return Swap agreement between Natixis and Natixis Real Estate Capital Inc.; • governance arrangements set up in respect of the GAPC guarantee (notably including draft operating charters for the Guarantee Supervision Committee and Workout Portfolio Management Committee).
The change in fair value of the total return swaps led to an expense of €47,225,505.78 for the fi scal year ended December 31, 2011 in respect of Natixis’ activities and income of $18,367,007 in respect of the subsidiaries’ activities. The latter expense was neutralized in Natixis’ accounts by recognizing an offsetting expense vis-à-vis the subsidiaries.
As the premium was recognized immediately in the balance sheet, its revaluation led to the recording of a €33,812,984.35 expense for the 2011 fi scal year.
5 FINANCIAL DATA Statutory auditors’ special report on related party agreements and commitments
Income recognized by Natixis in respect of cancellation payments came to €231,214,196.09 for the 2011 fi scal year.
Income recognized for the activation of guarantees came to €29,558,076.60 for the 2011 fi scal year.
2.1.5 CREDIT AND FINANCIAL GUARANTEE MASTER AGREEMENTS BETWEEN (I) NATIXIS AND BFBP AND (II) NATIXIS AND CNCE
The purpose of these agreements was to allow Natixis to borrow from its two central institutions in return for posting collateral. The amounts lent represent credit facilities granted under the terms of the agreements between the central institutions and SFEF. The terms therefore refl ect the agreement entered into between the central institutions (and all other banks in the marketplace) and SFEF.
Under the agreements, Natixis can indirectly benefi t from the facilities granted by SFEF, according to the following principles: • each central body borrows from SFEF against a pledge of collateral; • all or part of the income arising on this arrangement is used to grant Natixis a loan, in return for a guarantee in the form of collateral, which will be pledged by the central body to SFEF to secure the loan.
Income recognized by Natixis in respect of this agreement came to €1,406,182.82 for the fi scal year ended December 31, 2011.
2.1.7 LETTERS OF JOINT AND SEVERAL GUARANTEES AND COMMITMENTS CANCELLED OR COMPLETED
For joint and several guarantees entered into with CDC Finance – CDC Ixis, the creditors of Ixis CIB for transactions secured under these guarantees that were entered into before the expiry of the respective guarantees may, in accordance with the letter from the Chief Executive Offi cer of CDC dated October 12, 2004, enforce their rights directly against CDC through to the maturity of the transactions guaranteed, as if this commitment had been taken out directly by CDC on behalf of Ixis CIB’s creditors.
On July 10, 2009, the Board of Directors approved the tripartite agreements between Natixis, SFEF and each of the central institutions (BFBP and CNCE), designed to set up trust accounts (comptes d’affectation spéciaux (CAS)) to allow Natixis collateral to be pledged directly to SFEF. The agreements also established SFEF’s direct right of recourse against Natixis. The agreements cover: • “délégation imparfaite” agreements (agreements in which the original debtor remains liable as well as the person instructed to pay on its behalf), establishing SFEF’s right of recourse against Natixis, between (i) Natixis, BFBP and SFEF, and (ii) Natixis, CNCE and SFEF; • subsidiary financial guarantee master agreements, allowing Natixis collateral to be pledged directly to SFEF, between (i) Natixis, BFBP and SFEF, and (ii) Natixis, CNCE and SFEF; • trust agreements, setting up trust accounts (comptes d’affectation spéciaux (CAS)) between (i) Natixis, BFBP and SFEF, and (ii) Natixis, CNCE and SFEF; • representation agreements, allowing Natixis’ central institutions to represent it in its dealings with SFEF, between (i) Natixis and BFBP, and (ii) Natixis and CNCE; • side agreements aimed at limiting the credit risk incurred by Natixis in respect of its central institutions by allowing early repayments to be made at Natixis’ initiative, between (i) Natixis and CNCE, and (ii) Natixis and BFBP; • amendments to the revised intra-group financial guarantee master agreements signed in 2008 with BFBP and CNCE (see section 2.2.1 herein), between (i) Natixis and CNCE, and (ii) Natixis and BFBP.
On August 25, 2009, the Board of Directors approved a number of agreements between Natixis, NTF, SFEF and BPCE, extending the scope of SFEF receivables that may be used to Natixis Transport Finance. This makes use of a similar legal provision to the one approved by the Board of Directors in section 2.1.2 above. The agreements cover: • the trust agreement between NTF, Natixis, BPCE and SFEF setting up a trust account (comptes d’affectation spéciaux (CAS)) in the name of NTF, with Natixis acting as account administrator; • the representation agreement between Natixis and BPCE allowing BPCE to represent Natixis in its capacity as account administrator in its dealings with SFEF; • the intra-group credit master agreements between Natixis and NTF setting up the loans that can be granted by Natixis to NTF.
