Payroll charges were modestly up over the year. The provision for variable compensation of market professionals was adjusted pursuant to the new CRD 3 regulatory framework (European Directive on capital requirements). Furthermore, the costs related to incentive and profi t sharing expenses were substantially higher on the back of Natixis’ return to profi tability.
Other operating expenses were stable and refl ect the effectiveness of efforts made under the New Deal Plan. Cost-cutting efforts were particularly focused on temporary staff, market data, communications, offi ce space and logistics with the continuing closure of Group offi ces.
Headcount was relatively stable year-on-year if the impact of the GCE Paiements merger in the third quarter of 2010 on the consolidation scope is excluded.
The provision for credit losses was €321 million in 2010 (excluding the reversals in respect of GAPC), i.e. a normal level compared with 2009, which was hit hard by the effects of the fi nancial crisis.
Pre-tax profit was €2,272 million in 2010 compared with €627 million in 2009.
NET INCOME (GROUP SHARE), EXCLUDING GAPC, DISCONTINUED OPERATIONS AND RESTRUCTURING COSTS
After taking into account minority interests for a total of €36 million, net income (group share) was €1,940 million.
Pre-tax profi t 1,175 (277) n/a * At constant scope of consolidation and exchange rates.
Corporate and Investment Banking’s net revenues stood at €3,027 million in 2010, up 12.2% compared with 2009 (up 10.6% at constant exchange rates). This increase in net revenues was driven by the organization introduced to systemize cross-selling. Stringent control of market risk also contributed to the increase. In 2010, average trading VaR was limited to €9 million (excluding GAPC). At the end of the year it stood at €5.8 million, compared with €10.3 million at the end of 2009.
Capital Markets saw a 23.1% fall in revenue compared with 2009.
The Interest Rate, Credit, Foreign Exchange and Commodities businesses were down 34% on the previous year.
● The Interest Rate business had lower trading revenue. Although volumes were to the upside compared with 2009, the lower margin trend predominated.
● The Credit business experienced a decline in intermediation revenue, while the primary market business did relatively well. Natixis ranked 9th in the global DCM (Debt Capital Market) league tables for arranging primary market issues in euros. Sales performance improved by 34%, driven primarily by a few major repo transactions. However, the intermediation business was penalized by widening credit spreads, unlike the narrowing that impacted all market participants in 2009.
● The Foreign Exchange business grew in a market characterized by a higher volatility: clients’ higher hedging requirements helped drive income from options. The heightened competition as a result of the refocusing of the main players on cash management products led to a decline in margins on vanilla products but volumes were sharply higher.
Revenue contributed by the Equities division was up 8% yearon -year. This improvement belies the uneven results within its business lines.
Corporate Solutions posted a 47% gain for the year. Strategic Derivatives revenues were up sharply, driven by excellent sales performance after a disappointing 2009 during which there were few, if any, signifi cant new transactions.
In 2010, expenses of the CIB business stood at €1,650 million, up 3.1% compared with 2009 (up +2.2% at constant exchange rates). This slight variation is due in part to variable compensation of market professionals pursuant to the new CRD 3 regulatory framework and the increase the provision for incentive and profi t sharing expenses. The cost/income ratio is clear evidence of the success of the cost-cutting effort. It stood at 54.5% for 2010, a 4.8 point improvement on 2009.
Starting in Q3 of 2010, a new business was integrated into this division: Private Equity. A result of the spinoff of Natixis Private Equity, this business line is dedicated to private equity operations on behalf of third parties. Today, it has €1.9 billion in assets under management. A pro forma account was prepared to provision for the impact of this change in scope in the presentation of the 2009 and 2010 fi nancial statements.
The quality of the Natixis management teams was recognized and rewarded with several awards in 2010, including the nomination of David Herro (Harris Associates) as “Morningstar Fund Manager of the Year” in the International Stock category and by winning Investir Magazine’s Golden “Laurier” by Natixis Asset Management for its fund management in the Fixed Income 5-year category on behalf of CNP Assurances.
At the end of December, assets under management were up 3.5% to €538 billion (at constant exchange rates), sustained by buoyant capital markets. Short rates, which remain low, are putting pressure on Asset Management’s money market funds on the back of the high level of withdrawals over the last year (-€14.4 billion). Excluding money market products, net infl ows amounted to €2.7 billion. There was a high level of withdrawals in Europe, where the bulk of money market products under management is concentrated, while in North America there were net positive infl ows. In order to extend its product range in Europe, this business line continued its targeted strategy in 2010, focusing in particular on ETF products (having acquired a controlling stake in the specialized management company, Ossiam) and alternative products (with the creation of H2O Asset Management). New partnership agreements were also concluded in China and in India.
❚ BREAKDOWN OF ASSETS UNDER MANAGEMENT AS OF END DECEMBER 2010 (CHANGE VERSUS 12.31.2009 AT CONSTANT EXCHANGE RATES)
Regular money market 29% (+1.4pt) Insurance contracts 5% (+0.2pt) Real Estate
Alternative and Structured 24% (+0.3pt) Bonds 23% (+1.6pt) Equities and diversified mutual funds (UCITS)
At end-December 2010, life insurance revenue was up 27.6% year-on-year. Contract infl ows in euros were up 35.7%, on the back of invested capitalization contracts – the bulk of which were in euros – while infl ows of unit-linked life insurance were down 17.6% compared with 2009. This trend was driven by the implementation of a certain number of sales drives since the beginning of the year, which allowed Natixis Assurances to post revenue growth exceeding that of the life insurance market overall.
At end-December 2010, net inflows totaled €1,076 million (compared with €116 million at end-December 2009), including €838 million in France. Both client segments contributed to this performance; in particular, the networks contributed €573 million and the CGPI €373 million.
Assets managed at the end of the period were up 5.2% compared with 2009, reaching €15.4 billion.
The Private Equity business within Investment Solutions was inherited from Natixis Private Equity’s operations on behalf of third parties. The transfer of this business line took place in 2010.
Managed capital, including latent gains and fund liabilities, amount to €1,909 million at the end of 2010. In managed capital overall, development capital accounts for 40.0%, funds of funds 35.6% and venture capital 24.4%.
The implementation of the New Deal strategic plan resulted in three major operations in 2010 for the SFS division: ● the creation of a Groupe BPCE Single Paying Agent following the merger of GCE Paiements and Natixis Paiements on September 1, 2010. Natixis is now positioned as the third largest paying agent in France. The 2010 results include 4 months of contribution from GCE Paiements. The calculation of change on a constant consolidation basis is also presented; ● the improved positioning of Natixis Lease as a central player on the French real estate and equipment leasing market thanks to the acquisition of Cicobail and Océor Lease on December 31, 2010, impacting the balance sheet only on December 31, 2010; ● switching the first Caisses d’Epargne (Île-de-France and Auvergne-Limousin) to the unified Securities platform.
Specialized Financing posted strong sales performance throughout 2010. The most striking growth related to the recovery in Consumer Finance as the revolving credit business (loan book of €1.4 billion at end-2010) was up 13.6% over December 2009, driven by the launch of a debit/credit card by both networks. At €8.6 billion, the Caisse d’Epargne network’s personal loan book was up 17.5% over December 2009. The Factoring business also posted strong factored turnover (up 23.4% year-on-year). Finally, Financial Guarantees and Sureties also maintained its sustained sales momentum: on the retail market, revenue was up 67.4% year-on-year driven by lower interest rates and government measures in support of housing. On the Corporate market, revenue increased by 11.6% compared with 2009 due to the recovery in single-family home sales.
Gross operating income grew more substantially to €288 million (up 13.9% at constant scope of consolidation) thanks to cost control.
The scope of this business line was signifi cantly reduced in 2010 due to two major operations: the October 2010 disposal of Private Equity’s proprietary operations in France to a fund advised by AXA Private Equity and the transfer of operations for third party to Investment Solutions. FY 2009 is presented pro-forma of this transfer.
4FINANCIAL DATA Management Report for the year ending December 31, 2010 4.1.4.5 GAPC
GAPC pre-tax profit was -€182 million at the end of the year, after recognition of a loss of €247 million due to the BPCE guarantee. Income excluding the guarantee was positive at €65 million.
GAPC net income, after recognizing income tax of 30%, stood at -€127 million in 2010.
Over the year, total client inflows grew by around €7.8 billion, virtually completely allocated to on-balance sheet, whereas off-balance sheet infl ows remained relatively stable over the same period (+0.1%).
In the retail market, demand deposits rose by 6.9% and Livret A savings accounts continued to grow at a robust pace (+29.5%). The level of life insurance infl ows confi rmed its role as a product favored by individuals, with a €2.9 billion rise in 2010. In other markets, yearly infl ows of €5.2 billion broke down equally between demand deposits and term deposits. Mutual fund outstandings (UCITS) continued to ebb, losing 10.7% over the year.
4FINANCIAL DATA Management Report for the year ending December 31, 2010
Banques Populaires won 28,300 new active individual clients in 2010 and has acquired around 11,100 new professional clients and around 3,900 new corporate clients since December 2009. The cooperative shareholder base grew by around 160,000 to a total of 3.8 million cooperative shareholders at end-December 2010.
Net revenues advanced 1.8% over the year. The cost/income ratio improved by 1.4 percentage points to 63.4% and also benefi ted from continued cost control efforts (a dip of 0.3% in expenses in 2010).
The network recorded particularly robust credit activity (growth of €17.7 billion in outstandings), across all markets. Mortgage outstandings recorded signifi cant growth (+€10.3 billion) and consumer loans advanced 7.3% (representing an increase in outstandings of over €700 million). Specialized markets (companies, public sector, social economy, real estate professionals and social housing) also saw production growth enabling Caisses d’Epargne to confi rm its major role in fi nancing the local economy. In particular, it corroborates its leading position in the public sector.
Net revenues rose sharply over 2010 to €6,902 million (+9.1%), thanks to a high-quality sales performance and the very favorable rate curve confi guration in the fi rst half. It also reaped the rewards of its tactical growth driver plan through the mounting contribution of the Regional Development Bank to the network’s net revenues.
The provision for credit losses remained relatively stable (0.22% in customer volumes) despite a persistently fragile economic environment.
INDIVIDUAL PROVISION FOR CREDIT LOSSES FOR THE CIB BUSINESS (240) (1,046)
Against a chaotic European backdrop, Natixis refi nanced its balance sheet with ease thanks to a diversifi cation policy on the strength of its borrowings. Continued efforts throughout the year enabled a better balance between geographic areas, currencies and customer resources. Natixis, in particular, contributed to a better staggering of its current liabilities and thus responded to the new regulatory requirements of June 30, 2010. Moreover, 2010 marked the centralization of public refi nancing with BPCE as the issuer. This major change enabled Natixis to capture part of the debt raised, thanks to a coordinated program with Groupe BPCE and in line with its needs.
Documentation of Natixis’ senior debts (issued outside existing programs) also includes a standard negative pledge.
“The Notes are Deeply Subordinated Notes of the Issuer issued pursuant to the provisions of Article L.228-97 of the French Commercial Code, as amended in particular by Law No. 2003-706 on fi nancial securities dated August 1, 2003.
The proceeds of the issue of the Notes will be treated, for regulatory purposes, as consolidated fonds propres de base for the Issuer subject to the limits on the portion of the Issuer’s fonds propres de base that may consist of hybrid securities in accordance with Applicable Banking Regulations (the “Hybrid Securities Limit”) as interpreted by the SGCB. Fonds propres de base (“Tier 1 Capital”) shall have the meaning given to it in Article 2 of Règlement No. 90-02 dated February 23, 1990, as amended, of the Comité de la Réglementation Bancaire et Financière (the “CRBF Regulation”) or otherwise recognised as fonds propres de base by the SGCB. The CRBF Regulation should be read in conjunction with the press release of the Bank for International Settlements dated October 27, 1998 concerning instruments eligible for inclusion in Tier 1 Capital (the “BIS Press Release”).
In the event of liquidation of the Issuer, the notes shall rank in priority to any payments to any classes of share capital and any other equity securities issued by the Issuer.
Excluding depreciation/amortization of assets, operating expenses dropped €30 million. When depreciation/amortization on assets is added back in, the drop in operating expenses reaches €151 million.
Provisions for risk for fi scal year 2010 (-€84 million) dropped markedly compared with 2009 (-€1,556 million).
As of December 31, 2010, the balance sheet totalled €331,134 million, up from €319,879 million as of December 31, 2009.
Natixis’ fi nancial statements as of December 31, 2010 show net income of €284,641,699.57.
4 FINANCIAL DATA Management Report for the year ending December 31, 2010
Gain or loss on other assets (24) 0 (9) (6) (39)
Net income (group share), excl. discontinued operations and restructuring costs 1,940 (127) (9) (71) 1,732
In the management presentation, the net income from workout portfolio (GAPC), results from discontinued operations and net restructuring costs were placed 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 reclassifi cation and consolidated net income.
Change in value of goodwill (9) 0 0 0 (9) (9)
Customer loans and receivables 6.4 128,049 105,903 o/w institutional operations 645 512
Financial liabilities at fair value through profi t and loss 6.1 158,856 181,531
of which: ● Attributable to equity holders of the parent 1,732 (1,707)
Net income/(loss) and gains and losses recorded directly in equity 2,370 (1,294)
Capital increase Shareholder advances 500 Interest paid on shareholder advances Elimination of treasury shares 93 Equity component of share-based payment plans 2008 dividend paid in 2009 Total activity related to relations with shareholders 500 93 Issuance of Deeply Subordinated Notes and preference shares 6,221 Interest paid on Deeply Subordinated Notes and preference shares Change in gains and losses recorded directly in equity Income/(loss) as of December 31, 2009 Impact of acquisitions and disposals Other
Appropriation of 2009 income (2,046) Equity as of December 31, 2009 after appropriation of income 4,653 5,382 500 6,221 (19) Shareholder advances (500) Interest paid on shareholder advances Elimination of treasury shares 11 Equity component of share-based payment plans 2009 dividend paid in 2010 Total activity related to relations with shareholders (500) 11 Issuance and redemptions of Deeply Subordinated Notes and preference shares (1,582) Interest paid on Deeply Subordinated Notes and preference shares (12) Change in gains and losses recorded directly in equity Income/(loss) as of December 31, 2010 Impact of acquisitions and disposals (d)
Changes in cash generated by operating activities consist of cash fl ows generated by Group activities, with the exception of those relating to fi nancial assets held to maturity and investment property.
+/- Net charge to depreciation and amortization of property, plant and equipment and intangible assets 265 251
+/- Net charge to other provisions (including insurance companies’ technical reserves) 3,397 4,026
= Total non-cash items included in income/(loss) before tax and other adjustments 3,459 (5,487)
+/- Decrease/(increase) in non fi nancial assets or liabilities 1,287 911 -income taxes paid (225) (15)
+/- Decrease/(increase) in fi nancial assets and investments in associates (a) 1,082 1,262
+/- Other cash provided/(used) by fi nancing operations (b) (3,520) 1,131
(b) Flows from fi nancing activities can be broken down as follows: ● repayment of the shareholder advance (-€500 million); ● redemption of Deeply Subordinated Notes (-€2,350 million) and issue of new Deeply Subordinated Notes (+€750 million) (see Note 12.3.1); ● interest paid related to Deeply Subordinated Notes (-€366 million) and interest paid related to shareholder advance (-€22 million); ● fl ows related to subordinated debts (-€1,029 million).
As required by European regulation 1606/2002 of July 19, 2002, Natixis has prepared its consolidated fi nancial statements for the year ended December 31, 2010 in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union at that date (1). These standards include IAS 1 to 41, IFRS 1 to 8 and the related IFRIC interpretations adopted by the European Union as at December 31, 2010.
Natixis’ consolidated fi nancial statements include a balance sheet, income statement, statement of net income/(loss) and gains and losses recorded directly in equity, statement of changes in sharholders’ equity, cash fl ow statement and notes to the fi nancial statements.
The following standards, amendments and interpretations were applicable for the fi rst time as of January 1, 2010: ● the revised IFRS 3 (“Business combinations”) and IAS 27 (“Consolidated and separate financial statements”) adopted by the European Commission on June 3, 2009 and subject to mandatory application on a prospective basis to transactions occurring after the start of the first accounting period beginning on or after July 1, 2009. These revised standards modify the accounting treatment of business acquisitions and disposals.
According to the new provisions of IAS 27 (revised), changes in percentages of equity investments in exclusively-controlled entities are booked directly to consolidated reserves (group share): − in the event of an increase in the percentage of an equity investment, the difference between the purchase price and the share of net assets acquired is booked to consolidated reserves (group share),
− the fair value of the equity investment previously held by Natixis, and
− the value of the minority interests; with the fair value of the assets acquired and liabilities assumed in the acquired entity. The difference is the goodwill associated with the business combination. This goodwill is directly recognized through profit or loss if it is negative and is recorded under “Goodwill” on the asset side of the consolidated balance sheet if it is positive.
The value of minority interests is determined, at the entity’s discretion, based on (i) their share in the net assets acquired (partial goodwill method) or (ii) their fair value at the purchase date (full goodwill method). This choice is made for each transaction; ● IFRS 1, as revised (“First-time adoption of international financial reporting standards”), adopted by the European Commission on November 25, 2009. This revision reorganises the structure of the standard to make it easier to use. It will have no impact on Natixis’ financial statements; ● amendment to IFRS 1 entitled “Additional exemptions for first-time adopters” adopted by the European Commission on June 23, 2010. This amendment concerns entities applying IFRS for the first time as from January 1, 2010. It will therefore have no impact on Natixis’ consolidated financial statements; ● amendment to IFRS 5, under the annual IFRS improvements project, adopted by the European Commission on January 23, 2009. This amendment has not had any impact on Natixis’ financial statements; ● amendment to IAS 39 entitled “Eligible hedged items”, adopted by the European Commission on September 15, 2009. This amendment clarifies the application of hedge accounting to the inflation component of financial instruments and option contracts, where they are used as hedging instruments. These amendments have not had any impact on Natixis’ consolidated financial statements; (1) All of the standards adopted by the European Union are available from the European Commission’s website, at: ias_fr.htm#adopted-commission.
In addition, in drawing up the consolidated fi nancial statements as at December 31, 2010, Natixis also took into account: ● with regard to the valuation of financial instruments, the recommendation published on October 15, 2008 by the AMF, the French National Accounting Board (Conseil National de la Comptabilité), the French Banking Commission (Commission bancaire) and the French insurance regulator (Autorité de Contrôle des Assurances et des Mutuelles – ACAM), and the guide published by the IASB on October 31, 2008 entitled “Measuring and disclosing the fair value of financial instruments in markets that are no longer active”. These two texts underline the importance of using judgment to determine fair value in illiquid markets. As a result of this recommendation, as at December 31, 2010, Natixis does not systematically apply models using observable data, as with previous texts, in view of the lack of market liquidity affecting some asset classes; ● 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 French Banking Commission 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 3.7 of the “Risk management” chapter of the registration document.
