Natexis Banques Populaires serves the Banque Populaire regional banks and also builds long-term partnerships with its own clientele of large and mediumsized companies, institutional investors, banking and financial institutions.
Banques Populaires kept up its strategy of controlled growth, building on its existing strengths. As the Banque
overriding goal is to be viewed by clients as a benchmark player.
The Bank's various businesses experienced mixed fortunes in 2002.The Financing and Services businesses turned in a resilient performance but
With 72.85% of its capital held by Banque Fédérale des Banques Populaires, Natexis Banques Populaires enjoys the backing of a powerful group. This stable framework allied with the financial strength of the
Banque Populaire Group provides a solid basis for the steadfast implementation of our long-term development strategy.
were affected to varying degrees by last year's unstable markets and lackluster economic conditions.
The Financing business turned in a generally satisfactory performance. All of the business lines achieved good results, with the exception of the factoring business which experienced a temporary standstill.
In Services, the Banking, Financial and Technology Services business line experienced a sharp drop in execution volumes, but e-banking processing volumes grew strongly. In Asset Management, new money invested in life insurance products and money market funds rose at a satisfactory rate.
Over the past year, we worked hard to overcome the challenges of the turbulent market conditions, while at the same time reshaping our organization in order to reap the full benefits of the economic recovery when it finally comes.We have bolstered our structures, introduced greater consistency in our ways of working and launched a robust cost containment policy. Having taken the action required to restore momentum in our various businesses, we are poised to reap the full benefits, as of 2003, of last year's acquisitions of Coface and Arnhold & S. Bleichroeder.
Daniel Duquesne, Chief Executive Officer of Banque Populaire Loire & Lyonnais
Michel Goudard, Chief Operating Officer of Banque Fédérale des Banques Populaires
MARKET CAPITALIZATION in EUR billions earnings per share 7.10 6.70 2.40 based on average number of shares outstanding net dividend per share, 2.50 2.50 1.50* excluding tax credit * dividend recommended at the Annual Shareholders’ Meeting of May 22, 2003.
natexis banques populaires share performance as of December 31, 2002 capital stock EUR759,085,392 number of shareholders 200,000 approximately number of shares 47,442,837 market capitalization EUR3.8 billion market First Market Euronext Paris, eligible for deferred settlement service sicovam code 12068 reuters code CNAT.PA
voting rights Shares registered in the name of the same holder for at least 2 years carry double voting rights. As of December 31, 2002, there were 71,383,194 voting rights.
1st quarter 2002 561,837 2nd quarter 2002 1,244,071 3rd quarter 2002 503,099 4th quarter 2002 678,855
Banques Populaires has strengthened its cross-functional teams and unified information systems. The Bank has also devoted considerable time and effort to staff training in order to meet client needs in a constantly changing market. Lastly, in 2002, Natexis Banques
Natexis Banques Populaires has developed multichannel products tailored to the general public,which it offers to its direct clients and to the clients of the Banque Populaire banks.
Boards, as well as the role of the board members, chairmen and specialized committees. A central secretariat at Natexis Banques Populaires oversees almost all the subsidiaries’ corporate secretariats, with a view to ensuring a consistent approach to legal and labor law issues. Lastly, substantially all entities trade under the Natexis name followed by the name of the core business or the company’s former registered name.
Rue de Monttessuy site. As well as leading to increased efficiency, these transfers enabled the
Bank to scale down its real estate portfolio and capitalize on the upswing in the Paris property market.
Major information system projects – which consumed substantial resources in terms of people and technology – were completed in 2002.
Group-wide general accounting and receivables accounting systems are now in place, helping to promote standard working practices throughout the organization. In the Services business, securities processing for a major financial institution and for all banks using the same standards has been transferred to an information system that is consistent with the one used by
Natexis Banques Populaires has developed new management accounting software offering a more precise and consistent budgetary approach.
Adopted as of early 2003 by all management accounting departments of Natexis Banques
Populaires’ entities, the system will enable operating expenses to be monitored more accurately on a consolidated basis.
A crisis management plan has been drawn up to ensure continuity of critical operations in the event that any of the Bank's buildings or systems were to incur serious damage.
Teams dedicated to growth operations were also bolstered in early 2002. As well as working on external growth projects, these teams now also turn their attention to complex internal reorganizations.
Finally, the implementation of Bank-wide organization principles and quality standards initiated in 2001 continued in 2002 and will be completed in 2003. All initiatives in this area decided on by the parent bank will be rolled out in
Natexis Banques Populaires’ more centralized approach towards information systems projects will enable the Bank to leverage IT expertise and develop tools that can be shared across business lines. This in turn will enhance software applications while generating economies of scale.The
Bank’s information systems committee, whose members represent each core business, meets each month to roadmap IT strategies. Likewise,
Natexis Banques Populaires is currently working with i-BP (Informatique Banques Populaires)
Natexis Banques Populaires employees for the changes that will take place in the coming years. In terms of recruitment, this means catering for the
A centralized human resources policy is needed, in order to fully capitalize on interpersonal and technical skill sets. Several projects have been launched to this end, and will be rolled out over the coming years. Examples include the development of career plans for high potential staff and a management institute set up in late 2002, which will offer management training to some 300 executives. These initiatives,which interlock with projects conducted by Banque Fédérale des Banques Populaires, will foster mobility not only across the Bank but also throughout the Group as a whole.
As a major player in the fast-growing market of receivables management, the Banque Populaire
shares Coface’s ambition to become the world’s leading receivables rating, management and insurance platform.
Arnhold & S. Bleichroeder in July 2002. Formerly a subsidiary of Arnhold & S. Bleichroeder Holdings,
US-based Arnhold & S. Bleichroeder is specialized in equities brokerage and corporate finance services.Renamed Natexis Bleichroeder Inc., it has teamed with Natexis Capital – renamed Natexis
Populaires’ capital, has begun to bear fruit. In 2002, a number of Franco-German transactions were undertaken, the most significant one being a firsttime bond issue jointly managed on behalf of a
Bank’s strategy of strengthening its service offering for corporate clients, and represented a prime opportunity for Natexis Banques Populaires to bolster its receivables management and financing services – especially factoring and securitization –, while speeding up international expansion in this particular business area. The acquisition will also substantially enhance the Banque Populaire banks’
With over fifty years' experience and an unrivalled international presence, Coface facilitates trade throughout the world. The company is rated AA by Fitch and is listed on the Paris Bourse.
Coface helps companies to manage, protect and finance their business transactions, by allowing them to outsource all or part of their receivables/payables management while retaining full control over commercial decisions.
Outside France, the company has subsidiaries or branches in 56 countries and offers local services in a total of 91 countries through its partners in the CreditAlliance (credit insurance) and InfoAlliance (credit information)
In France, Coface manages export credit insurance on behalf of the French State.
– asia/oceania: australia, china, hong kong, india, japan, malaysia, singapore, south korea, taiwan, thailand coface network
■ Natexis Bleichroeder (ex-Natexis Capital), Natexis ABM Corp. (ex-ABM Corp.), Natexis Private Equity (ex-Financière Natexis Banques Populaires).
(3) DZ Bank AG (1.91%) and Arnhold & S. Bleichroeder Holdings (2.95%).
Banques Populaires as a foremost corporate banking institution, and Specialized Financing, centered on real estate and equipment lease financing and factoring.
EUR701 million contribution to net banking income EUR37.2 billion worth of risk-weighted assets 125 syndicated loan arranger mandates won in 2002 specialized financing
Populaires domestic and international network, with a view to bolstering the strong position that the Bank has carved out for itself in the corporate and international banking arena.
Corporate and International Banking services are organized around three business areas comprising sixteen business units. The
Corporates business area serves as a lynch pin, managing all aspects of client relationships. The Structured Finance area develops a wide range of financing solutions including asset financing, syndication and financial engineering solutions, acquisition and LBO financing.
In 2002, Corporate and International Banking confronted the headwinds generated both by the global economic slowdown and difficulties besetting certain industries. Against this difficult backdrop, Natexis Banques Populaires focused on gaining an even keener understanding of client businesses, in order to propose innovative solutions to their specific needs.
Lastly, the business line pursued its policy of strictly monitoring operating expenses, as borne out by the cost/income ratio which came in at 44%, marking its fourth straight year of improvement.
The focused strategy of steadily expanding the loan syndication business has paid off. Over the year, Natexis Banques Populaires arranged over 125 major syndicated loans for a host of leading net banking income in eur millions average outstanding loans in eur billions sixteen business units
Presentation brochure in French and English given to clients and prospects
Natexis Banques Populaires’ growth potential has been clearly affirmed in Madrid and Milan, where the Bank's recently-created branches completed their first full year of operations. The Moscowbased subsidiary obtained a banking license and opened for business in the first half of the year.
In 2002, a plan was launched to revamp processing tools for client and market transactions, with the aim of further strengthening client relationships by improving service quality. This cornerstone project encompasses all teams, from sales to the middle and back offices.
In 2003, the Corporate and International Banking business line will be further broadening its global reach by continuing to add to teams and extending the branch network in Algeria. At grass-roots level, teams will be doing all they can to expand the client base and develop structured finance business, laying the ground for Natexis Banques
Natexis Lease develops and distributes real estate and equipment lease financing products for companies of all sizes.
Natexis Factorem offers receivables management outsourcing solutions that help companies optimize their cash position and reduce client credit risks. Four types of services are offered: receivables management, receivables collection, bad debt guarantees and receivables financing
After four years of growth, corporate capital spending contracted by 7% in 2002.Real estate and equipment lease financing held up fairly well in this more difficult market, easing back by a modest 4%. The falloff primarily concerned heavy goods vehicles and machine tools – hitherto extremely buoyant sectors.
Equipment lease financing activities had another good year, with EUR939 million worth of new business. On the back of this performance Natexis
A total of 431 leases were set up, reflecting strong sales to the corporate clients of the Banque
New lease financing for energy management and environmental projects climbed 18% to
Natexis LLD, specialized in long-term vehicle leasing, rolled out its offer to practically all of the Banque Populaire regional banks and Natexis
Parce que vos investissements immobiliers sont spécifiques à votre entreprise, l’expérience et l’expertise de spécialistes constituent des atouts précieux pour finaliser vos projets. Les conseillers de Fructicomi, filiale de Bail Banque Populaire, sont des hommes et des femmes de terrain, qui connaissent votre métier et votre environnement. Ils vous aideront à construire le montage financier, patrimonial et juridique adapté à vos besoins et vous accompagneront pendant toute la durée de l’opération, du projet jusqu’à sa réalisation. Pour tout renseignement complémentaire, n’hésitez pas à contacter votre chargé de clientèle Banque Populaire.
Despite the current climate, companies still need to renew and upgrade equipment, just as they need to grow capacity. Hence capital spending may pick up again in the course of 2003.
Natexis Factorem's success in expanding its business without any attendant escalation of risk or any erosion of margins.
Kingdom and Italy, in addition to existing partnerships in Germany and Eastern Europe, as well as in North Africa.
Coface and Natexis Factorem teams are also being brought together, in a bid to position the Bank as a major player in the credit management market in France and abroad. The broader offer should help to boost sales volume and speed up expansion in France and the rest of Europe. Marketing synergies, coupled with the sharing of tools, will help to contain costs while sharpening the company’s competitive edge, as well as leading to the development of a comprehensive offering for the Banque Populaire Group and its clients.
Fixed Income, derivative and currency products. Its integrated origination, trading, sales, syndication and research services represent a key source of competitive advantage.
The Private Equity business line is a major player in the equity financing market, covering all segments of the
Natexis Banques Populaires was adversely affected by last year's highly unfavorable market conditions and it also incurred losses on structured equity products. Capital Markets Net Banking Income reflects the impact of these losses. By contrast, the Currency and
EUR139 million in net banking income 43 bond issues private equity
Despite a 50% falloff in the number of investment opportunities considered, Natexis Private Equity invested EUR235 million in 2002 versus EUR285 million the previous year. Several significant investments were sold, netting EUR113 million worth of gains.
In 2002, the Capital Markets business focused on developing global product offerings. The acquisition of the Arnhold & S. Bleichroeder
Holdings brokerage business paved the way for the creation of a Global Equities business.
In a year when the number of bond issues contracted by 40%, Natexis Banques Populaires increased its market share, acting as lead or joint lead manager of 43 bond issues (Sole/Joint
Milan, Madrid and London distributed products to investors in their local markets and also promoted the business's origination capacity among major issuers. Natexis Banques Populaires and DZ Bank teams joined forces to target clients in Germanspeaking countries and Eastern Europe. At the same time, Natexis Banques Populaires doubled the number of mandates obtained from nonresident issuers, especially in Italy.
Natexis Banques Populaires arranges over 90% of the commercial paper programs set up by French companies (source: Banque de France) and is one of the leading issuing and paying agents in this market, thanks to the steady growth in its portfolio of investors. The Bank was selected as Placing
The Fixed Income derivatives business practically doubled its contribution to Net Banking Income, powered by a broader product offering and wider client reach among corporates and institutional investors.
Natexis Banques Populaires has set up structured hedging facilities that have proven highly successful in the current harsh trading conditions.The Bank also arranged EUR350 million worth of bond issues indexed to Constant Maturity Swaps (CMS), on behalf of institutional clients.
The Treasury teams in Paris and New York meet the day-to-day refinancing needs of Natexis
Net Banking Income generated by the forex business soared 30% on a comparable basis, led by a sharp rise in sales of currency options – especially on major currencies.
Natexis Banques Populaires’ large corporate clients actively trade in all segments of the forex market, generating nearly half of the Bank’s profits from currency swaps and options during the year under review. In 2003, the Bank will be strengthening its derivatives and structured products sales capability to better meet the needs of this client population.
Arnhold & S. Bleichroeder, a subsidiary of the U.S.based company Arnhold & S. Bleichroeder
Holdings, specialized in equities brokerage and corporate finance. The newly acquired company
Natexis Banques Populaires' two arbitrage subsidiaries, Natexis ABM Corp. (mortgage bonds) and Natexis Arbitrage (equities)
investment banking capital markets extended its offer to include products and services for U.S. clients, including stocks listed on the New
Arnhold & S. Bleichroeder's on-line access to around 60 of the world's markets represents a solid basis for actively developing Natexis
Bleichroeder to extend its research capabilities to the other side of the Atlantic.
Parfumeries "Oceane" issue placed it among the top five French banks in the European convertible bond market (source: Bloomberg).
IPO. Natexis Private Equity acquires majority or minority interests, generally in unlisted companies, which it holds for an average of five years. The business is conducted by eleven subsidiaries organized around four business units: Growth Capital, Buy-Out/Buy-In
Natexis Equity Management, a portfolio management company that invests primarily in listed mid-cap stocks, completes the line-up.
International Private Equity 70 breakdown of invested capital in eur millions at december 31, 2002
International expansion 2000 and 2001 were devoted to creating a network of subsidiaries throughout Europe.
Banque Populaire Group launched a new innovation fund (FCPI), Banque Populaire
Venture set up the first FCPI in 1997, and so far has invested over EUR90 million in 70 companies.
European secondary market, alongside veteran partners. Secondary market transactions consist of acquiring one or several interests in partially called funds or investment portfolios, from investors, companies or asset management firms.This activity is grounded in the dual logic of meeting investor needs for new asset classes and injecting liquidity into funds when required.
An illustration of the Bank’s first move in this new area of business is the partnership agreement signed in late 2002 with Landmark, a US-based secondary market specialist with USD3.5 billion in capital under management, which was seeking a partner with in-depth knowledge of the European business landscape.
Despite harsh market conditions marked by a further decline in both the number and value of mergers and acquisitions, Natexis Finance consolidated its position over the year, achieving significant revenue growth. As a major player in the mid-cap segment,Natexis Finance furthered its international expansion and continued to diversify its client base that ranges from family-owned businesses to large corporates.
Natexis Private Equity with the opportunity to branch out into the euro zone venture capital and buy-out/buy-in capital markets, primarily
system (SIT), Natexis Banques Populaires is a foremost provider of high-tech outsourcing services for banks and financial institutions and a front-runner in e-banking services. A well-known and highly respected player in the bancassurance and asset management sectors, it is the leading employee savings plan manager in France and ranks fifth among fund managers.
The Services business area is organized around two clearly differentiated business lines: Banking, Financial and Technology Services for banks and financial institutions, and Asset Management and Insurance
In 2002,Natexis Banques Populaires was selected by several large banks to process their transactions. The Financial Services unit won a number of new clients, partially offsetting the sharp fall in trading volumes triggered by the depressed market conditions.
EUR322 billion in assets in custody 2.6 million custody accounts 3.3 million bank cards managed 1.8 billion transactions processed via the sit asset management and insurance
The business line managed to capture additional market share in a number of sectors.
The Banking Services offer spans payment media and electronic banking processing while the Financial Services offer encompasses all forms of custody services. The business line performs these back office services not only for the Banque Populaire banks, but also for over 150 other financial institutions. The offering is rounded off by the Personal Banking Services business area which is developing a
Services business line faced the dual challenge of integrating major banks into its processing systems and holding firm against the economic headwinds that buffeted the entire banking industry. The worldwide falloff in trading volumes inevitably impacted Financial Services, and particularly back office business, due to the scale of operations.
In the changing banking landscape, the business line concentrated on firming up its back office offering, improving productivity without sacrificing service quality. During the year, resources were adapted to handle further diversification of the service offer, launched in response to the market’s increasing demand for outsourcing solutions. As a provider of services for a large number of financial institutions, the business line works in the background,with the client banks' identity taking centre stage.
Paiements continued its preparatory work aimed at ensuring that the Banque Populaire Group’s electronic bank processing would meet the new international standards set by the EMV
Natexis Paiements manages 3.3 million bank cards and 171,000 retailer contracts, processing 10% of the credit card transactions carried out in France.
Financial Services. However, the sharp decline in processing volumes was cushioned by the integration of new clients.
The Banking Services electronic banking offer has been expanded with the addition of several new products which already show very promising signs of marketing success. One such product is the Visa Mission Plus corporate card which combines an array of functions designed to simplify the task of processing business expenses and expense claims, including online facilities.The Visa Business and Gold Business cards meet the specific business expense tracking needs of professional firms and the management of SMEs.
was the first French bank to process transactions according to the new international standard.