2.1.10 NATIXIS’ ROLE AS ARRANGER IN THE €25,000,000,000 SECURED BOND ISSUE PROGRAM LAUNCHED BY BANQUES POPULAIRES COVERED BONDS (BPCB)
To enable Natixis to act as the arranger for the €25 billion issue launched by BFBP, on November 23, 2007 the Supervisory Board approved: • credit and financial guarantee master agreements between BPCB, BFBP, Natixis, and initially, seven Banques Populaires banks; • a letter setting out hedging agreements between BPCB, BFBP and Natixis.
On May 13, 2009, the Board of Directors approved an amendment to the credit and fi nancial guarantee master agreement with BFBP, Banques Populaires Covered Bonds (BPCB), Natixis and all Banques Populaires banks. The amendment was designed to incorporate Banque Monétaire and Financière and Compagnie Européenne de Garanties and Cautions as providers of loan collateral subsequently pledged by certain Banques Populaires banks participating in the BPCB program.
5 FINANCIAL DATA Statutory auditors’ special report on related party agreements and commitments 2.1.12 “CLICK’N TRADE” SERVICE AGREEMENT AND PARTNERSHIP BETWEEN IXIS CIB, CNCE AND BANQUE PALATINE
On June 6, 2007, the Supervisory Board approved a service agreement between IXIS CIB, CNCE and Banque Palatine pertaining to CNCE’s transfer to Banque Palatine of the operating and technical management of the “Click’n Trade” website, with CNCE continuing to own the website and remaining the counterparty in forward and cash currency transactions vis-àvis IXIS CIB.
2.2 Agreements and commitments approved in prior years which were not performed during the year
2.2.1 RECIPROCAL FINANCIAL GUARANTEE PERTAINING TO THE “NEPTUNE” DEAL BETWEEN NATIXIS S.A. AND NATIXIS REAL ESTATE CAPITAL INC.
On February 24, 2010, the Board of Directors approved a fi nancial guarantee agreement between Natixis and Natixis Real Estate Capital Inc., mirroring the Neptune guarantee and covering all GAPC assets held by Natixis Real Estate Capital Inc.
This fi nancial guarantee took the legal form of a sub-participation in risk, in order to cover Natixis Real Estate Capital Inc., in proportion with a share of a portfolio of assets held by Natixis Real Estate Capital Inc. at June 30, 2009, following the clear failure to pay sums due in relation to the assets upon the contractually agreed payment date.
2.2.2 AGREEMENT REGARDING MIFID BETWEEN NATIXIS, BPCE AND CRÉDIT FONCIER DE FRANCE (CFF)
This agreement had no fi nancial impact on the 2011 income statement.
On December 18, 2008, the Supervisory Board: • adopted regulations for the closed collective pension scheme insofar as those regulations define the potential rights of Members of the Executive Board eligible to benefit from the scheme, provided that the Members were appointed to the Board between November 27, 2006 and December 15, 2008. It also closed the scheme to any new Members of the Executive Board (the regulations exclude any compensation resulting from the termination of professional relations with Members of the Executive Board); • regarding the collective scheme, agreed to continue offering in 2009 the provident insurance scheme available to the Chief Executive Officers of the Banques Populaires banks to Members of Natixis’ Executive Board, as there is conclusive evidence that the scheme adapts the guarantees applicable to all former Natixis Banques Populaires personnel to the specific situation of each Member; • regarding severance pay and retirement compensation, approved the decision not to apply the provisions regarding early termination or retirement compensation arrangements for the Chief Executive Officers of the Banques Populaires banks to Natixis’ corporate officers appointed after May 1, 2005.
These agreements had no fi nancial impact on the 2011 income statement.
On June 15, 2011, the Supervisory Board approved letters of joint and several guarantees and commitments between IXIS CIB and: • Natixis Financial Products Inc. (formerly IXIS Financial Products Inc.) for the USMTN issue. The guarantee given by Ixis CIB in connection with this agreement can be invoiced at 0.02%; • Natixis Financial Products Inc. (formerly IXIS Financial Products Inc.) for the issue of warrants. The guarantee given by Ixis CIB in connection with this agreement can be invoiced at 0.02%; • Natixis Securities North America Inc. (formerly IXIS Securities NA) for securities lending transactions. The guarantee given by Ixis CIB in connection with this agreement can be invoiced at 0.02% per year, applicable to the overall exposure with average risk over the period.
On December 19, 2001, the Supervisory Board approved a de facto association agreement between CDC, CNCE (acquired by CDC IXIS) and IXIS CIB (formerly CDC IXIS Capital Markets). This agreement, automatically renewed every three years, replaced the agreement entered into on August 30, 1996 between CDC and CDC Ixis Capital Markets (formerly CDC Marchés).
2.2.7 AGREEMENTS TO TRANSFER SOFTWARE USER RIGHTS AND SERVICES BETWEEN IXIS CIB AND CFF
On June 15, 2006, the Supervisory Board approved agreements to transfer software user rights and services between IXIS CIB and CFF.