The consolidated fi nancial statements are based on the individual fi nancial statements as at December 31, 2010 of the entities included in Natixis’ scope of consolidation.
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.
In accordance with IAS 27 (revised), potential voting rights resulting from a put option granted to minority interests are not taken into account in calculating the percentage of ownership and voting rights held, since they are not currently exercisable by Natixis.
Under IAS 28 and IAS 31, Private Equity investments between 20% and 50%-owned do not have to be accounted for using the equity method 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.
Ownership of the Banques Populaires and Caisses d’Epargne Cooperative Investment Certifi cates (CCIs), representing 20% of the share capital of each entity, gives Natixis signifi cant infl uence over the Banques Populaires and Caisses d’Epargne banks. The fi nancial statements of these entities are therefore accounted for using the equity method in Natixis’ consolidated fi nancial statements.
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).
In accordance with Article 116 of the amended fi nance law for 2005 (no. 2005-1720 of December 30, 2005) and the agreement signed with the French State on December 28, 2006, amended by amendment number 1 of April 16, 2010 and amendment number 2 of December 10, 2010, Natixis manages certain public procedures on behalf of the French State, mainly consisting of loans and gifts to foreign States conferred in the framework of Public Development Aid and the stabilization of export credit rates. The related transactions, some of which may be guaranteed by the State, are recognized separately in the fi nancial statements. The State and other related creditors have a specifi c right over the assets and liabilities allocated to these institutional operations. The bank’s assets, liabilities and commitments relative to these operations are identifi ed on a separate line of the balance sheet under each of the headings concerned with operations for which the management has been delegated to Natixis by the State.
Fees received and loans outstanding in connection with institutional operations are not material. Accordingly, these items were not restated at amortized cost. Operations other than fi nancing where Natixis acts as an intermediary on behalf of the French State, have been accounted for using the previous treatment in the fi nancial statements under IFRS.
€62 million was booked for 2010, versus €64 million in 2009. This decline is not attributable to a decrease in business, but rather to a 2009 comparison base effect, which included a catch-up effect in relation to 2008.
Natixis elected to use the option available under IFRS 1 on fi rst-time adoption, namely to transfer the cumulative balance of translation differences 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.
− 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),
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.
These valuation adjustments were divided into a depreciable component and a non-depreciable component in proportion to the value of the land and buildings in question. The depreciable component is depreciated in line with the rules and residual useful life applicable to similar assets (15 years on average).
In 2010, goodwill increased by €9 million, excluding translation losses of €87 million and write-down losses.
● The acquisition of 75% of Brazilian subsidiary Seguradora Brasileira, previously not considered to be a material entity within the consolidated scope, generated goodwill of €1.2 million (determined with the partial goodwill method).
All items of goodwill are impairment tested based on the value in use of the cash-generating units (CGUs) to which they have been allocated.
Value in use is determined principally by discounting the expected future cash fl ows from the CGU on the basis of the medium-term business plans drawn up by Natixis. However, for the Private Equity business (see Note 9.4), value in use is calculated based on net assets, since all assets in these entities are recorded at fair value.
Nor would any writedown have been recognized if the discount rate had been 1% higher or the perpetual growth rate 1% lower in each of Natixis’ core businesses (Corporate and Investment Banking, Investment Solutions and Specialized Financial Services).
2.6 Dilutive/accretive impact resulting from ownership of the CCIs issued by the Caisses d’Epargne and Banques Populaire
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 2.7 Treatment of put options granted to minority shareholders
Income generated from minority interests subject to put options are presented in “Net income for the period – portion attributable to minority interests” on the consolidated income statement.
On July 28, 2009, Natixis signed an agreement to sell its Natixis Algérie subsidiary to Banque Fédérale des Banques Populaires. However, this disposal was subject to the approval of the Algerian regulatory authorities. In accordance with IFRS 5 “Non-current assets held for sale and discontinued operations”, Natixis continued to show Natixis Algérie as fully consolidated in the consolidated statements for the year ended December 31, 2009 and grouped Natixis Algérie’s assets and liabilities in two separate places on the balance sheet: “Non-current Assets Held for Sale” and “Non-current Liabilities Held for Sale”.
Because Natixis had not obtained the necessary approval for the deal at December 31, 2010, Natixis Algérie’s assets and liabilities are no longer presented in two separate places on the balance sheet.
The following rules are applied to consolidate the fi nancial statements of insurance subsidiaries: ● income and expenses are classified by type in accordance with banking accounting principles and not as a function of expense; ● balance sheet items are included under the corresponding line items of the financial statements presented in the banking format.
Mathematical reserves for investment contracts correspond to the surrender value of the contract.
Technical reserves for provident insurance policies are calculated using regulatory discount rates and mortality tables. Incapacity and disability risks are calculated using BCAC tables for provident insurance and experience tables for borrower insurance.
A liability adequacy test is carried out in accordance with IFRS 4 in order to ensure that the insurance liabilities as presented in the consolidated fi nancial statements are suffi cient to cover future cash fl ows estimated at that date. The test is based on a stochastic valuation model of discounted future cash fl ows.
In accordance with IFRS 4, insurance and investment policies with a discretionary participation feature (life insurance) give rise to the recognition of a deferred participation asset or liability to offset the difference in value between assets and liabilities (shadow accounting).
The deferred participation asset or liability is equal to the portion of unrealized gains and losses on investments carried in assets, payable to policyholders pursuant to their insurance contracts or arising on consolidation adjustments. The rate is calculated on the basis of the average participation rate of policyholders recognized in the individual fi nancial statements under contractual rules (average contractual participation rate for each product weighted by the value of the investments on the calculation date). This rate was around 92% at December 31, 2010 (virtually unchanged from 2009).
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”: (in millions of euros) 2010 2009
A deferred participation liability was recognized on December 31, 2009 as a result of unrealized capital gains that may be attributed to policyholder contracts.
In the interest of refocusing the Private Equity business on third-party management, Natixis fi nalized the disposal of fi ve Private Equity entities to Axa Private Equity in the fourth quarter.
● Creation of special purpose entities Canvas Securization LLC and Lavender Trust.
● Acquisition of 50% of the minority interests in Dupont Denant Contrepartie, bringing Natixis’ controlling interest to 100%.
● Special purpose entity Guava CDO Ltd was deconsolidated at maturity.
● Natixis Securities was merged with Natixis S.A. on May 30, 2010.
● Total transfer of Garbo Invest’s assets and liabilities to Natixis S.A. at December 31, 2010.
● Acquisition of 40% of Natixis Assurances Partenaires; goodwill of €1.7 million was generated and booked to equity in accordance with IAS 27 (revised).
● Creation of 17 entities: − Absolute Asia Dynamic Equities Fund- 40 Act Fund; − Hansberger Focused International Equity Fund; − Reich Tang Deposit Solutions; − AEW Europe Investment Ltd; − AEW Europe Investment LLP; − Alphasimplex Managed Futures Fund; − Loomis Sayles Multi – Asset Real Return Cayman Fund; − Loomis Sayles Multi – Asset Real Return Fund; − Westpeak Active Beta Fund; − EPI SO SLP LLC; − Loomis Absolute Strategies Lux Fund; − Loomis Absolute Strategies US Fund; − AEW Co Invest; − Hansberger Investment Advisors Private Limited; − Aurora ASG Global Opportunities Fund; − Natixis Oakmark International Fund; − Natixis Oakmark Global Fund.
● Acquisition of 50% of asset management company H2O by Natixis Asset Management, generating goodwill of €10.5 million; H2O specializes in global macro hedge fund management; ● Acquisition of 51% of OSSIAM, an asset management company specializing in ETFs, by Natixis Global Asset Management. This acquisition generated goodwill of €4.2 million.
● Creation of AEW Europe SGP and NAMI AEW Europe following the double partial contribution of NAMI’s assets and the total transfer of the rest of NAMI’s assets to AEW Europe S.A.
● The restructuring of the US division entailed: − the sale of 60% of Natixis’ shares in Natixis North America LLC to NGAM P1, which then contributed the shares to NUSHI; − the sale of 40% of Natixis’ shares in Natixis North America Inc. to NUSHI.
Natixis North America LLC and Natixis Global Asset Management (US division) are wholly-owned by NUSHI.
● Acquisition and merger of GCE Paiements (subsidiary of Groupe BPCE) with Natixis Paiements. This acquisition was treated as a transaction under joint control, outside the scope of IFRS 3R; goodwill of €35.1 million was directly deducted from consolidated equity.
● Sale of Natixis Factor’s remaining 25% stake in VR Factorem Gmbh to VR Leasing Ag, generating a capital gain of €12.5 million.
● Incorporation of subsidiary Séguradora Brasileira C.E. (acquisition of 25% in 1997 and 50% in 2008), generating goodwill of €1.2 million.
● Acquisition of 25% of Coface Finans A/S Danmark (formerly MidtFactoring), bringing the percentage of ownership to 100%. Goodwill of €3.9 million was generated and booked to equity, under IAS 27 (revised).
● Deconsolidation of Natixis Cape and FNS3, which had become non-material.
● Incorporation of SAS Tasta, FCC Eridan, Aurora, IRR Invest, BRED IT, Banque Franco Lao, SAS Esfin Gestion, Financière Champlain and BPA Atouts Participations.
The various legal entities specifi cally created to manage a transaction or group of similar transactions (special purpose entities – SPEs) and substantially controlled by Natixis, even where there is no equity relationship, are consolidated if they make a material contribution to the consolidated fi nancial statements. The main criteria for assessing the existence of such control as defi ned by SIC 12 are as follows: ● Activity: the SPE’s activities are substantially conducted on behalf of Natixis which, directly or indirectly, has created the SPE to meet its specific business needs.
● Decision-making powers: Natixis has decision-making and management powers enabling it to control or obtain control of the SPE or its assets, including certain decision-making powers arising after the formation of the SPE. Such decisionmaking powers may have been delegated by setting up an auto-pilot mechanism.
SIC 12 does not apply to SPEs designed to manage postemployment and long-term employee benefi ts, which are covered by IAS 19 (“Employee Benefi ts”). Accordingly, employee pension funds and mutual insurance companies are not consolidated.
Acting as manager of the asset management company does not in itself transfer the majority of a fund’s risks and benefi ts to the NGAM sub-group. In fact, the asset management company does not guarantee and is not exposed to risk in respect of the fund’s assets, and any provision for profi t-sharing with the asset management company only applies to a small part of the gains. NGAM’s compensation as manager is marginal compared to the returns generated for investors.
SIC 12’s “risks” and “benefi ts” criteria must therefore be assessed in terms of any interest of the asset management company or any other Natixis entity in the funds. As neither NGAM nor any other Natixis entity have a majority interest in the funds, Natixis neither retains a majority of the benefi ts nor incurs a majority of the risks associated with these non-guaranteed mutual funds. Accordingly, these mutual funds are not consolidated.
Real estate funds are generally set up by NGAM, but it may only be manager of a portfolio of real estate assets under a portfolio management mandate entered into with a third party. Its role is strictly defi ned by the portfolio management agreement, which never provides it with effective control of the structure.
On this basis, only two real estate funds managed by the NGAM sub-group were consolidated as of December 31, 2010: ● the EPI SLP fund; ● the EPI SO SLP fund.
The following US funds were consolidated with respect to this principle as at December 31, 2010: ● AlphaSimplex Managed Futures Fund; ● Aurora ASG Global Opportunities Fund; ● ASG Laser Fund (Lux Fund); ● Dynamic Equities Fund – Singapore Sleeve; ● Dynamic Equity Fund – 40 Act Fund; ● Gateway Hedged US equities fund; ● Hansberger focused international equity fund; ● Loomis Absolute Strategies Lux Fund; ● Loomis Absolute Strategies US Fund; ● Loomis Multi Asset Real Return Cayman Fund Ltd; ● Loomis Multi Asset Real Return Fund; ● Loomis Sayles Global Equities Opportunites funds; ● Loomis Sayles Trust Company LLC (the “LLC”); ● Natixis Oakmark Global Fund; ● Natixis Oakmark International Fund; ● NPE Caspian 1A, LP; ● NPE Caspian 1B, LP; ● NPE Caspian GP, LP; ● Westpeak Active Beta Fund Equity.
● euro-denominated policies are policies under which the insured party receives a minimum guaranteed return plus the major share of the surpluses generated by the insurance company’s main fund. Any shortfall between the fund’s return and the minimum guaranteed return is borne by the insurer, which thus incurs the risks. The risks and benefits criteria are met for such funds if the insurer holds a majority interest.
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 Private Equity 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 Benefi ts” and “Majority of Risks”) are assessed on the basis of the level of Natixis Private Equity’s interest in each investment tranche, and on the basis of any guarantees provided to these entities.
The structures for which Natixis is the sole lender or the majority shareholder are limited in number and do not have a material impact on the Natixis consolidated fi nancial statements.
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 4.2.7 OTHER REAL ESTATE FUNDS
● The Natixis Lease sub-group holds a certain number of SPEs which own real estate assets. Four such SPEs are controlled by Natixis (interests in excess of 50%) and were material as of December 31, 2010. They were thus included in Natixis’ scope of consolidation at that date: − SCI Valmy Coupole; − Fructibail Invest; − OPCI Natixis Lease Investissement; − SASU Immobilière Natixis Bail held by OPCI Natixis Lease Investissement.
Natixis is also the sponsor of three ABCP conduits: Direct Funding, Magenta and Versailles.
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, and 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.
Available-for-sale fi nancial assets are non-derivative fi nancial assets that are not classifi ed as loans and receivables, heldto -maturity investments or fi nancial assets at fair value through profi t and loss. Assets in this category include Natixis’ investments in non-consolidated companies. On initial recognition, available-for-sale fi nancial assets are measured at fair value including transaction costs. Subsequently, and at each reporting date, the assets are remeasured to fair value based on the bid price for listed instruments.
The fair value of listed non-consolidated investments corresponds to their last listed price prior to the reporting date. The fair value of unlisted non-consolidated investments is obtained using the P/E (price/earnings ratio) or DCF (discounted cash fl ow) valuation methods.
Gains or losses arising from changes in the fair value (excluding income) of available-for-sale fi nancial assets that are not hedged are recognized directly in equity under “unrealized or deferred gains or losses”. Accrued or earned income is recognized in the income statement under “interest and similar income” using the effective interest rate method. Available-for-sale fi nancial assets are tested for impairment at each reporting date. Where there is objective evidence that an asset is impaired and a decline in the fair value has already been recognized directly in equity, the cumulative impairment loss is removed from equity and taken to income under Provision for credit losses (fi xedincome securities) or net revenues (variable-income securities).
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes impairment. The test involves a qualitative analysis considering a variety of factors such as share price performance over a given period or information relating to the issuer’s financial position. Where necessary, an impairment loss is recognized based on the market price at the reporting date. Irrespective of this analysis, an impairment loss is systematically recognized when securities present an unrealized capital loss of over 50% at the reporting date, or an unrealized capital loss on their face value for a period of more than 24 months; ● for investments in unlisted, non-consolidated companies: unrealized capital losses of over 20% on their face value for a period of more than 18 months, or significant changes in the technological, market, economic or legal environment suggesting that the amount invested in the equity instrument may not be recoverable; ● for shares in venture capital funds (FCPRs), net asset value alone is not enough to determine whether there is any evidence that the initial investment might not be recovered. This is because net asset value during the investment phase is reduced by start-up costs (structuring and brokerage fees, etc.). Accordingly, for investments of this type which are not quoted on an active market, the following impairment principles apply: − no impairment is recognized if, at the reporting date, the position and results of the fund are in line with the business plan,
− 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 financial 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,
IAS 17 also describes three indicators that individually or in combination could also lead to a lease being classifi ed as a fi nance lease: ● if the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee; ● gains or losses from the change in the fair value of the residual value accrue to the lessee; ● the lessee has the ability to continue the lease at a rent that is substantially below the market rent.
Revenues under the fi nance lease are recognized as income at the interest rate implicit in the lease so as to produce a constant periodic rate of return on the lessor’s net investment. The interest rate implicit in the lease is the discount rate that, at the inception of the lease, causes: ● the aggregate present value of the minimum lease payments receivable by the lessor and the non-guaranteed residual value, to be equal to the sum of: − (i) the fair value of the leased asset and (ii) any initial direct costs of the lessor, i.e., the costs incurred specifi cally by the lessor during the set-up of the leasing contract. These two items form the initial value of the asset.
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes in the estimated non-guaranteed 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.
Assets provided under operating leases are shown in the balance sheet under property, plant and equipment or intangible assets in the case of equipment leases, and investment property in the case of property leases. Lease income from operating leases is recognized in the income statement on a straight-line basis over the lease term, under “income or expenses from other activities”.
For the other two risk classes (industry and geographical risk), objective evidence of impairment is based on in-depth analysis and monitoring of business sectors and countries. An objective writedown indicator is most often formed from a combination of micro- or macro-economic indicators specifi c to the sector or country concerned.
For industry risk, microeconomic criteria include indicators of fi nancial solidity applied to a sample of companies representative of each industry sector. Examples of criteria tracked by industry analysts are trends in sales volumes, the extent to which companies in the industry meet their growth targets, profi t trends for companies in the industry, as well as available cash and gearing ratios. Examples of macroeconomic criteria include general market inputs such as the price of oil and the US dollar and commodities costs.
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 writedowns.
Where a group of fi nancial assets is found to be impaired, the impairment loss is calculated based on the expected losses arising on each exposure within the Group, in accordance with the provisions of Basel 2.
Cash fl ow hedges are mainly used by Natixis to hedge Natixis S.A.’s overall interest rate risk.
The subsidiary Natixis Financial Products LLD (formerly Natixis Capital Markets North America) documents overall hedging of its interest rate risk in accordance with fair value hedging rules. To account for these transactions, the subsidiary applies the carve-out provisions of IAS 39 as adopted by the European Union. The accounting treatment of derivative fi nancial instruments designated for accounting purposes as structural fair value hedges is similar to that applied to fair value hedging derivatives. Changes in the fair value of portfolios of hedged instruments are reported on a specifi c line of the balance sheet (“Revaluation adjustments on portfolios hedged against interest rate risk”), with a corresponding entry in income.
Outside these limits, the hedge no longer qualifi es for hedge accounting under IFRS.
The fair value of a fi nancial asset or liability is the amount at which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction.
