The Banque Populaire Group’s CAR (‘Caisse Autonome des Retraites’) pension fund, for which Natexis employees from the former Caisse Centrale des Banques Populaires were also eligible, was closed on December 31, 1993, in accordance with the professional agreement of September 13, 1993, applicable to the Banque Populaire banks by the Group agreement of
As regards pension funds specific to Natexis Banques Populaires, the former BFCE fund is at breakeven,while the former Crédit National fund shows a small deficit betwewen reserves and commitments.
For end-of-career allowances, consolidated entities cover all or part of their commitments through insurance policies with ABP Vie, the life insurance subsidiary of Natexis Banques Populaires, which is fully consolidated.
The Group’s liabilities in respect of long-service awards are calculated on a prospective basis, similar to that used for end-ofcareer allowances.
Number of employees (1) 14,098 13,465 (1) Average number of full-time equivalents 187NATEXIS BANQUES POPULAIRES
The main actuarial assumptions made as at December 31, 2005, are as follows: The drift rate for healthcare expenses is 4.5%, of which 2% relates to inflation and 2.5% to the “generation” effect.
For end-of-career allowances and long service awards, employee turnover is calculated by age bracket and grade based on a three-year average.The rate is 0% for employees over 55. Future salary increases are estimated by grade (ranging from 4.2% to 4.7%) based on a constant population and a three-year average.
in € millions Supplementary End-of-career Long-service Other Total pensions allowances awards
Items not recognized under IAS 19 7 9 - 3 19 Remaining changes in pension schemes - - - - -
Benefits paid over the period (1) (4) (2) (4) (10) Benefits vested over the period - 7 - 2 9
Expected gross return on plan assets (6) 1 - - (5)
Change in scheme over the period - (12) /////// - (12)
Year Allocation Number of Exercisable Expiry Exercise Options in Fair value date options as of date price circulation granted at end-2005 in thousands of euros Year 2005 Charge
- Private Equity and Wealth Management [2] comprises the private equity business of Natexis Private Equity and the wealth management business conducted by Banque Privée Saint Dominique and Natexis Private Banking Luxembourg.
- Services [3] includes Banking, Financial and Technology Services together with Asset Management (excluding Wealth Management).The Banking, Financial and Technology Services business line develops and markets a wide range of banking and financial services for banks and other institutions, including outsourcing services. Asset Management is principally conducted by Natexis Asset Management (fund management ), Natexis Assurances (insurance) and Natexis Interépargne (employee benefits planning).
- Receivables Management [4] comprises the credit insurance and credit management services activities conducted by Coface together with Natexis Factorem’s factoring business.
- Other businesses [5] correspond to activities conducted by Natexis Banques Populaires which are not businesses in the true sense of the term, including its activities as a holding company of direct subsidiaries. Net banking income from this segment includes income from treasury transactions, real estate revenues and revenues from institutional activities conducted on behalf of the State. General operating expenses correspond to headquarters expenses not allocated to the core businesses.“Other businesses” also includes certain consolidation adjustments that cannot be allocated to the core businesses.
in € millions Corporate & Private Services Recei- Other Intragroup Other Total Institutional Equity vables busi- & amounts
Held-to-maturity financial assets - - 6,973 121 - (41) - 7,053 in € millions Corporate & Private Services Recei- Other Intragroup Other Total Institutional Equity vables busi- & amounts
Financial liabilities at fair value through profit or loss 5,285 5 6 - 50 (58) - 5,288
Share of income of associates 10 2 - - 1 - 14
Change in value of goodwill 2 - - - - - 2
Technical reserves of insurance companies 25,014 1,134 28 19 42 - 26,236
XII.1 - Guarantee commitments Non-financial guarantee commitments given (or received) correspond to contracts entailing an obligation (or right) to give (or receive) non-financial assets in the event of default by the debtor.
IAS recognizes three types of financial guarantee: - guarantees granted (received) upon the transfer of financial assets/liabilities; - financial guarantees treated as derivative financial instruments; these are credit derivatives (see table on derivative financial instruments for details); - financial guarantees that meet the definition of an insurance contract and are accounted for as insurance contracts.
Real estate guarantees 672 709 Tax and other bonds 1,001 1,118 Other bonds and endorsements 5,399 5,393 Other guarantees 9,695 8,063
Financing commitments received From banks 7,278 5,872 From customers 0 0
The following financing commitments fall within the scope of IAS 39: - financial liabilities at fair value through profit or loss. If an entity has a practice or reselling or securitization of credits just after they are issued, these loans are subject to IAS 39 from the commitment phase - those which are subject to settlement (i.e. disposal); - those which result in a loan below market conditions.
Other financing commitments covered by IAS 37: A financing commitment given is a contingent liability, defined by IAS 37 as: - a possible obligation arising from past events whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise; or - a present obligation arising from past events but which is not recognized because: ° it is not probable that an outflow of economic benefits will be required to settle the obligation, or
Note XIII > OTHER INFORMATION XIII.1 - Maturity of assets and liabilities IAS 32 requires information about exposure to interest rate risk.The following table shows assets and liabilities by remaining contractual maturity.
Assets and liabilities without a maturity date, such as receivables and associated liabilities, ordinary accounts or immediately due receivables are shown in the column entitled “on demand”.
Held-to-maturity financial assets (HTM) - 5 6 2,691 4,351 - 7,053
Less than 1 year to More than Other 1 year 5 years 5 years
Operating leases Minimum payments due under non-terminable contracts 6 115 223 - 345 Contingent rents recognized //////// //////// //////// - -
Leases as lessee Total Less than 1 year to More than Other 1 year 5 years 5 years
Finance leases Minimum future lease payments 12 23 - - 34 Aggregate present value of minimum lease payments - - - - Contingent rents recognized as expenses for the period //////// //////// //////// - Minimum future sub-letting payments expected under sub-letting //////// //////// //////// - -
Operating leases Minimum future lease payments - 1 - - 1 Minimum future sub-letting payments expected under sub-letting contracts //////// //////// //////// - Minimum lease payments recognized as expenses //////// //////// //////// - Contingent rents recognized as expenses //////// //////// //////// - Sub -letting revenues //////// //////// //////// - -
Relations between consolidated companies Details of Natexis Banques Populaires’ main transactions with related parties (Banque Populaire Group including Banque Fédérale and its subsidiaries and the Banque Populaire banks and their subsidiaries, proportionally consolidated interests for the share not eliminated in consolidation and all associates) are given below: in € millions 12/31/2005 12/31/2004 EU IFRS 2004 IFRS
Net gains or losses on financial instruments at fair value through profit and loss (96) - - (75) - Net gains or losses on available-for-sale financial assets 1 - - - - Income and expenses from other activities 70 - - 52 - in euros 12/31/05 12/31/04 12/31/03
(1) In 2005, as in previous years, directors’ fees paid to Board members included a fixed portion (€1,525 per year and per director) and a variable portion (€1,220 per Board meeting and per Director).
This compensation is paid in full at the end of the year.
(2) Total gross compensation paid to members of Natexis Banques Populaires Executive Management Committee during their term of office during the period, including the Chairman and the Chief Executive Officer.
Executive officer compensation Total gross compensation paid to executive officers was as follows: in euros 12/31/05 12/31/04 12/31/03
Chief Executive Officer 14,000 13,000 12,000 number of options exercised 12/31/05 12/31/04 12/31/03
The number of share subscription options allotted in respect of offices held in the issuing company and associated undertakings was as follows: In 2005, the Chairman and Chief Executive Officer exercised options allotted to them in 2001 at a price of B94.30.
The aggregate amount of pensions paid to directors may not exceed 60% of revenues for the period, up to a maximum of B350,000. For directors appointed after January 1, 2005, this has been lowered to 50%.
Early retirement allowances In the event of the early retirement of an executive officer (apart from in the case of gross misconduct), the Banque Populaire Group shall pay an allowance equal to one year’s compensation, plus one-twelfth of annual compensation per year of service at the Group, and possibly one-twelfth of the same compensation per year as an executive officer.The maximum amount payable may not exceed 42/12ths of annual compensation.