Launched in October 2000, LineBourse ranks third among online brokers (source:Association des Brokers On Line), serving some 50% of online orders placed by clients of the Banque
insurance, multi-manager funds, real estate funds, employee savings plans, private asset management in France, and international private asset management. This organization allows the business line to offer a comprehensive range of products primarily distributed by the Banque Populaire Group network among its clientele of private individuals, small, medium and large businesses and institutions.
The subsidiaries that make up the Asset Management and Insurance business line are Natexis Assurances, Natexis Asset Management,
The Asset Management and Insurance business line was unfavorably impacted by the deteriorating stock market conditions that persisted throughout the year. This was compounded by high market volatility, triggering changes in savings and investment behavior. In view of these shifting patterns, the business line’s key goal was to anticipate new needs and propose custom-fitted solutions both in terms of innovative products and information support.
BP Sustainable Development funds with a view to extending the product offer of Natexis
Interépargne and Natexis Assurances.These funds respond to market demand for a better balance between social, environmental and financial considerations.
Natexis Private Banking Luxembourg S.A. 1.2 assets under management by entity at december 31, 2002 in eur billions
Close-knit relations have been woven between the business line and the Banque Populaire banks, thanks to a strong focus on developing private asset management solutions offered through
Assurances. All of the Banque Populaire regional banks now market the Fructi-Epargne package created under the recently introduced Fabius Act, with 6,400 policies signed by year-end 2002.
In an increasingly competitive market, the business line has kept up a sustained quality drive and made steady improvements to information systems in order to tighten client relationships. It has also sought to exploit synergies in communications, financial management and reporting. These synergies were deepened in 2002 by grouping staff at one site.
PEA. Natexis Asset Square, in conjunction with Natexis Assurances, developed Zelis funds –
Natexis Interépargne and Natexis Assurances worked together to offer complete employee savings solutions covering retirement, employee benefit schemes, employee stock plans and service vouchers (Natexis Intertitres). Meanwhile, in partnership with MAAF Assurances, Natexis
Assurances has developed a comprehensive business risk solution for tradesmen and retailers who are clients of the Banque Populaire banks.
Natexis Assurances is present in all segments of the insurance market, offering policies tailored to each client population of the
International, dedicated to marketing mutual funds outside France, is designed to build on Natexis
Asset Management’s expertise, especially in treasury products and European fund management, so that it can bid for international contracts and actively develop partnerships outside France.
On March 15,2002,Natexis Asset Management was accredited with AIMR-PPS and GIPS
I ncreasingly, companies and institutions operating in allsectors of the economy have come to view sustainable development and socially responsible investing as issues of crucial importance. Along with other major financial institutions, Natexis Banques Populaires upholds the highest standards in social and business practices, notably by offering equal employment opportunities, applying a strict code of ethics day in-day out, guaranteeing the safety of persons and property, and relaying transparent information on a regular basis.
At the same time, for Natexis Banques Populaires, sustainable development first and foremost means building on human relationships with each and every one of its stakeholders – clients, shareholders, correspondents, service providers and suppliers.
Officer (ISSO) took up the post of overseeing the 26 correspondents responsible for systems security issues at the Bank and its subsidiaries.The
A security action plan has been drawn up to ensure that operational risk remains at an acceptable level, taking into account the Bank’s regulatory, organizational and technical environment. The underlying aim of this plan is to ensure that all
Villevard in southwest France played host to a masterclass for fourteen talented musicians, led by the celebrated cellist Michel Strauss and financed by the Foundation.
December 2002, fifteen musicians supported by the Foundation gave a concert with the Pasdeloup orchestra at the Théâtre des Champs-Elysées, demonstrating their talents to some 800 professionals from the worlds of music and corporate sponsorship. Partnerships with the
As well as publishing an annual and an interim report, Natexis Banques Populaires also puts out regular press releases and organizes periodic meetings with the financial press and buy-side analysts. Special meetings and press conferences are organized when a significant event occurs, such as the acquisition of Coface in April 2002.
For individual investors, the main communication tool is a shareholders’ newsletter. This is sent out systematically to the Bank’s 200,000 identified shareholders. It is also addressed to around 17,000 employees of the Banque Populaire Group who took part in the employee stock ownership plan launched in June 2001.
Painting on the theme of music, an activity supported by the Banque Populaire Group Foundation
In addition to containing traditional corporate documents in French and English, it also hosts a special sub-site dedicated to individual shareholders, as well as an FAQ section.
SOLID FOUNDATIONS 8 FOR BUILDING THE FUTURE Fundamentals 9 International network 14 Simplified corporate structure 16
SERVICES 38 Banking, Financial and Technology Services 40 Asset Management and Insurance 44
CORPORATE GOVERNANCE Composition of the Board of Directors 55 Exercise of Executive Management duties 56 Activities of the Board of Directors 56 Board of Directors’ specialized sub-committees 56 Board of Directors’ Internal Regulations and Directors’ Charter 57 Compensation paid to members of Company bodies 57 Stock subscription options granted to executive officers 58 Information on the different duties exercised by members of Company bodies 58 Statutory Audit 58 General Meetings and Shareholder information 58 Appendix 59
MANAGEMENT REPORT Group structure 65 Overview of activities and results (excluding Coface) 65 Income statement review 66 Risk management 76 Income statement including Coface 82 Financial structure and regulatory ratios 83 Corporate and environmental information 85 Recent developments and outlook for the future 86
ADDITIONAL INFORMATION General information concerning Natexis Banques Populaires 163 Information on the capital stock 164 Stock ownership and voting rights 167 Natexis Banques Populaires and the stock market 167 Dividends 169 Other information concerning Natexis Banques Populaires 169 Persons responsible for the COB reference document and the audit of the financial statements 170
For a number of years now, Natexis Banques Populaires has undertaken to apply the principles of corporate governance. Specialist advisory sub-committees were formed as early as 1996. Other measures have since followed in response to the recommendations of the Vienot Report.
The Company provides shareholders with information which meets the recommendations of the Bouton Report.
The members of the Board of Directors and the Executive Management Committee are presented on pages 4 and 5 of this document.
As employees of Natexis Banques Populaires and its subsidiaries together with employees of Banque Populaire Group hold, since mid-2001, over 3% of the capital stock, they have been represented on the Board of Directors since the General Meeting of May 2002 by a director chosen from among three candidates presented to the General Meeting on behalf of the employee savings mutual funds.
The Board of Directors meeting of the same day appointed Mr. Philippe Dupont as Chairman of the Board of Directors. Up to this date, he had been Chairman and Chief Executive Officer. Executive Management responsibility was conferred on Mr. Paul Loriot (already Chief Executive Officer) up until the date of his sixtieth birthday at the end of October 2002, assisted by Mr. François Ladam, Deputy Chief Executive Officer, his designated successor on his departure.
Mr. François Ladam was appointed Chief Executive Officer by the Board of Directors meeting of October 23, 2002 with effect from November 1, 2002, with all the powers associated with this function.
3 – Activities of the Board of Directors The Natexis Banques Populaires Board of Directors met eight times during 2002. The attendance rate was high, at 93% on average over the year, for all directors and meetings.
The Board of Directors discusses all subjects concerning the strategy and operation of the Company, is kept informed of all activity trends and developments, approves the Company and consolidated financial statements, takes due note of the budget and examines the various communications concerning internal control and the setting of risk limits.
Populaires (required by the bylaws), together with those planned by its subsidiaries. Powers delegated to Executive Management in this respect are particularly limited.
4 – Board of Directors’ specialized sub-committees The Natexis Banques Populaires Board of Directors has created three specialized sub-committees: ■ the Financial Statements Review Committee; ■ the Audit Committee; ■ the Compensation Committee.
■ The Financial Statements Review Committee has four members, including one independent director: Messrs. Nalpas, Clavaud, de La Chauvinière, and Thibaud.
The Financial Statements Review Committee analyzes the draft financial statements and all financial documents issued by the Company at the fiscal year-end and reviews certain matters in greater depth prior to their presentation to the Board. In particular, it examines the main accounts closure options adopted, ensuring the relevance and consistent application of accounting methods and policies.
The Committee must, at a minimum, meet prior to the presentation of the annual and the half-year financial statements. It can also be convened at other times to discuss any matters falling within its scope of expertise and which in its opinion require examination. In 2002, the Committee met twice, once prior to the preparation of the 2001 financial statements and once prior to the preparation of the 2002 half-year financial statements. It paid particular attention to technical procedures and conditions concerning accounts closure and risk coverage.
■ The Audit Committee has four members: Messrs. Duquesne, Comas, Cordel, and Tourret.
The Audit Committee assists the Board of Directors with the management of Natexis Banques Populaires risks. Its role includes analyzing the Company’s key risk areas (excluding those relating to the accuracy of the financial statements and financial information) and appraising the Natexis Banques Populaires internal control system and its efficiency. In the same way as the
57Financial Statements Review Committee, it can consider any matters falling within its scope of expertise and which in its opinion require examination.
The newly composed Audit Committee determined, at the end of July 2002, a work program and meeting timetable for the coming 12 months. During the fiscal year, the committee notably examined the organization of inspection functions within Natexis Banques Populaires, the assignments of the Risk Management divisions, preparatory work for the implementation of the McDonough ratio, real estate risks and, in conjunction with the Financial Statements Review Committee, certain aspects of Capital Markets division operations.
The specialized sub-committees receive, in line with their needs, assistance from department heads able to help them in their work: the Inspector General, Financial Director, Risk Director, Auditors and, where necessary, any other manager able to provide the desired technical information. Neither the Chairman nor the Chief Executive Officer attend sub-committee meetings. Formal written minutes are kept of sub-committee discussions, and the sub-committee Chairmen present a summary report on their work and conclusions to the Board of Directors.
The Internal Regulations detail the areas of competence of the Board, its methods of operation (with in particular an obligation to meet at least six times a year) and principles of professional ethics.
The Directors’ Charter details the rights and obligations of Board members. It presents the provisions of the bylaws whereby each Director must hold at least one hundred shares in the Company. It sets the rules forbidding directors to trade in the Company’s shares during sensitive periods preceding the publication of results.
The Regulations also set the method of calculating directors’ fees. Directors’ fees comprise a small annual fixed portion (EUR1,525) and a variable portion strictly proportional to the number of meetings attended by each director, set at EUR1,220 per meeting. The Regulations set the compensation payable to members of specialized sub-committees at EUR915 per meeting.
Two individuals successively occupied the position of Chief Executive Officer in 2002: ■ Paul Loriot, Chief Executive Officer up to October 31, 2002, received compensation of EUR373,334; ■ François Ladam, Deputy Chief Executive Officer up to October 31 and appointed Chief Executive Officer from November 1 by the Board of Directors’ meeting of October 23, 2002, received total compensation of EUR331,273 in respect of these successive positions, including direct compensation of EUR290,000 and benefits in kind for the balance.
In accordance with the compensation scales detailed above, the 24 individuals who successively and/or simultaneously sat on the Board of Directors during the year received total directors’ fees in respect of 2002 of EUR210,145, including EUR174,460 received for attendance at Board of Directors’ meetings (fixed portion of EUR36,600 and variable portion of EUR137,860 based on attendance at meetings) and
No options were exercised by executive officers during the fiscal year.
Pursuant to regulations, this list details all duties exercised during the year. It does not enable the determination of a director’s position with respect to the rules governing plurality of executive officer positions, as this requires any financial investment links between companies in which a director holds positions to be taken into account.
No Natexis Banques Populaires director, with the exception of the director representing employee shareholders, has an employment contract with the
9 – Statutory Audit The financial statements of the Company are audited by three Audit firms.
The documentation presented to shareholders at the time of these meetings was drafted carefully to provide all shareholders, in a single document, with detailed information on the operations submitted for their approval.
Jean-François Comas AGM of 2003 Director CEO of 05/23/02 Banque Populaire Côte d’Azur
Claude Cordel AGM of 2007 Director Chairman of 05/23/02 Banque Populaire du Midi
Jean-Louis Tourret AGM of 2003 Director Chairman of Banque 05/23/02 Populaire Provençale & Corse
Robert Zolade BOD meeting 2006 Director Chairman of H.B.M. (Holding of 09/22/99 Bercy Management)
Michel Goudard AGM of 2004 Censor Chief Operating Officer of 05/23/02 Banque Fédérale des
Appendix: members of the Board of Directors (excluding non-director members of Senior Executive Management)
Representative of Banque Fédérale des Banques Populaires, Partner manager of: Bankeo, Cliveo
■ François Ladam Chairman of the Supervisory Board of: BPL - Banque pour les Paiements onLine
■ René Clavaud Chairman of the Board of Directors of: Banque Populaire du Centre
Permanent Representative of Banque Populaire Côte d’Azur, Manager of: SCI Domaine de l’Arenas
Appendix: other management, decision-making and supervisory offices exercised by Natexis Banques Populaires executive officers during 2002
Member of the Supervisory Board of: Banque Internationale de Commerce - (Bic BRED)
Member of the Supervisory Board of: Natexis Private Equity, Natexis Bleichroeder SA, SBE
Representative of Banque Fédérale des Banques Populaires on the Supervisory Board of: Assurances Banque Populaire, Banque pour les Paiements onLine, LineBourse, Novacrédit
Member of the Executive Committee of: Confédération Internationale des Banques Populaires
■ Christian Hébrard Chairman of the Board of Directors of: Banque Monétaire et Financière (BMF)
Director of: Assurances Banque Populaire, Parnasse Services S.A., CASDEN Banque Populaire, Umer
Chairman and CEO of: SA Central Hôtel, SIHT (Société d’Investissements Hôteliers et Touristiques)
Member of the Board of Directors of: Maison de la France
■ Jean de La Chauvinière Director of: Natexis Actions Europe (Sicav), France Entreprises, Sogeparc France, UEB Monaco, CIC Obli moyen terme
Vice-Chairman of the Board of Directors of: Banque Fédérale des Banques Populaires
Director of: Maison du Commerçant SA, Multi-Croissance SA, Socama 31 - Société Coopérative de caution mutuelle à capital variable, IBP SA
Permanent Representative of Banque Populaire Toulouse-Pyrénées, Member of the Supervisory Board of: Fructiger, Assurances Banque Populaire
Chairman of the Supervisory Board of: Natexis Interépargne, Natexis Epargne Entreprise
Joint Legal Representative of the co-manager, and partner Bercy Participations for: Société Elior
Permanent Representative of HBM, Chairman of the Board of Directors of: MRC
Provisions for loan losses and country risks (193) (184) + 5% Net gains on disposals of fixed assets 53 3 nm Income from companies accounted for by the equity method 3 13 - 77%
Income before exceptional items and tax 215 445 - 52% Exceptional items (16) 3 nm
Goodwill amortization (35) (20) + 75% Net reversal from Fund for General Banking Risks (FGBR) 21 0 nm
Fiscal 2002 was marked by geopolitical uncertainties, a substantial economic slowdown in Europe, a more muted recovery than expected in the USA, and depressed and volatile financial markets. In this particularly difficult context for its core businesses, Natexis Banques Populaires enjoyed varied fortunes, with financing and service businesses putting up good resistance and investment banking businesses suffering a downturn.
■ as such, Gross operating income is EUR352 million, down 43% on 2001; ■ Provisions for loan losses and country risks increased moderately by 5% to EUR193 million, representing 0.34% of Natexis Banques Populaires weighted outstandings; ■ Income before exceptional items and tax but after net gains on disposals of fixed assets and income from companies accounted for by the equity method is EUR215 million, compared to EUR445 million in 2001; ■ Net income is EUR113 million compared to EUR291 million last year. The figure takes into account an increase in exceptional expenses and goodwill amortization, a decrease in the corporate income tax charge, and a reversal of EUR21 million from the FGBR performed in the first half of the year.
The marked drop in investment banking NBI more than offset the growth recorded by the financing and services businesses.
Revenues (Net Banking Income) by core business in EUR millions 2002 2001 Change
3 – Income statement review Revenues (Net Banking Income) by core business growth recorded in 2001 and accounted for 54% of total Natexis Banques Populaires core business revenues.
67Average outstandings increased 3%, and 5% excluding US dollar exchange rate fluctuations, to reach EUR63 billion.
New production in 2002 totaled EUR11.4 billion, up 36% year-on-year, due partly to the contribution of the branches. It breaks down as follows: ■ EUR7 billion, corporate financing; ■ EUR3.3 billion, asset financing and acquisitions; ■ with the balance attributable to International commerce and trading.
Financing business Cooke outstandings, contrary to average outstandings, fell 4% to EUR37.2 billion at the end of the period. This fall, which was partly due to
* The 2001 breakdown was adjusted for comparison purposes with 2002.
■ Structured finance activities marked time in 2002 (8% fall in NBI to EUR169 million), after an exceptional 2001 (33% growth in NBI). The main contributing business lines were LBO and acquisition financing
(NBI of EUR35 million, net of provisions of EUR30 million against a Private Equity Fund portfolio in the USA); corporate real estate (EUR38 million), aircraft, ship and rolling stock financing (EUR27 million) and financial arrangements (EUR18 million).
While the Banque Populaire regional banks network remains the primary customer, providing 59% of new production, the contribution of Natexis Banques Populaires increased significantly during the year (21% of new production compared to 10% in 2001).
Average lease financing outstandings total EUR5.2 billion, up 1% on last year.
The 3% growth in NBI in 2002 to EUR88.7 million, was primarily the net result of : ■ 10% growth in “current” NBI (EUR82.1 million), primarily in the real estate lease financing sector; ■ an increase in capital gains on disposals (EUR9.7 million, compared to EUR2.4 million in 2001); ■ an increase in losses, the cost of which is deducted directly from NBI (EUR4.6 million in 2002).
compared to 12.7% in 2001), remaining the number three operator in France.
The Investment Banking sector, encompassing Capital Markets and Private Equity activities, was heavily hit by the weakness and volatility of the equity markets in 2002 and, more generally, the fall in company values. Overall, Net Banking Income totaled EUR194 million, down 48% on 2001.
Capital Markets activities reported NBI of EUR139 million, compared to EUR267 million last year.