2.3.1 AGREEMENT ON A SEVERANCE PAYMENT IN THE EVENT OF THE EARLY TERMINATION OF THE CHIEF EXECUTIVE OFFICER
On February 22, 2011, the Board of Directors approved an agreement in the event of the performance-related early termination of the Chief Executive Offi cer, in favor of Mr. Laurent Mignon, capping it at one year of maximum potential compensation (fi xed and variable).
No severance payment shall be given to the Chief Executive Offi cer if he leaves on his own initiative to serve in a new position or if he changes positions within the BPCE group.
This is a free translation into English of the statutory auditors’ report on the on Related Party Agreements and Commitments issued in French and it is provided solely for the convenience of English speaking users. This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
Legal information 6.1 NATIXIS BYLAWS 396 6.2 GENERAL INFORMATION ON NATIXIS’ CAPITAL 402 6.2.1 Form and transfer of shares (CHAPTER II, Article 4 of the bylaws) 402 6.2.2 Share capital 402 6.2.3 Authorized but unissued capital – Capital increase authorizations 402 6.2.4 Securities not conferring rights over the share capital 404 6.2.5 Other securities giving access to capital 404 6.2.6 Changes in the capital over the last fi ve fi scal years 406 6.2.7 Other information on the capital 406 6.3 DISTRIBUTION OF SHARE CAPITAL AND VOTING RIGHTS 407 6.3.1 Distribution of share capital at December 31, 2011 407 6.3.2 Ownership of shares by members of management and supervisory bodies 407 6.3.3 Treasury shares 407 6.3.4 Employee shareholding 408 6.3.5 Changes in the shareholder base over the past three years 408 6.3.6 Natural or legal persons exercising or potentially exercising control over Natixis 408 6.4 INFORMATION FROM ARTICLE L.225-100-3 OF THE FRENCH COMMERCIAL CODE 409 6.5 PURPOSE AND DRAFT RESOLUTIONS SUBMITTED TO THE GENERAL SHAREHOLDERS’ MEETING OF MAY 29, 2012 410 6.5.1 Report of the Board of Directors on the resolutions submitted to the General Shareholders’ Meeting 410 6.5.2 Agenda and draft resolutions of the ordinary general shareholders’ meeting of May 29, 2012 414
Chapter I: Form Of The Company – Name – Registered Office – Duration – Corporate Purpose
The corporate purpose, in France and elsewhere comprises: • the conduct of all banking business and related businesses as per the banking law; • the provision of all investment services as defined in the French Monetary and Financial Code; • the performance of the specific assignments entrusted by the French State in the economic and financial area, in the framework of special agreements; • the performance of all brokerage business; • the acquisition of interests in companies, groups or associations with a direct or indirect connection with the activities referred to above; • as well as the completion of all private and commercial transactions.
The Company may, under the conditions stipulated by the laws and regulations in force, request of any organization or authorized intermediary communication of all information regarding the holders of securities conferring immediately or in the future voting rights in its shareholders’ meetings, in particular their identity, nationality, address, the number of securities they own and the restrictions that these securities may be subject to.
In the event of non-compliance with the notifi cation requirement provided for in the previous paragraph and upon request, recorded in the minutes of the meeting from a shareholder representing at least 1.0% of the voting rights, the shares exceeding the fraction which should have been declared will lose their voting rights for a period of 2 years following the notifi cation compliance date.
The directors are appointed by the Ordinary General Shareholders’ Meeting; however, the Board has the right, in the event of the vacancy of one or more seats, due to death or resignation, to appoint replacements by co-opting, each for the period remaining in his predecessor’s term, subject to ratifi cation by the next General Shareholders’ Meeting.
When it has been established, in accordance with the regulations in force, that the percentage of the capital owned by employee shareholders exceeds the threshold established by law, a director is appointed by the Ordinary General Shareholders’ Meeting from among the candidates designated for this purpose by the Supervisory Board of the employee mutual fund(s). The director appointed in this capacity is not taken into account in calculating the maximum number of directors referred to in the fi rst paragraph of this Article.
Directors are appointed for a term of six (6) years. They may be re-elected. A director’s duties end at the end of the Ordinary
In the event of an Emergency, the notice and convening periods of the Board of Directors are not subject to Article 11.1 above, provided that the Chairman of the Company’s Board of Directors has: • given prior notice to the directors providing the reason for the Emergency as per the foregoing definition; and
Article 13 – Compensation of the members of the Board of Directors
The choice between these two Executive Management procedures is made by the Board of Directors which may take valid decisions only if: • the agenda containing this item has been sent out at least 15 days in advance of the Board Meeting; • at least two-thirds of the directors are present or represented at the meeting.
The Chief Executive Offi cer may be dismissed by the Board of Directors at any time.
