in EUR billions 2000 2001 2002 as of December 31, 2002 55 offices, including 40 outside france 200,000 shareholders approximately 11,880 employees long-term ratings
Drawing on its expertise in a wide range of complementary areas, it offers not only traditional banking services but also high value-added technology-based services.
Natexis Banques Populaires has recently expanded its service offering to corporate clients by acquiring Coface. This move has also enable the Bank to expand its international network.
The Bank holds leading positions in each of its core businesses. It is a major player in the financing market, serving substantially all major French companies. It is also ranked amongst the leaders in private equity, financial engineering and debt and equity brokerage. Natexis
Banques Populaires is the number one provider of high-tech services for banks and financial institutions.
profile natexis banques populaires is the banque populaire group’s financing, investment banking and service bank and is also the group’s listed vehicle.
Populaire Group's Financing, Investment Banking and Service bank, Natexis Banques Populaires'
Significant external growth operations were carried out during the year, with the acquisition of Coface and the US brokerage firm Arnhold & S. Bleichroeder. These two transactions, which testify to the robustness of our business model, will start to deliver benefits in 2003 in the shape of synergies and an expanded service offering.
In a persistently unsettled environment, I remain as confident as ever in the expertise and commitment of our staff.With their support, we are holding firm to our policy of sustainable business growth, which we consider to be the only sure way of increasing our earnings and further strengthening our balance sheet.
For Investment Banking, however, 2002 was a difficult year. With a few exceptions, the Capital
Markets businesses performed disappointingly and results were further weakened by specific problems related to equity derivatives. As was to be expected in an economic downturn, the Private Equity business had to record significant provisions for impairment.
françois ladam — Chief Executive Officer chairman’s message chief executive officer’s message chief executive officer’s message
Philippe Dupont, Chairman of the Board of Directors of Natexis Banques Populaires
Banque Fédérale des Banques Populaires, represented by Christian Hébrard, Honorary Chairman of CASDEN Banque Populaire Jean-Paul Bechat, Chairman and Chief Executive Officer of Snecma
Jean-Pierre Siesse, Specialized Financing 1 Olivier Schatz 2 Erik Lescar 3 Jean Duhau de Berenx 4 François Ladam 5 Jean-Yves Forel 6 Philippe Dupont 7 Luc Jarny 8 Jean-Pierre Morin 9 Jean-François Masson
as of december 31, 2002 % interest banque fédérale des banques populaires 72.85%
lines, Natexis Banques Populaires serves companies and institutional investors as well as banking and financial establishments and private individuals.
The primary goal of Natexis Banques Populaires is to leverage all the skills existing within the Bank and put these to use both on its own behalf and for the Banque Populaire banks by creating products and services tailored to ever-changing needs.
Populaire banks and over 150 non-Group establishments, draws on a broad range of services offered by the Bank, including custody services, securities services, transaction processing and high-tech services covering back office management, market counterparty business and international financing.
Banques Populaires stepped up efforts in all areas to tighten its organization structure and establish consistent work methods. The underpinning aim was to swiftly adapt to economic vagaries and thus promptly respond to client needs.
In early 2002, Natexis Banques Populaires bought out the minority shareholders of Natexis Asset
Bank the sole shareholder of practically all of its subsidiaries. A corporate governance charter has been drawn up, defining the mission of the subsidiaries’ Boards of Directors and Supervisory
With the related investments now paid for, this will result in significantly lower costs in future years. In addition, Natexis Banques Populaires no longer has to maintain the old systems.
The project for the processing of electronic banking transactions for a major bank is well on the way to completion. Switchover of ATMs and point-of-sale terminals to the Natexis
Internet projects also moved forward rapidly, with the operational launch of LineBanque, Natexis
Banques Populaires’ online banking solution which is now in the marketing phase. Plans have also been drawn up to gradually endow the Bank’s client portal with new functions.
Lastly, Natexis Altaïr is the proud occupant of a new building in which it can expand its business and receive new clients.
The Risk Management department stepped up its activities throughout the year, establishing a decentralized team to directly monitor risks associated with Capital Markets activities and appointing risk correspondents in all the Bank’s business units. It also continued to hone the central Risk Information System. An information systems security officer was appointed in 2002, to monitor operational risk and all aspects of systems security.
This cross-functional approach to information systems will foster enhanced control over
More than one thousand positions have been filled over the last eighteen months and some 40% of parent-company employees have been with the
Bank for less than five years.Currently, a quarter of the Bank’s people are under 35, and 40% are under 40. A comprehensive set of procedures has also been set up for new hires, including induction courses, welcome packs and CD-Roms, enabling new recruits to swiftly find their feet and grasp the way their new company works.
offerings for companies from 2003, by allowing them to propose credit management products and services closely tailored to these clients' needs.
The other significant external growth operation was Natexis Banques Populaires’ acquisition of
Bleichroeder SA – to form the Global Equities business of the Bank’s Capital Markets business line. The acquisition has enhanced Natexis
Banques Populaires’ equities research capability and beefed up its international placing capacity, as well as paving the way for the launch of international routed order processing services for
In 2002, Natexis Banques Populaires undertook two major external growth operations in order to meet client needs more effectively. The first was the acquisition of Coface through a simplified public tender offer, resulting in Natexis Banques
Coface's product and service offering is built around: - a global network - the common risk system database with information on 44 million companies worldwide which allows Coface to manage receivables ratings and insured risks on each company in real time.
- @rating, a unique rating system for insurable companies worldwide incorporated in all of
With over 4,000 employees, Coface is a preferred partner of companies engaged in domestic and international trade. It is one of the world's leading providers of credit insurance and credit management services.
– domestic or export credit insurance and credit management services, including credit information, receivables rating, and management and recovery – Coface has developed three related businesses (guarantee insurance, BtoB marketing and receivables financing through factoring services or securitization services offered in partnership with financial institutions).
Consolidated revenue 973.0 o/w premium income 707.0 o/w sales of services 266.0 excluding public procedures management fees 205.3
– africa: benin, burkina faso, cameroon, ivory coast, mali, senegal, togo – north, central and south america: argentina, brazil, chile, colombia, costa rica, ecuador, mexico, panama, peru, usa, venezuela
100% Natexis Factorem Factoring 100% Natexis Lease Lease financing 99.09% Natexis Pramex International Partnering corporate clients in international markets 92.50% Natexis Coficiné Finance company (audiovisual sector)
100% Natexis Algérie Banking in Algeria 100% Natexis Immo Développement Real estate development and refurbishment 80% Natexis Metals Ltd Commodities brokerage (London)
100% Natexis ABM Corp. Mortgage-backed securities manager in the United States 100% Natexis Arbitrage Equities and derivatives arbitrage 100% Natexis Private Equity Private Equity 100% Natexis Finance Mergers and acquisitions
(1) This organization chart shows the new registered names of the following Natexis Banques Populaires subsidiaries as approved, or to be approved, at their respective Extraordinary General Meetings: ■ Natexis Pramex International (ex-Pramex International), Natexis Coficiné (ex-Coficiné), Natexis Algérie (ex-Natexis Al Amana Banque), Natexis Immo Développement (ex-Sofep). Natexis Factorem (ex-Factorem), Natexis Lease (ex-Bail Banque Populaire).
■ Natexis Paiements (ex-BPL – Banque pour les Paiements onLine), Natexis Slib (ex-Slib), Natexis Asset Square (ex-Asset Square), Natexis Assurances (ex-Assurances Banque Populaire), Natexis Asset Management (ex-Banque Populaire Asset Management), Natexis Private Banking Luxembourg S.A. (ex-Banque Populaire du Luxembourg), Natexis Interépargne / Natexis Epargne Entreprise (ex-Interépargne), Natexis Immo Placement (ex-Fructiger - Fructifor).
100% Natexis Asset Square Multimanager funds 100% Natexis Assurances Life and non-life insurance personal risk insurance 100% Natexis Asset Management Fund management 87.80% Natexis Private Banking Luxembourg S.A.
International private banking 100% Banque Privée Saint Dominique Private banking in France 100% Natexis Interépargne/ Natexis Epargne Entreprise Employee savings plans 100% Natexis Immo Placement Real estate fund management asset management and insurance banking, financial and technology services 100% Natexis Paiements Electronic banking 100% LineBourse Online brokerage 100% Natexis Slib Banking software and facilities management 69.60% Samic Banking software 100% Natexis Altaïr IT services and data processing 98.01% Domestic and export credit insurance and credit management services
(2) Following the Extraordinary General Meeting of January 30, 2003, Crédit Coopératif adopted the status of "société anonyme coopérative de Banque Populaire".
The Corporate and International Banking business line turned in a resilient performance, raising its contribution to Net Banking
Income by 2%. Despite the less favorable economic environment, the various business units achieved satisfactory growth.
Equipment and real estate lease financing – including for energy management and environmental projects – topped EUR5.4 billion at December 31, 2002, fueled by EUR1.5 billion worth of new contracts. Meanwhile, Natexis Factorem retained its position among the top three players in the French factoring market.
natexis lease EUR89 million in net banking income EUR1.5 billion in new lease financing natexis factorem EUR91 million in net banking income EUR8.8 billion in factored receivables
business line offers a full range of integrated banking services to large and medium-sized companies, institutions and banks in France and abroad. It manages the Natexis Banques
The Correspondent Banking area acts as a lynch pin for relationships with financial institutions, as well as offering a broad range of services to clients in France and abroad.
Net Banking Income up 2% on 2001. Despite the less favorable economic environment, the various business units achieved satisfactory growth.
During 2002, particular attention was paid to heightening risk control through constant information exchange with the Risk Management division. At the same time, the system for managing loan guarantees and collateral was reviewed and enhanced.
Two major goals were achieved in 2002: augmenting the Bank’s role as arranger of major financing transactions and extending the geographic reach of Corporate and International
the number three deep-sea oil exploration contractor worldwide.The placement proved highly successful, thanks to skilled teamwork between
Houston and London, specializing in the energy, marine financing and loan syndication sectors.
Populaires’ expert skills in international financing allied with its keen understanding of local markets.
Other new international business included syndicated commodities financing – such as the loan syndication for Hurricane Kumkol, one of the leading Kazakh oil producers – international trade finance deals, asset financing deals for the aircraft industry, including aircraft financing for Air France and an innovative Japanese operating lease for
In November 2002, Natexis Banques Populaires made an offer for Vivendi Universal Publishing's
The EUR1.2 billion offer made in accordance with European Competition Law smoothed the way for acceptance of the entry of this business into the Lagardère Group. It also testifies to Natexis Banques Populaires’
vanguard position in arranging innovative transactions as well as its leading role in the media sector.
During 2002, the business line continued to expand in the international arena. Teams were beefed up in branches across the world, through recruitment and the secondment of staff specialized in high value-added businesses.
Populaires’ position as bilateral lender among major counterparties is rooted in the twofold goal of leveraging the Bank’s balance sheet and being a premier league lender to large and medium-sized companies.
Populaires to bolster its position as a top-tier arranger of large-scale transactions.
Natexis Banques Populaires was selected as co-arranger of financing for USD200 million worth of inventory on behalf of Russia-based
The Bank also arranged a USD140 million pre-shipment export financing facility for
Sidanco, a leading Russian oil producer.These innovative structured deals are evidence of
lease financing through Natexis Lease and factoring services through Natexis Factorem.
In 2002, Natexis Lease built on its international position and broadened its offering. The strategy paid off well, with new lease financing exceeding the target set at the start of the year.
– a rate on a par with 2001 – reflecting the high value of financed assets and strong momentum in the logistics sector.
The only area to experience a sharp drop was lease financing for energy management and environmental projects, due to a lack of large-scale projects.
Natexis Lease set up EUR1.5 billion worth of new contracts, driving up outstanding lease financing to over EUR5.4 billion at the year-end.
Lease was able to grow market share while maintaining tight control over risks and upholding margins.
EUR531 million, representing a growth rate which far outstripped that of the market as a whole.
The partnership agreement signed in late 2001 between Natexis Lease and VR Leasing, a subsidiary of the Germany-based DZ Bank, has led to several significant contracts with French and
Natexis Lease will be seeking to expand its leasing offer, in phase with its ongoing strategy. Operating leases,which represent a good source of profitable growth, will continue to be a focal point. Priority will be given to purchasing public works equipment and computer hardware for lease.
Despite the factoring market slowing significantly in 2002, Natexis Factorem’s performance remained on an even keel. With a 12.5% market share, the company held onto its number three position in the French factoring market (source: Association
In 2002, Natexis Factorem continued to tailor its structure to market needs and client expectations.
The quality of service offerings was again enhanced, leading to improved client satisfaction rates. 2003 should be a year of strong business growth, as Natexis Factorem pursues the twin goals of winning new clients and offering the best possible services both to its own clients and to the
Lease's entry into the Spanish market, through Natexis Banques Populaires' new
Madrid branch. In parallel, Natexis Lease continued to extend its partnership network, with new operating footholds in the United
Natexis Factorem continued to standardize business processes. New IT systems have been delivered, including automatic payment processing applications, which will generate productivity gains and improve service levels.
Natexis Factorem has also forged closer ties with the Banque Populaire Group network by increasing its sales force throughout France. The company is now present in all client segments, and has particularly targeted the Banque Populaire network's main franchise, comprising small and medium-sized companies.This strategy represents an illustration of how Natexis Factorem is leveraging marketing intiatives undertaken in association with the Group.The company has now also set up an outlet in Réunion, to partner the expansion of BRED Banque Populaire in the French overseas départements and territories.
Following the Group’s acquisition of a controlling interest in Crédit Coopératif and its factoring subsidiary, Crédifrance Factor, Natexis Factorem will be looking to federate skill sets so that the combined outfit can capitalize on the expertise of the two individual companies.The merger is winwin, offering Crédit Coopératif the opportunity to distribute the Natexis Factorem product range while enabling Natexis Factorem to diversify its distribution channels.
The Capital Markets business line offers its clientele of securities issuers and investors a wide range of equity,
And in Fixed Income, brokerage volumes outside France rose to 31% of total volumes from 16% in 2001.
Net Banking Income declined, however, due to unfavorable market conditions and losses on equity derivatives. These losses were due to the inability of certain valuation models to successfully manage the extreme market volatility and to certain anomalies in the data fed into the models.
Lead) compared with 45 the previous year. The number of underwriting contracts was unchanged, testifying to the confidence of issuers such as
Natexis Banques Populaires ranked among the leaders in French corporate euro bond issues,with seven issues on its score-card. It also held onto its
No. 1 position in French inflation-indexed bond issues, based on the number of deals (source: Bloomberg). The Bank is a primary dealer in government securities in France (SVT) – a position that was boosted in 2002 by Agence France Trésor selecting Natexis Banques Populaires, along with three other major international banks, to arrange a
The Fixed Income business continued to expand internationally in 2002. Fixed Income teams in
Natexis Banques Populaires is also a primary dealer in the government securities repo market.
Group by issuing paper on the euro and dollar markets. In 2002, euro-denominated bond issues totaled EUR600 million and issuance of dollar denominated bonds amounted to USD500 million.
Capital, renamed Natexis Bleichroeder SA, together make up the Global Equities arm of the
The risk management and back office unit is responsible for middle and back office functions, management accounting, technical logistics and legal and counterparty risks, while a marketing and communications team supports the Capital Markets business line's sales effort.
York Stock Exchange and the Nasdaq. Other synergies exist in the prime brokerage sector which Natexis Bleichroeder is seeking to exploit by marketing a comprehensive offer ranging from conventional securities lending and borrowing and repo transactions to more complex transactions for private clients. In electronic order routing,
In 2002, the leading British review AQ Euro 100 ranked the Natexis Capital team of financial analysts number one over three straight quarters for the quality of their European corporate earnings forecasts. On the same positive note, the acquisition of Arnhold & S. Bleichroeder’s brokerage business has enabled Natexis
Natexis Bleichroeder provides a large number of companies with a constant stream of information on their share price and the prices of strategically relevant securities.
Natexis Bleichroeder managed 25% of equity and convertible bond issues of under EUR250 million
Pierre et Vacances equity issue, lead manager for the sale of Groupe Bull's stake in Steria, and lead manager for the EUR45 million Orpea IPO.
Lastly, Natexis Bleichroeder is a major player in secondary market offers, with an 8% market share based on number of deals, and 10% of the squeeze-out market (source: COB).
The business line also operates in the mergers and acquisitions market through Natexis Finance.
The value of investments acquired and sold in 2002 was on a par with the previous year, despite the difficult economic conditions. Responding to the unsettled conditions, Natexis Private Equity adopted a very conservative approach to risk. This was reflected in the business line's income and in its stock of unrealized gains which nevertheless represent a respectable EUR148 million, after taking into account the impact on market values of the current environment which is hostile to trade sales and IPOs.
Despite a decrease in the number of investment opportunities considered during the year, Natexis
EUR41 million for Venture Capital and EUR70 million for International Private Equity. Natexis Private
Equity has significant growth drivers, including the international development momentum provided by its German, Spanish and Italian subsidiaries, and its private equity fund management business,which now accounts for almost half of the capital managed by Natexis Private Equity.
Natexis Private Equity has EUR738 million in private equity funds under management and an EUR805 million proprietary portfolio, versus EUR720 million and EUR780 million respectively in 2001. The expansion in non-proprietary portfolios reflects how private equity has come to be recognized as a separate asset class, alongside equities and bonds.
Natexis Private Equity’s portfolio comprises interests in 670 companies, for the most part unlisted, spanning all sectors of the economy.These companies are monitored by over 110 experts, grouped into eleven specialized subsidiaries that combine financial engineering skills with strong industry expertise.
In 2002, as in 2001, opportunities for trade sales and IPOs were limited. Nonetheless, Natexis
EUR223 million worth of investments.Transactions included the early-2002 IPO by Orpea, a private retirement home operator, and the sale of Pasteur
International Private Equity 167 assets under management in eur millions at december 31, 2002
Cerba exit strategy were devised five years ago by teams from Initiative & Finance and Natexis
Gains realized by the holding company in 2002 amounted to EUR113 million.
The role of Natexis Private Equity is to ensure across-the-board financial consistency and leverage the increased marketing clout of the combined outfit with a view to achieving a dual objective: consolidate the Bank’s position as the leading provider of private equity capital to French small caps and deepen its coverage of mid caps.The growth drive is also rooted in the goal of benefiting from the current favorable conditions for equity financing.
Building on this, Natexis Private Equity is now aiming to become a benchmark player among private equity capital providers to German, Italian and Spanish SMEs by raising fresh capital among investors from these target countries and drawing on the market knowledge of local experts. An apt example is Hügel, a German leader in small metal components that was acquired through an
Equity, and Natexis Asset Management, as are the six other funds in the same range.The aim of these funds is to provide private equity capital for unlisted innovative companies that have recorded early commercial wins.
The funds invest between EUR0.5 million and EUR3 million in each company, in a lump sum or in several instalments. SPEF
France, Germany and Italy. Set up as a joint venture, the partnership provides a vehicle for pooling investment projects, exchanging financial skills and co-financing private equitydeals.
Assets under management totaled EUR72.5 billion, up slightly on the previous year despite the sharp fall in equity prices.
Services business area covers the entire spectrum of back office processing operations related to payments and stock market transactions handled by banks and financial institutions. It proposes service offerings to a broad array of clients ranging from high street banks with branches throughout the country to small banks operating in niche markets, and financial institutions.
In the business line’s three main service areas, the offer now spans all distribution channels, including those using new technologies.
Natexis Banques Populaires is also one of the top four participants in the Centrale des Règlements
Interbancaires (CRI) Paris Net Settlement System, for real time settlement of high value transactions.
(Europay, Mastercard and Visa) international card schemes. The Group was the first bank to comply with the new payment authorization and telecollection standards. This drive will continue throughout 2003.
A new milestone was passed in the partnership with a major external banking group, with the migration of this partner's electronic banking applications to the Natexis Banques Populaires system. A project is also currently underway to migrate another major institution in the course of 2003.
The business line turned the challenging situation to its advantage by refocusing all action plans on client service quality and creating value in its core businesses. 2002 also saw strides made in developing an intranet solution bringing together all data used to manage and track the portfolios of the Banque Populaire banks' clients.
In 2002, Financial Services managed 2.6 million custody accounts and executed 8.2 million buy and sell orders, including trades on French and foreign stock markets and purchases and sales of mutual fund units. During the year, the large-scale project to integrate into its systems the Securities and
Stock Market Trading activities of an external banking group was completed.
Natexis Slib, the subsidiary specialized in securities and stock market trading IT solutions for investment service providers, strengthened its market position, especially in Belgium and the
In 2002, Personal Banking Services completed the launch of LineBanque – a multi-channel offering targeted at Natexis Banques Populaires’ 20,000 private clients.This online solution provides clients with access to all the banking and financial services of a high street bank, including opening a savings account,ordering a check-book,applying for a loan, online brokerage, and taking out insurance policies.
Populaire Group. A new range of services has been rolled out called Service PLUS, which sets
EUR69.9 billion in 2001. Market share was consolidated, and even in some cases increased, reflecting the success of offerings in the areas of employee savings plans, individual life insurance and mutual funds.