12/31/05 12/31/05 Insurance format Banking format in € millions Net General Gross Tax Sub- Net banking operating operating consolidation income income expenses income adjustments
Mark-to-market gains on assets 437 437 - 437 - - 437
Mark-to-market losses on assets held to cover linked liabilities (8) (8) - (8) - - (8)
Share of results of associates 4 - - - - 4 4
Operating expenses (533) (495) Amortization, depreciation and impairment of property, plant and equipment and intangible assets (21) (18)
Share of income of associates 8 8 Gains or losses (1) Change in value of goodwill - 1
Net income attributable to equity holders of the parent 213 142 199NATEXIS BANQUES POPULAIRES
XIII.6 - Breakdown of notional amount of derivatives - reconciliation with fair value
Financial instruments Company Restatements Consolidated Cash flow Fair value Non-hedging financial for financial hedges hedges instruments statements consolidation statements
Notional Notional Notional Fair Notional Fair Notional Fair amount amount amount value amount value amount value
Other - PTF POI XXX- purchased - - - - - - - - -
This report, together with the Statutory Auditors' report addressing financial and accounting information in the Chairman's report on internal control, should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
In accordance with our appointment as Statutory Auditors at the annual general meeting, we have audited the accompanying consolidated financial statements of Natexis Banques Populaires for the year ended December 31, 2005.
The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements, based on our audit.These financial statements have been prepared for the first time in accordance with IFRS as adopted by the European Union.They include comparative information restated in accordance with the same standards in respect of the 2004 financial year, except for IAS 32, IAS 39 and IFRS 4, which have been applied as of January 1, 2005, under the option provided by IFRS 1.
The group records provisions to cover employee benefits (notes V and X.3 of the notes to the financial statements).We examined the methodology used to value these commitments, as well as the assumptions and parameters used.
BARBIER FRINAULT & AUTRES DELOITTE & ASSOCIES SALUSTRO REYDEL ERNST & YOUNG Member of KPMG International
Cash and balances with central banks and post offices 1 24 15 15
Investments in associates and other securities held for investment 4 162 165 174
Deferred income and accrued charges 10 2,376 2,456 2,829 of which institutional activities 16 2 - -
Commitments given to financial institutions 3,165 2,451 2,330 Commitments given to customers 26,976 20,074 18,814
Customer transactions 1,463 1,154 1,114 Finance lease transactions 9 13 1 Operating lease transactions 9 5 1 Bonds and other fixed-income securities 443 476 492 Other interest income 315 210 215
Finance lease transactions (7) (12) (1) Operating lease transactions (8) (4) (1) Bonds and other fixed-income securities (1,075) (704) (715) Other interest expense (278) (283) (299)
Notes to the parent company financial statements 1 > Accounting policies and valuation methods The Natexis Banques Populaires financial statements have been prepared in accordance with generally accepted accounting principles applicable to credit institutions, including standard CRC 2000-03 on financial statement presentation.
1.1 Customer loans Loans are carried at their face value. Undrawn amounts on loans already committed and agreed are included in offbalance sheet items under the heading “financing commitments given”. Performing and non-performing loans are identified separately.
1.2 Loan impairment Since 2000, Natexis Banques Populaires provides for loan impairment at three levels: 1.2.1 Specific provisions n Loan principal
Where there is a risk of partial or total non-recovery of loans or non-compliance with loan terms or covenants, impairment charges or provisions are recognized in profit or loss under the heading “impairment charges and other credit provisions”. These impairment charges are determined on a case-by-case and country-by-country basis and adjusted at quarterly intervals, based on an analysis of the related risk and available collateral. In the case of lease financing transactions, capital gains and losses on disposal and charges to and reversals of provisions (leased assets and temporarily unleased assets) are recognized in net banking income. Termination compensation is booked as interest income. Only the principal amount of payments on non-performing leases is provided for under impairment charges and other credit provisions.
evolve, either negatively or positively. In 2003, additional provisions of B90 million were taken to cover potential risks arising as a result of major issues in the European marketplaces. This sum was maintained in the balance sheet at
The discount rate used for each subsidiary was based on the following: – the average 10-year OAT (French government bond) yield; – the risk premium in the subsidiary’s market; – a beta value based on a sample of comparable companies.
n Non-consolidated investments are valued individually at the lower of cost and value in use at the year end.Value in use is determined on the basis of criteria such as restated net asset value and profitability.
1.6 Income, value adjustments and gains or losses on securities n Income from variable income securities is recorded on a cash basis; n Income from fixed-income securities is recorded on an accruals basis; n Value adjustments and gains or losses on disposal of securities appear under different headings depending on the nature of the transaction: – trading account securities, securities held for sale and equity securities held for investment: value adjustments and gains or losses are recorded in net banking income; – debt securities held for investment: value adjustments and gains or losses are recorded under “impairment charges and other credit provisions” where they reflect counterparty risk, and “net gains/(losses) on disposals of non-current assets” where they reflect market risk or the result of disposal; – investments in associates and other long-term equity investments: value adjustments and gains or losses are recorded under “net gains/(losses) on disposals of non-current assets”.
1.7.3 Amortization and depreciation Assets are depreciated or amortized over their estimated useful lives either on a straight-line basis or on a diminishing balance basis where this better reflects the pattern of consumption of future economic benefits.The residual value of the asset is deducted from its depreciable or amortizable amount where it can be measured reliably. Natexis Banques Populaires does not believe it can reliably measure the residual value of items other than land and indestructible elevations. They are therefore assigned a nil residual value.
In line with the new standards, a specific deprecation schedule is drawn up for each significant component of an item of property, plant and equipment which has a different useful life or rate of consumption of future economic benefits than the items as a whole. For buildings used in the business and investment property, the following significant components and depreciation periods have been identified: – Land: N/A – Indestructible elevations: N/A – Walls, roof, waterproofing: 20 to 40 years – Foundations, framework: 30 to 60 years – External rendering: 10 to 20 years – Equipment and installations: 10 to 20 years – Internal fixtures and fittings: 8 to 15 years
Other intangible assets primarily comprise purchased goodwill with an indefinite useful life, which is not amortized but tested for impairment at least annually.
1.8 Perpetual and dated subordinated notes Natexis Banques Populaires has issued perpetual and dated subordinated notes, which in the event of the issuer’s liquidation, rank behind all other creditors.
1.11 Interest rate revision charges and prepayment penalties Interest rate revision charges and prepayment penalties are treated as deferred interest income and recognized in profit or loss over the life of the loan in proportion to the interest income lost in each year based on the original loan repayment schedule.
n Forward currency hedging transactions are recognized in profit or loss on an accruals basis, either as premiums or discounts where they are intended to hedge commercial transactions, or as accrued interest where they are intended to hedge long-term assets and liabilities denominated in foreign currencies.
1.13.3 Interest rate, currency and equity options and forward contracts The notional value of the instrument underlying the option or forward contract is recorded off-balance sheet, with hedging and trading transactions identified separately.
1.16 Employee-related liabilities and post-retirement benefits The main provisions for employee-related liabilities concern: n end-of-career awards and allowances; n supplementary banking pension; n early-retirement and supplementary pension benefits; n “CATS” early retirement plan benefits; n employer’s contributions to private health insurance companies for retirees and early retirees.
The provision recognized in the balance sheet is equal to: n the amount of the actuarial liability in respect of post-retirement and similar benefits for employees and retirees; n less the market value of plan assets; n less or plus any actuarial losses or gains arising from: – experience adjustments in respect of demographic variables; – changes in actuarial assumptions such as the discount rate, employee turnover and future salary increases; – differences between the actual return and expected return on plan assets.
The French Pensions Act of August 21, 2003 reformed the terms and conditions of retirement applicable to employees. In accordance with opinion 2004-A issued by the CNC Urgent Issues Task Force, this reform was treated as a change of applicable regime and its effect deferred over the employees’ remaining working lives.
1.17 Changes in accounting method As of January 1, 2003, Natexis Banques Populaires adopted standard CRC 2002-03 on the classification of non-performing loans and the accounting treatment of loans restructured at below market rates. In 2003, following work on identifying loans affected by this standard, a discount of B11 million was recorded to take account of the difference between the new interest rate and the market rate at the time of restructuring. As the loans were restructured in prior years, the discount was set off against 2003 opening shareholders’ equity.The discount was released to profit or loss as interest income in the sum of B1.8 million in 2003,B1.6 million in 2004 and B1.5 million in 2005.
In accordance with standard CRC 2004-04, long service awards are no longer treated as employee benefits but as an ordinary liability governed by standard CRC 2000-06. Accordingly, a provision for the full liability of B11.7 million was taken by way of deduction from 2004 opening shareholders ’ equity.
Pursuant to recommendation R 2003-01 issued by the CNC, full provisioning for employee-related liabilities in accordance with IAS 19 is compulsory in the parent company financial statements as of January 1, 2005 in line with Group accounting standards.Accordingly, an additional provision of B78 million was recognized by deduction from 2005 opening equity.