Deputy Chief Executive Offi cers may be dismissed at any time by the Board of Directors on the proposal of the Chief Executive Offi cer.
Shareholders’ meetings include all the shareholders whose securities have no outstanding payments due.
For holders of registered shares, such entry in the register by D-3 is suffi cient to enable them to attend the meeting.
The proxy or vote cast before the meeting by this electronic method, as well as the receipt that is issued for it, will be considered irrevocable written documents that are enforceable in all cases, it being clearly stated that in the event of the disposal of shares before the third business day preceding the meeting at zero hour, Paris time, the Company will, as a result, invalidate or change, depending on the case, the proxy or vote cast before that date and time.
Shareholders’ meetings are chaired by the Chairman of the Board of Directors, or in the event of his absence, by one of the Deputy Chief Executive Offi cers, or by a director appointed by the General Shareholders’ Meeting.
Each member of the General Shareholders’ Meeting is entitled to as many votes as the number of shares he owns or represents.
It determines the amount of the attendance fees to be allocated to the Board of Directors.
Chapter V: Fiscal year – Parent company financial statements – Appropriation of earnings
The Ordinary General Shareholders’ Meeting may offer an option to the shareholders, for all or a part of the dividend distributed, between payment of the dividend in cash or in shares. In this second option, payment will take through the allocation of Company shares in accordance with the applicable legal and regulatory provisions.
6 LEGAL INFORMATION General information on Natixis’ capital 6.2 General information on Natixis’ capital 6.2.1 FORM AND TRANSFER OF SHARES (CHAPTER II, ARTICLE 4 OF THE BYLAWS)
The share capital amounted to €4,931,753,420.80 at December 31, 2011, divided into 3,082,345,888 fully paid-up shares of €1.60 each.
This same meeting resolved in particular that under certain circumstances, the Board of Directors may: • determine the issue price of the shares, within the limit of 10% of the share capital per year, as part of a capital increase with waiving of preferential subscription rights; • decide to increase capital with waiving of preferential subscription rights through an offer as set out in Article L.411-2(II) of the French Monetary and Financial Code (private placement); • decide to increase capital with waiving of preferential subscription rights with a view to remunerating contributions in kind granted to the Company, within the limit of 10% of the share capital at the time of the issue;
• decide to increase capital via the incorporation of premiums, reserves, retained earnings or other items; • decide to increase the number of securities to be issued, within the legal limits, in the event of capital increases with or without preferential subscription rights; • decide to increase the share capital reserved for members of an employee savings plan, up to the par value limit of fortyeight (48) million euros.
SUMMARY TABLE OF AUTHORIZATIONS GRANTED TO THE BOARD OF DIRECTORS BY THE GENERAL SHAREHOLDERS’ MEETING
Amount used 05.27.2010 18 In order to allocate free shares €233m (a) 38 months €10,552,493 €11,029,478
In order to set the issue price in the event of an issue with cancellation of shareholders’ preferential subscription rights, subject to a limit of 10% of the capital the share capital (a)
In order to carry out a capital increase, through the issue – with preferential subscription rights maintained –
of shares and/or securities providing access to the capital of the Company and/or the issue of securities entitling holders to the allotment of debt securities €3bn 26 months none none
In order to carry out a capital increase through the issue- without preferential subscription rights maintained – of shares and/or securities giving access to the capital of the Company and/or the issue of securities entitling holders to the allotment of debt securities €3bn (b) 26 months none none
In order to determine the issue price of new shares in the event of a capital increase without preferential subscription rights maintained the share capital (b) 26 months none none
Company through an offer as set out in Article L.411-2 (II) of the French
In order to increase the number of securities to be issued in the event of capital increases with or without preferential subscription rights initial issue (b) 26 months none none
On November 25, 1985, Banque Française du Commerce Extérieur issued 140,000 non-voting shares with a par value of FRF5,000 (€762.25). The coupon is payable annually on November 25. Redemptions are on the initiative of the borrower. At December 31, 2011, 64,000 non-voting shares were outstanding.
These options were granted up to 2005: • to employees and corporate officers of Natexis Banques Populaires and other companies in which Natexis Banques Populaires directly or indirectly held majority interests; • to employees and corporate officers of Banque Fédérale des Banques Populaires, Banques Populaires and entities that were more than 50%-owned either directly or indirectly, exclusively or jointly, by Banque Fédérale des Banques Populaires or affiliated institutions.
No stock options were granted in respect of fi scal year 2006.
No Natixis stock options were granted in 2009, 2010 or 2011 .
6 LEGAL INFORMATION General information on Natixis’ capital 6.2.6 CHANGES IN THE CAPITAL OVER THE LAST FIVE FISCAL YEARS
Payment of the dividend in shares 42,342,502 67,748,003.20 329,424,665.56 2008 expenses offset against additional paid-in capital (66,113,652.29)
P ayment of the dividend in shares 174,208,195 278,733,112 289,185,603.70 6.2.7 OTHER INFORMATION ON THE CAPITAL
6.3.2 OWNERSHIP OF SHARES BY MEMBERS OF MANAGEMENT AND SUPERVISORY BODIES
Board members, including natural and legal persons, owned 72.26% of Natixis’ capital at December 31, 2011 (almost all of this being owned by BPCE).