On initial recognition, fair value is the price paid or received. On subsequent reporting dates, fair value is estimated on the following basis: ● if the instrument is quoted on an active market, fair value is its quoted price. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis; ● if the market for a financial instrument is not active, fair value is established using various valuation techniques. Valuation techniques may refer to observable data from recent transactions, the fair value of similar instruments, discounted cash flow analysis and option pricing models, proprietary models in the case of complex products or non-observable data when no pricing or market data are available. The fair values obtained using these models may be adjusted, depending on the instruments concerned and the associated risks, to take account of factors such as the bid-ask spread and modeling risk.
This mainly includes listed securities and derivatives traded on organized markets (futures, options, etc.) whose liquidity can be demonstrated, and shares of UCITS whose NAV is determined and reported on a daily basis.
Instruments measured using level 2 inputs also include: ● securities not quoted on an active market whose fair value is determined based on observable market data. Example: use of market data published by listed peer companies or the earnings multiple method; ● shares of UCITS whose NAV is not determined and published on a daily basis, but are subject to regular reporting or offer observable data from recent transactions; ● debt issues measured at fair value through profit and loss. The valuation of the “issuer credit risk” component is based on the discounted cash flow method, using directly observable parameters (swap yield curve, revaluation spreads, etc.). For each issue, this valuation represents the product of its remaining notional amount and its sensitivity, taking into account the existence of calls, and based on the difference between the revaluation spread and the average issue spread.
Inputs relating to all such instruments were demonstrated to be observable. From a methodology perspective, observability is based on four inseparable criteria: ● inputs are derived from external sources (a recognized contributor wherever possible); ● they are updated periodically; ● they are representative of recent transactions; ● their characteristics are identical to the characteristics of the transaction. If necessary, a proxy may be used, provided that the relevance of such an arrangement is demonstrated and documented.
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 little liquidity observed for such shares; ● instruments carried at fair value on the balance sheet and for which data are no longer available due to a freeze in trading in the wake of the financial crisis, which were not reclassified within “Loans and receivables” pursuant to the amendment to IAS 39 and IFRS 7 published on October 13, 2008 (see below). When there is a significant drop in trading in a given market, a valuation model is used based on the only available relevant data.
In accordance with the decree of February 20, 2007 on requirements resulting from the Third Pillar of Basel 2, a description of crisis simulations and ex-post controls (validation of the accuracy and consistency of internal models and modeling procedures) is provided for each model used in the “Risk Management” section of the registration document.
The following assumptions applied in previous years were maintained: ● the current rating of assets posted as collateral rated CCC or below is taken into account by applying a 97% discount to the underlyings. This discount was reduced to 70% for underlying assets initially rated AAA in standard securitization transactions (i.e., excluding Commercial Real Estate CDOs – CRE CDO, ABS CDO, ABS CDO Mezzanine, on which a 97% discount continues to be applied); ● non-subprime underlying assets held (excluding US RMBS) are valued using a discount matrix taking into account transaction types, ratings and vintages; ● valuation of RMBS and CLOs based on the model used for directly held RMBS and CLO positions.
The approach used since Q1 2009 to determine provisions for contracts with CDPCs (Credit Derivatives Product Companies) was refi ned by applying a transparency-based approach to the underlying assets. This adjustment was based on an estimate of exposure at the time of default, with the PD and LGD based on the tranche’s maturity. A stress factor of 1.2 was applied to the probabilities of default thus determined for the underlyings, based on a recovery rate of 27%. Counterparties are associated with a probability of default whenever the losses resulting from the calculation exceed the CDPC’s net available assets.
In addition to these provisions, a general reserve also takes into account the volatility of the fair value of the contracts.
The same valuation model as in previous periods was applied, based on projected future cash fl ows and cumulative loss rates for each structure, adjusted for stress. Cumulative loss rates per structure were determined based on 84 default scenarios applied to this asset class, published by S&P. All scenarios were implemented for each structure and the 42 least favorable scenarios were used to determine the price of each transaction.
The fair value of instruments reclassifi ed in accordance with the “Reclassifi cation of fi nancial assets” amendment to IAS 39 and IFRS 7 published on October 13, 2008, was calculated using the valuation models described below.
On November 12, 2009, an asset protection system was implemented for part of the GAPC portfolios by BPCE, with retroactive effect at July 1, 2009. With this guarantee mechanism, Natixis can free up a substantial portion of the capital allocated to segregated assets to guard against risks of losses on these portfolios subsequent to June 30, 2009. This protection system is structured around two mechanisms: ● a sub-participation with the characteristics of a financial guarantee, covering 85% of the face value of assets recognized in “loans and receivables” and “available-for-sale financial assets”. Under this guarantee, Natixis is protected from the very first euro in default up to 85% of the default amount; ● two Total Return Swaps (TRS), one in euros and one in US dollars, transferring to BPCE 85% of unrealized and realized gains and losses on the portfolio of instruments at fair value through profit and loss (cash and derivatives) since July 1, 2009. TRS are derivatives and are therefore carried at fair value on the balance sheet, with a matching entry to income. At the same time, Natixis purchases an option from BPCE which, if exercised, allows it to recover the net gains on this portfolio after a ten-year period in return for the payment of a premium estimated at €367 million. The premium is also recognized at fair value.
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); ● deferred recognition of the discount 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.
Property, plant and equipment and investment property are recorded at their purchase price at the acquisition date, including directly attributable costs (transfer duties, fees, commissions and registration expenses) as well as borrowing costs when these meet the criteria for capitalization set out in IAS 23 “Borrowing Costs”.
Computer software developed in-house is recognized under “intangible assets” at its direct cost of development, which includes the related hardware costs, service costs, payroll costs directly attributable to the production and preparation of the software for use, and borrowing costs when these meet the criteria for capitalization set out in IAS 23 “Borrowing Costs”.
In accordance with Article R.332-210-1 of the French Insurance Code, a fi ve-year appraisal is conducted by an independent expert approved by the French insurance regulator (ACAM). Between two appraisals, the market value of property is certifi ed by experts on a half-yearly basis.
As soon as they are in a condition to be used by Natixis in the manner in which they were intended, property, plant and equipment and intangible assets are depreciated or amortized over their estimated useful lives on a straight-line, declining or increasing balance basis, whichever best refl ects the pattern in which the economic benefi ts are consumed. The residual value of the asset is deducted from its depreciable or amortizable amount when it can be measured reliably. Natixis does not believe it can reliably measure the residual value of items other than land and non-destructible buildings classifi ed as historical monuments. They are therefore assigned a residual value of zero.
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes a whole. For buildings used in the business and investment property, the following components and depreciation periods have been identifi ed: Component Depreciation period
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 “non-current 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.
These equity investments, initially recorded under “Financial assets at fair value through profi t and loss – fair value option” were reclassifi ed to “Non-current assets held for sale” on the consolidated balance sheet at December 31, 2010. However, they are still measured according to the provisions of IAS 39, in line with IFRS 5 recommendations.
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, identifying at least: − the operations or part of the operations concerned,
No provisions were recognized in respect of future operating losses or major repairs, nor were any contingent assets or liabilities recorded.
A provision is accrued for termination benefits when the employer is demonstrably committed to provide such benefits.
In accordance with the principles of recognition set out in IAS 19, Natixis has identified the following types of postemployment benefit: ● 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.
Contributions paid under defi ned contribution plans are expensed in the period in which the employee rendered the service in exchange for said contributions.
● minus any past service cost not yet recognized in income; ● plus or minus any unrecognized actuarial gains or losses arising from: − experience adjustments linked to demographic variables,
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, 12 months or more after the end of the fi scal year in which the services were rendered, is recognized over the required period of presence as from the start date of the fi scal year in which the employees began rendering the corresponding services.
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes l’Économie Française (SFEF) as security for any loans they receive from SFEF. The corresponding loans granted to Natixis by BPCE, itself eligible for SFEF financing, are shown in the consolidated balance sheet within “deposits from financial institutions”. 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.
Financing obtained indirectly from SFEF and the undated Deeply Subordinated Notes subscribed by SPPE are detailed in Note 6.17. “French State support”
The variable compensation plan set up by Natixis in early 2010 for some of its employees complies with the professional standards issued by the Fédération Bancaire Française and the provisions of the decrees of November 3, 2009 and December 13, 2010, amending CRBF Regulation No. 97-02. The share-based plans established in this framework are paid out either in Natixis shares or cash indexed to the Natixis share.
The tax expense for the year comprises: ● tax payable by French companies at the standard rate of 34.43%, and by foreign companies and branches at the local rate; ● deferred taxes arising from temporary differences between the carrying amount of assets and liabilities and their tax basis, which are calculated using the balance sheet liability method.
The French Finance Act for 2010 replaced business tax with the “contribution économique territoriale”. This tax includes the real property contribution, or “contribution foncière des entreprises“ (CFE) and the value added contribution, or “cotisation sur la valeur ajoutée des entreprises“ (CVAE). The CFE is treated as a tax other than on income, and will be recognized in the 2010 fi nancial statements within “Operating expenses” in the consolidated income statement. Natixis considers that the same treatment will be applied to the CVAE, since its calculation is not based on taxable income.
Allocations to the capitalisation reserve and reversals as from January 1, 2010 are no longer used to determine taxable income.
There are no IFRS standards prescribing the accounting treatment of fi nancial guarantees received. In the absence of specifi c guidance, the accounting treatment applied must be determined by analogy with the accounting treatment prescribed by other standards in similar situations. Accordingly, guarantees received meeting the defi nition of a fi nancial guarantee for an issuer are accounted for in accordance with: ● IAS 39, for guarantees received in respect of financial instruments; ● IAS 37, for guarantees received in respect of liabilities falling within the scope of IAS 37.
The specifi c treatment applied to the guarantee granted to Natixis by BPCE on GAPC assets is disclosed in Note 5.7.
All fi nancing commitments granted by Natixis give rise to loans granted at market rates at the grant date. The drawn-down portion of these commitments is classifi ed in “Loans and receivables”. These commitments represent contingent liabilities and are recorded in accordance with IAS 37. At inception, they are not recognized in the balance sheet. A provision is recognized in liabilities if the cost of the commitment exceeds the associated revenue.
Accounting estimates which require assumptions to be made are mainly used to measure the items set out below: FINANCIAL INSTRUMENTS RECORDED AT FAIR VALUE
Natixis records a net deferred tax asset linked to its ability to generate taxable income over the next 5 years. Recognition of the deferred tax is conservatively limited to the generation of profi ts over the next 5 years, while tax loss carryforwards are deductable with no time limitation in France and UK or over very long periods (20 years in the US).
Provisions recognized in the consolidated balance sheet, other than those relating to fi nancial instruments, employee benefi ts and insurance contracts, mainly concern provisions for litigation, fi nes and tax risks.
Net income/(loss) attributable to shareholders (in millions of euros) (a) 1,352 (1,732)
Average number of shares used to calculate earnings/(loss) per share 2,903,899,660 2,897,417,712
Net earning/(loss) attributable to the Group (in millions of euros) 1,732 (1,707)
Number of potential dilutive shares resulting from stock option plans (b) 13,656,034 6,551,256
(a) The difference corresponds to the interest generated on Deeply Subordinated Notes – preference shares for -€374 million after tax savings and interest on payments of issuance fees for -€6 million.
(b) This number of shares refers to the shares granted under the deferred share-based bonus plans (2009 and 2010 plans). In 2010, based on th average share price, the 2007 and 2008 stock option plans presented in Note 11.2.4 are not considered as potential dilutive shares.
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes
Instruments designated at fair value through profi t and loss 6.1.2.1 and 6.1.2.2 45,046 49,773
(a) The fair value (determined using the method described in Note 5.6) recorded in respect of th issuer spread on the Natixis issues totaled €437 million at December 31, 2010 versus €416 million at December 31, 2009 (see Note 7.3), refl ecting the change in the level of the Natixis spread since year-end 2009.
(b) Other payables comprise a portfolio of structured pensions managed according to a dynamic approach similar to an ALM approach.
Managed on a fair value basis Embedded derivatives Carrying amount Accounting mismatch
Fair value hedging is used to hedge changes in the fair value of Fixed Income securities on an individual basis, and also as a structural hedge against the interest rate risk incurred by Natixis Financial Products LLD (formerly Natixis Capital Markets North America).
The table below shows available-for-sale fi nancial assets by type of instrument (loans outstanding, Fixed Income securities, variable income securities). It discloses the gross value before impairment, the amount of impairment and the carrying amount net of impairment.
The fair value of loans and receivables to banks totaled €67,940 million at December 31, 2010 compared with €67,408 million at December 31, 2009.
The fair value of loans and receivables to customers totaled €128,175 million at December 31, 2010, versus €101,692 million at December 31, 2009.
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.5 Held-to-maturity financial assets
The fair value of held-to-maturity fi nancial assets totaled €5,125 million at December 31, 2010, versus €5,761 million at December 31, 2009.
Impairment that would have been recognized in income in respect of assets previously classifi ed as available-forsale
Loans and receivables 22,410 9,764 6.6.4 FINANCIAL ASSETS RECEIVED AS SECURITY AND ABLE TO BE SOLD OR REUSED AS SECURITY
With the exception of repurchased securities described in Note 6.6.3, Natixis does not hold any assets for which the related cash fl ows have been transferred within the meaning of IAS 39 and that have not been fully or partially derecognized on the basis of Natixis continuing to control these assets or substantially all of the risks and rewards attached to these assets.
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.6.6 RESTRUCTURED FINANCIAL ASSETS
Restructured fi nancial assets are debt instruments recognized as assets whose terms and conditions (e.g., interest rate or repayment terms) have been renegotiated as a result of fi nancial diffi culties experienced by the borrower.
Restructured assets mainly derive from Natixis S.A. (€31 million in 2010 versus €33 million in 2009) and Natixis Financement (€55 million in 2010 versus €44 million in 2009).
Financial assets designated at fair value through profi t and loss 27,369 10,263 15,775 1,331
Securities designated at fair value through profi t and loss 13,771 10,263 2,939 569
Derivative instruments not eligible for hedge accounting (positive fair value) 3,249 444 (116)
Other fi nancial assets designated at fair value through profi t and loss 758 24 (10)
TOTAL FINANCIAL ASSETS RECORDED AT FAIR VALUE 15,621 485 207 47
Sensitivity analysis of the fair value of fi nancial instruments measured according to level 3 (assets and liabilities)
− or +/-1% for CMBS/CLO underlyings; i.e. a sensitivity impact representing a valuation increase of €38 million (refl ecting an improvement in the above-mentiond inputs) or a valuation decrease of €53 million (refl ecting a deterioration in said inputs) (2).
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.7 Deferred tax assets and liabilities
This heading corresponds to technical accounts, details of which are given below: 6.8.1 OTHER ASSETS AND LIABILITIES
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.8.2 ACCRUAL ACCOUNTS
Other accrual accounts 4,352 7,558 6.8.2.2 Accrual accounts (excluding insurance) – Liabilities
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.8.3 INSURANCE ACCRUAL ACCOUNTS
Other payables 3 3 6.9 Property, plant and equipment, intangible assets, investment property 6.9.1 CHANGES IN PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS OVER THE PERIOD
The table below lists the assets obtained by taking possession of guarantees, detailing the type and carrying amount of such assets (securities, buildings, etc.), recognized after calling on guarantees or leveraging other forms of credit enhancement (e.g. surety).
Natixis Real Estate Capital Inc. recovered property through mortgage loan guarantee foreclosures for an amount of €6 million.
The fair value of deposits from banks totaled €106,684 million at December 31, 2010 versus €95,498 million at December 31, 2009.
The fair value of customer deposits amounted to €60,087 million at December 31, 2010 versus €42,607 million at December 31, 2009.
These debt securities are initially recognized at fair value, i.e. at the issue price less transaction costs, and subsequently measured at amortized cost using the effective interest rate method in order to recognize issue costs over the life of the securities.
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.14 Insurance company technical reserves
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 6.15 Provisions and impairment 6.15.1 SUMMARY OF PROVISIONS
Provisions for employee benefi ts 275 90 (15) 1 3 354
(a) Of which €365 million in provisions at December 31, 2010 in respect of Madoff net outstanding.
(b) Loan repayments and securities redemptions comprise: early repayment/redemption: j the redemption of €21 million in undated subordinated notes issued in November 1985.
At maturity: j the repayment of the reimbursable subordinated loan by Natixis Factor concerned the French franc-denominated February 1998 tranche, i.e. an equivalent value of €9 1 million, and the February and October 2000 tranches for €7 6 million and €4 6 million.
Derivative instruments not eligible for hedge accounting (negative fair value) 85,953 1,411 84,139 404
Other fi nancial liabilities designated at fair value through profi t and loss 8,552 2 8,550
4 FINANCIAL DATA Notes to the 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 1,329 314
Derivative instruments not eligible for hedge accounting (negative fair value) 658 333
TOTAL FINANCIAL LIABILITIES RECOGNIZED AT FAIR VALUE 1,329 314 6.19 Breakdown of financial liabilities by contractual maturity
Liabilities (in billions of euros) Balance sheet total Less than 1 month 3 months 3 months to 1 year 1 to 5 years
Financial liabilities at fair value through profi t and loss 72.9 37.6 11.8 11.6 6.3 9.9
Due and accrued interest on derivatives 1,016 (1,194) (177) 1,363 (1,485) (122)
Financing, guarantee, securities, and derivative commitments (a) 225 (217) 8 139 (141) (3)
At December 31, 2010, the expense recognized in respect of the premium totaled -€293 million, of which -€159 million was posted to net revenues and -€134 million to Provision for credit losses.
Hedging derivatives include changes in the fair value of derivatives classifi ed as fair value hedges, including interest, plus the symmetrical revaluation of the items hedged. They also include the “ineffective” portion of cash fl ow hedges.
Net gains/(losses) on other fi nancial assets and liabilities designated at fair value through profi t and loss (b) (96) (478)
(a) “Net gains/(losses) on fi nancial assets and liabilities held for trading” lnclude: ● the valuation of unhedged ABS CDOs with subprime exposure (see Note 5.6), representing an expense of €19 million in 2010 (excluding the impact of the BPCE guarantee), versus €392 million at December 31, 2009, for a net exposure of €625 million at December 31, 2010; ● writedowns taken against the fair value of CDS entered into with monoline insurers (see Note 5.6), which led to an increase of €234 million in writedowns in 2010, verus €213 million in 2009 (excluding the impact of exchange rate fl uctuations and the BPCE guarantee), bringing cumulative writedowns to €2,086 million at December 31, 2010 versus €1,741 million at December 31, 2009; ● Writedowns taken against credit derivatives contracted with Credit Derivatives Product Companies (see Note 5.6), reversed in the amount of €145 million in 2010 to reach €15 million, versus an allocation of €63 million in 2009 (excluding the impact of the BPCE guarantee), for an economic exposure of €80 million at December 31, 2010.
● At December 31, 2010, the discount against fund units recognized in 2009 based on the selling prices observed on the secondary market totaled €70 million versus €100 million at December 31, 2009, i.e. a decrease of €30 million year-on-year.