■ Natexis Capital brokerage and market origination activities also suffered as a result of the equity market crisis in 2002, although to a lesser extent, whether in terms of stock market indices (34% drop in the CAC 40 over the year) or trading volumes (fall of approximately one-third from July). This activity generated NBI of EUR41 million compared to EUR55 million in 2001, with notably a substantial downturn in convertible bond activities, penalized by the marked increase in certain credit spreads and the high volatility of underlying shares.
This overall performance masks contrary trends: significant drop in ABM Corp. NBI (EUR16 million compared to EUR23 million), whose mortgaged debt portfolio arbitrage activities were penalized by loan renegotiations provoked by the historic fall in long-term interest rates in the United States, stable DupontDenant Contrepartie NBI at EUR9 million (financial and foreign index arbitrage), a lower loss than last year for Natexis Arbitrage (EUR8 million compared to EUR11 million), whose results continue nonetheless to suffer the consequences of the market slump and, finally, an improvement in the results of Natexis Metals, purchased at the end of 2000 and specializing in commodities trading and broking (NBI of EUR8 million compared to EUR6 million in 2001).
With NBI of EUR41 million, own fund activities represent 75% of total sector income. The 54% drop recorded in 2002 is primarily attributable to the increase in risk charges deducted from NBI, rather than net capital gains realized (only 7% below 2001 levels).
Similarly, NBI generated by asset management activities totaled EUR8.5 million (down 43%), due to the fall in management and distribution commission linked to fund performance.
Conversely, merger and acquisition activities enjoyed growth, reporting NBI of EUR5.6 million compared to
Subsidiary activities improved their contribution slightly with NBI of EUR28 million (up 2%). LineBourse, an online broker with over 30,000 open accounts, reported NBI of EUR3 million, compared to EUR2 million last year. Samic, the IT services company which specializes in software for private asset management banks, reported a 15% fall in NBI on 2001 (EUR8.4 million).
Asset Management and Insurance Asset Management and Insurance business outstandings under management and NBI increased 4% and 6% respectively in 2002. Excluding changes in Group structure relating to the buy-out of minority interests in BPAM, NBI fell 2%.
Total assets under management at the year-end 72.5 69.9 + 4%
Mutual fund outstandings managed by Banque Populaire Asset Management (BPAM) increased significantly by 9% to reach EUR57 billion at the end of 2002. As a result, BPAM’s market share increased from 5.4% to 6.4% in one year, consolidating its position in the short-term mutual fund market (market share of 9.9%) and losing some ground in the long-term mutual fund market (market share of 3%).
Assets under management fell EUR0.6 billion (from EUR2.6 billion in 2001 to EUR2.0 billion in 2002), following a loss in equity portfolio values. Collection flows remained almost stable on last year and Private asset management activities reported a net increase of close to 900 in the number of accounts.
Banque Privée Saint Dominique reported a 21% fall in NBI on 2001 to EUR24 million, due to a reduction in both management and movement commissions.
■ Employee savings plans Interépargne assets under management fell 8% to EUR10 billion. Interépargne nonetheless improved its market share slightly (20.7% compared to 20% in 2001) and increased the number of its corporate clients by 54% to 15,200, thanks notably to the success of the Fructi-Epargne product within the framework of the “Fabius Act”.
In this context, Interépargne reported NBI of EUR58 million, up 5% on last year.
■ Insurance Assurances Banque Populaire outstandings under management increased 4% to EUR17.8 billion, due to net collections on individual life insurance policies. Personal risk insurance activities also developed significantly.
■ Real-estate asset management Real-estate assets managed by Fructiger increased 3% (EUR1.1 billion) and NBI 21% (EUR8 million).
Non-divisional activities Non-divisional activities reported NBI of negative EUR33 million in 2002 compared to NBI of EUR35 million in 2001, a fall of EUR68 million. Information systems and logistics activities reported NBI of EUR18 million, primarily generated by Altaïr, which recorded a 41% increase in NBI from own customer activities.
Institutional activities, encompassing a range of activities performed on behalf of the French State under a mandate initially carried out by Crédit National and BFCE, generated NBI of EUR17 million, compared to EUR18 million last year. The real-estate subsidiaries reported NBI of EUR11.5 million, compared to EUR7 million last year. Finally, other items (NBI of negative EUR27 million) include corporate treasury and banking income and expenses not attributable to specific activities. The contribution of these headings decreased significantly in 2002, primarily due to capital losses and provisions recorded against the own fund investment portfolio (negative NBI of EUR52 million).
■ Employee numbers The number of Natexis Banques Populaires employees remained stable overall in 2002: 7,838 full-time equivalent (fixed-term and permanent contracts) as of December 31, 2002 compared to 7,810 one year previously (+28 FTE). The carry-forward impact from 2001 nonetheless generated an automatic increase in average employee numbers (7,863 FTE compared to
The stabilization of employee numbers at the year-end was accompanied by the implementation of a policy to reduce recourse to external employees, with notably the completion of a certain number of IT convergence programs: external personnel numbers were reduced from 1,374 to 875 in one year.
This trend breaks down as follows by activity sector: ■ two divisions benefited from an increase in employee numbers: Corporate and International Banking activities (+55) and Information Systems and Logistics (+33), accompanied, in the case of the latter division, by a significant decrease in the number of external employees; ■ two divisions recorded a decrease in employee numbers: Capital Markets (-19) and Banking, Financial and Technology Services (-32).
Personnel costs The moderate increase in personnel costs (3.2%) was due to: ■ the carry-forward effect of the increase in employee numbers and salary measures taken in 2001 (+EUR20 million), plus the impact of salary measures taken in 2002 and more negligibly, the increase in employee numbers in 2002; ■ partially offset by the decrease in variable compensation components, employee profit-sharing and incentives.
The Natexis Banques Populaires risk hedging policy focuses on three levels: ■ provisions for specific credit risks cover 59.6% of non-performing loans used to calculate the solvency ratio.The net charge for the period of EUR218 million is up 16% on last year, with a wider spread of risk than in 2001; ■ provisions for industry and country risks are recorded in respect of performing loans, in activity sectors or geographical areas requiring particular vigilance. Total provisions amounted to EUR358 as of December 31, 2002, or 2.7% of Cooke outstandings; ■ in addition, EUR21 million was reversed from the FGBR, which stands at EUR242 million as of December 31, 2002 and covers 0.6% of remaining Cooke outstandings. Added to provisions for industry and country risks, it represents a loan loss and country risk provision rate of 1.11% of total outstandings, compared to an average annual cost over the last three years of 0.29%.
While 2001 was characterized by the concentration of loan loss provisions on certain dossiers concerning all major French and international banks, 2002 recorded a wider spread of provisions, clearly reflecting the downturn in the economic climate: net charges to provisions in excess of EUR1 million were recorded in respect of approximately 50 dossiers compared to only
Corporate and International Banking activities recorded a 17% increase in charges to loan loss provisions to
Markets provisions (EUR10 million) due to charges to equity portfolios exposed to corporate risk in the USA; reversal of EUR5 million from Private Equity provisions.
Geographical analysis of the net charge to provisions for specific credit risk in EUR millions 2002 2001
Other items ■ Net gains on disposals of fixed assets total EUR53 million, compared to EUR3 million in 2001.They primarily comprise: – capital gains on disposals of investments in affiliates of EUR45 million; – capital gains on disposals of real-estate assets of EUR19 million, including additional consideration of EUR11 million received in respect of the sale of the former BFCE Haussmann building; ■ income from companies accounted for by the equity method fell from EUR13 million to EUR3 million, primarily due to: – nil contribution from private-equity companies in 2002, compared to a contribution of EUR4 million in 2001; – a Coface contribution, on a constant Group structure basis, of EUR2 million, compared to EUR8 million last year;
75■ the combination of these factors produced Income before exceptional items and tax of EUR215 million, down 52% on the 2001 figure of EUR445 million; ■ the net exceptional expense for the period is EUR16 million, compared to net exceptional income of EUR3 million in 2001. This expense almost entirely comprises a definitive additional charge to provisions in respect of the former Natexis Banque Employment Adaptation Plan; ■ the corporate income tax charge fell significantly during the period from EUR79 million in 2001 to EUR18 million.This decrease was primarily due to: – a substantial decrease year-on-year in consolidated net income before tax, goodwill amortization and income from companies accounted for by the equity method, which represents the theoretical base taxable at the standard rate: the EUR217 million decrease in this base accounts for EUR77 million of the fall in the tax charge, assuming a theoretic tax rate in France of 35.43%; – an increase in the loss reported by Natexis Investment Corp. in the United States to EUR69 million. This loss, included in the reduced tax base referred to above, accounts conversely for a EUR20 million increase in the tax charge on 2001, during which such losses only concerned a few French companies not consolidated for tax purposes. In effect, in application of the rule of prudence, these losses are not recognized as deferred tax assets, and losses limited in the interests of prudence total EUR25 million in 2002 compared to only EUR5 million in 2001; ■ goodwill amortization increased significantly (EUR34 million compared to EUR20 million in 2001), following the buy-out by Natexis Banques Populaires of minority interests in BPAM and Interépargne.
Analysis of Income before exceptional items and tax by core business The breakdown of Income before exceptional items and tax by core business reflects the difficulties encountered in 2002 by Investment Banking businesses.
Income before exceptional items and tax of Specialized Financing activities fell 13% on last year to EUR 69 million. This fall was due to three factors: a slight decrease in NBI (down 3%), additional expenses relating to the modernization of IT tools (up 5%) and an increase in charges to loan loss provisions (up 12%). The management ratios of these activities remain, nonetheless, favorable (cost/income ratio of 34% for lease financing and 58% for factoring).
Capital Markets activities generated a net loss of EUR70 million, compared to Net income of EUR68 million last year.This decrease was due to the substantial fall in NBI (48%), a breakdown of which is presented in this report. At the same time, expenses were reduced 6%.
Private Equity activities generated a net loss before exceptional items and tax of EUR10 million, again attributable to the substantial fall in NBI (49%), which includes charges to loan loss provisions in respect of these activities. Operating expenses fell 1%.
Banking, Financial and Technology Services, which more or less broke even last year, reported a loss before exceptional items and tax of EUR13 million. The improvement in the Gross operating income of these activities, due to reduction in expenses (down 2%) was more than offset by the increase in charges to loan loss provisions (EUR28 million compared to EUR10 million in 2001).
4 – Risk Management While overall the Natexis Banques Populaires risk control system remained unchanged in 2002, close attention was paid to three areas. Firstly, the capital market risk control structures were strengthened significantly during the second half; the organization of these structures will be finalized in the first half of 2003. Secondly, the difficult economic climate led to increased vigilance of counterparty risks, in order to maintain the quality of our assets. Finally, work continued in 2002 aimed at the implementation in 2003 of the tools necessary for the calculation of the future solvency ratio.
At a more operational level and with greater frequency, Risk Management committees were set up by the principal divisions. They bring together operating managers, the Risk Management division and Internal Audit.These committees include: ■ the credit committee of the Corporate and International Banking division and its associated subsidiaries; ■ the Risk Management committees of the Capital Markets division and its associated subsidiaries; ■ the Risk Management committee of the Specialized Financing division; ■ the Risk Management committee of the Banking, Financial and Technology Services division; ■ the Investment committee of the Private Equity division; ■ the Risk Management committee of the Asset Management and Insurance division.
Risk Management division The Risk Management division reports to the General Secretariat and, as such, is independent of the operating divisions.
Its activities include the setting of delegation rules for the operating divisions. Natexis Banques Populaires has retained its highly centralized delegation system. The Risk Management division issues an opinion on all Natexis Banques Populaires counterparty risks, when new risks are accepted or existing facilities renewed. For example, Risk Management analysts considered approximately 9,500 dossiers for Corporate and International Banking activities alone in 2002.
The Risk Management division controls the internal rating system.With a view to the future solvency ratio, it performed significant work in 2002 on rating tools able to assess counterparty failure probability. The underlying statistical models were developed in conjunction with Banque Fédérale des Banques Populaires. At the same time, the rating procedures were overhauled and a new, more detailed, rating grid was produced.These measures should be brought into operation in 2003.
The Risk Management division is also responsible for implementing counterparty monitoring and control tools. Fiscal 2002 was marked by a series of one-off or industry analyses in order to increase the reaction speed of the bank. Similarly, controls on compliance with limits were extended. The Risk Management division also monitored country risks using forecasting tools and monitored compliance with commitment ceilings per country, which can be revised to reflect changes in the economic environment. These ceilings apply to the Bank in its entirety.
The Risk Management division also develops risk reporting instruments. During 2002, it worked on enriching these management reports. It also produced a number of studies covering sensitive sectors and counterparties for Senior Executive Management.
Finally, the Risk Management division coordinates work on operating risks via the Operating Risks Committee. Work carried out in 2002 is described above.
Credit risks Corporate customer average loan outstandings in 2002 (on and off balance sheet): ■ Corporate and International Banking: EUR63 billion – Companies: EUR42 billion – Asset financing: EUR13 billion – International commerce: EUR8 billion
Breakdown of the 2002 charge to provisions for loan losses and country risks by geographical area in EUR millions Specific credit Country risks Industry risks Total provisions risks for loan losses
Total provisions for loan losses and country risks (218) 18 7 (193)
Ratings 1 to 4 are equivalent to the investment grade of rating agencies.The fiscal year was, nonetheless, marked by a general deterioration in counterparty risk, particularly with respect to the 2 rating. Close to 40% of loan outstandings are now rated 4.
The current internal rating system was implemented in 1997.Natexis Banques Populaires continues to adapt its internal rating system in line with the future international capital adequacy and solvency ratio system to be implemented in 2005. To this end, Natexis Banques Populaires, which created a dedicated taskforce to concentrate on this assignment, is working in close conjunction with Banque Fédérale des Banques Populaires and participating in the deliberations of the French Banking Federation.
Financial risks The Natexis Banques Populaires capital markets risk control system is founded on three pillars: ■ a control architecture organized around three control levels: the Middle Offices, Internal Control departments of each entity, and the capital market risk department of the Risk Management division, which is responsible for the independent supervision of risks; ■ a capital market risk measurement methodology aimed at identifying the risks to which the bank is exposed,whether interest rate, foreign exchange, equity, commodity or option risks; ■ a limits system consistent with the risk indicators defined in the internal risk measurement methodology. This limits system covers both Natexis Banques Populaires and its subsidiaries.
The difficulties encountered by the Structured Equities desk during the second half of 2002 led to the strengthening of control means and procedures, which continued during the opening months of 2003.
In addition, Natexis Banques Populaires Internal Audit and Banque Fédérale des Banques Populaires Internal Audit, intervene occasionally within the framework of targeted audit assignments.
2 – Risk measurement methodology Natexis Banques Populaires Capital Markets risks are controlled using a system which measures the capital market risks to which the different Group entities are exposed. The current methodology consists of a number of standard indicators, although Natexis Banques Populaires is developing an internal model based on VaR.
Breakdown of risks and provisions by geographical area as of December 31, 2002 in EUR millions Specific credit Country Total Specific Country Industry Total risks risks risks credit risk risk risk provisions
The US subsidiary, ABM Corp., which operates in the securitized mortgaged debt market, is monitored individually on a stress scenario basis which simulates a uniform movement in the interest rate curve of plus or minus 100 base points and takes account of specific market characteristics (early repayments, volatility, etc.). As of December 31, 2002, the most unfavorable scenario provokes a reduction in the portfolio value of USD7.3 million.
Since 2000, interest rate, exchange rate and liquidity risks are centralized within Natexis Banques Populaires. These risks are monitored and managed by the Capital Markets division.
Transformation limits were expressed in value terms up until May 7, 2002, when the Balance Sheet Management committee approved the expression of transformation limits as a percentage of net assets. Minimum liquidity gap coverage levels are as follows: Horizon limit
5 – Other risks Natexis Banques Populaires is governed by the laws and regulations applicable to credit institutions and, notably, those concerning investment services.
Natexis Banques Populaires’ activities do not expose it to any industrial or environmental risks. Natexis Banques Populaires has adequate insurance coverage encompassing all risks to which it is exposed as a result of its activities: third-party liability, damage and/or losses (in particular multi-risk, building, material and consequential damage to computer hardware and data, bank, fraud and misappropriation).
Coface activity trends in 2002 Group revenues measured in accordance with insurance sector standards increased 5% between 2001 and 2002 to EUR973 million.
Despite a fall in activity in the second half, all insurance businesses (which account for 73% of total revenue) reported growth in 2002.The group won market share, particularly in the self-insurance sector, despite a difficult economic climate. The greatest year-on-year growth was recorded by guarantee bond activities (+18.7%), notably in Italy where the group enjoys considerable technical expertise and a leading position.
Spain reported revenue growth of close to 70% thanks to excellent commercial performances.
In addition, the two technical amortization mechanisms represented by reinsurance and the equalization provisions continue to impact annual data with, respectively, a positive reinsurance contribution of EUR3.8 million and a reversal of EUR15.8 million from equalization provisions. The half-year profile is, however, highly contrasted, as the reinsurance contribution falls from positive EUR22 million in the first half to negative EUR18.2 million in the second half. Similarly, a charge of EUR1.7 million is booked to the equalization provision in the second half, after a reversal of EUR17.5 million in the first half; ■ elsewhere, the significant tightening of financial markets lead to poorer performances by Group assets. In the absence of a significant deduction from unrealized capital gains as in 2001, net income from financial investments fell considerably: a net loss of EUR4.2 million was recorded in the second half giving total income for 2002 as a whole of EUR5 million, compared to EUR57 million in 2001; ■ operating expenses totaled EUR187 million in the second half of 2002, roughly stable on the previous period.
Gross operating income 347 613 Provisions for loan losses and country risks (193) (184) Net gains on disposal of fixed assets 53 3 Income from companies accounted for by the equity method 3 13
(*) These consolidated financial statements and the notes thereto are presented in the Financial Information section..
6 – Financial structure and regulatory ratios Review of the Consolidated balance sheet (Consolidated balance sheet as of December 31, 2002 with Coface fully consolidated) Assets in EUR billions 12/31/2002 12/31/2001
The Natexis Banques Populaires Consolidated income statement including the full consolidation of Coface in the second half of 2002 is as follows (*):
Security transaction outstandings fell slightly to EUR19.1 billion, while insurance company investment portfolios increased 11% to EUR19.2 billion.
