(1) The full standards adopted by the European Union are available on the internet site of the European Commission at: accounting/ias_fr.htm#adopted-commission.
IFRIC 9 specifi es that the embedded derivative must be valued at the inception of the contract, except where the terms of the contract undergo any substantial change.
IAS 14 “Segment Reporting”. It modifi es the presentation of segment information, prioritising the managerial approach for defi ning segments. Excluding the various presentation aspects, this standard may have an impact on the depreciation of goodwill, which would be reallocated to new segments. However, this standard is not expected to have any material impact on the Natixis Group’s consolidated fi nancial statements for 2009; IFRIC 11 “Group and Treasury Share Transactions” covers two points for the application of IFRS 2, specifying the accounting treatment for transactions whose payment is based on shares: For which the entity chooses or is required to buy its own treasury stock from independent third parties due to the
fact that shares are awarded or paid for by the entity itself or by its shareholders,
Which concern several entities from a given group (parent company or other entity from the same group) in the individual or separate fi nancial statements for each entity from a group that receives the services from benefi ciaries for the plan.
The application of IFRIC 11 is not expected to have any material impact on Natixis’ consolidated fi nancial statements.
The fi gures given in the notes are expressed in millions of euros
Natixis’ consolidated fi nancial statements include the separate fi nancial statements of Natixis and its main subsidiaries.
IFRS: companies that are exclusively controlled, companies that are jointly controlled and companies over which the entity exercises a signifi cant infl uence. Analysis of the control of the consolidating entity is not restricted to identifying voting rights in subsidiaries, but includes economic and legal analysis of relations between the consolidating entity and its subsidiaries.
Special purpose entities (SPEs) created to manage a specifi c operation or group of similar operations are fully consolidated if they are controlled substantially by Natixis, even where there is no equity relationship. The main criteria for assessing the existence of control as defi ned by SIC 12 are as follows: Activities: the SPE’s activities are substantially conducted on behalf of Natixis, which directly or indirectly created the
Companies over which Natixis exercises signifi cant infl uence are consolidated using the equity method.
Signifi cant infl uence is the power to participate in the fi nancial and operating policy decisions of an economic activity but is not control over such policies. Signifi cant infl uence is presumed to exist when the reporting entity directly or indirectly owns at least 20% of the voting rights.
Populaires and Caisses d’Epargne networks, and (ii) by de facto infl uence deriving from operational and technical cooperation by the Banque Populaire and Caisses d’Epargne with Natixis.
Delegation of powers concerning the risk management function (defi nition of standards and risk assessment methods); Exchange of management personnel.
In accordance with article 116 of the amended fi nance law for 2005 (2005-1720 of December 30, 2005) and the agreement signed with the French State on December 28, 2006, Natixis manages certain public procedures on behalf of the French
State. These transactions are recognized separately in the fi nancial statements, and some of them may be guaranteed by the State. The State and other related creditors have a specifi c right over the assets and liabilities allocated to these institutional activities. The bank’s assets, liabilities and commitments relative to such institutional activities are identifi ed on the balance sheet based on an abstract for each one of the sections concerned by the procedures whose management has been entrusted by these State to Natixis.
The amount of fees received and fi nancing outstanding in connection with institutional activities is not material.
Accordingly, the fi nancing outstanding has not been restated at amortized cost. Activities other than fi nancing, where Natixis acts as an intermediary on behalf of the State, have been accounted for using the previous treatment in the IFRS fi nancial statements.
As far as Coface is concerned, insurance operations managed on behalf of the State are not recognized in the fi nancial statements. Only management fees received within this framework are recognized on the income statement under commission income. The agreement relating to the management of these operations is under negotiation with the
The income statements of foreign subsidiaries and branches whose functional currency is not the euro are translated at average rates for the year. Any resulting translation gains or losses, in terms of balance sheet and income statement items, are recognized directly in equity under “exchange gains or losses” for the portion attributable to the Group and “minority interests” for the portion attributable to third parties.
With the fi rst application of IFRS, Natixis chose the option available under IFRS 1 First Application to not retrospectively restate business combinations carried out prior to January 1, 2004 in accordance with the provisions of IFRS 3 Business
When the recoverable amount is lower than the carrying amount, an irreversible impairment loss is recognized on the consolidated income statement for the period and charged fi rst against the goodwill allocated to the CGU or group of
Principles adopted for measuring c ontributions by Groupe Caisse d’Epargne to Natixis
The assets contributed by CNCE to Natixis fall into two categories of assets: shares in the corporate and investment banking and services subsidiaries; a portion of the cooperative certifi cates of investment (CCIs)
For these two categories of assets, the contribution values used for consolidation purposes are the carrying amounts of these assets in CNCE’s consolidated fi nancial statements, restated in accordance with IFRSs as adopted in the European
Furthermore, there are no other standards applicable to the type of transaction observed, given that neither the Groupe
Natixis; commits both parties to maintaining equivalent ownership interests in Natixis and providing funds in equal amounts to comply with the prudential rules.
Against this backdrop, the method that involves recognizing items at their carrying amount has two advantages: it maintains consistency in the basis of measurement used for the combined entity’s assets, namely between the entities transferred by the Groupe Caisse d’Epargne and those operating in the same business line and part of the preexisting Natixis group, and thus the accounting treatment is the same regardless of the origin of the relevant activities; it provides a fairer view of the economic substance of the transaction, which aims to allow each of the two founding groups to continue operating the pooled activities within the scope of the larger jointly controlled Natixis operation.
In accordance with IFRS 3, the other structural transactions presented in Note 1 – contributions of the remaining Caisses d’Epargne CCIs, 1.23% of Ixis CIB’s share capital, 4.63% of Ixis
Since the assets contributed were recognized at their IFRS net carrying amount, no valuation differences have been recorded on the various assets and liabilities contributed. In addition, the difference between the acquisition cost and the Group’s interest in the net assets of the entities contributed does not represent goodwill within the meaning of IFRS 3, since the acquisition cost takes into account the real value of the shares, while the contributions were recognized at their net carrying
takeover of Alpha Simplex and €6 million on a further stake acquired in Hansberger; €298 million in goodwill from Caceis, resulting from the acquisition of the HypoVereinsBank security custody business for €180 million and the Olympia Group for €117 million; €41 million in goodwill from transactions for the Coface sub-group (acquisition of Kompass France and Kompass
Value in use is determined principally (2) by discounting the expected future cash fl ows from the CGU on the basis of the medium-term business plans drawn by the Group for strategic planning purposes.
The following assumptions underpinning these forecasts were as follows: expected future cash fl ows: forecast data for 3 years taken from the Group’s medium-term business plan (3); perpetual growth rate: 2%; discount rate: various rates ranging between 9.86% and 10.14%.
Caisse Nationale des Caisses d’Epargne, Natixis’ stake in the CIFG sub-group was reduced to 0.47% at December 31, 2007. As a result, this sub-group was withdrawn from the scope of consolidation at that date and the securities still held were depreciated in full in light of the company’s fi nancial position. The line on the income statement for “income from discontinued operations or those in the process of disposal”
3.8 – Standardization of individual data and elimination of intra-group t ransactions
Insurance company investments are classifi ed in the balance sheet under the various categories of fi nancial asset defi ned in IAS 39.
Mathematical reserves for savings contracts correspond to the buyback value of the contracts.
(life insurance) give rise to the recognition of a deferred participation liability to offset the difference in value between assets and liabilities, in accordance with IFRS 4 (shadow accounting). The deferred participation liability is equal to the portion of gains or losses on investments due to policyholders in respect of their insurance contracts. The amount is calculated on the basis of the average rate of distribution to policyholders
(average contractual distribution rate for each product weighted by the value of investments on the calculation date).
The change in the deferred participation liability is recognized in equity in respect of changes in the value of assets classifi ed as “available for sale” and in income for changes in the value of assets held at “fair value through profi t and loss”, as well as for changes in the fair value of investment property held to cover insurance contracts.
Having reached the consolidation thresholds, this entity’s fi rst consolidation generated goodwill of €4.7 million,
Entry of Kompass Belgium, the business of which is fi nancial information. Its entry into scope lead to goodwill of €2.7 million,
Creation of Coface Factoring Spain, which is in the business of factoring,
Acquisition of Cerved: this is in the fi nancial-information business and is consolidated according to the equity method,
Natixis Pramex International Do Brazil (Brazil): they are in the business of promotion and international commerce operations.
Creation of Natixis Panama, a branch of Natixis, which is in the business of fi nancing and investment,
Variation in interest percentage: Repurchase of 0.34% of the minority shareholdings in
Following the contribution of the ex-CNCE entities, the size of the Natixis Group’s consolidation perimeter very signifi cantly changed from December 31, 2006: more than 600 entities; a total balance sheet nearing €460 billion; a pro forma net banking income exceeding €7,300 million; and a pro forma net profi t of more than €2.2 billion.
Consequently, the thresholds set for keeping entities within the consolidation perimeter were revised upwards for 2007.
Asset Management > €40 million > €5 million > +/-€2 million
Certain entities are consolidated even though they have not reached the above thresholds. These are: subsidiaries having an impact on the presentation of the fi nancial statements: nominal partnerships or real-estate companies constituted under civil law having fi nancial leasing contracts; subsidiaries with growth estimated over two years; holdings and branches; ■
Natixis Asset Square (NAS) merged with IPCM, which changed registered company name, becoming Natixis
Acquisition of Alpha Simplex Group LLC leading to goodwill of €15.8 million.
Earnings-per-share increase effect at the Ixis AM tier bringing the interest percentage from 84.58% to 88.66%
Increase in the percentage holding of Hansberger Group Inc from 21% to 88% accompanied by recognition of goodwill of €6.2 million.
Repurchase of 5% of the minority holding of Ecureuil Gestion in CNCE, generating goodwill of €24.9 million.
Creation of a business division in Malta. In December 2007, the CIB division created two subsidiaries located in Malta, whose business is structured fi nancing: Natixis Malta
Investments Ltd. (NMI) and Califano Investments Ltd. (CIL), 100% subsidiary of NMI, which will constitute the holding subsidiary for the various operational subsidiaries which will be created in Malta.
Investissement Groupe (EIG), which will directly carry out the business of fi nancial investment. EIG is held respectively at 33% and 66% by NBI and EDF, and is consolidated by proportional consolidation by NBI.
Municipal Tender Option Bonds (TOB) business: de consolidation of 28 SARATOGA trusts on January 1, 2007 following their liquidation during the 2006 fi nancial year.
January 1, 2007) and Master Financial Inc. (complete suspension of activity in the second half-year 2007).
Repurchase of minority interests in Socamab bringing the holding from 60% to 100% and generating goodwill of €3.4 million.
Merger of SOCAMA Haute Savoie and SOCAMA Savoie to create SOCAMA des Alpes
Ixis SP S.A. – Compartiment Prévie Mutual fund FI 100 100 100 100 Luxembourg
Other fi nancial company FI 100 100 100 100 United States
MASTER FINANCIAL INC. (10) Property fi nancing 0 0 90 0 United States
NATIXIS ALTERNATIVE INVESTMENTS INTERNATIONAL S.A (5) Holding FI 100 100 0 0 Luxembourg
Transactions on derivative contracts FI 100 100 100 100 United States
Other fi nancial company FI 100 100 100 99 United States
NATIXIS MALTA INVESTMENTS LIMITED (7) Holding FI 100 100 0 0 Malta
NATIXIS NORTH AMERICA INC.(Formerly Ixis North America Inc) * Holding FI 100 100 100 100 United States * Former name.
NATIXIS SECURITIES (formerly Ixis Securities) * Brokerage house FI 100 100 100 100 France
PAR FUND GP LLC Other fi nancial company FI 100 100 100 100 United States
PLAZA/ TRINITY LLC (24) (11) Property fi nancing FI 100 100 0 0 United States
Islands 11 WET DIVISION LLC (24) (11) Property fi nancing FI 100 100 0 0 United States
holding company FI 100 100 0 0 Luxembourg * Former name.
NATIXIS MOSCOW (formerly NATEXIS MOSCOW) * Foreign banking FI 100 100 100 100 Russia
Management of the resources of English companies 0 0 100 100 Great Britain
Issue of negotiable debt securities FI 100 100 100 100 United States * Former name.
NATIXIS TRANSPORT FINANCE (formerly NATEXIS TRANSPORT FINANCE) * Bank FI 100 100 100 100 France
International trade operations and promotion FI 100 99 100 99 Spain
International trade operations and promotion FI 100 99 100 99 Germany
International trade operations and promotion FI 100 99 0 0 Tunisia
International trade operations and promotion FI 100 99 100 99 Russia
NATIXIS PRAMEX INTERNATIONAL AP LTD (formerly Natexis Pramex Asia LTD) *
NATIXIS PRAMEX INTERNATIONAL CORP (formerly Natexis Pramex North America Corp) *
International trade operations and promotion FI 100 99 100 99 United States
MERCOSUL International investment fund FI 100 95 100 84 Great Britain
NATEXIS CAPE International investment fund FI 98 88 98 84 Luxembourg
Portfolio management FI 100 100 100 100 United States * Former name.
NATIXIS VENTURE SELECTION (ex -NATEXIS VENTURE SELECTION) * Investment fund FI 100 100 100 100 France
NATIXIS PRIVATE BANKING INTERNATIONAL (formerly NATIXIS PRIVATE BANKING Luxembourg SA) *
Management of venture-capital mutual funds FI 100 100 100 100 France
Management FI 89 89 85 85 United States * Former name.
AEW SECURITIES LIMITED PARTNERSHIP (35) Distribution FI 89 89 85 85 United States
ABSOLUTE ASIA AM (formerly Ixis ASSET MANAGEMENT ASIA, LTD) (35) *
NATIXIS DISTRIBUTION CORPORATION (formerly Ixis ASSET MANAGEMENT DISTRIBUTION CORPORATION) * (35) Distribution FI 89 89 85 85 United States
NATIXIS DISTRIBUTORS, LP (formerly Ixis ASSET MANAGEMENT DISTRIBUTORS, LP) * (35) Distribution FI 89 89 85 85 United States
NATIXIS ASSET MANAGEMENT JAPAN CO., LTD (formerly Ixis ASSET MANAGEMENT JAPAN, LTD) (35) *
LOOMIS SAYLES DISTRIBUTORS, INC. (35) Distribution FI 89 89 85 85 United States
LOOMIS SAYLES DISTRIBUTORS, LP (35) Distribution FI 89 89 85 85 United States
MC MANAGEMENT, INC. (35) Holding FI 89 89 85 85 United States
NATIXIS ASSET MANAGEMENT PARTICIPATIONS 1 (formerly Ixis ASSET MANAGEMENT PARTICIPATIONS 5) (35) * Holding FI 89 89 85 85 France
NATIXIS GLOBAL ASSET MANAGEMENT (formerly Ixis ASSET MANAGEMENT GROUP) (35) * Holding FI 89 89 85 85 France
NATIXIS GLOBAL ASSET MANAGEMENT HOLDINGS, LLC (formerly Ixis ASSET MANAGEMENT HOLDINGS, LLC) (35) * Holding FI 89 89 85 85 United States
NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 1 (formerly ASSET MANAGEMENT PARTICIPATIONS 1) (35) * Holding FI 89 89 85 85 France
NATIXIS GLOBAL ASSET MANAGEMENT PARTICIPATIONS 2 (formerly Ixis ASSET MANAGEMENT PARTICIPATIONS 6) (35) * Holding FI 89 89 85 85 France
NATIXIS GLOBAL ASSET MANAGEMENT, LP (formerly CORPORATIONIXIS ASSET MANAGEMENT NORTH AMERICA, LP (35) * Holding FI 89 89 85 85 United States
NATIXIS GLOBAL ASSOCIATES GERMANY (formerly Ixis FONDSSERVICES GMBH) (35) * Distribution FI 89 89 85 85 Germany
Asset Management FI 89 89 85 85 United States * Former name.
NATEXIS ASSET SQUARE (27) Distribution of mutual funds 0 0 100 100 France
Information provision and management of receivables 0 0 84 84 Chile
Information provision and management of receivables FI 100 100 100 100 United States
COFACE DEUTSCHLAND (formerly AK COFACE HOLDING AG) * Holding FI 100 100 100 100 Germany
COFACE FACTORING ESPANA (12) Factoring FI 100 100 0 0 Spain
COFACE FACTORING ITALIA SpA Factoring FI 100 100 100 100 Italy * Former name.