Other insurance income and expenses 7.5.2 4,520 (3,318) 1,202 4,905 (4,075) 830
Other related income and expenses 7.5.3 789 (418) 371 1,336 (234) 1,102
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 7.5.1 FINANCE LEASES
Gains or losses on sales 5 (15) (11) 1 (12) (11)
(b) 2009 income from other operations primarily includes: ● a gain of €418 million on the reclassifi cation within equity of undated Deeply Subordinated Notes and preference shares; ● a gain of €392 million relating to the July 2009 exchange of Deeply Subordinated Notes.
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 7.6 General operating expenses
Provision for credit losses mainly comprises the costs associated with the risk inherent to credit transactions: net charges to specifi c and collective provisions, loans and receivables written off during the period and recoveries on bad debts written off.
This item also includes any writedowns recorded in respect of proven default risks associated with counterpartis of OTC instruments.
Provisions for risks and other costs (27) 61 0 0 34 (391) 52 0 0 (339)
Provisions for impairment of fi nancial assets (687) 496 (36) 17 (210) (2,626) 665 (111) 9 (2,063)
Share of net assets Share of net income Share of net assets Share of net income 7.9 Gains or losses on other assets
Net capital gains/(losses) on disposals (22) (17) (39) (30) 2 (28)
+ Losses for the period not recognized for deferred tax purposes (161) (327)
(c) Of which €132 million in tax savings arising from the deduction of previous unused tax losses from the 2010 profi t generated by the US subsidiaries and foreign branches.
Share in unrealized or deferred gains or losses or associates 40 (5) 35 (174) (41) (215)
Coface, the Private Equity businesses (proprietary, sponsored funds and third party management slated for disposal) and Natixis Algérie are now managed as fi nancial holdings because they have fewer synergies with Natixis’ other businesses and with BPCE.
This new-look organization is used by Management to monitor divisional performance, draw up business plans and manage the business from an operational standpoint. In accordance with IFRS 8 “Operating Segments”, this is the segmentation used by Natixis to defi ne its operating segments.
The Corporate and Investment Banking business offers its corporate, institutional investor, insurer and banking customers a broad spectrum of fi nancing and capital market services leveraging all the expertise in advisory, origination, structuring and placement.
This business line groups together a number of service businesses primarily serving the Caisses d’Epargne and Banques Populaires networks, and other Natixis business lines: ● Factoring: this is France’s third-leading factoring business, providing companies with invoicing management solutions such as financing, insurance, and collection. Natixis Factor uses the Banques Populaires and Caisses d’Epargne networks, which account for a significant portion of its business; ● Sureties and financial guarantees: this business line is operated by Natixis Garanties and notably includes: guarantees for mortgage loans granted to retail and business customers by the Caisses d’Epargne, and more recently the Banques Populaires networks, along with legal guarantees and bail bonds; ● Consumer finance: this Natixis business line includes a broad range of activities throughout the value chain for revolving loans (marketing, origination, administrative management, out-of-court collection) and administrative management services for personal loans. These activities are operated by Natixis Financement, which carries and manages revolving loans granted by the Banques Populaires and Caisses d’Epargne networks, and manages personal loans granted by the Caisses d’Epargne.
● 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.
● Private Banking: this business line encompasses wealth management activities in France and Luxembourg, financial planning solutions, and services for independent wealth managers. Banque Privée 1818, created from the merger between Banque Privée Saint Dominique (BPSD) and La Compagnie 1818, has taken its place as a major player on the French market. Its clientele derives mainly from Caisses d’Epargne and Banques Populaires, and to a lesser extent from Natixis. Private Banking offers advisory services, financial planning and expertise, and fund management solutions.
This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2010.
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 comprised of pro forma data incorporating interest expenses on Deeply
This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2009. This information is presented in accordance with the new business structure adopted by Natixis at December 31, 2010. It takes into account the presentation of the Private Equity business for third party clients within the Investment Solutions and the Film Industry Financing business within the Specialized Financial Services.
Loans and receivables to customers 87,250 1,544 18,762 4,374 11 10,466 5,641 128,049
Financial liabilities at fair value through profi t and loss 116,779 123 5 41,767 183 158,856
Deposits from fi nancial institutions 53,111 729 14,342 3,645 29,710 5,079 106,616
This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2009.
Net income for the period (group share) 434 424 823 (10) 61 1,732
The liquidity ratio is designed to ensure that liquid assets with maturities of less than one month are equal to or exceed liabilities falling due within the same period. It is defi ned as the ratio between liquidities and liabilities falling due in less than one month.
The information on risk management required under IFRS 7, with the exception of the disclosures given below, is presented in pillar III in section 3.2 of Chapter III “Risk Management”.
Financial assets at fair value through profi t and loss (excluding variable-income securities) 136,808 0 0 136,808 157,139
Available-for-sale fi nancial assets (excluding variable-income securities) 27,656 0 (151) 27,505 25,049
The reclassifi cation of consolidated accounting volumes as gross exposure and exposure at default with respect to prudential credit risk involves the following key operations: ● exclusion of equity-accounted insurance companies in the prudential scope; ● exclusion of exposure classified in the trading scope; ● inclusion of netting agreements on market transactions; ● restatement of factoring positions to take into account exposure to the risk of default and a position on risk of dilution; ● application of a credit-equivalent conversion factor on financing and guarantee commitments.
Africa and the Middle East 212 1,464 1,676 100 60 160
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 10.2.4 CHANGE IN COLLECTIVE PROVISIONS
The segment reversal included a write-back of €280 million for CDPCs and a “pure“ segment reversal of €14 million.
The disclosures on the management of market risk, overall interest rate risk, liquidity risk and structural foreign exchange risk required under IFRS 7 are presented in pillar III of part 3.3 in Chapter 3 “Risk Management“.
Compensation and employee benefi ts include wages and salaries net of rebilled expenses paid within twelve months of the end of the reporting period in which the services were rendered, deferred cash-settled or equity-settled compensation, employee incentives and profi t-sharing for the period, the cost of pensions and other employee benefi t obligations such as long-service awards and deferred compensation payable in cash twelve months or more after the end of the fi scal year in which the services were rendered.
Variable remuneration settled in cash less than twelve months after the end of the fi scal year in which the services were rendered are recognized in expenses payable in the year of reference for which the services were rendered.
On March 18, 2009, Natixis set up a retention plan for Corporate and Investment Banking employees. The 2009 retention plan is designed to foster loyalty among key employees and encourage them to continue contributing to CIB’s activities. The rights to deferred compensation vest gradually over a period running from the grant date (March 18, 2009) to July 1, 2012.
The amount settled in cash at each payment date depends on changes in performance-linked ratios relating to CIB and more generally Natixis, as well as the holding period.
This plan is considered to fall within the scope of IAS 19 and is accounted for as a long-term 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 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, 2010 amounted to €30 million.
Since the early 2010 implementation of a new variable compensation policy for certain categories of employees addressed by CRBF Regulation No. 97-02 as amended, fi ve share-based payment plans have been established: two for services rendered in 2009 and three for services rendered in 2010. The accounting treatment of share-based deferred compensation is determined using the Natixis share (see Note 5.18).
● Plans settled in cash and indexed to the Natixis share: onethird will be paid in March 2011, one-third in March 2012 and the last third in March 2013; ● Plans settled in Natixis shares: one-third will be paid in March 2011, one-third in March 2012 and the last third in March 2013.
− a short-term plan that will be settled in September 2011, subject to a presence condition; ● A share-based plan, one-third of which will be paid in March 2012, one-third in March 2013 and the last third in March 2014. Settlement is subject to presence and performance conditions.
With the exception of the short-term plan, the estimated cost of the deferred compensation is recognized on a straightline basis over the period during which benefi ciaries must be present according to the plan, starting at the beginning of the reporting period in which the employee begins to provide the related service i.e., January 1, 2010 for compensation awarded in respect of 2010. The estimated cost recognized in the 2010 fi nancial statements is: ● €5 million for the long-term plan settled in cash indexed to the price of the Natixis share; ● €7.6 million for the share-based plan.
Regarding allocations not yet formally carried out at the reporting date, these expenses have been estimated using best available estimates of inputs at the reporting date. These inputs relate to the share value and dividend assumptions. The details of the plans and the assumptions used are described in Note 11.2.4.
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.
These measures had no material impact on the obligations in respect of post-employment defi ned benefi ts schemes. The adjustment of retirement age assumptions used to determine the Company’s commitments was recorded under actuarial gains or losses.
As Natixis has undertaken, in respect of the employment preservation (2009) and work adjustment (2008) plans, to carry the benefi ciaries of these plans until the age of retirement on full benefi ts, this additional cost resulted in the recognition of an additional provision for plan restructuring in the amount of €6.7 million.
During 2010, the following changes took place in the scope of benefi ciaries for Natixis’ benefi t plans: ● on January 1, 2010, the employees of the former Natixis Securities were transferred to the benefit plan operated by Natixis S.A. following the entity’s legal merger (see Note 3). With effect from this date, the employees concerned are eligible for end-of-career awards, supplementary healthcare benefits and long-service awards offered to Natixis S.A. employees;
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes e) Employee benefi t obligations at December 31, 2010
Benefi ts vested over the period 6 13 3 49 71
Recognized actuarial gains and losses over the period 4 1 (3) 2
Other items (change in consolidation scope, etc.) (17) 2 (2) 1 (16)
Change in actuarial gains and losses not recognized (3) (8) (3) (14)
Unrecognized past service cost 11 27 38 * Of which -€35 million related to a funding surplus.
Transfers, curtailments and other 3 3 6 g) Breakdown of assets held to fund post-employment benefi ts granted to employees
Impact on present value of gross benefi t obligations at December 31 15.32% 10.43% 9.68% 0.59%
Impact on present value of gross benefi t obligations at December 31 -0.65%
Year of plan Grant date Number of shares granted Acquisition date
Number of indexed shares in cash probable at the acquisition date
On June 18, 2009, Natixis was granted two advances totaling €1.5 billion from its main shareholders, Banque
The amounts shown represent the nominal value of the commitment undertaken: (in millions of euros) 12.31.2010 12.31.2009
In accordance with IAS 39 (§2), fi nancing commitments outside the scope of IAS 39 are recognized in accordance with IAS 37, “Provisions, contingent liabilities and contingent assets”.
A fi nancing commitment given is a contingent liability, defi ned by IAS 37 as: ● a potential 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 entity; or
● a present obligation arising as a result of past events but is 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 sets up securitization transactions on behalf of its customers and investors using specifi c conduits. Natixis extends liquidity lines to fi ve of these vehicles, including two ABCP conduits (Versailles and Elixir). These lines totaled €4 billion at December 31, 2010.
A liquidity line in the amount of €1.1 billion was also granted to a vehicle (Hudson) for which Natixis is a co-sponsor.
Natixis also extended liquidity lines to several funds arranged by third parties (Landale, Northwest, Cedulas) for a total of €713 million.
On November 15, 2010, Banque Privée 1818 and Rothschild & Cie Gestion entered into an agreement defi ning the terms and conditions of the merger of their respective subsidiaries, 1818 Partenaires and Sélection R, in the interest of unifying their distribution platforms for independent wealth management advisers. Banque Privée 1818 will be the majority shareholder and will take operational control of the new entity.
The deal was approved by the French Prudential Supervisory Authority on December 9, 2010 and the European Commission’s Directorate General for Competition is expected to issue an opinion in March 2011. The merger will be fi nalized in the fi rst half of 2011.
At December 31, 2010, Natixis had entered into exclusive negotiations for the sale of equity investments held by the fully consolidated private equity fund NPE Natixis Mercosul Fund. The deal will be fi nalized in the fi rst half of 2011.
Unsecured residual value accruing to lessor 646 109 755 15.1.2 LEASES AS LESSEE
4FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 15.2 Related parties
Loans and receivables to fi nancial institutions 15,066 7,515 7,075 10,976 13,263 5,693
Financial liabilities at fair value through profi t and loss 3,405 356 2,595 3,702 264 2,377
Net gains or losses on fi nancial instruments at fair value through profi t and loss (723) 222 1,579 (418) 334 851
Relations with proportionally-consolidated entities and entities accounted for by the equity method are not material.
Revaluation adjustments on portfolios hedged against interest rate risk 20 236
Net gains or losses on fi nancial instruments at fair value through profi t and loss 141 47
Writedown, amortization and impairment of property, plant and equipment and intangible assets (228) (237)
Restatements on consolidation: ● Profi t from the increase in the share in income 23 55
(a) In 2010, attendance fees paid to members of the Board of Directors included a fi xed portion (€10,000 per year per person) and a variable portion (€2,000 per Board Meeting per person). The members of the Audit Committee and Compensation Committee received a fi xed payment (€5,000 and €3,000, respectively) and a variable payment of €1,000 per meeting per person.
Number of members of the Senior Management Committee in 2010 and 2009: 9.
No stock options previously granted to executive corporate offi cers vested in 2010 and 2009.
As regards net revenues, in the interest of consistency, insurance income and expenses that are similar to banking income and expenses (principally interest and fees and commissions) are reclassifi ed under the corresponding line items in the banking format. Technical reserves and claims expenses are charged to net revenues rather than recognized as provisions for risk.
Tranche B corresponds to the fraction of annual compensation between €35,352 and €141,408.
Tranche C corresponds to the fraction of annual compensation between €141,408 and €282,816.
Change in fair value of investments carried at fair value through profi t and loss 335 335 335 335
Other recurring operating income and expenses (386) (44) (334) (378) (8) (386)
4 FINANCIAL DATA Notes to the consolidated fi nancial statements and notes 15.3.2 INSURANCE COMPANY CONTRIBUTIONS TO THE CONSOLIDATED INCOME STATEMENT
Net gains or losses on fi nancial instruments at fair value through profi t and loss 386 645
Other operating Net gains or losses on available-for-sale fi nancial assets income 49 (235)
Fully and proportionally consolidated subsidiaries and branches 174 101 2% 1% 56 7 1% 0% 60 0 2% 0%
Management of venture capital mutual funds FC 61 61 0 0 Luxembourg
NATIXIS HONG KONG Financial institution FC 100 100 100 100 Hong-Kong
NATIXIS NORTH AMERICA LLC (ex-NATIXIS NORTH AMERICA INC.)* Holding FC 100 100 100 100
NATIXIS DERIVATIVES INC. Brokerage FC 100 100 100 100 United States
NATIXIS REAL ESTATE HOLDINGS LLC (formerly NATIXIS REAL ESTATE CAPITAL INC.)* Real estate fi nance FC 100 100 100 100
SUMMER COMMONS LLC (1) Real estate fi nance FC 100 100 100 100
LIDO APARTMENTS LLC (1) (3) Real estate fi nance 0 0 100 100
ABSOLUTE ASIA DYNAMIC EQUITIES FUND (1) Asset Management FC 100 100 100 100
AEW EUROPE LLP (7) Asset Management FC 100 60 0 0 United
AEW GLOBAL ADVISORS (Asia) Pte, LTD Asset Management FC 100 100 100 100 Singapore
AEW REAL ESTATE ADVISORS, INC. Asset Management FC 100 100 100 100
ALPHASIMPLEX MANAGED FUTURES FUND (1) (7) Asset Management EM 48 48 0 0
ASG DIVERSIFYING STRATEGIES FUND (1) (6) Asset Management 0 0 60 60
ASG LASER FUND (1) Asset Management FC 76 76 69 69 United States
CAPITAL GROWTH MANAGEMENT, LP Asset Management EM 50 50 50 50
CASPIAN CAPITAL MANAGEMENT, LLC Asset Management FC 51 51 51 51
AEW EUROPE ADVISORY LTD Asset Management FC 100 60 100 60
AEW EUROPE SGP (10) Asset Management FC 100 60 0 0 France
AEW COINVEST (7) Asset Management FC 60 60 0 0 France
NATIXIS EPARGNE FINANCIERE (16) Asset Management 0 0 100 100 France
EPI SO SLP LLC (1) (7) Asset Management FC 100 60 0 0 United States
FEDERAL STREET MANAGEMENT, INC. Asset Management FC 100 100 100 100
GATEWAY INVESTMENT ADVISERS, LLC Asset Management FC 100 100 100 100
GATEWAY HEDGE US EQUITIES FUND (1) Asset Management FC 53 53 68 68
HANSBERGER GLOBAL INVESTORS, INC Asset Management FC 100 100 100 100
HANSBERGER GLOBAL (HK) LTD Asset Management FC 100 100 100 100
HANSBERGER INVESTMENT ADVISORS PRIVATE Ltd (7) Asset Management FC 100 100 0 0 India
AURORA ASG GLOBAL OPPORTUNITIES FUND (1) (7) Asset Management FC 100 100 0 0
AURORA INVESTMENT MANAGEMENT LLC Asset Management FC 100 100 100 100
HANSBERGER FOCUSED INTERNATIONAL EQUITY FUND (formerly HGI/VN GLOBAL EQUITIES Fund) (1) (7) Asset Management FC 100 100 0 0
NATIXIS ASSET MANAGEMENT JAPAN CO., LTD Asset Management FC 100 100 100 100 Japan
LOOMIS SAYLES & COMPANY, LP Asset Management FC 100 100 100 100
LOOMIS SAYLES MULTISTRATEGY ALPHA, LP (1) (12) Asset Management 0 0 100 100
LOOMIS SAYLES ABSOLUTE STRATEGIES FUND (LUX) (1) (7) Asset Management FC 100 100 0 0
LOOMIS SAYLES ABSOLUTE STRATEGIES FUND (US) (1) (7) Asset Management FC 84 84 0 0
LOOMIS SAYLES GLOBAL EQUITIES OPPORTUNITIES FUND (formerly NATIXIS LOOMIS SAYLES GLOBAL GROWTH FUND) (1) Asset Management FC 100 100 100 100
AXELTIS S.A. (formerly NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 4)* Holding 0 0 100 100 France
NATIXIS GLOBAL ASSET MANAGEMENT, LP Holding FC 100 100 100 100
NATIXIS OAKMARK GLOBAL FUND (1) (7) Asset Management FC 93 93 0 0
NATIXIS SECURITIES INVESTMENT CONSULTING Co. LTD Asset Management FC 100 100 100 100 Taiwan
REICH & TANG DEPOSIT SOLUTIONS (7) Asset Management FC 100 100 0 0
REICH & TANG DISTRIBUTORS, INC. Retail FC 100 100 100 100
VAUGHAN NELSON INVESTMENT MANAGEMENT, LP Asset Management FC 100 100 100 100
VAUGHAN NELSON TRUST COMPANY Asset Management FC 100 100 100 100
WESTPEAK ACTIVE BETA FUND (1) (7) Asset Management FC 100 100 0 0
WESTPEAK GLOBAL ADVISORS, LP (29) Asset Management 0 0 100 100
AXELTIS S.A. (formerly NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 4)*** (13) Holding FC 100 100 0 0 France
NATIXIS AXELTIS LTD (formerly AXELTIS LTD)* (2) Fund distribution 0 0 100 100
BANQUE PRIVÉE 1818* (formerly LA COMPAGNIE 1818 – BANQUIERS PRIVEES)** Holding FC 100 100 100 100 France 1818 – GESTION (formerly LA COMPAGNIE 1818 – GESTION)*
OPCI NATIXIS LEASE INVESTMENT (1) Real estate fund FC 100 100 100 100 France
OCÉOR LEASE TAHITI (24)** Equipment lease fi nancing FC 100 100 0 0 Tahiti
COFACE FINANS A/S DANMARK (formerly MIDTFACTORING) (4) Factoring FC 100 100 75 75 Denmark
COFACE SVERIGE (EX-AKC Norden) – SUCC (COFACE KREDIT) Insurance FC 100 100 100 100 Germany
COFACE UK – SUCC (COFACE S.A.) Insurance FC 100 100 100 100
COFACE LUXEMBOURG (SUCCCOFACE S.A.) Insurance FC 100 100 100 100 Luxembourg
COFACE PORTUGAL – SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Portugal
COFACE SWITZERLAND – SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Switzerland
COFACE FINANCES PAYS-BAS – SUCC COFACE FINANZ Factoring FC 100 100 100 100 Netherlands
COFACE DANMARKSUCC (COFACE KREDIT) Insurance FC 100 100 100 100 Denmark
LEID – SUCC (COFACE AUSTRIA) Insurance FC 100 100 100 100 Austria
COFACE SINGAPOR -SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Singapore
COFACE HONG KONG -SUCC (COFACE S.A.) Insurance FC 100 100 100 100 Hong-Kong
NATEXIS INDUSTRIE SCR IXEN (26) Capital investment 0 0 98 98 France
Loan country risk sale option vehicle FC 100 100 100 100
BANQUE FRANCO LAO Lending institution/Bank EM 20 11 0 0 France
BCI MER ROUGE Lending institution/Bank EM 20 10 10 10 France
(14) Acquisition of 49% from minority shareholders in Antéis Epargne by Banque Privée 1818 then sale of 100% of shares to non-group entity in Q4 2010.