Liabilities Interbank liabilities fell back – in the same way as assets – to EUR25.6 billion, while customer deposits and debt securities increased slightly to EUR35.3 billion, compared to EUR33.1 billion one year previously. Insurance company technical reserves increased 10% to EUR19 billion. Repurchase agreements increased significantly, similarly to reverse repurchase agreements, reaching EUR33.9 million.
Shareholders’ equity and regulatory ratios Capital stock The capital stock was increased by 1,717,431 shares in 2002 following the conversion of TSDIC and the issue of 1,401,082 shares to finance the purchase of Arnhold & S. Bleichroeder in the Unites States. A further 9,972 shares were issued under existing employee savings mutual funds and on the exercise of stock subscription options.
Capital adequacy ratio French financial institutions have, since 1996, been required to measure and comply at all times with global regulatory capital levels covering both counterparty risks and capital market risks: interest rate, foreign exchange, etc.
Other regulatory ratios The liquidity ratio confirms that cash balances available within less than one month at least cover balances falling due within the same period.This ratio is equal to the relationship between assets and liabilities maturing within less than one month.
Regulatory requirements state that this ratio must exceed 100%. At December 31, 2002, it stood at 118%.
Refinancing Natexis Banques Populaires refinancing is managed by a treasury team from Paris, New York and Singapore, which uses all available short and long-term instruments
In strict compliance with regulatory and internal prudential ratios, Natexis Banques Populaires constantly optimizes its refinancing cost through the active management of its debt.
The Natexis Banques Populaires company financial statements for the year ended December 31, 2002 report a net income of EUR206,037,266.02.
The General Meeting will propose the following appropriation of retained earnings: dividend distribution of EUR71,164,255.50, transfer of EUR125,000,000 to general reserves and allocation of the remaining balance of EUR727,027.33 to retained earnings.
At the same time, the Company recorded 316 departures during 2002, including 93 resignations and 60 dismissals, 7 redundancies and 59 employees who left at the end of fixed-term contracts.
The average annual contractual salary paid to men working full-time under permanent contracts was
One of Natexis Banques Populaires’ major preoccupations is white paper consumption. Between 2001 and 2002 it reduced consumption by 6.29%, representing 46 tons of paper.This saving was the result of an aggressive policy based on measures such as rebilling the actual cost of consumables and photocopies, restricting the number of personal printers, setting up a highly reactive central photocopying department and the wider use of e-mail.
An “eco-project” approach is adopted for all new work projects. A “sustainable development” correspondent has been appointed within the Information Systems and Logistics division.
8 – Recent developments and outlook for the future ■ In January 2003, François Ladam, Chief Executive Officer, appointed Olivier Schatz Head of Capital Markets and Jean-Yves Forel Head of Banking, Financial and Technology Services.
■ On the presentation of its results in March 2003, Natexis Banques Populaires detailed the areas of priority action for the current year: – continued development of businesses where the Group has a strong commercial position and proven distinctive expertise; – capitalization on the opportunities offered by new acquisitions: Coface and Natexis Bleichroeder; – in-depth review of Capital Markets and Banking, Financial and Technology Services portfolios, with revalidation of the strategic choices of certain activities generating insufficient profits and improvement of commercial efficiency and the level of control; – continuation of cost control efforts; – rigorous risk control in an unstable environment. ■ At Banque Populaire Group level, recent transactions in the retail banking sector will have a positive impact on Natexis Banques Populaires results and activities from 2003: – in January 2003, the Crédit Coopératif Group became one of the parent companies and affiliates of Banque Fédérale des Banques Populaires, adopting the status of a Banque Populaire regional bank.The Crédit Coopératif Group is one of the major players in France in the social and solidarity economy. Its customer base comprises cooperatives, associations and mutual insurance companies, as well as SME-SMIs and private individuals.
The alliance of these establishments, with identical origins and cooperative cultures, will enable them to capitalize on complementary geographical, industry and commercial areas. The Group network now includes 2,476 branches (including 95 Crédit Coopératif branches and 140 Crédit Maritime branches).
Interbank and money market assets 3 42,084 22,757 27,998 of which institutional activities 1,379 1,267 1,435 of which institutional activities 96 251 437
Bonds, equities and other fixed and variable income securities 5 19,166 19,498 18,023
Interbank and money market liabilities 11 46,184 35,624 37,956 of which institutional activities 1,453 1,279 1,447
Customer deposits 12 22,820 14,264 15,701 of which institutional activities 106 36 114
Debt securities 13 23,621 23,411 21,881 of which institutional activities - 305 495
Shareholders’ equity 3,760 3,668 3,315 Capital stock 17 759 709 684 Additional paid-in capital 17 1,750 1,579 1,706 Retained earnings 17 1,143 1,089 675 Net income for the year 17 108 291 250
Financing commitments given in favor of: 21,386 19,774 18,297 of which institutional activities - 13 14
Commitments on securities 463 619 1,009 of which securities acquired with repurchase options - - -
Commitments on securities 436 282 355 of which securities sold with repurchase options - - comparative consolidated off-balance sheet items at december 31
Depreciation, amortization and provisions for impairment of property and equipment and intangible assets (67) (43) (50)
Provisions for loan losses and country risks 30 (193) (184) (147)
Diluted earnings per share 2.28 6.57 5.84 Consolidated net income per share, based on the number of shares outstanding at the year-end.
In 2002, NBP performed a securitization transaction on behalf of customers to refinance their loan portfolios on the commercial paper market. NBP acted as arranger, depository, underwriter, liquidity provider, and letter of credit guarantor for this transaction.
In December 2002, Investima 10 acquired the entire European publishing assets of VUP on behalf of Groupe Lagardère (“GL”).
Simultaneously, Segex sold Groupe Lagardère Ecrinvest 4 capital stock, payable immediately. As this sale is subject to the prior authorization of the European Commission, the transfer of ownership will only take effect following a decision of the anti-trust authorities.
Ecrinvest 4 is excluded from the scope of consolidation pursuant to CRC Regulation 99-07, as its capital stock is held solely with a view to a future sale. Furthermore, “severe and sustainable restrictions” prevent NBP from exercising control over its assets, and NBP is not exposed to the majority of risks and does not receive the majority of net income.
1.2 – Presentation of the financial statements 1.21 – Consolidated financial statements
Due to the full consolidation of Coface in the second half of 2002, and its recording under the equity method in the first half, as well as in fiscal years 2001 and 2000, the balance sheets and income statements of these years are not comparable on a uniform basis.
To enable meaningful comparisons over three fiscal years, note 39 presents the financial statements without full consolidation of Coface in the second half of 2002. Instead, Coface is accounted for by the equity method for the entire fiscal year, as in 2001 and 2000.
Insurance transactions managed by Coface on behalf of the State are not recorded in the balance sheet, off-balance sheet items or the income statement. Only management fees received are recorded in the income statement under Net fee and commission income.
1.4 – Basis of consolidation The consolidated financial statements are based on the financial statements of Group companies at December 31.
1.5 – Goodwill When a company is consolidated for the first time, the difference between the acquisition cost of the investment and the total value of identified assets and liabilities as of the acquisition date is recorded as goodwill and amortized in an appropriate manner taking account of the objectives and characteristics of the acquisition.Goodwill and negative goodwill is amortized on a straight-line basis over periods not exceeding ten years. Balances of less than EUR1 million are amortized over one year.
Further information on goodwill and negative goodwill is presented in Note 9.
Income statement items are translated at average annual rates of exchange (as published by the Banque de France) and the resulting differences (closing versus average rate) are taken directly to translation reserves in shareholders’ equity.
consolidated financial statements 95Life and personal risk insurance company capitalization reserves are adjusted against 2001 opening shareholders’ equity, net of an amount representing an adverse movement in the interest rate curve impacting reserve liability securities.This adjustment results in the recognition of deferred profit-sharing in the amount of the calculated risk.
The equalization provision for these companies (life and personal risk insurance) is eliminated and reclassified in consolidated reserves, except for that part included in the calculation of underwriting profits paid under contract to business providers.
Pursuant to Article R331-5-1 of the Insurance Code, a reserve for enforceability risk was recorded under technical reserves in the consolidated financial statements in respect of insurance activities in the amount of EUR64 million. With the agreement of the Insurance Audit Commission, this reserve was recorded in the amount of 30% of total net unrealized capital losses of investments subject to Article R332-20 of the Insurance Code and not covered by Asset impairment provisions in balance sheet assets.
2 – Accounting policies and valuation methods 2.1 – Customer loans Loans are recorded in the balance sheet at face value. Undrawn amounts on loans already committed and agreed are included in off-balance sheet items under the heading “Financing commitments given”.
2.2 – Provisions Since fiscal year 2000, Natexis Banques Populaires focuses its risk coverage policy on three provision levels: A – Specific provisions Principal recovery risk Where there is a risk of partial or total non-recovery of loans or non-compliance with loan conditions or covenants, loan loss allowances or other provisions for risk are raised and the charge taken to the income statement within Provisions for loan losses and country risks. Provisions are valued quarterly on a case-by-case and country-by-country basis, taking into account an appraisal of risks and security available. As regards lease financing transactions, capital gains and losses on disposal and charges to and reversals of provisions (leased assets and assets temporarily not leased) are recorded in Net Banking Income. Termination compensation is recorded within Interest income. Only the capital portion of doubtful lease installments is provided within Provisions for loan losses and country risks.
Interest recovery risk 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 this interest is subsequently recovered, it is credited to income through this same account on receipt; ■ doubtful loan interest, where customer repayments are overdue three, or, if the case arises, six or nine months, is also fully provided by deduction from the interest account in which it was initially recorded; ■ under the contamination principle, all loan outstandings of these customers are classified as nonperforming, even if the risk appraisal does not call for provision of principal recovery risks; ■ this similarly applies to assets leased under lease financing arrangements, where a loan loss allowance is raised for the amount outstanding, as soon as a lease installment or ancillary costs are overdue more than three (equipment) or six (real-estate) months.
Adjustment of former BFCE sovereign risks In 1991 and 1992, sovereign risks in respect of former BFCE assets were subject to a number of adjustments. These fell into two categories, defeasance-based (removal from the balance sheet) and put option-based. Accordingly, two structures were set up, Edval for the defeasance operation and Worledge for the put option,and consolidated for the first time as of December 31, 2002.
The consolidation of these companies, pursuant to Section 10052 of CRC Regulation 99-07 on special-purpose entities, required a review of the level of provisions covering loans at risk underlying the put option.
Consequently, the net income from the first consolidation of these subsidiaries (EUR6.6 million) was allocated, in full, to an additional charge to provisions for country risks to maintain the balance between provision charges and entity income.
As of December 31, 2002, net loan outstandings underlying the options totaled EUR77 million (gross EUR152 million, provisions of EUR75 million), while the defeasance loan portfolio was sold in full on the secondary market.
Group loans which present sovereign risks not covered by the adjustments referred to in paragraph (A) above are reviewed on a periodic basis, and provisions are raised where necessary in accordance with the method recommended by the supervisory authorities, based on the estimated value of these loans on the secondary country risk market.
consolidated financial statements 97■ securities held for sale: these securities are acquired with the intention of holding them for a period of more than six months, and are valued individually at the yearend at the lower of cost or market value. Unrealized losses are provided; unrealized gains are not recognized. Any premium or discount between the acquisition cost (excluding purchased interest) and redemption value is deferred and amortized to income over the remaining period to maturity; ■ debt securities held for investment: these are Fixed Income securities, acquired with the original intention of holding them as permanent investments and are either specifically funded or appropriately hedged with respect to interest rate risk. They are recorded at acquisition cost (excluding purchased interest), and any premium or discount between acquisition cost and redemption value is deferred and amortized to income over the remaining period to maturity.
B – Unconsolidated investments in affiliates and equity securities held for investment
■ Unconsolidated investments in affiliates are stated individually at the lower of fair value at December 31 and cost. Fair value at year-end is determined according to criteria such as revalued net worth and profitability.
■ Equity securities held for investment are securities acquired in an entity which is to be managed with the aim of increasing its value and obtaining the highest possible capital gain in the long term.These securities are stated at cost. Where necessary, a provision is raised to ensure that the net book value does not exceed the estimated current value (recent transaction value, value based on profitability, market value for listed securities or other valuation method used at the time of acquisition).
The former BFCE assets are recorded in the Group consolidated financial statements at their fair value attributed on the acquisition of BFCE by Crédit National.
Intangible assets mainly comprise Coface group network assets, valued based on 40% of net sales for insurance companies, and a multi-criteria valuation analysis (discounted net cash flows, PER multiple, net sales multiple) for service companies (information and loan management).
2.8 – Perpetual and fixed-term subordinated notes The Group has perpetual and fixed-term subordinated notes in circulation, the redemption of which, in the case of liquidation, ranks after the satisfaction of all other creditors.
2.9 – Participating securities Debt service costs in respect of participating securities are considered equivalent to an interest cost and expensed in the income statement on a timeapportioned basis.
2.11 – Interest rate review charges and early repayment penalties Interest rate review charges and early repayment penalties are considered as unearned interest income and are amortized to income over the life of the loan, allocated to each year in proportion to the loss of interest income for the year according to the loan repayment schedule.
2.12 – Loan and capital issuance costs For all transactions performed post January 1, 1994, Natexis Banques Populaires has elected to spread loan issuance costs over the life of the related loan, as permitted by tax legislation (Law of August 8, 1994) and in line with changes in the nature of loan issuance costs, which essentially represent an additional financing cost.
Expenses relating to issues of parent company capital stock are offset, net of tax, against the issue premium. Expenses relating to issues by subsidiaries are charged against income for the year.
2.13 – Financial instrument transactions performed on Natexis Banques Populaires’ own account The nominal amount of these instruments is recorded off-balance sheet for internal monitoring and regulatory purposes, but is not included within published offbalance sheet commitments. Further details concerning these instruments can be found in the notes to the consolidated financial statements.
A – Interest rate swaps These transactions are performed for one of four purposes: – micro-hedging (transaction-specific) – macro-hedging (overall balance sheet management)
consolidated financial statements 99– speculative position-taking – specialized management of a trading portfolio. ■ Hedging transactions belonging to the first two categories are treated for income statement purposes as equivalent to lending/borrowing transactions and amounts received and paid are taken to income on a time-apportioned basis.
Revenues or expenses relating to hedging transactions are matched against those relating to the hedged item.
D – Institutional activities Commitments, which by their nature may be deemed to fall within this category, given to banks granting foreign currency export credits, in order to guarantee the exchange rate of the funding, are not disclosed in the published off-balance sheet statement. Income and expenses in respect of Institutional activities (swaps and exchange rate guarantees) are charged or credited to the French Treasury, in accordance with agreed terms and conditions.
2.15 – Corporate income tax The current tax charge includes: ■ taxes payable by French companies included in the consolidation, at a rate of 35.43%, and at the local prevailing rate for foreign companies and branches; ■ deferred tax resulting from timing differences in the statutory accounts and from consolidation adjustments calculated using the liability method.
Following the harmonization of long-service medal schemes within the different Natexis Banques Populaires entities, an identical treatment was adopted for these commitments during fiscal year 2001. An amount of EUR5.7 million was deducted from shareholders’ equity, net of deferred tax assets.
consolidated financial statements 1013 – Interbank and money market assets in EUR millions 2002 2001 2000
Government securities and equivalent (1) 4,893 5,851 11,835 Trading account securities 1,113 1,571 9,945 Securities held for sale 2,769 3,471 1 Debt securities held for investment (2) 881 646 1,800
Non-performing loans 90 79 95 Accrued interest receivable 571 147 124 Provisions for loan losses (62) (55) (59)
Accrued interest receivable 3 3 4 – Customer loans and lease financing in EUR millions 2002 2001 2000
Equipment lease financing 1,404 1,267 1,127 Outstandings 1,400 1,264 1,124 Assets temporarily not leased and non-performing loans 24 18 18 Accrued interest receivable 3 2 2 Provisions for asset impairment (12) (8) (7) Provisions for loan losses (11) (9) (10)
4.3 – Non-performing loans and provisions for loan losses in EUR millions 2002 2001 2000
Coverage: provisions for loan losses against gross non-performing accounts 58% 62% 58%
consolidated financial statements 1035 – Bonds, equities and other fixed and variable income securities in EUR millions 2002 2001 2000
Securities held for sale (2) 6,785 6,598 2,045 Equities and other variable income securities 1,017 862 833 Bonds and other Fixed Income securities 5,768 5,736 1,212
(1) Of which: receivables representing securities loaned 281 716 322 transferred to securities held for sale - (5,430) -
Venture capital activities 27 31 36 +X Développement 12 13 13 IDF Nord Croissance 6 7 8 Sofinnova 2 3 6 Sud-Est Croissance 7 8 6 Other - - 3 of which Share in net income/(loss) - 3 11
Insurance activities 28 97 106 Coface Division (1) 15 86 82 Assurances Banque Populaire Division 13 11 24 of which Share in net income/(loss) 4 10 8 of which Share in net income/(loss) (1) - -
Other investments in affiliates and associated undertakings and other securities held for investment
(1) Coface SA shares equity accounted in 2000 and 2001. Coface consolidated group shares equity accounted in 2002.
(4) Including EUR1,250 million shareholder advance to Ecrinvest 4 as part of the temporary holding of Vivendi Universal Publishing securities.