COFACE HOLDING AUSTRIA (12) Holding FI 100 100 0 0 Austria
COFACE KREDIT INFORMATIONS (formerly ALLGEMEINE KREDIT COFACE INFORMATIONS GMBH (AKI)) *
Information provision and management of receivables 0 0 100 75 Poland
COFACE RECEIVABLE FINANCES (formerly LONDON BRIDGE FINANCE LTD) * Factoring FI 100 100 100 100 Great Britain
Information provision and management of receivables 0 0 100 75 Romania
Information provision and management of receivables FI 100 100 100 100 Italy
Information provision and management of receivables 0 0 100 100 Colombia
Information provision and management of receivables 0 0 100 100 Ecuador
Information provision and management of receivables 0 0 100 100 Peru
Information provision and management of receivables 0 0 100 100 Venezuela
Information provision and management of receivables 0 0 100 100 Chile
COFACE SERVICIOS MEXICO SA DE CV (formerly Informes Veritas) (25) *
Information provision and management of receivables 0 0 100 100 Panama
Information provision and management of receivables FI 100 100 100 100 Portugal
Information provision and management of receivables FI 100 100 100 100 Great Britain
Information provision and management of receivables FI 100 100 100 100 France
Information provision and management of receivables EM 28 28 28 28
GROUPE COFACE CENTRAL EUROPE HOLDING (formerly COFACE INTERCREDIT HOLDING AG) * Holding FI 75 75 75 75 Austria
KOMPASS Belgique (33) Marketing and other services FI 100 100 0 0 Belgium
KOMPASS JAPAN (25) Marketing and other services 0 0 100 100 Japan
Administrative management of mutual funds FI 100 100 100 100 France
NATIXIS PAIEMENTS (formerly NATEXIS PAIEMENTS) * Banking services FI 100 100 100 100 France
NEW GENERATION FUNDING (24) (49) Financial services NA NA NA NA Jersey
Defeasance structure for country credit risk FI 100 100 100 100 Great Britain
NATIXIS ALTAIR (formerly NATEXIS ALTAIR) * IT services FI 100 100 100 100 France
COFACE SVERIGE (formerly AKC NORDEN) - SUCC (COFACE KREDIT) Insurance FI 100 100 100 100 Germany
COFACE CANADA - SUCC (COFACE SA) Insurance FI 100 100 100 100 Canada
LEID - SUCC (COFACE AUSTRIA) Insurance FI 100 100 100 100 Austria
COFACE JAPAN - SUCC (COFACE SA) Insurance FI 100 100 100 100 Japan
NATIXIS HONG KONG Financial institution FI 100 100 100 100 Hong Kong
Non-fi nancial / Services institution EM 19 19 19 19 France
BRED HABITAT Credit institution / Surety company EM 20 20 20 20 France
Credit institution / Financial leasing of property EM 20 20 20 20 France
Credit institution / Financial leasing of property EM 18 18 18 18 Luxembourg
SBE (formerly SOGEFIP) * Credit / Financing institution Spec. EM 20 20 20 20 France
Credit institution / Financial leasing of property EM 14 14 14 14 France
(23) Resulting from the merger of Caisse d’Epargne des Alpes and Caisse d’Epargne Rhône-Alpes that occurred in May 2007.
(28) Resulting from the merger of Caisses d’Epargne de Flandre, of Pays du Hainault and of Pas-de-Calais occurring in October 2007.
(30) Transfer of all assets and liabilities to S.A.G.P – 2007.
(41) Resulting from the merger between Socama Haute Savoie and Socama Savoie.
(49) Deconsolidation of the CIFG tier following the capital increase underwritten by Banque Populaire and the Caisse d’Epargne.
(54) Acquisition of the safekeeping business from HypoVereinsbank by CACEIS SAS.
(58) Creation of Cofoblig to hold the investments managed by COFACE SA.
(60) Creation of Placements Cofaction 2 to hold the investments managed by COFACE SA.
(62) Creation of CACEIS FASNET AMERICAN ADMINISTRATION following the acquisition of the Olympia Capital International Group.
(65) First consolidation in 2007 of Natixis Consumer Finance acquired on November 17, 2006.
(66) Deconsolidation on January 1, 2007 following the partial contribution of the assets of its business to Natixis Financement.
Principles used to p repare the 2006 p ro f orma i ncome s tatement
In addition, the scope used to prepare the pro forma fi nancial statements at December 31, 2006 is identical to that presented in paragraph 4.3 of this document fi led with the fi nancial market authorities on April 17, 2007 (p. 194 to 234).
Contributions to the 2006 p ro f orma i ncome s tatement
Net gains or losses on fi nancial instruments at fair value through profi t or loss 556 1,485 (104) 1,935 1,148
Net gains or losses on fi nancial assets available for sale 217 105 322 334
Share of income of associates 11 15 295 358 679 672
Net income from discontinued operations or those in the process of disposal 22 0 22 (369)
* For unrealized capital losses on the New York portfolio, the conversion rate used is the annual average rate of €1 = $1.371.
exposure carried by securitization conduits: Exposure as at Dec. 31, 2007
Faced with the worsening US real estate crisis, it was decided to include within this exposure all exposure relating to the
The valuation of assets represented by this exposure has been established as follows: using market prices at December 31, 2007 when available; otherwise, in the absence of any market reference data, using a valuation model. The valuation technique used is based on calculating an assumed rate of loss for each year in which loans were originated. The following assumed loss rates were used to measure this exposure: 23% for loans originated in 2006 and 2007, 9% for loans originated in 2005, historical loss rates for loans originated in previous years.
6.3 – Revision of liquidity risk allowances applied to the valuation of certain p ortfolios
The large divergences between bid and offer prices observed on some markets as at December 31,2007 has been taken into account in calculating liquidity reserves applied to the valuation of certain portfolios valued at fair value through profi t or loss, for a total amount of €55.1 million.
this support has taken various forms materializing in any of the following: acquisition of part of the assets held by the entity in question; subscription of securities issued by the ad hoc entity; granting of new or additional fi nancing or liquidity lines; setting up a fi rst demand guarantee
European ABSs. At December 31, 2007, NGAM’s control over the ABS+ mutual fund was 37%.
Spain -€8 million; Credit enhancement sector -€175 million covering guarantees of which Natixis is a benefi ciary through CDSs entered into with these entities.
The liquidity crisis has led to delays in syndication and diffi culties in placing on the secondary market that share of syndicated loans initially subscribed with the intention of short-term resale.
Syndicated property fi nance and LBO lending has been worst affected by this phenomenon.
Financial support has been provided to CIFG, an American credit enhancement subsidiary, by the Caisse Nationale des Caisses d’Epargne and Banque Fédérale des Banques
Populaires at the end of December 2007. This fi nancial support translated into the subscription of a capital increase amounting to $1.3 billion. This means that, as at December 31, 2007, Natixis’ holding in CIFG amounted to only 0.47%, fully covered by an impairment charge of €536 million. CIFG
Populaires took place at end of January 2008. Consequently, the 2006 pro forma accounts have been corrected to show
December 31,2007. The following methodology has been applied to determine this valuation: income from the nominal value of issues has been discounted using the net margin representing, for each issue, the difference between the average contractual spread and the replacement spread for a
These are securities held for trading purposes or designated as at fair value through profi t and loss upon their initial recognition in accordance with the fair value option amendment to IAS 39
The fair value of these assets upon their initial recognition is determined on the basis of the bid price. Fair value is reviewed at each subsequent reporting date, and any changes including accrued interest are recorded in the consolidated income statement under “Gains and losses on fi nancial instruments at fair value through profi t or loss”.
Upon their initial recognition, loans and advances are measured at fair value plus transaction costs and less any discount and transactions revenues. In the case of loans, transaction costs include fees and any internal and external expenses directly attributable to the granting of the loan.
After initial recognition, they are measured at amortized cost using the effective interest rate method and tested for impairment on each reporting date. Where necessary, an impairment charge is recorded in income under cost of risk.
When loans are granted at conditions that are less favorable than market conditions, a discount corresponding to the difference between the face value of the loan and the sum of future cash fl ows discounted at the market interest rate is deducted from the face value of the loan. The market rate of interest is the rate implemented by the vast majority of fi nancial institutions at any given time for instruments and counterparties with similar characteristics. These discounts for Natixis are not material.
The fair value of listed non-consolidated investments is determined to the last listed price prior to the balance sheet date. The fair value of unlisted non-consolidated investments is obtained using the P/E (price earnings ratio) and DCF
“interest and similar income”. Available-for-sale fi nancial assets are tested for impairment at each balance sheet date. When there is objective evidence that the asset is impaired and a decline in the fair value of an available-for-sale fi nancial asset has already been recognized directly in equity, the cumulative loss that had been recognized directly in equity is removed from equity and recognized in income under impairment charges and other credit provisions in the case of fi xed-income instruments and by deduction from net banking income in the case of variable-income instruments.
The detection of an objective indication of impairment results from a multi-criteria analysis which includes, in the case of debt instruments in particular, the opinion of an expert assessor.
over a period exceeding 18 months, or signifi cant changes in the technological, market, economic or legal environment having an unfavourable effect on the issuer, which indicate that the amount of the investment in equity instruments cannot be recovered.
In accordance with IFRIC 10, impairment losses recorded against equity instruments with quarterly reporting dates (IFRS
IAS 17 also describes three indicators that individually or in combination could also lead to a lease being classifi ed as a fi nance lease: if the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee; gains or losses from the change in the fait value of the residual accrue to the lessee; the lessee has the ability to continue the lease at a rent that is substantially below the market rent.
Upon adoption of IFRSs, Natixis analyzed the substance of its lease contracts in accordance with the provisions of IAS 17, which are more specifi c than French GAAP. This led to certain fi nance leases being reclassifi ed as operating leases.
Provisions for fi nance leases are determined using the same method as that described for loans and advances.
Assets subject to operating leases are presented in the balance sheet under property, plant & equipment or intangible assets in the case of equipment leases, and under investment property in the case of property leases. Lease income from operating leases is recognized in the income statement on a
Financial data straight-line basis over the lease term under “other net banking income” or “expenses from other activities”.
At each balance sheet date, Natixis reviews assets classifi ed as Loans and advances in order to assess whether there is any objective evidence of impairment arising from one or more events occurring after initial recognition of the asset and having an impact on estimated future cash fl ows. This applies particularly to loans identifi ed under French regulations as doubtful or non-performing (CRC regulation 2002-03).
For the other two risk classes (industry and geographical risk), objective evidence of impairment is based on in-depth analysis and monitoring of business sectors and countries. Objective evidence of impairment usually consists of a combination of micro or macroeconomic indicators specifi c to each industry or country.
Where necessary, Natixis calls on the opinion of experts in order to adjust the results of this calculation to the Natixis group’s real risks.
Derivative fi nancial instruments held for trading purposes are recorded in the balance sheet under “Financial assets at fair value through profi t or loss” where their market value is positive, and under “Financial liabilities at fair value through profi t or loss” where their market value is negative.
The prospective test entails the establishment (by index type and currency) of a schedule of cumulative variable-rate borrowings and fi xed rate borrower swaps by maturity, and a schedule of cumulative variable-rate loans and fi xed-rate lender swaps by maturity category.
Hedging is demonstrated if for each maturity category of the target repayment schedule, the nominal amount of items to be hedged is greater than the notional amount of hedging derivatives.
The retrospective test is used to verify after the event whether or not the hedging implemented at different reporting dates is effective. At each period-end, changes in the fair value excluding accrued interest of hedging instruments are compared with changes in the hypothetical derivative instruments (synthetic instruments representing assets and liabilities and management intentions). The ratio between these respective changes must be between 80% and 125%.
Fair value hedges are intended to hedge the risk of fl uctuations in the valuation of instruments on the balance sheet and fi rm commitments.
The Natixis Capital Markets North America subsidiary documents structural hedging of its interest rate risk using the fair value hedging method. In terms of the accounting treatment of these transactions, the entity applies the provisions set out in IAS 39 as adopted by the European Union (IAS 39
Outside these limits, the hedging ratio would no longer be justifi ed under IFRS accounting principles.
Changes in the fair value of derivatives are recorded in the income statement (for both the effective and ineffective portion).
At the same time, changes in the fair value of hedged risk components are also recorded in the income statement.
The net impact on the income statement is therefore limited to the ineffective portion of the hedge.
Changes in the fair value excluding accrued interest of hedging derivatives are recorded in the income statement under “Gains and losses on fi nancial instruments at fair value through profi t or loss”. Accrued interest relating to these instruments is recorded under “Interest and similar income” or “Interest and similar expenses”.
of changes in fair value of derivative fi nancial instruments classifi ed for accounting purposes a hedge of net investment is recognized in equity, and the ineffective portion in income.
Unrealized gains and losses recognized in equity are transferred to income when all or part of the net investment is sold.
A number of internal contracts involving derivatives used in hedge accounting exist between Natixis and its subsidiaries.
To qualify as a hedge at consolidated level, Natixis ensures from time to time that the relevant transactions are hedged correctly in the market.
The credit derivatives used by Natixis are not considered as fi nancial guarantess but as derivative instruments, and therefore fall within the scope of IAS 39. They are classifi ed as assets or liabilities at fair value through profi t or loss.
Non-monetary items denominated in foreign currencies and measured at fair value are translated at the exchange rates when fair value is estimated. When a gain or loss on a nonmonetary item (e.g. available-for-sale fi nancial assets) is recognized directly in equity, any foreign exchange component of that gain or loss is recognized directly in equity. Conversely, when a gain or loss on a non-monetary item (e.g. fi nancial assets measured at fair value through profi t or loss) is recognized in income, any foreign exchange component of that gain or loss is recognized in income.
Upon their initial recognition, fair value is the price paid or received. On subsequent reporting dates, fair value is estimated on the following basis: if the instrument is quoted on an active market, it is measured at its quoted price. A fi nancial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis; ■
Financial data if the market for a fi nancial instrument is not active, fair value is established using various valuation techniques. Valuation techniques may refer to observable data from recent transactions, the current fair value of another instrument that is substantially the same, discounted cash fl ow analysis and option pricing models. Values may be adjusted, depending on the instrument concerned and the associated risks, notably to take account of factors such as the bid-ask spread and modeling risk in the case of hybrid instruments.
The majority of over-the-counter derivatives, swaps, forward rate agreements, caps, fl oors and standard options are traded in an active market, i.e. a liquid market with regular trading.
For these instruments, the extent to which models are used and the observability of parameters have been documented.
Certain hybrid and/or long-maturity fi nancial instruments are valued using a recognized internal model and on the basis of market parameters derived from observable data such as yield curves, implied volatility layers of options and loss assumptions obtained from consensus data or from active over-the-counter markets.
For all of these instruments, the parameter has been demonstrated to be observable in nature. In terms of methodology, the observability of parameters is based on four key criteria: the parameter is derived from external sources (via a recognized contributor if possible); the parameter is updated periodically; the parameter is representative of recent transactions; ■
the characteristics of the parameter are identical to those of the transaction. If necessary, a proxy may be used, subject to demonstration and documentation of its relevance.
The fair value of instruments obtained using valuation models is adjusted in order to take account of counterparty risks, model risks and parameter risks.
As at December 31, 2007, the scope of instruments for which the margin on the day of trading was deferred comprises essentially: multi-underlying structured equity and index products; options on funds; hybrid interest rate and infl ation-linked products; fi xed forward rate derivatives; securitization swaps; structured credit products (CDSs, CDOs and FTDs); Iiterest rate option products; Vanilla equity and index-based option products; Carbon-based derivative instruments.
For shares in securitization vehicles classifi ed as assets valued at fair value for which no market price was available as at
Financial data 7.7 - Property, plant and equipment and intangible assets
Property, plant and equipment and investment properties are recorded at their acquisition date at their purchase price including directly attributable costs (transfer duties, fees, commissions and registration expenses). Natixis does not record its borrowing costs under balance sheet assets as allowed for by IAS 23.
IAS 38 in terms of technical feasibility, intention to complete the asset for internal use or sale, probability of future economic benefi ts, availability of resources and ability to measure the development expenditure reliably. Expenses incurred during the research phase are recognized as expenses when they are incurred.
Code, a fi ve-yearly appraisal is conducted by an independent expert approved by the ACAM (Autorité de Contrôle des
“depreciation, amortization and provisions for impairment of property, plant and equipment and intangible assets”.
Impairment losses are recognized in the income statement under “depreciation and amortization” and “provisions for impairment of property, plant & equipment or intangible risks”.
They may be reversed if conditions change (e.g. no more evidence of impairment).
Non-current assets that Natixis intends to sell within a period not exceeding twelve months and for which an active plan to locate a buyer has been initiated are identifi ed separately in the balance sheet. An impairment loss is recognized if the carrying amount falls below fair value less costs to sell. Associated liabilities are also identifi ed separately in the balance sheet.
In the fi nancial statements as at December 31, 2007, the
7.9 - Financial liabilities at fair value through profit or loss
Debt instruments issued by Natixis that are not classifi ed as fi nancial liabilities at fair value through profi t and loss are measured using the amortized cost method and recognized in the balance sheet under the headings “deposits from banks”,
If control is retained, the fi nancial asset continues to be recognized on the balance sheet to the extent of the group’s continuing involvement. Continuing involvement is evidenced by the existence of contractual conditions such as: an option or obligation to repurchase the assets transferred; receipt of fi nancial compensation linked to performance of the asset transferred.