(21) Partial transfer of assets from Natixis Trust to Natixis Bank.
(25) Consolidation as Natixis is the majority shareholder in the Fund.
(30) Merger of Socama Haute Garonne and Socama Midi Pyrennes Ouest into Socoma Pyrenées Garonne.
(31) Merger of Socama Bas Rhin and Socama Haut Rhin into Socoma Alsace.
4 FINANCIAL DATA Statutory Auditors’ report on the consolidated fi nancial statements 4.3 Statutory Auditors’ report on the consolidated financial statements
The consolidated fi nancial statements have been approved by the Board of Directors. Our responsibility is to express an opinion on these fi nancial statements based on our audit.
Pursuant to Article L.823-9 of the French Commercial Code regarding the justifi cation of our assessments, we draw your attention to the issues set out below: Guarantee mechanism for GAPC assets
As described in Note 5.7 to the consolidated fi nancial statements, a guarantee mechanism set up by BPCE has been in place since July 1, 2009 covering certain assets ring-fenced in the Workout Portfolio Management structure (GAPC). We analyzed the conditions in which this mechanism was set up and the accounting treatment adopted in the Group accounts.
As indicated in Notes 5.6, 6.68 and 6.18 to the consolidated fi nancial statements, the Group uses internal models and methodologies to value fi nancial instruments that are not traded on an active market, as well as to book certain impairment losses. We examined the control procedures relating to the assessment of whether a given market was inactive, the validation of models and the defi nition of the parameters used.
The Group recognizes impairment losses to cover the credit and counterparty risks inherent in its businesses (Notes 5.1, 5.2, 5.3, 6.4 and 6.15.1, and 7.7 to the consolidated fi nancial statements). We examined the control procedures relating to credit and counterparty risk monitoring, the assessment of risks of non-collection and the provisions set aside for individual and collective impairment.
4FINANCIAL DATA Statutory Auditors’ report on the consolidated fi nancial statements
These assessments were made in the context of our audit of the consolidated fi nancial statements taken as a whole, and therefore contributed to form the opinion expressed in the fi rst part of this report.
3 Cash and balances with central banks 12,136 3,497 857 3 Government securities and equivalent 18,393 30,329 23,161 23 o/w institutional operations: 5 Bonds and other fi xed-income securities 28,618 31,974 61,966 5 Shares and other variable-income securities 16,090 14,196 17,219 7 Investments and other long-term securities 10,710 10,258 9,644 7 Investments in related subsidiaries and affi liates 15,402 15,279 14,760 4 Leasing 4 Operating leases 12 Property, plant and equipment 159 182 202
Revaluation reserves 20 Regulated provisions and investment subsidies 24 25 24 21 Retained earnings (101)
Balance of transactions on securities held for trading 3,429 1,891 (1,914)
Funding/reversal of fund for general banking risks and regulated provisions 2 1 (1)
NOTE 7 INVESTMENTS IN SUBSIDIARIES AND AFFILIATES, OTHER LONG-TERM SECURITIES AND TREASURY SHARES 346
NOTE 8 INVENTORY – INVESTMENT PORTFOLIO AT DECEMBER 31, 2010 347
NOTE 23 STATEMENT OF ASSETS, LIABILITIES AND COMMITMENTS RELATED TO MANAGEMENT OF PUBLIC PROCEDURES 365
NOTE 29 GAINS/(LOSSES) ON SECURITIES HELD FOR SALE AND SIMILAR 368
Natixis’ separate fi nancial statements have been prepared and presented in accordance with the standards laid out by France’s Comité de la réglementation comptable (CRC) and comité de la réglementation bancaire et fi nancière (CRBF).
The fi nancial statements for the year are presented in identical format to those for the previous year. Generally accepted accounting principles have been applied in compliance with the principle of prudence based on the following principles: ● going concern; ● consistency of accounting methods; ● principle of periodicity.
Unpaid amounts of loans already committed are included in offbalance sheet items under “Financing commitments given”.
Non-performing loans are identifi ed and recognized in accordance with CRC regulation 2002-03 as amended. This regulation and the notice issued by the CNC Urgent Issues Task Force on December 18, 2003 set out the regulations for classifying non-performing loans and reclassifying them as unrecoverable loans.
Loans declared in default, restructured loans on which the borrower has once again defaulted and loans classifi ed as non-performing for more than one year for which a write-off is planned are deemed to be unrecoverable.
The reversal of the effect of discounting on writedowns of non-performing loans associated with the passage of time is recognized under “Interest and similar expenses” on the income statement.
Provisions for geographic risk are primarily based on each country’s internal rating, integrating different parameters and indicators (political situation, the performance of the economy and the economic outlook, the banking system situation, etc.). Calculation of the impairment is based on an internal rating/ provisioning rate correlation table.
Allowances for sector risk are based on combinations of indexes specifi c to each sector (sector growth, cash held by businesses in the sector, cost of commodities, etc.). The method for calculating impairment loss is the “expected loss” method calculated on maturity.
In accordance with comité de la réglementation bancaire Regulation 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.).
Instruments are assigned to one of the following categories based on their nature and the economic rationale according to 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 as part of specialized management of a trading portfolio. When initially recognized these securities must be traded on an active market with accessible 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 evaluation differences is recognized on the income statement under the heading, “Balance of transactions on securities held for trading”.
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.
● 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 on the acquisition date at the purchase price excluding acquisition costs.
● Investments in related companies: shares and other securities in related corporate entities over which Natixis exercises exclusive control, i.e. corporate entities likely to be fully consolidated in Natixis group. They are recognized on the acquisition date at the purchase price excluding the costs of purchase. These securities are valued individually at the lower of value in use at the reporting date or acquisition cost. Any unrealized loss is subject to an allowance for impairment.
● Treasury shares: Natixis holds treasury shares to regulate the share price under a liquidity agreement. These shares are recognized as securities held for trading and follow the same rules as other securities in this category.
− under “Gains/(losses) on disposals of fi xed assets” for investments in associates and related companies and other long-term securities.
The regulation allows banks to sell all or part of the securities reclassifi ed as “held for investment” if the two following conditions are met: ● the transfer was motivated by exceptional circumstances; ● the market for these securities has become active again.
As soon as they are in a condition to be used by Natixis in the manner in which they are intended, fi xed assets are depreciated or amortized over their estimated useful lives on a straight-line or declining balance basis when this better refl ects the economic amortization. If necessary, any residual value of the asset is deducted from its amortizable amount when it can be measured reliably.
4 FINANCIAL DATA Parent company fi nancial statements and notes business and investment property, the following components and depreciation periods are applied: ● land: non-depreciable; ● non-destructible buildings (of historical importance): nondepreciable; ● walls, roofs and waterproofing: 20-40 years; ● foundations and framework: 30-60 years; ● external rendering: 10-20 years; ● equipment and installations: 10-20 years; ● internal fixtures and fittings: 8-15 years.
This line item comprises debt attributable to securities held for sale issued by Natixis in France or in foreign countries, with the exception of subordinated instruments recognized as subordinated debt. This line item notably includes medium-term notes, interbank market instruments, negotiable debt securities and bonds and other fi xed-rate securities.
Original issue premiums or redemptions of bond issues are amortized over the life of the issues in question and the related expense is recognized under the heading, “Interest and similar expenses” on the income statement.
The notional amount of these instruments is recorded offbalance sheet for internal monitoring and regulatory purposes, but they are not included in the published statement of offbalance sheet items. Details for these instruments are provided in the notes.
The accounting principles applied depend on the instrument involved and the purpose of the transaction (hedging or trading).
So-called “outright” foreign currency futures or transactions hedging other foreign currency futures are measured based on the forward foreign exchange rate remaining to run on the currency in question.
Natixis distinguishes two types of post-employment benefi ts: ● 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.
The amount recognized as an employee benefi t obligation in the balance sheet represents the present value of the obligation under defi ned benefi t plans: ● minus any past service cost not yet recognized in income; ● plus or minus any unrecognized actuarial gains or losses arising from: − experience adjustments linked to demographic variables,
− differences between the actual return and expected return on plan assets; ● minus the market value of plan assets.
Any compensation deferred by more than twelve months, settled in cash and allocated to certain employees under variable compensation policies introduced in early 2010 are contingent on satisfying service and performance requirements. Estimating the expense takes account of actuarial assumptions relating to satisfying these requirements. It is recognized over the mandatory service period beginning on the start date of the period in which the employee begins to render the related services.
Since the introduction in early 2010 of the new variable compensation policy applicable to specifi c categories of personnel falling under the scope of Comité de la Réglementation Bancaire et Financière Regulation 97-02, as amended, fi ve plans featuring share-based payment were created: two for services rendered in 2009 and three more for services rendered in 2010.
● Plan settled in Natixis shares: one third will be paid in March 2011, another third in March 2012 and the final third in March 2013.
Compensation paid under these plans is contingent on satisfying service and performance requirements.
● Two plans are settled in cash indexed to the value of Natixis shares: − a so-called “long-term” plan for which the payment schedule is the following: one third of the units will be paid in September 2012, another third in September 2013 and the fi nal third in September 2014. Settlement is contingent on satisfying service and performance requirements; − a so-called “short-term” plan for which settlement is planned for September 2011 and for which payment is contingent on satisfying a service requirement.
● A plan settled in Natixis shares for which the payment schedule is the following: one third in March 2012, another third in March 2010 and the final third in March 2014. Settlement is made contingent on satisfying performance requirements.
Plans settled in shares are treated in accordance with CRC Rule No. 2008-15, which provides for the recognition of a liability where there is the likelihood or the certainty that the obligation to grant shares generates an outfl ow in settlement without a counterpart provision.
If the granting is made by means of the issue of new shares, and outfl ow in settlement is not deemed to be likely and, as a result, no expense is recognized.
There was no provision set aside for expenses related to plans settled in shares on December 31, 2010. In fact, the 2009 plan will be settled through the issue of new shares. The 2010 plan, which will be allocated by the Board of Directors on February 22, 2011, will also be settled through the issue of new shares.
CRC regulation 2009-03 on the accounting treatment of commissions and fees associated with the grant or the obtainment of a loan has been in force since January 1, 2010. Commissions and costs covered by the area of understanding of this regulation must now be recognized over the life of the loan at the effective interest rate. This change in approach resulted in a negative impact of €100.6 million on the Company’s equity at January 1, 2010.
In terms of accounting comparisons, a change in reporting was introduced in 2010 on some derivatives. Interest expense and income on these instruments are now reported using offsetting.
INTERBANK AND SIMILAR TRANSACTIONS 126,850 131,737 120,056 * o/w subordinated loans: o/w reverse repurchased securities: 52,604 41,854 38,017
Current accounts overdrawn 4,042 3,963 3,977 o/w writedowns of non-performing (86) (147) (86)
Cash and consumer credit 25,575 25,079 34,010 o/w accrued interest 1 2
Reverse repurchased securities 21,123 10,319 10,526 o/w non-performing 0 o/w writedowns of non-performing 0 o/w writedowns of non-performing (1,184) (1,085) (574)
Transfers of securities between categories: There were no transfers of securities between categories in 2009 or 2010.
CAISSE D’EPARGNE DE BRETAGNE – PAYS DE LA LOIRE 9,640,000 450,773,956.00
D) Investments with an inventory amount of less than or equal to €150,000 1,338,267.17
The table below was drawn up in accordance with the provisions of Article L.247-1 of the French Commercial Code: No. of shares at 12.31.2010
ICMNA International Holding Suite 770 919 N Market St DE-19801 Wilmington US$2,232,862 US$(43,973) 19.28%
NATIXIS ALGERIE 62, Chemin Drareni Mohamed Hydra Algérie DZD10,000,002 DZD1,346,149 100.00%
NATIXIS ASIA LIMITED Suite 1911-1922-19 F TWO 88 Queensway Pacifi c Place HKD632,395 HKD31,866 100.00%
NATIXIS BLEICHROEDER NY 44 Th Floor 1345 av. of the Americas Ny 10105 New York US$162,398 US$4,128 100.00%
Non-operating fi xed assets 3 (2) 1 3 (1) 2 5 (2) 3
(in millions of euros) End 2009 Charges Reversals Other End 2010
(in millions of euros) 2010 2009 2008 o/w securities held for trading 0 0 0 o/w liabilities on securities held for trading 35,827 40,087 48,833
Total transfer of assets and liabilities – Garbo Invest 2 2
The share capital is composed of 2,908,137,693 shares each with a par value of €1.60. All shares confer the same rights on their holders, except for treasury shares, which have no voting rights.
Any losses transferred to the parent company give rise to a provision for restitution of corporate tax, deemed to offset the additional group tax incurred if subsidiaries return to profi t, and their tax contribution is decreased by the amount of prior year losses. The provisions for restitution of corporate tax for consolidated and tax-consolidated subsidiaries are eliminated in the consolidated fi nancial statements.
(in millions of euros) <=1 month months months from 6 months to 1 year 1 to 5 years >5 years perpetual Total
Cash and balances with central banks 12,136 0 0 0 0 0 0 12,136
(in millions of euros) <1 year 1 to 5 years >5 years
NOTE 40 ESTABLISHMENTS AND OPERATIONS IN NON-COOPERATIVE STATES OR TERRITORIES WITHIN THE MEANING OF ARTICLE 238-0A OF THE FRENCH GENERAL TAX CODE
Article L.511-45 of the French Monetary and Financial Code and the Ministerial order of October 6, 2009, require banks to disclose in a note to their fi nancial statements their establishments and operations in states and territories that do not have an administrative assistance agreement with France aimded at countering fraud and tax evasion, which provides access to banking information.
Company financial performance over the last five years (Art. 133, 135 and 148 of the Commercial Companies Decree)
Income before tax, depreciation, amortization and provisions 677,795,500.73 852,134,041.69 (2,548,305,710.82) (1,664,174,176.79) 644,584,484.60
Income after tax, but before amortization and provisions 0.51 0.81 (0.82) (0.52) 0.26
Income after tax, amortization and provisions 0.61 (0.38) (1.74) (0.70) 0.10
In our opinion, the parent company fi nancial statements give a true and fair view of the fi nancial position and assets and liabilities of the Company at December 31, 2010, and of the results of its operations for the year then ended, based on French accounting rules and principles.
Without prejudice to the opinion expressed above, we draw your attention to Note 2 to the parent company fi nancial statements, which describes a change in accounting method made in accordance with regulation ° 2009-03 of the French Accounting Regulations Committee pertaining to the accounting treatment of commissions and fees incurred from the granting or acquisition of a credit line.
4 FINANCIAL DATA Statutory Auditor’s report on the parent company fi nancial statements
The Company records provisions to cover employee benefi ts (Notes 1.7, 18 and 31 to the parent company fi nancial statements). We examined the methodology used to measure these benefi t obligations, as well as the main assumptions and inputs applied.
We have nothing to report regarding the fairness of the information provided in the Management Report of the Board of Directors and in the documents addressed to shareholders on the Company’s fi nancial position and fi nancial statements, or its consistency with those fi nancial statements.
4FINANCIAL DATA Statutory Auditor’s Special Report on Related Party Agreements and Commitments 4.6 Statutory Auditor’s Special Report on Related Party Agreements and Commitments
It is our responsibility to inform you, on the basis of information provided to us, of the basic characteristics and procedures of agreements and commitments that we were informed of, or that we discovered while carrying out our assignment. It is not our responsibility to ascertain the existence of such agreements, or to comment on their relevance or substance, or to determine whether other agreements and commitments exist. Under the provisions of Article R.225-31 of the French Commercial Code, it is the shareholders’ responsibility to determine whether the agreements and commitments are appropriate and should be approved.
We performed the procedures that we considered necessary in accordance with the professional standards issued by the French Statutory Auditors’ Board (Compagnie Nationale des Commissaires aux Comptes (CNCC)). Those procedures involved ensuring that the information disclosed to us was consistent with the source documents from which it was taken.
I - AGREEMENTS AND COMMITMENTS SUBJECT TO THE APPROVAL OF THE ANNUAL GENERAL MEETING
As required by Article L.225-40 of the French Commercial Code, we have been advised of those agreements and commitments which were subject to prior authorization by your Board of Directors.
1.1.1 RECIPROCAL FINANCIAL GUARANTEE PERTAINING TO THE “NEPTUNE” DEAL BETWEEN NATIXIS S.A. AND NATIXIS REAL ESTATE CAPITAL INC.