7.1 – Investments in unconsolidated subsidiaries and affiliates in EUR millions 2002 2001 2000
Main shareholdings: Soparind 43 43 26 SCI Colomb Magellan 21 38 20 Sicovam Holding 30 30 7 IKB Deutsche Industriebank 29 29 29 Athlon Groep 23 - 8 – Property and equipment and intangible assets
Gross Deprec, Net Gross Deprec, Net Gross Deprec, Net book amort, book book amort, book book amort, book in EUR millions value provisions value value provisions value value provisions value
Intangible assets 560 (126) 434 139 (86) 53 142 (95) 47 Property and equipment 692 (300) 392 526 (208) 318 635 (246) 389
Assets leased out under non-financial operating leases 226 (105) 121 256 (123) 133 285 (135) 150
Non-operating property and equipment: (5) (1) 1 0 0 (5) Non-operating land and buildings (5) (1) 1 - - (5) Other non-operating property and equipment - - - - - Charge to depreciation, amortization and provisions - - - - - -
Assets leased out under non-financial operating leases (123) 1 17 0 0 (105)
Charge to income in respect of equity affiliates - - -
Reversal to income in respect of consolidated companies (14) (13) (24)
Banque Populaire du Luxembourg 139 135 9 14 – Deferred income, accrued charges and other liabilities in EUR millions 2002 2001 2000
consolidated financial statements 11115 – Provisions for contingencies and charges in EUR millions 2002 2001 2000
(1) In 2000, in accordance with Opinion n° 2000-C issued by the French National Accounting Institute Urgent Issues Taskforce, retirement benefit commitments were provided in full by deducting EUR38 million, gross of deferred tax, from opening shareholders’ equity.
consolidated financial statements 113(2) Perpetual subordinated debt: - of USD 100 million at a post-swap rate of 12.7% and with an effective maturity date of February 25, 2004, treated as debt repayable as to capital in the accounts (see Note 2.8).
Equity and equivalents at 12/31/2000 after appropriation 684 1,706 818 3,208 263 3,471 592
Equity and equivalents at 12/31/2002 before appropriation 759 1,750 1,143 3,651 242 3,893 671
Equity and equivalents at 12/31/2002 after appropriation (5) 759 1,750 1,180 3,689 242 3,931 671
(4) Natexis Bleichroeder Inc. goodwill (107) Revaluation of the historical holding in Coface 53
consolidated financial statements 11518 – Information concerning counterparty risk on derivatives in EUR millions 2002 2001 2000
Breakdown of weighted risk equivalent by type of counterparty (net of collateral)
Type of market Interest rate 404,194 459,029 472,090 Foreign exchange 180,924 96,512 27,975 Other 58,732 37,160 8,336
Commitments on over-the-counter markets by period to maturity 0 to 1 year 383,730 394,696 293,435
Net positions on- and off-balance sheet 2002 2001 2000 in EUR millions Currency Country of issue Long Short Long Short Long Short 21 – Interest income in EUR millions 2002 2001 2000
Bonds and other Fixed Income securities 1,136 1,085 856 22 – Interest expenses in EUR millions 2002 2001 2000
Other interest expenses - - 23 – Income from variable income securities in EUR millions 2002 2001 2000
consolidated financial statements 11724 – Net fee and commission income in EUR millions 2002 2001 2000
26 – Net gains on securities held for sale in EUR millions 2002 2001 2000
Real-estate sales and rental income recorded by real-estate subsidiaries 18 11 30
Average number of employees (full time equivalent) 9,875 7,458 6,671 29.1 – Audit fees
consolidated financial statements 12131 – Net gains/(losses) on disposals of fixed assets in EUR millions 2002 2001 2000
Gains Investments in affiliates and other securities held for investment 51 23 21 Debt securities held for investment 1 1 1
IT convergence and euro costs Charge to the provision - - (10)
Other exceptional items Other exceptional charges (1) - (9) Other exceptional income 1 6 -
Net income of defeasance and put-option structures Charge to country risk provisions for loans hedged by options (6) - Exceptional income from first consolidation of Edval and Worledge structures 6 - -
= Consolidated accounting net income before tax, goodwill amortization, and income from companies accounted for by the equity method 211 435 plus/minus permanent timing differences (1) (209) (185)
plus: Contributions and minimum annual tax charges (3) (7) Income taxed at reduced rates (16) (2) Losses of the period restricted in the interests of prudence (2) (25) Impact of tax grouping 21 6 Impact of foreign subsidiary income taxed at different rates (4) 1 Revised tax assessments 6 (16) Tax credits 11 15
(1) The main deductions in respect of permanent timing differences concern the tax-exempt net income of venture capital subsidiaries and subsidiaries which have issued preferred stock, the dividends of which are treated as interest expenses for tax purposes.
Provisions for loan losses and country risks (196) (4) (29) - 36 (193)
Income from companies accounted for by the equity method - - 1 2 1 4
Net gains/(losses) on disposals of fixed assets - (5) (2) - 59 52
Income before exceptional items and tax 282 (80) 71 6 (69) 210
(*) Sector Net Banking Income excludes income from own fund investment activities of subsidiaries and, as such, differs from NBI as detailed in the Management Report.
Net fee and commission income (112) (157) (90) (91) (84) (85)
Gross margin on insurance operations 395 385 204 186 203 187
Income from companies accounted for by the equity method - - - - - -
(1) In 2002, as in previous years, directors’ fees paid to Board members included a fixed portion (EUR1,525 per year and per director) and a variable portion (EUR1,220 per Board meeting and per director). Members of the Financial Statements Review Committee, the Audit Committee and the Compensation Committee received in addition EUR915 per meeting and per director.This compensation is paid in full at the end of the year.
consolidated financial statements 12536 – Comparative balance sheet - institutional activities
38 – Companies included in the scope of consolidation in 2000, 2001 and 2002
ASSET SQUARE Mutual fund distribution 100 100 100 100 - -
AXELTIS LTD (Asset Square London) Mutual fund distribution 100 100 - - - -
BANQUE POUR LES PAIEMENTS ONLINE Banking services 100 100 100 100 100 100
BANQUE PRIVEE SAINT DOMINIQUE GESTION Private asset management 100 100 100 100 99 99
BAIL BANQUE POPULAIRE Equipment lease financing 100 100 100 100 100 100
BANQUE SAINT DOMINIQUE Private asset management (3) (3) (3) (3) 100 99
CAURI Insurance broker and advisor (1) (1) (1) (1) 100 100
COFACE Credit insurance and services 98 98 (5) (5) (5) (5)
COFACE DEBT PURCHASE Information and debt management services 100 98 (5) (5) (5) (5)
COFACE INTERCREDIT HOLDING AG Holding company 75 73 (5) (5) (5) (5)
COFACE INTERCREDIT POLAND Information and debt management services 97 71 (5) (5) (5) (5)
COFACE INTERCREDIT SLOVENIA Information and debt management services 60 44 (5) (5) (5) (5)
COFACE INTERCREDIT SLOVAKIA Information and debt management services 100 73 (5) (5) (5) (5)
COFACE INTERCREDIT ROMANIA Information and debt management services 60 44 (5) (5) (5) (5)
COFACE INTERCREDIT HUNGARY Information and debt management services 100 73 (5) (5) (5) (5)
COFACE INTERCREDIT HRATSKA Information and debt management services 100 73 (5) (5) (5) (5)
COFACE UK Information and debt management services 100 98 (5) (5) (5) (5)
COFACERATING.DE Information and debt management services 100 98 (5) (5) (5) (5)
COFACERATING.IT Information and debt management services 100 98 (5) (5) (5) (5)
COFACERATING.UK Information and debt management services 100 98 (5) (5) (5) (5)
COFINPAR Credit insurance and services 100 98 (5) (5) (5) (5)
COGERI Information and debt management services 100 98 (5) (5) (5) (5)
COMPAGNIE FONCIERE NATEXIS Real-estate investment 100 100 100 100 100 100
CREDICO LDT Information and debt management services 100 98 (5) (5) (5) (5)
CREDITORS INFORMATION CO LTD Information and debt management services 100 98 (5) (5) (5) (5)
DOMIMUR Rental of professional premises 100 100 100 100 100 100
EDVAL C INVESTMENTS Ltd Country risk defeasance structure 100 100 - - - -
INITIATIVE ET FINANCE INVESTISSEMENT Buy-out/Buy-in financing 92 77 92 75 92 73
INTERFINANCE NATEXIS N.V. International loan issues 100 100 100 100 100 100
LA SERENITE Private asset management (1) (1) (1) (1) 99 99
NATEXIS ACTIONS NOUVEAUX MARCHES Mutual funds 81 77 81 77 83 80
NATEXIS AMBS Preferred stock issues 50 14 50 17 50 36
NATEXIS ARBITRAGE (formerly SPAFIN ) Stock and derivative arbitrage 100 100 100 100 100 100
NATEXIS BAIL Real-estate lease financing 100 100 100 100 100 100
NATEXIS EPARGNE ENTREPRISE (8) Employee savings management company 100 100 - - - -
NATEXIS INVESTISSEMENT (formerly SOFININDEX) Growth capital 99 93 99 93 77 71
NATEXIS PRIVATE EQUITY (formerly FNBP) Private equity 100 100 100 100 100 100
NATEXIS US FINANCE CORPORATION Portfolio management (1) (1) (1) (1) 100 100
NBP PREFERRED CAPITAL I Preferred stock issues 100 0 100 0 100 0
OKV KREDITINFORMATIONS Information and debt management services 100 92 (5) (5) (5) (5)
PRAMEX INTERNATIONAL International commerce promotion and operations 99 99 99 99 (15) (15)
REACOMEX Credit insurance and services 100 98 (5) (5) (5) (5)
S.A.S. MONTMARTRE 1 Recovery of mutual fund assets 100 100 100 100 100 100
S.D. CONSEIL Own funds advisory services (1) (1) (1) (1) 100 100
SOFEP Real-estate promotion and renovation 100 100 100 100 100 100
SOFINGEST Secondary debt market operator 100 100 100 100 100 100
UNISTRAT ASSURANCES Credit insurance and services 50 49 (5) (5) (5) (5)
INFORMES VERITAS Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS BRAZIL Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS BUSINESS INFORMATION Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS DE CENTRO AMERICA Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS PERU Information and debt management services 100 98 (5) (5) (5) (5)
VERITAS PUERTO RICO CORP. Information and debt management services 100 98 (5) (5) (5) (5)
VISCONTEA COFACE Credit insurance and services 100 98 (5) (5) (5) (5)
CHÂTEAU DE FIEUZAL Management of agricultural estates (1) (1) (1) (1) 57 57
COFACREDIT Credit insurance and services 36 35 (5) (5) (5) (5)
IDF NORD CROISSANCE Private equity 33 33 33 33 33 18
(5) Coface SA is accounted for by the equity method in December 2000 and 2001 and for the first half of 2002.
(10) Absorbed by Sofinindex, now Natexis Investissement (11) + X Altaïr Services was absorbed by +X Altaïr on June 29, 2001 (12) Merged with Natexis Private Equity (formerly FNBP) (13) After transfer of venture capital mutual investment fund manager and venture capital subsidiary activities of Spef and
Spef Venture (14) After transfer of venture capital mutual investment fund manager activities of Spef Venture (15) Pramex International is accounted for by the equity method in December 2000 and is fully consolidated in December 2001 and 2002.
The following assumptions were made in the preparation of these financial statements: ■ Coface is accounted for by the equity method at a rate of 18.95%, based on the historical interest in this company; ■ temporary holding costs estimated at EUR9.6 million, gross of tax of EUR3.4 million, have been cancelled; ■ goodwill amortization in respect of the Coface group of EUR3.2 million has been cancelled.
Comparative consolidated balance sheets with Coface accounted for by the equity method for the entire fiscal year 2002
Interbank and money market assets 42,604 22,757 27,998 of which institutional activities 1,379 1,267 1,435
Investments in affiliates and associated undertakings and other securities held for investment 1,695 489 470
Accrued income, prepaid expenses and other assets 10,714 10,133 11,041 of which institutional activities 0 1 5
Comparative consolidated off-balance sheet items with Coface accounted for by the equity method for the entire fiscal year 2002 in EUR millions 2002 2001 2000
Financing commitments given in favor of: 21,447 19,774 18,297 of which institutional activities - 13 14
Guarantees given on behalf of: 15,237 15,237 12,511 of which institutional activities 9 28 34
Commitments on securities 463 619 1,009 of which securities with repurchase options - - -
Commitments on securities 436 282 355 of which securities sold with repurchase options - - -
consolidated financial statements 135Comparative consolidated income statements with Coface accounted for by the equity method for the entire fiscal year 2002 in EUR millions 2002 2001 2000
Income from companies accounted for by the equity method 3 13 20
Earnings per share 2.52 6.73 7.14 Consolidated net income per share, based on the average number of shares outstanding during the year.
Diluted earnings per share 2.38 6.57 5.84 Consolidated net income per share, based on the number of shares outstanding at the year-end.
The consolidated financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financial statements, based on our audit.
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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
We have also performed the procedures required by law on the Group financial information given in the Management Report. We have no comment to make as to the fair presentation of this information nor its consistency with the consolidated financial statements.
In accordance with our appointment as auditors of your Company, we are required to report on agreements involving members of the Board of Directors of the Company which have been brought to our attention.The terms of our engagement do not require us to identify such agreements if any.
This is a free translation of the original text in French for information purposes only.It should be understood that the agreements reported on are only those provided by the French Commercial Code and that the report does not apply to those related party transactions described in IAS 24 or other equivalent accounting standards.
Investments in affiliates and other securities held for investments 179 209 435
Guarantees received from financial institutions 1,771 645 1,009 comparative parent company balance sheets at december 31
Shareholders’ equity 3,161 2,836 2,740 Capital stock 3 759 709 684 Additional paid-in capital 3 1,746 1,579 1,706 Reserves 3 335 372 478 Tax-driven provisions & investment grants 114 102 103 Retained earnings 3 1 - Net income (loss) for the year 206 74 (231)
Interest income 5,452 5,121 4,905 Transactions with financial institutions 2,568 1,740 2,296 Customer transactions 1,944 2,397 1,881 Bonds and other Fixed Income securities 673 915 696 Other interest income 267 69 32
Net charge to/(release from) Fund for General Banking Risks and tax-driven provisions 17 (3) (232)
The following information is drawn from the parent company financial statements, which are the subject of an unqualified audit report and may be obtained on request from the registered office. Figures shown in these notes are expressed in millions of euro, unless otherwise stated. Accounting policies and valuation methods are detailed in Note 2 to the consolidated financial statements.
In 2001, the EGM of November 30, 2001 approved the merger-absorption by Natexis Banques Populaires of Natexis Capital’s service activities, initially exercised by Xeod, with effect from January 1, 2001.
Control over operating expenses continued in 2002, with respect to 2001 (personnel costs and other management costs).
2002 Gross Operating Income remained largely unchanged on 2001 (down from EUR248 million to EUR246 million). The cost/income ratio is identical at 76.5%.
The Natexis Banques Populaires balance sheet as of December 31, 2002 includes assets and liabilities transferred in as part of: ■ the merger-absorption of Société Immobilière ABC. The transfer comprised total assets of EUR47.6 million and total liabilities of EUR18.6 million, representing a net asset transfer of EUR29 million; ■ the asset pooling merger with Fructigestion. Net assets transferred totaled EUR16 million.
Total assets as of December 31, 2002 amounted to EUR99,723 million compared to EUR83,393 million one year previously, representing an increase of EUR16,330 million.
company financial statements 143Note 3 – Capital stock, additional paid-in capital, reserves and retained earnings Year-on-year movements break down as follows: in EUR millions 2002 2001 2000
Dividends on treasury stock carried forward - - Dividend equalization tax (Précompte mobilier) - - -
Movements in shareholders’ equity 219 130 695 Scrip dividends - - 68 Arnhold & S. Bleichroeder acquisition 106 - - TSDI conversion 113 - Transfer of Bail Banque Populaire stock - - 35 Transfer of SAS Factorem stock - - 15 Transfer of SAS Fructivie stock - - 81 Transfer of Factorem & Assurances Banque Populaire stock - - 102 Stock issue (12/2000) - - 384 Operation Alizé stock issue - 102 - Other - 28 10
(**) The capital stock was made up of 42,719,392 shares of EUR16 par value each as of December 31, 2000 and of 44,314,352 shares of EUR16 par value each as of December 31, 2001.