The table below shows the number and percentage of shares held as treasury shares at December 31, 2010 and December 31, 2011.
Furthermore, in accordance with Articles L.225-197-1 and following of the French Commercial Code and resolution 18 adopted by the shareholders during the General Meeting of May 27, 2010: • the Natixis Board of Directors, at its meeting on August 5, 2010, decided to grant 6,595,308 free shares to certain employees of Natixis and its subsidiaries by virtue of their employment contracts; • the Natixis Board of Directors, at its meeting on February 22, 2011, decided to grant 6,893,424 free shares to certain employees of Natixis and its subsidiaries by virtue of their employment contracts.
6.3.5 CHANGES IN THE SHAREHOLDER BASE OVER THE PAST THREE YEARS
6.3.6 NATURAL OR LEGAL PERSONS EXERCISING OR POTENTIALLY EXERCISING CONTROL OVER NATIXIS
The application of corporate governance rules and the rules set out for Board Members prevent the risk of abusive exercise of control.
6 LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 29, 2012 6.5 Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 29, 2012 6.5.1 REPORT OF THE BOARD OF DIRECTORS ON THE RESOLUTIONS SUBMITTED TO THE GENERAL SHAREHOLDERS’ MEETING
You may refer to this registration document for the statement on the fi nancial condition, activity and results of the Company and its group during the past fi scal year and the various disclosures required by the legal and regulatory provisions in effect.
Eleven resolutions will be submitted to the shareholders at the Ordinary General Shareholders’ Meeting to be held at 3 p.m. on May 29, 2012 at the Carrousel du Louvre – 99, rue de Rivoli 75001 Paris.
The resolutions concern fi scal year 2011 (approval of the fi nancial statements and related party agreements), the appointment of directors, the reappointment of Statutory Auditors and trading by the Company in its own shares.
In resolutions One and Two, the General Shareholders’ Meeting is asked to approve the Natixis 2011 parent company and consolidated fi nancial statements, respectively.
Resolution Four concerns the approval of related party agreements, pursuant to Articles L.225-38 and following of the French Commercial Code, authorized by the Board of Directors during fi scal year 2011. These commitments and agreements are presented in the Statutory Auditors’ special report along with those entered into prior to fi scal year 2011 and still effective, which do not require new approval by the shareholders.
Resolutions Five through Seven ask the General Shareholders’ Meeting to appoint three new Natixis directors to replace Messieurs Mateu, Criton and Jeannin, who resigned. The persons in question are: • Stéphanie Paix, aged 47, Chairman of the Management Board of the Caisse d’Epargne Rhône Alpes ; • Catherine Halberstadt, aged 53, Chief Executive Officer of Banque Populaire Massif Central ; • Alain Condaminas, aged 54, Chief Executive Officer of Banque Populaire Occitane.
The new directors will be appointed for a term of six (6) years, i.e. until the end of the Ordinary General Shareholders’ Meeting called in 2018 to approve the fi nancial statements for the fi scal year ending December 31, 2017.
Since the term of offi ce of the substitute Statutory Auditors is due to expire at the close of this meeting, resolution Nine proposes that Mr. Franck Boyer be appointed as substitute Statutory Auditors for a term of six years expiring at the end of
These proposals of reappointment follow the recommendations of the Audit Committee of February 17, 2012, presented in Board of Directors on February 22nd, 2012.
Resolution Ten asks the General Shareholders’ Meeting to renew for a period of 18 months the authorization to buy back shares granted to the Board of Directors at the last General Shareholders’ Meeting on May 26, 2011.
These shares may be bought, sold or transferred at any time (except in the event of a public offer of the Company’s shares) by any means (including block trades or the use of derivatives) in accordance with the regulations in effect (see the table below summarizing the fi nancial resolutions presented to the shareholders).
REPORT OF THE BOARD OF DIRECTORS ON THE RESOLUTIONS SUBMITTED TO THE GENERAL SHAREHOLDERS’ MEETING: SUMMARY TABLE ON THE FINANCIAL RESOLUTIONS SUBMITTED TO THE GENERAL SHAREHOLDERS’ MEETING BY THE BOARD OF DIRECTORS: No. Subject Duration Reasons for possible uses of the delegated power 10 Authorization to trade in shares of the Company 18 months Possible objectives for share buybacks by your Company: ● Implementing option plans to buy shares of the Company or similar plans ● Awarding or transferring shares to employees ● Awarding free shares to employees or corporate offi cers ● Generally, honoring obligations related to stock option programs or other share allocations to employees or corporate offi cers of the issuer or a related company ● Tendering shares upon exercising rights attached to securities giving access to the capital ● Canceling all or a portion of the securities bought back ● Tendering shares in connection with acquisitions, mergers, spin-offs or asset transfers ● Promoting the share in the secondary market or the liquidity of the Company’s share through an investment services provider in connection with a liquidity contract that meets the terms of the compliance charter recognized by the AMF ● Any other goal authorized or that may be authorized by law or regulations in effect.