Corporate offi cers concerned: ● Mr. François Pérol: Chairman of the BPCE Executive Board, Chairman of the Natixis Board of Directors; ● Mr. Jean Criton: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Nicolas Duhamel: Chief Financial Officer and Member of the Executive Board of BPCE, Permanent Representative of BPCE on the Natixis Board of Directors; ● Mr. Stève Gentili: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Bernard Jeannin: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Olivier Klein: Member of the BPCE Executive Board – Banque Commerciale et Assurances, Natixis Director; ● Mr. Yvan de La Porte du Theil: Member of the BPCE Executive Board – Banques Populaires network, Natixis Director; ● Mr. Alain Lemaire: Member of the BPCE Executive Board – Caisses d’Epargne network, Natixis Director; ● Mr. Didier Patault: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Philippe Sueur: Natixis Director, Vice-Chairman of the Orientation and Supervisory Committee of Caisse d’Epargne Île-de-France.
On February 24, 2010, the Board of Directors approved a fi nancial guarantee agreement between Natixis and Natixis Real Estate Capital Inc, in reciprocity to the Neptune guarantee and dealing with all GAPC assets held by Natixis Real Estate Capital Inc.
This fi nancial guarantee takes the legal form of a sub-participation in terms of risk, in order to cover Natixis Real Estate Capital Inc., in the proportion of a certain share of a portfolio of assets held by it as of June 30, 2009, following the clear failure to pay sums due in relation to the assets upon the contractually agreed payment date.
4 FINANCIAL DATA Statutory Auditor’s Special Report on Related Party Agreements and Commitments 1.1.2 ADDENDUM NO. 1 TO THE AGREEMENT PERTAINING TO THE FINANCIAL GUARANTEE (SUB-PARTICIPATION IN TERMS OF RISK) OF GAPC BETWEEN NATIXIS AND BPCE.
On August 5, 2010, the Board of Directors approved addendum No. 1 to the fi nancial guarantee (sub-participation in terms of risk) between Natixis and BPCE of November 12, 2009 (see point 2.1.4).
This addendum’s purpose is to specify the application of certain provisions of the Guarantee to covered assets that were subject to a writedown.
1.1.3 INVOICING AGREEMENT BETWEEN NATIXIS AND BPCE PERTAINING TO THE AFFILIATION OF NATIXIS.
Corporate offi cers concerned: ● Mr. François Pérol: Chairman of the BPCE Executive Board, Chairman of the Natixis Board of Directors; ● Mr. Jean Criton: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Nicolas Duhamel: Chief Financial Officer and Member of the Executive Board of BPCE, Permanent Representative of BPCE on the Natixis Board of Directors; ● Mr. Stève Gentili: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Bernard Jeannin: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Olivier Klein: Member of the BPCE Executive Board – Banque Commerciale et Assurances, Natixis Director; ● Mr. Jean-Bernard Mateu: Natixis Director, Chairman of the Executive Board of Caisse d’Epargne and Prévoyance de Rhône Alpes (CERA); ● Mr. Didier Patault: Member of the BPCE Supervisory Board, Natixis Director; ● Mr. Philippe Queuille: Member of the BPCE Executive Board – Operations, Natixis Director; ● Mr. Philippe Sueur: Natixis Director, Vice-Chairman of the Orientation and Supervisory Committee of Caisse d’Epargne Ile-de-France.
On December 16, 2010, the Board of Directors approved the invoicing agreement pertaining to the affi liation of Natixis between Natixis and BPCE.
The expense recognized by Natixis in respect of this agreement totaled €16,500,000.00 for the fi scal year ended December 31, 2010 (covering the last three quarters of 2010).
On February 22, 2011, the Board of Directors approved a compensation agreement by Natixis in favor of Mr. Laurent Mignon, in the event of early termination as Chief Executive Offi cer. The agreement is based on performance criteria and conditions and is capped at one year of maximum potential compensation (fi xed and variable salary). 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 Groupe BPCE.
4FINANCIAL DATA Statutory Auditor’s Special Report on Related Party Agreements and Commitments
2.1 Agreements and commitments approved during previous fi scal years, the performance of which continued into the past year
The expense recognized by Natixis in respect of these agreements totaled €5,571,716.69 for the fi scal year ended December 31, 2010.
2.1.2 AGREEMENT BETWEEN NATIXIS AND BPCE REGARDING THE PURCHASE OF SECURITIES AND THE ISSUE AND SUBSCRIPTION OF UNDATED DEEPLY SUBORDINATED NOTES
On August 25, 2009, the Board of Directors approved an agreement between Natixis and BPCE regarding the purchase of securities and the issue and subscription of undated Deeply Subordinated Notes. The Deeply Subordinated Notes were redeemed in the second half of 2010.
The expense recognized by Natixis in respect of this agreement totaled €112,657,698.42 for the fi scal year ended December 31, 2010.
2.1.4 AGREEMENTS BETWEEN NATIXIS AND BPCE CONCERNING THE GAPC ASSET GUARANTEE
Changes in the fair value of total return swaps led to the recognition at December 31, 2010 of €80,674,239.89 in income for Natixis’ activities and a US$328,636,000 expense in respect of subsidiaries. The US dollar expense is neutralized in Natixis’ fi nancial statements by recording symmetrical income with these subsidiaries.
The transaction was recognized immediately in the balance sheet, and its revaluation led to the recognition of a €28,144,507.68 expense for the 2010 fi scal year.
The income recognized by Natixis for cancellation payments amounted to €120,212,409.00 for the 2010 fi scal year.
4 FINANCIAL DATA Statutory Auditor’s Special Report on Related Party Agreements and Commitments 2.1.5 CREDIT AND FINANCIAL GUARANTEE MASTER AGREEMENTS BETWEEN NATIXIS AND NATIXIS LEASE
On December 17, 2009, the Board of Directors approved the credit and fi nancial guarantee master agreements between Natixis and Natixis Lease, designed to provide access to SFEF fi nancing against the posting of collateral.
2.1.6 CREDIT AND FINANCIAL GUARANTEE MASTER AGREEMENTS BETWEEN (I) NATIXIS AND BFBP AND (II) NATIXIS AND CNCE
The purpose of credit master agreements is to defi ne the terms and conditions for intra-group loans. The purpose of fi nancial guarantee master agreements is to organize Natixis’ collateral arrangements.
On December 18, 2008, the Supervisory Board approved an agreement providing for the distribution of Natixis products and services to the regional banks acquired by Groupe Banque Populaire from HSBC, pursuant to which Natixis is to be the exclusive supplier of the regional banks in the businesses concerned by the agreement as from 2009. The agreement also stipulates that the terms and conditions governing dealings with Natixis and Groupe Banque Populaire shall apply to the former HSBC banks.
Income recognized by Natixis in respect of this agreement totaled €2,149,329.14 for the fi scal year ended December 31, 2010.
On May 30, 2007, the Supervisory Board approved the provisions of an invoicing agreement regarding the affi liation of Natixis to BFBP and CNCE, setting the contribution paid by Natixis at €10,000,000, representing €5,000,000 for each central institution, with annual indexing based on objective criteria. The expense recognized by Natixis in respect of this agreement amounted to €2,616,751.00 for the fi scal year ended December 31, 2010 (covering the fi rst quarter of 2010).
2.1.9 LETTERS OF JOINT AND SEVERAL GUARANTEES AND COMMITMENTS CANCELLED OR COMPLETED
2.2.1 TRIPARTITE AGREEMENTS BETWEEN NATIXIS, SOCIÉTÉ DE FINANCEMENT DE L’ECONOMIE FRANÇAISE (SFEF) AND, RESPECTIVELY, BFBP AND CNCE
2.2.3 AGREEMENT REGARDING MIFID BETWEEN NATIXIS, BPCE AND CRÉDIT FONCIER DE FRANCE (CFF)
On February 25, 2009, the Supervisory Board approved the revisions to this program. On May 13, 2009 the Board of Directors approved an addendum to the credit and fi nancial guarantee master agreement with BFBP, Banques Populaires Covered Bonds (BPCB), Natixis and all Banques Populaires banks. The amendment is designed to incorporate Banque Monétaire et Financière and Compagnie Européenne de Garanties et Cautions as providers of loan collateral subsequently pledged by certain Banques Populaires banks participating in the BPCB program.
4 FINANCIAL DATA Statutory Auditor’s Special Report on Related Party Agreements and Commitments 2.2.6 ADOPTION OF REGULATIONS FOR THE CLOSED COLLECTIVE PENSION SCHEME
2.2.7 “CLICK’N TRADE” SERVICE AGREEMENT AND PARTNERSHIP BETWEEN IXIS CIB, CNCE AND BANQUE PALATINE
2.2.8 LETTERS OF JOINT AND SEVERAL GUARANTEES AND COMMITMENTS BETWEEN IXIS AND ITS SUBSIDIARIES IN FORCE
On June 15, 2006, the Supervisory Board of Ixis CIB, prior to the merger within Natixis, approved a number of agreements providing for the transfer of software user rights and services between Ixis CIB and CFF.
Under these agreements, Ixis CIB grants CFF a non-transferable, non-exclusive and personal right to use the AMeRisC software, and also provides any available market and econometric data to CFF on a daily basis for running the AMeRisC software. In connection with the deployment of the software within CFF, Ixis CIB also provides consulting services at cost price.
“Trajectoire RH”, the Human Resources function roadmap was launched in June 2010, along with ambitious projects concerning all the key aspects contained in the roadmap. It is consistent with Groupe BPCE’s “HR Effi ciency” program and also incorporates features specifi c to Natixis’ business lines.
The plan centers on six major themes, namely Career Management and Mobility, Hiring, Training, Compensation, Employer-Employee Relations and Security. In all, 38 projects incorporate cross-business issues such as managerial values, diversity, international and senior managerial/high potential staff. At the same time, the Human Resources function continues to consolidate and improve its resources (information systems, communication, administrative management, etc.).
Career development meetings provide an opportunity for the local Human Resources to communicate with employees about their career and professional plans and to devise an action plan regarding future mobility. The annual evaluation mechanism also serves to identify each employee’s personal objectives, which the manager then passes on to the local Human Resources.
Through its active participation in forums at France’s prestigious grandes écoles and universities, Natixis made almost 1,500 proposals to students in 2010 (long-term internships, work-study programs and international corporate volunteer programs) in France and abroad.
The success of the New Deal relies on realizing each employee’s talent and skills to the fullest. In order to step up the personalized management of employee careers, Natixis has set up a dynamic system that is gradually being implemented within the entities.
The annual evaluation is a key component of dialogue and a major step in career development: the 2010 campaign, rolled out across the entire Company and coordinated by the Human Resources Department, has four objectives, including comprehensiveness, quality, reinforcing the evaluation of skills and communicating on career development.
Line managers took part in many awareness-raising initiatives, led by Human Resources teams. These involved holding meetings and conferences regarding the importance of the annual evaluation in all entities, distributing manuals on the process, and organizing training and support sessions.
The Training teams work closely with the business lines and their employees, setting up training solutions. These include tailored programs aimed at developing individual skills and thereby increasing the Company’s competitiveness and anticipating how jobs will evolve over time.
In 2010, nearly 200,000 training hours were logged by Natixis’ employees. Moreover, e-learning as well as anti-money laundering training programs were held.
Natixis made substantial efforts in the managerial development area in 2010. These involved providing training programs for 740 managers and implementing specifi c measures geared to preventing psychosocial risks (nearly 1,000 managers attended awareness-raising sessions), rolling out the evaluation campaign, management training, change management, managerial practices, etc.
These efforts will continue in 2011 with the addition of new tools including a managerial behavior charter, a manager’s guide and a dedicated intranet.
Moreover, management of the Bank’s senior executives was strengthened by events fostering the cohesion of Top 100, as well as by an evaluation/goal-setting mechanism and by redefi ning the roles and processes relating to the development of senior executives’ careers within the Human Resources function.
Natixis is integrated into BPCE’s senior executives’ management system through its employees’ active participation in BPCE training programs.
New Personnel Representative Bodies were set up in response to the creation of Groupe BPCE and Consolidated Natixis.
5 SOCIAL AND ENVIRONMENTAL INFORMATION Human Resources within Consolidated Natixis” was signed between Executive Management and the majority of the unions active within this scope. This agreement enables the aforementioned right to form unions and collective bargaining to be adapted to the scope and structure of the “consolidated company” comprising Natixis S.A. and the subsidiaries of our three core businesses. The new collective bargaining body that was subsequently set up within the Consolidated Natixis scope will facilitate, in conjunction with Groupe BPCE’s labor policies, the negotiation of collective bargaining agreements on issues common to some or all of the companies comprising Consolidated Natixis.
A new Group Committee was formed at the BPCE level and sub-group Committees were set up at the same level as the former Groupe Banque Populaire, Caisse d’Epargne and Natixis Committees. The Natixis sub-Committee was formed during the meeting of September 20, 2010 when the body’s secretary was elected and its operating method defi ned.
5.1.5.2 Consultation with Personnel Representative Bodies on the creation of non-business line functions under the New Deal
In 2010, talks with personnel representative bodies led to the creation of non-business line functions under the New Deal. These discussions involved all functions including Legal, General Audit, Communications, Human Resources, Compliance, Finance, Risk and IT.
An agreement designed to prevent stress and psychosocial risks and to improve the quality of life within the workplace was signed for Natixis S.A. This agreement seeks to address issues related to preventing stress and psychosocial risks in the Company, by fully integrating these issues into Natixis’ labor policies.
Overall remuneration includes the following elements: ● fixed compensation, which remunerates the skills and expertise that are expected of the employee in a given position. It is determined by taking into account other companies’ practices for similar positions and internal levels; ● variable compensation depending on the business line. It takes into account external practices and complies with the compensation policy; ● collective compensation (employee savings plan), which comprises: − a common component for all employees of Consolidated Natixis: − a single profit-sharing agreement (target 2011).
The compensation package is rounded out by additional social benefi t mechanisms, especially in countries without a universal insurance scheme.
The compensation system for employees charged with controlling risks and compliance and, more broadly, for support staff and teams in charge of validating transactions, is founded on targets that are different from those of the departments whose transactions they validate. Variable compensation takes account of Natixs’ overall performance and market trends.
The Risk and Compliance Departments are solicited for their opinions regarding the defi nition and implementation of compensation policy for professionals whose professional activities have a signifi cant impact on the Company’s risk profi le. In this way, Executive Management ensures that the principles presented comply with professional standards and are in line with risk management objectives.
Natixis’ Compensation Committee was set up by the Board of Directors (See Chapter 2 Corporate Governance, section 2.3.2.2 – The Compensation Committee).
The Compensation Committee also examines the compensation of the Head of Compliance, the Head of Permanent Control and the Head of the Risk function.
On the proposal of the Compensation Committee, the Board of Directors approves the principles of compensation policy for professionals whose professional activities have a signifi cant impact on the Company’s risk profi le as well as the compensation of the Head of Compliance, the Head of Permanent Control and the Head of the Risk function.
This decision-making process and the principles presented are documented to ensure their traceability. Group Internal Audit conducts a post-process audit in order to ensure the process complies with the principles approved by the Board of Directors. A summary of Group Internal Audit’s report is sent to the Compensation Committee.
The basis used to set variable compensation refl ects net profi t generated on transactions after taking into account all costs (including operating costs, and the provision for credit losses, liquidity and allocated capital).
Guaranteed variable compensation is prohibited, except in the event of recruitment (excluding transfers within Groupe BPCE). In this case, guarantees are strictly limited to one year.
Principle of deferred, conditional payment of a fraction of variable compensation
Payment of a fraction of variable compensation awarded for a fi scal year is deferred and conditional.
The use of individual strategies for hedging or insuring compensation or responsibility and which would limit the scope of the risk alignment measures included in employees’ compensation packages is prohibited.
As a result, the variable compensation policy in respect of fi scal 2010 and applicable as at January 1, 2011, respects all of the principles contained in the European CRD 3 Directive which was transposed into French law by the Order of December 13, 2010 which amended rule 97-02 (which, following European Directive CRD 3 of July 7, 2010, complements the decree of November 9,2009). Quantitative information will be published in a specifi c report, which will be available on the web site of Natixis, prior to the 2011 Annual General Meeting.
Natixis applies its sustainable development commitment to all business lines. As a Member of the United Nations Global Compact since July 2007, Natixis is among the leading fi nanciers of renewable energy projects and managers of funds dedicated to countering global warming. In 2010, Natixis adopted the Equator Principles (a fi nancial industry standard for managing social and environmental risk in project fi nancing), thus beginning an additional phase in the management of the social and environmental risks associated with project fi nance.
In the Asset Management fi eld, Natixis has more than 25 years experience and is one of France’s leading players in Socially Responsible Investment (SRI) and solidarity fi nancing.
Lastly, Natixis develops partnerships with associations which enable it to reach out to civil society, and in 2010 it reiterated its 5-year commitment to the struggle against malaria with NGOs and research Institutes.
In 2010, Natixis’ leasing subsidiary, Natixis Lease, helped fi nance eleven solar PV plants, 10 wind farms and 4 municipal waste biogas facilities via its subsidiary Energeco. Natixis Lease also diversifi ed its renewable energy projects with the funding of a hydropower plant, a biomass plant and a geothermal plant.
Project finance in the renewable energy field maintained brisk growth through the funding of eight new projects in 2010. These projects represent a combined capacity of 560 megawatts split between fi ve solar PV farms and three wind farms located in Italy, Spain and the United States. To date, Natixis’ project fi nance teams have funded over 70 renewable energy projects with a combined installed capacity of nearly 9,000 megawatts.
Natixis Environnement & Infrastructures (NEI) and Luxembourg (NEIL) boast six investment funds totaling more than €1.5 billion in assets under management, managed by a team of 31 asset management professionals (Paris,
Natixis Asset Management is a pioneer in Socially Responsible Investment (SRI) and solidarity fi nancing, with an accumulated expertise in this fi eld of over 25 years. Natixis AM’s current product range covers all the main SRI asset classes and main approaches.
− No. 1 in solidarity fund management in France, with market share of 36.6%, according to the 2010 edition of the Baromètre professionnel des Finances Solidaires compiled by Finansol, La Croix and Ipsos.
Natixis Interépargne manages a total of 25 solidarity FCPEs (employee savings funds), six of which have received the Finansol label: Carrefour Equilibre Solidaire, ES-PL Solidaire BP, Natixis ES Insertion Emplois Solidaire, Impact ISR
Natixis Interépargne holds the leading position in SRI employee savings, with a 31% market share (Source CIES: press release of September 15, 2010). At the end of December 2010, assets under management with the CIES label amounted to €887 million.
Natixis Interépargne and Natixis Asset Management are leaders on the French market for solidarity employee savings, with 48.37% market share (Source: 2010 edition of the Baromètre professionnel des fi nances solidaires compiled by Finansol).