The amount disbursed in respect of the asset is recognized under “securities bought under repurchase agreements”. This receivable is recorded under “loans and advances”.
At subsequent year-end dates, securities are again valued by the assignor in accordance with the rules in their original category. For the assignee, the receivable is recorded at face value under loans and advances.
Securities lending/borrowing is not comparable to a transfer of fi nancial assets in the IFRS sense of the term. Consequently, these transactions cannot give rise to derecognition of the securities loaned. Loaned securities are not identifi ed under
IFRSs. They are still recognized in their original IFRS category and valued accordingly. Borrowed securities are not recognized by the borrower.
The amount recognized as a provision should be the best estimate of the expenditure required to settle the present obligation at the balance sheet date. This amount is discounted where the effect is material. Provisions are reviewed at each balance sheet date and adjusted if necessary.
The provision recognized in the balance sheet is equal to: the amount of the actuarial liability in respect of postretirement and similar benefi ts for employees and retirees; less the market value of plan assets; less or plus any actuarial gains or losses arising from: experience adjustments in respect of demographic variables, changes in actuarial assumptions such as the discount rate, employee turnover and future salary increases, differences between the actual return and expected return on plan assets.
Natixis has used the option available under IFRS 1 to recognize all as yet unrecognized actuarial gains or losses in equity on the transition date, i.e. in the opening balance sheet as at 7.14 - Distinction between debt and equity
In addition, the issuing vehicle is contemplating repaying the initial preferred share issue on June 30, 2008, the fi rst date on which the call may be exercised, provided that it secures authorization from the French Banking Commission’s
In accordance with the provisions of IAS 32, this issue has thus been classifi ed as a debt instrument.
IFRS principles require these types of transaction to be recognized in income as payroll expenses: Natixis grants stock options to certain of its employees. The options are exercisable over a period of three years after a lock-up period of four years. As required by IFRS 2, stock options granted after November 7, 2002, which have not vested at the balance sheet date, are stated at their fair value on the grant date using the Black & Scholes model.
Since 2002, Natixis has set up fi ve stock option plans, the characteristics of which are set out in Note 13.4; ■
Payments based on Natixis Global Asset Management shares relate to option plans settled in cash. Under IFRS2, options are stated at their fair value based on a binomial model incorporating the volatility-related imagreement of a sample of comparable companies. Their fair value is recognized as an expense under “wages and salaries” over the vesting period, with a corresponding reduction in liabilities on the balance sheet (“deferred income and accrued charges”).
This liability is reassessed at each balance sheet date until the settlement date through the income statement.
Management participations1’s preferred shares. The vesting period under these plans is three years for the US benefi ciaries and four years for the European benefi ciaries.
Capital Management) in 2004. The vesting period under this plan is four years.
The plan consists of three stages spread over four years: November 12, 2007: allocation date and start of two-year vesting period.
Shareholder groups will bear the cost of the portion of expenses incurred in setting up and running bonus share allocation plans that is attributable to them, in proportion to the number of shares allocated to their employees (this distribution method is used for most of the expenses passed on); this portion mainly represents the cost of acquiring the shares.
Consequently, only the value of benefi ts granted to group employees is recorded by Natixis as an expense in its income statement. In accordance with IFRS 2, this value is measured using the share price as at the allocation date less the discounted amount of dividends not received by employees during the vesting period. The value thus determined represents an employee expense which is recognized in income over the two year vesting period.
On this basis, €209 million of deferred tax assets were not recognized at December 31, 2007.
The capitalization reserve recognized in the individual fi nancial statements of insurance companies is intended to defer
Financial data capital gains arising on the sale of certain bonds to offset subsequent capital losses. The portion presumed unlikely ever to be used is reclassifi ed in equity. Under French GAAP, no deferred taxation is recognized. Under IAS 12, it is treated as a temporary difference that gives rise to a deferred tax liability.
All timing differences have been recognized, irrespective of the recovery or payment date.
In accordance with paragraph 43 of the amendment to IAS 39 and IFRS 4 (published by the IASB in August 2005 and adopted by the European Union), fi nancial guarantees given are carried at their fair value plus any transaction costs directly attributable to the issuance of the guarantees. For independent agreements entered into at market rates, fair value at the inception of the agreement is theoretically equal to the amount of the premium(s) received. All the fi nancial guarantees issued within the Natixis group are entered into at market rates.
Subsequently, fi nancial guarantees are stated at the higher of: the amount initially recognized upon inception less, where appropriate, the amount of amortization recorded in line with the principles outlined in IAS 18 “Revenues”. This amortization represents the deferred recognition of the fees received over the over the period covered by the guarantee; and the value determined under IAS 37 “Provisions, contingent liabilities and contingent assets”, which is the amount that the entity would normally pay to settle the obligation or to transfer it to a third party.
However, given the preponderant impact of operational risk on the fair value of the guarantee, these guarantees issued to mutual funds are treated as fi nancial guarantees.
All fi nancing commitments granted by Natixis give rise to the grant of loans at market rates which are classifi ed as loans and advances. These commitments constitute contingent liabilities and are recorded in accordance with IAS 37. Upon their initial recognition, they are not recognized in the balance sheet.
7.21 - Fair value in the notes to the financial statements
If there is a quoted price that meets the criteria of IAS 39, the quoted price is used.
Diluted earnings per share correspond to net income for the period (attributable to equity holders of the parent), divided by the weighted average number of shares adjusted for the maximum imagreement of the conversion of dilutive instruments into ordinary shares. Stock options issued are taken into account in calculating diluted earnings per share.
Average number of shares for diluted earnings per share calculation 1,224,841,727 577,285,267
Fair value of hybrid market instruments not traded on an active market is calculated using valuation techniques. Valuations produced in this way using valuation models are adjusted, depending on the instruments in question and the associated risks, to take account of the bid and offer price for the net position, risks inherent in the models, counterparty risk and parameter risk. Fair values thus recorded may differ from actual prices at which such transactions might be concluded in the event of a sale on the market.
At the balance sheet date, Natixis assesses whether or not there is any objective evidence of impairment in Loans and advances, either on an individual basis or collectively by risk category. In order to detect any signs of impairment, Natixis analyses trends in a number of objective criteria, but also relies on the judgment of its own experts. Similarly, Natixis may use its expert judgment to establish the likely timing of future cash fl ow recoveries (where the aim is to calculate the amount of individual impairment losses) or to adjust the amount of expected losses under the McDonough framework, on which the amount of collective impairment losses is based.
Unlisted equity instruments classed as available-or-sale assets primarily consist of investments in non-consolidated companies. The fair value of unlisted non-consolidated investments is obtained principally by using the P/E (price earnings ratio) and DCF (discounted cash fl ow) valuation methods. Use of these methods requires certain choices and assumptions to be made in advance (in particular, projected expected future cash fl ows and discount rates).
All goodwill is assigned to a CGU so that it may be tested for impairment. The tests conducted by Natixis consist of comparing the book value of each CGU (including goodwill)
medium-term plans; projecting cash fl ows from year three out to infi nity at a rate refl ecting the expected annual growth rate; discounting cash fl ows at an expected annual rate of return to infi nity from listed stocks in the relevant sector.
The fair value of unrated loans is determined using the discounted future cash fl ows technique. The discount rate is based on an assessment of rates used by the institution during the period for groups of loans with similar risk characteristics.
Loans have been classifi ed into groups with similar risk characteristics based on statistical research enabling factors having an impact on the level of credit spreads to be identifi ed.
Provisions recorded in the consolidated balance sheet, other than those relating to fi nancial instruments, employee benefi ts and insurance policies, primarily consist of provisions for litigation, fi nes, penalties and tax risks.
8.1 - Financial assets and liabilities at fair value through profit and loss
Loans and advances as at fair value 8.1.1.2 and 8.1.1.3 2,002 9,646
Financial data 8.1.1.2 Loans and advances designated as at fair value and credit risk
Loans and advances with banks 465 667 0 0 250 250 0 0
Natixis does not cover, by protective purchases, the credit risk for l oans and advances classifi ed as instruments at fair value by results on option.
Financial assets are designated at fair value through profi t and loss when this choice provides more pertinent information or when these instruments carry one or more signifi cant and separable incorporated derivatives. The use of the “fair value”
■ option is considered to provide more pertinent information in two situations: in the absence of accounting compatibility between economically-linked assets or liabilities. In particular, this is the case between an asset and a hedging derivative when hedge accounting conditions are not fulfi lled; in the presence of a portfolio of fi nancial assets and liabilities managed and evaluated at fair value as part of a documented policy of assets and liabilities management.
Book value of hybrid instruments designated at fair value by result because of the presence of signifi cant and separable incorporated derivatives
The use of fair value on option to avoid accounting imbalance represents the majority of assets evaluated at fair value by result.
Financial data 8.1.2 Financial liabilities at fair value through profit and loss
Securities classifi ed as instruments coming under dealing activities/positions are essentially constituted of uncovered sales of fi nancial assets.
Difference between the book value and the amount contractually due on maturity Book value
Difference between the book value and the amount contractually due on maturity
Variation in the fair value of fi nancial liabilities designated at fair value by result
Variation in the fair value of fi nancial liabilities designated at fair value by result, attributable to credit risk
Deposits in the form of securities issued 52,238 52,292 (54) 49,590 48,554 1,036 (172) 742 34 34
Financial data 8.1.2.2 Conditions for classification of financial liabilities designated as at fair value
Financial liabilities are designated at fair value through profi t and loss when this choice provides more pertinent information or when these instruments carry one or more signifi cant and separable incorporated derivatives.
The use of the “fair value” option is considered to provide more pertinent information in two situations: in the absence of accounting compatibility between economically-linked assets or liabilities. The “fair value”
option is used in particular when the conditions for hedge accounting are not fulfi lled: a natural compensation thus operates between variations in fair value of the instrument hedged and those of the hedging derivative; in the presence of a portfolio of fi nancial assets and liabilities managed and evaluated at fair value as part of a documented policy of assets and liabilities management.
Book value of instruments designated at fair value because of accounting imbalance with related instruments
Book value of instruments designated at fair value by result and included in a portfolio of fi nancial assets or liabilities managed and evaluated at fair value by result
Debt in the form of securities issued 52,238 49,727 354 2,157
Hedging of net investments in foreign currencies 0 0 0 0 0 0
8.4 - Loans and advances 8.4.1 Loans and advances to banks
TOTAL PERFORMING LOANS 112,428 114,923 8.4.2 Loans and advances to customers
At December 31, 2007, the fair value of loans and advances to customers, calculated in accordance with the methods set out in
At December 31, 2007, the hedging rate of non-performing loans stood at 34% compared with 33% at December 31, 2006.
Financial data 8.6 - Other information relating to financial assets 8.6.1 Reverse repos
(cf. Note 8.6.1), Natixis holds no assets for which the cash fl ows would have been transferred in the meaning of the
The restructured assets are essentially under the Natixis parent company for an amount of €86 million in 2007 (€98 million in 2006), Natixis Financement for an amount of €29 million in 2007 (€22 million in 2006) and the leasing business for an amount of €14 million in 2007 (€7 million in 2006).
For overdrafts, the arrears is counted from the date when the client is notifi ed and the amount to be indicated is the total overdraft.
The age of the amount in arrears is determined according to the age of the fi rst unpaid amount observed for the debt in question. Breakdown over the period is performed on the basis of the fi rst amount in arrears.
products, often prepared to order, the evaluation model is sometimes fed by parameters that are not observable in the market. For these instruments, profi t or loss can only be established upon initial recognition. The margin shown upon initial booking must, in this situation, be deferred. This margin must be spread over the lifetime of the instrument.
The table below presents the fair value of all fi nancial assets, whether they are booked to the balance sheet by fair value or not. This information is broken down according to the hierarchy given by the IAS 39 standard for determining the fair value of an instrument.
The instruments for which the fair value is determined according to an evaluation technique that is not supported by market data are those for which the initial margin has been deferred and those for which the initial margin has not been deferred only because of the absence of impact on valuation of the non-observable criterion.
Financial assets held for trading 173,991 173,991 84,157 89,834 646 112
Financial assets designated as at fair value 28,937 28,937 23,372 5,565 1
Accrued income and prepaid expenses and deferred income and accrued charges correspond to technical accounts, details of which are given below.
Financial data 8.8.2 Accrued income and prepaid expenses and deferred income and accrued charges 8.8.2.1 Accrued income and prepaid expenses 8.8.2.2 Deferred income and accrued charges
(in € millions) Note Dec. 31, 2007 Dec. 31, 2006 8.8.2.2.1 Restatement day one P&L
Margin remaining to redeem at the beginning of the period 251 266
(1) Instalment schedule for the fi nancial year concerned -€7 million for transactions initiated during 2007 and -€72 million for transactions prior to 2007.
Financial data 8.8.3 Accrued income and prepaid expenses and deferred income and accrued charges – insurance companies 8.8.3.1 Accrued income and prepaid expenses – insurance companies
Deferred acquisition costs 113 105 8.8.3.2 Deferred income and accrued charges – insurance companies
The fair value of investment property is obtained by discounting the rental yield of these assets at the market rate.
Ixis North America recovered property through mortgage loan guarantee foreclosure for an amount of 9 million euros during the 2007 fi nancial year.
They are measured in accordance with IAS 39 as other fi nancial liabilities under the amortized cost method.
At December 31, 2007, the fair value of customer deposits was €61,701 million against €50,244 million at December 31, 2006.
Debt securities in issue (interest-bearing notes, interbank market instruments, etc.), are broken down by nature, excluding subordinated debt which is recorded separately in a specifi c line item.
Life insurance loss reserves cover the capital payable upon the occurrence of a loss. In credit insurance, they include an estimate of the total cost of losses reported but not yet settled at the close of period. Accrued losses are topped up by a reserve for unknown losses calculated statistically.
Amortization, dpreciation and impairment on property, plant & equip ment and intangible assets
(in € millions) Notes Jan. 1, 2007 Increase Utilization Reversals not used
At December 31, 2007, the fair value of subordinated debt was €10,678 million compared with €8,780 million at December 31, 2006.
(1) issues of dated subordinated notes in 2007 comprised: one tranche of €1,347 million (net of the intra-group share) issued by Natixis (RSCN May 2007: €500 million – maturity 14/05/2019, RSCN –
June 2007: €1,000 million – maturity 06/07/2017); one tranche of €186 million (net of issue premium) issued by Natixis (RSCN September 2007: €200 million – maturity 15/12/2021); one tranche of €50 million (net of the intra-group share) issued by Caceis (RSCN December 2007: €100 million – maturity 26/12/2027).
The IAS 39 standard establishes a hierarchy in the means of determining fair value: the best representation of fair value is the price quoted on an active market; A market is considered as active if the prices are easily and regularly available from a stock market, a broker, a negotiator, a price-evaluation service or a regulatory agency and these prices represent real transactions regularly occurring in the market; failing this, their fair value must be determined using evaluation techniques. These techniques include the use of recent transactions, the reference to the fair value of a substantially identical instrument, the method of updating cash fl ows, share-valuation models and any evaluation technique commonly used by players in the market.
When an evaluation model is applied, it must make maximum use of data from the market. In the case of certain structured products, often prepared to order, the evaluation model is
sometimes fed by parameters that are not observable in the market.
For these instruments, no profi t or loss may be recognized at their initial booking. The margin shown upon initial booking must, in this situation, be deferred. It is spread over the lifetime of the instrument.
Fair value amount determined according to evaluation techniques not based on market data
Financial liabilities designated at fair value through profi t and loss 59,946 59,946 6,314 53,632
Financial liabilities at amortized cost – Due to customers 61,701 61,701 61,701 61,701
Expiry of hedging relationship (CFH) 15 (15) 0 1 (1) (0)
Net gains on fi nancial assets and liabilities held for trading 3,202 848 o/w non-hedging instruments 176 181
Ineffi ciency of the cash fl ow hedge (CFH) 6 (2)
Variable-income securities classifi ed as available-for-sale are tested for impairment and an impairment loss recognized if their carrying amount is lower than their recoverable amount.
Impairment in fi xed income securities is recognized under impairment charges and other credit provisions.
Income and expenses from other activities comprises mainly income and expenses relating to lease fi nancing and investment property. This item also includes income and expenses relating to insurance activities, in particular life insurance premium income, paid benefi ts and claims and changes in insurance liabilities.
This item comprises mainly cost of risk relating to credit transactions: charges net of reversals of specifi c and collective provisions, receivables written off during the period and recoveries on bad debts written off.
Share of net income 9.9 - Gains or losses on other assets
Net capital gains on disposals 244 294 538 2 9 11
Net capital gains on disposals of investments in consolidated companies during 2007 include €178 million arising from the capital gain on dilution of Natexis Asset Management into
+ Net income attributable to equity holders of the parent 1,101 943
+ Income from discontinued activities 369 - Share of income of associates (672) (64)
= Consolidated net income before tax, goodwill amortization and share of income of associates 1,015 1,306
Caisses d’Epargne’s personal loans; guarantees and bail bonds: this business line is operated by Natixis Garanties. The main services it provides are: guarantees for mortage loans granted by the Caisses d’Epargne network to personal and small business customers, legal guarantees and fi nancial bail bonds.