Natexis Interépargne consolidated its leadership position in France in the employee savings plans sector (source: AFG-ASFFI). Natexis Asset
Management held onto its number five ranking in mutual fund management (all categories combined)
and climbed to the top spot in money market mutual funds (source: Europerformance).
Income of EUR310.5 milion and Gross operating income of EUR101.4 million.
In September 2002, Natexis Assurances launched an automobile and personal risk insurance offer, following its acquisition of a stake in Adir, a subsidiary of the Byblos bank in Lebanon. The new offering has already proven highly successful.
Italian subsidiary, wrote 23,092 policies in its first eighteen months of operations and is continuing to develop its business in partnership with the Banca
Natexis Assurances and Natexis Asset Management created a range of guaranteed funds for private individuals called Fructi-Garanti 2002 Vie, Fructi-
a multimanager offering for private asset management clients. And Natexis Asset Square also launched a range of alternative funds for the
Banque Populaire Group ranging from private individuals to small, medium and large businesses. The new comprehensive business risk offering launched and actively distributed in partnership with MAAF Assurances, rounds off the range of insurance products targeted at tradesmen and retailers,and demonstrates the
The new Asset Management and Insurance organization structure is now up and running, and will enable the business line to position itself as a multi-business player by leveraging synergies on a national and international scale.
In 2003, the business line’s key objective will continue to be capturing additional market share in
France and abroad. At the same time, it will be seeking to streamline resources and ensure a seamless organizational fit by grouping teams that work in similar areas. These units will also take part in designing Equinoxe, the Banque Populaire
Group’s new distribution information system which will be a large-scale project for the Banque
Since 1996, Natexis Assurances has focused intensely on client service quality. In 2002, the business line significantly enhanced its quality management system and was accredited with
performance presentation standards for the period covering January 1, 1998 to December 31, 2001.These standards serve as a warranty for investors that the information relayed to them is complete and transparent.
Natexis Banques Populaires applies socially responsible practices on a daily basis by respecting people, ethics, safety, and information quality.
Socially responsible growth also means vigorously respecting the code of ethics applicable throughout the banking industry. The Bank’s employment contracts include ethics clauses and in 2002, the role of the Corporate Ethics Officer was strengthened. The task of this Officer is to implement and coordinate a strict code of ethics tailored to the businesses and related risks of
As well as establishing and updating the Bank’s code of ethics, the Corporate Ethics Officer’s role also encompasses organizing training and information sessions, and raising awareness among employees of the need to respect the Bank’s ethical standards. Each of the Bank's business lines has its own ethics officer, responsible for monitoring day-to-day compliance, and the
The first phase of the action plan was rolled out at the end of 2002, and consisted of examining information systems used to process transactions on behalf of other financial institutions, strengthening contingency plans for interbank transaction processing and laying the foundations for even tighter security.
Natexis Banques Populaires ten years ago, the Foundation now also receives funding from
Banque Fédérale des Banques Populaires and the 24 Banque Populaire regional banks.
In 2002, the Foundation extended its support to fourteen classical musicians, including two composers. It also helped seventeen young disabled people to fulfil life-enhancing projects in the area of work, sport, culture or their social life.
In 2002, information sessions also took place with employees from the Banque Populaire banks who help to sell Natexis Banques Populaires shares, and conference calls were arranged to explain the
Individual shareholders in France can also access information throughout the year by dialing the toll free number 0 800 600 525. All calls are taken by members of the financial communications team in a bid to personalize client relations and ensure quality responses.
The Annual General Meeting held on May 23, 2002 at Maison de la Chimie was the perfect
Euronext and Investir. Each of these events is aimed at giving private individuals insight into the workings of the stock exchange.
Natexis Asset Management has launched two new funds – BP Développement Durable
to meet the growing demand from individual and institutional investors for products that promote sustainable development. The funds aim at striking a balance between financial performance and social and environmental responsibility. Investors can acquire units in the funds as part of a PEA personal equity portfolio or under a life insurance policy with
in EUR billions in EUR millions 2000 2001 2002 net banking income of core businesses 1,755 1,805 1,835 net banking income by core business natexis banques populaires corporate communications investor and shareholder relations
The English language version of this annual report is a free translation from the original, which was prepared in French. All possible care has been taken to ensure that the translation is an accurate representation of the original. However in all matters of interpretation of information, views or opinion expressed therein the original language version of the document in French takes precedence over the translation.
FINANCIAL INFORMATION Consolidated financial statements 88 Notes to the consolidated financial statements 92 Auditors’ report on the consolidated financial statements 136 Auditors’ report on agreements involving members of the Board of Directors of the Company 137 Company financial statements 138 Notes to the Company financial statements 141 Auditors’ report on the financial statements 151
LEGAL INFORMATION Shareholders’ Meetings 153 Board of Directors’ report on the proposed resolutions 153 Resolutions presented to the Shareholders’ Meeting 155
1 – Composition of the Board of Directors All directorships and functions held by members of the Board of Directors are presented at the end of this Section.
The composition of the Board of Directors changed considerably during the course of the fiscal year, with half of all seats changing hands. Corporate directors, in the form of the Banque Populaire regional banks, which held until 2001 significant direct interests in the capital stock of Natexis Banques Populaires, were replaced by private individual directors by the Shareholders’ General Meeting of May 23, 2002. The presence of these corporate directors on the Board was no longer justified following the transfer at the end of 2001 of the majority of the shares held by these entities to Banque Fédérale des Banques Populaires, which remains the sole corporate director on the Board.
As a result of the current ownership structure of Natexis Banques Populaires capital stock (approximately three-quarters of which is held by the Banque Populaire Group), the majority of directors belong to this majority shareholder group. The percentage of directors belonging to this group reflects its percentage shareholding: three independent directors (excluding the director representing employee shareholders) represent 21% of the Board of Directors (excluding the director representing employee shareholders).
The three independent directors, who have no link, direct or indirect, with company shareholders, do not belong to company executive management and have been in office less than 12 years. The companies managed by them, where applicable, do not realize a significant portion of their revenue with the Company: ■ one independent director manages a major industrial company, which is one of the leading aircraft engine manufacturers wide-world; ■ a second independent director manages a major service company, founded by him, which is one of two leading French groups in the collective catering sector; Through their expertise in the industrial and service sectors, these two individuals offer the Natexis Banques Populaires Board of Directors a different but complementary point of view to that of banking professionals, who make up the majority of the Board. ■ the third independent director is a retired manager of a bank and stock market company. He offers the Board considerable expertise and total independence vis-à-vis financial groups and is readily available for the activities of the Board of Directors and its specialized sub-committees. This independent director chairs the Compensation Committee and is a member of the Financial Statements Review Committee. He is extremely well placed to listen to the preoccupations of small minority shareholders.
2 – Exercise of Executive Management duties Pursuant to the options offered by the New Economic Regulations Law of May 15, 2001, the Natexis Banques Populaires Board of Directors elected on January 16, 2002 to separate the functions of Chairman and Chief Executive Officer, in accordance with the general logic underlying the organizational structure of the Group.
The meetings last on average three hours. A document several tens of pages long, containing detailed information on all subjects to be covered during the meeting, is presented to directors several days prior to the meeting.
The Board of Directors also regularly hears, throughout the year, presentations by the heads of each of the six Natexis Banques Populaires business lines on their position and future outlook, providing the directors with a detailed picture of the internal operations of the Company.
The Board of Directors also deliberates in advance the main investment acquisitions proposed by Natexis Banques
The make-up of these sub-committees changed significantly following modifications to the composition of the Board of Directors in May 2002.
Before presenting them to the Board, the Compensation Committee examines all matters concerning the personal status of company officers and, in particular, compensation and pension terms and conditions and the allotment of stock subscription and purchase options.
The Audit Committee met five times during the year. The Financial Statements Review Committee and the Compensation Committee each met three times during the year. The attendance rate for all meetings held in 5 – Board of Directors’ Internal Regulations and Directors’ Charter The Board of Directors approved the terms and conditions of Internal Regulations governing its activities and a Directors’ Charter in March 2001.
6 – Compensation paid to members of Company bodies At the recommendation of the Compensation Committee, the Board of Directors set the fixed compensation payable to the Chairman of the Board of Directors in respect of 2002 at EUR263,000, plus a bonus of EUR30,000.This bonus was effectively paid, as disclosed in the Notes to the financial statements.
The maximum directors’ fees received by a single director was EUR16,775 (see table on page 63).
7 – Stock subscription options granted to executive officers Using the authorizations granted by shareholders in General Meeting and in accordance with applicable regulations, the Board of Directors’ meeting of November 20, 2002 decided, after examination by the Compensation Committee, to allot: ■ 5,500 options to the Chairman, executive officer as of November 20, 2002; A further 5,500 options were allotted to the Chairman, in respect of his duties within Banque Fédérale des Banques Populaires; ■ 11,000 options to the Chief Executive Officer, in office up to October 30, 2002; ■ 5,500 options to the Chief Executive Officer, executive officer as of November 20, 2002; ■ 38,500 options to the members of the Executive Management Committee, excluding executive officers benefiting from the specific provisions detailed in the preceding paragraphs.
The strike price of these options, set in accordance with the decisions of the General Meeting of May 31, 2001, is EUR72.47.
8 – Information on the different duties exercised by members of Company bodies In accordance with regulations, a list of the duties exercised by Natexis Banques Populaires executive officers is detailed in the table on page 60.
■ Deloitte-Touche Tohmatsu, whose current term of office was approved by the General Meeting of June 16, 1998; ■ RSM Salustro Reydel, whose current term of office was approved by the General Meeting of June 16, 1998; ■ Barbier Frinault et Associés, whose current term of office was approved by the General Meeting of June 16, 1998.
Audit fees received by these firms in respect of their audit work are presented in Note 29.1 to the consolidated financial statements.
10 – General Meetings and Shareholder information Natexis Banques Populaires held two General Meetings in 2002: ■ the first meeting was held in May; this Annual General
Last name Date of Date of expiry Main function Main function and First name, first appointment of term of office within the company outside the company or Corporate name (AGM held to adopt the financial statements for fiscal year)
Banque Fédérale des BOD 2007 Director Honorary Chairman Banques Populaires – meeting of of CASDEN represented by 11/25/97 Banque Populaire Christian Hébrard
Jean-Paul Bechat CGM of 2003 Director Chairman and CEO 11/18/98 of Snecma
René Clavaud AGM of 2005 Director Chairman of 05/23/02 Banque Populaire du Centre
Daniel Duquesne AGM of 2003 Director CEO of Banque 05/23/02 Populaire Loire & Lyonnais
Francis Thibaud AGM of 2002 Director CEO of 05/23/02 Banque Populaire du Sud-Ouest
■ Philippe Dupont Chairman and CEO of: Banque Fédérale des Banques Populaires
Permanent Representative of Natexis Banques Populaires, Member of the Supervisory Board of: +X Altair, Assurances Banque Populaire, Fructiger
Chairman of the Supervisory Board of: Smurfit Limousin, Bail Banque Populaire
Permanent Representative of Banque Populaire Côte d’Azur, Chairman of: Foncière Victor Hugo, Société Méditérranéenne d’Investissement
Technical advisor to the: Nice Côte d’Azur Chamber of Commerce and Industry
■ Claude Cordel Chairman of the Board of Directors of: Banque Populaire du Midi
Chairman of: Commission financière nationale de l’unicem, Cellule économique BTP du Languedoc Roussillon, SAS CPSL
■ Steve Gentili Chairman of the Board of Directors of: BRED Banque Populaire, BRED Gestion, Spig
Chairman of: Banque Fédérale des Banques Populaires, Coface, Cofibred, LFI, BRED Cofilease, BRED Gestion
Permanent Representative of: BRED Gestion on the Board of Directors of LFI 2
■ Michel Goudard Chief Operating Officer of: Banque Fédérale des Banques Populaires
Permanent Representative of CASDEN Banque Populaire, Director of: Bicec, Parnasse Finance S.A., Filia MAÏF S.A.
■ Alain Jacquier Chairman of the Board of Directors of: Banque Populaire Bourgogne Franche-Comté, SFIH (Société Financière d’Investissements Hôteliers)
Member of the Management Board and Chairman of: the Commission for the Promotion and Development of the National Hotel Industry Federation
Director of: Banque Fédérale des Banques Populaires, Soprolib Sud-Ouest, Socami Bordeaux Région, Socama Sud-Ouest
Vice-Chairman of the Supervisory Board of: BPL - Banque pour les Paiements onLine
■ Jean-Louis Tourret Chairman of the Board of Directors of: Banque Populaire Provençale et Corse, Proclair SAS, Tourret SAS
Legal Representative of the co-manager, and partner HBM for: Société Elior
Legal representative of the partner manager Eliance SAS in: Eliance Orly Ouest, Eliance Roissy
Banque Populaire de Franche-Comté, du Mâconnais et de l’Ain, represented by Bernard Jeannin 5,185
1 – Group structure The principal changes in Group structure since fiscal year 2001 relate to: ■ the buy-out by Natexis Banques Populaires of minority interests held by the Banque Populaire regional banks in Banque Populaire Asset Management and Interépargne, leading to the full consolidation of these companies in 2002, compared to their proportional and full consolidation in the amount of 69.9% and 50.1% respectively in 2001; ■ the entry into the scope of consolidation of new subsidiaries: Coface, fully consolidated from July 1, 2002; Axeltis Ltd; Worledge and Edval, defeasance structures previously not consolidated; Arnhold & S. Bleichroeder, acquired on December 6 and fully consolidated at balance sheet level only.
Populaires income statement, financial structure and ratios, inclusive of Coface, are presented in sections 5 and 6.
■ The core businesses reported Net Banking Income of EUR1,644 million, down 9% on last year. After deduction, notably, of provisions recorded against the own funds equity investment portfolio, Net Banking Income is EUR1,611 million, down 12% on 2001; ■ operating expenses totaled EUR1,259 million, representing an increase of only 2.6% compared to 17% in 2001, in a context of ongoing Natexis Banque and Caisse Centrale des Banques Populaires merger operations;
Financing With NBI of EUR881 million, up 1% year-on-year, the financing businesses consolidated the remarkable 20%
Natexis Banques Populaires continued its commercial policy during the year of privileging the risk/return ratio, with an increase in the margin rate on last year, while retaining substantial diversification of outstandings both at industry and geographical level, as shown in the risk management tables (see below).
With 2% growth in NBI, Corporate and International Banking activities consolidated in 2002 the growth surge recorded in 2001 (21%).This overall performance hides varied trends in the different activity sectors: ■ Corporate activities (France, Europe and multinational) report NBI growth of 6% on 2001 to EUR368 million. This growth is due to both financing operations (marked increase in margins and commission on new operations) and the rapid development of services, notably concerning the management of payment media. Conversely, income from cash balances and interestfree deposits is down on last year due to the fall in interest rates.
■ International commerce and trading activities generated NBI of EUR164 million in 2002 compared to EUR158 million last year, primarily fed by the development of commodity financing activities (EUR67 million), which generated rapidly growing arrangement fees, and by a turnaround in trade finance activities (EUR59 million).
Specialized Financing The Specialized Financing sector, which encompasses the activities of the lease financing (Bail Banque Populaire), and factoring (Factorem) subsidiaries, reported NBI of EUR180.1 million, down 3% on last year.
In the lease financing sector, Bail Banque Populaire is one of the top five players in the French market. In an unfavorable economic climate, new production totaled EUR1.5 billion in 2002, up 14% year-on-year, attributable in the amount of EUR940 million to equipment lease financing (up 1% on 2001), EUR530 million to real estate lease financing (up 46%) and EUR40 million to Sofergie.
In the factoring sector, 2002 broke with recent trends. After a long period during which the market grew at annual rates of between 12% and 24%, 2002 recorded a brutal stop (growth of only 1.1%). In this context, Factorem maintained its share of the market (12.5%
in EUR millions 2002 2001 Change in EUR millions 2002 2001 Change
69■ Capital markets NBI is EUR74 million, compared to EUR186 million last year.This drop reflects the severe crisis in the financial markets in 2002 and integrates the heavy loss recorded on equity structured products (Net banking loss of EUR118 million), due to certain valuation models being poorly adapted to the exceptional volatility of the equity markets.
Consequently, Natexis Banques Populaires developed new tools and reviewed its procedures, with the help of external advisors, to adapt them to the new market conditions.
The other capital market activities held up well in 2002, whether treasury activities (NBI of EUR56 million compared to EUR61 million in 2001), foreign exchange activities (EUR33 million compared to EUR24 million), debt securities held for investment and securities held for sale portfolios (EUR36 million compared to EUR37 million), securitization activities (EUR33 million compared to EUR29 million), or even derivative or structured interest rate activities (EUR19 million compared to EUR24 million).
■ Subsidiary activities reported a slight drop in NBI (EUR24.2 million compared to EUR26.6 million).
Private Equity The Private Equity division reported NBI for the year ended December 31, 2002 of EUR55 million, down 50% on 2001.
Private equity activities remained high with investments of EUR235 million (up 11% on 2001 on a constant Group structure basis). Divestments generated revenues of EUR223 million, compared to EUR293 million in 2001. Capital under management increased 3% to EUR1.54 billion, including 48% held in third-party portfolios, and breaks down as follows: Growth capital EUR660 million (43%) Venture capital EUR480 million (31%) Buy-out/buy-in financing EUR237 million (15%) International EUR167 million (11%)
Services The total contribution of service businesses to Natexis Banques Populaires NBI increased 3% to EUR569 million.
Banking, Financial and Technology Services NBI of the Banking, Financial and Technology Services division fell slightly on last year from EUR260.7 million to EUR258 million.
■ The Banking services sector reported NBI of EUR67 million, up 11% on 2001. The 16% growth in revenues from automated payment services more than offset the 8% fall in NBI generated by check processing and exchange system activities. Services to Banque Populaire regional banks reported growth of 9%, while NBI from activities with non Banque Populaire Group customers remained stable at EUR18 million, after recording a substantial increase in 2001.
Activity indicators clearly reflect payment media trends in 2002, both with respect to the customer base and the organization of the financial market: the card pool increased 6%, the number of card transactions 16% and ITS transactions 67%, mainly due to the launch of check truncation in June 2001. Conversely, the number of checks processed fell 75% for national checks and 52% for international checks.
This downturn is almost exclusively attributable to Xeod Services order-flow activities, which reported a drop in NBI from EUR27 million to EUR15 million, due to a significant fall in the number of orders processed (31% drop in on-line broker orders, which represent close to 57% of Xeod Services’ activities).
Conversely, financial production activities maintained NBI at last year’s levels (EUR129 million compared to EUR130 million), thanks to the good performance of custody (assets under custody up 5%), accounting services (net assets up 16%) and depository (outstandings up 9%) activities.
The contribution of the different business lines to this total was as follows: ■ Fund management
On a constant Group structure basis, Fund management NBI fell 6% on 2001 to EUR51 million. This fall was primarily due to the absence of commission for outperforming the market in 2002 and the reduction in equity outstandings caused by the stock market crisis.
Total NBI of the Assurances Banque Populaire sector amounted to EUR130 million, compared to EUR124 million last year (up 4%). Of this income, 55% comprises remuneration on life-insurance assets under management, which increased 5% despite the negative impact of the markets on unit of account policies.
■ Estate planning While outstandings under management by Banque Populaire du Luxembourg, which specializes in estate planning, increased slightly to EUR1.2 billion (up 1%), NBI fell considerably (EUR19.4 million compared to
Operating expenses Operating expenses The increase in operating expenses was limited to 2.6% in 2002 and gives rise to the following comments: ■ it marks, in accordance with 2002 budget orientations, the end of a period of rapid growth in expenses (17% increase in 2001) linked to the merger operations and the implementation of both external and internal development projects, in a buoyant economic context. The impact of these investment categories in 2002 was less significant, without calling in to question the development actions currently in progress (electronic banking, equities, LineBanque, etc.); ■ it reflects excellent reactivity to the economic difficulties encountered in 2002. The slow-down in expenses was amplified during the year, both with respect to employee costs and control over operating expenses; ■ as such, the 2.6% or EUR32 million increase must be considered taking into account the carry-forward effect of EUR20 million in respect of personnel costs and Group structure changes (full consolidation of BPAM), which generated additional expenses of EUR15 million in the 2002 financial statements.
The average number of Natexis Banques Populaires employees (internal and external) was therefore 8,713 in 2002, compared to 9,184 one year previously (reduction of 471).
Other operating expenses Other operating expenses increased only 2.1%, due to a decrease in expenses associated with the Natexis Banque and Caisse Centrale des Banques Populaires merger and the implementation of a cost control program encompassing all types of expenditure (external services, logistic costs, current operating costs, etc.) and involving all departments of Natexis Banques Populaires and its subsidiaries.
The charge to Provisions for loan losses and country risks totaled EUR193 million, compared to EUR184 million in 2001 (+5%). It encompasses net charges of EUR218 million to provisions for specific credit risks and net reversals of EUR25 million from provisions for industry and country risks.