Natixis AM has launched a number of new SRI initiatives, in particular via the organization of the Prix de l’Investisseur Responsable (Socially-responsible Investor Award, created with Amadéis in partnership with Les Échos), its collaboration in the main initiatives and fi nancial working groups concerning SRI and its active participation in events and fi nancial market projects regarding responsible asset management.
In 2010, Natixis AM expanded its SRI and solidarity offer by creating the solidarity fund Planet Finance Nord Sud, transforming the open-end mutual fund Fonsicav into an SRI
fund, and developing solidarity management activities via the venture capital mutual fund (FCPR) Natixis Solidaire.
Carbon footprint of Natixis consolidated operations in France In 2010, Natixis established the Bilan Carbone® (carbon footprint) for its consolidated operations in France, based on 2009 fi gures. This assessment determined the GHG emissions generated by the Bank’s entire operations, including purchases, energy consumption, travel and waste management.
Our waste sorting initiative, launched in 2005, has now reached maturity, with tangible results in the different business lines: paper, batteries, cartridges, IT equipment, offi ce automation equipment and telephones. All of this waste is now sorted in accordance with regulations, or is recycled or reused (See NRE Appendix [5.4] Environmental Information).
Since 2007, Natixis has implemented a Company Travel Plan (plan de déplacement d’entreprise or PDE), aimed at fi nding alternatives to the use of private vehicles for commuting and traveling between corporate offi ces: ● use of public transport and “soft” modes of transport (installation of bicycle parking racks); ● business travel: train travel is favored for destinations in France, Belgium, the Netherlands, Luxembourg and London. In addition, the use of video conferencing is steadily increasing; ● environmental management of the car fleet: since 2006, vehicles with low CO
emissions have been referenced within Natixis’ car policy; ● carpooling: through this program, Natixis employees working in the Île-de-France region (some 7,000 people) can share their vehicles for commuting and inter-office travel.
The Purchasing Department has consistently improved its responsible purchasing policy since 2005. Accordingly, it undertakes to include more social and environmental criteria in its relations with suppliers throughout the entire purchasing process. The responsible purchasing report showed signifi cant incorporation of sustainable development criteria in 2010: ● 86% of purchases factored in social and environmental criteria, accounting for 94.5% of the amounts of purchases made; ● of the 588 main purchases processed by the Purchasing Department, 508 took Sustainable Development issues into account; ● in accordance with the new responsible purchasing standards developed in 2010, calls for tenders now incorporate product and supplier criteria in both the social and environmental fields. Three levels of requirements were defined, comprising regulatory, mandatory and recommended criteria. The Purchasing Department also decided to conduct 15 CSR surveys with selected suppliers, in light of the strategic importance of their business for Natixis.
The 2010 action plan, based on the conclusions from the 2009 assessment, is primarily focused on gender equality in the workplace, extending the careers of senior staff and supporting employees with disabilities.
The action plan for seniors, developed in late 2009, was also continued. Thanks to targeted measures, employees aged over 55 are now remaining within the Company for longer and leaving the Company an average of three months later than before.
Natixis has confi rmed the place of employees with disabilities within the Company as an important corporate responsibility issue. A preliminary review led to the creation of “Mission Handicap” in 2006. This review was repeated in 2010 and rounded out with a study into the ease of access to buildings, measures to reinforce Mission Handicap and further awarenessbuilding initiatives, notably during France’s national handicap week in November 2010.
Natixis’ AccessWeb-certifi ed website is accessible to people with disabilities and a Diversity intranet was created in 2010.
The programs implemented under the “Plan France” with the support of Natixis have already saved thousands of lives in Cameroon and Burkina Faso: ● in the villages in question, the inhabitants have been educated about the link between mosquitoes and malaria; ● 12,200 mosquito nets have been distributed in Cameroon and 29,400 in Burkina Faso; and
To mark the Year of Biodiversity in 2010, a presentation was given to the employees of Natixis, raising their awareness of the benefi ts of biodiversity for our daily lives (health, leisure, work, arts, food, etc.) and the need to protect it.
Indicators taken into account are those defi ned in the French decree of February 20, 2002 relating to France’s New Economic Regulations (NRE) law. The corresponding indicators in the GRI 3 (Global Reporting Initiative) reference document are indicated in brackets.
The data provided herein refer to: ● FTE staff, to Natixis’ overall scope of consolidation (France and International); ● staff under contract and the majority of labor indicators, to France including Natixis S.A. and other legal entities in France; ● remuneration data, to Integrated Natixis’ French scope.
Changes within the scope: ● incorporation of Natixis Securities into Natixis S.A. in June; ● in the Investment Solutions division: removal of Natixis Asset Management Immobilier (NAMI) and Natixis Epargne Financière; creation of Axeltis, AEW Europe-SGP, NAMI-AEW Europe with staff transfers between the division’s subsidiaries; creation of OSSIAM and H
Additional information on Natixis S.A. is available in the 2010 Company (non-consolidated) balance sheet.
5 SOCIAL AND ENVIRONMENTAL INFORMATION NRE Appendices – Labor information * Pro forma fi gures accounting for changes in the scope of consolidation in 2009, in particular the removal of Cacéis.
In 2010, 81 fi xed-term employment contracts were converted into permanent employment contracts.
In 2010, total hires increased but remained below 2008 levels. The total number of new hires in France was 1,235, up 12% on 2009. Moreover, the proportion of fi xed-term contracts in these new hires fell slightly, to 38% from 42% in 2009.
The percentage of new management hires sharply increased to 57.1%, without reaching the 2008 level of 65.1%. New hires (permanent/fi xed-term) in 2010 represented 8.9% of the total workforce in France.
3. Natixis experienced several internal transfers of teams in 2010, either due to mergers (Natixis Securities) or to reorganizations (Investment Solutions).
The number of employee dismissals in France in 2010 was 63 (112 in 2009), of which 27 were for Natixis S.A.
The 127 redundancies in the framework of the Natixis S.A. staff reduction programs are included in “Workforce reduction and employment preservation plans”.
Other legal entities 6.1 9.8 11.6 * Methods were changed n 2010 so as to factor in on-call assignments for employees recorded on an hourly basis.
Nearly all the remaining employees concerned by the two employment preservation plans (PSEs) 2008 and 2009 left Natixis S.A. in 2010.
years years years years years years 56 years and over 5.3.8 WORK ARRANGEMENTS, WORKING HOURS AND ABSENTEEISM
The following measures were taken: ● a collective measure to increase gross annual base salary by 0.7% for employees whose salary is €70,000 or less, with a minimum of €300. This measure applies to employees on fixed-term and permanent contracts, excluding government employment policy contracts; ● the minimum gross annual pay upon hiring was set at €20,000 for full-time employees on fixed-term and permanent contracts, excluding government employment policy contracts; ● employees accorded managerial status receive at least a €1,350 increase in their minimum annual base salary,
● a budget amounting to 0.2% of total payroll was set aside in order to regulate any professional inequalities, such as those that might concern women (as part of gender equality policy), older members of staff and employees with disabilities; ● the total employer contribution to the Collective Retirement Plan (PERCO) was increased from €150 to €500; ● the system for examining the situation of employees who had not received raises in the past three years or more (excluding collective raises) and which was introduced in 2008 and 2009, was renewed in 2010.
❚ TOTAL CONTRIBUTION PAID AS PART OF THE NATIXIS S.A. EMPLOYEE SAVINGS PLAN
(in millions of euros) 2010 2009 2008 5.3.11 LABOR RELATIONS AND COLLECTIVE LABOR AGREEMENTS
In 2010, the Committee for Hygiene, Safety and Working Conditions (CHSCT) continued to work closely with each of its sub-Committees responsible for ensuring the application of rules on health & safety and working conditions at each specifi c site (Charenton, Lumière, Austerlitz, Bourse). This organization enables the CHSCT to concentrate on more general issues related to the restructuring carried out at the Company and its impact on working conditions.
Moreover, it also has the important task of studying the situation of individuals who have decided to contact the Commission because they consider themselves to be in situations of abnormal stress or harassment. There were no such cases formally referred to the Commission in 2010, since the situations in question were handled in the earlier stages.
On the subject of psychosocial risks, Natixis signed an agreement in September 2010 that ratifi es pre-existing mechanisms (“stress observatory”, the above-mentioned Commission), and it is creating or developing other mechanisms (training, dedicated email hotline, option for employees to speak to professional psychologists confi dentially and free of charge).
The “stress observatory” has been in place since January 2009. It gives employees the option of answering a detailed questionnaire on stress during their periodic visits to the workplace doctor. The individual results of these questionnaires are presented to each employee and commented by the doctor, and, at the collective level, the information is fed into a statistical database that allows the degree of stress to be measured based on different criteria.
In 2009, the Sanitary Support Committee met on several occasions between spring and autumn, during a period of Infl uenza A (H1N1) observation and preventitive initiatives. It did not meet in 2010 given the improved situation.
The number of employees participating in training increased in 2010. However, as the length of training was reduced, the total number of hours decreased.
In 2010, efforts focused on helping employees adjust their skills to changes in the Company; this explains the preponderance of “business line”, “general” and “IT” training, both at Natixis S.A. and across France.
5 SOCIAL AND ENVIRONMENTAL INFORMATION NRE Appendices – Labor information 5.3.14 CORPORATE DIVERSITY (LA 14)
● Working hours: women represent 92.2% of persons working part-time in the France workforce (92.6% in 2009).
Women granted individual pay increases 2010* 2009* 2008 * On the integrated Natixis France scope.
Within both the “France” and “Natixis S.A.” scopes, women accounted for a higher proportion of trainees and total training hours, relative to their proportion in the respective workforces.
Share of total training hours received by women 51.9% 51.9% 47.8%
The age pyramid of the France workforce (permanent contracts only) is relatively balanced. A total of 25.8% of employees were under 35, while at the other end of the pyramid, there were 3,260 employees aged 50 or over at the end of 2010, i.e. 24.5% of staff.
Average age in years 42.3 42.2 41.9 * Excluding pre-retired PACEC staff.
5 SOCIAL AND ENVIRONMENTAL INFORMATION NRE Appendices – Labor information 5.3.15 EMPLOYMENT AND INTEGRATION OF DISABLED EMPLOYEES
(b) The overall rate takes account of service contracts with entities that work with people with disabilities and of weightings for age.
Each year, Natixis S.A. allocates 1.3% of its total payroll costs to the funding of social and cultural activities. In addition to this allocation, it provides holiday vouchers to the entire staff (based on family income criteria and number of children) representing 0.6% of total payroll.
The Company makes every effort to ascertain that the service providers and suppliers it engages as subcontractors or outsourcers abide by the legal requirements relating to personnel management.
In all our requests for proposals, the Purchasing Department includes clauses by which the suppliers commit to respecting human rights and equal opportunities.
Natixis’ international businesses contribute to local development in the countries in which they are established. Close to 8,900 employees work in our offi ces, branches and subsidiaries outside France. Virtually all of these employees are recruited locally. The group has a very limited number of expatriate employees. Only 147 employees from the “France” scope are currently working abroad as expatriates.
The increase in consumption between 2009 and 2010, which practically regained its 2007 level, is mainly due to a recovery in business.
Consumption per workstation (in 500-sheet reams) 21.2 15.2 17.4 18.7 5.4.2 WATER CONSUMPTION (EN 8)
Total energy consumption (electricity, heating and air-conditioning) (in MWh) 145,541 128,545 136,012 141,722
Total fuel consumption (in m3) 51 59 97 208 5.4.4 MEASURES TAKEN TO IMPROVE ENERGY EFFICIENCY
The environmental quality of buildings is systematically assessed during the design stage of new sites.
As a result of such measures, Natixis completed an HQE® (High Environmental Quality) certifi cation, process within its “Antares” project, for its two new data centers in the Paris region, Véga and Sirius. The project served as a pilot site and reference for creating an HQE® label for this type of IT building.
Natixis attaches particular importance to the environmental quality of its buildings in order to limit the environmental impact of its operations in the immediate vicinity of its business locations.
Natixis refrains from installing any water loss air conditioning systems in order to avoid expelling polluted water: the glycolated water used in our systems is recovered from the heat exchangers during periodic draining of the systems by companies specialized in processing this product. Used fl uids from combustion engines (electricity generators, vehicles, etc.) are also recovered and processed by specialized companies.
Printer cartridges Recovery of used cartridges for recycling. 9,765 cartridges 9,055 cartridges 4,274 cartridges
Recovered by the Ateliers du Bocage, an association affi liated to the Emmaüs network. Handsets in working condition are sold through Emmaüs stores, and defective handsets are transferred for disposal in accordance with legislation.
5SOCIAL AND ENVIRONMENTAL INFORMATION NRE Appendices – Environmental information 5.4.9 MEASURES TAKEN, IF ANY, TO ENSURE THAT THE COMPANY’S BUSINESS OPERATIONS COMPLY WITH ENVIRONMENTAL LEGISLATION AND REGULATIONS
In 2010, Natixis invested the following sums in environmental protection: ● asbestos abatement: €500; ● processing of potentially polluting fluids: €26,000; ● replacement of air conditioning equipment using CFC gas: 0.
Natixis is also highly involved in fi nancing “green” growth through its business lines. The Bank occupies a leading position in fi nancing renewable energies and managing funds dedicated to reducing climate change (e.g. our Impact Climate Change fund managed by Natixis Asset Management and our European Carbon fund managed by Natixis Environnement et Infrastructure).
Crisis situations in the event of an accident or pollution are covered in the Group Business Continuity Plan.
5.4.15 INFORMATION ON TARGETS SET FOR INTERNATIONAL SUBSIDIARIES IN RELATION TO ITEMS ABOVE
The Company is managed by a Board of Directors, composed of at least three (3) Directors and no more than eighteen (18) Directors subject to the departures stipulated by law in the event of a merger.
When this percentage is exceeded, the oldest of the directors leaves offi ce at the end of the next Ordinary General Shareholders’ Meeting.
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 General Shareholders’ Meeting convened to approve the fi nancial statements of the past fi scal year, held the year during which his term expires.
The Board of Directors elects a Chairman who must be an individual, selected from among its members. The Chairman is elected for the duration of his term as director and may be reelected.
Decisions are made at a majority of the votes of the members present or represented. In the event of a tie, the vote of the Chairman of the meeting is the casting vote, except for the appointment of the Chairman of the Board of Directors.
● provided all directors, along with the notice of said meeting, with all the necessary information for their analysis.
The Company’s executive management is the responsibility of either the Chairman of the Board of Directors, or that of another individual appointed by the Board of Directors bearing the title of Chief Executive Offi cer.
The Board of Directors determines the compensation and term in offi ce of the Chief Executive Offi cer, which shall not exceed that of his term as director when he is a Board member.
They may be appointed temporarily by the Board of Directors subject to the ratifi cation by the next General Shareholders’ Meeting.
With respect to holders of bearer shares, it is their authorized intermediaries which hold accounts of bearer shares which prove their clients’ status as a shareholder directly to the centralizing body of the meeting. They do so by producing a certifi cate that they attach to the voting form or admission card request in the name of the shareholder or the name of the registered intermediary acting on behalf of the shareholder. A certifi cate is also delivered to shareholders who wish to attend the meeting in person and who have not received an
The Board of Directors may, at the time of the notice, decide to publicly broadcast the entire meeting by videoconference or telecommunication means. This decision is transmitted, as the case may be, in the announcements and notices of the meetings.
Minutes are drafted and copies or extracts of proceedings are issued and certifi ed in accordance with the regulations in force.
The Company’s fi scal year begins on January 1 and ends on December 31.
The Ordinary General Shareholders’ Meeting may also decide to distribute sums levied from retained earnings or from the reserves at its disposal; in such case, the decision expressly references the reserve items from which the levies are made.
Under the legal conditions in force, the Board of Directors may decide to pay interim dividends in cash or in shares.
The Combined General Shareholders’ Meeting of April 30, 2009 granted the Board of Directors fi nancial authorization for a 26-month period to carry out capital increases with retention or cancellation of preferential subscription rights.
Report of the Board of Directors on the use of capital increase authorizations in 2010
❚ SUMMARY TABLE OF AUTHORIZATIONS GRANTED TO THE EXECUTIVE BOARD OR TO THE BOARD OF DIRECTORS BY THE GENERAL SHAREHOLDERS’ MEETING
Possibility for shares or securities giving access to capital issued without shareholders’ preferential subscription rights to be used to remunerate contributions in kind 10% of the share capital (at the time of issue) (a) 26 months none none
For the purpose of increasing the capital via the incorporation of premiums, reserves, retained earnings or other items €4bn (a) 26 months none none
Possibility to increase the amount of issues in the event of oversubscription
Possibility for shares or securities giving access to capital issued without shareholders’ preferential subscription rights to be used to remunerate contributions in kind 10% of the share capital (at the time of issue) (b) 26 months none none
For the purpose of a capital increase reserved for members of employee savings plans, with cancellation of preferential subscription rights in favor of said members pursuant to
Article L.225-129-6 of the French Commercial Code €32 million (c) 26 months none Resolution rejected none Resolution rejected
(a) Amount deducted from the ceiling decided in resolution no. 1 of said General Shareholders’ Meeting.
(b) Amount deducted from the ceiling decided in resolution no. 13 of said General Shareholders’ Meeting.
(c) Amount deducted from the ceiling decided in resolution no. 13 of the General Shareholders’ Meeting of April 30, 2009.
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.
In 2008, the Natixis Executive Board approved a plan to grant stock options to certain employees and corporate offi cers of Groupe Banque Populaire and Groupe Caisse d’Epargne. The corporate offi cers of these two groups waived their right to their options.
Observations: The fi gures factor in the adjustment to the option exercise price and the number of options following the cash capital increase of September 2008.
Certain exemptions allow options to be exercised early (third party fi nancial transactions impacting Natixis’ capital, and the death or negotiated retirement of the benefi ciary).
(a) Including 1,109,911,689 shares in respect of the par value split on November 17, 2006.
NATEXIS BANQUES POPULAIRES BECOMES NATIXIS – PAR VALUE DIVIDED BY 10
New situation 1,233,235,210 1,973,176,336 2006 expenses offset against additional paid-in capital (3,879,879.00)
shares in respect of the exercise of stock options 22,500 36,000 142,688.50
6 LEGAL INFORMATION General information on Natixis’ capital 6.2.7 OTHER INFORMATION ON THE CAPITAL
At December 31, 2009, Natixis’ main shareholders were as follows: % capital % voting rights
The portion of Natixis’ capital held by Company or Groupe BPCE employees stood at 0.96% at December 31, 2010.
They will be locked-up until November 14, 2011 and will become freely transferable at that date.
Article L.225-100-3 requires companies whose securities are admitted for trading on a regulated market to make available and explain certain information, where said information may have an impact in the event of a public offer.
Natixis’ main shareholder, BPCE, held 71.54% of the capital and 71.65% of the voting rights of Natixis at December 31, 2010. In light of this capital structure, Natixis considers that a hostile public offer would be unlikely to succeed.