Cash and balances with central banks and post offices 24 15 15
Government securities and equivalent 4,894 5,775 4,088 Trading account securities 3,451 3,471 1,798 Securities held for sale 1,060 1,890 1,833 Accrued interest receivable 30 59 66
Debt securities held for investment 383 414 457 Accrued interest receivable 10 8 13
Accrued interest receivable 11 41 3 Non-performing loans 1 1 1
Accrued interest receivable 484 244 315 Non-performing loans 81 85 85
Accrued interest receivable 11 - Non -performing loans 20 19 16
Short-term loans and consumer loans 15,949 12,149 10,296 Accrued interest receivable 47 41 47
Accrued interest receivable 4 3 7 Non-performing loans - - -
Temporarily unleased assets and non-performing loans - - Accrued interest receivable - - -
Bonds and other fixed-income securities 13,934 11,228 9,505 Trading account securities 5,651 4,119 2,373 Securities held for sale 4,272 2,902 1,299 Debt securities held for investment 3,991 4,176 5,777 Non-performing securities 20 31 56
At December 31, 2003, in accordance with standard 2002-03, irrecoverable loans comprise loans where an event of default has occurred and loans classified as non-performing for more than one year.
Investments in affiliates and other securities held for investment 162 165 174
Treasury stock 230 160 130 Trading account securities 226 156 126
Long-term investments* 4 4 4 * Including impairment charges 0 0 0 215NATEXIS BANQUES POPULAIRES
D) Investments with a carrying value equal to or less than €15,000 - 24,447.34
C) Other SICOVAM HOLDING 3,694 30,417,099.22 PAI EUROPE 4 FCPR 2,500,000 24,989,750.00 EMBRAER 273,120 10,492,370.08 LUCIA 186,000 3,965,687.02 JACQUET SA 142,141 3,250,388.36 CARLYSE EUROPE PARTNERS II LP 3,203,114 3,203,114.00 GIE SPRING RAIN 17,599,140 2,682,971.60 INDUSTRI KAPITAL 3,009,998 2,428,193.25 SYSTRA 7,300 1,855,000.00 ROBINSON (Singapour) 7,757,557 1,256,739.85 MILLENIUM Nts Steel (Singapour) 44,938,197 1,001,590.23 Pt SIERAD (Singapour) 126,906,390 984,919.89 SRITHAI SUPERWARE (Singapour) 8,511,685 925,571.75 LOXLEY PUBLIC Co Ltd (Singapour) 16,150,000 679,913.54 AIT Int/PT Ait Batam 6,687,402 508,638.61 NATEXIS PRAMEX INTERNATIONAL 33,984 487,977.56 PORCHER INDUSTRIES 506 470,830.10 SOCIETE CONCESSIONNAIRE DU GRAND LOUVRE (SCESCL) 16,009 457,361.32 SOFRANTEM 15,002 388,822.74 GIE VULCAIN ENERGIE 24,446 372,676.87 GIE LES JEUNES BOIS 251,540 251,534.70 GIE STAR TROIS 149,902,077 228,524.24 SIAM STEEL Int Plc (Singapour) 4,956,427 201,504.62 CABLECOM (Londres) 234 194,897.47 Pt JAPFA COMFEED (Singapour) 7,930,882 167,557.00 ASSURANCES BANQUE POPULAIRE IARD (ex-Fructi-MAAF) 44 132,000.00 SEPIA 14,099 107,468.93 ECICs (Singapour) 132,436 92,930.41 PT ADES ALFINDO (Singapour) 625,157 89,489.70 PARNASSE IMMO 300 78,128.30 ECONOCOM GROUP 13,252 56,031.24 SEMAEST - Société d’économie mixte d’aménagement de l’est de Paris 2,500 50,000.00 UNICEREALES 2,750 41,923.48 ECRINVEST 8 ( EX-NAM GERANCE ) 2,496 38,370.63 VAL “E” 2,494 38,020.80 SDH DEVELOPPEMENT DE L'HORLOGERIE (Sté) 2,400 36,587.76 SNPE 500 36,206.64 SWIFT 353 34,326.77 O.G.I.F. - Omnium de gestion Financière de l'Ile de France 77,350 31,556.95 SOFREAVIA 3,750 17,150.51 TRANSVALOR 1,069 16,754.15 CLEMET 1,000 15,244.90 SADEPAR 100 15,244.90 CAISSE DE GARANTIE IMMOBILIERE “ C.G.I.F.F.B.” 2,000 15,244.90
% Number of shares Additions at 12/31/2005 at 12/31/2005 2 - Subscriptions and capital contributions Natexis Investor Servicing 92.89% 110,896 Investima 18 100.00% 3,700 Investima 19 100.00% 3,700 Investima 20 100.00% 3,700 PAI Europe 4 6.07% 2,500,000
Company or group of companies Share Reserves Percentage Book value Outstanding Guarantees Total revenues Net income (loss) Dividends Comment capital interest at of investment loans and given in previous year in previous year received in 2005 12/31/2005 Cost Net advances
NATEXIS ALTAIR 4, rue Charles Gounod - 77185 LOGNES 10,040 EUR 6,036 EUR 100.00% 14,445 14,445 - - 89,035 EUR 6,006 EUR 5,522 * NATEXIS ASSURANCES 27, boulevard Bourbon - 75004 PARIS 54,055 EUR 317,959 EUR 100.00% 593,335 593,335 - - 81,324 EUR 81,729 EUR 96,492 * AUXILIAIRE ANTIN 18, rue de la Chaussée d’Antin - 75009 PARIS 127,578 EUR (3,426) EUR 100.00% 127,119 127,119 - - 2,576 EUR 2,528 EUR - * NATEXIS LEASE 115, rue Montmartre - 75002 PARIS 267,242 EUR 132,611 EUR 100.00% 399,595 399,595 1,722,266 - 46,611 EUR 21,654 EUR 18,504 * NATEXIS ASSET MANAGEMENT 68-76, quai de la Rapée - 75012 PARIS 30,468 EUR 7,360 EUR 87.45% 176,993 176,993 - - 137,311 EUR 42,160 EUR 32,670 * NATEXIS PRIVATE BANKING LUXEMBOURG S.A. 47, boulevard Royal - L 2449 LUXEMBOURG 28,750 EUR 2,455 EUR 95.80% 52,206 32,101 68,360 81,322 20,226 EUR (2,533) EUR - * NATEXIS PAIEMENTS 115, rue Montmartre - 75002 PARIS 22,419 EUR 2,848 EUR 100.00% 22,087 22,087 32,158 - 101,195 EUR 14,021 EUR - * BANQUE PRIVEE SAINT DOMINIQUE 12-14, rond point des Champs Elysées - 75008 PARIS 20,464 EUR (1,250) EUR 100.00% 26,821 21,813 2,598 - 18,222 EUR 543 EUR - * COFACE 12, cours Michelet - La Défense 10 - 92800 PUTEAUX 54,957 EUR 449,230 EUR 100.00% 694,107 694,107 519,554 20,000 489,318 EUR 47,186 EUR 47,051 * NATEXIS COFICINE 26, rue de Montévidéo - 75016 PARIS 5,897 EUR 7,198 EUR 92.50% 30,317 27,817 150,000 - 12,364 EUR 4,523 EUR 2,946 * NATEXIS FACTOREM 4, place de la Coupole - 94600 CHARENTON LE PONT 12,000 EUR 121,579 EUR 99.66% 127,459 127,459 260,000 126,764 103,201 EUR 32,094 EUR 28,686 * FINANCIERE CLADEL 115, rue Montmartre - 75002 PARIS 9,727 EUR 1,142 EUR 100.00% 10,099 10,099 - - 440 EUR 329 EUR 802 * NATEXIS IMMO EXPLOITATION 45, rue Saint-Dominique - 75007 PARIS 117,036 EUR 5,169 EUR 100.00% 124,002 124,002 - - 53,488 EUR (2,415) EUR 1,458 * LINEBOURSE 45, rue Saint-Dominique - 75007 PARIS 5,761 EUR (817) EUR 100.00% 20,196 5,046 - - 1,964 EUR 2,522 EUR - * NATEXIS AMBS 645 Fifth Avenue - NY 10022 - NEW YORK 562,050 USD (5,747) USD 100.00% 243,325 243,325 - - 24,441 USD 24,355 USD - *
NATEXIS LUXEMBOURG SA 28, avenue Marie-Thérèse - L2131 LUXEMBOURG 40,000 EUR 17,290 EUR 100.00% 4
NATEXIS BLEICHROEDER SA 100, rue Réaumur - 75002 PARIS 73,636 EUR (27,349) EUR 100.00% 75,679 50,548 - 257,500 51,670 EUR 700 EUR - *
NATEXIS ASSET-BACKED MANAGEMENT CORPORATION 600 Steamboat Road (1st floor) Greenwich, CT 06830 (U.S.A) 10,000 USD 55,725 USD 100.00% 8,477 10,029 356,023 - 14,248 USD - - * (1)
NATEXIS TRANPORT FINANCE (SBFI) 45, rue Saint-Dominique - 75007 PARIS 95,626 EUR 76,354 EUR 100.00% 177,127 174,894 1,699,370 - 17,762 EUR 13,232 EUR - *
VAL A 115, rue Montmartre - 75002 PARIS 167,200 EUR 163,173 EUR 100.00% 282,279 282,279 - - 30,026 EUR 17,083 EUR - *
NATEXIS MOSCOW Business Center Parus, 1th Tverskaya - YANSKAYA STR.23/1 125047 MOSCOU - RUSSIE 1,153,089 RUR 88,182 RUR 100.00% 34,448 36,743 180,292 50,743 236,687 RUR 93,200 RUR - * (1)
Quantity Purchase Average Quantity Exit Average Closing % of share purchased price purchase sold price exit stock capital price price
Non-operating assets 286 (165) 121 272 (161) 111 269 (145) 124 Property, plant & equipment 87 (43) 44 83 (47) 36 79 (40) 39 Intangible assets 199 (122) 77 189 (114) 75 190 (105) 85
Non-operating assets 9 (6) 3 9 (3) 6 12 (3) 9 Property, plant & equipment - - - - - - - - - Intangible assets 9 (6) 3 9 (3) 6 12 (3) 9 in € millions 2004 Acquisitions Disposals Other 2005
Property, plant & equipment used in business 189 18 (8) - 199 Land and buildings 53 48 - - 101 Other 136 (30) (8) - 98
Property, plant & equipment used in business 114 9 - (1) 122 Land and buildings 18 5 27 (1) 49 Other 96 4 (27) - 73
(*) Including securities delivered under repurchase agreements: 7,324 7,252 11,172 Accrued interest payable 80 49 49
Interbank market and money market securities 30,238 25,855 21,990 Accrued interest payable 184 143 154
Retail certificates of deposit and savings bonds 1 1 1 Accrued interest payable - - -
(*) of which provisions for major repairs: 1 of which risks in subsidiaries and affiliates: 8
Dated subordinated debt 3,182 2,662 2,343 Subordinated notes 2,514 1,950 1,691 Subordinated loans 668 712 652
Perpetual subordinated debt 615 335 382 Participating loans - - 107
At January 1, 2004 0 10 0 10 Charges - 2 - 2 Reversals - (1) - (1) Translation differences - - - 0 Other changes - - - 0
At January 1, 2005 0 11 0 11 Charges - - - 1 Reversals - - - 0 Translation differences - - - 0 Other changes - - - 0