Industry and country risks Purely industry provisions represent 30% of total provisions, or EUR107 million. Net charges to these provisions in 2002 totaled EUR14 million, as a result of the inclusion of new sectors (for example the cable audiovisual sector) and, to a lesser extent, changes in outstandings and provision rates. Provisions for country risks total EUR171 million. A net amount of EUR18 million was reversed from these provisions, with the reduction in outstandings more than offsetting the increase in provision rates in certain countries. Finally, EUR9 million was reversed from other industry and country risk provisions, on a constant exchange rate basis, following a reduction in outstandings.
Divisional analysis of the net charge to provisions for specific credit risk in EUR millions 2002 2001
The net charge to provisions for specific credit risk increased 16% from EUR188 million in 2001 to EUR218 million in 2002.
EUR180 million, representing 0.48% of Cooke outstandings. This increase is attributable to international commerce and trading and structured financing activities. Conversely, corporate activities recorded a lower charge to provisions than in 2001.
Banking, Financial and Technology Services account for EUR28 million of net charges to provisions, compared to EUR12 million in 2001, attributable almost exclusively to Xeod Services. Other services pass from a net charge of EUR3 million in 2001 to a net charge of EUR1 million in 2002.
As already indicated, provisions for loan losses in respect of certain of these activities are also deducted from NBI.
Charges to provisions for specific credit risk recorded in 2002 concern three main geographical areas: ■ Western Europe (EUR111 million, 51% of total), affected by the general economic slowdown; ■ USA (EUR67 million, 31% of total), where provisions of EUR42 million were recorded in respect of high-yield security portfolios due to the increase in corporate risk in this country; ■ Central and Latin America (EUR41 million, 18% of total), where the majority of charges concerned Argentina (EUR29 million) and Cuba (EUR6 million).
Net loan Specific credit Industry and Total % coverage outstandings risk provisions country risk provisions in USD millions provisions
Total contribution to Income before exceptional items and tax 273 482 - 43%
These contributions exceed total Income before exceptional items and tax, which includes non-divisional items (drop in NBI generated by the investment of own funds).
Financing Corporate and International Banking activities generated Income before exceptional items and tax of EUR213 million, up 4% on last year. This increase was primarily due to an improvement in Gross operating income (EUR393 million, up 4%), attributable in turn to tight control over costs (down 1%), and a slight increase in NBI (up 2%).The strengthening of operating headings enabled the absorption of a slight increase in loan loss provisions.The 2002 cost/income ratio of the division is 44%.
General principles The risk management system is structured around the Large Exposures committee. This committee brings together the Chairman, all operating directors, the Risk Management division and Internal Audit. Its role is to monitor the bank’s key risks, measure any developments and take the necessary preventive corrective measures. The Large Exposures committee also assesses the quality of the security measures implemented by each division, such as risk monitoring tools. It focused in 2002 on the treatment of legal risks, money laundering, the disaster recovery plan and the risk control systems of the New York branch and six subsidiaries.
Finally, the Operating Risks committee seeks to appraise, on a transversal basis, all Natexis Banques Populaires operating risks. It concentrated specifically in 2002 on crisis management, physical security, the business line disaster recovery plans and fraud attempts.
Created in 2001, the capital markets risk department of the Risk Management division progressively increased its employee numbers and widened its scope of expertise during 2002. Capital market difficulties encountered during the year accelerated the strengthening of the department’s resources.Work was concentrated in 2002 on the revision of a certain number of procedures and the implementation of an expanded and more rigorous limits framework. The department also took part in important work on valuation models during the second half of the year.76
Breakdown of loan outstandings by major class of counterparty as of December 31, 2002
The European Union accounts for 79.2% of total outstandings, compared to 77.9% as of December 31, 2001. North America (primarily the United States) accounts for 10.6% of outstandings, down slightly on last year. Japanese commitments remain marginal. Together, all emerging countries account for 6.8% of gross outstandings, down significantly on last year (7.3% at the end of 2001).
Breakdown of corporate loan outstandings by internal rating as of December 31, 2001
1 – Organization of the capital market risk control system The capital market risk control function operates at several levels: ■ level one control is performed by the Middle Offices of each entity. These are responsible for designing the capital market risk appraisal system and the capital market risk authorization and limits system, as well as for the daily monitoring of capital market risks and the control of market data; ■ level two control is performed by the Internal Control departments of each entity. These perform occasional compliance tests (regulatory and accounting standards and internal procedures) and ongoing controls of general (regulatory, accounting) and specific risks generated by the activities of the entities; ■ level three control is performed by the Risk Management division, which is responsible, on behalf of the entire Natexis Banques Populaires Group, for defining, in conjunction with the entities concerned, methods of quantifying capital market risks applicable to the group, ensuring the reliability of the models used, formulating crisis scenarios and assisting Senior Executive Management with the allocation of capital market limits by entity.
The risk control organizational structure is completed by capital market risk management committee meetings held monthly and bringing together the heads of the different control levels and Front Office managers.The committee is chaired by the head of Capital Markets activities. It validates any proposed changes to limits and reviews the various overruns identified.
The Board of Directors of the Bank validates the overall risk limit for all entities.
Africa and the Middle East 119 488 607 54 65 5 125
2-1 – Standard indicators The main standard indicators used are: ■ sensitivity to a change in interest rates of +/- 1%; ■ exchange position; ■ exposure to the equity markets; ■ sensitivity to a change of +/- 1% in equity, foreign exchange and interest rate market implicit volatility; ■ change in the delta for a change in the underlying (equity, interest rate or foreign exchange rate); ■ sensitivity to a change in dividend levels; ■ sensitivity to a change in the government security/swap spread; ■ monthly and annual loss alert; ■ theta.
2-2 – VaR In parallel to these standard indicators, Natexis Banques Populaires performs global VaR calculations. It calculates the historical VaR using the Riskmetrics Riskmanager tool. It seeks to quantify, based on prudent assumptions, the potential loss risk to which capital market activities are exposed.The measure is defined based on: ■ historical data covering one year; ■ a ten-day potential loss horizon; ■ a confidence interval of 99%.
3 – Limits system The Natexis Banques Populaires limits system covers the capital markets activities of Natexis Banques Populaires and its subsidiaries. Its coverage was intensified considerably during 2002. Natexis Banques Populaires sought throughout the period to implement limits in risk areas not previously covered. Efforts were concentrated in particular on interest rate, foreign exchange and stock option activities.
In this bid to strengthen the limits system, the Risk Management and Capital Markets divisions implemented a Loss Alert procedure in August 2002, enabling the rapid identification of abnormal losses and their analysis, as well as the necessary measures to contain the source of losses.
The maximum sensitivity of interest rate schedules to a 1% translation of the interest rate curve is EUR100 million. This limit also applies to a point-for-point deviation of the interest rate curve.
A specific limit has been set for security/swap arbitrage transactions. It enables the impact on results of a 0.1% gap between these two benchmark curves to be measured. This limit stood at EUR40 million at the beginning of 2002 and was reduced to EUR30 million in September.
Volatility risk limits for interest rate, foreign exchange and stock option transactions represent a total of EUR4.5 million, for a 1% change in volatility.
4 – Global interest rate, liquidity and foreign exchange The ALM Committee, chaired by the Chief Executive Officer and comprising members from the Capital Markets, Financial Management and Risk Management divisions, defines the general thrust of asset and liability management, liquidity and own fund investment activities.
81Global interest rate The maximum sensitivity of interest rate schedules to a 1% translation of the interest rate curve is EUR100 million. This limit also applies to a point-for-point deviation of the interest rate curve. Sub-limits for short-term and long-term treasury were set at EUR20 million and EUR30 million respectively.
Global 100 of which Short-term treasury 20 of which Long-term treasury 30
Liquidity In terms of liquidity risks, the Capital Markets division refinances the needs of the different Natexis Banques Populaires activities, rebilling the liquidity cost.
The authorized liquidity gap and transformation limits are monitored and reviewed by the Balance Sheet Management committee.
Foreign exchange Foreign exchange risk is monitored by the capital markets Risk Management committee and the ALM committee. Foreign exchange risk is measured using an equivalent positions indicator, expressed in euro. The current limit is EUR35 million.
In particular, it is subject to the confidentiality obligations detailed in Article L 511-33 of the Monetary and Financial Code and Investment Service rules of good conduct.
Furthermore, Natexis Banques Populaires is not subject to any significant commitments which should be recorded off-balance sheet, other than those relating to its every-day activities.
Revenue from sales of services increased 2.8% to EUR266 million. This increase was driven by debt management activities (+24.3%), which benefited notably from the dynamism of the factoring market in Germany and by insurance-related services (+8.5%). This growth was offset by a fall in income from the management of public procedures (-9.4%) and from corporate information and marketing activities (-3.2%).
Revenue growth in 2002 varied from country to country. France remained, nonetheless, the group’s main market, generating revenues of EUR407 million, up 3.8% on 2001. Elsewhere, the two other traditional Coface markets, Germany and Austria, and more recent markets saw revenue growth penalized by a strengthened selectivity policy.
Coface Income statement for the second half of 2002 The Coface Income statement for the second half of 2002 breaks down as follows by banking analytical income statement heading: Net Banking Income: ■ consolidated NBI for the second half of 2002 is EUR191 million, compared to EUR211 million for the first half of the year.
NBI fell 9% period-on-period, including a fall of 5.5% for Insurance activities to EUR77 million, 19.4% for insurance-related services and 6.5% for activities performed on behalf of the French State.Only Information and Debt management activities recorded growth in the second half, increasing 15% to EUR56.3 million; ■ excluding net income from investments, insurance NBI increased 12% period-on-period to EUR81.2 million. This includes a 2% fall in NBI to EUR350 million, a 21% reduction in the risk charge to EUR221 million and a 3% reduction in business provider costs to EUR30 million.
Year-on-year operating expenses increased only 1%. Cost control remained a top priority in 2002.
Control measures were particularly notable in Coface France and AK Coface, with the cessation of external recruitment, a substantial reduction in variable expenses and optimization at group level of information purchases; ■ Gross operating income totaled EUR4.7 million, compared to EUR25 million for the first half of 2002; ■ after deduction of exceptional expenses, corporate income tax, goodwill amortization and minority interests, Net income for the second half of 2002 is EUR6.2 million, down 46% on first half Net income of EUR11.4 million.
Net Banking Income 1,793 1,840 General operating expenses, depreciation and amortization (1,446) (1,227)
Income before exceptional items and tax 210 445 Exceptional items (16) 3 Corporate income tax (13) (79) Goodwill amortization (38) (20) Net reversal from the Fund for General Banking Risks 21 Minority interests (56) (58)
Total consolidated assets amounted to EUR133.4 billion as of December 31, 2002, compared to EUR110.4 billion as of
Assets Customer loans, including lease financing outstandings, total EUR34 billion, down 7% on last year due to the marked drop in the US dollar/euro exchange rate in 2002 and tight control over outstandings.
Overall, these operations increased the capital stock to EUR759,085,392, comprised of 47,442,837 shares of EUR16 par value each as of December 31, 2002.
Shareholders’ equity and the international solvency ratio As of December 31, 2002, Natexis Banques Populaires consolidated regulatory capital for international solvency ratio purposes, extended to include capital market risks, amounted to EUR5.8 billion, compared to EUR5.6 billion as of December 31, 2001.
Tier one capital remains stable at EUR4.1 billion. The capital stock increase and the issue of USD150 million of preferred shares was offset by an increase in goodwill and negative movements in currency translation reserves, notably in respect of the US dollar.
Tier two capital increased following the issue of 300 million redeemable subordinated securities in June 2002, which exceeded the impact of conversion of the TSDIC.
Weighted assets (EUR57.2 billion) are up slightly by EUR0.1 billion on last year.
The international solvency ratio is 10.2%, including Tier one capital of 7.2%.
Regulatory requirements state that this ratio must exceed 100%. As of December 31, 2002, the capital adequacy ratio was 135%, compared to 132% as of
As of December 31, 2002, this ratio stands at 75% for Natexis Banques Populaires, unchanged on December
Under banking regulations, no single loan or advance must exceed 25% of capital and the sum of risks exceeding 10% of capital must not exceed eight times equity capital.
85as and when necessary: CD, USCP, ECP, EMTN, BMTN and Schuldschein.
This requires: ■ a constant presence on the main European,American and Asian financial markets in order to diversify sources of funds and capitalize on all refinancing opportunities; ■ substantial trading capacity on secondary debt markets, in order to ensure liquidity for investors.
The third resolution presented to the General Meeting of May 22, 2003 asks shareholders to increase this net income by retained earnings brought forward from the prior year of EUR1,155,880.11 and to transfer an amount of EUR10,301,863.30 to the legal reserve, giving distributable earnings of EUR196,891,282.83.
The average annual contractual salary paid to women working full-time under permanent contracts was EUR34,578 (EUR27,647 for technician positions and EUR46,797 for executive positions).
In 2002, Natexis Banques Populaires had 79 handicapped employees and paid a contribution of EUR568,597 to the AGEFIPH fund for the professional insertion of handicapped employees.
Environmental information Natexis Banques Populaires has adopted a global approach to environmental issues. This consists of assessing the financial impact on long-term operations of any decision concerning the installation or modification of energy consuming technical equipment.
Electricity and fluid consumption in 2002 has been determined taking into account Natexis Banques
Consumption figures are as follows: - electricity: 20,498.8 MWh (up 0.10% on 2001); - hot/cold energy: 11,359 MWh equivalent (up 7.59% on 2001); These increases were the results of changes in Group structure, changes in configuration and transitional technical measures.
Investments in affiliates and associated undertakings and other securities held for investment 7 1,686 489 470
Accrued income, prepaid expenses and other assets 10 11,458 10,133 11,041 of which institutional activities - 1 5
Total liabilities & shareholders’ equity 133,400 110,354 113,131 of which institutional activities 1,667 1,726 2,175
Net gains on securities held for sale 26 4 293 169
Net gains/(losses) on disposals of fixed assets 31 53 3 (3)
Earnings per share 2.42 6.73 7.14 Consolidated net income per share, based on the average number of shares outstanding during the year.
1 – Consolidation methods and principles The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and the accounting rules and methods laid down in French accounting regulations and, in particular, Regulation 99-07 regarding consolidation rules and Regulation 2000-04 regarding summarized consolidated documents.
The main changes during the fiscal year were as follows: ■ removal from the scope of consolidation of CITA, as its activity is no longer considered material at group level; ■ removal from the scope of consolidation of SCI Villcom, following the sale of its assets; ■ entry into the scope of consolidation of Spef LBO, a fund management company involved in business transfers; ■ entry into the scope of consolidation of ZAO Natexis Banques Populaires, a banking subsidiary in Russia; ■ entry into the scope of consolidation of Axeltis Ltd., a NBP subsidiary in London involved in the central distribution of mutual funds; ■ entry into the scope of consolidation of Natexis Bleichroeder Inc., a broker-dealer company incorporated under New York State law, acquired in December by NBP; ■ entry into the scope of consolidation of NBP Preferred Capital II, a NBP subsidiary set up to manage the issue of the third tranche of preferential shares; ■ entry into the scope of consolidation of Edval Investment Ltd. and Worledge Investment Ltd., two NBP subsidiaries created in 1991 and 1992 for the adjustment of former BFCE country risks (see Note 2.2 A); ■ sale of CFJPE, a private-equity company; ■ buy-out of minority interests in BPAM and Interépargne, providing the group with full control of these subsidiaries. Accordingly BPAM, accounted for by the proportional method in 2001, was fully consolidated; ■ Coface: this company was accounted for by the equity method up to June 30, 2002; during the second half, the Coface sub-group was fully consolidated following the takeover bid for cash in July 2002.
B – Tax arrangements These cover the financing of assets (planes, boats, hotel complexes, technological centers, etc.) on behalf of customers using tax transparent structures (EIGs, real-estate investment companies, public companies notes to the consolidated financial statements
consolidated financial statements 93consolidated for taxation purposes) in which Natexis Banques Populaires is the sole shareholder or where control is shared with other banks. Under these arrangements, NBP takes the role of lender and vendor of tax positions. As regards the consolidation of these structures, NBP has the power of decision over ordinary activities as trustee, which it exercises in the interest of its customers. The savings generated by these arrangements are equivalent to asset management income where NBP does not control the entity, as defined in Section 10052 of CRC Regulation 99-07.
These cover the financing of real-estate assets (car parks, offices, corporate headquarters, etc.) on behalf of customers, using real-estate investment companies as holders of finance leases set up by NBP finance lease subsidiaries or finance lease companies themselves. As for tax arrangements, NBP Group intervenes as trustee at the request of its customers without exercising control as defined by the three criteria set forth in Section 10052 of CRC Regulation 99-07.
The European publishing assets of Vivendi Universal Publishing “VUP” were acquired on behalf of Groupe Lagardère by Investima 10, a wholly owned subsidiary of Ecrinvest 4, itself wholly owned by Segex, which is a wholly owned subsidiary of Natexis Banques Populaires.
The financial statements are presented in millions of euro, with comparative figures covering three years.
The assets, liabilities and commitments of the bank resulting from its institutional activities are identified in the balance sheet and off-balance sheet items under each heading concerned by procedures managed by Natexis Banques Populaires on behalf of the State.
Companies in which Natexis Banques Populaires owns a direct or indirect interest of 20 to 50% of the capital stock (giving it a significant influence over such companies) are accounted for using the equity method.
The derogation method permitted by Section 215 of CRC Regulation n° 99-07 was applied to the Natexis Bleichroeder Inc. acquisition, and the related goodwill deducted from shareholders’ equity.
1.8 – Lease financing – lessee Natexis Banques Populaires elected from December 31, 2000 to account for financing transactions where it is the lessee using the preferred method. Operating assets purchased under lease finance contracts (lessee) are recorded in property and equipment in the consolidated balance sheet where material and depreciated over the expected useful life of assets of the same category.
Inter-company balances and gains and losses arising on inter-company transactions are eliminated on consolidation.
Accounting policies and valuation rules specific to nonbanking activities are retained in the consolidated financial statements, in particular those applicable to insurance subsidiary accounts. However, eliminating transactions between these subsidiaries and the banking subsidiaries cancels the matching of investments and technical reserves in the insurance companies’ balance sheet. As a result,technical reserves are covered by insurance and banking assets.
1.11 – Full consolidation of insurance companies Since the application as of January 1, 2001 of Regulation 2000-05 on the consolidation of insurance companies, the following rules are applied for the consolidation of insurance subsidiary financial statements: ■ income and expenses are classified by nature in accordance with banking accounting policy and not by destination; ■ balance sheet and off-balance sheet items are presented using the same headings already existing under the banking format.
Movements during the year in the capitalization reserve and equalization provision are reversed from consolidated net income and result in movements in deferred profitsharing and deferred tax balances.
In assets in the consolidated balance sheet, the net loan outstandings underlying the options are covered by zero-coupon securities held by these entities. Changes in net income of these entities are solely due to increases in the value of the zero-coupon securities until their redemption date and the end of the arrangement in 2014. Over this period, the increase in value of these securities exactly offsets the full provision of these loans underlying the options to ensure the complete neutrality of net income and the cash necessary to refinance these operations.
B – Industry and country risk provisions Industry and country risk provisions cover certain Natexis Banques Populaires activity sectors presenting potential future but unknown risks. They primarily include tax-driven country risk provisions. These geographical areas and the provision rates vary with time and in line with the economic cycles of the different activity and geographical sectors.
C – Fund for General Banking Risks (FGBR) In order to complete the range of general risk coverage, Natexis Banques Populaires maintains a Fund for General Banking Risks out of post-tax income.
2.3 – Securitization transactions Securitization transactions in progress transfer credit risk without disposing of the reference portfolios.
Such transactions are credit-derivative based synthetic securitization transactions entered into with third-party banks jointly with special-purpose entities. The credit derivatives are equivalent in principle to credit insurance and provide protection against the signature risk (bankruptcy, restructuring of the terms and conditions of a reference asset and inability to pay) of debtors making up the portfolio. The special-purpose entities are not consolidated, as their financial statements merely reflect the protection provided to Natexis Banques Populaires and its hedging on the market, the residual risk being insured by the investors who finance the entities.
2.4 – Receivables, payables and off-balance sheet commitments denominated in a foreign currency Receivables, payables and off-balance sheet commitments denominated in a foreign currency are translated into euro at exchange rates prevailing at the year-end. Resulting unrealized exchange gains or losses are taken directly to income.
The following rules apply irrespective of the legal form of the security (equity, bonds and notes, treasury bills, certificates of deposit, negotiable instruments, money market securities, etc.) and depend solely on the purpose of the transaction: ■ trading account securities: these securities, which are acquired or sold with the original intention of reselling or repurchasing them after a short period, are traded on markets with guaranteed liquidity. Such securities are recorded at transaction value (including expenses and any accrued interest).At the balance sheet date, they are marked to market, and the aggregate net amount of differences arising is taken to the income statement. If these securities are held for more than six months, they are reclassified as securities held for sale at their market value on the date of reclassification;
■ Income from Fixed Income securities is recorded on an accruals basis.