Maximum purchase price of €5 per share (adjustable particularly in the case of a reverse split)
6 LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 29, 2012 6.5.2 AGENDA AND DRAFT RESOLUTIONS OF THE ORDINARY GENERAL SHAREHOLDERS’ MEETING OF MAY 29, 2012
• Report of the Board of Directors and of the Statutory Auditors on the Company’s activities during the year ended December 31, 2011; • Report of the Chairman of the Board of Directors; • Approval of the 2011 parent company financial statements; • Approval of the 2011 consolidated financial statements; • Appropriation of earnings; • Statutory Auditors’ special report and approval of the agreements and commitments covered by Articles L.225-38 and following of the French Commercial Code; • Appointment of directors; • Reappointment/appointment of permanent and substitute Statutory Auditors; • Trading by the Company in its own shares: powers delegated to the Board of Directors; • Powers to complete formalities.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the report of the Chairman of the Board of Directors on the structure of the Board, preparation and organization of the Board’s work and the internal control and riskmanagement procedures established by the Company, the report of the Board of Directors on the consolidated fi nancial statements and the management report relating thereto, and the reports of the Statutory Auditors on the consolidated fi nancial statements for fi scal year 2011, hereby approves the 2011 consolidated fi nancial statements as presented, including the balance sheet, income statement and notes to the fi nancial statements, as well as the transactions refl ected in these fi nancial statements or summarized in these reports.
The shareholders hereby resolve to appropriate the distributable earnings as follows: To the legal reserve (5% of the earnings for the fi scal year) €43,671,828.74
The dividend is set at €0.10 per share for each of the 3,082,345,888 shares entitling holders to dividends. For individual benefi ciaries who are residents for tax purposes in France, this dividend will be taken into account automatically by law to determine total gross income subject to the progressive income tax scale, and will be eligible for an allowance of 40% of the gross amount received (Article 158-3-2 of the French General Tax Code). However, this dividend may be subject, at the benefi ciary’s discretion, to an optional deduction at a fl at rate of 19% (Article 117 quater of the French General Tax Code). All of the Company’s shares are eligible for this tax treatment.
In accordance with legal provisions, the shareholders hereby note that for the three fi scal years prior to fi scal year 2011, the following dividends were distributed: Fiscal year Number of shares remunerated Dividend per share
RESOLUTION FOUR (APPROVAL OF THE AGREEMENTS AND COMMITMENTS COVERED BY ARTICLES L.225-38 AND FOLLOWING OF THE FRENCH COMMERCIAL CODE)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the special report of the Statutory Auditors on the agreements and commitments subject to the provisions of Articles L.225-38 and L.225-40 to L.225-42 of the French Commercial Code, hereby approves all provisions of this report and the new agreements mentioned therein, previously authorized by the Board of Directors during the fi scal year ended December 31, 2011.
Stéphanie Paix has already indicated that she accepts this appointment and that she does not hold any offi ce, and is not subject to any measure likely to prevent her from performing this role.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, hereby appoints Catherine Halberstadt as director, replacing Jean Criton, who resigned, with effect from the end of this General Shareholders’ Meeting, for a term of six (6) years ending at the close of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending December 31, 2017.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the report of the Board of Directors noting the expiry of the term of offi ce as permanent Statutory Auditor of the fi rm Mazars S.A. at the end of this meeting, resolves to reappoint, as permanent Statutory Auditor, the fi rm Mazars S.A.
(Tour Exaltis, 61 Rue Henri Régnault - 92400 Courbevoie, France), to be represented by Michel Barbet-Massin and Emmanuel Dooseman, for a term of six years, expiring at the end of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending December 31, 2017.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the report of the Board of Directors noting the expiry of the term of offi ce as substitute Statutory Auditor of Patrick de Cambourg at the end of this meeting resolves to appoint Mr. Franck Boyer, Tour Exaltis, 61 rue Henri Regnault 92400 Courbevoie, as substitute Statutory Auditor, for a term of six years, expiring at the end of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending December 31, 2017.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the report of the Board of Directors and in accordance with the provisions of Articles L.225-209 and following of the French Commercial Code, hereby authorizes the Board of Directors, with the right to sub-delegate said powers under the conditions established by law, to buy back the Company’s shares or to arrange for them to be bought back and: 1) resolves that these shares may be purchased so as to: – implement any Company stock option plan in accordance with the provisions of Articles L.225-177 and following of the French Commercial Code or any similar plan; – award or transfer shares to employees in connection with their share of Company profits or implement any Company or group employee savings plan (or similar plan) under the conditions provided for by law, in particular Articles L.3332-1 and following of the French Labor Code; – allocate free shares in accordance with the provisions of Articles L.225-197-1 and following of the French Commercial Code; – generally, honor obligations related to stock option programs or other share allocations to employees or corporate officers of the issuer or a related company; – tender shares upon exercise of rights attached to securities giving access to capital; – cancel all or a portion of the shares bought back accordingly; – tender shares (for exchange, payment or other reason) in connection with acquisitions, mergers, spin-offs or contributions; – promote Natixis shares in the secondary market or the liquidity of the Natixis share through an investment services provider in connection with a liquidity contract that meets the terms of the compliance charter recognized by the French Financial Markets Authority (Autorité des Marchés Financiers – AMF).