Financing commitments given to: Financial institutions 2,023 890 687 Customers - 2 20
Off-balance sheet items: Financing commitments 20 35 33 Guarantee commitments 19 13 11 Other commitments given 3 5 (4)
Charges to provisions (17) (23) (12) Reversals from provisions 17 28 17 Losses covered by provisions (8) - (3) Losses not covered by provisions - - Recovery of bad debts written off 1 - -
Charges to provisions (50) (24) (112) Reversals from provisions 14 53 57 Losses covered by provisions - - Losses not covered by provisions - - Recovery of bad debts written off - - -
Reversal of impairment charges Investments in associates and other securities held for investment 38 45 13 Debt securities held for investment - 4 6
Personnel costs Reversals from provision for departures under the employee assistance program 2 4 5 Transfer of personnel costs in connection with the employee assistance program (2) (4) (5)
Other exceptional items Other exceptional charges - (1) - VAT reassessment - - (30) Other exceptional income (1) 82 - 31 Recovery of VAT from Banque Populaire regional banks - - 30 2003: (1) Subsidy paid by Banque Fédérale des Banques Populaires - €30 million
Rebate on tax reassessments - €1 million 2005: (1) Compensation on termination of lease contract over the Liberté 2 building
Impact of foreign branch income taxed at different rates (3) (3) (1)
Financing commitments given to: 3,814 4,613 2,185 Financial institutions 3,795 3,744 1,643
Forward transactions Euros receivable / currencies deliverable 59,864 35,045 42,217 Currencies receivable / euros deliverable 71,600 42,745 46,268 Currencies receivable / currencies deliverable 22,383 22,450 16,330 Currencies deliverable / currencies receivable 22,483 21,150 16,801 Premium / discount receivable 277 189 109 Premium / discount payable 260 259 131
Auditors’ report on the parent company financial statements Year ended December 31, 2005
This is a free translation into English of the Statutory Auditors' report issued in the French language and is provided solely for the convenience of English speaking readers.The Statutory Auditors' report includes information specifically required by French law in all audit reports, whether qualified or not, and this is presented below in the opinion on the parent company financial statements.These assessments were considered for the purpose of issuing an audit opinion on the financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the financial statements.
1. Opinion on the 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audit provides a reasonable basis for our opinion.
As part of our assessment of the accounting policies used by the company, we verified the appropriateness of the basis for and presentation of these changes.
As described in paragraph 5.2 of the section on accounting policies and valuation methods in the notes to the financial statements, Natexis Banques Populaires reviewed the value of its investments in subsidiaries. As part of our assessment of the significant estimates used to prepare the financial statements, we verified that the forecast data used was consistent with the medium-term plans drawn up the group.
3. Specific verifications and disclosures We also conducted the specific verifications required by law, in accordance with professional standards applicable in France.
It is not our responsibility to ascertain the existence of such agreements, nor to comment on their relevance or substance. We are simply required to report to shareholders, based on the information provided, on the basic terms and conditions of agreements that have been disclosed to us. Under the provisions of article 92 of the decree of March 23, 1967, it is the shareholders ’ responsibility to determine whether the agreements are appropriate and should be approved.
We conducted our investigations in accordance with the professional standards applied in France.Those standards require that we verify the consistency of the information given to us with the contents of the source documents.
Agreements approved in prior years and still in effect during the year Pursuant to the decree of March 23, 1967, we have been advised that the following agreement, approved in the previous year, remained in effect during 2005: Collateralised Loan Obligation, to which Natexis Banques Populaires, Natexis Asset Management and Vallauris CLO plc are party.
Natexis Banques Populaires received B1,501,991 in fees from Vallauris CLO plc, of which B150,199 were passed on to Natexis Asset Management.
This report was prepared pursuant to Article L225-37 of the French Commercial Code, as amended by the French Financial Security Act of August 1, 2003.
It was submitted to the Board of Directors of Natexis Banques Populaires on February 22, 2006, and to the Board’s Risk Management Committee.
The system is based on periodical control comprising audits, with teams responsible for the continuous control of the compliance and security of operations, as well as verifying the effectiveness of the bank’s risk control and monitoring systems. It complies with French banking and finance regulations and with the internal control principles of the Banque Populaire Group, of which Natexis Banques Populaires is a member.
During its meeting of September 7, 2005, the Board of Directors of Banque Fédérale des Banques Populaires redefined these principles, in accordance with the order of March 31, 2005, amending regulation 97-02 relating to internal control in credit institutions and investment firms.These principles are now included in the Banque Populaire Group’s corporate governance charter, as well as in five charters concerning the implementation of periodical controls (audit) and continuous controls (compliance, operational risks, financial risks and credit risks).
Like all other Group banks, Natexis Banques Populaires is regularly audited by Banque Fédérale des Banques Populaires and notably by its Internal Audit department.
2.1 General organization Internal controls are organized from the lowest to the highest level. In 2005, with the approval of the Chairman and in line with the guidance issued by the Board of Directors, the
Chief Executive Officer developed guidance to ensure the further reinforcement of Natexis Banques Populaires’ internal control procedures, in order to continue to meet technical and regulatory requirements for the banking industry, as well as new standards implemented within the Banque Populaire Group.
2.1.1 Internal involvement in control In line with the guidance set out in the Banque Populaire Group’s five internal control charters, Natexis Banques Populaires has a three-tier control system coordinated by Executive Management.
Employees and their supervisors are responsible for preliminary or simultaneous checks of each operation they carry out as part of their normal duties.These first-tier controls provide the foundations of the internal control system and are documented in formal written procedures, covering areas such as the segmentation of duties, appointing authorized signatories, delegating credit limits and managing and monitoring market risks. The Corporate and Institutional Banking and Markets core business has established a middle office team to make its first-tier control more independent.The team reports directly to the core business head and is responsible for both financing and markets activities.
The main departments involved in second-tier control are Risk Management (counterparty, market, country, operational risk etc.), Information Systems Security (IT clearances, information systems fraud etc.), Ethics and Compliance (compliance with AMF regulations etc.) and Fraud Prevention (money laundering).
The Internal Control department is structured into five sub-departments covering all business lines and support functions of Natexis Banques Populaires (parent company, subsidiaries and branches). Internal Control reports to the
The Internal Control department’s mission is set out in a detailed instruction issued by the Chief Executive Officer on November 18, 2003. Its key responsibility is to ensure that the business lines comply with internal regulations. It is also involved in monitoring operational risks and provides second -tier accounting controls. The depar tment is also responsible for following up the implementation of recommendations resulting from internal and external audit assignments.