Note 4 – Disclosure of significant shareholdings in French companies: The following information is provided pursuant to Article L. 247-1 of the French Commercial Code: additions % Number of shares
ECRINVEST 4 - - FRUCTIGESTION - - NATEXIS EPARGNE ENTREPRISE - - SADEF - -
A) Banking and credit institutions B.P. DI NOVARA 30,000 231,696.78 BANCO FINANTIA 1,520,652 15,119,614.38 BANQUE GABONAISE DE DEVELOPPEMENT 16,200 67,077.57 EURONEXT NV 2,302,903 0.00 I.K.B 2,200,000 29,430,369.72 PARNASSIENNE DE CREDIT 100 76,224.51 SEBADOUR « Ste financière des pays de » 4,680 75,151.27 W.G.Z. BANK 290 650,545.87
B) Financial institutions AFH - AFRICAN FINANCIAL HOLDING 25,760 4,396,006.28 AL WASSIT - INTERMEDIATION ET CONSEIL FINANCIER 9,375 68,683.09 FIARO 29,166 97,508.98 MAGHREB PRIVATE EQUITY FUND LTD 262 541,106.18 MEDIAFINANCE 255,000 4,047,120.84 NBP IMAGES 4 15 15,000.00 OFIVM 679,999 11,333,322.00 PARIS TITRISATION 3,999 86,356.02 PROPARCO 267,300 4,017,739.19 SICOVAM HOLDING 3,694 30,417, 099.22 SOFARIS 133,372 3,242,831.92 SOFIPROTEOL 17,501 243,163.03
C) Other ADVENT Global Private Equity IV-D (London) 2,859,000.00 ALUMINIUM DUNKERQUE 680 1,886,556.59 AXELTIS 627,000 1,025,777.75 BANQUE INTERNATIONALE ARABE DE TUNISIE 160,000 1,568,576.07 BPAM GERANCE 2,496 38,370.63 CAISSE DE GARANTIE IMMOBILIERE « C.G.I.F.N.B. » 2,000 15,244.90 CLEMET 1,000 15,244.90 COMPAGNIE LAITIERE EUROPEENNE 302,368 550,073.86 DEVELOPPEMENT DE L’HORLOGERIE (Sté) 2,400 36,587.76 E.A.D.S. (France) 7,365 88,561.89 ECICs (Singapore) 250,000 165,000.00 ECONOCOM INT NVCL 13,252 56,031.24 EMBRAER 273,120 10,492,370.08 EUROMEZZANINE 2 .SCA. 460,000 701,265.48 EUROMEZZANINE.SCA 12,500 25,918.38 EUROPAY France 9,802 685,291.03 EUROPE OBLIGATIONS 1,872 23,572.76 EUROPOLIS INVEST 32,399 383,721.29 EXPERTIM 11,946 36,423.12 FRUCTI-MAAF 44 132,000.00 GIE FIRST SNOW 396,086,798 603,830.43 GIE SPRING RAIN 17,599,140 2,682,971.60 GIE VULCAIN ENERGIE 24,446 372,676.87 I.D.P.C. 375 57,168.38 IMMOBILIERE PRIVEE 70 15,244.90 JACQUET SA 142,141 1,625,282.10 LES JEUNES BOIS GIE 251,540 250,799.70 LOXLEY PUBLIC Co Ltd (Singapore) 1,615,000 19,000.00 LUCIA 186,001 3,965,687.02 MTS FRANCE 289,473 28,947.30 O.G.I.F. - OMNIUM DE GESTION FINANCIERE DE L’ILE DE FRANCE 77,350 31,556.95 PAI EUROPE 3 FCPR 2,018,000 5,515,000.00 PARNASSE IMMO 300 78,128.30 PATRIMOINE EUROPE (SCPI) 2,941 2,767,864.37 PRAMEX INTERNATIONAL 33,986 507,832.26 SADEPAR 100 15,244.90 SAINT AUBIN CHIMIE GIE 7,617,500 1,161,280.39 SEPIA 14,099 107,468.93 SNPE 500 36,206.64 SOCIETE CONCESSIONNAIRE DU GRAND LOUVRE 16,009 457,361.32 SOFIMAC 221 33,521.89 SOFRANTEM 15,002 388,822.74 SOFREAVIA 3,750 17,150.51 SOGEMAC HABITAT 3,580 54,576.75 SOMIVAL 1,750 26,678.58 SOPARIND 36,956 25,887,797.52 STAR TROIS GIE 149,902,077 228,524.24 SWIFT 385 35,719.36 SYSTRA 7,300 1,779,789.65 THIRD CILVEN FUND (London) - 4,431,000.00 TRANSVALOR 1,069 16,754.15 UNICEREALES 2,750 41,923.48 VEV 1,316,566 182,870.33
A) Banking and financial institutions BAIL BANQUE POPULAIRE 16,670,493 399,594,796.90 BANQUE POPULAIRE DU LUXEMBOURG 10,097 47,471,418.97 BANQUE POUR LES PAIEMENTS ONLINE 2,399,989 21,886,781.97 BANQUE PRIVEE SAINT DOMINIQUE 1,637,103 26,821,639.99 CFDI - CAISSE FRANÇAISE DE DEVELOPPEMENT INDUSTRIEL 29,994 4,572,555.82 COFICINE 109,099 30,317,040.34 FACTOREM 1,249,981 109,317,697.35 INTERFINANCE NATEXIS NV 29,997 28,527.24 NATEXIS ALGERIE 799,993 6,846,395.40 NATEXIS BANQUE LUXEMBOURG 399,999 40,636,720.29 SBFI - SOCIETE DE BANQUE FRANÇAISE ET INTERNATIONALE 53,555 6,103,261.25 SOFINGEST 170,121 3,880,704.99
A - Investments with a carrying value in excess of 1% (’000) (’000) of the capital stock of the reporting undertaking
ASSET-BACKED MANAGEMENT CORPORATION 712 Fifth Avenue - NY 10019 - NEW YORK USD10,000 USD41,944 100.00%
ASSET SQUARE 68-76, quai de la Rapée - 75012 PARIS EUR9,000 EUR(2,679) 99.99%
AUXILIAIRE ANTIN 18, rue de la Chaussée d'Antin - 75009 PARIS EUR127,578 EUR(20,975) 100.00%
BANQUE POUR LES PAIEMENTS ONLINE 115, rue Montmartre - 75002 PARIS EUR22,800 EUR(66) 100.00%
FACTOREM 4, place de la Coupole - 94600 CHARENTON LE PONT EUR10,000 EUR108,543 99.99%
FINANCIERE CLADEL 115, rue Montmartre - 75002 PARIS EUR9,727 EUR2,436 100.00%
NATEXIS AMBS 645 Fifth Avenue - NY 10022 - NEW YORK USD550,000 USD9,643 100.00%
NATEXIS ARBITRAGE 115, rue Montmartre - 75002 PARIS EUR38,298 EUR(3,251) 100.00%
NATEXIS BANQUE LUXEMBOURG 28, avenue Marie-Thérèse - L2131 LUXEMBOURG EUR40,000 EUR9,882 100.00%
NATEXIS BLEICHROEDER SA 100, rue Réaumur - 75002 PARIS EUR43,425 EUR5,135 99.99%
Pursuant to Articles 133, 135 and 148 of the Commercial Companies Decree of March 23, 1967 (in EUR)
In accordance with our appointment as auditors at your Annual General Meeting, we hereby report to you for the year ended December 31, 2002 on: - the audit of the accompanying financial statements of Natexis Banques Populaires, - the specific procedures and disclosures required by law.
1. Opinion on the financial statements We conducted our audit in accordance with professional standards applicable in France.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements give a true and fair view of the financial position and the assets and liabilities of the Company as of December 31, 2002 and the results of its operations for the year then ended, in accordance with accounting principles generally accepted in France.
Pursuant to the law, we have verified that the Management Report contains the appropriate disclosures as to the acquisition of participating and controlling interests and the percentage interests and votes held by shareholders.
Board of Directors’ report on the resolutions presented to the Shareholders’ Meeting of May 22, 2003 153
Resolutions presented to the Shareholders’ Meeting of May 22, 2003 155 legal information
Double voting rights shall be granted, based on the amount of shares held in the Company and pursuant to applicable laws and regulations, to all registered capital stock fully paid-in. Evidence of stock ownership in the same name for a period of at least two years shall be requested.These same double voting rights shall also be granted, in the event of a capital stock issue via capitalization of available reserves, additional paid-in capital or profits, to registered capital stock issued free of charge to a shareholder based on existing shares entitled to this right.
Shares converted into bearer shares or sold shall cease to grant entitlement to double voting rights. Nonetheless, the two-year period referred to in the previous paragraph shall not be interrupted by transfer operations between registered holders as a result of in testate succession or inheritance by will, the split of assets between spouses or gifts during lifetime to a spouse or close relative.
The merger of the Company does not impact on double voting rights, which may be exercised within the absorbing company, where permitted by the bylaws of this company.
Shareholder identification Under Article 5 of the bylaws, the Company may, under the conditions laid down by law and applicable regulations, request any relevant body or authorized intermediary to provide all information concerning holders of securities that confer immediate or future rights to vote at shareholders’ meetings, and notably their identity, nationality, address, the number of securities held by them and the restrictions binding such securities.
The fourth resolution concerns the approval of the consolidated financial statements as presented to shareholders, in accordance with the regulations of the French Commercial Code.
The sixth resolution asks shareholders to authorize the Company to trade in its own shares, in accordance with defined limits and conditions, where permitted by law.
The seventh resolution asks shareholders to renew the authorizations granted to the Board of Directors to issue debenture loans, up to a maximum amount of EUR10 billion.
Resolutions presented to the Extraordinary General Meeting The ninth to twelfth resolutions ask shareholders to renew the global authorization granted by the Shareholders’ Meeting of May 31, 2001 to the Board of Directors for a period of 26 months, to perform stock issues at its own initiative, with retention or cancellation of preferential subscription rights, up to a total maximum amount of EUR150 million.This authorization will be used as and when necessary to consolidate the shareholders’ equity of the Company or respond to specific circumstances.
The thirteenth and fourteenth resolutions ask shareholders to approve the transfer to Natexis Banques Populaires of Banque du Dôme-Crédifrance Factor securities currently held by Banque Fédérale des Banques Populaires.
In illustration of the strategy aimed at enabling Natexis Banques Populaires and its subsidiaries to benefit from synergies with Crédit Coopératif, a merger is currently in progress between the two factoring subsidiaries of Natexis Banques Populaires (Factorem) and Crédit Coopératif (Banque du Dôme-Crédifrance Factor).
Banque du Dôme-Crédifrance Factor joined the Crédit Coopératif group in 1988 and has since enjoyed regular growth in revenues to today’s figure of EUR821 million.
In addition to offering a complementary portfolio strongly focused on the Crédit Coopératif customer base (40% of activity), Banque du Dôme-Crédifrance Factor will provide Factorem with access to its prescriber network and expertise in the direct canvassing of customers. While modest, this operation should enable Natexis Banques Populaires to consolidate its already strong position in this sector.
The merger will be performed in three stages: transfer in December 2002 of the entire interest held by Crédit Coopératif in Banque du Dôme-Crédifrance Factor to Banque Fédérale des Banques Populaires; transfer to Natexis Banques Populaires by Banque Fédérale des Banques Populaires of the shares received and absorption of Banque du Dôme-Crédifrance Factor by Factorem.
The transfer will be performed on May 22 with retroactive effect from January 1, 2003. It is the subject of a transfer contract under which the Banque du Dôme-Crédifrance Factor shares transferred, valued at EUR18,140,419, will be remunerated via the issue of 218,559 new Natexis Banques Populaires shares at a unit price of EUR83. On this basis, the capital stock increase will dilute existing shareholdings by 0.46%.
Shareholders, having reviewed: ■ the report on the business activities of Natexis Banques Populaires during the fiscal year ended December 31, 2002; ■ the parent company financial statements; ■ and having heard the Auditors’ reports; approve the 2002 financial statements as presented to them.
Second resolution: auditors’ Report Overview: This resolution asks shareholders to approve any agreements involving members of the Board of Directors covered by Article 225-38 of the French Commercial Code and presented in the Auditors’ Special Report.
Third resolution: appropriation of earnings; dividends Overview: This resolution asks shareholders to set the net dividend per share at EUR1.50, to which will be added a tax credit the amount of which will depend on the shareholder’s situation.
Shareholders, having taken due note of the proposed appropriation of earnings recommended by the Board of Directors, approve this proposal and: ■ decide to: – appropriate net income for the year of EUR206,037,266.02
■ decide to: – distribute a dividend of EUR71,164,255.50 – transfer an amount to the general reserve EUR125,000,000.00 – appropriate the residual balance to retained earnings EUR727,027.33 giving total distributable earnings appropriated of EUR196,891,282.83
Shareholders, having reviewed: ■ the report on the business activities of Natexis Banques Populaires and the companies included in its scope of consolidation during the fiscal year ended December 31, 2002; ■ the consolidated financial statements; ■ and having heard the Auditors’ Report on the consolidated financial statements; approve the 2002 consolidated financial statements as presented to them.
Fifth resolution: allocation of dividends payable on treasury stock held by the Company Overview: This resolution asks shareholders to allocate the 2002 dividends payable on treasury stock held by the Company at the payment date.
Shareholders hereby resolve to allocate to retained earnings the 2002 dividends payable on the Natexis
Banques Populaires shares held by the Company as of the payment date. In 2001, such dividends represented an aggregate amount of EUR1,155,822.50.
Seventh resolution: authorization granted to the Board of Directors to issue debenture loans and equivalents Overview: This resolution asks shareholders to renew the authorizations granted to the Board of Directors to issue debenture loans, up to a maximum amount of EUR10 billion.
Shareholders authorize the Board of Directors to decide at its own initiative,on one or more occasions, the creation and issue, in France or abroad, on all markets, public and private, of bonds or equivalents (notably perpetual subordinated debt securities (TSDI), redeemable subordinated securities (TSR) and any other instrument of the same nature), with or without guarantees.
The remuneration and/or redemption of the issues may be subject to any terms and conditions authorized by prevailing regulations (notably fixed or floating rate, nil coupon, single coupon, progressive interest payments, optional reinvestment of the coupon, redemption on maturity or by amortization, early redemption, fixed redemption premium or variable above the nominal amount, with the premium added to the fixed maximum amount, etc).
Eighth resolution: renewal of a Director’s term of office Overview: This resolution asks shareholders to renew the term of office as Director of Mr. Francis Thibaud, which expires this year, for the period provided in the bylaws.
Shareholders hereby renew the term of office as Director of Mr. Francis Thibaud for a period of six years, expiring at the end of the Annual General Meeting held to adopt the 2008 financial statements.
Shareholders, deliberating in accordance with the conditions of quorum and majority governing Extraordinary General Meetings, having familiarized themselves with the Board of Directors’ report and the Auditors’ special report and in accordance with paragraph 3 Article L 225-129 of the French Commercial Code,
Confer on the Board of Directors full powers to issue, on one or more occasions and in the amounts and at the times decided by it, both in France and abroad, capital stock and securities, including unattached warrants, of whatever nature conferring immediate and/or future rights, at any time or at fixed dates, to new or existing shares in the Company, or another company where such securities are issued pursuant to Article L 228-93.
Board of Directors may grant shareholders entitlement to subscribe to an additional number of securities in excess of that to which they are entitled as of right, in proportion to their subscription rights and subject to demand: where subscriptions as of right and, as appropriate, excess subscriptions do not account for the entire stock or security issue as defined above, the Board of Directors may take one or more of the following measures, as it sees fit: ■ restrict the issue to the number of subscriptions received, provided this is at least equal to threequarters of the issue decided; ■ freely distribute all or part of the unsubscribed securities; ■ offer all or part of the unsubscribed securities to the general public.
Take due note that the above authorization includes the express waiver by shareholders of their preferential subscription rights to all other securities conferring entitlement to a share in the capital stock to which the securities issued grant access.
Decide that amounts received immediately and in the future by the company for each share issued pursuant to the above authorization, plus the issue price of unattached stock subscription warrants, in the case of issue of such warrants, shall be at least equal to the par value.
Confer on the Board of Directors full powers, including that of delegation to its Chairman, in accordance with the terms and conditions provided by law, to implement this authorization and, in particular: ■ determine the dates and terms and conditions of issues and the class and characteristics of the securities created; ■ determine the issue price and conditions; ■ decide the amounts to be issued; ■ decide the dividend ranking date, potentially retroactive, of the securities to be issued; ■ decide the way in which the shares or other securities issued shall be paid up and, where applicable; ■ determine the terms and conditions of their buy-back on the stock market and of the possible suspension of
And more generally, take all necessary measures in accordance with prevailing legal and regulatory terms and conditions as of the date of these issues.
Take due note that the above authorization includes the express waiver by shareholders of their preferential subscription rights to all other securities conferring access to a share in the capital stock to which the securities issued grant access.
159the terms and conditions provided by law, to implement this authorization and, in particular: ■ determine the dates and terms and conditions of issues and the class and characteristics of the securities created; ■ determine the issue price and conditions; ■ decide the amounts to be issued; ■ decide the dividend ranking date, potentially retroactive, of the securities to be issued; ■ decide the way in which the shares or other securities issued shall be paid up and, where applicable, the terms and conditions of their buy-back on the stock market; ■ suspend, where appropriate, the exercise of stock allotment rights attaching to securities to be issued for a period not exceeding three months; ■ determine the terms and conditions protecting the rights of holders of securities conferring future entitlement to a share in the capital stock, in accordance with legal and regulatory provisions; ■ make any deductions, where appropriate, from additional paid-in capital and, in particular, expenses incurred in performance of the issues; ■ enter into all agreements to ensure the correct performance of the issues and the listing and financial servicing of the securities; ■ record the capital stock increases resulting from any issues performed pursuant to this authorization and amend the bylaws accordingly.
More particularly, in the event of issues of shares or securities in consideration for securities transferred under a share exchange bid launched by the Company, the Board of Directors is granted full powers and, notably, the power to: ■ set the exchange parity and, where appropriate, the cash balance payable; ■ record the number of shares transferred under the exchange and the number of shares or securities to be created in consideration; ■ determine the dates and terms and conditions of issue, notably the issue price and dividend ranking date, of new shares or, where appropriate, securities conferring immediate and/or future entitlement to a share in the capital stock of the Company; ■ record in balance sheet liabilities in the “additional paid-in capital” account to which all shareholders hold rights, the difference between the issue price and par value of the new securities and deduct from this “additional paid-in capital”, where appropriate, total expenses and duties generated by the authorized operation.
The Board of Directors is granted full powers to issue composite securities, including that of delegation to the Chairman and, in particular, the power to decide the subordinated nature or not of the securities, the interest rate, where applicable, the term, fixed or variable redemption price with or without premium, the interest payment procedures, where applicable, and repayment schedule depending on market conditions and the terms and conditions under which these securities confer entitlement to a share in the capital stock.
Shareholders decide that this authorization renders null and void all previous authorizations of a similar nature, for the amounts not used.
Capital stock increases performed pursuant to this resolution may not exceed a total par value amount of one hundred and fifty million euros, this ceiling being independent of that set for capital stock increases resulting from the issue of securities authorized by the preceding resolutions.
Shareholders decide that rights relating to fractions may not be traded and that the corresponding securities shall be sold. The proceeds of such sales shall be allocated to the shareholders owning the rights no later than thirty days after the entry in their account of the number of whole shares allotted.
Shareholders confer full powers on the Board of Directors, including that of delegation to its Chairman, under the terms and conditions provided by law, to determine the dates, terms and conditions of issues, decide the amounts to be issued and, more generally, take all measures necessary to ensure the proper performance of the issue and undertake all actions and formalities to render the corresponding share issues definitive and make the necessary amendments to the bylaws.
Shareholders decide that this authorization renders null and void all previous authorizations of the same nature, for the amounts not used.The authorization granted to the Board of Directors is valid with effect from the present meeting, for the duration provided in paragraph three Article L 225-129 of the French Commercial Code.