■ Gains or losses on sales of securities and adjustments in value appear under different headings depending on the nature of the transaction: – trading account securities, securities held for sale and equity securities held for investment: the appropriate Gains/(losses) heading in Net Banking Income, – debt securities held for investment:Provisions for loan losses and country risks where the gains or losses reflect counterparty risk and Net gains/(losses) on disposals of fixed assets where the gains or losses reflect a market risk or are the result of a disposal, – investments in affiliates and other long-term equity investments: Net gains/(losses) on disposals of fixed assets 2.7 – Property and equipment and intangible assets Operating property and equipment and intangible assets ■ Former Crédit National assets purchased prior to December 31, 1976 are stated at the value resulting from the 1976 statutory revaluation.Purchases since this date are stated at acquisition cost.
■ Property and equipment are depreciated, generally on a straight-line basis, over their estimated useful lives as follows: Buildings used for operations 25 to 40 years Other property and equipment 5 to 10 years
These network securities are not amortized on an annual basis but are subject to an annual impairment test.
The majority of Natexis Banques Populaires Group occupied and leased-out buildings are recorded in the balance sheets of real-estate companies, which, as detailed in note 1.3, are fully consolidated as under the exclusive control of the Group.
Buildings under lease financing arrangements In accordance with the aforementioned October 21, 1997 letter, a provision is raised in respect of leased buildings where their accounting value exceeds their estimated market value and where there is a probable or certain risk that the building which is the subject of the lease contract will remain, on termination, the property of the lessor.
Computer software and hardware Computer hardware is depreciated on a declining balance basis over five years.
Computer program internal development costs are expensed in the year incurred, where the computer program is intended for internal use; where it is intended for commercialization, costs are capitalized and amortized over an appropriate period of use.
2.10 – Interest, premiums, fees and commission Interest, together with premiums, fees and commission considered as equivalent to interest income are recorded in the income statement on a timeapportioned basis. Other commission is recognized on a receipts basis.
B – Currency swaps Open spot swap transactions are valued at closing rates at the period-end.
Forward currency hedging transactions are taken to income on a time-apportioned basis, either as premiums and discounts where the transactions form part of commercial activities, or as accrued interest where they are intended to hedge long-term foreign currency denominated assets and liabilities.
C – Interest rate, currency and stock options and forward contracts The nominal value of the underlying instrument covered by the option or forward contract is recorded offbalance sheet, with hedging and trading transactions separately identified.
Deferred tax assets and liabilities are offset within the same tax entity. The tax entity consists of either the entity itself or the tax group where one exists. Prudence requires that deferred tax assets only be recognized where they can be effectively used in the future to reduce the overall tax charge. Accordingly, tax losses carried forward are not recognized, and it is assumed that future tax savings will not be recovered if the tax entity has reported tax losses in the last two fiscal years.
2.16 – Employee-related liabilities and retirement benefit commitments Employee-related liabilities mainly comprise commitments in respect of: ■ retirement termination payments; ■ early-retirement and supplementary pension contributions; ■ payments for the cessation of salaried employee activity; ■ employer contributions payable to private health insurance companies in respect of retired employees and employees having accepted early retirement; ■ long-service medals.
In accordance with opinion n° 2000-C issued by the Urgent Issues Taskforce, retirement benefit commitments were provided in full, as per the preferred method identified in CRC Regulation 99-07, by deduction from fiscal year 2000 opening shareholders’ equity.
The difference between retirement benefit commitments as of January 1, 2000 and total pension fund reserves and provisions raised in this respect in the company accounts of the entities concerned, amounted to EUR24 million, net of deferred tax assets.
2.17 – Change in accounting method CRC Regulation 2000.06 regarding liabilities is applicable to fiscal years commencing on or after January 1, 2002 and as such was applied for the first time in the preparation of the 2002 financial statements. This regulation lays down the terms and conditions for recognition of provisions for contingencies and charges not directly relating to banking or associated activities and defines a liability as “an obligation of the company to a third party which is probable or certain to lead to an outflow of resources to this third party, without a counterparty at least equivalent in amount from this third party.”
Application of this new regulation did not impact the consolidated financial statements for the year ended December 31, 2002 or the amount of provisions for contingencies and charges recorded in the 2002 opening consolidated balance sheet.
Securities held for sale (9) (12) Debt securities held for investment - - -
(3) Including accrued interest receivable on: 130 163 89 Securities held for sale 117 143 Debt securities held for investment 13 20 89
Other loans to customers 26,199 27,436 26,704 Accrued interest receivable and amounts not allocated 274 302 480 Non-performing loans 1,176 1,173 1,121 Provisions for loan losses (663) (686) (643)
Other loans to customers 26,199 27,436 26,704 4.2 – Lease financing in EUR millions 2002 2001 2000
Real-estate lease financing 3,411 3,375 3,358 Outstandings 3,214 3,206 3,198 Assets temporarily not leased and non-performing loans 253 215 246 Accrued interest receivable 94 110 58 Provisions for asset impairment (16) (19) (25) Provisions for loan losses (134) (137) (119)
Operating leases 589 562 533 Outstandings 588 561 532 Assets temporarily not leased and non-performing loans 3 3 1 Accrued interest receivable 1 1 2 Provisions for asset impairment (1) - - Provisions for loan losses (2) (3) (2)
Trading account securities (1) 3,009 2,968 6,302 Equities and other variable income securities 360 227 86 Bonds and other Fixed Income securities 2,649 2,741 6,216
(2) Of which: listed 5,320 5,219 826 receivables representing securities loaned - - transferred from trading account securities - 5,430 transferred to/from debt securities held for investment 18 1,678 subordinated 51 105 135 issued by public institutions 71 - treasury stock 4 47 2 unrealized capital gains (excess of market value over cost) 38 12 21 unrealized capital losses provided in the balance sheet (103) (92) (68)
(5) Of which: listed 22 189 171 net of provisions of (210) (150) (140)
Net book Estimated Net book Estimated Net book Estimated value value value value value value in EUR millions
Insurance investments consisting of resources issued by other Group entities are eliminated as inter-company transactions.
in EUR millions 2002 2001 2000 of which: ■ life insurance 14,935 13,684 12,657
■ non-life insurance 128 6 5 ■ representative of unit of account contracts 2,821 3,342 3,328
(1) The accounting treatment of these provisions is presented in note 1.11
consolidated financial statements 1057 – Investments in affiliates and associated undertakings and other securities held for investment in EUR millions 2002 2001 2000
Subtotal 62 136 147 of which Share in net income/(loss) 3 13 20
Total property and equipment 2001 Additions Disposals Changes Other 2002 in Group in EUR millions structure
Operating intangible assets: 139 52 (15) 391 (7) 560 Purchased goodwill 29 10 - 346 3 388 Software 104 30 (13) 43 (9) 155 Other intangible assets 6 12 (2) 2 (1) 17
Operating property and equipment: 526 109 (39) 107 (11) 692 Operating land and buildings 298 45 (3) 11 (2) 349 Other operating property and equipment 228 64 (36) 96 (9) 343
Non-operating property and equipment: 30 1 (2) 0 0 29 Non-operating land and buildings 28 - (2) - - 26 Other non-operating property and equipment 2 1 - - - 3
Charge to income in respect of consolidated companies (52) (33) (26)
consolidated financial statements 10910 – Accrued income, prepaid expenses and other assets in EUR millions 2002 2001 2000
Checks and notes presented for collection, settlement accounts in respect of security transactions 1,112 401 1,237
11 – Interbank and money market liabilities in EUR millions 2002 2001 2000
Accrued interest payable 378 194 246 12 – Customer deposits in EUR millions 2002 2001 2000
(1) Convertible bonds In 1993, Natexis Banques Populaires issued 1,781,000 bonds, for a total amount of FRF 1.3 billion, convertible into stock at a rate of 1 share for 1 bond and redeemable in full on January 1, 2001. As of December 31, 2001, all bonds had been redeemed.
(2) Including securities issued directly by: in EUR millions 2002 2001 2000
Trading account securities – liabilities on borrowed securities 2,339 2,478 3,389
(1) Including unearned income of EUR1,247 million received in respect of the temporary holding of Vivendi Universal Publishing securities.
(1) In 2001, in accordance with Opinion n° 2001-G issued by the French National Accounting Institute Urgent Issues Taskforce, policies covering employee-related liabilities taken out by group companies with group insurance companies are eliminated on consolidation in the amount of premiums paid and the value of these contracts is transferred from Mathematical provisions to Provisions for contingencies and charges – employee-related liabilities in the consolidated balance sheet. A total of EUR15 million was transferred in this way.
(1) In 2002, the increase in employee-related liabilities (+EUR51 million) was due to changes in Group structure with the full consolidation of Coface (+EUR34 million), an additional charge to provisions in respect of the Natexis Employment Assistance Plan (+EUR10 million), a charge to provisions in respect of the Early Cessation of Salaried Employment contracts (+EUR3 million) and miscellaneous adjustments (+EUR4 million).
(2) Movements in other provisions between 2001 and 2002 are due to changes Group structure with the full consolidation of Coface in the amount of EUR5 million.
in EUR millions 2002 2001 2000 - convertible into Natexis Banques Populaires stock, issued in May 1996 1 115 137 - of USD 150 million issued in December 1996 - - 161 - of USD 100 million issued in February 1997 - - 107 - Non-redeemable participating securities issued in 1985 by BFCE, where the remuneration comprises a fixed-dividend component payable at TAM x 45% (benchmark money market rate for variable issues) and a variable component linked to the year-on-year increase in consolidated net income 107 107 107
17 – Movements in equity and equivalents (per proposed appropriation of income)
Capital Additional Retained Shareholders’ FGBR Share- Minority stock paid-in earnings (1) equity before holders’ interests in EUR millions capital FGBR equity
Equity and equivalents at 12/31/2001 before appropriation 709 1,579 1,089 3,377 263 3,640 562
(2) Provision for long-service medals (5) Inclusion of the capitalization reserve in consolidated reserves 32
(5) Minority interests in subsidiaries having issued preferred stock total EUR648 million.
Transactions traded over the counter 563,322 544,708 427,648 Transactions on organized or equivalent markets 80,528 47,993 80,753
Type of product Swaps 108,127 371,600 354,231 FRAs 207,394 26,427 6,713 Futures 59,128 42,942 80,753 Interest rate caps, floors and options 42,942 40,268 12,586 Other options 104,820 17,011 24,251 Forward currency transactions 97,503 84,543 27,008 Other 23,936 9,910 2,859
Balance sheet outstandings related to derivatives Contingent instruments purchased 2,174 742 404 Contingent instruments sold 2,449 573 276
Equity securities held for investment disposal costs (3) (1) 27 – Gross margin on insurance operations in EUR millions 2002 2001 2000
consolidated financial statements 11929 – General operating expenses in EUR millions 2002 2001 2000
Barbier Frinault % RSM Salustro % Deloitte Touche % in EUR thousands & Autres Reydel Tohmatsu
30 – Provisions for loan losses and country risks in EUR millions 2002 2001 2000
On contingencies and off-balance sheet commitments: Charged (134) (151) (167) to provisions for contingencies (130) (146) (164) to provisions for signature commitments (4) (5) (3)
Reversed 152 149 107 from provisions for contingencies 147 141 101 to provisions for signature commitments 5 8 6
Country and industry risks (liabilities) 491 48 (89) - (26) 424 * Provisions for unpaid interest are recorded within NBI. ** “Other” primarily consists of translation differences and inter-account reclassifications.
Losses Investments in affiliates and other securities held for investment (17) (20) (4) Debt securities held for investment (5) (15) (8)
Charged to provisions Investments in affiliates and other securities held for investment (10) (15) (19) Debt securities held for investment - - -
Reversed from provisions Investments in affiliates and other securities held for investment 24 20 9 Debt securities held for investment - - -
Net income attributable to minority shareholders bought out - - (32)
33 – Corporate income tax in EUR millions 2002 2001 2000
33.1 – Reconciliation of the tax charge per the financial statements and the theoretical tax charge in EUR millions 2002 2001 plus: Net income 108 291 Minority interests 55 58 Corporate income tax charge 13 79 Goodwill amortization 38 20 less: Income from companies accounted for by the equity method (3) (13)
= Consolidated tax income 2 250 x Standard tax rate 33.33% 33.33%
(2) In 2001, losses restricted in the interest of prudence were included in “Other”, as immaterial in amount.
consolidated financial statements 12334 – Income statement analysis by activity sector in EUR millions Financing Investment banking Services Coface Other Total
34.1 – Contribution of fully consolidated non-banking companies to consolidated net income The principal fully consolidated companies belong to the Assurances Banque Populaire business line (Fructilife, Fructiprévoyance, Fructivie SA,La Prosperité,Vitalia Vie and BancAssurance Popolari) and the Coface consolidated group.
Contrib. to Insurance Contrib. to Insurance Contrib. to Insurance consolidated underwriting consolidated underwriting consolidated underwriting in EUR millions net income income net income income net income income
Net gains/(losses) on securities held for sale (3) - - - - -
Depreciation, amortization and provisions for impairment of property and equipment and intangible assets (9) (10) (1) (1) (1) -
Gross operating income 81 49 71 63 78 68 Provisions for loan losses and country risks - - - - - -
Income before exceptional items and tax 83 49 71 63 77 68 Exceptional items (1) - - - (1) (1)
Underwriting Income - 49 - 63 - 67 Corporate income tax (28) - (17) - (29) -
35 A – Executive officer compensation Total gross compensation paid to executive officers was as follows: Chief Executive Officer (01/01/2002 to 10/31/2002) 373,334 459,000 365,878
Chief Executive Officer, former Deputy Chief Operating Officer (10/15/2001 to 12/31/2001) 331,273 80,912 -
The number of stock subscription options allotted in respect of offices held in the issuing company and associated undertakings was as follows: Chief Executive Officer
Chief Executive Officer, former Deputy Chief Operating Officer (10/15/2001 to 12/31/2001) 5,500 4,500 -
Deferred income, accrued charges and other liabilities 108 106 119 in EUR millions 2002 2001 2000
December 31, 2002 Less than 3 months 1 to 5 More Perpetual Total in EUR millions 3 months to 1 year years than 5 years
Loans and advances to banks 8,938 19,207 6,073 3,265 - 37,483
Bonds and other Fixed Income securities 5,637 2,023 5,785 3,356 - 16,801
Loans and advances from banks 14,793 15,396 1,209 1,339 - 32,737
AK COFACE FINANZ Factoring company 100 98 (5) (5) (5) (5)
ALLGEMEINE KREDIT INFORMATIONS Information and debt management services 100 98 (5) (5) (5) (5)
ASSET-BACKED MANAGEMENT CORPORATION Securitized security arbitrage 100 100 100 100 100 100
ASSURANCES BANQUE POPULAIRE Insurance company holding company 100 100 100 100 100 100
CIMCO SYSTEMS LDT Information and debt management services 100 98 (5) (5) (5) (5)
COFACE HOLDING NORTH AMERICA Holding company 100 98 (5) (5) (5) (5)
COFACE INTERCREDIT BULGARIA Information and debt management services 65 48 (5) (5) (5) (5)
COFACE MOPE Information and debt management services 100 98 (5) (5) (5) (5)
COFACE NORTH AMERICA Credit insurance and services 100 98 (5) (5) (5) (5)
COFACE SCRL Information and debt management services 100 98 (5) (5) (5) (5)
COFACE SCRL PARTICIPATIONS Holding company 100 98 (5) (5) (5) (5)
COFACE SERVICES Information and debt management services 100 98 (5) (5) (5) (5)
COFACERATING HOLDING Information and debt management services 100 98 (5) (5) (5) (5)
COFACERATING.US Information and debt management services 100 98 (5) (5) (5) (5)
CREDITORS GROUP HOLDINGS LTD Information and debt management services 100 98 (5) (5) (5) (5)
CREDITORS GROUP LIMITED Information and debt management services 100 98 (5) (5) (5) (5)
ECRINVEST6 (formerly IMMOBILIERE NATEXIS) Real-estate investment 100 100 100 100 100 100
NATEXIS ACTIONS AVENIR Mutual funds 79 77 80 78 85 84
NATEXIS BLEICHROEDER S.A. (formerly NATEXIS CAPITAL ) Broker/dealer 100 100 100 100 100 100
NATEXIS INTEREPARGNE Employee savings (formerly INTEREPARGNE) (9) management company 100 100 50 50 50 50
NATEXIS INVESTMENT CORP. Portfolio management 100 100 100 100 100 100
NATEXIS METALS (formerly SOGEMIN) Precious metal broker 80 80 80 80 80 80
NATEXIS PRIVATE EQUITY ASIA Management company (private equity) 100 100 100 100 100 100
NATEXIS PRIVATE EQUITY INTERNATIONAL Private equity 100 100 100 100 100 100
NBP PREFERRED CAPITAL II Preferred stock issues 100 0 - - - -
NEM 2 Management company (private equity) 88 88 88 88 88 85
NXBP1 (formerly NATEXIS GESTION) Holding company 100 100 100 100 100 100
OSTERREICHISCHE KREDITVERSICHERUNG COFACE Credit insurance and services 94 92 (5) (5) (5) (5)
+X ALTAIR SERVICES CELAD IT services (1) (1) (1) (1) 50 50
PROXIGMA (formerly SPATITRES) IT services 100 100 100 100 100 100
SOCIETE DE BANQUE FRANCAISE ET INTERNATIONALE Bank 100 100 100 100 89 89
SOCIETE FINANCIERE DE LA BFCE Portfolio company 100 100 100 100 100 100
SOCIETE IMMOBILIERE A.B.C. Real-estate company 100 100 100 100 100 100
SOPRANE ASSURANCES Private asset management 100 100 100 100 100 99
SPEF DEVELOPPEMENT (13) Venture capital mutual investment fund manager 100 100 100 100 - -
SPEF VENTURE (formerly SOPAGEST) Innovation mutual investment fund manager 100 100 100 100 100 55
VERITAS SOUTH AMERICAN CORPORATION Holding company 100 98 (5) (5) (5) (5)
JI INTERNATIONAL Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS ANDINA Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS ARGENTINA Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS CARIBBEAN CORPORATION Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS CHILE Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS COLOMBIA Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS CREDIT CORPORATION Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS VENEZUELA Information and debt management services 100 98 (5) (5) (5) (5)
VITALIA EPARGNE Employee savings management (1) (1) (1) (1) 100 50
WORLEDGE A INVESTMENTS Ltd Country risk put-option structure 100 100 - - - -
ZAO NATEXIS BANQUES POPULAIRES Foreign bank 100 100 - - - -
CODINF Services Information and debt management services 30 29 (5) (5) (5) (5)
EUROMEZZANINE S.C.A. 2 Buy-out/Buy-in financing (1) (1) (1) (1) 32 32
EUROPOLIS INVEST Real-estate investment in Europe (1) (1) (1) (1) 20 20
IFCIC Cinema and audio-visual sector guarantees 20 20 20 20 20 20
SUD EST CROISSANCE Private equity 25 25 25 25 25 14 * Consolidated on a proportional basis ** In earnings: For those companies with share classes conferring different rights to earnings, the percentages indicated represent the Group portion of their earnings; for those companies no longer within the scope of consolidation, the percentage indicated is that existing on the date of removal from scope.
(1) Company removed from the scope of consolidation (2) Consolidated on a proportional basis in December 2001 and 2000 and fully consolidated in December 2002 following the buy-out of minority interests (3) Absorption of Banque Saint Dominique by Banque Privée Saint Dominique on May 31, 2001 (4) Company sold outside the Group on June 29, 2001.The 2001 consolidated income statement includes 50% of firsthalf income and expenses.
Customer loans 32,893 34,204 33,606 of which institutional activities 96 251 437
Bonds, equities and other fixed and variable income securities 19,162 19,498 18,023
Total assets 131,669 110,354 113,131 of which institutional activities 1,475 1,519 1,877
Interbank and money market liabilities 46,068 35,624 37,956 of which institutional activities 1,453 1,279 1,447
Customer deposits 22,803 14,264 15,701 of which institutional activities 106 36 114
Debt securities 23,501 23,411 21,881 of which institutional activities 0 305 495
Deferred income, accrued charges and other liabilities 13,571 12,366 13,866 of which institutional activities 108 106 119
Shareholders’ equity 3,706 3,668 3,315 Capital stock 759 709 684 Additional paid-in capital 1,750 1,579 1,706 Retained earnings 1,084 1,089 675 Net income for the year 113 291 250
Depreciation, amortization and provisions for impairment of property and equipment and intangible assets (59) (43) (50)
In accordance with our appointment as auditors by your Annual General Meeting, we have audited the accompanying consolidated financial statements of Natexis Banques Populaires Group, for the year ended December 31, 2002.
In our opinion, the consolidated financial statements give a true and fair view of the financial position and the assets and liabilities of the Group as of December 31, 2002 and the results of its operations for the year then ended in accordance with accounting principles generally accepted in France.
Auditors’ report on agreements involving members of the Board of Directors of the Company
We hereby inform you that no agreement to which article L 225-38 of the French Commercial Code would be applicable has been brought to our attention.