APPROVAL OF THE FINANCIAL STATEMENTS FOR FISCAL YEAR 2010 (RESOLUTIONS 1 AND 2)
APPROPRIATION OF 2010 EARNINGS AND OPTION TO PAY DIVIDENDS IN SHARES (RESOLUTIONS 3 AND 4)
The dividend will be detached from the share on June 2, 2011 and paid starting on July 4, 2011.
To calculate income tax, the dividend is eligible for the 40% allowance and the fi xed deduction applicable to individuals residing in France.
If the shareholder opts for this payment method, the request must be made during the period from June 2, 2011 through June 24, 2011. If the shareholder does not exercise this option, the dividend will be paid in cash.
Resolution Five 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 2010. These commitments and agreements are presented in the Statutory Auditors’ special report along with those entered into prior to fi scal year 2010 and still effective, which do not require new approval by the shareholders.
This commitment is discussed in a special report by the Statutory Auditors.
Philippe Queuille, 54 years old, is a member of the Management Board of BPCE (see Mr. Queuille’s CV in Chapter 2 “Corporate Governance”, section [2.2.4]); ● the co-opting as Director of Jean-Bernard Mateu, upon the decision of the Board of Directors of August 5, 2010, replacing Alain Lemaire, who resigned, for the remainder of his directorship, i.e. until the end of the General Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2014; ● Jean-Bernard Mateu, 47 years old, is Chairman of the Management Board of the Caisse d’Epargne Rhône Alpes (see Mr. Mateu’s CV in Chapter 2 “Corporate Governance”, section [2.2.4)]; ● the co-opting as Director of Christel Bories, upon the decision of the Board of Directors of February 22, 2011, replacing Jean-Charles Naouri, who resigned, for the remainder of his directorship, i.e. until the end of the General Shareholders’ Meeting called to approve the financial statements for the fiscal year ending December 31, 2014.
Christel Bories, 46 years old, is Chairman and Chief Executive Officer of Alcan Engineered Products (see Ms. Bories’ CV in Chapter 2 “Corporate Governance”, section [2.2.4]).
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 27, 2010.
The Board of Directors would thus be authorized to set up a treasury share buyback program until, as per the law, 10% of the capital is owned. The objectives of these share purchases would be: ● to implement a liquidity contract; ● to award or transfer shares to the employees in respect of their share of the Company profits, employee savings plans or share buyback programs and to award free shares or any other form of share allocation to members of the staff; ● to pay or exchange shares in connection with merger and acquisition transactions; ● to cancel shares in connection with resolution Eleven submitted to the shareholders at this meeting.
This transaction involves reducing the number of outstanding shares without changing the amount of the issuing company’s capital. The purpose is to reduce the share’s volatility and to align volatility with that of other major bank securities.
This reverse split would be carried out by awarding one new share with a par value of €11.20 for seven (7) shares with a par value of €1.60.
6 LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011
Starting from the date of this publication, shareholders would then have a period of up to two years set by the Board of Directors to consolidate their shares through the reverse split.
If the number of shares held by a shareholder is not a multiple of seven (7), the shareholder would be required, at his discretion, to purchase the additional shares or sell the old shares on the market through his or her account-keeping institution in order to obtain a multiple of seven.
During the two-year period available to shareholders to consolidate their shares through the reverse split, any share that has not been consolidated would entitle the shareholder to one vote and each consolidated share would entitle the shareholder to seven (7) votes.
Assuming this reverse stock split is authorized, the Board of Directors would be fully empowered to deal with the consequences, such as making necessary adjustments and amending the Company’s bylaws.
The General Shareholders’ Meeting is therefore asked to renew these fi nancial authorizations and delegated powers, all of which are designed to entrust your Board with the fi nancial management of your Company, by enabling it to increase the capital according to various terms and conditions and for various reasons as set out below and in the following table.
The goal of these fi nancial authorizations is to provide your Board of Directors with fl exibility, over a 26-month period starting from this General Shareholders’ Meeting, in choosing to issue securities it may propose and to adjust, when appropriate, the type of fi nancial instruments to be issued based on the state of the fi nancial markets and the opportunities available in France or abroad.
Accordingly, resolutions Thirteen and Fourteen aim to grant the Board of Directors the authority to decide on share capital increases, whether or not such increases maintain preferential subscription rights.
Your Board recommends that you grant it the option to eliminate this preferential subscription right for some of these resolutions. Based on market conditions, the type of investors affected by the issue and the type of securities issued, it may be preferable, and perhaps even necessary, to eliminate the preferential subscription right in order to carry out a placement of securities under the best possible conditions, particularly when the speed of the transactions is an essential condition for their success, or when the securities are issued on foreign fi nancial markets. The elimination of these rights may enable the Company to obtain a larger amount of capital because of more favorable conditions for an issue. Lastly, the law sometimes provides for this elimination of rights: in particular, according to the law, the vote to delegate powers to your Board to issue shares reserved for members of employee savings plans (resolution Twenty) would result in the express waiver by the shareholders of their preferential subscription rights in favor of the benefi ciaries of these issues or awards.
These capital increases, which may not exceed an overall par value ceiling of three (3) billion euros, could be carried out either through issuing shares or through issuing securities that give access to share capital, particularly in the form of fi nancial instruments representing debt securities.
In connection with certain special transactions, the Board of Directors may: ● determine the issue price of the shares, within the limit of 10% of the capital per year, as part of a capital increase with waiving of preferential subscription rights: this is the subject of resolution Fifteen; ● 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): this is the subject of resolution Sixteen; ● decide to increase the 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; this is the subject of resolution Seventeen; ● decide to increase the capital through the incorporation of premiums, reserves, earnings or other items; this is the subject of resolution Eighteen; ● 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: this is the subject of resolution Nineteen; ● decide to increase the share capital reserved for members of an employee savings plan, up to the par value limit of forty-eight (48) million euros: this is the subject of resolution Twenty.
Resolution Twenty-One proposes amending the bylaws in order to offer shareholders the option to participate in General Shareholders’ Meetings by electronic means, and in particular to permit Internet voting by electronic signature via a process that meets the requirements set out in Article 1316-4 of the French Civil Code, i.e. through the use of a reliable process of identifi cation to guarantee the link of the signature to the form, potentialy consisting of a user name and a password.
AMENDMENTS TO THE BYLAWS: HOLDING SHARES PROPORTIONAL TO THE REVERSE SHARE SPLIT (RESOLUTION 22)
Resolution Twenty-Two aims to amend the Company’s bylaws so that directors will be obligated to hold a number of shares proportional to the reverse share split. Up to now the number of shares has been 1,000. It would therefore decrease to 140 Company shares if the reverse split of the Company’s shares is implemented.
❚ 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
− 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 observes with the compliance charter recognized by the AMF
26 months May be used by your Board to decide on these issues and to issue securities without preferential subscription rights in favor of shareholders, in France or abroad, by public offer, or
− For liquidity contracts, the 10% ceiling is calculated net of the number of shares resold during the authorization period
Maximum purchase price of €10 per share (adjustable particularly in the case of a reverse split)
Price set by your Board − Possibility of establishing the right to subscribe for shares in excess of shareholder entitlements*
− Possibility of establishing a non-transferable priority right* in the French market and if market conditions so permit, where applicable in excess of shareholder entitlements*, for which the Board will set the exercise terms and conditions
No. Subject Duration Reasons for possible uses of the delegated power 15 Determination of the issue price of shares in connection with a capital increase without preferential subscription rights*
26 months May be used to override the rules setting the minimum issue price of capital increases without preferential subscription rights*
16 Issue without preferential subscription rights* of shares and/or securities giving access to the capital* of the Company and/or the issue of fi nancial instruments entitling the allotment of debt securities* through an offer set out in Article L.411-2 (II) of the French Monetary and Financial Code 26 months May be used by your Board to decide on these issues and to make offers through private placement*
19 Increase in the number of securities to be issued in the case of a capital increase with or without preferential subscription rights*
26 months May be used to reopen a capital increase at the same price as the initially planned transaction in the event it is oversubscribed (“greenshoe” clause)
20 Issue of shares or securities giving access to the capital* reserved for members of savings plans 26 months May be used to develop the employee shareholder base in France or abroad
Minimum price equal to the average of the last three stock market trading sessions prior to setting the issue price, less a maximum discount of 15%
Price of shares and securities giving access to capital* set in the same manner as for resolution Fourteen
− 10% of the capital adjusted based on transactions affecting it after the date of this Shareholders’ Meeting
− For each issue, ceiling equal to the limit set out by the regulation applicable on the day of the issue (currently, 15% of the initial issue)
− Ceiling included in the Overall Ceiling* − Price set by your Board within the limit of a minimum issue price for shares or securities giving access to capital: − 80% of the Reference Price*
− 70% of the Reference Price* when the lock-up period provided for in the plan is greater than or equal to 10 years
PSR is the acronym in English for preferential subscription right (droit préférentiel de souscription). For a description of preferential subscription rights and a statement of the reasons for requests to eliminate preferential subscription rights, see the paragraph on “Renewal of fi nancial authorizations and delegated powers”.
Subsidiaries Companies in which your Company directly or indirectly owns more than 50% of the share capital
Overall Ceiling General ceiling for capital increases carried out under resolutions Thirteen to Twenty, equal to three (3) billion euros.
Since April 1, 2009, the law has permitted capital increases without preferential subscription rights, within the limit of 20% of the share capital per year, through offers aimed exclusively at (i) persons providing portfolio management investment services for third parties or (ii) qualifi ed investors or a limited circle of investors, provided that these investors act for their own portfolios. The objective is to optimize the Company’s access to capital and to enjoy the best possible market conditions, as this fi nancing method is faster and simpler than a capital increase through a public offer.
Minimum issue price provided for by regulations on the day of the issue, i.e. to date: ● For shares: weighted average of the market prices from the last three trading sessions on the regulated market of the NYSE Euronext Paris prior to setting the subscription price of the capital increase, less 5%, after, as applicable, adjusting this average for the difference between the vesting dates.
Your Board of Directors may in certain cases establish the right to subscribe for shares in excess of shareholder entitlements. If established, in the event the subscriptions on an exact rights basis (i.e. through the exercise of preferential subscription rights) were insuffi cient, the unsubscribed shares would be allocated to the shareholders who subscribed in excess of shareholder entitlements on a preferential basis, in proportion to the subscription rights they hold and, in any event, within the limit of their requests.
6LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011
Terms and conditions for allocating shares to which securities giving access to capital entitle holders and dates on which this right may be exercised: Securities giving access to capital that would take the form of debt securities (for example, bonds convertible or redeemable in shares, or bonds with equity warrants) might give access, at any time, during specifi ed periods or on fi xed dates, to the allocation of shares. This allocation could be made through conversion (for example, of bonds convertible into shares), redemption (for example, bonds redeemable in shares), exchange (for example, bonds exchangeable into shares) or presentation of a warrant (for example, bonds with equity warrants) or in any other manner, throughout the term of the borrowings, whether or not the shareholders’ preferential subscription rights to the securities issued accordingly are maintained.
If these resolutions are adopted, your Board may determine the type and characteristics of the securities entitling the allotment of debt securities to be created, in particular their interest rate, their term and the option of reducing or increasing the par value of the securities. If applicable, your Board may provide for the following when the securities are issued or during the life of the securities concerned: − that these securities will have warrants entitling the holder either during specifi ed periods or at fi xed dates, to the allotment, acquisition or subscription for bonds or other debt securities; or
− that the securities will be subject to repurchase on the stock market or a purchase or exchange offer by the Company.
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 risk-management procedures established by the Company, the report of the Board of Directors on the parent company fi nancial statements and the management report relating thereto, the reports of the Statutory Auditors on the parent company fi nancial statements for fi scal year 2010, hereby approves the 2010 parent company 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 General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, hereby notes that the fi nancial statements fi nalized as of December 31, 2010 and approved by the shareholders at this meeting show earnings for the fi scal year of €284,641,699.57, and that, taking into account the retained earnings of -€100,632,051.21, distributable earnings amount to €184,009,648.36, the appropriation of which is submitted for the approval of the shareholders at today’s meeting.
(a) The total distribution amount mentioned in the table above is calculated on the basis of the number of shares comprising the capital as of December 31, 2010 and may vary depending on changes in the number of treasury shares held and options exercised from January 1, 2011 to the date the dividend is detached.
The shareholders hereby resolve to distribute an aggregate dividend of €668,871,669.39 by appropriating €174,809,165.94 from distributable earnings and by deducting €494,062,503.45 from additional paid-in capital.
The dividend is set at €0.23 per share for each of the 2,908,137,693 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.
The new shares covered by this option will be issued at a price equal to 90% of the average of the opening prices listed during the 20 stock market trading sessions prior to the day of the General Shareholders’ Meeting, less the amount of the dividend covered by resolution Three and rounded up to the nearest euro cent. The shares issued accordingly will vest on January 1, 2011.
Shareholders may opt for payment of the dividend in cash or in new shares from June 2, 2011 to June 24, 2011, inclusive, by sending their request to the fi nancial intermediaries authorized to pay the dividend. After this last date, the dividend will be paid only in cash.
For shareholders who do not opt for payment in shares, the dividend will be paid starting on July 4, 2011 after the option period expires.
If the amount of dividends for which the option is exercised does not correspond to a full number of shares, the shareholder will receive the immediately lower number of shares, plus a cash equalization payment.
RESOLUTION FIVE (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, approved by the Board of Directors during the fi scal year ended December 31, 2010.
RESOLUTION SIX (APPROVAL OF A COMMITMENT COVERED BY ARTICLE L.225-42-1 OF THE FRENCH COMMERCIAL CODE MADE IN FAVOR OF LAURENT MIGNON)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, hereby ratifi es the co-opting by the Board of Directors on August 5, 2010 of Jean-Bernard Mateu as Director, replacing Alain Lemaire, who resigned, for the remainder of his directorship, i.e. until the end of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending December 31, 2014.
RESOLUTION NINE (RATIFICATION OF THE CO-OPTING OF CHRISTEL BORIES AS DIRECTOR)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, hereby ratifi es the co-opting by the Board of Directors on February 22, 2011 of Christel Bories as Director, replacing
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,
− tender shares upon exercise of rights attached to securities giving access to capital by means of redemption, conversion, exchange, presentation of a warrant or any other means,
− cancel all or a portion of the shares bought back accordingly, subject to the adoption by the shareholders acting in the Extraordinary General Shareholders’ Meeting of resolution 11 below,
− tender shares (for exchange, payment or other reason) in connection with acquisitions, mergers, spin-offs or contributions,
This program is also intended to enable the Company to implement any market practices that might be permitted by the AMF and, more generally, to conduct any other transaction that complies with the regulations in effect. In such a scenario, the Company will notify its shareholders by means of a press release;
The maximum share purchase price under this resolution will be ten (10) 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, amortization of the 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 €2,908,000,000.
The Board of Directors will ensure that these buybacks are executed in accordance with prudential requirements, such as those established by regulation and by the French Prudential Supervisory Authority.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for extraordinary business, having reviewed the report of the Board of Directors and the special report by the Statutory Auditors, hereby authorizes the Board of Directors to reduce the share capital, on one or more occasions, in the proportions and at the timing of its choosing, by cancelling any number of treasury shares that it decides, within the limits authorized by law, in accordance with Articles L.225-209 and following and Article L.225-213 off the French Commercial Code.
The maximum number of shares that may be cancelled by the Company by virtue of this authorization, for a period of 24 months, is ten percent (10%) of the shares comprising the capital of the Company, at any time; it being specifi ed that this limit applies to the Company’s share capital adjusted, where necessary, to take account of transactions affecting the share capital subsequent to this General Shareholders’ Meeting.
6LEGAL INFORMATION Purpose and draft resolutions submitted to the General Shareholders’ Meeting of May 26, 2011 2) delegates to the Board of Directors, with the right to sub-delegate said power in accordance with the law, its authorization to decide upon issuance of securities giving access to the capital of companies, of which the Company directly or indirectly owns over 50% of the share capital; 3) resolves to set the following limits to capital increases in the event of use by the Board of Directors of this authorization: − the maximum aggregate par value of the capital increases that may be carried out either immediately or in the future by virtue of this authorization is set at €3 billion, it being stipulated that the maximum aggregate par value of capital increases likely to be carried out in virtue of this authorization and those provided for in resolutions 14, 15, 16, 17, 18, 19 or 20 of this meeting is set at €3 billion,
− formally notes that, in accordance with Article L.225-134 of the French Commercial Code, if subscriptions in proportion to the number of shares held and any subscriptions in excess of shareholder entitlements do not absorb the entire capital increase, the Board of Directors may take, under the conditions set out by law and in the order that it sees fi t, any or all of the following actions: − limit the capital increase to the amount of subscriptions, provided that this amount reaches at least three-quarters of the capital increase decided upon,
− determine the dates and terms of the capital increase and the nature, number and characteristics of the securities to be issued; and, in the case of bonds or other debt instruments (including securities entitling their holders to the allotment of debt securities referred to in Article L.228-91 of the French Commercial Code), whether they are subordinated or not (and, where applicable, their subordination ranking in accordance with the provisions of Article L.228-97 of the French Commercial Code), set their rates of interest (fi xed or variable rate of interest, zero coupon or indexed), stipulate, if applicable, mandatory or optional cases where interests will be suspended or passed, set their term (fi xed or perpetual), the possibility of reducing or increasing the nominal value and the terms of other issuance processes (including the granting of security or collateral) and of redemption (through the delivery of Company assets); where applicable, such securities may feature warrants entitling their holders to the allotment, acquisition or subscription of bonds or other debt instruments, or include an option for the Company to issue debt securities (whether fungible or not) in lieu of interest payments suspended by the Company, or take the form of complex debt instruments as understood by stock market authorities (for example, owing to the terms of redemption or remuneration terms or other rights such as indexation or option rights); modify, during the life of the securities in question, the above terms, in respect of the applicable formalities,
− determine the method of payment for shares or securities giving access to the share capital to be issued immediately or in the future,
− set the terms and conditions under which the Company shall have the option of buying or exchanging on the stock market, at any time or during specifi ed periods, the securities issued or to be issued immediately or in the future, with a view to cancellation thereof, in accordance with the legal provisions,
− determine and make any adjustments to take account of the impact of the transactions on the capital of the Company, in particular, in the event of a change in the nominal value of the share, of a capital increase by capitalization of reserves, a free allocation of shares, stock split or reverse stock split, distribution of dividends, reserves or premiums or any other assets, amortization of capital, or any other transaction affecting equity or capital (including by a public offer and/or a change in control), and set all the terms enabling, where necessary, rights of holders of securities giving access to the share capital to be protected (including through adjustments in cash),