Thirteenth resolution: approval of the transfer of Banque du Dôme-Crédifrance Factor securities Shareholders: ■ deliberating in accordance with the conditions of quorum and majority governing Extraordinary General Meetings; ■ having heard the Board of Directors’ report comprising a description of the provisions of the transfer agreement signed by Banque Fédérale des Banques Populaires and Natexis Banques Populaires with a view to the transfer of 748,531 Banque du
Fourteenth resolution: remuneration of the transfer – Capital stock increase Shareholders, deliberating in accordance with the conditions of quorum and majority governing Extraordinary General Meetings and having heard: ■ the Board of Directors’ report comprising a description of the provisions of the agreement for the transfer of Banque du Dôme-Crédifrance Factor securities, signed by Banque Fédérale des Banques Populaires and Natexis Banques Populaires; ■ the report of the Reporting Accountant appointed by decree by the President of the Paris Trade Court on January 22, 2003; Decide, subject to the approval of the first resolution, to increase the capital stock in the amount of EUR3,496,944, through the issue of the number of new shares of EUR16 par value each obtained by dividing EUR18,140,419.64 by a unit share value of EUR83, that is 218,559 new shares, fully paid-up and issued in consideration for the aforementioned transfer. The difference between the value of the transfer and the amount of the capital stock increase - that is EUR14,643,453 - shall represent additional paid-in capital (to which will be added the balancing payment of EUR22.64).This shall be recorded in a special liabilities account in the Natexis Banques Populaires balance sheet, to which all shareholders, both existing and new, shall hold rights and in respect of which shareholders may decide all appropriations.
Legal form Natexis Banques Populaires is a French “société anonyme” governed by commercial company regulations, the provisions of the Monetary and Financial Code and its bylaws.
Corporate purpose Pursuant to Article 2 of the bylaws, the corporate purpose in France and abroad is as follows: ■ the performance of all type of banking transactions and related operations under banking law; ■ the supply of all type of investment services as defined by the Monetary and Financial Code; ■ the performance of specific assignments on behalf of the State in economic and financial areas, in connection with particular agreements; ■ the performance of all brokerage operations; ■ the acquisition of interests in companies, groups or associations with a direct or indirect involvement in the above-mentioned activities; ■ and the performance of all manner of private and commercial transactions.
Company legal documents All books and records relating to the Company and, in particular, its bylaws, financial statements and reports presented to Shareholders’ Meetings by the Board of Directors or the Auditors, may be consulted at the registered office.
Capital stock EUR759,085,392 as of December 31, 2002, made up of 47,442,837 fully paid-up ordinary shares of EUR16 par value each.
The Extraordinary General Meetings of June 23, 1997 and June 16, 1998 approved the renewal of these authorized amounts with cancellation of preferential subscription rights. The Shareholders Meeting of May 27, 1999 also accepted the renewal of these authorizations up to a maximum capital stock increase of EUR230 million.
Stock subscription options The Extraordinary General Meeting of May 31, 2001 renewed for a further three years the authorization granted by the 1996 Shareholders’ Meeting, which expired in 2001, enabling the allotment of stock subscription or purchase options to employees of Natexis Banques Populaires and its subsidiaries, as well as other Banque Populaire Group employees, where permitted by law.The maximum number of new shares that may be created is 2,524,000, corresponding to the exercise of options granted since May 31, 2001 (2,000,000 options) and options granted previously and likely to be exercised within the period set at the time of allotment (maximum of 524,000 options).
165Stock subscription options 1998 Plan 1999 Plan 2000 Plan 2001 Plan 2002 Plan
Subordinated securities convertible into shares In May 1996, 2,068,968 subordinated securities convertible into shares up until December 31, 2002 on the basis of one share for one subordinated security, were issued for a total par amount of FRF 900,001,080.
In 2002,1,717,431 subordinated securities were converted into ordinary shares. Authorizations were granted to proceed with the early redemption on January 1, 2003 of all non-converted subordinated securities.
Employee stock ownership The Extraordinary General Meeting of June, 16 1998 renewed for 5 years the measures adopted by the Extraordinary General Meeting of April 27, 1993 in respect of the creation of employee stock ownership plans (ESOP), namely by means of a Company mutual investment fund subject to a maximum capital stock increase of FRF 100 million or its equivalent in euro. As of December 31, 2002, these plans held 2,035,714 shares.
In June 2001, a first Group stock ownership plan was implemented, resulting in the issue of 1,273,854 new shares reserved for Banque Populaire Group employees.Within the Group, 17,275 employees, or 50% of the total number of employees, subscribed to these shares. The securities are held in two new Company mutual investment funds, which represent 2.63% of
Number of shares Number of shares Number of shares Capital stock Capital stock at the beginning created during at year-end (in FRF) (in EUR)
(1) of which 105,735 shares subscriptions to CN ESOP 128,870 shares exercise of stock subscription options 308,908 shares payment of dividends in shares
(2) of which 16,081,704 shares issued in consideration for the partial asset transfer by CCBP to Natexis S.A. 459,555 shares issued in consideration for the merger-absorption of Banques Populaires Ingénierie
Natexis Banques Populaires and the stock market Markets on which Natexis Banques Populaires securities are listed Natexis Banques Populaires shares are listed on the Paris Euronext Premier Marché and qualify for deferred settlement (ISIN Code: FR0000120685). Natexis Banques Populaires securities are included in the SBF 120 and SBF 250 indexes.
Changes in average monthly prices and trading volumes since September 2001 Natexis Banques Populaires stock (in EUR)
Year Month Average High Low Number Capital of shares traded traded in EUR’000
Background Natexis Banques Populaires was created by the transfer of Caisse Centrale des Banques Populaires’ (CCBP) operating activities to Natexis S.A. and was approved by the Extraordinary General Meetings of the two entities on July 27, 1999.
Background of the entities making up Natexis Formed in 1919, Crédit National initially concentrated on developing its activities as a medium and long-term lender, before branching out into complementary activities in order to offer its corporate clients a wider and more comprehensive response to their needs.
During 1996, Crédit National increased its stake in Banque Française du Commerce Extérieur (BFCE) from 10.06% to 88% and then 100%. Formed in 1947, BFCE performed commercial banking activities, concentrating on the development of these activities in parallel with the progressive reduction in its export support activities, performed in its role as an agent of the French State.
Simplification and unification of legal structures The transfer in July 1999 of CCBP operating activities to Natexis S.A. produced a new entity, Natexis Banques Populaires.
On June 28, 2000, Natexis Banques Populaires shareholders in Extraordinary General Meeting approved the merger-absorption of Natexis Banque by Natexis Banques Populaires, with effect from June 30, 2000. As the operation involved the absorption of a wholly owned subsidiary, it was performed under the simplified merger regime and did not result in the issue of new shares.
Other simplification measures were implemented during fiscal years 1999 and 2000: absorption of Banques Populaires Ingénierie (B.P.I.) by Natexis
Banques Populaires in December 1999; restructuring of the private equity division in December 1999; transfer in June 2000 to Natexis Banques Populaires of Bail Banque Populaire stock held by the Banque Populaire regional banks, in consideration for the issue of 606,225 Natexis Banques Populaires shares and transfer of Natexis Gestion collective asset management activities to Banque Populaire Asset Management.
ASB and Natexis Banques Populaires also signed a Value Protection Agreement.This agreement stipulates that in the event of the sale of the aforementioned 55% remaining shares, at a price less than the initial value of the shares transferred, additional Natexis Banques Populaires shares will be allotted free of charge to ASB shareholders. These shares shall be provided by the majority shareholder of Natexis Banques Populaires, Banque Fédérale des Banques Populaires. Accordingly, the cost of this agreement, entered into for the benefit of ASB, is not borne by Natexis Banques Populaires minority shareholders.
As of December 31, 2002, ASB held 2.95% of Natexis Banques Populaires capital stock.
Cedex 08 – Barbier Frinault et Autres, 41, rue Ybry - 92576
Paris – Aldo Cardoso, residing 4, rue de l'Ouest - 92200
Free translation of a French language original for convenience purposes only. Accounting principles and auditing standards and their application in practice vary among nations. The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than France. In addition, the procedures and practices utilized by the statutory auditors in France with respect to such financial statements included in a prospectus may differ from those generally accepted and applied by auditors in other countries. Accordingly, the French financial statements and the auditors’ report of which a translation for convenience purposes only is presented in this document are for use by those knowledgeable of French accounting procedures, auditing standards and their application in practice.
Mr. François Ladam, Chief Executive Officer, is responsible for the preparation of the "Reference Document". Our responsibility is to report on the fairness of the information presented in the "Reference Document" relating to the financial situation and the financial statements.
We have conducted our work in accordance with professional standards applicable in France. Those standards require that we assess the fairness of the information presented relating to the financial situation and the financial statements and its consistency with the financial statements on which we have issued a report. Our procedures also include reading the other information contained in the "Reference Document" in order to identify material inconsistencies with the information relating to the financial situation and the financial statements and to report any apparent material misstatement of facts that we may have found in reading the other information based on our general knowledge of the company obtained during the course of our engagement. As the reference document does not contain any prospective data resulting from an organized process, our procedures did not need to take account of management assumptions or the resulting figures.
We have audited in accordance with professional standards applicable in France the Company and Consolidated financial statements for fiscal year 2002, approved by the Board of Directors. We expressed an unqualified opinion on such financial statements.
The auditors Barbier Frinault & Autres - Richard Olivier and Olivier Durand Deloitte Touche Tohmatsu - Philippe Vassor RSM Salustro Reydel - Michel Savioz
IV. Assets - Financial situation - Results Management Report Page 64 Natexis Banques Populaires consolidated financial statements Page 88 Natexis Banques Populaires financial statements Page 138
V. Directors, executive officers and supervisory bodies Composition and activities of the Board of Directors Pages 4, 55 Board of Directors and executive officer compensation Pages 57, 124, 164 Personnel incentive plans Page 164
Pursuant to Regulation 98-01, the original version of this reference document in French was filed with the Commission des Opérations de Bourse (COB) on April 11, 2003.
This document may only be used in connection with a financial operation where accompanied by a prospectus approved by the COB.
This reference document was prepared by the issuers and is the responsibility of its signatories.
Caen (processing center) 10, rue des Roquemonts ZAC Folie-Couvrechef – 14000 Caen
Business centers Paris Région Cergy-Pontoise 3, Mail des Cerclades – BP 112 95021 Cergy-Pontoise Cedex
Strasbourg 16, place Gutenberg BP 20 Strasbourg Cathédrale 67000 Strasbourg Cedex
Compagnie Financière Européenne - ABS 19, rue Vivienne – 75002 Paris www.absysteme.fr
Epf Partners 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.epf-partner.com
Natexis Altaïr 4, rue Charles Gounod – 77185 Lognes www.altair.fr 10-12, avenue Winston Churchill 94677 Charenton-le-Pont Cedex
Natexis Altaïr Toulouse 13, avenue Georges Pompidou – 31132 Balma Cedex
Natexis Asset Management 68-76, quai de la Rapée – 75606 Paris Cedex 12 www.bpam.fr
Natexis Equity Management 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.nem-sa.com
Natexis Finance 5-7, rue de Monttessuy – 75340 Paris Cedex 07
Natexis Immo Services 68-76, quai de la Rapée – 75606 Paris Cedex 12
Natexis Industrie 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.natexis-industrie.com
Natexis Interépargne / Natexis Epargne Entreprise 68-76, quai de la Rapée – 75606 Paris Cedex 12 www.interepargne.fr * In this section, subsidiaries are referred to by their new names, as approved or to be approved by their Extraordinary Shareholders' Meetings.
Natexis Intertitres 68-76, quai de la Rapée – 75606 Paris Cedex 12
Natexis Private Equity International 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.natexis-pe.com
Offices: 66, rue de la Villette – 69425 Lyon Cedex 03
Société de Banque Française et Internationale (SBFI) 45, rue Saint-Dominique – 75007 Paris
Spef Venture 5-7, rue de Monttessuy – 75340 Paris Cedex 07 www.spef-venture.fr
Natexis Banques Populaires C/o IKB Deutsche Industriebank Wilhelm – Bötzkes Strasse 1 D – 40002 Düsseldorf
Natexis Banques Populaires Siessmayerstrasse, 10 D – 60323 Frankfurt am Main
Natexis Banques Populaires Via Monte di Pieta 1 I – 20121 Milano
Via del Banco di Santo Spirito, 42 I – 00186 Roma
Comavam Le Patio Palace 41, avenue Hector Otto MC 98000 – Principauté de Monaco
Samic L'Aigue Marine 24, avenue de Fontvieille MC 98000 – Principauté de Monaco
Natexis Moscow Business Center Parus 1st Tverskaya – Yamskaya str. 23/1 125047 Moscow
Pramex Iberica SA Paseo de Recoletos, 7-9-7° E – 28046 Madrid
Natexis Banques Populaires Level 33,Tower 42, 25 Old Broad Street GB – London EC2N IHQ
Houston Natexis Banques Populaires 333 Clay Street – Suite 4340 Houston – Texas 77002
Los Angeles Natexis Banques Populaires 1901 Avenue of the Stars – Suite 1901 Los Angeles – CA 90067
New York Natexis Banques Populaires 1251 Avenue of the Americas New York – NY 10020
Natexis Metals Inc 1251 Avenue of the Americas New York – NY 10020
Natexis Banques Populaires Avenida Fransisco de Miranda Edificio Banco del Orinoco La Floresta Caracas 1060 africa middle-east
Natexis Banques Populaires 299,West Dastgerdi Avenue (Zafar) Africa Expressway Tehran 19686
Natexis Banques Populaires Level 45 – 55 Collins Street – PO Box 1809 Melbourne Victoria 8003
Pramex Asia 12th Floor Citic Tower 1 Tim Mei Avenue Central – Hong Kong
Natexis Metals (Asia) Ltd Room 1210, 12th floor Citic Tower 1,Tim Mei Avenue, Central – Hong Kong
China Merchants Tower 34th floor 161 Lujiazui Road Pudong, New-Area Shanghai 200120
Pramex Asia 34th floor – 66 Lugiazui Road Pudong, New-Area Shanghai 200120
Natexis Metals Ltd Tokyo Branch Toranomon 3 – Chome Annex 4F 3-7-12 Toranomon – Minato – Ku Tokyo – 105-0001
Natexis Banques Populaires Marketing Office Suite 16.5 Level 16th Menara Weld 77 Jalan Raja Chulan MY 50200 Kuala Lumpur
Natexis Banques Populaires 42, Pyidaungsu Yeiktha Road PO Box 872 Yangon
Natexis Banques Populaires 41st Storey Singapore Land Tower, 50 Raffles Place Singapore 048623
Natexis Banques Populaires Prime Center, 53 Quang Trung Room 16-02 – 16th floor Hanoi
at December 31 international capital tier one ratio 7.2% 7.2% 7.2%
IXIS Securities, offer investors an extensive array of broking, structured finance, engineering and research services.
The Group delivers an expansive product offering to clients on global markets from its Paris headquarters, as well as from branches in Frankfurt,
London and Tokyo and its New York-based operation, CDC IXIS Capital
CDC IXIS Capital Markets is a wholly-owned subsidiary of CDC IXIS, which is itself owned by Compagnie Financière EULIA (53%), Caisse des dépôts et consignations Group (43.55%) and Sanpaolo IMI (3.45%).
Compagnie Financière EULIA is a holding company owned jointly between Caisse des dépôts Group (50.1%) and Caisses d’Epargne Group (49.9%), and which was set up on 31 December 2001 as part of the alliance between the two Groups. ■
Financial market conditions were dreadful in 2002, but CDC IXIS Capital Markets displayed fine resilience after a second taxing year in succession, particularly for the equities business line. The 15% increase in profits relative to 2001 underlined the high degree of professionalism attained by our personnel.
2002 also witnessed the integration of CNCEP’s capital markets arm into the Group. Thanks to the extreme rapidity with which it was achieved, this operation enabled us to build business relations with the regional banks of the Caisses d’Epargne Group and yielded a positive contribution to our bottom line right from the first year.
Our dynamism again brought us rewards, notably via the new inroads made on the commercial front, especially with large corporate clients. These advances were fully in line with the major goals set by the CDC IXIS Group for 2002 and were a tribute to the creativity of our personnel and to the ever closer co-operation between our various business lines.
The Supervisory Board was also able to verify during its four meetings in 2002 that growth in business and profits was achieved without undermining the extremely selective risk policy pursued since CDC IXIS Capital Markets was founded.
CDC IXIS Capital Markets’ resilience in 2002 was the fruit of past investments
(1) net of minority interests and excluding the Fund for General Banking Risks (FGBR)
This performance was fuelled by healthy levels of business in fixed-income markets and proprietary activities, combined with fine resistance by our equities business in dreadful stock-market conditions.
CDC IXIS Capital Markets’ 2002 results were also buoyed by the successful incorporation of CNCEP’s capital markets personnel in January 2002 and efforts to unlock synergies with other business lines within the CDC IXIS Group, notably Financing and Financial Engineering.
We will continue to develop the services provided to Caisses d'Epargne and strive to reinforce synergies with other business lines within the CDC IXIS Group by building on the successful operations carried out together in 2002. Lastly, international alliances are still of prime importance, especially the development of relations with Sanpaolo IMI.
* Francis Mayer, the new Chief Executive Officer of Caisses des dépôts et consignations, is now CDC IXIS’s permanent representative, and a member of the Remuneration Committee.
Chairman Isabelle Bouillot (appointed 3 November 1998) Chairman of CDC IXIS Executive Board
Caisse Nationale des Caisses d’Epargne et de Prévoyance (appointed 13 October 1999) Represented by Philippe Wahl Chief Executive Officer of CNCEP
General responsibilities of the Supervisory Board The Supervisory Board ensures the Company and the entities attached to it are functioning correctly. In this capacity, it exercises control over the management of the Executive Board and on the accounts drawn up by the Board.
Activity of the Supervisory Board in 2002 CDC IXIS Capital Markets’ Supervisory Board convened on four occasions in 2002, each time in the presence of at least one representative of the Employee Representative Council (Comité d’entreprise). The average attendance rate was 72%.
The Supervisory Board also examined the following matters more specifically: • the renewal of Executive Board member mandates, • the presentation of the 2002-05 business plan, • the plans to merge CDC IXIS Capital
Lastly, as part of its special powers enshrined by law, the Supervisory Board approved the signature of a regulated agreement, termed a “replacement contract”, between CDC IXIS, CDC IXIS Asset Management and CDC IXIS Capital Markets on 16 October 2002. The purpose of this agreement was to replace CDC IXIS Asset Management with CDC IXIS as counterparty to CDC IXIS Capital Markets for a 10-year swap contract concerning a decreasing notional amount of US$1.1bn concluded in 2000.