Its main activities are: credit insurance, business information and ratings (solvency and marketing), receivables management (from issuance through to collection), factoring,
ownership of the Banques Populaires’ and the Caisses d’Epargne retail banking networks and from the business lines distributed by the networks. Both shareholder groups’
The Caisses d’Epargne banks have a strong presence in the personal and small-business customer segment, offering a full spectrum of products and services. They also boast robust local roots and are prime movers in regional development, offering local authorities, social housing organizations and businesses an extensive range of products and services.
Natixis has four geographical regions: France; other EU countries; north America (Canada, US); other OECD countries.
This analysis refl ects the main regions in which it operates, of which France is the largest market.
sections 4.1 to 4.5 and 4.7 “Risk Management”. They are an integral part of the audited fi nancial statements.
As a lending institution, Natixis is subject to banking regulations and to supervision by the French Banking Commission. This control is exercised on the basis of consolidated accounts and its purpose is to set a number of rules guaranteeing the bank’s capital adequacy, liquidity and fi nancial equilibrium.
The main means used to achieve these objectives are a quantitative mechanism consisting of ratios governing capital adequacy, control of large exposures and liquidity, accompanied by a qualitative mechanism based on internalcontrol requirements.
The capital adequacy ratio encompasses the credit risk and market risks. This ratio measures the adequacy of regulatory capital in relation to risks. The numerator represents the bank’s consolidated regulatory capital, calculated in accordance with
The purpose of controlling large exposures is to prevent an excessive concentration of risks on a single benefi ciary. The requirement is based on an ongoing dual obligation: all of the risks carried on a single benefi ciary must not exceed 25%
NOTE 13 - PAYROLL COSTS, NUMBER OF EMPLOYEES, COMPENSATION AND EMPLOYEE BENEFITS
The annual charge for defi ned benefi t plans comprises: additional entitlements vested with all employees; interest costs (discount effect); the gross yield on plan assets; amortization of actuarial gains and losses (application of the so-called corridor approach) and past service costs.
The main provisions for employee-related liabilities concern: CAR supplementary banking pension; supplementary banking pension for other Natixis Caisses; end-of-career awards and allowances; long service awards.
As regards pension specifi c funds for Natixis, the former BFCE
fund and the former Crédit National funds are at breakeven, with a slight defi cit between reserves and discounted commitments.
ABP Vie, the life insurance subsidiary of Natixis, which is fully consolidated.
The Social Security fi nancing act for 2008 amends the conditions under which employees may be retired before the age of 65. The interim measures introduced by the Social
At December 31, 2007, this change does not have any impact on the calculation of commitments for Natixis, with the legal transfer for employees only taking place on January 1, 2008.
The drift rate for healthcare expenses is 4.5%, of which 2%
(in € millions) Supplementary pensions End-of-career allowances Long-service awards Other Total
Items not recogniz ed under IAS 19 26 28 6 60
Change in scheme recognized over the period 0 0 0 1
Natixis is concerned by the application of IFRS 2 for four plans on which the allocation date is after November 7, 2002 in accordance with the interim provisions of this standard and for which rights have not yet been vested at January 1, 2006.
Dividend payment rate 5.09% per year 5.28% per year 3.54% per year 4.75% per year
Caisse d’Epargne Groups. More specifi cally, this allocation concerns employees working in France and with at least three months seniority on the allocation date, covering the following entities: Natixis; Banque Fédérale des Banques Populaires; Caisse Nationale des Caisses d’Epargne; Credit institutions affi liated with one of the central bodies; entities whose capital is at least 50%-owned – directly or indirectly, exclusively or jointly – by Natixis, one of the central bodies or one of the affi liated credit institutions.
On the allocation date, each benefi ciary employee is entitled to receive 60 shares within two years subject to the presence conditions. The two-year vesting period required under
As of this day, the shares will be available. They will be able to be held under the same conditions, at no cost for benefi ciaries, or be sold at any time.
* Fair value of liability *Change in fair value of liability over the year (€K)
* Fair value of liability * Change in fair value of liability over the year (€K)
Assets at fair value through profi t and loss 189,934 1,145 1,539 9,753 29 1,994 (1,467) 202,927
Financial liabilities at fair value through profi t and loss 165,282 31 303 50 (637) 165,029
The key income statement lines shown above are broken down into six business divisions, refl ecting the six business lines identifi ed in Natixis’ organization structure.
Asset Management [3] holds the asset management activities performed by various subsidiaries, including NGAM.
Services business [5] houses the remaining activities: Securities back-offi ce services (CACEIS and Gestitres strengthening Natixis’ position), Payments, Insurance
Other businesses [7] are a category housing Natixis activities that are not directly operational, notably its own holding company activities serving its direct subsidiaries. Net banking income derives from the management of its corporate treasury, real estate income and institutional activities performed on behalf of the French State. General operating expenses refl ect overheads not allocated to the individual business lines. The Other businesses category also includes certain consolidation adjustments that cannot be assigned to business segments.
Impairment charges and other credit provisions (209) (33) (4) (1) 3 0 (244)
Share of income of associates 653 11 7 0 1 0 672
Gains or losses on other assets 489 11 37 1 0 0 538
Assets at fair value through profi t and loss 161,337 20,059 22,175 2 222 (867) 202,928
Financial assets available for sale 29,846 3,310 1,692 36 111 (234) 34,761
Technical reserves of insurance companies 32,356 1,826 53 16 61 (405) 33,907
IAS recognizes three types of fi nancial guarantee: guarantees granted (received) upon the transfer of fi nancial assets/liabilities; ■
fi nancial guarantees treated as derivative fi nancial instruments; these are credit derivatives (see table on derivative fi nancial instruments for details); fi nancial guarantees meeting the defi nition of an insurance contract and covered by suffi cient technical reserves.
IAS 39: commitments classifi ed as fi nancial liabilities at fair value through profi t and loss. If an entity has a practice of reselling or securitizing credits just after they are issued, these loans are subject to IAS 39 from the commitment phase; those which are subject to settlement (i.e. disposal); those which result in a loan below market conditions.
TOTAL FINANCING COMMITMENTS RECEIVED 2,927 15,830 15.3 - Commitments on securitizations
The Natixis Group structures securitization operations on behalf of its clients or investors, using specifi c conduits. The
Financial assets available for sale 1,981 4,020 2,706 2,184 4,239 11,076 8,556 34,761
Assets held through to maturity 3 0 429 1,189 1,341 3,539 0 6,501
((in € millions) Under 1 month 1 to 3 months 3 months to 1 year
Financial liabilities at fair value through profi t and loss 106,891 3,445 7,041 4,215 15,856 27,560 22 165,030
(in € millions) Total Euros US dollars Sterling Yen Swiss francs Other 16.3 - Information about finance leases and operating leases 16.3.1 Leases as lessor
Less than 1 year > or equal to 1 year and < 5 years > 5 years Unassignable Total
The principal transactions between Natixis and consolidated companies (the Banque Populaire Group including Banque
and its subsidiaries and the Caisses d’Epargne banks and their subsidiaries, proportionally consolidated investments with respect to the portion not eliminated for consolidation purposes and all equity associates) are described hereinafter : CONTENTS< >
Assets at fair value through profi t and loss 3,877 2,407 42 2,135 1,874 10
Net gains/(losses) on fi nancial assets available for sale 1 1
Financial assets at fair value through profi t and loss 8,712 6,474
Financial liabilities at fair value through profi t and loss 2,724 489
Amortization, depreciation and impairment of property, plant and equipment and intangible assets (209) (213)
Net income attributable to equity holders of the parent 1,340 1,595
Net income attributable to equity holders of the parent for the CCI at 20% 268 319
Consolidation restatements: Profi t for the increase in the share in income 38 80
(1) In 2007, as in previous years, directors’ fees paid to Board members and members of the Supervisory Board included a fi xed portion (€10,000 per year and per person) and a variable portion (€2,000 per Board meeting and per person). The directors sitting on the account control committee, audit committee and compensation committee received a fi xed payment of €3,000 or €5,000 depending on the committee and a variable payment of €1,000 per meeting and per person. This compensation is paid in full at the end of the years.
(2) Total gross compensation paid to members of Natixis’ Executive Committee during their term of offi ce during the period, including members of the
Total gross compensation paid to executive offi cers was as follows: Philippe Dupont, Executive Chairman of Natixis 350,000 463,002
In this regard, the aggregate amount of pensions paid to directors may not exceed 60% of revenues for the period, up to a maximum of €370,000. For executive managers appointed after January 1, 2005, this has been lowered to 50%.
In the event of the early retirement of a director (apart from in the case of gross misconduct), an allowance will be paid equal to one year’s compensation, plus one-twelfth of annual compensation per year of service with the Natixis Group, or one of the two shareholder groups, and possibly one-twelfth of the same compensation per year as an executive offi cer.
On retirement or early retirement, a payment is made equal to one-fortieth of annual compensation per year of service with the Group, up to a maximum of 40/40ths of annual compensation.
The companies within Natixis’ scope using the insurance format are: Coface and its subsidiaries (credit insurance, business information and debt management services), Natixis
The following table shows a reconciliation between the fi nancial statements of insurance businesses and how these fi nancial statements translate into the fi nancial statements in the banking format.
The main reclassifi cations concern general operating expenses, which are analyzed by destination in the insurance format and by nature in the banking format.
Other current operating income and expenses (87) (59) (17) (75) (12) (87)
Financial data 16.5.2 Insurance companies’ contribution to the consolidated income statement
Net gains or losses on fi nancial instruments at fair value through profi t and loss (313) (627)
Amortization, depreciation and impairment of property, plant and equipment and intangible assets (18) (23)
We conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting methods used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As indicated in note 7.23, Natixis uses signifi cant estimates within the context of its banking activities: the Group records provisions to cover the risks inherent in its business (notes 7.3 and 11 of the notes to the fi nancial statements).
The Group records provisions to cover employee benefi ts (see note 7.13 of the notes to the fi nancial statements). We examined the methodology used to value these commitments, as well as the assumptions and parameters used.
Share capital subscribed not paid in 13 Accrued income and prepaid expenses 23,951 1,011 1,842
33 Net gains/(losses) on disposals of non-current assets (453) 73 32
Highlights of the year 2007 witnessed further progress in the process of integrating the various entities transferred to Natixis on November 17, 2006 into the Group (*), together with the legal merger of
Ixis CIB and Natixis on December 31, 2007. Note that for accounting and tax purposes, the merger was backdated to
The Risk function’s new organizational structure was rolled out and inserted into the joint control mechanism involving the two central institutions to which Natixis is affi liated.
shares in Natixis’ balance sheet and the net value of the assets transferred by Ixis CIB as at 31/12/2006 (the backdating date). All of the adjustment (€861 million) was booked against goodwill. It will be subjected to impairment tests.
By virtue of this agreement and in their capacity as Natixis’
In exchange for BFBP and CNCE exercising these responsibilities, Natixis is to make a fi xed payment to the two central institutions in respect of the 2007 fi scal year. In subsequent years, this payment is to be indexed to changes in the consumption of regulatory capital.
The following points should be noted regarding the impact of the fi nancial crisis: Indirect subprime risk exposures carried on Natixis’
Shares in securitizations excluding subprime exposures for which no prices could be identifi ed were valued using the following types of valuation models: a correlation model (for CSOs), a scoring model for structures (for ABS CDOs and CLOs), which involved defi ning the level of risk for each structure according to distinguishing criteria benchmarked against observable data.
(*) Note that the merger with Groupe Caisse d’Epargne on November 17, 2006, comprised the following legal transactions: – the transfer by Caisse Nationale des Caisses d’Epargne (CNCE) of some of its subsidiaries and equity interests in the corporate and investment banking and services fi elds, together with the transfer of some of the cooperative investment certifi cates (Caisse d’Epargne CCIs) issued since 2004 by each Caisse d’Epargne et de Prévoyance (except for the Caisses situated in Martinique and New Caledonia) and representing 20% of their capital; – the contribution to Natexis Banques Populaires by SNC Champion, the vehicle formed by the Banque Fédérale des Banques Populaires (BFBP) and the Banques Populaires, of the remainder of the Caisses d’Epargne CCIs not contributed by CNCE and that SNC Champion had previously acquired from CNCE. CNCE and SNC Champion also contributed the share capital of Ixis Corporate & Investment Bank (Ixis CIB) and of Ixis Asset Management
Exposures on US monoline insurers: Transactions concluded with credit enhancers in the form of credit default swaps (CDSs) were subject to writedowns to refl ect the impact of the crisis on monoline insurers’ credit quality. As a result, a €156 million negative fair-value adjustment was applied to the value of these instruments. A €138 million writedowns determined on a collective basis was also recorded.
NAV of shares in SIVs owned by Natixis and of the ensuing liquidation risk, Natixis recognized a €17 million writedown on these shares (classifi ed as held-to-maturity securities), on
Equity interest in CIFG: Caisse Nationale des Caisses d’Epargne and Banque Fédérale des Banques Populaires provided fi nancial support to Natixis’ US credit enhancement subsidiary, CIFG. This fi nancial support involved the two institutions subscribing for equal shares of a $1.3 billion capital increase at the end of December 2007. As a result of this capital increase, Natixis’ residual equity interest in CIFG
was only 0.47% at 31/12/07, the value of which had been fully written off. A €536 million writedown was recognized for this purpose at 31/12/07. The transfer of CIFG shares to Caisse Nationale des Caisses d’Epargne and Banque
The Natixis fi nancial statements have been prepared in accordance with generally accepted accounting principles applicable to credit institutions, including standard CRC 200003 on fi nancial statement presentation.
Since 2000, Natixis has provided for loan impairment at three levels: 1.2.1 Specific provisions 1.2.1.1 Loan principal
Where there is a risk of partial or total non-recovery of loans or non-compliance with loan terms or covenants, impairment charges or provisions are recognized in income under
the heading “cost of risk ”. These impairment charges are determined on a case-by-case and country-by-country basis and adjusted at quarterly intervals, based on an analysis of the related risk and available collateral. With lease fi nancing transactions, capital gains and losses on disposal and charges to and reversals of provisions (leased assets and temporarily unleased assets) are recognized in net banking income.
Termination compensation is booked as interest and similar income. Only the principal amount of payments on nonperforming leases is provided for under cost of risk.
The impairment charge is calculated as the difference between the carrying amount and the estimated recoverable amount discounted at the original effective interest rate.
In accordance with banking regulations: unpaid accrued interest on loans to borrowers subject to bankruptcy proceedings is deducted from the interest account in which it was initially recorded. If the interest is subsequently recovered, it is credited to income upon receipt through the same account; interest on non-performing loans three, or where applicable, six or nine months past due is also provided for in full by deduction from the interest account in which it was initially recorded; all other loans made to these customers are also classifi ed as non-performing, even where the risk appraisal does not call for an impairment charge against the principal amount outstanding; the same rules apply to lease fi nancing transactions, where a provision is taken for the amount outstanding when a lease payment or any incidental costs are more than three months
In accordance with paragraph 10052 of standard CRC 9907, consolidation of these two entities led to an adjustment of provisions covering at-risk loans covered by the put option.
On the assets side of the balance sheet, the net outstanding balance of the loans concerned by the put option is covered by zero-coupon bonds held by the two entities. The results of the two entities consist solely of annual accruals to recognize the value appreciation of the zero-coupon bonds up to their redemption value in 2014, when the bonds mature and the defeasance structure will be wound up. Over this period, the value appreciation exactly matches the provisions required to write down the full amount of the loans covered by the put option. Consequently, the operation has no imagreement on the income statement and the cash required to refi nance the transactions is offset by a cash infl ow.
Assets that are not specifi cally identifi ed as impaired are divided into groups of assets with similar credit risk characteristics on an industry by industry basis. Each group of assets is assessed for objective evidence of impairment based on observable data indicating a probable decrease in the estimated recoverable cash fl ows for that group of assets. Collective provisions are taken to cover any estimated losses. Assets that are subsequently specifi cally identifi ed as impaired are no longer included in the groups of assets assessed collectively.
The impairment provision is based on the expected loss at maturity.
Securitizations are transactions that transfer credit risk without disposing of the underlying portfolios. They consist of synthetic securitizations based on credit derivatives carried out jointly with third party banks and special purpose vehicles.
In substance, the credit derivatives are equivalent to credit insurance protecting Natixis against the risk of borrower default or debt rescheduling.