Liabilities & shareholders’ equity in EUR millions note 2002 2001 2000
Net gains/(losses) on trading account securities (93) 142 32 Net gains/(losses) on trading account securities (33) (388) 653 Net foreign exchange gains/(losses) 38 6 60 Net gains/(losses) on financial instruments (98) 524 (681)
The scope of Natexis Banques Populaires activities has undergone the following changes in the last three years: In 2000, the Extraordinary General Meeting (EGM) of June 28, 2000 approved the merger-absorption of Natexis Banque by Natexis Banques Populaires, with retroactive effect from January 1, 2000. 2000 net income after these restructuring operations therefore comprises net income from commercial banking activities, now housed within a single entity for which the role as holding company for the principal business line subsidiaries has been retained.
In 2002, the EGM of December 6, 2002 approved the merger-absorption by Natexis Banques Populaires of Société Immobilière ABC with effect from April 1, 2002.
Income statement 2002 Net Banking Income dropped by 1%: the recording of losses on “structured equity” products had a negative impact of EUR118 million. However, income from variable income securities, representing, for the most part, holding activity revenue increased significantly by EUR108 million.
Charges to Provisions for loan losses and country risks decreased considerably, from EUR162 million in 2001 to EUR121 million in 2002. North American risk continues to impact the accounts of the New York branch but to a lesser degree than in 2001, when the Enron dossier was provided in the amount of EUR31 million. In mainland France, four Argentine banks were declassified to non-performing loans in 2002. In 2001, these loans were provided with respect to country risk. In addition to being declassified, an additional provision of EUR15 million was raised.After adjustment for transfers from country risk to specific credit risk and taking into account the impact of translation differences, the change in provisions for industry and country risks represented a provision reversal of EUR17.7 million, mainly due to the reduction in the provision basis.
Balance sheet The Natexis Banques Populaires balance sheet as of December 31, 2002 includes assets and liabilities transferred in as part of the Natexis Capital merger absorption. The transfer comprised total assets of EUR1,528 million and total liabilities of EUR1,469 million, representing a net asset transfer of EUR59 million.
This significant increase is mainly due to repurchase and reverse repurchase activities: – assets, + EUR19,665 million; – liabilities, + EUR16,709 million.
Financing commitments given in favor of financial institutions 904 153 342 customers 924 66 240
Guarantees given on behalf of financial institutions 598 600 700 customers 357 506 651
Balance at January 1 2,660 2,868 2,139 Capital stock (*) (**) 709 684 531 Additional paid-in capital 1,579 1,706 1,164
Balance at December 31 2,842 2,660 2,868 Capital stock (*) (**) 759 709 684 Additional paid-in capital 1,746 1,579 1,706 Reserves (***) 336 372 478 Retained earnings 1 - -
(*) Including FRF 115 million (EUR17 million) arising from the 1983 capitalization of the special reserve established in 1978 in connection with the revaluation of non-depreciable assets.
Provision for medium and long-term loan refinancing risk 11 11 11
Acquisitions, subscriptions and asset transfers NATEXIS INTEREPARGNE 99.99 555,654 BANQUE POPULAIRE ASSET MANAGEMENT Gérance 99.84 2,496 FRUCTIGER 99.65 89,612 COFACE 98.04 12,790,204 BANQUE POPULAIRE ASSET MANAGEMENT 86.88 512,750 VAL E 79.96 1,999
I – Investments in affiliates and other securities held for investment
D) Investments with a carrying value equal to or less than EUR15,000 121,615.24
B) Financial institutions ARNHOLD & BLEICHROEDER Inc 100 248,899,988.78 ASSET-BACKED MANAGEMENT CORPORATION 100 10,028,858.60 ASSET SQUARE 899,992 8,999,920.00 AUDLEY FINANCE BV 39,998 17,936.34 BANQUE POPULAIRE ASSET MANAGEMENT 512 ,750 137,881,590.73 COMPAGNIE FINANCIERE EUROPEENNE ABS 7,647 116,577.76 CONTANGO TRADING SA 3,844 38,455.00 CRENINVEST 1 4,994 76,133.04 IFCIC 37,708 574,854.75 INVESTIMA 1 3,850 38,500.00 INVESTIMA 11 3,850 38,500.00 INVESTIMA 3 3,850 19,250.00 INVESTIMA 5 3,850 38,500.00 INVESTIMA 6 477,082 4,425,219.00 INVESTIMA 7 3,850 19,250.00 INVESTIMA 8 3,850 19,250.00 INVESTIMA 9 3,850 19,250.00 LUGDUNUM GESTION 7,995 289,653.21 NATEXIS AMBS Ordin. (New York) 275,000 262,717,000.00 NATEXIS BLEICHROEDER S.A. 397,197 45,419,195.54 NATEXIS FINANCE 162,004 1,814,718.42 NATEXIS INTEREPARGNE 555,654 81,837,640.24 NATEXIS INVESTMENT ASIA (Singapore) 1 15,352,000.00 NATEXIS INVESTMENT CORP 3,217 2,552,930.38 NATEXIS METALS Ltd 16,000,000 20,372,340.33 NATEXIS PRIVATE EQUITY 16,826,626 433,783,025.77 NATEXIS US FINANCE CORPORATION (New York) 65,000 51,000.00 NBP PREFERRED SCHARES C2 (New York) 10,000,000 9,536,000.00 OMNIUM NATEXIS GIE 1,250 19,056.13 SAGP 990 15,092.45 SAINT DOMINIQUE RADIO 3,850 38,500.00 SCI ANTIN HAUSSMANN 18 274,408.23 SCI HAUSSMANN 90 1,809 2,757,802.72 SEMA ENGHIEN LES BAINS 1,500 22,867.35 SOCIETE FINANCIERE BFCE 6,052,993 92,950,992.79
SOGAFI - SOCIETE DE GARANTIE FINANCIERE 49,994 1,807,862.41 SPAFIC 2,494 652,201.59 SPAFICA 33,456 40,651,649.12 ZAO NATEXIS BANQUES POPULAIRES 37,908 15,767,290.18
C) Other ASSURANCES BANQUE POPULAIRE 5,246,972 496,843,291.17 AUXILIAIRE ANTIN 8,338,449 118,893,164.53 BANCOSYS 9,996 152,439.00 CAURI 3,462 52,981.38 CCBP HOLDING BV 14,677 6,738,063.62 CLADEL MARITIME 4,590 69,974.09 CO-ASSUR 2,493 282,457.17 COFACE 12,790,204 641,219,931.15 COMAVAM 399 59,850.00 CRENINVEST 7 2,494 38,020.78 CRISTAL NEGOCIATIONS 14,994 436,302.34 FINANCIERE CLADEL 607,893 10,099,287.00 FRUCTIFOR 3,888 44,456.27 FRUCTIGER 89,612 1,241,183.26 GECOMEX 4,994 76,133.80 GIE RESTAUPRISE 14,740 22,470.99 INVEST ALPHA 14,994 228,582.06 INVEST DELTA 14,994 228,582.06 INVEST GAMMA 2,494 32,807.63 INVEST OMEGA 2,494 25,744.43 INVEST SIGMA 7,674,468 124,002,203.69 LINEBOURSE 1,636,108 11,794,065.35 NATEXIS ARBITRAGE 2,553,174 38,614,541.35 NATEXIS FORMATION 3,494 55,904.00 NXBP 1 2,590 39,484.30 +X ALTAIR 6,274,962 14,445,291.99 PROXIGMA SA 70,628 1,596,391.41 SAMIC 695 15,915,677.40 SAS CYBERPLUS MARKET 696 4,500,000.00 SAS MONTMARTRE 1 2,499 34,151,59 SLIB 323,693 5,896,574.15 SOFEP 92,674 6,775,622.44 TURBO SA 8,165 126,833.01 VAL « A » 1,640,000 276,872,875.00 VAL « B » 2,494 38,416.68 VALMY LIBERTE CONSEIL 2,476 67,104.78
D) Investments with a carrying value equal to or less than EUR15,000 60,155.32
E) Current account advances FINANCIERE CLADEL - 45,091.07 SPAFIC - 2,141,592.06 SCI ALTAIR 1 - PARTNER CURRENT ACCOUNT - 6,021,446.05 SCI ALTAIR 2 - PARTNER CURRENT ACCOUNT - 2,396,037.25
Subsidiaries and investments in affiliates (holdings in excess of 10%) + X ALTAIR 4, rue Charles Gounod - 77185 LOGNES EUR10,040 EUR6,755 99.99%
ASSURANCES BANQUE POPULAIRE 27, boulevard Bourbon - 75004 PARIS EUR241,869 EUR43,195 100.00%
BAIL BANQUE POPULAIRE 115, rue Montmartre - 75002 PARIS EUR266,728 EUR130,891 99.99%
BANQUE POPULAIRE ASSET MANAGEMENT 68-76, quai de la Rapée - 75012 PARIS EUR9,148 EUR1,887 86.88%
BANQUE POPULAIRE DU LUXEMBOURG 47, boulevard Royal - L 2449 LUXEMBOURG EUR28,750 EUR5,156 87.80%
BANQUE PRIVEE SAINT DOMINIQUE 12-14, rond point des Champs Elysées - 75008 PARIS EUR20,464 EUR1,511 99.99%
COFACE 12, cours Michelet - La Défence 10 - 92800 PUTEAUX EUR49,736 EUR486,630 98.04%
COFICINE 26, rue de Montévidéo - 75016 PARIS EUR5,897 EUR3,687 92.50%
CRISTAL NEGOCIATIONS 45, rue Saint-Dominique - 75007 PARIS EUR240 EUR3,053 99.96%
INVEST SIGMA 45, rue Saint-Dominique - 75007 PARIS EUR117,036 EUR7,460 100.00%
NATEXIS BLEICHROEDER INC 1345 avenue of the Americas - NY 10105 - NEW YORK USD151,503 USD(740) 100.00%
NATEXIS INTEREPARGNE 16 - 18, rue Jules César - 75012 PARIS EUR8,891 EUR21,077 99.99%
NATEXIS METALS 47-53, Cannon Street - LONDON EC4M 5SH GBP20,000 GBP(6,792) 80.00%
NATEXIS PRIVATE EQUITY 5-7, rue de Monttessuy - 75007 PARIS EUR423,646 EUR165,318 91.35%
VAL A 115, rue Montmartre - 75002 PARIS EUR167,200 EUR116,412 100.00%
ZAO NATEXIS BANQUES POPULAIRES Business Center Parus, 1th Tverskaya - YANSKAYA STR.23/1 125047 MOSCOW - RUSSIA RUR379,080 RUR35,079 100.00%
Book value Outstanding Guarantees Total revenues Net income/(loss) Dividends Observ. of securities held loans and advances given by the in last reported of last reported received
Gross Net at December 31, 2002 Company period period during 2002
Operating revenue net of tax 67,660,795.95 6,017,734,663.05 12,744,230,589.08 16,645,820,852.62 13,524,84, 592.82
Social security, pension costs and other employee benefits 212,588.26 38,646,789.53 123,272,964.19 138,251,232.60 130,778,397.65
2. Specific procedures and disclosures We have also performed the other procedures required by law, in accordance with professional standards applicable in France.
Richard Olivier auditors' report on the financial statements for the year ended december 31, 2002
Shareholders’ Meetings Convening of shareholders’ meetings Shareholders’ Meetings are convened by the Board of Directors in accordance with law.The meetings are held at either the registered office or any other specified location.
Conditions of admission All shareholders are entitled to attend General Meetings and vote on resolutions personally or by proxy, in accordance with applicable law and regulations, irrespective of the number of shares they own.
In the event that the above-mentioned reporting obligation is not complied with, and at the request, recorded in the minutes of the shareholders’ meeting, of a shareholder representing at least 1% of the voting rights, those shares held in excess of the percentage limits that should have been declared shall be stripped of all voting rights for a period of two years following the date notice is given.
Board of Directors’ report on the resolutions presented to the Shareholders’ Meeting of May 22, 2003 Resolutions presented to the Annual General Meeting The first resolution asks shareholders to approve the 2002 Natexis Banques Populaires financial statements, which show a net income for the year of EUR206,037,266.02.
Shareholders, having approved in the second resolution agreements involving members of the Board of Directors detailed in the Auditors’ Special report, are asked to approve, in the third resolution, the appropriation of earnings and the distribution of dividends.
The Board of Directors asks shareholders to approve the distribution of a dividend of EUR1.50 to each of the 47,442,837 shares making up the capital stock. The dividend shall fall due for payment on May 26, 2003.
Finally, the eighth resolution asks shareholders to renew the term of office as Director of Mr. Francis Thibaud, which expires at the end of the present Shareholders’ Meeting.
NBI for the year ended December 31, 2002 is EUR10.6 million, down slightly on 2001 due primarily to a less dynamic factoring market during the year. Due to a significant increase in loan loss provisions, the company reported a net loss for the first time (EUR230,000). The company currently has 54 employees who will be integrated into the Factorem teams in accordance with the provisions of Article 122-12 of the Labor code.
On May 27, the Extraordinary General Meetings of Factorem and Banque du Dôme-Crédifrance Factor will vote on the absorption of the latter by the former. Pursuant to the provisions of the merger agreement, Natexis Banques Populaires will receive on this date, in exchange for its shares in Banque du Dôme-Crédifrance Factor, 97,634 new Factorem shares, ranking for dividends with effect from January 1, 2003.
Shareholders take due note of the Auditors’ Report on agreements involving members of the Board of Directors covered by Article 225-38 of the French Commercial Code.
Shareholders hereby set, for the year ended December 31, 2002, the net dividend at EUR1.50, payable to each of the 47,442,837 shares making up the capital stock. The tax credit shall be EUR0.75.
In accordance with the law, shareholders are reminded that dividends paid in respect of the last three fiscal years were as follows: Dividend per share with a par value
Fourth resolution: approval of the consolidated financial statements Overview: This resolution asks shareholders to approve the consolidated financial statements for fiscal year 2002, pursuant to the law of May 15, 2001.
Sixth resolution: trading in the Company’s own shares Overview: This resolution asks shareholders to authorize the Company to buy, subject to a 5% limit, its own shares on the stock market.
These shares may be purchased, in one or more installments, using any means, notably: ■ in order to regulate the stock market price by systematically trading against current trends; ■ in order to trade in line with positions on the market; ■ to accompany external growth operations, with the possibility that all or part of the acquired shares may subsequently be presented as consideration, sold or exchanged; ■ with a view to their subsequent transfer to employees of Natexis Banques Populaires, its subsidiaries, and Banque Populaire Group, in particular as part of stock purchase programs and/or under stock purchase option schemes.
This authorization is granted for a period of 18 months as from this date and replaces the authorization granted by the Shareholders’ Meeting of May 23, 2002.
Shareholders confer full powers on the Board of Directors and Executive Management to implement and realize the buyback program, and to place stock market orders, sign all documents, and more generally, do all that is necessary. Shareholders also authorize the Board of Directors and Executive Management to delegate such powers, as they deem necessary.
This authorization is granted for a maximum nominal amount of EUR10 billion, or its foreign currency equivalent based on euro exchange rates as of the dates of issue. Issues may be performed in euro or foreign currencies, in the amounts and form, at the times and rates, and under the issue terms and conditions considered appropriate by the Board.
Shareholders grant full powers to the Board of Directors, including that of delegation, in accordance with legal provisions, to perform such issues and comply with all formalities required by law, to decide the terms and conditions and determine the characteristics of bonds and all other securities provided for above and any associated rights.
This is a global authorization, granted pursuant to Article L225-129 paragraph 3 of the French Commercial Code and valid for a period of twenty-six months. It covers stock issues, with or without retention of shareholder preferential subscription rights and capital stock increases by capitalization of reserves.
This authorization sets a non-cumulative maximum of EUR150 million for stock issues and capital stock increases, representing the creation of approximately one new share for five existing shares.
Decide that shareholders may exercise, under the terms and conditions provided by law, their preferential subscription rights held as of right. Furthermore, the
Decide that the issue of stock subscription warrants pursuant to Article L 228-95 of the French Commercial Code, falling within the maximum set in paragraph three above, may be performed by offer for subscription in accordance with the terms and conditions provided above or by bonus allotment to holders of existing shares.
the exercise of stock allotment rights attaching to securities to be issued for a period not exceeding three months, determine the terms and conditions protecting the rights of holders of securities conferring future entitlement to a share in the capital stock, in accordance with legal and regulatory provisions; ■ make any deductions, where appropriate, from additional paid-in capital and, in particular, expenses incurred in performance of the issues; ■ enter into all agreements to ensure the correct performance of the issues and the listing and financial servicing of the securities; ■ record the capital stock increases resulting from any issues performed pursuant to this authorization and amend the bylaws accordingly.
The Board of Directors is granted full powers to issue composite securities, including that of delegation to the Chairman and, in particular, the power to decide the subordinated nature or not of the securities, the interest rate where applicable, the term, fixed or variable redemption price with or without premium, the interest payment procedures, where applicable, and repayment schedule depending on market conditions and the terms and conditions under which these securities confer entitlement to a share in the capital stock.
The authorization granted to the Board of Directors is valid as from the date of this meeting for the duration provided in paragraph three, Article L 225-129 of the French Commercial Code.
Tenth resolution: authorization for the Board of Directors to issue securities conferring entitlement to the capital stock with cancellation of preferential subscription rights Shareholders, deliberating in accordance with the conditions of quorum and majority governing Extraordinary General Meetings, having familiarized themselves with the Board of Directors’ report and the Auditors’ special report and in accordance with paragraph 3 Article L 225-129 of the French Commercial Code,
Decide to cancel shareholder preferential subscription rights to securities to be issued, it being understood that the Board of Directors may grant shareholders priority subscription rights to all or part of the issue, for periods and under terms and conditions determined by it. Such priority subscription rights shall not give rise to the creation of negotiable rights but may, where the Board of Directors deems appropriate, be exercised as of right or as excess rights.
Decide that where shareholder and general public subscriptions do not absorb the entire stock or security issue as defined above, the Board of Directors may limit, where appropriate, the issue to the amount of subscriptions received, provided this is at least threequarters of the initial issue decided.
Decide that amounts received immediately and in the future by the company for each share issued pursuant to the above authorization (plus, in the case of unattached stock subscription warrants, the issue price of said warrants) shall be at least equal to the average stock market price of the shares during ten consecutive trade days chosen from among the twenty trade days preceding the launch of the issue of the shares and/or other securities.
Confer on the Board of Directors full powers, including that of delegation to its Chairman, in accordance with
Eleventh resolution: authorization for the Board of Directors to increase the capital stock by capitalization of reserves, profits and additional paid-in capital Shareholders in Extraordinary General Meeting, deliberating in accordance with the conditions of quorum and majority governing Annual General Meetings and having familiarized themselves with the Board of Directors’ report, hereby confer on the Board full powers to increase the capital stock, on one or more occasions, by successive or simultaneous capitalization of all or part of reserves, profits and additional paid-in capital, the capitalization of which is permitted by legislation and the bylaws, through the creation and bonus allotment of shares and/or an increase in the par value of shares.
Twelfth resolution: overall limit applicable to the authorizations granted by the preceding resolutions Shareholders, deliberating in accordance with the conditions of quorum and majority governing Extraordinary General Meetings and having familiarized themselves with the Board of Directors’ report and the Auditors’ special report decide: ■ to set the maximum par value amount of immediate and/or future capital stock increases performed pursuant to the authorizations granted by this general meeting at one hundred and fifty million euros; this maximum shall be increased, where appropriate, by the par value of additional shares issued to protect the rights of holders of securities conferring entitlement to capital stock, in accordance with the law; ■ to set the maximum par value amount of debt securities conferring entitlement to the capital stock which may be issued at one hundred and fifty million euros, or its equivalent in foreign currency.
Dôme-Crédifrance Factor securities, for a total value of EUR18,140,419.64; ■ and having heard the report of the Reporting Accountant appointed by decree by the President of the Paris Trade Court on January 22, 2003; ■ hereby approve the aforementioned transfer and all its provisions, the aforementioned transfer transaction and the value of the transfer performed by Banque du Dôme-Crédifrance Factor.
The new shares shall rank equally with existing shares; they shall have the same rights and be subject to the same provisions of the bylaws and decisions of Shareholder Meetings.The first dividends to which they shall confer entitlement shall be dividends paid out of profits of the year of issue.The listing of the new shares on the Euronext Paris S.A. Premier Marché shall be requested.
The capital stock of the Company is EUR762,583,336, made up of 47,661,396 fully paid-up shares of EUR16 par value each.”
Persons responsible for the COB reference document and the audit of the financial statements 170 additional information
Appropriation of earnings (Title V, Article 34 of the Company’s bylaws) 5% of annual profits, less any prior year losses, is taken to the legal reserve. This transfer of profits is no longer required once this reserve exceeds an amount equal to one-tenth of the capital stock and becomes mandatory once again when the reserve falls below one-tenth of the capital stock.
Remaining profits, along with any retained earnings, constitute distributable earnings. The Annual General Meeting may distribute these profits as it deems appropriate in accordance with applicable law, and may either allocate them to retained earnings or reserves, or distribute them in full or in part, upon the recommendation of the Chairman of the Board duly approved by the Board of Directors.