The maximum purchase price under this resolution will be fi ve (5) euros per share (or the equivalent value of this amount on the same date in any other currency). This maximum price applies only to purchases decided from the date of this meeting and not to forward transactions entered into by virtue of an authorization given at a previous General Shareholders’ Meeting and providing for purchases of shares subsequent to the date of this meeting. The shareholders delegate to the Board of Directors, in the event of a change in the par value of the share, capital increases by capitalization of reserves, free share allocations, splitting or reverse-splitting of shares, distribution of reserves or of any other assets, redemption of capital, or any other transaction affecting the share capital, the power to adjust the maximum purchase price indicated above so as to take into account the impact of these transactions on the share value; 4) resolves that the aggregate amount allocated to the share buyback program authorized above may not exceed €154,117,294; 5) fully empowers the Board of Directors, with the right to subdelegate said power under the conditions established by law, to decide upon and implement this authorization, to specify its terms and conditions if necessary and to determine its procedures, in order to carry out the buyback program and, in particular, to place any stock market order, enter into any agreement, allocate or reallocate the shares acquired to the objectives sought under the applicable legal and regulatory provisions, establish the terms and conditions according to which the rights of holders of securities or options will be protected, if appropriate, in accordance with legal, regulatory or contractual provisions, make any filings with the AMF and any other competent authority, and complete all other formalities and, in general, do whatever is necessary.
6 LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 29, 2012
7.1 STATEMENT BY THE PERSON RESPONSIBLE FOR THE REGISTRATION DOCUMENT 420 7.2 DOCUMENTS AVAILABLE TO THE PUBLIC 421 7.3 ANNUAL INFORMATION REPORT 422 7.3.1 Information published with the AMF 422 7.3.2 Issues and prospectuses 423 7.3.3 Information published in the “BALO” 423 7.3.4 Filings with the Clerk of the Paris Tribunal de Commerce 423 7.3.5 Information published in the French offi cial legal announcement publication 424 7.3.6 Investors presentations 424 7.3.7 Information published in the French offi cial legal announcement publication 424 7.4 CROSS-REFERENCE TABLE OF REGISTRATION DOCUMENT 425 7.5 CROSS-REFERENCE TABLE FOR THE ANNUAL FINANCIAL REPORT 427 7.6 SOCIAL AND ENVIRONMENTAL CROSS-REFERENCES 428
7 ADDITIONAL INFORMATION Statement by the Person responsible for the registration document 7.1 Statement by the Person responsible for the registration document
Available on the Natixis website www.natixis.com under Investor Relations / Regulated Information in France and on the Autorité des Marchés Financiers website www.amf-france.org: Date of publication Document description 04/21/2011
(combined annual and extraordinary general meeting) of May 26, 2011 05/09/2011 May 26, 2011 General Shareholders’ Meeting: Preparatory documents 05/11/2011 Number of shares and voting rights in April 30, 2011 05/12/2011 Press releases: First quarter 2011 results 06/17/2011 Number of shares and voting rights in May 31, 2011 06/29/2011 Press releases: Natixis bought back “Titres participatifs”
07/04/2011 Press releases: The 2010 dividend paid 85% in new shares 07/06/2011 Situation of liquidity contract at June 30, 2011 07/07/2011 Number of shares and voting rights in June 30, 2011 07/15/2011 Exposure to European sovereign risk 08/04/2011 Press releases: Second quarter 2011 results 08/10/2011 Number of shares and voting rights in July 31, 2011 08/29/2011 First update of the 2010 registration document and Half-Year Financial Reports 09/16/2011 Number of shares and voting rights in August 31, 2011 10/07/2011 Number of shares and voting rights in September 30, 2011 11/09/2011 Press releases: Third quarter 2011 results 11/16/2011 Number of shares and voting rights in October 31, 2011 12/07/2011 Number of shares and voting rights in November 30, 2011 01/09/2012 Number of shares and voting rights in December 31, 2011 01/09/2012 Situation of liquidity contract at December 31, 2011 02/09/2012 Number of shares and voting rights in January 31, 2012 02/23/2012 Press releases: Fourth quarter and full-year 2011 results
Notifi cation to attend the General Shareholders’ Meeting of May 26, 5/30/2011 Quarterly fi nancial results at March 31, 2011 1102979 6/03/2011
Shareholders’ Meeting of May 26, 2011 1103213 8/10/2011 Quarterly fi nancial results at June 30, 2011 1105199 7.3.4 FILINGS WITH THE CLERK OF THE PARIS TRIBUNAL DE COMMERCE
Available from the Clerk of the Paris Tribunal de Commerce de Paris, listed on the website www.infogreffe.com.