1.5 - Securities portfolio 1.5.1 Securities transactions (trading account securities, securities held for sale, debt securities held for investment)
Financial data securities held for sale are securities not registered as trading account securities nor debt securities held for investment. They are valued individually at the year-end at the lower of cost or estimated fair value. An impairment charge is taken for unrealized losses but unrealized gains are not recognized. Premiums and discounts, corresponding to the difference between the cost of fi xed-income securities
Elsewhere, a free share allocation scheme (SAGA) was set up in November 2007 for the benefi t of employees of
Commercial Code. The number of treasury shares held for this purpose amounted to 5,760,208 at December 31, 2007, of which shares to the value of €89 million were classifi ed as held-for-sale securities. The cost of acquiring these shares will be recognized in the form of a provision for risks and charges spread over the rights-acquisition period (two years on a time-apportioned basis).
The discount rate used for each subsidiary was based on the following: the average 10-year OAT (French government bond)
yield, the risk premium in the subsidiary’s market, a beta value based on a sample of comparable companies.
Income from fi xed-income securities is recorded on an accruals basis.
Value adjustments and gains or losses on disposal of securities appear under different headings depending on the nature of the transaction: trading account securities, securities held for sale and equity securities held for investment: value adjustments and gains or losses are recorded in net banking income, debt securities held for investment: value adjustments and gains or losses are recorded under “impairment charges and other credit provisions” where they refl ect counterparty risk, and “net gains/(losses) on disposals of non-current assets” where they refl ect market risk or the result of disposal, investments in associates and other long-term equity investments: value adjustments and gains or losses are recorded under “net gains/(losses) on disposals of noncurrent assets.
Financial data 1.7 - Property, plant & equipment and intangible assets 1.7.1 Measurement on initial recognition
New acquisitions are recognized at cost plus directly attributable transaction costs (transfer duties, fees, commissions and registration expenses). Borrowing costs are not capitalized.
After recognition, assets are carried at cost less any accumulated depreciation, amortization and impairment losses.
Natixis has issued perpetual and dated subordinated notes, which in the event of the issuer’s liquidation, rank behind all other creditors.
Remuneration paid in respect of participating notes is treated as interest payable and recognized in income on an accruals basis.
Interest, together with premiums, fees and commissions treated as interest income, is recognized in income on an accruals basis. Other fees and commissions are accounted for on a cash basis.
1.13.4 Institutional activities: Commitments given to banks that grant export credits fi nanced in foreign currencies in order to fi x the exchange rate of their foreign currency borrowings are not included in published offbalance sheet commitments. Income and expenses arising on institutional activities (swaps and exchange rate guarantees)
are charged to or paid to the French Treasury in accordance with agreed terms and conditions.
Exceptional income and expenses are items of income and expense that are unusual in terms of their nature, amount or frequency.
less or plus any actuarial losses or gains arising from: experience adjustments in respect of demographic variables, changes in actuarial assumptions such as the discount rate, employee turnover and future salary increases, differences between the actual return and expected return on plan assets.
Natixis provides for the entire amount of employee benefi t obligations.
2.1 - Principles applied to prepare the 2006 pro forma income statement and balance sheet
The pro forma accounts were prepared by adding together the respective contributions of Natixis and Ixis CIB, i.e. their individual 2006 accounts as reported and restated for intragroup transactions between the two companies.
Other principles applied in the preparation of these pro forma accounts are described in the note titled “Accounting policies and valuation methods”.
Net gains/(losses) on securities held for sale (789) (5) (293) (298)
Net gains/(losses) on disposals of non-current assets (453) 73 (4) 69
Cash and balances with central banks and post offi ces 175 44 1 45
Due to central banks and post offi ces 1,405 613 0 613
Off-balance sheet items – Commitments given Natixis contribution Natixis contribution Ixis CIB
NOTE 7 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES, OTHER SECURITIES HELD FOR INVESTMENT AND TREASURY STOCK
D) Investments with a book value of less than or equal to €150,000 2,179,496.81
II - INVESTMENTS IN ASSOCIATES AND OTHER SECURITIES HELD FOR INVESTMENT
BP VAL DE FRANCE – ST QUENTIN EN YVELINES 1,175,000 332,739,909.76
CEP LOIRE CENTRE – formerly VAL DE FRANCE ORLÉANAIS 1,675,293 238,467,971.00
D) Investments with a book value of less than or equal to €150, 000 1,619,007.81
The information is provided pursuant to the provisions of Article L. 247-1 of the French Commercial Code: % at December 31, 2007 Number of shares at
CEP LOIRE CENTRE – ex VAL DE FRANCE ORLÉANAIS 20.00% 1,675,293
Pursuant to Article L. 233-15 of the French Commercial Code (Thousands of units)
COMPAGNIE 1818 08 RUE DU PROFESSEUR LAVIGNOLLE 33049 BORDEAUX CEDEX 118,918 EUR (49,263) EUR 58.00%
30 AV PIERRE MENDÈS FRANCE 75013 PARIS 105,000 EUR (2) EUR 100.00%
88 QUEENSWAY PACIFIC PLACE HONG KONG HONG KONG 400,000 HKD (162,125) HKD 100.00%
30 RUE PIERRE MENDÈS-FRANCE 75013 PARIS 117,036 EUR 439 EUR 100.00%
51 AVENUE J.F. KENNEDY L-1855 LUXEMBOURG 333,503 EUR 92,172 EUR 100.00%
51 AVENUE JF KENNEDY L-1855 LUXEMBOURG 33,340 EUR 5,303 EUR 100.00%
30 RUE PIERRE MENDÈS-FRANCE 75013 PARIS 95,626 EUR 80,685 EUR 100.00%
NXBP 1 30 RUE PIERRE MENDÈS-FRANCE 75013 PARIS 2,378 EUR 3,519,828 EUR 100.00%
(1) The net value of these lines of securities is higher than their gross value, due to a positive translation differential.
Intangible assets used in the business 47 55 24 (24) 0 101
Non-operating property, plant & equipment 6 0 0 (2) 0 4
Due to central banks and post offi ces 1,405 613 412
Charges to provisions for contingencies and charges (pension commitments) (1) 6 (4)
Investments in associates and other securities held for investment 98 85 13
Investments in associates and other securities held for investment 95 9 38
Investments in associates and other securities held for investment 0 2 3
Five year summary of financial data Pursuant to Articles 133, 135 and 148 of the Commercial Companies Decree
Income after tax, depreciation, amortization and provisions 4.18 4.43 9.37 0.61 (0,38)
FINANCIAL DATA 6 Auditors’ report on the parent company fi nancial statements
In accordance with our appointment as Statutory Auditors at the annual general meeting, we hereby present our report for the year ended December 31, 2007 on: our audit of the accompanying fi nancial statements of Natixis; justifi cation of our assessments; the specifi c verifi cations and disclosures required by law.
Furthermore, in the note to the fi nancial statements “Signifi cant events of the year”, the company reviewed the specifi c context of the crisis, its direct and indirect exposures and the system implemented to estimate them, and the changes made for the calculation of valuation and writedown of certain fi nancial instruments. We examined the system implemented to assess these exposures and their valuation, and the appropriateness of the information contained in the above-mentioned note.
Natixis records provisions to cover employee benefi ts (paragraph 16 of the section on accounting policies and valuation methods).
We also conducted the specifi c verifi cations required by law, in accordance with professional standards applicable in France.
As required by law, we verifi ed that the management report contains the appropriate disclosures concerning the acquisition of participating and controlling interests and the identity of the company’s shareholders.
As required by article L. 225-88 of the French Commercial Code, we have been advised of those agreements which were subject to prior authorization by the Supervisory Board.
responsibility to determine whether the agreements are appropriate and should be approved.
We conducted our investigations in accordance with the professional standards applied in France. Those standards require that we verify the consistency of the information given to us with the contents of the source documents.
1.1 Agreements approved by the Supervisory Board of Natixis 1.1.1 Invoicing agreement relative to the affi liation of Natixis with Banque Fédérale des Banques Populaires (“BFBP”) and the Caisse Nationale des Caisses d’Epargne et de Prévovance (“CNCE”)
1.1.2 Natixis’ participation as arranger in the €25,000,000,000 secured bond issue programme by BFBP
Corporate offi cers concerned: Philippe Dupont, Jean-Louis Tourret, Jean Clochet, Stève Gentili, Bernard Jeannin and Yvan de la
Board approved the following on November 23, 2007: the conclusion of a fi nancial guarantee and credit master agreement between Banques Populaires Covered Bonds, BFBP, Natixis and, initially, seven Banques Populaires; the signature of a coverage contract letter entered into between Banques Populaires Covered Bonds, BFBP and Natixis.
Corporate offi cers concerned: Charles Milhaud, Jean-Louis Tourret, Bernard Comolet, Michel Goudard, Stève Gentili, Yvan de Ia
Porte du Theil, Nicolas Mérindol, Jean-Claude Créquit, Francis Henry, Bruno Mettling, Didier Patault, Jean Clochet, Bernard Jeannin and Philippe Sueur.
On December 19,007, the Supervisory Board authorized the signature of a risk control and assistance mandate with BFBP and
CNCE, under which Natixis will be responsible, up until December 31, 2009 (subject to renewal) or until CIFG Holding is sold to a third party, for the control and supervision of the CIFG Group (risk policy, portfolio supervision, new fi le acceptance procedure, IT systems, models, etc.) in the interests of BFBP and CNCE (the “Mandate”).
Under the Mandate, Natixis will be entitled to compensation equal to the costs incurred by Natixis plus 10%.
1.2 Agreements approved by the Supervisory Board of Ixis CIB before the merger within Natixis 1.2.1 “Clic’n Trade” partnership and service agreement between Ixis CIB, CNCE and Banque Palatine
On June 6, 2007, the Supervisory Board authorised the conclusion of a service agreement between Ixis CIB, CNCE and Banque
2.1 Agreements approved by the Board of Directors of Natexis Banques Populaires (now Natixis)
Natixis received €3,417,688.39 in fees from Vallauris CLO plc, of which €252,645.40 was passed on to Natexis Asset
2.2.1 Letters of joint and several guarantee and commitment terminated or ended
To date, the following letters of joint and several guarantee and commitment have been terminated or have ended: a) between Caisse des Dépôts (CDC) and Ixis CIB (previously CDC Ixis Capital Markets), which came into force on July 12, 1996 and was terminated by CDC effective June 30, 2001 (midnight); b) between CNCE (acquiring rights in CDC Finance — CDC Ixis (“CDC Ixis”) further to the merger dated December 31, 2004) and
Ixis CIB (previously CDC Ixis Capital Markets), which entered into force on July 1, 2001 and was terminated by CDC Ixis effective
November 1, 2003; c) between CNCE (acquiring rights in CDC Ixis) and Ixis CIB (previously CDC Ixis Capital Markets), joint and several guarantee “1”, which entered into force on November 1, 2003 and ended on January 23, 2004 (inclusive); d) between CNCE (acquiring rights in CDC Ixis) and Ixis CIB (previously CDC Ixis Capital Markets), joint and several guarantee “2”, which entered into force on January 24, 2004 and ended on January 23, 2007 (inclusive); e) between CNCE and Ixis CIB (previously CDC Ixis Capital Markets), which entered into force on January 24, 2004 and was terminated by CNCE effective December 31, 2007 (midnight); f) between Ixis CIB (previously CDC Ixis Capital Markets) and Natixis Municipal Products Inc. (previously CDC Municipal Products
Inc.); Natixis Derivatives Inc. (previously CDC Derivatives Inc.); Natixis Financial Products Inc. (previously CDC Financial Products
These agreements did not have any fi nancial impact in 2007.
2.2.4 De facto association agreement between CDC, CNCE (acquiring rights in CDC Ixis) and Ixis CIB (previously CDC Ixis Capital Markets)
On December 19, 2001, the Supervisory Board authorized the conclusion of an agreement between Ixis CIB (previously CDC Ixis
On November 17, 2005, the Supervisory Board authorized the conclusion of an addendum to this agreement relative to a reduction in the transfer-costing percentage for services provided, down from 25% to 18.75%.
The cost incurred by Ixis CIB under this agreement represented €3,600,000 for the year ended December 31, 2007.
On November 17, 2005, the Supervisory Board authorized the conclusion of a service and partnership agreement between Ixis CIB
and CNCE relative to the development and hosting of an Internet site for CNCE by Ixis CIB for placing orders on forward and cash exchange transactions.
2.2.7 Guarantee agreement between Ixis CIB and Ixis Investor Services (“Ixis IS”, now CACEIS Bank)
In addition, on a daily basis, Ixis CIB provided the market and econometric data available to it for running the AMcRisC software.
Populaire and Groupe Caisse d’Epargne. This merger took place on November 17, 2006 after authorization was obtained from the CECEI on October 11, 2006. The process continued with Ixis CIB’s merger into Natixis in 2007. The transaction
In 2007, the internal control system was revamped in order to rationalize structures and enhance effi ciency, in accordance with principles described in the report dated September 17, 2007 and approved by the CECEI on November 15, 2007.
Natixis’ internal control system complies with the legal and regulatory requirements arising in particular from amended
Banques Populaires and Caisse Nationale des Caisses d’Epargne. These institutions are responsible for ensuring that their respective groups respect risk monitoring requirements on a consolidated basis. As a result, structures and systems for coordinating permanent and periodic controls and thereby geared to ensuring overall consistency were set up when
Natixis was created. Similarly, the Risk, Compliance and Audit departments are integrated into the corresponding business units of each of the two shareholder groups.
Natixis’ internal control mechanism complies with both external and internal regulations and standards.
Activity Modernization Act of July 2, 1996); more specifi cally as regards internal controls, it is subject to the specifi c banking guidelines resulting from CRBF rule 97-02 and its additional clauses; as a provider of investment services, Natixis is subject to the provisions set out by the French fi nancial market regulator
(AMF), and especially the rules of good conduct concerning market participation and customer relations; Natixis complies with the terms of the codes of good conduct published by professional associations, whenever the regulator recommends or enforces their application
Analysts, made mandatory by the AMF); Natixis applies anti-money laundering and terrorist fi nancing regulations, under the control of the French Banking
Financial Services Regulatory Authority in Ireland), where the activities exercised locally are subject to the said rules; in the fi eld of periodic control, Natixis enforces the IFACI/
Natixis’ internal control system is organized around several sets of rules: a set of charters and procedures which standardizes and regulates the Group’s risk processes (procedure governing
Natixis’ permanent and periodic controls are organized as operational or functional fi rst-tier controls, up to the highest level: Natixis separates its risk-taking and control functions, and different levels of control levels. This separation results in: a distinction between front- and back-offi ce functions, the existence of fi rst-tier controls at the operational level, a distinction between periodic and permanent controls.
These controls are carried out by operational or functional departments under managerial supervision. These departments are responsible in particular for: verifying the compliance of transaction processing procedures; justifying the accounting balances of account movements relating to the transactions they carry out.
Until late-October 2007, Natixis’ second-tier permanent controls concerned three main departments, i.e. Risk,
The Controls department’s responsibilities regarding permanent second-tier control could be summarized as follows: ensure that procedures existed and were effectively applied
(via document inspection); assist in controlling operational risk (including compliance risk), especially that generated by credit and capital market activities; perform second-tier accounting audits; steer and coordinate internal control action in the subsidiaries and branches.
The changes to Natixis’ internal control system were geared to two objectives: maximizing synergies between the various control entities within Natixis; improving the clarity of the internal control system in the eyes of the various businesses lines.
CHAIRMAN’S REPORT ON CORPORATE GOVERNANCE AND INTERNAL CONTROL 7 Internal c ontrol p rocedures ensuring centralized recording of dysfunctions that entail compliance risk at subsidiary or business-line level, with a view to their consolidation at Group level; centralizing any dysfunctions in the sense of article 112 of amended rule 97-02, at subsidiary or business-line level, with a view to consolidating them at Group level and reporting them to the two shareholder Groups; defi ning the conditions for exercising the alert facility provided for in above article, in keeping with confi dentiality requirements regarding information providers; preparing regular summary reports especially for use by
As a result, Compliance managers in the subsidiaries report to the executive body or, exceptionally if the size of the entity warrants it, to a permanent controls manager who, in turn, reports to the executive body and through a strong hierarchical link to the Natixis compliance manager. This link means that: Natixis’ Head of Compliance is required to issue prior approval to the attachment, appointment or withdrawal of the subsidiary’s Compliance manager; Natixis’ Head of Compliance participates in annual performance reviews and career advancement decisions; the subsidiary Compliance manager must fulfi ll mandatory reporting requirements vis à vis Natixis’ H ead of
In the non-subsidiarized businesses, Compliance managers report directly and hierarchically to Natixi’s Head of
There are three main components to Natixis’ Compliance mechanism: Professional ethics
Group’s clients were classifi ed either as professionals, eligible counterparties or non-professionals and were sent notice of this categorization, along with information on the new regulations. The tests used to assess the professional competence of each client were revised and standardized.
Compliance Department and the detection of proven confl icts of interest.