Authorized capital stock, not issued The Extraordinary General Meeting of May 3, 1996 authorized the Board of Directors to increase the capital stock of the Company in accordance with the required conditions. The same Extraordinary General Meeting limited capital stock increases that could be performed pursuant to these authorizations to a total par value amount of FRF 1,500 million. These authorizations may be used in the event of a takeover bid for cash or shares for the Company’s stock.
These authorizations, granted by class of security and for specific periods, were replaced by decision of the Combined Shareholders’ Meeting of May 31, 2001, with a global authorization, granted in accordance with article L 225-129 paragraph 3 of the Commercial Code, for a period of 26 months, setting a non-cumulative maximum of EUR150 million. This authorization covers stock issues performed with and without retention of shareholder preferential subscription rights.
These options may be allotted to: ■ employees and company officers of Natexis Banques Populaires, together with employees and company officers of companies in which Natexis Banques Populaires holds a majority capital stake, directly or indirectly; ■ employees and company officers of Banque Fédérale des Banques Populaires which controls Natexis Banques Populaires, the Banque Populaire regional banks, and entities in which Banque Fédérale des Banques Populaires or associated undertakings hold, directly or indirectly, individually or jointly, over 50% of capital stock.
The subscription price is equal to the average closing listed price during the twenty stock market sessions preceding the Board meeting which determined the conditions of the annual stock option plan, after deducting the 5% discount provided by applicable law.
In respect of 2002, the Board of Directors’ meeting of September 10, 2002 decided to allot 375,000 stock subscription options. During the meeting of the Compensation Committee held to consider this proposal, it was decided to allot 329,735 stock subscription options as follows: ■ 165,800 to employees and executives of Natexis Banques Populaires and its direct or indirect subsidiaries; ■ 163,935 to employees and executives of Banque Fédérale des Banques Populaires, the Banque Populaire regional banks and entities in which Banque Fédérale des Banques Populaires or associated undertakings hold, directly or indirectly, individually or jointly, over 50% of capital stock.
Options available for exercise from 07/07/2003 09/22/2004 11/25/2005 09/20/2005 09/11/2006 * The amounts shown in this table are included in the preceding table.
As of December 31, 2001, 1,727,124 subordinated securities were still outstanding (number of subordinated securities converted into shares during fiscal year 2001: 258,527.)
With a total of 2,059,275 securities converted, the balance of 9,693 securities was redeemed at EUR66.32 per bond, plus the coupon.
December 31, 2002. Taking into account the Company mutual investment funds which previously existed, the share of capital stock held by Banque Populaire Group employees now totals 4.30%.
S.A. by Natexis Banques Populaires 481,131 shares payment of dividends in shares 725,698 shares subscriptions to ESOPs 2,370 shares exercise of stock subscription options
(3) of which 606,225 shares issued in consideration for the transfer to Natexis Banques Populaires of Bail Banque Populaire stock held by Banque Populaire regional banks 1,014,910 shares payment of dividends in shares 3,386,962 shares issued in consideration for the transfer of Assurances Banque Populaire and Factorem and the transfer-merger of SAS Fructivie and Factorem 8,172 shares subscriptions to ESOPs 83,310 shares conversion of perpetual subordinated securities convertible into shares 5,550 shares exercise of stock subscription options 236 shares conversion of bonds convertible into shares 4,400,392 shares November and December 2000 stock issues
(5) of which 5,355 shares subscriptions to ESOPs 4,400 shares exercise of stock subscription options 1,717,431 shares conversion of perpetual subordinated securities convertible into shares 1,401,082 shares issued in contribution for Arnhold & S. Bleichroeder securities 217 shares issued following the merger with the real estate company ABC
167Stock ownership and voting rights As of December 31, 2002, the principal Natexis Banques Populaires shareholders were as follows: % capital stock % voting rights
(1) a wholly owned subsidiary of Banque Fédérale des Banques Populaires.
To the best of Natexis Banques Populaires’ knowledge, no other shareholder, other than those cited in the table above, holds more than 5% of the capital stock or voting rights.
Under the stock buy-back program authorized by the Annual General Meeting of May 23, 2002, Natexis Banques Populaires held, as of December 31, 2002, 914,187 of its own shares (stripped of voting rights), representing 1.93% of the capital stock.
Stock held by directors, executive management and members of supervisory bodies Members of the Board of Directors, both individuals and legal entities, hold 72.85% of the capital stock of Natexis Banques Populaires (almost exclusively Banque Fédérale des Banques Populaires).
Executive officer stockholdings are not material. Please refer to page 164 for details of stock options allotted to certain employees and executive officers.
Individuals or legal entities that exercise or may exercise control over Natexis Banques Populaires The Banque Populaire Group, as majority shareholder in Natexis Banques Populaires, exercises those responsibilities provided for under banking regulations.
Perpetual subordinated securities convertible into shares (TSDIC) 5 5/8% May 1996 (in EUR)
169Dividends Dividends not claimed within a period of five years following the date of payment are barred by statute and paid to the French State in accordance with the law.
Dividends distributed during the past five years: 31/12/1998 31/12/1999 31/12/2000 31/12/2001 31/12/2002
Natexis Banques Populaires offered shareholders the option of receiving payment of dividends in shares (scrip), up to the dividend paid in respect of fiscal year 1999. This option will not be offered in 2003 in respect of fiscal year 2002.
CCBP CCBP was created in 1921 to support the expansion of the Banque Populaire regional banks, and to perform both institutional activities on behalf of the Banque Populaire regional banks (management and monitoring of excess treasury balances of Banque Populaire regional banks, special assignments on behalf of the Chambre Syndicale des Banques Populaires, debenture loan issues and issues of similar securities) and operating banking activities in the competitive market sector.
In October 1997, CCBP acquired a 23.35% stake in Natexis S.A. This was followed by a friendly takeover bid after which, on June 2, 1998, the Banque Populaire Group held 71.4% of Natexis S.A. capital stock. This interest was increased to 74.36% at the end of 1998.
At the end of 1999, Banque Populaire Group held 88.06% of the capital stock of the new Natexis Banques Populaires entity. At the end of 2000, the shareholding interest had fallen back to 79.23%, following the stock issue placed primarily with private investors.
The decision by Natexis Banques Populaires to control the entire capital stock of its subsidiaries within its own structure, resulted in a number of transactions during 2000 which led to it holding the entire capital stock of Assurances Banque Populaire and Factorem. Similar transactions were performed in 2001, particularly in the private equity and asset management and insurance divisions.
The program was completed in 2002 with the buy-out of participating interests held by the Banque Populaire regional banks in BPAM and Interépargne, companies now wholly owned by Natexis Banques Populaires.
During the year, two transactions impacted directly on Natexis Banques Populaires share ownership: ■ in May 2002, the German bank DZ Bank AG acquired Natexis Banques Populaires shares as part of its partnership with the Banque Populaire Group, giving it a 1.91% holding as of December 31, 2002; ■ in July 2002, an agreement was signed between Natexis Banques Populaires and Arnhold & S.
Under the agreement, ASB undertook to hold at least 45% of the securities issued in consideration of the contribution for a minimum period of five years. The remaining shares (i.e. 55% of the securities issued) may be sold progressively, over a total period of 7 years, in accordance with predetermined windows and limits.
Persons responsible for the COB reference document and the audit of the financial statements
Person responsible for the COB reference document François Ladam Chief Executive Officer
Gaulle - 92200 Neuilly-sur-Seine – RSM Salustro Reydel, 8, avenue Delcassé - 75378 Paris
Alternate – Bernard Boiton, residing 16 Parc de Béarn - 92210
The statutory auditors and alternate auditors were appointed by the Extraordinary General Meeting of June 16, 1998, for a period of six years expiring at the end of the Annual General Meeting held to approve the 2003 financial statements.
Auditors’ opinion on the reference document for the year ended December 31, 2002
As statutory auditors of Natexis Banques Populaires and in accordance with Rule 98-01 of the Commission des Opérations de Bourse and professional standards applicable in France, we have performed certain procedures on the information contained in this "Reference Document" relating to the historical financial statements of the Company.
We have audited in accordance with professional standards applicable in France the consolidated financial statements for fiscal years 2000 and 2001, approved by the Board of Directors. We expressed an unqualified opinion on such financial statements, including the following observations in our report: - the observation contained in our report on the consolidated financial statements for fiscal year 2000 draws attention to Note 1 to the consolidated financial statements which indicates that the 1999 and 2000 financial statements have been prepared in accordance with the new consolidation rules laid down in CRC Regulation 99-07 and the new summary consolidated financial statement format applicable to credit institutions laid down in CRC Regulation 2000-04; - the observation contained in our report on the consolidated financial statements for fiscal year 2001 draws attention to Notes 1.8, 1.11 and 2.16 to the consolidated financial statements which detail the
accounting changes resulting, respectively, from the adoption of the preferred accounting method for lease finance transactions where the Group is the lessee, the application of the new consolidation rules applicable to insurance companies and the harmonization of longservice medal schemes.
Person responsible for investor relations Pierre Jacob Head of Investor and Shareholder Relations
This annual report, to which the sections below have been added, constitutes the reference document filed with the Commission des Opérations de Bourse.
I. Person(s) responsible for the reference document and the audit of the financial statements Pages 58,170
II. General information on Natexis Banques Populaires and its capital stock General information on the Company Page 163 General information on the capital stock Pages 7, 84, 164, 167 Stock ownership and voting rights Page 167 Stock exchange information Page 167 Dividends and distribution policy Pages 6, 169
III. Information on Natexis Banques Populaires activities Presentation of the Company and Group Pages 8, 65, 163 Presentation of the Company’s activities Pages 18 to 47 Dependence Page 170 Exceptional events and litigation Page 170 Changes in staffing levels Pages 11, 72, 85 Investments Pages 72, 144 Information concerning the main subsidiaries Pages 16, 148 Company risks Page 76
Only the French language version of the reference document has been submitted to the Commission des Opérations de Bourse. It is therefore the only version that is binding in law.
Other offices 115, rue Montmartre – 75002 Paris 115, rue Réaumur – 75002 Paris 10-12, avenue Winston Churchill 94677 Charenton-le-Pont Cedex 2-4-6, avenue du Général de Gaulle
Paris-Nord Centre d’affaires Paris Nord II Bâtiment Le Sisley 23, allée des Impressionnistes – BP 600 53 95972 Roissy-Charles-de-Gaulle Cedex
Saint-Quentin-en-Yvelines 9, avenue du Centre – BP 202 78051 Saint-Quentin-en-Yvelines Cedex
175Main subsidiaries* Banque Privée Saint Dominique 12-14, Rond Point des Champs Elysées 75382 Paris Cedex 08 www.bpsd.fr
Coface 12, cours Michelet La Défense 10 – 92800 Puteaux www.coface.fr
Natexis Factorem 4, place de la Coupole 94676 Charenton-le-Pont Cedex www.factorem.fr
Natexis Immo Placement 68-76, quai de la Rapée – 75606 Paris Cedex 12 www.immoplacement.natexis.fr
Natexis Private Equity 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.natexis-pe.com
Natexis Slib Head quarters: 10-12, avenue Winston Churchill 94677 Charenton-le-Pont Cedex www.slib.fr
Spef Développement 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.spef-developpement.fr
Spef LBO 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.spef.banquepopulaire.fr
Vitalia Epargne 68-76, quai de la Rapée – 75606 Paris Cedex 12 europe Germany Düsseldorf
Pramex Italia SRL Via Monte di Pieta 1 I – 20121 Milano
Natexis Private Banking Luxembourg S.A. 47, Boulevard Royal L – 2449 Luxembourg
Pramex Iberica Paseo de la Gracia, 2-3° E – 08007 Barcelona
Pramex Britannica Ltd 76 Cannon Street GB – London EC4N 6AE
Natexis Metals Ltd 5th floor, Mansion Court 47-53 Cannon Street GB – London EC4M 5SH
Natexis Banques Populaires Av. Paulista, 37 – 7e andar conjunto 72 – Bela Vista
Miami Representative Office 1001 Brickell Bay Drive, Suite 1714 Miami – FL 33131
Natexis Bleichroeder Inc 1345 Avenue of the Americas New York – NY 10105-4300
Pramex of North America 1251 Avenue of the Americas 34th floor New York – NY 10020
Chaabi Leasing Angle Bld Zerktouni et rue d'Avignon – n°1-3 Casablanca
Natexis Banques Populaires Sanlam Park,West Block – 1st Floor 9, Fredman Drive – C/o Bute Lane PO Box 1414, Morningside 2057 Sandown Sandton 2196
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Toll free number: 0800 600 525 – E-mail: relinvest@nxbp.fr securities department
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Credit Institution, licensed as a financial company with capital stock of €457,500,000
RCS.: Paris B 340 706 407 – Head office: 51, rue de Lille – 75007 Paris
a financial company under French law and a leading player on French and European capital markets.
The twin advantages of an AAA/Aaa rating and human dimensions ensure CDC IXIS Capital Markets offers clients both security and speed of reaction.
(1) In a public statement dated 21 January 2003, the European Commission notified France a recomendation to take appropriate measures for the phasing out of the CDC Guarantee (granted by Caisse des dépôts et consignations to its subsidiary CDC IXIS).
On 28 March 2003, the European Commission, the French Authorities and CDC reached an agreement which covers the gradual phasing out of the guarantee system granted by CDC to counterparties of CDC Finance – CDC IXIS and, directly or indirectly, a number of it subsidiaries (including CDC IXIS Capital Markets).
However, the guarantee can be “grandfathered” for all on and off-balance sheet liabilities existing at 1 April 2003 until they mature. All on and off-balance sheet liabilities entered into during the transitional period until 23 January 2007 are covered by the guarantee if they mature before 23 January 2017. For those liabilities maturing after 23 January 2017, the guarantee will not be maintained.
There will be an additional one-year transitional period until 23 January 2004 for those of-balance sheet items that mature after 23 January 2017. This is to enable CDC IXIS to create a special purpose vehicule, which it anticipates will obtain an AAA rating, and will be dedicated to this activity.”
CDC IXIS Capital Markets put up stern resistance during the year, faring well in very tough market circumstances. With consolidated net profit of €96m and a 16% ROE, the Group not only achieved its targets, but also improved upon the previous year’s results.
Another satisfying factor was that all our international branches and subsidiaries made a profit in 2002. This was a particular feat in Tokyo’s case, given that conditions were tougher in Japan than anywhere else. Frankfurt again led the way as in previous years, while London made progress, despite having to shoulder the burden of extensive investments in 2001 and 2002. Efforts to develop global business lines have now reached a mature stage for our three branches in Frankfurt, London and Tokyo.
Our support functions also succeeded in coping with the substantial growth in our business, both in terms of increased volume and complexity.
Against a still-difficult market backdrop, one of the major challenges in 2003 will be to achieve a return on the substantial investments in human and other resources (notably IT) made over the last two to three years.
Vice-chairman Gérard Barbot (appointed 3 November 1998) Chief Executive Officer of CDC IXIS
The mandates of the members of the Supervisory Board will next be subject to renewal at the Annual General Meeting of Shareholders convened to approve the accounts for the financial year ending 31 December 2003.
The four members of the Executive Board were appointed for an initial mandate on 3 November 1998, which will be subject to renewal on 3 November 2006.
(1) See pages 40-44 for the full list of responsibilities and functions exercised on various company boards by the members of the Supervisory Board.
In the process of exercising these responsibilities, the Supervisory Board may decide to set up specialised committees from among its own members. These committees report to, and are assigned their remit by the Supervisory Board.
Each year, the Supervisory Board is required to present a report to the Annual General Meeting of Shareholders that contains its observations on the report of the Executive Board and on the accounts for the previous financial year.
Composition and organisation of the Supervisory Board CDC IXIS Capital Markets’ Supervisory Board comprises eight members(1), all of whom own at least one share issued by the Company. Although CDC IXIS Capital Markets is a wholly-owned subsidiary of CDC IXIS, its Supervisory Board nevertheless includes one independent Board member. CDC IXIS Capital Markets’ definition of an independent Board member is that set out in the Bouton report of 23 September 2002, i.e. any person whose judgement remains free of influence from any relations that he or she may maintain either with the Company, the Group to which it belongs or its management.
Making use of Specialised Committees where necessary (see above), the Supervisory Board primarily sought to verify that: • the Executive Board’s strategic and investment decisions were appropriate; to this end, the Supervisory Board was kept regularly abreast of the development of new business activities and the creation of new structures; • the Company’s risk profile remained undistorted and that control mechanisms were functioning efficiently; • results were being obtained in line with the targets established at the start of the year; • financial information released by the Company, primarily in the form of annual and interim financial statements, was of good quality.
The Remuneration Comittee The Remuneration Committee is a fourmember committee chaired by a personality from outside the Group and which is responsible for setting the remuneration of the members of the Executive Board. The Committee met on two occasions during 2002, with all members present.
(3) See page 38 for the full list of responsibilities and functions exercised on various company boards by the members of the Executive Board.
(4) Fees are assigned to the financial year audited and stated on a tax-inclusive basis
CDC IXIS CAPITAL MARKETS – PARIS PricewaterhouseCoopers Audit Compulsory auditing of period-end accounts 286 373 288 984 Mazars & Guérard Compulsory auditing of period-end accounts 286 373 275 091
CDC IXIS CAPITAL MARKETS – ZWEIGNIEDERLASSUNG DEUTSCHLAND PricewaterhouseCoopers Compulsory auditing of period-end accounts 63 060 59 160
Special assignment – tax and legal services 18 000 18 000 Cabinet Touber Compulsory auditing of period-end accounts 22 000 22 000
CDC MARCHÉS INFORMATIQUE Mazars & Guérard Compulsory auditing of period-end accounts 11 200 11 300
The early-year rebound in the euro zone proved short-lived, mainly as a result of the firmer euro and further efforts to adjust production capacity.
The depressed global environment also affected other industrialised countries, with UK GDP growth slowing from 2% in 2001 to 1.7% in 2002, and the Riksbank in Sweden, a country highly exposed to external economic conditions, ultimately being compelled to wipe out all of the rate increases applied in the early part of the year. Growth remained anaemic in Japan at only 0.2%, held in check by lacklustre investment, in spite of two antideflation packages designed notably to deal with bad debts. Emerging markets also suffered from sluggish world demand, with most Latin American companies experiencing crisis situations.
Exchange rates The euro strengthened throughout the year against the dollar and returned close to levels that were consistent with its purchasing power parity (PPP) and probably also more in line with the general balance of payments equilibrium. ■
Jan. Feb. Mar. Apr. May Jun Jul. Aug. Sept. Oct. Nov. Dec. Jan.
Net banking income advanced 20.3% to €500.4m in 2002, despite extremely harsh financial market conditions.
Conditions for our equities business were very tough in 2002. Economic visibility was poor, markets were volatile, volumes were down and all the world’s stock markets fell heavily. CDC IXIS Capital Markets nevertheless managed to weather the storm and hold NBI steady relative to 2001.
The 9.5% rise in operating expenses was a good result in the light of the 9% increase in staffing levels during the year, of which close to half stemmed from the incorporation of Caisses d'Epargne’s capital markets personnel. Following several years in which our production capacity had risen substantially, the pace of recruitment stabilised in 2002. In view of prevailing conditions, particular attention was devoted to cost containment.
ROE based on the average of period-opening and period-end equity rose to 15.9% from 14.6% at year-end 2001. ■
Following the agreements signed between Caisse des dépôts Group and Caisses d’Epargne Group, the highlight of 2002 was the incorporation of Caisses d’Epargne’s capital markets interests and the smooth links established with CDC IXIS Capital Markets’ trading room.
Elsewhere, the focus remained on: • stepping up commercial activity, with the share of revenues derived from outside France growing twice as fast as the overall rate; •making widespread use of electronic trading mechanisms, this being part of a broader objective to rationalise processes and cut costs; •undertaking research and investment in high value-added activities.
Our internet-based online offering was enhanced with simple long-term swap quotations. The product offering was broadened substantially and opened up further growth prospects which give the business the potential to rank among the leading global players in the sector.
2002 saw CDC IXIS Capital Markets make inroads into the corporate debt market, by managing issues for Compagnie Financière de Suez, Imerys (the company’s first-ever bond issue) and Accor. We were also selected as sole lead manager for an issue of inflationlinked bonds for Alis (the company that manages France’s A28 motorway), in a transaction elected “Deal of the Year” by Project Finance International magazine.
The Company also managed its first ABS (asset-backed securities) issues, while significantly increasing its business on the EMTN platform.
Fixed Income and Foreign Exchange 2002 continued in the same vein as 2001 and again witnessed record levels of trading, sales and engineering activity for fixedincome and foreign-exchange products.
CDC IXIS Capital Markets strengthened its positions in secured bonds, a field in which it ranked first in both property bonds and cedulas hipotecarias. Managing Pfandbriefe issues also remained a priority.
The secondary market for private bonds High spreads continued to reduce liquidity and complicate operations in the private debt secondary market. Nonetheless, CDC IXIS Capital Markets managed to balance its books by making reasonable choices both as regards its offering and risk-acceptance criteria, while continuing to structure its activities in preparation for an upturn in business.