This mission has been drilled down to operating unit level in the form of a charter setting out the rights and duties of both parties. At the end of 2005, 39 charters had been signed covering almost all of the Group’s entities (excluding Coface). At this date, there were a total of 110 full-time equivalent internal control staff reporting to the Internal Audit department, 48 of whom were based at subsidiaries and branches. The department has been built up steadily over the last two years and will continue to expand further in 2006.
In 2005, the Internal Control department continued with the roll-out of tools and working methods intended to improve the efficiency of the internal control officers. The NEC application, accessible via the intranet, allows for management of the entire cycle of an assignment, from planning to the following up of recommendations. It is currently used by nearly all entities in France and will be rolled out abroad in 2006. In addition, a sampling methodology was established in mid-2005, used by all internal control officers in France and abroad. This methodology ensures that all samples used in survey-based controls are representative, thereby allowing for more precise assessment of the reliability of results.
Third-tier or periodical control is the responsibility of the Internal Audit department.
The Internal Audit department conducts audit assignments through the entire Natexis Banques Populaires group (parent company, subsidiaries and branches), covering all categories of risk involved in the bank’s various business activities. It has full and unrestricted access to all information, confidential or otherwise. Its field of investigation encompasses all of Natexis Banques Populaires’ operational activities, as well as its functional departments, including in particular entities in charge of second-tier controls.
In the twelve to eighteen months after the initial audit, the Internal Audit team conducts follow-up audits to monitor progress in implementing its recommendations, as well as ongoing investigations by continuous control teams.
As required by banking law, the purpose of the plan is to ensure that the entire Natexis Banques Populaires group structure is fully covered within a reasonable time period (five years), taking account of the degree of risk to which its business activities are exposed.
The plan is therefore based on a hierarchy of priorities defined according to a risk map of Natexis Banques Populaires’ activities and the status of risk within the group
structure as perceived by Internal Audit from the information reported by the bank’s business units and second-tier control teams.
In 2005, in line with the guidance set out by Executive Management, the Internal Audit depar tment fur ther strengthened its team, focusing on hiring auditors with expertise in information systems and market techniques.
In accordance with the “audit” charter, the Internal Audit department participated in the first “Group audit” initiated by Banque Fédérale des Banques Populaires, concerning audit assignments conducted simultaneously throughout the entire Banque Populaire Group for shared issues, using standardized methodological tools.
This committee – which is one of the practices set out in the control charters adopted by the Banque Populaire Group – deals with all issues concerning the internal control structure and the results of internal or external audit assignments.
2.2 Risk management Natexis Banques Populaires is exposed to four main categories of risk: n credit risk; n market risk; n interest rate, currency and liquidity risk; n operational risk.
Risk measurement and management is the responsibility of the Risk Management department, which reports to the Board Secretary and is therefore independent from the business lines. It is involved in the implementation of risk procedures within the Banque Populaire Group, as documented formally in the form of charters in September 2005.
2.2.1 Credit risk The Risk Management department is responsible for analyzing the credit risk on a group of counterparties, using financial information, external ratings and the internal rating system, supported by the expertise of the bank’s credit analysts, which itself draws on the specialist knowledge of various areas of the bank.
Credit decisions are made either under authorized limits (which are low) or by credit committees. Authorized limits are set out formally and depend on the seniority of the person concerned and the type, term and quality of commitment. For financing activities, separate committees have been created for small and large exposures.The large exposures committee is chaired by the Chief Executive Officer.
Exposure is monitored on the basis of internal ratings and client categories. Natexis Banques Populaires has a conservative risk provisioning policy.
Exposures are automatically aggregated by the bank’s “e-ris” system, which covers all its major subsidiaries. Natexis Banques Populaires can therefore consolidate risk either daily or on specific reporting dates. In addition to this internal system, the bank also has access to reports produced by Banque Fédérale des Banques Populaires, notably following meetings of the Group risk management committee.
Risk diversification represents a fundamental risk management rule and is governed by internal and external guidelines. Natexis Banques Populaires complied with these guidelines at end-December 2005.
Counterparties in the capital markets business are mostly banks and financial institutions. Counterparty exposure is governed by limits which are set by an ad hoc committee and monitored by the bank’s risk management systems.Any violations of these limits are handled at specific monthly committee meetings.
Natexis Banques Populaires trades in the capital markets through its Global Debt & Derivatives Markets and Equity Group core businesses.They trade both on behalf of clients of Natexis Banques Populaires (intermediation, brokerage, asset management) and on their own behalf.
Proprietary trading is conducted by the Global Debt & Derivatives Markets and Equity Group core businesses.
Natexis Banques Populaires’ market risk management system is based on three pillars: n a three-tier control system comprising the middle office of each entity, Internal Control and Risk Management, the latter two providing independent control over risks; n a market risk measurement model designed to quantify the bank’s risk; n a system of limits set in accordance with the risk indicators set out in the internal risk measurement model. Limits apply to Natexis Banques Populaires and its subsidiaries.
The market risk management system is based on a risk metrics model that measures the risk run by each Natexis Banques Populaires entity.The current model consists of a number of standard metrics, although Natexis Banques Populaires is also developing an internal VaR-based model, with a view to obtaining approval from the French Banking Commission.
2.2.3 Interest rate, currency and liquidity risk management The Asset & Liability Committee (ALM Committee), which is chaired by the Chief Executive Officer and comprises representatives of Global Debt & Derivatives Markets, the Finance department and the Risk management department, is responsible for setting out the broad guidelines for ALM, liquidity and investment of own funds.
Interest rate, currency and liquidity risks have been centralized at Natexis Banques Populaires since 2000. These risks are monitored and managed by the Global Debt & Derivatives Markets business line.
The Global Debt & Derivatives Markets department refinances all the liquidity needs of the various Natexis Banques Populaires businesses and subsidiaries and charges back the cost.
2.2.4 Operational risk Operational risk is defined as the risk of loss due to inadequacies or deficiencies in processes, people and systems, or to external events.
This project, placed under the responsibility of the Risk Management department, is based on a bottom-up systematic and homogenous approach in each core business, with the aim of: n identifying operational risks on a self-assessment basis; n among these risks, defining the risks to be managed within the business line, implementing a system for monitoring and reducing these risks using indicators and plans of action; n identifying the type of operational risk incidents and losses relating to the business line; defining the inflow process for these incidents; n at the end of the project phase, defining and implementing a permanent operational risk management system,based on dedicated human resources (operational risk officers), a dedicated organization and a system for reporting to the Risk Management department.
In 2004, Natexis Banques Populaires redefined the duties and the composition of the operational risks committee in order to make it a body for the management of operational risks.As a result, the scope of the operational risks committee now includes the management of Natexis Banques Populaires’ operational risks and the business recovery plan. The operational risks committee is co-chaired by the General Secretary and the Head of Information Systems and Logistics; Natexis Banques Populaires’ four core businesses are represented by operating risk officers.
In 2004, Natexis Banques Populaires also redefined the accounting, analysis and control procedure at parent company level for unusual income and expenses relating to
Compliance is organized as follows: n in each operating department; n close functional ties with the Legal Affairs department; n functional ties with other support functions (Internal Control and Risk Management); n a central depar tment comprising specific functions (Compliance and Fraud Prevention) and cross-departmental functions.
In addition to being responsible for general coordination, monitoring employees in sensitive positions and monitoring financial operations (surveillance, suspension and insider dealing lists), the central Ethics and Compliance team oversees the activities of compliance officers based in the business lines.
Several ad hoc committees have been created to ensure this coordination and the operational managing of surveillance, suspension and insider dealing lists and related controls, the number of which increased substantially over the period.Control tools are gradually being developed in order to allow for a timely reaction to the diligence requirements of directives relating to Market abuse and Markets in financial instruments.
The filtering of payments that may be linked to terrorism financing using Fircosoft software, implemented in September 2004, was extended to the majority of SWIFT messages over the year. At the end of 2005, around twothirds of messages sent and received were filtered using the new system, with remainder filtered using the old system. The software underwent further configuration in order to keep “false alarms” at a relatively low level, similar to that observed at other banks using the same software.
The fraud prevention committee created in June 2004, comprising representatives of the internal control function and various business lines of Natexis Banques Populaires and its subsidiaries, stepped up its activities, increasing the frequency of meetings to once a month. Its actions included deciding to end business relationships considered “sensitive” from a regulatory viewpoint and validating procedures to improve anti-money laundering procedures.
The aim of this function is to ensure that personal data is handled in accordance with the rules set out by the CNIL and to coordinate the activities of persons responsible for this type of monitoring within the network.