The Natixis S.A. p arent c ompany drafted new internal regulations and a Compliance Manual that are due to come into effect in 2008. Rules of good conduct rules were expanded and detailed to the business lines, in particular those related to fi nancing.
module was designed for corporate and investment banking front offi ces and “face-to-face” training was conducted by the business line compliance offi cers on the operational consequences of the MiFID Directive.
Lastly, the Compliance Department continued to participate in the new product creation process by taking part in many ad hoc Committees .
As a result of these efforts, nearly 80% of p arent c ompany employees and over 60% of subsidiary employees (excluding
Coface) had received anti-money laundering training by end-December 2007. In addition, a focus on this issue was inserted into broader compliance training programs, in order to remind employees of the due diligence required in this area. These initiatives resulted in a substantial rise in the number of affi davits and atypical transactions submitted to the department for analysis.
The anti-money laundering procedure was totally overhauled during the year. The new version, which is now available on the Natixis intranet, is due to be updated shortly when the 3rd European Directive is incorporated into French law.
The changes will entail the incorporation of the risk-based approach and the reinforcement of the entry-into-businessrelations mechanism, via systematic validation of clients after image risk has been identifi ed and analyzed.
Efforts to update client fi les in accordance with regulatory requirements continued during the year. Any new business relationship automatically triggers requests for and analysis of ID, as well as measures to assess the honorability of the client and the effective benefi ciaries. Files of former clients also continued to be updated.
Additional action was carried out in 2007 to extend the scope of controls on atypical transactions using behavioral analysis software. As a result, a broad range of p arent c ompany activities were covered by the system at the end of the year.
In addition, use of Fircosoft software to fi lter fund fl ows suspected of being connected with terrorism or violating international embargoes was extended in May 2007. In addition to covering all issued and received Swift messages, the software now consolidates payments into a single fi le.
The number of ”false alerts” related to embargoes issued by the European Union and/or OFAC on new countries, was reduced, thanks to a signifi cant improvement in settings and to the software upgrade. Likewise, the centralization of almost all alert processing activities within a single unit improved both responsiveness and productivity. As regards requirements to identify order originators, measures were taken to ensure payments issued by Natixis were compliant with these requirements and steps were also taken to ensure payments received from other establishments were also compliant.
Following the aforementioned transfer of resources from the Controls Department, the Compliance Department’s permanent second-tier control responsibilities were extended to include controls geared to ensuring the application of procedures.
Under the new organization, Compliance’s permanent secondtier controls focus on: transaction compliance: this involves checking that both transactions and transaction execution processes comply with applicable banking and fi nancial rules, market rules,
AMF reporting rules and rules concerning reporting to other fi nancial market fi rms; organizational compliance; the quality of data transmitted to Compliance (via automated tools and various reports); ■
The Head of ITSS works for Natixis and its subsidiaries, and with service providers, suppliers and clients. Responsibilities include: ensuring that policy is always appropriate to the risks involved; promoting policy and ensuring adherence to it at all levels; providing any necessary security services; verifying and monitoring adherence to policy and reporting globally across the whole of the Natixis Group.
Committees in charge of the Bank’s controls and operational risks, and especially in: the Internal Functions Coordinating Committee; ■
Commission’s White Papers and rule 97-02 and, more generally, in the Basel Committee’s guidelines.
(10 persons at end-2007); local correspondents within the business lines, who are in charge of conveying security policy locally and providing advice and assistance within their area of responsibility; correspondents within IT project management teams who are in charge of setting up and maintaining security mechanisms.
Executive Board and meets twice yearly. It is responsible for the highest-level validation of the annual security plan prepared for Natixis and its subsidiaries; an ITSS Coordination Committee which meets regularly and comprises the various parties involved in security, and especially the Heads of ITSS within the subsidiaries. It is responsible for drafting and monitoring the annual security plan, coordinating and steering all ITSS actions and pooling security projects; Security Committees within subsidiaries or business lines.
These Committees are chaired by the Head of ITSS within the subsidiary or within Natixis and oversee ITSS initiatives at the local level.
ITSS activities in 2007 focused both on recurring measures and projects geared to reinforcing IT security.
managers in relation to their counterparts within Natixis and the subsidiaries. The resulting policy, which was prepared by Heads of ITSS within the subsidiaries and validated by the Executive Board, sets out the responsibilities of all participants in the system, as well as security objectives and procedures for reporting to the Heads of ITSS within Natixis and the subsidiaries; assessing Natixis’ degree of compliance with established security policy and preparing the ITSS action plan for 2008; implementing a Group-wide performance chart for the
Executive Board. It has strong functional ties, of a hierarchical nature, with the internal audit departments of Natixis’
shareholders and central institutions – Banque Fédérale des Banques Populaires (BFBP) and Caisse Nationale des
“front-to-back” processes through which activities are carried out. Using a risk-based approach, this analysis involves assessing the existing points of control in audited processes and, if necessary, formulating recommendations designed to make these points of control more comprehensive or more robust. These recommendations are set out by order of priority.
Internal audit reports are sent to the audited units and to the
Internal Audit’s assignments are set out in a yearly audit plan, which itself forms part of a four-year plan setting out the frequency of audits and assigning resources according to the nature of the risks to be verifi ed.
The audit plan may be revised during the year at the request of
Natixis’ yearly and multi-year audit plans are approved by the Chairman of the Executive Board and the internal audit departments of the Bank’s shareholders and central institutions. The yearly audit plan is examined by Natixis’ Audit
In 2007, the Internal Audit Department conducted assignments on all of the risk classes arising from Natixis’ operations. It also dedicated a substantial portion of its resources to regulatory surveys, as part of the Bank’s Basel II certifi cation processes.
In addition, as part of measures to reorganize the internal control system, special efforts were made with a view to consolidating Natixis’ audit function in three main directions: agreements regarding the organization of periodic controls were proposed to Natixis’ main subsidiaries in France. They are subject to the approval of the executive bodies of the relevant companies and of Natixis during 2008; the auditors located in Natixis’ main French and foreign subsidiaries and branches – which previously reported to the former Internal Controls Department – were integrated into the audit function run by the Internal Audit Department.
A new position, with responsibility for coordinating the international audit network, was consequently created and fi lled; the work begun in 2006 to rationalize and standardize
Internal Audit continued to reinforce headcount in line with the plan launched when Natixis was formed in 2006.
The Control Functions Coordination Committee, which already existed within the former Natexis, saw its remit renewed within the new Group in 2007.
The Risk Department plays a key role in the Bank’s internal control system by identifying, measuring and controlling risk. It makes proposals to the Executive Board and keeps it informed about Natixis’ commitments and their development.
Committee, which defi nes the key elements of risk policy, analyzes the main risks and validates the principal risk standards and methodologies.
The Risk Department is responsible for analyzing counterparty credit risk using a formalized credit dossier for each counterparty and benefi ciary group. This dossier includes all information relevant and useful for forming an opinion, such as: internal information about the client and its business activities, e.g. fi nancial data, internal ratings, identifi cation and analysis of the client in accordance with methods validated by the
CHAIRMAN’S REPORT ON CORPORATE GOVERNANCE AND INTERNAL CONTROL 7 Internal c ontrol p rocedures external data, e.g. external credit agency ratings, sector analyses, etc.; information regarding commitments; e.g. the credit fi le summarizes all credit risks incurred by the Bank, including those on capital market transactions; information concerning the counterparty’s profi tability.
Credit decisions are made either via delegations or authorizations accorded to business lines and certain members of the Risk Department or by the relevant credit committee, following a contradictory analytical process
Offi cer or any person with the appropriate authority. They are granted according to the counterparty’s category and internal credit rating, and to the type and duration of the commitment.
The delegation system was revised when Natixis was created in order to implement a single procedure to cover the corporate and investment banking activities of both the former Natexis
In another initiative, a shared tripartite organization for assigning roles and monitoring in the ratings area was also developed in collaboration with Groupe Banque Populaire and
The Bank’s commitments are measured and monitored on a daily basis using consolidation tools.
The Risk Department provides the Executive Board and the business line managers with fundamental analyses and reports on the Group’s business. The state of and movements in Natixis’ commitments are presented according to various risk indicators such as: the category, internal rating, business sector or client location; the type of commitment; the Basel II segmentation.
Day-to-day monitoring is performed by the business lines and the Middle Offi ce for fi nancing, while the Risk Department performs all second-tier controls.
Regarding excesses, an excess committee meets monthly in order to analyze movements in excesses based on various indicators (number, business lines affected, etc.), and to examine signifi cant excesses and monitor their regularization.
Their entry onto watch list is then examined and, if applicable, offi cialized by the Special Affairs and Litigation Department, the
Risk Department or the relevant Credit Committee, depending on the level of exposure.
Sensitive cases are reviewed at least quarterly and are presented to the quarterly Watch List Committee.
Since the transition to IFRS, these provisions have been categorized as collective provisions and established for similar types of assets according to the following criteria: credit rating for loans to individuals and small businesses; sector risk and geographic risk for other counterparties
The rules for diversifying risk form part of the tripartite agreement between Natixis, Groupe Banque Populaire and
to its central institutions, which then jointly validate the credit cases and ratings assigned to the counterparties concerned at least once yearly.
& Financings business line within Natixis CIB (p arent c ompany and specialist subsidiaries).
The new front-offi ce management systems were selected and gave rise to a unifi ed and standardized application architecture within the Group.
The migration of former Natexis Banques Populaires transactions to the new systems involved the application throughout Natixis of a 1-day parametric VaR with a 99%
confi dence interval and monthly and annual loss alerts. The entire mechanism was reviewed, business line by business line.
The functions and organization of Market Risk Control at Natixis are described in Natixis’ Market Risk Regulation Charter, which was approved by the Group Risk Committee in March 2007.
The Charter applies to all Natixis Group entities whose activity entails market risks.
Committee at the time of its inception. The Committee is chaired by the Chief Executive Offi cer or his delegate.
In addition to the Committee, a system of delegations was set up in order to enable decisions to be taken between scheduled
It reports regularly to the Group’s central institutions, especially within the framework of the Joint Standards and Methods
Committee (as regards tripartite methodological aspects) and the Joint Risk Committee (as regards risk monitoring).
The Asset & Liability Committee (ALM Committee), which is chaired by the Chief Executive Offi cer and includes representatives of the Corporate and Investment Bank, the
The ALM Committee’s remit covers the banking portfolios of the head offi ce, and of those branches and subsidiaries presenting signifi cant structural balance-sheet risks. In line with the tripartite convergence plan for monitoring structural balance sheet risks taken through Natixis’ double affi liation with its two core shareholder groups, the supporting documents and minutes of all committee meetings are addressed to the central institutions in order for them to monitor Natixis’
risk on a consolidated basis. During the target phase of the convergence plan, which will come into effect at the end of 2008, Natixis’ ALM system will be interfaced with those of the central institutions.
The Corporate and Investment Bank’s Treasury function is organized around the head offi ce and the New York and
As a corporate and investment bank, the bulk of Natixis’ overall liquidity and interest-rate risks stem from the mismatching of transactions with contractual maturities. As a result, the impact of ALM agreements on the risk monitoring and measuring mechanism is negligible.
Committee. Because of their specifi c activity, certain subsidiaries are permitted to manage their own mismatching on a delegated basis via their own ALM Committee or Treasury
The liquidity risk monitoring mechanism was rounded out with stress scenarios during the year. The four scenarios involve applying asset shocks (drawings on confi rmed credit lines, for instance) or liability shocks (specifi c crisis on Natixis’
European Central Bank to successfully participate in oneweek /three-month auctions by using the Banque de France and the Bundesbank via Frankfurt. The new submissions, in USD, to the European Central Bank and the US Federal
Reserve were also successfully used. The emphasis was on renewing maturities, reducing the liquidity gap, extending maturity on interbank loans and repos in order to obtain a neutral or long liquidity position at the yearly cut-off point.
Natixis, consists of risk from net investments abroad refi nanced by purchase of currency and so-called non-operational currency risk resulting from revenue and expenses recorded in currencies other than the euro.
With regard to the fi rst component, the ALM committee approved continued refi nancing of long-term investments
Concerning the second category of risks, a portion of gross operating income budgeted to be earned in dollars is hedged by advance sales of the dollar against the euro, with the corresponding repurchases to be made as and when earnings are effective formed in dollars. This hedging is geared to neutralizing an adverse variation in the average EUR/USD rate over the year in relation to the average budgeted rate.
More specifi cally, the Operational Risk function is responsible for: monitoring the various elements of the operational risk system: mapping, proven incidents, risk factors and action plans set up to reduce risks; summary reporting on the progress of action plans instituted to reduce the most signifi cant risks, as well as the most sensitive risk factors (key risk indicators); training employees and promoting an operational risk culture within the Bank.
Risk Department, either directly, or by a strong functional relationship of the hierarchical type. With regard to operational risks, this meant putting the function in sole charge of recording and investigating all incidents, producing reporting documents for the Executive Board, business lines, central institutions and regulators, monitoring operational risk action plans, producing maps of potential risk situations and, ultimately, performing risk valuation.
The Operational Risk function relies on a network of correspondents within the business lines. The correspondents are responsible for reporting to the Operational Risk function any incidents that might entail operational risk and gathering appropriate data (incidents, environment variables, progress on action plans, etc.).
Operational Risk Committee. The Committee is chaired by the Head of the Business Line and is the sole operational risk management body for the business line.
The Group’s Operational Risk System is placed under the supervision of Natixis’ Operational Risk Committee. The
Committee is chaired by a member of the Executive Board and comprises managers or representatives of each business line, support services and controls departments. The Head of Operational Risk serves as the Committee’s secretary. He/
Operational Risk Committee initiates and checks progress on company-wide action plans. In 2007, the Committee launched two working groups, namely “Seine fl ooding” and “Securing employee entry/departure procedures”.
Natixis is required to prepare its own consolidated fi nancial statements, although it is also the main part of a subset that now includes the two consolidation entities formed by Groupe
As things stand, the consolidation process is operationally autonomous, but remains fully enmeshed in that of the two central institutions.
The reliability of the process is based on the following core principles: defi nition and communication of accounting principles applicable to Group companies, including new texts issued during the period, in terms of both French accounting standards and IFRS; use of the direct consolidation method (now being rolled out throughout the Group), in order to permit the consolidation packages from each consolidated company to be examined via a formal review process; preparation of consolidated fi nancial statements on a quarterly basis. This allows for a better level of control of half-yearly and annual fi nancial statements, on the basis of projected transactions for the year and increased reconciliation of intra-group operations; an automated control procedure for individual information provided by the consolidated entities. This process uses consolidation packages including checks for accuracy and consistency, which must be passed for the data to be transmitted; item-by-item analysis of all entries that impact consolidated shareholders’ equity and production of a tax proof for each consolidated entity. This procedure provides full evidence of consolidated shareholders’ equity and individual justifi cation of recognized deferred taxes; ■
In 2007, Natixis continued work to decentralize its consolidation tool within the London, Ho Chi Minh City, Dubai and Panama branches (the latter two newly created).
In order to facilitate production of the consolidated accounts within these tighter timescales, the overall process was revised by: redefi ning the consolidation criteria so as to better refl ect the increased size of the new Group; adjusting work organization and the overall schedule.
As this situation did not prove totally adequate from the operational standpoint, Natixis agreed with the central institutions to start work on a project geared to developing its own dedicated consolidation base that will communicate with the central institutions’ corresponding bases. The project will be jointly managed with the central institutions and has entered the detailed design phase.
French Banking Commission (CRBF rule n° 97-02) for the prudential monitoring of credit institutions, Natixis’ Internal
Audit department uses the results of periodic audits to assess internal control procedures. There is a particular focus on
These permanent and periodic controls encompass reviews of account justifi cation work undertaken by the various departments, clearance of suspense items, accountingmanagement reconciliation (for both balance sheet and income statement), rules for allocating income and expenses, rectifi cation of errors identifi ed through these controls and the corresponding documentation.
These controls are conducted using the diverse accounting information systems throughout the Group.
For all systems, Natixis and its subsidiaries continued efforts to upgrade accounting and fi nancial control procedures and develop audit trail tools.
The business lines have been involved since the study phases of the project and played a key part in various deliveries and especially in the “Collective reception” and “Parallel Run”
Natixis’ accounting control system is based on the following core principles: strict separation of recording and accounting control functions; dimensions tailored to objectives; work schedule balanced with roll-out of accounting controls; management and monitoring conducted by the Finance department.
Efforts in 2007 focused on: simplifying the organization of the accounting control system: Efforts geared to improving the fl uidity of the general control process and helping to shorten the period-end reporting process were completed in 2007.
The mechanism now only comprises two tiers: a fi rst tier of detailed controls, decentralized in the business lines, a second tier of management and general controls, centralized at the Finance Department.
This adjustment involved transferring revision activities from the former Internal Control Department to the Finance
Thematic assignments were nevertheless left under the responsibility of the Compliance Department; adapting control tools to the new ERP tool.