Thanks to our operations in Frankfurt, London and Paris, we maintained our strengths in market-making in all significant segments of the markets, i.e corporates, financials, secured bonds, agencies and ABS. We also traded on benchmark electronic systems such as the various MTS platforms and Bondvision, and are preparing to provide quotations on our own website.
In terms of guaranteed fund engineering, efforts were focused during the year on expanding the European client base and on product innovation. CDC IXIS Capital Markets notably helped engineer an inflation-linked guaranteed fund for La Poste.
We also made further progress in structured products in the property field, a highlight of the year being the property sale and leaseback deal arranged for Alstom.
Lastly, our ART (alternative risk transfer) activities also got underway in 2002. Our approach is currently to offer hybrid products (financial, investment and hedging products), whose underlyings are classical and industrial insurance risks, and climate derivatives.
CDC IXIS Capital Markets ranked third in the league table of 21 primary dealers in French government securities (SVT or Spécialistes en Valeur du Trésor), established by Agence France Trésor. We also started to diversify in this segment, by offering short-term debt securities issued by other European countries such as Holland, Finland and Portugal.
Structured products CDC IXIS Capital Markets signs firstever pan-European property sale and leaseback deal with Alstom.
The sharp slowdown in new equity issues in France and Europe worsened in 2002, to the extent that only eight IPOs for a total amount of €2.7bn went ahead in France during the year.
Partnership strengthened with IMI bank Our partnership with IMI bank was strengthened throughout the year. Not only did we participate jointly in the institutional syndicate set up for ASF’s IPO, but CDC IXIS Capital Markets also acted as underwriter for the Italian airline Alitalia’s rights issue in June 2002, which was led by IMI.
Our specialist equity and index derivatives team responded to clients’ diversification needs by extending the range of underlying instruments, both in sector and geographic terms. The choice of underlying instruments was nonetheless highly selective, with the constant aim being to limit risk and identify the highest potential returns.
We also embarked on a cross-departmental approach to improve operational processing of equity-derivative transactions, by integrating IT processing and management channels in the most efficient manner.
A more highly-integrated cross-border organisation to capitalise on new opportunities More so than in the previous year, 2002 brought widely fluctuating market conditions, a sharp decline in capital operations (cash and share tender offers etc.) and severe volatility in equity markets and credit spreads.
Market share gains CDC IXIS Securities is CDC IXIS Capital Markets’ broking arm for European equities. Amid difficult conditions for the second successive year, the company managed to gain market share.
Despite conditions in the midcap market being even harsher than for large caps, the midcap equity-broking venture, CDC IXISLCF Rothschild Midcaps (50%-owned by CDC IXIS Capital Markets) posted some promising commercial results in its first full year of existence. All told, 54 specific accounts were opened and the French midcap team organised more than 20 company roadshows in France, the UK and the US, and arranged some 10 site visits for clients. ■
Lastly, interest-rate risk exposure was virtually erased after we took profits following interest -rate cuts in the US and Europe. ■
A diversified and evolving range of publications Economic monitoring and forecasting is carried out for the euro-zone countries (primarily Germany, France, Italy and Spain), the USA, Japan and non euro-zone European economies (“out” countries), as well as on an aggregate basis for the euro zone as a whole. The results of this analysis are published in the monthly “Economic Outlook & Financial Markets” review.
Two new publications were added to the range of products in 2002: “Linked Inflation”, a monthly review of the inflation-linked market in the euro zone was launched in July 2002, while “Market Chronicle”, a French language commentary on the day’s main data has been published every evening since September 2002.
The Research unit also continued to analyse credit markets and regularly contributed to the Group’s monthly and quarterly publication, “Spread & Credits”, in conjunction with the primary-market team.
Stringent quantitative analysis Quantitative analysis techniques (econometrics ) are used to analyse and forecast trends in fixed-income and equity markets.
Studies of interest-rate markets were primarily focused on multilateral relations between European yield curves as well as the analysis of interest rates in individual countries in the main economic regions. Apart from analysing sovereign debt yield curves, specific attention was paid to the factors determining yield spreads between sovereign bonds and private-sector bonds (corporate, Pfandbriefe etc.).
Market Chronicle offers French-language comment on the day’s main data every evening.
The portfolio of marketable and investment securities rose €5bn, reflecting growth in securitisation and proprietary activities.
As regards the structure of the balance sheet in terms of time-to-maturity, assets with less than one year to run and liabilities with less than one year to run represented 86% of total assets and 88% of total liabilities, respectively.
ASSETS Loans and money market 24.7 18.6 6.1 32.80 Securities received under repo 38 40.5 (2.5) (6.20)
LIABILITIES Borrowings and money market 54.2 50 4.2 8.40 Securities sold under repo 30.8 26.8 4 14.90
The variation in off-balance sheet commitments reflected strong growth in fixedincome business, notably via a sharp increase in the notional amounts of OTC transactions: • interest-rate swap contracts represented €1,271bn at year-end 2002 versus €846bn a year earlier, a rise of 50% or €425bn; • caps and floors amounted to €144bn at year-end 2002 versus €90bn at year-end 2001.
The equivalent credit risk weighted for derivatives amounted to €3.7bn at 31 December 2002, versus €2bn at year-end 2001, an 85% increase that also reflected growth in business.
As at 31 December 2002, the total of counterparty-weighted individual risks that exceeded 10% of equity amounted to €6.4bn, as compared to an overall limit of €9.9bn, based on eight times equity. Moreover, no individual counterpartyweighted risk exceeded the 25% limit. The corresponding figures for year-end 2001 were €6.4 and €8.5bn, respectively.
This ratio is subject to a minimum requirement of 60% and stood at 383% at year-end 2002 versus 689% a year earlier. ■
Daily and weekly control reports are then produced for inspection by the Chairman of the Executive Board and by the Executive Board as a whole. The risk situation is also presented on a monthly basis to the Chairman of the Supervisory Board.
In accordance with French banking regulation CRBF 95-02, CDC IXIS Capital Markets declares its overall risk provisioning ratio to France’s banking commission (Commission Bancaire). Since 1997, it has also been authorised to monitor market risks via its own internal model, Scénarisk.
Value-atRisk (VaR): A tool for measuring the maximum potential loss for a given set of portfolios on a daily basis.
The reliability of the VaR indicator is measured regularly by comparing it with daily trading results, in order to match the potential loss predicted by the VaR indicator with the profit or loss effectively realised.
To this end, the VaR needs to be rendered consistent with daily trading results. A reduction coefficient is therefore applied so as to obtain a “standard” VaR, with a 99% confidence interval and the assumption that positions are held for 1 day.
In addition, the main stress tests carried out on positions as of 31 December 2002 yielded the following data concerning the impact on the profit & loss account in absolute value terms: •Fixed Income and Foreign Exchange Variation of interest rates (+100bp): €34.9m Variation of volatility (homothety of +50%): €8.1m Paper/swap spreads (+20bp): €55.8m
•Equities Variation of indices/equities (+25%) :€6.5m Variation of index/equity volatility: €4.4m (+20% for ST, +10% for LT)
An in-depth analysis is undertaken to assign an internal credit rating to the counterparty (using a similar scale to those of credit rating agencies). This rating is then used to set limits according to the type of activity (fixedincome, foreign exchange, equities), the type of transaction (balance sheet and off-balance sheet) and the transaction maturity (short or long-term). A formal credit analysis is conducted prior to each limit opening, during which the counterparty’s economic and financial situation is studied from both quantitative and qualitative aspects in compliance with the group’s credit procedures.
Overall risk management is carried out via a monthly review of portfolio exposure covering CDC IXIS Capital Markets’ 2,000 active counterparties, classified by credit rating, sector and country.
In order to reduce credit risk exposure, CDC IXIS Capital Markets has also set up master collateralisation agreements with its main counterparties so as to reduce bilateral risks via the use of margin calls. ■
Breakdown of exposure by geographic region as at 31 December 2002
The notion of operational risk applied by CDC IXIS Capital Markets is consistent with that defined in the Basle Committee’s proposed text of September 2001. Operational risk concerns the risk of direct losses resulting from deficiencies or breakdowns related to procedures, personnel, internal systems or external events.
This cartography was established by a project group comprising personnel from Internal Control, Risk Control and General Secretariat functions, in compliance with principles set out by CDC IXIS’s Risk Department. More specifically, this involved: • an approach focused on the notion of “source of risks”, matched with that of business line-market processes, primarily with the aim of facilitating risk assessment by operational personnel; •operational personnel making a self-assessment of operational risks via questionnaires for each business line.
The project has involved: • separating CDC IXIS Capital Markets’ activities into individual entities; • interviewing all the operational personnel concerned so as to complete questionnaires (establishing the source of risk, identifying the degree of gravity and the degree of risk control, then validating the contents); • setting up a dynamic database containing all the collected data; •establishing operational risk cartographies.
Action plans and indicators By analysing cartographies, areas of fragility within the company can be identified. This analysis serves as a decision-making tool for the implementation of action plans, bearing
Operational Risks In order to comply with the demands of the Basle reform, and as part of a process underway in the CDC IXIS Group, CDC IXIS Capital Markets started to implement systems for identifying, measuring and controlling operational risks at the end of 2001.
in mind that action plans may be either curative or preventative in nature. The project group proposes various action plans to the Steering Committee, which then selects the most appropriate for implementation.
The statistics drawn from the incident database will enable the amount of equity to be allocated to operational risk to be calculated according to three methods: •an “operational risk VaR” for the most frequent incidents (using a loss distribution model); •an internal measurement model for the least frequent incidents; this model combines the probability of an event occurring, the estimated losses that would ensue, an exposure indicator and a weighting coefficient, this latter to be fixed by the Basle Committee after cross-checking the first results produced by this model with those for the rest of the profession; •a predictive equity allocation derived from a scoring procedure for the different business lines. The resultant allocations are adjusted over time according to the effectiveness of the action plans.
The first version of the incidents database is due to be installed on a pilot site in the first quarter of 2003.
CDC IXIS Capital Markets also has a longstanding policy of formally insuring against legal and operational risks. In addition to the policies taken out to insure its various premises and their contents, the Group, its head office and its branches are covered by a worldwide programme that insures against the risks of professional civil liability, fraud and embezzlement. ■
To this end, a team of capital markets specialists undertakes periodic local controls of complex engineering products and activities.
In recognition of the importance of the risks entailed, this remit is fulfilled via a number of methods, some of which focus on reacting to changes in businesses, systems and regulations, while others rely on more fundamental analysis. Methods include: •audit assignments, more often than not involving a front-to-back-process; • snap controls, triggered by internal indicators and reports from support functions, and which notably ensure that the permanent controls exercised within each business line are functioning effectively; •preventative action, which may involve members of the Internal Control team attending certain internal committee meetings and providing the impetus needed to establish rules and reinforce control points in cross-disciplinary procedures.
Containing market risks: As in previous years, existing risk-containment mechanisms, such as procedures for setting and monitoring limits, and measuring and controlling risks, were reviewed for several activities including option/currency hybrids, equity/swap hybrids. More specifically for the foreign branches, the team verified that global business lines were functioning effectively and that these activities were effectively being controlled by headquarters in Paris.
During assignments, systematic checks were made to ensure all applicable compliance rules were being respected.
Co-ordination with the Group audit network With the aim of standardising tools, Internal Control participated in the development of the risk assessment and cartography procedure drawn up by CDC IXIS’s General Internal Audit Department.
In 2003, Internal Control activities will notably focus on: •back-office organisation and the degree to which this is suitable for handling growing volumes and complexity,
The Compliance unit continued to increase its role in the decision-making process in 2002, with the team taking an active role at a very early stage in the preparation of complex transactions.
In order to facilitate the integration of new personnel, CDC IXIS Capital Markets strove to maintain an extensive training programme, notably in the English language and on specific and detailed themes, concerning amongst others, securitisation, IT systems implementation (Summit) and compliance (the fight against money laundering). All in all, CDC IXIS Capital Markets’ personnel benefited from 8,400 hours of training during 2002.
personnel versus 829 in 2001 70 capital markets personnel incorporated from CNCEP
At the same time, we continued to put the finishing touches to the Disaster Recovery Plan in 2002. These involved signing a new contract with the service provider and developing crisis management procedures.
E-business developments (website, electronic markets), particularly those tuned towards the Caisses d’Epargne group, continued last year and are scheduled to enter a stabilisation and maintenance phase in 2003.
Securities processing underwent the first stage of an extensive modernisation programme, which began with the launch of the second phase of the middle office platform (SUMMIT Bonds M/O), the start-up of the first phase of the back-office platform (SUM-
CDC IXIS Capital Markets will continue to expand its specialist activities, primarily in Europe, in specific client segments and in a range of high value-added businesses.
Following the heavy investments in manpower and IT undertaken over the last two years, efforts will now focus on earning a return on these investments. To this end, the two prime goals in 2003 will be to develop our commercial activities to external clients, especially in international markets, and innovate in terms of products and services.
We will also pursue efforts to strengthen our international alliances, especially those with BCEEL and IMI Bank.
The rising volume and complexity of transactions will both represent challenges for the back office and support functions. Our IT personnel will continue to work on the overhaul of the back-office securities processing channel, especially for equities. Like all banks, CDC IXIS Capital Markets will be working to prepare for the introduction of Basle 2 rules and the future switch to IAS reporting.
Lastly, support functions will also be busy with the last phase of the move to our new offices in the Austerlitz buiding, which will culminate with the transfer and installation of CDC IXIS Capital Markets’ personnel in the new premises during the course of the year. ■
The shares are registered and all transfers to third parties require approval by the company.
•Authorised capital not yet issued: nil •Stock option programme: nil •Other securities providing access to capital: nil •Capital used as security or guarantee: nil
Changes in capital since creation of company: YEAR NATURE OF INCREASE IN CAPITAL TOTAL CAPITAL TOTAL NOMINAL
Creation Initial cash issue 5,000,000 francs – 5,000,000 francs 50,000 100 francs 29/6/90 Asset transfer 8,000,000 francs – 13,000,000 francs 130,000 100 francs 28/5/96 Cash issue 2,987,000,000 francs – 3,000,000,000 francs 30,000,000 100 francs 1/9/01 Conversion of capital into euros and incorporation of reserve 152,948,30 euros – 457,500,000 euros 30,000,000 15.25 euros
Ownership of capital and voting rights over the last three years
* CDC IXIS is the trading name of CDC Finance-CDC IXIS ** members of Supervisory Board
CDC IXIS FINANCIAL GUARANTY EUROPE SA F Censor since 18 October 2002; previously Chairman of Supervisory Board (resigned 25 September 2002)
CDC IXIS ASSET MANAGEMENT SA F Member of Supervisory Board CDC IXIS PRIVATE CAPITAL MANAGEMENT SA F Member of Supervisory Board PART’COM SA F Member of Board of Directors
SOLSTICE SICAV F Member of Board of Directors (resigned 21 February 2002)
(resigned 21 February 2002) TRESOR REAL SICAV F Chairman of Board of Directors
(resigned 19 December 2002) LILLEREAU SA F Liquidator ARAMIS MANAGEMENT COMPANY LUX Member of Board of Directors CDC IXIS CAPITAL MARKETS NORTH AMERICA USA Member of Board of Directors
CDC IXIS GMBH GER Member of Supervisory Board (resigned 1 July 2002)
CDC IXIS CAPITAL MARKETS SA F Member of Executive Board; Joint Head of Front Office CDC IXIS SECURITIES SA F Permanent representative of CDC IXIS Capital Markets on the Supervisory Board CDC IXIS LCF ROTHSCHILD MIDCAPS SA F Member of Supervisory Board FILINKS SAS F Chairman of Supervisory Committee
(resigned 19 December 2002) MARTIGNAC FINANCE SA F Member of Supervisory Board CDC FINANCIAL PRODUCTS INC. USA Member of Board of Directors CDC IXIS CAPITAL MARKETS NORTH AMERICA USA Member of Board of Directors CDC MORTGAGE CAPITAL INC. USA Member of Board of Directors CDC SECURITIES INC. USA Member of Board of Directors ICMOS IRELAND LTD IRL Director ICMOS PANGAEA GLOBAL HEDGE FUND PLC Director NEXGEN FINANCIAL HOLDING LIMITED IRL Alternate Director NEXGEN RE LIMITED IRL Alternate Director
Remuneration and benefits received in 2002 in exchange for responsibilities and functions exercised within CDC IXIS Capital Markets: €777,587.68
Remuneration and benefits received in 2002 in exchange for responsibilities and functions exercised within CDC IXIS Capital Markets and CDC IXIS Securities: €777,893.28
CDC IXIS CAPITAL MARKETS SA F Chairman of Supervisory Board CDC IXIS SECURITIES SA F Permanent representative of CDC Finance-CDC IXIS
CDC IXIS PRIVATE CAPITAL MANAGEMENT SA F Permanent representative of CDC Finance-CDC IXIS on the Supervisory Board
CDC IXIS PRIVATE EQUITY SA F Permanent representative of CDC Finance-CDC IXIS on the Board of Directors
FONCIERE DES PIMONTS (listed) SA F Permanent representative of CDC Finance-CDC IXIS on the Board of Directors (mandate ended on 27 September 2002)
CDC IXIS AM US CORPORATION USA Member of Board of Directors
CAISSE DES DEPOTS DEVELOPPEMENT C3D SA F Member of Board of Directors (resigned 24 September 2002)
CDC IXIS FINANCIAL GUARANTY SA F Permanent representative of CDC IXIS Financial Guaranty Holding on the Supervisory Board
CDC IXIS CAPITAL MARKETS SA F Vice-Chairman of Supervisory Board CDC IXIS NORTH AMERICA USA Member of Board of Directors
on the Board of Directors (since 25 November 2002; previously Member of the Supervisory Board)
CDC IXIS PRIVATE CAPITAL MANAGEMENT SA F Vice-Chairman of Supervisory Board CDC TRESOR SA F Chairman of Board of Directors VEGA FINANCE SA F Chairman of Supervisory Board CDC IXIS AM DEUTSCHLAND GER Member of Board of Directors (resigned 30 January 2002) CDC IXIS AM US CORPORATION USA Member of Board of Directors CDC IXIS AM US LLC USA Member of Board of Directors
CDC IXIS ITALIA HOLDING SA F Vice-Chairman of Supervisory Board (resigned 17 September 2002)
CNP ASSURANCES (listed) SA F Member of Supervisory Board CDC INVESTMENT FUND LUX Member of Board of Directors CDC ARBITRAGE FUND LUX Member of Board of Directors
CNCEP SA F Member of Supervisory Board ECUREUIL GESTION SA F Permanent representative of CDC Finance-CDC IXIS
CDC IXIS CAPITAL MARKETS SA F Permanent representative of BCEEL on the Supervisory Board
BCEEL LUX Chief Executive Officer; Chairman of Management Committee CARGOLUX LUX Member of Board of Directors COMPAGNIE LUXEMBOURGEOISE DE TELEDIFFUSION LUX Member of Board of Directors LUXAIR LUX Member of Board of Directors SES GLOBAL LUX Member of Board of Directors SOCIETE DE LA BOURSE DE LUXEMBOURG LUX Member of Board of Directors
CDC IXIS CAPITAL MARKETS SA F Permanent representative of CDC Finance-CDC IXIS on the Supervisory Board (resigned 17 February 2003)
CAISSE DES DEPOTS DEVELOPPEMENT C3D SA F Permanent representative of CDC on the Board of Directors (mandate ended 16 January 2003)
CNP ASSURANCES (listed) SA F Permanent representative of CDC on the Supervisory Board (mandate ended 16 January 2003)
COMPAGNIE FINANCIERE EULIA SA F Chairman of Board of Directors (resigned 16 December 2002)
AREVA (listed) SA F Member of Supervisory Board CLUB MED (listed) SA F Member of Supervisory Board
(since 25 September 2002) CDC IXIS FINANCIAL GUARANTY SERVICES INC. USA Member of Board of Directors (since November 2002) CDC IXIS FINANCIAL GUARANTY NORTH AMERICA INC. USA Member of Board of Directors (since November 2002)
ANATOL INVEST SA F Member of Board of Directors IXIS AEW EUROPE (EX-CDC IXIS IMMO) SA F Member of Supervisory Board
(resigned 25 November 2002) CDC IXIS PRIVATE EQUITY SA F Member of Board of Directors MAGNANT SA F Permanent representative of CDC Finance-CDC IXIS
on the Board of Directors PART’COM SA F Member of Board of Directors SPID SA F Member of Board of Directors (resigned 12 July 2002) CDC IXIS AM US CORPORATION USA Member of Board of Directors
Director’s fees received in 2002 in exchange for responsibilities exercised within CDC IXIS Capital Markets: nil
CDC FINANCE – CDC IXIS SA F Member of Supervisory Board (since 28 February 2002)
CNCEP SA F Member of Executive Board CREDIT FONCIER DE FRANCE (listed) SA F Member of Supervisory Board ECUREUIL MONETAIRE SICAV F Permanent representative of CNCEP
Director’s fees received in 2002 in exchange for responsibilities exercised within CDC IXIS Capital Markets: nil 2002 MR JEAN SEBEYRAN
CDC IXIS ASSET MANAGEMENT SA F Member of Supervisory Board (resigned 1 January 2002)
on the Board of Directors (resigned 1 January 2002) INGEPAR SA F Chairman of Board of Directors SOCFIM SA F Permanent representative of CNCEP
Director’s fees received in 2002 in exchange for responsibilities exercised within CDC IXIS Capital Markets: €16,000
CDC IXIS FINANCIAL GUARANTY HOLDING SA F Permanent representative of CDC on the Supervisory Board
CDC IXIS ASSET MANAGEMENT SA F Member of Supervisory Board CDC IXIS PRIVATE EQUITY SA F Member of Board of Directors
(since January 2002) EGIS SA F Member of Board of Directors (resigned 11 January 2002) SCIC SA F Member of Board of Directors (resigned 7 February 2002) SOCIETE DU GRAND THEATRE DES CHAMPS ELYSEES SA F Member of Board of Directors (resigned 11 January 2002) TRANSDEV SA F Member of Board of Directors (resigned 11 January 2002) CDC DI GMBH GER Chairman (resigned 31 May 2002)
on the Board of Directors LA MUTUELLE DU MANS ASSURANCES VIE MUT F Permanent representative of CNCEP
Director’s fees received in 2002 in exchange for responsibilities exercised within CDC IXIS Capital Markets: €9,600 * Key to form of Company SA (Société Anonyme) = French limited company SAS (Société Anonyme Simplifiée) = Simplified French limited company SICAV = Mutual fund SCA (Société en Commandite par Actions) = Limited partnership with shares EPIC = Publicly-owned company MUT = Mutual insurer
Resolutions submitted to the Annual General Meeting of Shareholders of CDC IXIS Capital Markets on 14 May 2003
The Executive Board requests that shareholders present at the Annual General Meeting of Shareholders: • approve the parent company and consolidated accounts for the 2002 financial year, these having been certified without qualification by the Auditors; • approve the regulated agreement concluded during the course of 2002, which has previously been authorised by the Supervisory Board and which is presented in the Auditors’ special report; • approve the proposed allocation of earnings, which after taking into account the 5% to be assigned to the legal reserve, provides for distributable profit of €105,592,068.40 to be allocated in full to retained earnings; • allocate total director’s fees of €20,800 to the members of the Supervisory Board in respect of the 2002 financial year.