> Cross-departmental functions Cross-depar tmental functions, in the process of being organized, are intended to coordinate the activities of all employees involved in compliance (legal, compliance officers, fraud prevention specialists, personal data protection specialists etc.) in order to ensure the correct application of all compliance duties, as set out in CRBF regulation 97-02, ensuring the monitoring and control of all non-compliance risks resulting from the failure to adhere to regulations applicable to banking activities.
The department takes an active role in the main committees responsible for operational risk, including: n Internal control overarching committee; n IT asset protection committee;
Apart from its ongoing responsibilities, the department’s main actions in 2005 comprised: n Reinforcement of the bank’s security policy in conducting projects; n Monitoring or legal and regulatory requirements relating to the “personal data protection officer”; n Training and increasing the awareness of employees.
2.3 Internal control over financial reporting 2.3.1 Preparation of the consolidated financial statements The Finance department is responsible for preparing the consolidated financial statements of Natexis Banques Populaires using the consolidation system and manual developed by Banque Fédérale des Banques Populaires. As a listed company,Natexis Banques Populaires is required to prepare its own consolidated financial statements, although it also forms a subset of the Banque Populaire Group, which has a much broader scope of consolidation. Its consolidation process is therefore independent from but still inextricably linked with that of its parent.
The reliability of this process is based on the following core principles: n Definition and communication of accounting principles applicable to Group companies, including the analysis and interpretation of new texts issued during the period, in terms of both French accounting standards and IFRS; n Use of the direct consolidation method (currently under development in the Coface sub-group), to permit detailed examination of the consolidation packages of consolidated entities according to a formal review process; n Use of a single consolidation system for all consolidations and sub-consolidations conducted with the Natexis Banques Populaires group (currently under development in the Coface sub-group), in order to guarantee the internal consistency of scopes of consolidation, definitions, standards, charts of accounts, processing sequences and analysis; n Preparation of consolidated financial statements on a quarterly basis, allowing for a better level of control of halfyearly and annual financial statements, on the basis of projected operations for the year and increased reconciliation of intra-group operations; n Checking of data reported by consolidated entities through the use of a consolidation package including more than 8,900 accuracy and consistency tests which must be completed for the data to be transmitted; n Item-by-item analysis of all entries that impact consolidated shareholders’ equity and production of a tax proof for each consolidated entity in order to provide full evidence of consolidated shareholders’ equity and individual justification of deferred taxes; n An audit trail system to trace the accounting data published in the financial statements and the notes back to the accounts of each consolidated entity and the consolidation adjustments; n Archiving and security procedures including twice-daily back-up of the unified consolidation database and regular data recovery testing; n Regular training of accounting teams in the consolidated entities and promoting the use of best practice throughout the Natexis Banques Populaires group.
The reliability of this process enabled the Group to meet the requirements relating to the first-time adoption of IFRS for the financial statements to June 30, 2005. For the financial statements for the 2005 financial year – which officially constitutes the year of transition to IFRS – the deadlines for the production of the consolidated financial statements are the same as in 2004, even though the new standards require more complex treatment and a greater quantity of relevant and detailed financial data.
The mandatory adoption of IFRS represents a major change for Natexis Banques Populaires and all parties directly concerned by the financial information provided.
Mindful of the importance of this transition, the Banque Populaire Group launched a project to implement these new standards in September 2002, which involved customizing and adjusting the parameters of its information systems, drafting new procedures and training everyone par ticipating in the production of financial data. Accounting teams at Natexis Banques Populaires are involved in this project and have set out the specific requirements of the bank’s business lines so as to define a global solution for the management of IFRS in the consolidation system.
2.3.2 Internal control processes at the level of the consolidated entities As part of the regulatory process implemented by the French Banking Commission (CRBF regulation 97-02) for prudential monitoring of credit institutions, the Internal Audit department of Natexis Banques Populaires uses the results of its periodic audits to assess the internal control procedures, and particularly accounting and financial procedures, of all entities within the scope of consolidation, whether or not they have credit institution status.
For all systems, Natexis Banques Populaires and its subsidiaries are upgrading their audit trail tools.
This architecture defines the target to which business applications need to migrate in order to deliver the data flows required by the enterprise systems, as well as the databases (third-parties, structures, activities, products) that need to be updated to manage data shared between management applications and enterprise systems.The group plans to create an inventory management warehouse to collect all of the data required for the enterprise systems and regulatory declarations.
The functioning of the Board of Directors was updated with the implementation of a process to evaluate its work.
These strategies will remain a key focus for Natexis Banques Populaires in 2006. Work will continue on harmonizing its internal control and risk management system in line with developments in its business activities and in accounting, banking and financial regulations, as well as on integrating it fully into the organizational structure defined at the level of the Banque Populaire Group by the Board of Directors of Banque Fédérale des Banques Populaires.
As statutory auditors to Natexis Banques Populaires, and in accordance with the final paragraph of article L225-235 of the French Commercial Code, we hereby present our report on the Chairman’s report on internal control over financial reporting for the year ended December 31, 2005, drawn up in accordance with the provisions of article L225-37 of the French Commercial Code.
On the basis of our investigations, we have no particular comment to make on the information and statements with respect to internal control over the financial reporting process contained in the Chairman’s report, prepared in accordance with article L225-37 of the French Commercial Code.
1 > General meetings of shareholders Notice of meeting Shareholders’ meetings are called by the Board of Directors in accordance with the applicable legal provisions. Meetings take place either at the company’s head office or at any other place specified in the notice of meeting.
Double voting rights shall cease automatically in the event that shares are converted to bearer shares or are transferred. However, the period referred to in the foregoing paragraph shall not be interrupted by any transfer from one registered shareholder to another where this arises by reason of a transfer upon inheritance or intestacy, division of estate between divorcing spouses or gifts inter vivos to a spouse or other person entitled to inherit.
2 > Report of the Board of Directors on the resolutions to be put to the vote at the annual general meeting Ordinary business
The purpose of the fourth resolution is to enable dividends to be paid in the form of shares.
The fifth resolution seeks approval of the consolidated financial statements presented to the meeting, in accordance with the provisions of the French Commercial Code.
Trading in the company’s own shares In the sixth resolution, the Board of Directors is seeking authority to trade in the company’s own shares under the conditions set out in European Directive 2003/6/EC of January 28, 2003 and in European regulation 2273/2003 of
Composition of the Board of Directors The seventh and eighth resolutions propose the re-election of two members of the Board.
The purpose of the thirteenth resolution is therefore to delegate to the Board of Directors the power to increase the capital stock on one or more occasions by the issue of shares reserved for employees of the whole of the Banque Populaire Group, who are members of a savings plan introduced by the Group.
First resolution: approval of parent company financial statements Summary: the purpose of this resolution is to seek approval of the financial statements for the year ended December 31, 2005.
- 2004 coupons attached to treasury shares B5,230,047.90 - Exit tax deducted from retained earnings B4,798,181.49 n Retained earnings at December 31, 2005 B(89,039,924.52)
Third resolution: appropriation of earnings – dividends Summary: the purpose of this resolution is to set a dividend of B5 per share.
Having considered the appropriation of earnings proposed by the Board of Directors, the shareholders hereby approve their proposal and resolve as follows: n first: - to allocate the year’s net earnings of B459,177,494.14 - less the balance held on retained earnings in the sum of B(89,039,924.52)
- to the legal reserve in the sum of B3,985,870.37 leaving a sum available for distribution of B366,151,699.25 n second: - to pay a dividend of B244,977,400.00 - to make a transfer to the general reserve in the sum of B121,170,000.00 - to transfer the balance to retained earnings, in the sum of B4,299.25 making a total sum distributed of B366,151,699.25
A tax allowance of 40% is available in respect of dividends paid in 2006 pursuant to ar ticle 158-3 of the French General Taxation Code, as amended by the French 2006 Finance Act, where the beneficiaries are natural persons resident for income tax purposes in France.
For information, as required by law, dividends paid in the previous three years were as follows: Having received and considered: - the management report on the operations of Natexis Banques Populaires and its consolidated subsidiaries for the year ended December 31, 2005, - the consolidated financial statements for that year, and - the report of the Acting Auditors on the consolidated financial statements, the shareholders hereby approve the consolidated financial statements as presented.
The shares may be bought, sold, exchanged or transferred by any means, on the stock market or over-the-counter, including, if necessary, by the use of firm or conditional derivative instruments.
Trading may take place at any time within the limits authorized by the regulations in force.
Dividend per €16 par value share 1.50 € 2.50 € 3.30 €
Fourth resolution: option to pay dividends in the form of shares Applying the provisions of articles L232-18 et seq. of the French Commercial Code and of article 34 paragraph 3 of the company’s bylaws to the dividend for the financial year 2005, the shareholders resolve to give every shareholder the option to receive the dividend in respect of his or her shares paid in the form of shares.