The changes primarily involved incorporating: dual input to the tools from General Accounting and
2007 year-end reporting was affected by the merger in the following ways: the existence of two distinct accounting channels, which made it impossible to prepare individual accounts directly; the transfer of certain former-Natixis activities to former-Ixis channels, which made it hard to match certain transactions and compare the two fi scal years, thereby necessitating a series of accounting migrations; ■
2007 was Natixis’ fi rst full year of existence after its creation in 2006.
Like many other fi nancial institutions, Natixis had to cope with the diffi culties arising from the international fi nancial crisis. The
Bank from such risk on a lasting basis and undertaking a more general examination of the issue of fraud and how to prevent it. Work in this area is being coordinated by a specially-created team comprising representatives of the periodic and permanent control teams. The team furnishes Natixis’ executive bodies with regular updates regarding this action plan, in line with the utmost vigilance called for by the executive bodies in this area.
CHAIRMAN’S REPORT ON CORPORATE GOVERNANCE AND INTERNAL CONTROL 7 Auditors’ report on Chairman’s report
As statutory auditors to Natixis, and in accordance with Article L. 225-235 of the French Commercial Code, we hereby present our report on the Chairman’s report for the year ended December 31, 2007, drawn up in accordance with the provisions of Article L. 22568 of the French Commercial Code.
Resolutions to be put to the vote at the Annual Shareholders of May 22, 2008 399
The right to take part in general shareholders’ meetings is subject to shares being registered in the name of the shareholder at midnight on the third business day prior to the meeting, either in registered share accounts held by the company or in bearer share accounts held by the appropriate intermediary.
Pursuant to Article 5 of the bylaws and in accordance with the applicable legal and regulatory provisions, the Company may request any authorized body or intermediary to provide any information about the holders of securities conferring immediate or future voting rights at shareholders’ meetings, and in particular as to their identity, nationality and address, the number of securities that they hold and any restrictions attached thereto.
In the event of failure to comply with the obligation to supply information set out in the foregoing paragraph, and on the application of a shareholder representing at least 1% of the voting rights, duly recorded in the minutes of the meeting, any shares in excess of the threshold, which ought to have been declared, shall be stripped of their voting rights until the expiry of a period of two years commencing on the date on which the notifi cation is properly given.
Renew the authority to the Executive Board granted for 26 months in accordance with the law by the meeting dated
In the third resolution, shareholders are asked to approve the proposed appropriation of earnings and the payment of a dividend. The Executive Board is proposing to pay a dividend of €0.45 per share for each of the 1,222,042,694 shares comprising the capital stock. The dividend will be payable on
The fourth resolution is to provide an option of a share dividend.
The purpose of the fourteenth resolution is to authorize the reduction in capital as part of the share buyback program, within the limit of 5% of the capital.
ADDITIONAL INFORMATION8 Legal information 2006 dividend in respect of treasury shares €433,846.78; Appropriation of the 2006 earnings -€16,584,314.50; Balance of 2006 appropriation of earnings €486.22; Retained earnings at December 31, 2007 €434,333.00.
The dividend for the year ended December 31, 2007 is therefore €0.45 per share for each of the 1,222,042,694 shares comprising the capital stock.
For information, as required by law, dividends paid in the previous three years were as follows: Dividend per €16 par value share €0.86 €5 €3.30
The issue price of the new shares, dated January 1, 2008, is set at 90% of the average of the fi rst quoted prices during the twenty stock market sessions prior to the day of the present assembly, reduced by the net amount of the dividend.
If the amount of dividends due to a shareholder does not correspond to an integral number of shares, the shareholder may receive: the number of shares immediately below, supplemented by a cash adjustment; or the number of shares immediately above, in consideration of an additional cash payment.
The option for the payment of the dividend in shares will be open on May 30, 2008, namely two days after the date of coupon detachment. Shareholders must make their requests to the establishment holding their share accounts. The option will be closed on June 18, 2008 inclusive. If the option has not been exercised by this deadline, shareholders will receive the dividends due to them in cash on June 27, 2008.
The shareholders give full power to the Executive Board to account for the number of shares issued and the resulting increase in capital and consequentially modify the text of
Having received and considered: the management report on the operations of Natixis and its consolidated subsidiaries for the year ended
ADDITIONAL INFORMATION 8 Legal information the consolidated fi nancial statements for that year; and the report of the Acting Auditors on the consolidated fi nancial statements; the shareholders hereby approve the consolidated fi nancial statements as presented.
In accordance: with the provisions of Articles L. 225-209 et seq. of the
French Commercial Code; with the provisions of European Directive 2003/6 and of
European regulation 2273/2003 of December 22, 2003; with Articles 631-1 et seq., and Articles 241-1 et seq., of the general regulations of the Autorité des Marchés Financiers; with market practices as accepted by the Autorité des
Marchés Financiers in two decisions of March 22, 2005; and having regard to the description of the program published in the manner provided by the Autorité des Marchés Financiers, the shareholders, having received and considered the report of the Executive Board, hereby grant it the authority to purchase shares in the company.
This authority, which is granted for a period of eighteen months with effect from the date of this shareholders, is intended to enable the company: to ensure liquidity or make a market in the shares through an independent investment service provider acting independently under the terms of a liquidity agreement complying with the Code of Ethics of the AFEI; to allot shares to employees under the conditions permitted by the regulations, and particularly in the context of a profi tsharing arrangement, stock option plan, company or group savings plan or free allocation of shares; to offer the shares in payment or exchange, particularly with respect to acquisitions; to use the shares to cover obligations relating to debt securities giving access to the capital; to cancel the shares by way of a reduction in the capital.
For the purpose of implementing this authority, the shareholders confer all necessary powers on the Executive Board, including the power to subdelegate as defi ned in Article L. 225-209 paragraph 2 of the French Commercial Code, to decide to implement this authority and to determine the manner in which this will take place, particularly in order to adjust the aforementioned purchase price in the event of transactions altering the Company’s equity capital or capital stock or the nominal value of its shares; to place any stock market orders and enter into any agreements; to make any declarations and complete any formalities; and, more generally, to do whatever may be necessary.
Board and the special report of the Acting Auditors, acting under the conditions as to quorum and majority required for extraordinary shareholders and pursuant to the provisions of
Article L. 225-180 of the French Commercial Code, or some of them; CONTENTS< >
Eighth resolution: renew the authority to increase capital via the issue of ordinary shares or any capital securities, with preferential subscription rights for existing shareholders
The shareholders, giving the ruling on the quorum and majority conditions for special shareholders’ meetings, after having been made aware of the Executive Board’ report and the special report from the Acting Auditors, and in accordance with the clauses of Articles L. 225-129-2, L. 228-92 and L. 228-93 of the Commercial Code: 1. Delegate to the Executive Board, subject to the prior authorization of the Supervisory Board in the cases provided for in the statutes, the authority to decide on one or more capital increases through the issue, in France or abroad, in euros, of ordinary shares of the company or any capital securities giving access by any means, immediately and/or in future, to ordinary shares of the company or a company for which it directly or indirectly owns more than half of the capital, these securities also being able to be denominated in foreign currencies or in any monetary unit established by reference to several currencies.
ADDITIONAL INFORMATION 8 Legal information decide that, if the subscriptions by way of right, and where appropriate, subject to allocation have not absorbed all of the issue, the Executive Board may use, under the conditions provided for by the law and in the order which it will determine, one and/or the other of the options provided for by Article L. 225-134 of the Commercial
Ninth resolution: renew the authority to increase capital via the issue of ordinary shares or any capital securities, without preferential subscription rights for shareholders
L. 228-92 and L. 228-93 of the Commercial Code: 1. Delegate to the Executive Board, subject to the prior authorization of the Supervisory Board in the cases provided for in the statutes, the authority to decide on one or more capital increases through the issue, in France or abroad, in euros, of ordinary shares of the company or any securities giving access by any means, immediately and/or in future, to ordinary shares of the company or a company for which it directly or indirectly owns more than half of the capital, these securities also being able to be denominated in foreign currencies or in any monetary unit established by reference to several currencies.
Such authority is valid for a period of twenty-six months from the present meeting; ■
ADDITIONAL INFORMATION8 Legal information 2. Decide that the total amount of increases in equity capital which may be thus carried out immediately and/or in future, may not be greater than €150 million (one hundred and fi fty million euros) in nominal value, this amount coming under the ceiling fi xed in the preceding resolution, to the amount of which will be added, where appropriate, the additional amount of shares to be issued to preserve, in accordance with the law, the rights of the bearers of securities giving the right to shares; 3. Decide that the maximum nominal amount for the issue of securities representing debt or giving access to capital that may be carried out under the present authority may not exceed a nominal amount of €1,500 million, or the exchange value of this amount in case of issue in another currency, this amount coming under the ceiling fi xed in the preceding resolution; 4. Decide to abolish the preferential subscription right of shareholders to these securities, which will be issued in accordance with the legislation, and to confer on the
Eleventh resolution: to allow for the possibility of shares issued without preferential subscription rights for existing shareholders to be used as remuneration for shares tendered in the event of a share swap offer or an asset transfer
The shareholders, giving the ruling on the quorum and majority conditions for special shareholders’ meetings, after having been made aware of the Executive Board’ report and the special report from the Acting Auditors, and in accordance with the clauses of Articles L. 225-147 paragraph 5 and
L. 225-148 of the Commercial Code: 1. Delegate to the Executive Board, subject to the prior authorization of the Supervisory Board in the cases provided for in the statutes, during a period of twenty-six months from the present meeting, the necessary authority to proceed with the issue of shares and securities giving access, immediately and/or in future, to the Company’s capital, in order to remunerate securities that may be contributed to the Company as part of a public offer including a securities-exchange component meeting the conditions set by Article L. 225-148 of the Commercial
conditions, the parity of exchange and, where appropriate, the amount of the cash adjustment to pay, determine the terms of the issue either as part of a public exchange offer or a tender offer or a primary exchange, matching a public exchange offer or an individual tender offer, at its sole initiative, set off the fees from the increases in equity capital against the amount of the premiums which relate to it and deduct from this amount the sums necessary to bring the legal reserve to one tenth of the new capital after each increase, generally, conclude any agreements, particularly to ensure the success of the envisaged operation(s), take any measures and carry out any formalities in relation to the fi nancial servicing of the issued securities, in accordance with the present authority and the exercise of the rights which are attached to it, account for the completion of each capital increase, carry out correlative modifi cations to the statutes and generally do what is necessary.
Twelfth resolution: renew the authority to increase capital via the incorporation of premiums, reserves, earnings or other items
L. 225-130 of the Commercial Code that the rights relating to fractional amounts will not be negotiable or transferable and that the corresponding shares will be sold and the amounts from the sale will be allocated to the holders of rights no later than thirty days after the date when the whole number of their shares is registered to their account, deduct, from one or more available reserve items, the amounts necessary to bring the legal reserve to one tenth of the equity capital after each capital increase, take all necessary precautions to ensure the correct completion of the capital increase, account for the completion of the capital increase, proceed with correlative modifi cations of the statutes and carry out all proceedings and formalities relating to it, and generally do what is necessary; 4. Formally record that the present authorization cancels any previous authorization having the same purpose.
The shareholders, giving the ruling on the quorum and majority conditions required for special shareholders’ meetings, after having been made aware of the Executive Board’ report and the special report from the Acting Auditors, and in accordance with the clauses of Articles L. 225-129 and following and
are associated with it in the sense of Article L. 444-3 paragraph 2 of the Employment Code, from when these employees join a company savings plan; 2. Authorize the Executive Board, during these capital increases, to freely assign these shares, within the limits provided for by Article L. 443-5 paragraph 4 of the
L. 443-5 of the Employment Code; 5. Confer the necessary powers on the Executive Board, with the right to sub-delegate under the conditions provided for by the law, to set the terms and conditions for implementation of the capital increase (or increases)
decided in accordance with the present resolution, particularly to: determine the companies whose employees may benefi t from the subscription offer, fi x the number of new shares to be issued and their dated date, set, within the legal limits, the conditions for the issue of the new shares and the periods granted to employees for exercising their rights, set the periods and terms for payment for the new shares, it being specifi ed that this period may not exceed three years, charge the fees for the capital increase(s) to the amount of the premiums relating to it, account for the completion of the capital increase(s) up to the amount of shares subscribed and proceed with correlative modifi cations of the statutes, carry out all operations and formalities made necessary by the completion of the capital increase(s).
The present authorization is granted for a period of twenty-six months from today.
Fourteenth resolution: authority to reduce the equity capital by canceling purchased shares in application of a share-buyback program
It is governed by French company law, the provisions of the
Pursuant to Article 2 of the bylaws, the Company’s corporate purpose in France and abroad is: the conduct of all and any banking business and related businesses within the meaning of the French Banking Act; the provision of all and any investment services as defi ned in the French Monetary and Financial Code; the performance of specifi c assignments on behalf of the
All documents concerning the Company, including its bylaws, fi nancial statements and reports presented to general meetings of shareholders by the Executive Board or the Statutory
After deduction of any prior year losses, a minimum of 5% of each year’s earnings shall be transferred to the legal reserve as required by law. This provision shall no longer apply once the legal reserve has reached one tenth of the value of the company’s capital stock, but shall be reinstated if for any reason the legal reserve falls back below this minimum requirement.
The balance, plus any retained earnings, comprises the sum available for distribution, which may by resolution of the shareholders at the annual general meeting be used as they deem appropriate within the limits permitted by law, either by way of transfer to retained earnings or other reserves, or on the recommendation of the Executive Board, distributed in full or in part as a dividend.
As permitted by law, the Executive Board may decide to pay an interim dividend either in cash or in shares.
(6) years. In the event of a vacancy for a member of the
Executive Board, the Supervisory Board shall appoint a replacement for the remainder of the term of offi ce of his or her predecessor, as provided by law.
Article 10 – Chairmanship of the Executive Board – Chief Executive Offi cer
The functions of the Chairman, and, if applicable, of the Chief
The Executive Board shall meet as often as the interests of the Company require, upon a notice of meeting being issued by its Chairman or by at least half its members. It shall meet at the head offi ce or in any other place indicated in the notice of meeting. Additions may be made to the agenda when the
meeting takes place. Notices of meetings may be issued by any means including by word of mouth.
In the event of a tied vote, the Chairman of the meeting shall have a casting vote.
The Executive Board shall draw up its own regulations governing its manner of functioning, and shall provide a copy of them to the Supervisory Board for information.
No restriction on the Executive Board’s powers shall be enforceable against third parties, which may commence legal action against the Company to enforce obligations entered into on its behalf by the Executive Chairman or by a Chief
Executive Offi cer, on condition that their appointments were properly published.
The members of the Supervisory Board shall be appointed by the ordinary general meeting of shareholders, save that in the event of one or more positions becoming vacant, the Board may co-opt replacements for the remainder of the term of offi ce of their predecessors, subject to ratifi cation by the next general meeting.
When it has been determined in accordance with current regulations that the percentage of the capital stock owned by employee shareholders is in excess of the threshold provided by law, a member of the Supervisory Board shall be appointed by the general meeting from among candidates put forward by the Supervisory Board of the Employee Share Ownership
Board in offi ce may be more than 70 years of age. When this proportion is exceeded, the oldest of the members of the
Supervisory Board, except for the Chairman, shall cease to hold offi ce at the end of the next ordinary general meeting of shareholders.
Throughout his or her term of offi ce, each member of the
Supervisory Board must be the owner of at least one thousand
The members of the Supervisory Board shall be appointed for a term of six (6) years. They may be re-elected. The functions of a member of the Supervisory Board shall come to an end at the end of the ordinary general meeting of shareholders called to approve the fi nancial statements for the fi nancial year ended, which is held in the year in which his or her term of offi ce expires.
The Supervisory Board shall determine their compensation, whether fi xed or variable.
The Chairman shall be responsible for convening meetings of the Supervisory Board at least four times a year, and for directing its proceedings.
Article 16 – Meetings of the Supervisory Board 16.1 The Supervisory Board shall meet as often as is required by the interests of the Company and legal and regulatory provisions, and at least once a quarter in order to examine the written quarterly report of the Executive Board.
Subject to Urgent Business as defi ned below, the Board of
Meetings shall be conducted and shall make decisions according to the conditions as to quorum and majority provided by law.
Coface or any other company controlled directly or indirectly by the Company within the meaning of Article L. 233-3 of the
In the event of Urgent Business, the time limits for convening and conducting meetings of the Supervisory Board shall not be subject to Article 16 above, on condition that the Chairman of the Supervisory Board of the Company has: fi rst sent a notice to the members of the Supervisory Board justifying the existence of the Urgent Business within the meaning of the defi nition set out above; and provided all the members of the Supervisory Board with all the information necessary for them to analyze the situation, together with the notice of meeting.
The Executive Board shall present it with a report at least once a quarter, summarizing the main acts or other matters in connection with the management of the Company, and including all the information necessary for the Supervisory
After the closing of each fi nancial year and within the time limits provided by the regulations, the Executive Board shall present the Supervisory Board with the annual and consolidated fi nancial statements and with its report to the general meeting, for verifi cation and inspection. The Supervisory Board shall present the annual general meeting with its observations on the report of the Executive Board and on the annual, parent company and consolidated, fi nancial statements.