Excerpt from the Minutes of the Board of Directors’ meeting of February, 2011: Co-opting of a director 22455 6/06/2011
Excerpt from the Minutes of the Combined Shareholders’ Meeting of May 26, 2011: Decision to carry out a capital increase – Delegation of powers
7 ADDITIONAL INFORMATION Annual information report 7.3.5 INFORMATION PUBLISHED IN THE FRENCH OFFICIAL LEGAL ANNOUNCEMENT PUBLICATION
Dates Presentations 06/10/2011 Goldman Sachs Conference 06/14/2011 BPCE Debt Investor Day 06/28/2011
Article L. 225-100 of the French Commercial Code 202 to 333; 336 to 384
● Analysis of results 10 to 31; 129-130; ● Analysis of fi nancial position 129 to 134
Report by the Chairman of the Board on corporate governance, internal controls and risk management (Article L.225-37 of the French Commercial Code) 110 to 124 10. Statutory Auditors’ report on the Chairman’s Report 125
All other chapters of reference documents fi led under numbers D.11-0236 and D.10-0375 that are not mentioned above are either of no material interest to investors or covered elsewhere in this registration document.
The report of the Board of Directors or the Executive Board presents, (…), the way in which the company takes into account the social and environmental consequences of its activity, as well as its social commitments in terms of sustainable development 1.2 40
Labor relations ● The organization of employer-employee communication - including regulation and procedures regarding information, consultation and negotiation with personnel ● Collective bargaining agreements Art. 148–2 4 LA4 54
Health and safety ● Health and safety standards ● If applicable, agreements signed with unions or employee representatives in terms of health and safety at work Art. 148–2 5 LA6, LA8, LA9 56
● Company organization to consider environmental issues and, if applicable, evaluation or certifi cation procedures for environmental concerns.
Pollution and waste management ● The prevention, reduction or compensation of air, water and land emissions that seriously damage the environment ● The prevention of waste production, recycling and disposal ● Taking into account noise pollution and, where relevant, all types of pollution specifi c to a particular activity Art. 148–3 1
Contribution to adapting to and fi ghting climate change ● Greenhouse gas emissions
• The frequency and severity of work-related accidents and the recording of occupational diseases
• Where relevant, specific professional training programs for employees Art. 148–2 6 LA11, LA12 56
● The amount of environmental risk guarantees and provisions, except if this information could be seriously damaging to the company in the event of litigation Art. 148–3 7 -
Subcontractors and suppliers ● The importance of sub-contracting and the social and environmental responsibilities in relation to service providers and sub-contractors Art. 148–2 9 HR1, HR2 48
The independent third-party organization called to give its opinion (...) on social and environmental information that appears or should appear on the report is designated by the Chief
Executive Offi cer or Chair of the managing Board for a period that may not exceed six fi scal years 3.13 63
Association de défense des actionnaires minoritaires/Association for the defense of minority shareholders
Association pour faciliter l’insertion professionnelle des jeunes diplômés/Association for the professional integration of recent graduates
Association générale des institutions de retraite des cadres/General association for managers’ pension institutions
Association pour le régime de retraite complémentaire des salariés/Association for the employee complementary pension scheme
Confédération de l’artisanat et des petites entreprises du bâtiment/Confederation of artisans and small companies in the building sector
de Contrôle Prudentiel/French Credit Institutions and Investment Firms Committee, which has become the Regulatory Control Body
CGPI Conseiller en Gestion de Patrimoine Indépendant/Independent Financial Advisor or Wealth advisor
CRBF Comité de la Réglementation Bancaire et Financière/Banking and Financial Regulation Committee
Établissement et service d’aide par le travail/Establishments where handicapped persons can work in special conditions
IDFC Infrastructure Development Finance Company lFACl Institut français de l’audit et du contrôle internes/French Institute of Internal Auditing and Control
LGD Loss Given Default (Basel 2 credit risk indicator corresponding to loss in the event of default)
Prêt couvrant les Certifi cats Coopératifs d’Investissements/Loan covering the Cooperative investment certifi cates
Plan d’adaptation au contexte économique et concurrentiel/Plan for adaptation to the competitive and economic context
SGAR Supervision et gestion active des risques/Supervision and active management of risks