Having heard the reports of the Executive Board, the Supervisory Board and the Auditors, the Shareholders’ Meeting approves the consolidated financial statements for the year ended 31 December 2002, as presented.
Having heard the Auditors’ special report on agreements governed by article L.22586 of the French Companies Act, and after ensuring that the quorum is greater than a quarter of the shares with voting rights for the agreement submitted for approval, the Shareholders’ Meeting approves the said agreement in accordance with the conditions of article L.225-88 of the French Companies Act.
• 2001 : – a dividend of FF364,800,000, plus a tax credit of FF182,400,000 (approved by the Shareholders’ Meeting of 23 May 2001, convened to vote on the financial statements for the year ended 31 December 2000); – an interim dividend of €94,000,000, plus a tax credit of €47,000,000 (recommended by the Executive Board meeting of
The Shareholders’ Meeting gives all powers to the bearer of a copy or extract of the minutes of the Meeting to carry out all filing and publication formalities, as required by law. ■
INTERBANK AND EQUIVALENT TRANSACTIONS Cash, central banks, giro accounts 10 - 2 Public securities and equivalents 4 8,262 7,087 6,436 Loans to credit institutions 2 55,562 53,836 41,929
Share premium accounts 10 10 10 Consolidated reserves and others 71 15 53 Profit for the year (+/-) 96 84 111
INTEREST AND EQUIVALENT INCOME + Interest and equivalent income on transactions of which accrued interest on current account 13 - -
+ Interest and equivalent income on customer transactions 16 160 214 156
- Interest and equivalent expenses on transactions with credit institutions 15 (2,571) (3,178) (3,267)
- Interest and equivalent expenses on bonds and other fixed-income securities 18 (324) (412) (235)
GAIN OR LOSS ON TRADING PORTFOLIO TRANSACTIONS 21 1,218 1,463 1,172
DEPRECIATION, AMORTISATION AND PROVISIONS (17) (16) (17) ON TANGIBLE AND INTANGIBLE FIXED ASSETS
COMMITMENTS ON SECURITIES Securities acquired with a repurchase or transfer option Other commitments granted 752 837 1,004
Other commitments granted 555 893 904 Other commitments received 2,773 2,184 3,126
2 - Consolidation scope and methods There has been no change in the scope of consolidation of CDC IXIS Capital Markets Group relative to the previous year.
CDC IXIS Capital Markets is organised as follows: The subsidiary CDC IXIS Securities and the CMI information technology economic-interest group are consolidated using the full-consolidation method.
In addition, in accordance with paragraph 101 of regulation 99-07, two special purpose vehicles set up in 2002 were excluded from CDC IXIS Capital Markets’ scope of consolidation, in view of the fact that shares or securities issued by these identities were still in the process of being marketed: • FINALTAÏR (€20m still to be placed out of a total of €127.5m) ; • GLASS Funding (€80.7m still to be placed out of a total of €130.7m).
3.2 Bank receivables and debts Receivables and debts include current accounts, loans, borrowings and securities purchased and sold under resale or repurchase agreements.
3.3 Securities transactions Securities are valued in accordance with the rules defined in regulation 90-01 of the French Banking Regulation Committee, as amended by regulation 2000-02 of the CRC.
Investment securities The investment securities portfolio includes bonds and other fixed-income securities which have been acquired with the intention of being held long-term, in principle until their maturity. The valuation method varies depending on whether or not the securities are transferable.
Negotiable loan notes and other interbank instruments These securities and other stocks are recorded at nominal value and the difference between the purchase price and the nominal value is amortised based on the yield-to-maturity method over the residual life of the security.
Borrowed securities are recorded as an asset in the trading securities category at their market price on the date on which they are borrowed and as a liability in recognition of the securities debt to the lender. These securities are marked to market at the end of the period.
Gains or losses on hedging operations are recorded in the profit & loss statement on a symmetric basis with gains or losses on the hedged item.
These apply one or more of the following methods: price confirmation from brokers or external counterparties, comparison with real transactions and detailed examination of issuer or instrument category.
Wherever instruments are valued on the basis of financial models, such models incorporate parameters that affect the valuation of these instruments, in particular the low liquidity of the markets in question, and also take into account the relevant risk assessment.
3.7 Complex transactions Complex transactions involve combinations of instruments (of identical or different types, nature and valuation methods), that are recorded in a single batch or as a transaction whose accounting treatment is not subject to specific regulations.
terparty to another, generally in exchange for the payment of a premium settled at the origin or timeapportioned. In the event of a default (i.e. “a credit event”) that is predefined in the credit derivative contract, the seller of the protection is called upon to pay the cost of the default as defined in the contract.
•Transactions executed for trading purposes are marked to market taking into consideration future management and counterparty risk costs wherever the liquidity of the derivatives market is guaranteed. Otherwise, valuation is carried out by applying the appropriate methodology to transactions involving credit derivatives: - at historic cost; - applying a provision for depreciation where appropriate.
3.10 Long-term equity investments and subsidiaries Long-term equity investments are recorded at book value. At the end of the period, they are valued individually at book value or going concern, whichever is lower. Provision for depreciation is made in the event of a permanent impairment of value.
3.11 Foreign branches The accounts of foreign offices are integrated into the head office accounts in local currency. The profit & loss statement is converted at the month-end spot exchange rate.
3.13 Subordinated debts This section includes all debt materialised by perpetual loans, whose redemption in the event of liquidation of the debtor is only possible after the other creditors’ claims have been settled.
3.14 Pension commitments Pension commitments are estimated using the actuarial method and give rise to provisions; details are provided in the notes.
Timing differences between the accounting profit and the profit for taxation purposes lead to the calculation of deferred taxation, according to the variable carry-forward method. This corrects the deferred tax assets calculated in prior years for changes in tax rates.
As part of an ongoing tax inspection, a demand for back-tax received in 2002 and relating to the first
financial year inspected gave rise to a provision. Taking into account the reasons underlying the demand for back-tax, an estimate has also been made of potential liability for the following financial years and a provision has been made for the appropriate sum.
Control is deemed to exist when the controlling company (i.e. CDC IXIS Capital Markets): • can make decisions or exercises managerial control; • enjoys the majority of the profit or shoulders the majority of the loss made by the Company; • is exposed to the majority of the risks incurred by the Company.
(3) Including €127.20m of investment securities which were sold before maturity date or on which the issuer exercised a redemption option,
Gross Accumulated Net Gross Accumulated Net €m value depreciation value value depreciation value and provisions group and provisions
Prepaid expenses 13.61 36.14 Currency adjustments 746.77 10.72 Accrued income and marked-to-market adjustments of futures and options 3,864.39 2,257.38 Other accruals 1,302.25 998.14
Securities sold under repurchase agreements (1) 26,640.13 21,970.41 Accrued interest 297.37 241.74
Including as at 31/12/2002: (1) €11.009bn of public securities and equivalents. (2) €64.685bn of borrowings from CDC IXIS Group companies.
(1) Including €3.168bn of public securities and equivalents as at 31/12/2002.
Unearned income 2.66 61.61 Currency adjustments 10.06 121.44 Accrued expenses and marked-to-market adjustments of futures and options 2,745.31 2,197.63
(1) This item notably includes margin calls and guarantee deposits received from market counterparties. (2) Other debts on securities notably include securities received under a repurchase agreement then subsequently sold.
(2) The redemption date of fixed-term subordinated securities is 2/8/2010. CDC IXIS Capital Markets classifies these issues as "other equity capital", in accordance with French banking regulation 90-02.
Allocation of 2001 profit 83.62 (83.62) 2002 dividend in respect of 2001 profit Other variations (13.72) (27.38)
(1) CDC IXIS Capital Markets' registered share capital totals €457,500,000, It comprises 30,000 shares with a nominal value of €15.25 all of the same category, and 100%-owned by CDC IXIS as at 31/12/2002.
Interest on current account deposits (215) (56) Interest on term borrowing (1,596) (2,327) Interest on securities sold under repurchase agreements (668) (702) Expenses on premiums/discounts (12) (35) Other interest and equivalent expenses (1) (80) (58)
Interest on term loans to customers 86.20 112.07 Interest on repurchase agreements 73.34 101.81
Note 18 Interest and equivalent expenses on bonds and other fixed-income securities 31/12/2002 31/12/2001
Interest expenses on medium-term notes (252.00) (272.11) Other interest expenses (71.91) (140.37)
Note 22 Gain or loss on marketable securities and equivalent portfolios 31/12/2002 31/12/2001
Gain or loss on divestment of marketable securities 969.19 719.81 Allocations to and releases from provisions (17.76) 2.48
Pension expenses (7.56) (5.70) Other social security expenses (31.47) (30.74) Contractual and regulatory profit sharing (7.14) (7.20) Taxes and equivalent payroll expenses (14.66) (10.48) Allocations to and releases from pension provisions (0.10) 1.22
Releases on provisions for: Risks on complex transactions - 5.75 Other risk provisions 0.10 -
Spot foreign-exchange transactions Euros purchased not yet received 2,326 2,510 Non-euro currencies purchased not yet received 7,341 6,726 Euros sold not yet delivered 2,310 3,659 Non-euro currencies sold not yet delivered 7,690 7,437
Lending/borrowing Non-euro currencies lent not yet delivered 21 366 Non-euro currencies borrowed not yet received 1,675 5,181
Non-euro currencies to be received against non-euro currencies to be delivered - non-euro currencies to be received 50,725 43,492 - non-euro currencies to be delivered 50,841 45,491
The Supervisory Board has set up a Market Risk Committee chaired by Isabelle Bouillot. This Commitee is in charge of recommending regulations on market-risk monitoring and supervision, and ensuring that the regulations are in line with those established at Group level. It also ensures that the regulations are adhered to and advises the board on matters relating to market risk.
Systematic information is provided to both the Financial and Internal Control Committee and the Supervisory Board. These bodies meet four times per year.
Counterparty risk on financial instruments, either interest rate or currency futures and options contracts, is analysed in accordance with the regulations governing credit-risk equivalent calculations in regulatory model 4801C (information on derivative instruments traded on assimilated and over the-counter markets, as provided for under order 96-06 of the French Banking Commision).
As at 31/12/2002, the equivalent weighted risk on forward financial instruments amounted to €3.730bn. The breakdown of risk before weighting was as follows: Type of counterparty OECD governments and central banks 9.18% OECD financial institutions 63.93% Other counterparties 26.89%
Credit rating (S&P) AAA 16.05% AA 29.09% A 13.44% Other ratings 3.00% Non rated 38.42%
≤3 months >3 months >1 year >5 years Total €m and ≤1 year and ≤5 years
Note 31 Breakdown of consolidated profit & loss statement by branch of activity
The breakdown aims to reflect the performance of the main branches of capital markets activity, in the most relevant manner possible.
The branches are distinguished as follows: - Fixed-income and foreign-exchange business, covering the traditional activities in these areas; - Equity business, covering all equity-related activities, as well as the group's equity-broking arm.
The assumptions underlying the breakdown of the main profit & loss line items are as follows: - Net banking income represents the direct contribution from each business, including the proceeds from investing that portion of the equity allocated to the business; - General expenses include the direct expenses of each branch of activity including analytical rebilling of support functions; - The tax charge allocated to each branch of activity is calculated by applying a normative rate on the basis of taxation territoriality; the differences between normative and real tax, including the balance of deferred taxes, are broken down by branch of activity.
Net profit excluding provisions to FGBR 73 9 82 77 7 84
Note 32 Results from the main transactions with the parent company
We have conducted our audit in accordance with auditing standards applicable in France. These standards require that we perform such tests and procedures so as to obtain reasonable assurance that the consolidated financial statements are free from material mis-statement. An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements.
INTERBANK AND EQUIVALENT TRANSACTIONS Cash, central banks, giro accounts 10 2 Public securities and equivalents 8,262 7,087 6,436 Loans to credit institutions 55,543 53,811 41,724
SHAREHOLDERS' EQUITY (EXCLUDING FGBR) 3 626 563 610 Subscribed capital 458 458 457 Share-premium account 10 11 11 Reserves 48 43 23 Revaluation reserve Regulated provisions and investment subsidies Retained earnings (+/-) 20 43 23 Interim dividends (94) Profit for the year (+/-) 91 103 96
+ INTEREST AND EQUIVALENT INCOME + Interest and equivalent income on transactions with credit institutions 1,624 1,951 1,880 of which accrued interest on current account 13
- Interest and equivalent expenses on bonds and fixed-income securities (378) (412) (235)
+/- GAIN OR LOSS ON TRADING PORTFOLIO TRANSACTIONS 1,206 1,451 1,158
+/- GAIN OR LOSS ON MARKETABLE SECURITIES AND EQUIVALENT PORTFOLIOS 950 722 (16)
OTHER COMMITMENTS Other commitments granted 555 893 904 Other commitments received 2,773 2,184 3,126
Note 1 Parent company financial statements accounting and consolidation principles 1 - Introduction The parent company financial statements have been drawn up in accordance with regulation No.91-01 of the French Banking Regulation Committee (Comité de Réglementation Bancaire – CRB), as amended by regulation 94-04 of the French Accounting Regulation Committee (Comité de la Réglementation Comptable – CRC). The parent company financial statements have been prepared in accordance with the provisions of CRC regulation 2000-03.
Gains and losses on currency transactions are based on the exchange rate at the transaction date.
2.3 Securities transactions Securities are valued in accordance with the regulations defined in regulation 90-01 of the French Banking Regulation Committee, as amended by regulation 2000-02 of the CRC.
Negotiable loan notes and other interbank instruments These securities and other instruments are recorded at nominal value. The difference between the nominal value and the purchase price is recorded in the profit & loss statement over the residual life of the securities, based on the yield-to-maturity method. Provision is made for any unrealised losses on a lineby -line basis.
Investment securities The investment securities portfolio includes bonds and other fixed-income securities which have been acquired with the intention of being held long term, in principle until their maturity. The valuation method varies depending on whether or not the securities are transferable.
The accounting entries for the gains and losses on these instruments depend on their intended use.
Fixed-income and currency swaps In accordance with regulation No. 90-15 (as amended by No. 92-04) of the French Banking Regulation Committee, fixed-income or currency swaps are classified as follows: •micro-hedging: the gain or loss is recorded on a symmetric basis to the gain or loss on the hedged item; • specialised management of a trading portfolio: these contracts are marked to market. In accordance with
regulations, the value is adjusted to take into account counterparty risks and the discounted present value of future management costs. The adjusted marked-to-market gain or loss is recorded in the profit & loss statement.
2.5 Market value Where market prices of instruments or valuation parameters are not officially listed, alternative valuation methods are used.
2.7 Complex transactions Complex transactions involve combinations of instruments (of identical or different types, nature and valuation methods), that are recorded in a single batch or as a transaction whose accounting treatment is not subject to specific regulations.
Gains or losses are considered globally so as to reflect the economic nature of the transactions. Management intentions will dictate treatment of the overall result: •Results of transactions carried out for hedging purposes are apportioned on a straight-line basis over the relevant period. In the case of an overall negative market value of a complex transaction with its related hedging component, a provision is booked.
•Results of transactions carried out for trading portfolio management purposes or whose results can be treated as a financial engineering commission are recorded at the origin. In this last case, the commission on an engineering service is booked at the origin if it is acquired definitively and can be estimated sufficiently accurately. A discount is applied to take into account the future management expenses and any possible counterparty risks.
2.9 Treatment of income and expenses Interest and related commissions are recorded pro-rata temporis.
2.11 Foreign branches The accounts of foreign branches are integrated into the head office accounts in local currency. The profit & loss statement is converted at the month-end spot exchange rate.
2.12 Fixed assets Fixed assets are recorded in the balance sheet at cost.
Depreciation is calculated over the estimated lives of the tangible asset using the straight-line or diminishing -balance method.
2.13 Subordinated debts This section includes all debt materialised by perpetual loans, whose redemption in the event of liquidation of the debtor is only possible after the other creditors’ claims have been settled.
2.15 Corporate tax This includes current tax for the fiscal year after deduction of any tax credits which may be offset against the amount due.
As part of an ongoing tax inspection, a demand for back-tax received in 2002 and relating to the first financial year inspected gave rise to a provision. Taking into account the reasons underlying the demand for back-tax, an estimate has been made of potential liability for the following financial years and a provision has also been made for the appropriate sum.
Book Advances Provisions Total Previous Previous % value of year’s year’s shareshares equity profit holding €m capital
2002 dividend in respect of 2001 profit (27.20) Other variations (13.72)
(1) CDC IXIS Capital Markets' registered share capital totals €457,500,000, It comprises 30.000 shares with a nominal value of €15.25, all of the same category, and 100%-owned by CDC IXIS as at 31/12/2002.
Maximum potential shares to be created in future: - by bond conversion - by exercise of equity warrants
Profit after tax, profit sharing, depreciation/amortisation and provisions 48,571,725 79,618,113 96,430,121 102,621,443 90,614,206
Profit after tax and profit sharing, but before depreciation/amortisation and provisions 2.21 3.76 3.77 3.14 4.41
Profit after tax, profit sharing depreciation/amortisation and provisions 1.62 2.65 3.21 3.42 3.02
1.7. Statutory allocation of profit A sum equivalent to 5% of the year’s net profit, less any previous losses, is deducted
and assigned to the legal reserve. This practice ceases to be compulsory when the reserve reaches a level equivalent to onetenth of the Company’s registered capital; the practice is resumed when the legal reserve falls below this level.
All shareholders have the right to attend meetings upon presentation of proof of identity, on the condition that his/her shares are fully paid up and have been registered in his/her name for at least five days prior to the Meeting.
Contractual profit-sharing During the last five years, CDC IXIS Capital Markets has concluded two contractual profit-sharing agreements: •a first agreement signed on 25 June 1999 and covering the 1999, 2000 and 2001 financial years
4. Responsibility for the reference document and the audit of the financial statements 4.1. Person responsible for the reference document Anthony Orsatelli, Chairman of the Executive Board 4.2. Statement by the person responsible for the reference document The information contained in this reference document is accurate to the best of my knowledge. It includes all the information required by investors to allow them to make their own judgements on the assets and liabilities, business, financial situation, results and outlook of the Company; there are no omissions liable to have any material bearing on the scope of the information provided.
Section Regulation 1.1. Name and functions of persons responsible for the document p86 1.2. Statement by persons responsible p86 1.3. Name and address of auditors p11 1.4. Information policy p87 3.1. General information on the issuer p84 and 85 3.2. General information on the capital p38 3.3. Current ownership of capital and voting rights p38 3.4. The issuer’s securities market N.A.
4.4. Investment policy p34 and 81 4.5. Information on subsidiaries p21, 58 and 81 4.6. Business history (non-meaningful) N.A.