The Supervisory Board may decide to set up Committees responsible for considering matters referred by the Supervisory
Executive Offi cers of the Principal Subsidiaries (as defi ned in Article 16.2),
Natixis or any of the Principal Subsidiaries (as defi ned in Article 16.2) or Dedicated Subsidiaries (the term
Assurance, or any company that might be substituted for them) may be party, any increase of the capital stock of Natixis, immediate or future, while cancelling preferential subscription rights, approval of the Company’s business plan prepared by the
(6) years. They may be re-elected, and may be dismissed by the general meeting of shareholders.
Shares in the Company may either be registered shares or identifi able bearer shares, at the option of the holder. They shall be registered in an account and transferred in the manner provided by applicable laws and regulations.
L. 228-93 of the French Commercial Code, and for a period of 26 months with effect from the date of the meeting, to increase the capital on one or more occasions, with or without preferential subscription rights, in a maximum nominal amount of €150 million, by the issuance of shares or any marketable securities conferring rights in the capital stock.
This general meeting of shareholders also decided, in accordance with the regulations: that in the event of excess demand, the issuances of shares decided on could be increased by a maximum of 15% of the initial issuance; that the Executive Board could make issuances of up to 10% of the capital stock in the form of equity capital or marketable securities conferring rights in the capital stock, in order to pay for contributions in kind to the company.
Date of meeting Resolution Authority Amount authorized Date used Amount used
In order to provide scope to increase the amount of the issues in the event of surplus demand 15% of initial
In order to allow for the possibility of shares issued without preferential subscription rights for existing shareholders, to be used as remuneration for shares tendered in the event of a share swap offer or an asset transfer
For the purpose of increasing capital via the incorporation of premiums, reserves, earnings or other items €150M
For the purpose of allocating options to subscribe for or to purchase shares options Jan. 29, 2007 options
Nov. 17, 2006 21 For the purpose of allocating free shares shares -
May 24, 2007 7 For the purpose of allocating free shares shares Nov. 12, 2007 shares
As indicated in the table below, 23,531,457 exercisable or yet to be exercised options to subscribe for new or purchase existing shares were in existence at December 31, 2007.
Populaires directly or indirectly held the majority of the capital stock; ■
The exercise price is equal to the average price quoted in the 20 trading sessions preceding the date on which the Executive
Board fi xed the terms and conditions of the annual options plan.
No option to subscribe for new shares was granted in the fi nancial year 2006.
On 24 May 2007, the mixed annual/extraordinary general meeting of shareholders authorized the Executive Board to grant, on one or more occasions, options to subscribe for or to purchase shares, to the company’s employees or corporate offi cers or to certain of them, or to companies affi liated to it in the sense defi ned by Article L. 225-180 of the French
Commercial Code. This authorization is valid up to a maximum amount of €10,000,000.
Certain derogations allow options to be exercised early (fi nancial operations by a third party in relation to the capital of Natixis, and the negotiated retirement or death of the benefi ciary).
From 2001 to 2005, the benefi ciary directors were the Executive Chairman and Chief Executive offi cer of Natexis Banques Populaires.
In 2007, the benefi ciary directors were the four members of the Executive Board.
Number of shares at the end of the fi nancial year
Banque Fédérale des Banques Populaires and Caisse Nationale des Caisses d’Epargne have entered into a shareholders’
The proportion of the capital of Natixis owned by the employees of Groupe Banque Populaire reached 0.70%.
Physical or legal persons exercising or capable of exercising control over Natixis
The Banque Populaire and Groupe Caisse d’Epargnes exercise the responsibilities provided by the banking regulations, by reason of their position as the principal shareholders of
The application of the corporate governance rules and the rules imposed on the members of the Board enable the risk of the abusive exercise of management control to be prevented.
On November 17, 2006, a shareholders’ agreement was entered into between BFBP and CNCE, the principal provisions of which are described below: Stability of the respective investments
“dilutive” circumstances after which the investment of each shareholder would be less than 34% of the capital on a fullydiluted basis, subject to a limit of investment of 34% of the capital on a fully-diluted basis, on the understanding that such acquisitions of shares shall be carried out on behalf of the two shareholders by a jointly-appointed investment services provider; of the subscription on an irreducible basis of increases in the capital of Natixis while maintaining preferential subscription rights, and of subscriptions of increases in the capital necessary to maintain the prudential equity capital of Natixis.
The shareholders shall meet every two years with effect from the date of signature of the agreement in order to re-examine the best way to ensure the durability and stability of their
agreement and the stability of their investments in the capital of Natixis, whether by the creation of a joint holding company to which they would transfer their respective investments in the capital of Natixis, or by the extension of the 10-year stability period.
In the event that either of the shareholders gives notice of its decision not to renew the stability period (inalienability and upper limits) for a further period of fi ve years at the end of the initial period of 10 years (or of a tacit extension of that initial term), any transfer of securities that the said shareholder planned to carry out will be subject to a right of pre-emption of the other shareholder.
Natixis shares owned by each of the shareholders have been registered in pure registered accounts on the books of the
Company and a custody agreement has been entered into with a fi nancial institution, under the terms of which the Company can only transfer those shares upon the instructions of the said fi nancial institution given under the conditions provided by its agreement.
In the event that either of the shareholders owns a number of shares in excess of the number of shares owned by the other shareholder, that shareholder shall waive its voting rights in respect of the excess shares, and undertakes to sell them at the latest on the fi fth trading day following the date of their acquisition. In default, that shareholder: shall be solely responsible for the costs and obligations resulting there from pursuant to the applicable stock exchange regulations, particularly as regards the compulsory fi ling of a takeover bid for Natixis; undertakes (by way of a sale undertaking) to sell half of the excess shares thus owned to the other shareholder, at a price equal to their nominal value.
Prohibition on the conclusion of new agreements constituting a concert party
The shareholders’ agreement is intended to guarantee the principle of parity of representation of the two shareholders on the Supervisory Board of Natixis.
Supervisory Board is chaired alternately by a representative of one of the two shareholders for a period of six fi nancial years.
The Executive Board is composed of between 2 and 7 members appointed for a term of six years by the Supervisory
Board (on a proposal from the Executive Chairman in the case of the other members). They are chosen according to competence criteria without distinction according to the group to which they belong.
Executive Board is Mr. Philippe Dupont. The dismissal of all or any of the members of the Executive Board by the general meeting of shareholders requires the prior agreement of the two shareholders.
Essential decisions are: the appointment and dismissal of the Executive Chairman; the dismissal and, on a proposal from the Executive
Executive Board as Chief Executive Offi cer; the withdrawal of the position of Chairman or Chief Executive
or the constitution of a joint venture by Natixis or any of its subsidiaries, for an amount in excess of €150 million; any asset transfer, merger or spin-off transaction to which
In the event of disagreement relating to an essential decision, the matter will be referred to the Chairmen and, if applicable, the Supervisory Boards and Boards of Directors (as the case may be) of each of the shareholders in order for them to consult and arrive at a joint position. If the disagreement persists at the time of a second meeting of the Supervisory
Subject to the existence of distributable profi ts and reserves and the applicable prudential rules, and save in exceptional circumstances, BFBP and CNCE are committed (i) to proposing to every general meeting of shareholders convened for the purpose of approving the fi nancial statements of Natixis a distribution of dividends in an amount at least equal to 50%
(50% of the net pro forma profi t for the fi nancial year 2006) and
after a period of 10 years, subject to giving prior notice of 6 months.
(including the stability period if one of the two shareholders has not terminated it in accordance with the terms and conditions mentioned above), unless notice to terminate is given by either of the two shareholders at least 6 months before its expiry.
Natixis shares are traded on the Eurolist by Euronext Paris (compartment A) and are eligible for deferred settlement
Natixis shares form part of the SBF 120, SBF 250 indices, and, since March 1, 2007, of the CAC Next20 index.
TRENDS IN AVERAGE MONTHLY PRICES AND TRADING VOLUMES SINCE SEPTEMBER 2005
Dividends not claimed within the legal limitation period of fi ve years become the property of the State.
Number of shares comprising the capital stock 1,222,042,694 1,219,864,330 48,995,480 48,255,962 48,045,139 * After the division of the nominal value of the shares by 10.
A - Description of the principal provisions of the Banques Populaires CCI Agreement
and all the Banques Populaires, are as follows: 1. Restrictions on the free transferability of the Banques Populaires CCIS
CCI of which the sale is envisaged and, if applicable, the price offered and the terms of payment of the price.
(ii) by its “de facto” infl uence arising from the industrial and technical cooperation between the Banques Populaires and
Populaires will arise particularly from the following provisions of the Banques Populaires CCI Agreement: (i) the extension of the mission of the federal representative representing BFBP on the Boards of Directors of the
BFBP, for all decisions of the Board of Directors which relate to its mission as the central body of the Banques
Banques Populaires, the approval of increases in the capital, of bond issues and of acquisitions and sales of investments, and the centralization of cash fl ow surpluses of the Banques Populaires and their refi nancing); (iv) the right of Natixis to request a second resolution in the event that the Board of Directors of BFBP decides not to follow the advice given by Natixis on a decision likely to cause harm to its fundamental interests; (v) the right of Natixis to full and complete information regarding the operational and fi nancial management of the
Banques Populaires; (vi) the rights of Natixis in respect of the audit of the Banques
Populaires, and particularly the association of Natixis, in its capacity as a non-voting director, with the decisions taken by the Board of Directors of BFBP relating to administrative, technical and fi nancial control of the organization of the management of the Banques Populaires; (vii) the delegation of powers by BFBP to Natixis as regards the defi nition of standards and methods of assessment of risks common to BFBP, CNCE and Natixis.
The Banques Populaires CCI may be repurchased from Natixis on the initiative of each Banque Populaire, without the prior authorization of the special general meeting of CCI holders and with the prior authorization of the Board of Directors of
BFBP, in the following circumstances: any substantial alteration in the balance of the respective shareholdings of BFBP and CNCE in Natixis and/or an end to the joint control exercised by CNCE and BFBP over
Natixis; any reform of 1947 Law involving a substantial alteration of the rights of CCI holders.
In addition, in the event that legislative or regulatory changes or changes in the assessment of the regulators concerned or of the statutory auditors of Natixis should make it necessary to increase the infl uence of Natixis or to alter it signifi cantly in order to enable the consolidation of the Banques Populaires CCI by
4. Technical and industrial cooperation between Natixis and the Banques Populaires
In particular, the provision of the following services currently provided by Natexis Banques Populaires to the Banques
Upon the expiry of the period of 10 years provided above, either of the parties may terminate, in whole or in part, the existing commercial and industrial relations and any other relations which might have been added in the meantime, in accordance with the special contractual provisions governing those relations and subject to giving one year’s prior notice.
An agreement relating to the CCI issued by the Caisses d’Epargne and transferred to Natexis Banques Populaires will be entered into by each Caisse d’Epargne et de Prévoyance and by CNCE, SNC Champion and Natexis Banques
Since the Caisses d’Epargne CCI do not carry voting rights, the particular infl uence of Natixis over the Caisses d’Epargne will be characterized (i) by its legal infl uence arising from Natixis having the means to assess and make known its assessment of the consequences for Natixis of operational and fi nancial management decisions made by the Caisses d’Epargne provided for in the Caisses d’Epargne CCI Agreement, and
Caisses d’Epargne; (vi) the rights of Natixis in respect of the audit of the Caisses d’Epargne, and particularly the association of Natixis, in its capacity as a non-voting director, with the decisions taken by the Board of Directors of CNCE relating to administrative, technical and fi nancial control of the organization of the management of the Caisses d’Epargne; (vii) the delegation of powers by CNCE to Natixis as regards the defi nition of standards and methods of assessment of risks common to BFBP, CNCE and Natixis.
There are numerous economic ties between the subsidiaries transferred by CNCE and the Caisses d’Epargne and these are likely to continue and to develop with the creation of Natixis.
In particular, the transferred subsidiaries provide the Caisses d’Epargne with the following services: custody services; the design and management of customer products (asset management, revolving credit, guarantee insurance for borrowers, factoring and equipment leasing, fi nancial planning and market products, local government fi nancing, debt management); and securities and derivatives brokerage.
Natixis after the completion of the Operation; (ii) any sale and/or transfer of the Caisses d’Epargne CCI for any reason whatever, including in the event of a merger or spin-off of Natixis; (iii) any reform of France’s law of 1947 involving a substantial alteration of the rights of CCI holders; (iv) any legislative or regulatory changes or changes in the assessment of the regulators concerned or of the statutory auditors of Natixis that makes it necessary to increase the infl uence of Natixis or to alter it signifi cantly in order to enable the consolidation of the Caisses d’Epargne CCI
In addition, without prejudice to the benefi t of paragraph (iii), in the event of a legislative amendment conferring a voting right on the holders of CCI, Natixis undertakes to act in concert with
The repurchase value of the Caisses d’Epargne CCIS will be calculated using the method of valuation used when they were issued, and must take account of the proportion of the net assets to which the CCI confer a right. In the absence of agreement between Natixis and CNCE or the Caisse d’Epargne concerned, this repurchase value will be determined by an expert.
On November 17, 2006, Natixis entered into purchase and sale undertakings with Banque Palatine, Foncier Participations and Crédit Foncier de France relating to the investments held by Banque Palatine, Foncier Participations and Crédit Foncier de France in the capital of Compagnie 1818 – Banquiers
Foncier de France. Banque Palatine, Foncier Participations and Crédit Foncier de France reciprocally undertook to sell their investment in Compagnie 1818 – Banquiers Privés to
The purchase undertakings will be exercisable between July 1 and August 31, 2008. The sale undertakings will be exercisable between September 1, 2008 and November 30, 2008.
Natixis was created following the transfer of the assets of CNCE (Caisse Nationale des Caisses d’Epargne et de
Prévoyance) and SNC Champion (a wholly-owned subsidiary of Banque Fédérale des Banques Populaires) to Natexis
Banques Populaires, bond and similar issuance) and banking activities in the competitive market sector.
Founded in 1919, Crédit National initially focused on developing its business as a medium and long-term lender before branching out into related activities in order to offer its corporate clients broader and more comprehensive solutions to their needs.
Française du Commerce Extérieur (BFCE) from 10.06% to 88% and then 100%. BFCE, which was founded in 1947, had focused on developing its commercial banking activities while gradually scaling back its export support activities on behalf of the French state.
Natexis Banques Populaires was created in July 1999 following the transfer of CCBP’s operating activities to Natexis S.A.
At an extraordinary general meeting held on December 6, 2002, the shareholders of Natexis Banques Populaires approved all the provisions of this agreement, as well as the transfer value of the shares transferred by ASB. The shareholders also approved a capital increase of €22,417,312 to pay for the acquisition, through the issuance of 1,401,082 fully paid-up shares with a nominal value of €16 each.
Caisse d’Epargne enter into exclusive negotiations concerning the creation of Natixis.
Executive Board of Caisse Nationale des Caisses d’Epargne, signed the agreement that sets out the terms and conditions of the creation of their new joint subsidiary, Natixis.
Populaires and Natexis Banques Populaires and the supervisory Board of Caisse Nationale des Caisses d’Epargne approved the agreement at their meetings held on June 2 and 6 respectively.
Banque Populaire banks to Natexis Banques Populaires of the remaining Caisses d’Epargne CCIs not transferred by
Populaire banks issued CCIs for Natexis Banques Populaires representing 20% of its share capital (together referred to as the “Banque Populaire CCIs”).
Natixis shares in the form of an open price offer (“Offre à Prix
Documents relating to Natixis (deeds of incorporation, bylaws, reports, letters and other documents, historical parent company and consolidated fi nancial information for each of the fi nancial years preceding the publication of this document)
and under the heading “Shareholders and investors” on the company’s institutional website at www.natixis.com.
Natixis can request documents free of charge and without obligation: by letter, from: Natixis
Immeuble Arc-de-Seine 30, avenue Pierre Mendès-France 75013 Paris by telephone, from: by e-mail: relinvest@natixis.fr
Heading Registration document page number 3. Selected fi nancial information 3.1. Selected historical fi nancial information regarding the issuer for each fi nancial year 6 - 7 3.2. Selected historical fi nancial information for interim periods N.A.
5. Information about the issuer 5.1 History and development of the issuer 426 - 427 6. Business overview 6.3. Exceptional factors N.A.
10.5. Information regarding the anticipated sources of funds needed to fulfi ll commitments referred to in items 5.2. and 8.1 173 - 174 11. Research and development, patents and licenses N.A.
809/2004 of April 29, 2004, the following information is incorporated by reference in this registration document: the consolidated fi nancial statements for the year ended
D.06-0152 and are either of no material interest to investors or covered elsewhere in this registration document.