Seventh resolution: re-election of a Director Summary: the purpose of this resolution is to re-elect as a Director Stève Gentili, whose term of office expires this year, for the period provided by the bylaws.
Eighth resolution: re-election of a Director Summary: the purpose of this resolution is to re-elect as a Director Yvan de La Porte du Theil, whose term of office expires this year, for the period provided by the bylaws.
The shareholders hereby re-elect Yvan de La Porte du Theil as a Director for a term of six years ending on the date of the annual general meeting held to approve the financial statements for the year ending December 31, 2011.
Ninth resolution: appointment of a Director Summary: the purpose of this resolution is to appoint Jean Clochet as a Director to replace Daniel Duquesne, who is resigning from office.
The shareholders hereby appoint Jean Clochet as a Director to replace Daniel Duquesne,who is resigning from office, for the remainder of the latter’s term of office, namely until the annual general meeting held to approve the financial statements for the year ending December 31, 2009.
Tenth resolution: appointment of a Director Summary: the purpose of this resolution is to appoint Bernard Jeannin as a Director to replace Richard Nalpas, who is resigning from office.
In accordance with the law, this authority shall automatically involve a waiver by the shareholders of any preferential subscription rights in respect of the shares to be issued following the exercise of the options.
The exercise price of options to subscribe for new shares fixed by the Board of Directors may not be more than the
In the case of options to purchase existing shares, the exercise price may not be less than 95% of the average purchase price paid by the company for its shares under the provisions of articles L225-208 and L225-209 of the French Commercial Code.
This authority is valid for a period of fourteen months with effect from the date of this meeting.
Thirteenth resolution: authority to the Board of Directors to increase the capital stock for the benefit of employees of the Banque Populaire Group Summary: the purpose of this resolution is to authorize the Board of Directors to increase the capital stock of Natexis Banques Populaires on one or more occasions for the benefit of employees of the whole Banque Populaire Group, in the context of the employee savings regulations. It is proposed that the shareholders authorize an increase in the capital stock in a maximum amount of 1,500,000 shares.
Having received and considered the report of the Board of Directors and the special report of the Acting Auditors, the shareholders hereby authorize the Board of Directors to increase the capital stock on one or more occasions by the issue of shares reserved for employees of the Banque Populaire Group consisting of Natexis Banques Populaires, companies that are more than 50%owned either directly or indirectly by Natexis Banques Populaires, the Banques Populaires banks, the Banque Fédérale des Banques Populaires and entities under the control of the Banque Fédérale des Banques Populaires and/or the Banque Populaire banks, and who are members of a company savings plan introduced by the Banque Populaire Group.
The issue price of the shares may not be more than the average price quoted on the Paris stock exchange during the twenty trading sessions preceding the date on which the Board of Directors sets the opening date of the offer, nor more than 20% less than that average.
The Board of Directors shall also have all necessary powers to complete the increase in the capital stock, to record its completion and to make any corresponding amendments to the bylaws.
Having received and considered the report of the Board of Directors and the special report of the Acting Auditors, and voting under the quorum and majority conditions required for extraordinary business, the shareholders: n hereby authorize the Board of Directors, in its sole discretion and on one or more occasions, to cancel shares held by the company or which may be held by the company following share buybacks carried out in the context of article L225-209 of the French Commercial Code, up to a maximum of 2,500,000 shares representing 5% of the capital stock, and to reduce the capital stock by a corresponding amount in accordance with the legal and regulatory provisions in force.The maximum par value of capital stock cancelled may not exceed B40 million; n resolve that his authority shall be valid for a period of eighteen months with effect from the date of this meeting; n confer all necessary powers on the Board of Directors to complete the transactions required to cancel the shares and reduce the capital stock, to amend the bylaws accordingly and to carry out any other formalities required.
1 > General information about Natexis Banques Populaires Name Natexis Banques Populaires
Incorporation particulars Paris Trade and Companies Register Registration number: Access to legal documents All documents concerning the company, including its bylaws, financial statements and reports presented to general meetings of shareholders by the Board of Directors or the Statutory Auditors, are available at the company’s head office.
Additional information Financial year The company’s financial year runs from January 1 to December 31.
Appropriation of earnings (Title V, Article 34 of the bylaws) After deduction of any prior year losses, a minimum of 5% of each year’s earnings shall be transferred to the legal reserve as required by law. This provision shall no longer apply once the legal reserve has reached one tenth of the value of the company’s capital stock, but shall be reinstated if for any reason the legal reserve falls back below this minimum requirement.
Provisions of the bylaws concerning executive directors (Title III, Articles 9 to 20 of the bylaws)
Board of Directors Article 9 – Composition The company is administered by a Board of Directors comprising a maximum of 18 members appointed by the general meeting of shareholders.
funds. A director appointed in this way shall not be taken into account in the calculation of the maximum number directors provided for by the first subparagraph of this article.
A director appointed in this way shall be entitled to vote on the Board of Directors and shall be subject to the same rights and obligations as the other directors.
Article 10 – Conditions governing directorships Every director last known at least 10 shares in the company. The term of office of directors shall be six years, subject to the provisions of the following paragraphs.Directors may be re-elected.
In the event of a vacancy for one or more directors between ordinary general meetings of shareholders due to death or resignation, the board may make provisional appointments subject to ratification by the next ordinary general meeting.
A director appointed in this way shall only remain in office for the remainder of the term of office of his or her predecessor.
Article 12 – Chairman of the Board of Directors The Board of Directors shall appoint a Chairman, and if appropriate, a Vice Chairman, from among its members. The term of office of the Chairman shall end, at the latest, at the end of the ordinary general meeting of shareholders called to approve the financial statements for the financial year in which the Chairman reaches the age of 65 years.
However, the Board of Directors may increase this age limit on one or more occasions by a total period not exceeding three years, at its the meeting following this general meeting.
Meetings of the Board may also be called by the Chairman at the request of a least one third of the directors, or at the request of the Chief Executive Officer, to consider a particular agenda if the last meeting was held more than two months previously. The Chairman shall be bound by such requests.
At least half the members of the Board in office must be present for the Board to deliberate validly.
Article 14 – Directors’ fees The general meeting of shareholders may allocate directors’ fees to directors.The board shall distribute these among its members as it sees fit.
Executive management Article 15 – Organization of executive management In accordance with the law, the Board of Directors shall decide whether the executive management of the company shall be the responsibility of the Chairman of the Board of Directors himself, or of another natural person appointed to the office of Chief Executive Officer. The board shall determine the duration of the option chosen. This decision shall be brought to the attention of third parties by means of the advertising provided for by current regulations.
The Board of Directors shall determine the extent and duration of the powers of the chief executive officer. However, limitations of such powers shall not be enforceable against third parties.
The Board of Directors shall determine the extent and duration of the powers conferred on deputy chief executive officers. With regard to third parties, they shall have the same powers as the chief executive officer. The remuneration of the deputy chief executive officer(s) shall be determined by the Board of Directors.
Control Article 19 – Non-voting directors The general meeting of shareholders can appoint one or more non-voting directors, whose term of office shall be three years.They may be re-elected, and may be dismissed by the general meeting of shareholders.They shall sit on the board of directors in a consultative capacity. They may be appointed temporarily by the Board of Directors subject to ratification by the next general meeting of shareholders.
Article 20 – Auditors Acting and substitute auditors shall be appointed by the ordinary general meeting of shareholders and the conditions provided by law.Their duties and powers shall be as provided by current legislation.
2 > General information about the capital stock Form and registration of shares (Title II, Article 4 of the bylaws) Shares in the company may either be registered shares or identifiable bearer shares, at the option of the holder.They are registered in an account and transferred according to the provisions of the law.
Capital stock The capital stock was B783,927,680 at December 31, 2005, divided into 48,995,480 shares with a par value of B16 each, fully paid-up.
Capital stock authorized but not yet issued At their annual general meeting on May 31, 2001, the shareholders conferred a global authority on the Board of Directors in accordance with Article L225-129 para. 3 of the French Commercial Code, and for a period of 26 months, to make capital increases on one or more occasions, with or without preferential subscription rights, in a maximum non-cumulative amount of B150 million. This authority was renewed for the same amount and the same period at the extraordinary general meeting of shareholders held on June 22, 2003.This authorization was due to expire in July 2005.
The general meeting of shareholders held on May 19, 2005 replaced this authority with an authority delegated in accordance with the provisions of Articles L225-129-3, L228-92 and L228-93 of the French Commercial Code, as amended by the Ordonnance dated June 24, 2004 reforming the marketable securities regime. This authority granted by the general meeting of shareholders to the Board enabled the Board, for a period of 26 months with effect from the date of the meeting, to make capital increases on one or more occasions, with or without preferential subscription rights, in a maximum non-cumulative amount of B150 million, by the issuance of shares or any marketable securities conferring rights in the capital stock.
The general meetings of shareholders held on May 27, 2004 and May 19, 2005 each renewed this authorization for one year and in an amount of 500,000 shares.
These options may be granted: n to employees and executive directors of Natexis Banques Populaires and other companies in which Natexis Banques Populaires directly or indirectly holds the majority of the capital stock; n to employees and executive directors of Banque Fédérale des Banques Populaires which controls Natexis Banques Populaires, the Banque Populaire banks and entities that are more than 50%-owned either directly or indirectly, exclusi-
(*) Under certain circumstances, options may be exercised early (e.g. offers by third parties involving Natexis Banques Populaires S.A.’s capital stock, beneficiary’s retirement, negotiated departure or death).
First exercise date September 20, September 11, September 11, November 17, November 15, 2005 * 2006 * 2007 * 2008 * 2009 *
vely or jointly, by Banque Fédérale des Banques Populaires or affiliated institutions.
The exercise price is equal to the average price quoted in the 20 trading sessions preceding the date on which the Board of Directors fixed the terms and conditions of the annual options plan, subject to a discount in accordance with the legislation.
At its meeting on November 15, 2005, and after consultation with the Remuneration Committee, the Board of Directors decided to grant a maximum of 500,000 stock options in respect of the 2005 financial year.
A total of 496,500 options were ultimately granted, as follows: n 236,500 to employees and executive directors of Natexis Banques Populaires and its direct or indirect subsidiaries (excluding Coface and its subsidiaries); n 200,000 to employees and executive directors of Banque Fédérale des Banques Populaires, the Banque Populaire regional banks or other entities that are more than 50% owned either directly or indirectly, exclusively or jointly, by Banque Fédérale des Banques Populaires or affiliated institutions (these figures are included in the global summary set out above); n 60,000 to employees and executive directors of Coface and its direct or indirect subsidiaries.
Opening number Number of shares issued Closing number Capital stock of shares during the year of shares (€)
Options exercised by the 10 employees who exercised the most options
(**) The amounts shown in this table are included in the table above and relate to the Chairman, Chief Executive Officer and members of the Management Committee of Natexis Banques Populaires.
First exercise date 20 September 11 September 11 September 17 November 15 November 2005 * 2006 * 2007 * 2008 * 2009 *
Conversion of perpetual subordinated notes convertible into shares 258,527 4,136,432 13,007,869.36
Shares issued in exchange for the acquisition of Arnhold & S. Bleichroeder shares 1,401,082 22,417,312 83,448,443.92
Shares issued in exchange for the transfer of Banque du Dôme-Crédifrance Factor shares 218,559 3,496,944 14,643,375.64
Banque Fédérale des Banques Populaires 74.97% 84.88% o/w employees (Alizé Levier plan) 2.09% 2.39%
Ownership of capital stock at December 31, 2005 At December 31, 2005, the main shareholders of Natexis Banques Populaires were as follows: (1) Wholly-owned subsidiary of Banque Fédérale des Banques Populaires.
Treasury stock Under the share buyback program authorized by the shareholders at the Annual General Meeting on May 19, 2005, Natexis Banques Populaires owned 1,654,605 treasury shares (stripped of voting rights) representing 3.38% of the capital stock, at December 31, 2005.
The following table shows the number and percentage of shares owned at February 28, 2006.
Employee stock ownership By extraordinary resolution at their general meeting on May 31, 2001, the shareholders authorized the Board of Directors to issue new shares to employees of the Banque Populaire Group, on one or more occasions, up to a maximum of 2,500,000 shares and for a period of five years, or until May 31, 2006.
In June 2001, a first Group employee stock ownership plan was established pursuant to this authorization, resulting in the issuance of 1,273,854 new shares to Banque Populaire Group employees. 17,275 employees, representing 50% of the total, subscribed to the offering.The shares are held in two corporate mutual funds, which owned 2.36% of the capital stock of Natexis Banques Populaires at December 31, 2005. All the funds, including the corporate mutual funds previously established, owned 1,624,830 shares, and Banque Populaire Group employees now own 3.43% of the capital stock.
The application of corporate governance rules and the rules to which directors are subject enable the risk of abuse to be avoided.
4 > Market in Natexis Banques Populaires shares Market listings Natexis Banques Populaires shares are traded on the Euronext Paris Eurolist and are eligible for deferred settlement (ISIN code: FR0000120685).
Natexis Banques Populaires shares form part of the SBF 120, SBF 250 and CAC MID 100 indices.
During this period, shares in Natexis Banques Populaires remained in the SBF 120 index.
5 > Dividends Dividends not claimed within five years of the date of payment lapse and become the property of the French State, as provided by law.
Until payment of the 1999 dividend, Natexis Banques Populaires offered shareholders the option of receiving their dividend payment in the form of shares.This option will be offered again in 2006, in respect of the 2005 dividend.
6 > Other information about Natexis Banques Populaires Background Natexis Banques Populaires was created following the transfer of the operating activities of Caisse Centrale des Banques Populaires (CCBP) to Natexis S.A.The transfer was approved by the shareholders of both entities in extraordinary general meetings held on July 27, 1999.
Following the transfer of its operating activities to Natexis S.A. in July 1999, CCBP became the Banque Fédérale des Banques Populaires (BFBP).At the end of 1999, the Banque Populaire Group held 88.06% of the newly formed Natexis Banques Populaires. At the end of 2000, its holding was reduced to 79.23% following a new share issue placed primarily with retail investors.
At their extraordinary general meeting on June 28, 2000, the shareholders of Natexis Banques Populaires approved the merger of Natexis Banque into Natexis Banques Populaires,with effect from June 30, 2000.As the transaction involved a wholly-owned subsidiary, it took place under the simplified merger regime and no new shares were issued.
A series of other measures were taken during 1999 and 2000 to simplify the legal structure: in December 1999: the merger of Banques Populaires Ingénierie (B.P.I.) into Natexis Banques Populaires; in December 1999: the restructuring of the private equity arm; in June 2000: the transfer to Natexis Banques Populaires of Bail Banque Populaire shares held by the Banque Populaire regional banks, in exchange for 606,225 Natexis Banques Populaires shares; and the transfer of Natexis Gestion’s fund management activities to Banque Populaire Asset Management.
In 2000, the decision of Natexis Banques Populaires to control 100% of the capital stock of its subsidiaries resulted in transactions which giving it 100% control over Assurances Banque Populaire and Factorem. Similar transactions took place in 2001, particularly in the private equity and asset management arms. This program was completed in 2002 with the buyout of the Banque Populaire banks’ holdings in BPAM and Interépargne.
Arrival of new shareholders in Natexis Banques Populaires in 2002 In May 2002, the German bank DZ Bank AG acquired shares in Natexis Banques Populaires as part of its partnership with the Banque Populaire Group.
In July 2002, Natexis Banques Populaires agreed to acquire the entire capital stock of Arnhold & S. Bleichroeder Holdings Inc. (“ASB”), a company incorporated under the laws of New York State, for the sum of USD105 million, payable in Natexis Banques Populaires shares.
At an extraordinary general meeting held on December 6, 2002, the shareholders of Natexis Banques Populaires approved all the provisions of this agreement, as well as the transfer value of the ASB shares. The shareholders also approved a capital increase of B22,417,312 to pay for the acquisition, through the issuance of 1,401,082 fully paid-up shares with a par value of B16 each.
At December 31, 2005, ASB owned 1.57% of the capital stock of Natexis Banques Populaires.
7 > Persons responsible for the annual report and information Person responsible for the annual report François Ladam
Person responsible for information M. Pierre Jacob Group Director of Financial Communication e-mail: relinvest@nxbp.fr 8 > Documents available to the public Documents relating to Natexis Banques Populaires (deeds of incorporation, bylaws, reports, letters and other documents, historical parent company and consolidated financial information for each of the financial years preceding the publication of this document) are partially included in this document and may be consulted at the company’s head office, preferably by appointment.
Heading Registration document page number 1. Persons responsible 272 2. Statutory Auditors 28 3. Selected financial information 3.1. Selected historical financial information regarding the issuer for each financial year 6 3.2. Selected historical financial information for interim periods N.A.
This document is an English-language translation of the French document de référence filed with the Autorité des Marchés Financiers (AMF) on March 23, 2006, in compliance with article 212-13 of the AMF’s standard regulations. Only the original French version can be used to support a financial transaction, provided it is accompanied by a note d’opération duly certified by the Autorité des Marchés Financiers.