Opinion of the Supervisory Board on the 2002 financial year The Supervisory Board does not have any comments to make on the parent company and consolidated financial statements for the 2002 financial year, nor concerning the Management Report presented by the Executive Board. It therefore asks shareholders to approve the accounts for the year, together with the resolutions proposed by the Executive Board. The Supervisory Board wishes to thank all personnel for the work accomplished over the past year and the quality of the information supplied to it.
Activity of the Specialised Committees in 2002 The Supervisory Board is assisted in its duties by two Specialised Committees set up in 1998, namely the Financial and Internal Control Committee and the Remuneration Committee.
The Financial and Internal Control Committee The Financial and Internal Control Committee is a three-member committee that meets in the presence of the company’s Auditors. Each meeting gives rise to a report that is subsequently presented to the Supervisory Board at a meeting during the following fortnight, the intervening period being used by the Committee for preparation purposes.
The Financial and Internal Control Committee is responsible for assessing period-end financial reporting data and ensuring that internal control procedures are respected. It therefore fulfils a number of duties: • examining the interim and annual financial statements before they are presented to the Supervisory Board, ensuring in particular that the accounting methods used are both appropriate and consistent, as well as soliciting the opinion of the Auditors; •ensuring that internal control mechanisms are functioning properly and that the corresponding regulatory provisions are being applied; • issuing an opinion on the appointment of the Auditors and their work programme; •monitoring exposure to the various types of risk (market, counterparty etc.) and the various mechanisms for tracking such risks.
The Financial and Internal Control Committee convened on four occasions in 2002. The average attendance rate for Committee members was 75%. These meetings primarily examined: • the 2001 annual financial statements and 2002 interim financial statements; •the reports to the French Banking Commission on risk monitoring and internal control, together with the report to the CMF (the French stock-market regulator) on the control exercised over investment services supplied by the company; • the work undertaken during the year by the internal control, compliance and risk control functions; • the cost-cutting action plan.
General responsibilities of the Executive Board The Executive Board is granted full powers to act on behalf of the Company in all circumstances, in compliance with the purpose of the Company and subject to the powers attributed by law to the Supervisory Board and shareholders’ meetings.
Auditors Pricewaterhouse Coopers Audit 32, rue Guersant AGM of 30/6/97 AGM voting on 2004 represented by 75833 PARIS Cedex 17 financial statements Etienne Boris
Auditors Mazars & Guérard Tour le Vinci AGM of 11/6/96 AGM voting on 2007 represented by 4, allée de l’Arche financial statements Guillaume Potel 92075 Paris La Défense
Substitute Dominique Paul 32, rue Guersant AGM of 30/6/97 AGM voting on auditors 75833 PARIS Cedex 17 financial statements
Substitute Michel Rosse Tour le Vinci AGM of 15/5/97 AGM voting on 2007 auditors 4, allée de l’Arche financial statements 92075 Paris La Défense
CDC IXIS CAPITAL MARKETS – TOKYO BRANCH PricewaterhouseCoopers Compulsory auditing of period-end accounts 23 413 23 560
Regulatory control and internal control of accounting procedures 19 832 Special assignment-tax services 21 283
CDC IXIS SECURITIES Ernst & Young Audit Compulsory auditing of period-end accounts 39 000 39 000
Composition and organisation of the Executive Board CDC IXIS Capital Markets’ Executive Board comprises four members(3), whose mandates were renewed for four years on 3 November 2002. The Executive Board is organised in accordance with internal regulations that notably specify the methods by which it operates, its powers and the signature delegation mechanism (formalised by a list of approved signatories).
Activity of the Executive Board in 2002 CDC IXIS Capital Markets’ Executive Board convened on a weekly basis during the year.
The average attendance rate for Board members was 83%. Executive Board meetings systematically examined and commented on the regular spreadsheets detailing each business line’s activity and risk exposure during the previous week. They also assessed the risks to be assumed by the Company during the course of its activities, as well as approving all projects prior to implementation and taking the decisions needed to ensure the smoothfunctioning and development of the Company. Minutes were drawn up after each meeting.
After stagnating in 2001, US GDP grew by 2.4% in 2002, primarily on the back of 3.1% growth in consumer spending and a 3.4% rise in residential investment. Capital investment remained depressed, however, largely due to over-capacity and the corporate focus on debt reduction. By the end of the year, growth momentum was flagging.
Overall, euro-zone GDP grew by only 0.8% in 2002, versus 1.1% in 2001. Private-sector consumption rose by 1.1% and investment by 0.8%. Individual growth, inflation and public-deficit performances were highly mixed within the euro zone during the year.
Investors’ heavy aversion to risk set the tone for the markets during the year
Equity markets Equity markets were hard-hit by poor fundamental conditions and corporate accounting revelations. Equities fell for the third consecutive year, this time heavily, with both the DAX and the CAC 40 indices sustaining record losses during the year (-43.9% and -33.7%, respectively). European bourses underperformed the US market (S&P 500: -23.4%), primarily due to the slide in the value of European financial stocks.
Interest rates Bond yields declined in Europe and the US, with short-dated maturities outperforming, e.g. the spread between 2-year and 10-year rates reached 160 basis points in Germany and 230 basis points in the US at year-end. The main factors behind the steeper yield curve were highly accommodating monetary policies (European and US key rates came down another 50 basis points) and the abundant supply of sovereign bonds, notably as a result of deteriorating budgets. US treasuries outperformed German bunds until October when the trend went into reverse. Yield spreads between the various EMUcountry bonds narrowed sharply. The spread between swap and 10-year bund rates was flattened out by the move to a steeper yield curve.
The general expectations for the heavily counter-cyclical economic policies pursued in 2001 to pay off in 2002, ultimately proved unfounded.
This was a fine performance compared with results posted by other capital markets’ players and was driven by healthy levels of business in the fixed-income area, where NBI climbed 32.4% relative to 2001. CDC IXIS Capital Markets reaped the rewards of the previous years’ restructuring and investments undertaken in the commercial and engineering fields in particular. Further momentum came from the smooth start-up of the partnership with Caisses d'Epargne and a mounting contribution from international operations.
Non-operating items comprise additional provisions for miscellaneous risks, notably concerning a request for back-tax notified to the Company in 2002. These provisions were offset by the recovery of all sums previously assigned to the FGBR (Fund for General Banking Risks), there being no further need for this reserve in view of CDC IXIS Capital Markets’ prospective merger with its parent company and 100% shareholder, CDC IXIS.
The corporate tax charge rose sharply as a result of increased gross operating profit, together with the reduction in tax credits arising from the equities business.
Thanks to a wealth of personnel know-how and a range of continuously updated tools, the fixed-income derivatives business undertook several high-profile operations in the simple and complex derivatives field, as well as in niches like interest-rate and forex hybrids, securitisation swaps or inflationlinked derivatives.
The year witnessed a sharp expansion in commercial activity, both in France and internationally, which yielded sustained growth in profits while keeping risks under tight control.
The primary bond market, excluding sovereign bonds In a year in which the primary market picked up slightly, CDC IXIS Capital Markets ranked 18th worldwide in the euro league tables. This was achieved against a backdrop of narrowing margins.
Lastly, our credit repo team performed strongly and enabled us to rank among the leading European players in this sector and as number one in French securities.
Our securitisation activities also gathered momentum in 2002. We ranked fifth in the European league tables in the RMBS field (residential mortgage-backed securities) and first in France for the full spectrum of securitisation instruments.
The year witnessed intense competition in the segments of the money-market instruments and government bond trading and sales business in which we operate and the team therefore concentrated its efforts on enhancing operating conditions during the year.
Efforts were primarily focused on: - making greater use of electronic trading systems both in relations with fellow professionals and clients; - systematically seeking to use STP or straightthrough -processing for transactions; - diversifying revenue sources (markets and clients) and innovating with the aim of expanding in new markets.
These efforts enabled CDC IXIS Capital Markets to maintain and, in certain cases, improve its positioning across the full spectrum of money-market instruments and government debt securities, while also enhancing profitability.
BUSINESS LINES IN 2002 3rd out of 21 in the official rankings of primary dealers (SVT) in French government securities.
At the same time, we consolidated our market share in short-term euro swaps and continued our successful diversification into other currencies.
We also reinforced our short-term debt intermediation activities, notably by taking an active role in placing debt issued by CNCEP and short-term refinancing instruments issued by CDC IXIS Capital Markets’ securitisation conduits (ABCP or asset-backed commercial paper). CDC IXIS Capital Markets holds a major position in this market segment and is a recognised counterparty of euro-zone central banks (we enjoy fine-tuning counterparty status and belong to the ECB’s contact group), and also of other central banks and asset managers.
Lastly, significant inroads were made in 2002 in the short-term credit derivatives segment. These instruments may be negotiated on a stand-alone basis or packaged in CLN (CreditLinked Note) type structures, which were in high demand during the year.
On the electronic trading front, the CDC IXIS Capital Markets website was enhanced with foreign exchange and government debt offerings, with the result that transaction volume rose substantially through this channel. We also strengthened our presence on inter-professional electronic trading platforms and made the technical investments needed to ensure we can most efficiently manage the current situation, whereby a given range of products is traded on a variety of different platforms. ■
Nonetheless, CDC IXIS Capital Markets took an active role in the year’s most significant operations, whether as co-lead manager of the institutional and retail syndicates for ASF’s IPO in March, as co-manager for an equity placement and subsequent capital increase for Vivendi Environnement in June, or as comanager for Travelers Property Casualty’s IPO in New York.
All in all, the structured products business remained highly profitable during 2002, while we also strengthened the trading teams and continued to invest aggressively in IT.
Primary market CDC IXIS Capital Markets took an active role in some of the biggest equity primary market transactions (ASF, Vivendi Environnement, Travelers Property Casualty).
Our equity activities resisted against a backdrop of sharply falling markets in 2002.
Our Paris, Frankfurt and New York teams took advantage of this shifting environment to continue efforts to organise on a global businessline basis, with the aim of enhancing the fluidity of exchanges between the various trading teams and hence their speed of reaction. Lastly, with all our arbitrage activities now extended to cover Europe and the US, we are geared up to identify and seize opportunities offered by all the world’s major financial marketplaces.
In volume terms, CDC IXIS Securities retained its fifth place in terms of market share on French equities and handled 5% of traded volume in 2002. Although business with fellow brokers and partner networks suffered from the harsh environment, that with institutions put up fine resistance, with revenues declining only slightly for US clients, holding steady for French clients and falling by less than 10% for other European clients. These results reflected the increased recognition accorded to our sales and research personnel in rankings established by the Company’s clients. In the June 2002 Agefi rankings, for example, eleven of our sector research teams were nominated by clients (versus four in 2001), a performance that ranked CDC IXIS Securities fifth among Paris equity brokers.
A structured sales and marketing function Efforts to bolster the sales and marketing function were rounded off in 2002 by organisational reinforcements with the aim of servicing large French, European and US accounts. Measures were largely centred on systematic marketing efforts tailored to the specific needs of individual clients. All in all, CDC IXIS Securities organised some 350 roadshows in 2002, a 50% increase on 2001, 200 of which in conjunction with the respective analysts’ teams and 150 with listed companies (20% of which were non-French companies). The sales force offered clients two to three roadshows per month in each of the main European countries.
BUSINESS LINES IN 2002 11 sector research teams nominated in the June 2002 Agefi rankings, versus four in 2001.
CDC IXIS Securities ranked 5th in French equities in terms of traded volume, with 5% of the market.
2002 turned out to be a record year in terms of financing and was particulary busy for EMTN issues. With over €6.5bn in new issuance during the year, the portfolio reached €10.7bn at 31 December 2002. This enabled us to maintain our excellent position in the rankings achieved in 2001: CDC IXIS Capital Markets was the leading issuer in terms of the number of transactions (close to 600) and ranked third in terms of the sums issued, behind the World Bank and KFW (Kreditanstalt für Wiederaufbau).
The profit earned on the credit portfolio testifies to the solid resistance displayed in an environment where many of our competitors lost money. This achievement was to a large part due to the introduction of buy-side credit analysts two years ago and our decision to abandon the investor-type management model which has proved to be ill-suited to the balance sheet of a capital markets-oriented bank. Portfolio rotation was increased, the average duration of instruments in the portfolio was reduced to three years and the amount of outstandings was limited to €6.5bn.
Proprietary Activities Proprietary activities continued to develop along similar lines to previous years.
N°1 in privately-placed EMTN issues in terms of number of transactions.
These new publications enhance the existing range of products which includes: • “Markets Weekly”, a weekly report assessing macroeconomic data released during the week and anticipated market movements; •“Flashes”, short publications which provide in-depth themed analysis on economic or financial market trends. More than 300 Flashes were published in 2002, a 10% increase on the previous year.
308 Flashes analysing economic and financial-market trends were published in 2002.
2 new research publications in 2002: Linked Inflation provides a monthly analysis of inflationlinked markets in the euro zone.
The balance sheet total amounted to nearly €131bn, including €10bn for foreign branches, and rose €20bn during the year.
Of this increase, €11bn stemmed from growth in securities-related business, namely: • arbitrage and trading of government securities and other securities, • securitisation. Securities represented 43% of the balance sheet total at year-end 2002 versus 41% a year earlier.
The portfolio of trading securities grew by close to €6bn and represented 75% of the €56bn in overall securities assets held at the end of 2002.
Excluding ordinary accounts (i.e. the current account with CDC IXIS), activity focused more on loans and there was a related decline in securities received under repo transactions.
The financing of new uses of funds was reflected in increases in all categories of resources for the businesses concerned, e.g. borrowings (+€4bn), securities sold under repo (+€4bn), securities issued (+€3bn) and debt securities (+€1bn).
The increases in other assets (+€5bn) and other liabilities (+€7bn), via movements in accruals, stemmed from solid growth in the volume of activity on forward financial instruments.
The capital adequacy ratio worked out to 116% at year-end 2002 versus 121% a year earlier.
CDC IXIS Capital Markets’ P/L and Risk Control function reports directly to the Chairman of the Executive Board and is totally independent from operational units. It is responsible for establishing the principles for measuring market and counterparty risk in accordance with Group standards, as well as developing its own tools for monitoring such risk (e.g. the Scénarisk model for market risks and the Amerisc model for counterparty risks).
Variations in the main market parameters such as interest rates, exchange rates, share prices, issuer spreads, as well as the implicit volatility of each of these items (and potentially all other market data), may have either a positive or negative direct impact on the valuation of the stock of transactions in CDC IXIS Capital Markets’ books. The potential loss arising from these variations represents the market risk harboured by the whole of the CDC IXIS Capital Markets Group, including internationally (Tokyo, Frankfurt and London).
The Group’s risk exposure is calculated on a daily basis using indicators that identify the losses that may potentially be incurred by each activity, using the by-now-classical Value at Risk or VaR statistical measure.
This risk measurement indicator identifies the maximum potential loss based on a pre-determined confidence interval and for a given set of portfolios. The VaR indicator is compiled from a model based on a statistical analysis of the behaviour of all the market parameters affecting the value of the portfolios over a period of 365 days.
These VaR are monitored to ensure they comply with the Group’s permanent risk limits which are fixed annually by the Executive Board of CDC IXIS Capital Markets. These limits represent economic equity and are established on the basis of observed or targeted return/risk pairings. They incorporate a 99% confidence interval, the assumption that positions are held for 10 days and a security multiplier of 2.7 (20 standard-deviation VaR).
Quantitative data on market risks 20-standard deviation VaR averaged €87m for fixed-income and foreign exchange, and €67m for equity trading in 2002. The chart above shows how VaR varied by business line during the course of 2002.
Risk analysis and limit allocation Credit risks (i.e. issuer and counterparty risks) are managed in accordance with CDC IXIS Group’s general policy. Credit risk is defined in the strict sense as the risk of incurring a loss at a given point of time in the future, following default by a counterparty. Credit risk also incorporates the risk of a deterioration in the quality of the counterparty’s signature over the duration of transactions initiated by CDC IXIS Capital Markets for its own account. In other words, credit risk corresponds to the risk of a loss of value on a position following a decline in counterparty solvency. It therefore requires portfolio commitments to be monitored on a dynamic basis.
In view of this situation, CDC IXIS Capital Markets’ counterparty risk service is responsible for selecting credit risks and co-ordinating limit requests emanating from the different capital-market business lines. Counterparty risk limit allocations are decided by CDC IXIS Capital Markets’ Credit Committee in full independence, but where the scope of such decisions goes beyond its delegated powers, the decision is referred to the Counterparty Risk Committee of the parent company, CDC IXIS.
With a view to the Risk Control function being integrated more closely into the CDC IXIS Group, the decision-making process was overhauled so as to specialise analysis on a sector basis (e.g. Banks, Corporations, Securitisation). This orientation favours a committee-based approach to limitallocation decisions (Markets, Financing, Counterparties). In addition to this horizontal process, a risk-control expert is permanently assigned to the capital markets business for individual transactions.
Counterparty risks are managed at the operational level by CDC IXIS Capital Markets, and centrally by CDC IXIS, a daily report being submitted to CDC IXIS for this purpose. Risk and credit limit monitoring is facilitated by an internally-developed, dedicated software tool (Amerisc), which traders can access in real time. This tool calculates both “potential exposure” (i.e. a statistical assessment of CDC IXIS Capital Markets’ present and future commitments) and the economic equity and provisions needed to support credit risks. The process involves numerical simulations combining master netting agreements and market scenarios compiled in accordance with VaR techniques (referred to in this case as CVaR or Credit-Value at Risk).
CDC IXIS Capital Markets is highly demanding as to the quality of issuers in its portfolio and its derivatives counterparties. As at 31 December 2002, 86% of Marked-to-Market (MtM) exposure concerned signatures rated AAA to A and 94% related to signatures rated investment grade or above, despite the numerous ratings downgrades in 2002. 84% of these signatures were concentrated in the European Economic Area, while in addition, most transactions with North American counterparties were carried out by CDC IXIS Capital Markets North America, a subsidiary of CDC IXIS.
The charts below show the breakdown of overall MtM exposure by credit rating and geographic region.
Breakdown of exposure by credit rating as at 31 December 2002
France of Markedto -Market exposure as at 31 December 2002 concerned signatures rated AAA to A.
Operational risk is recognised once it can be identified as having an adverse impact of a legal, regulatory or financial nature.
CDC IXIS Capital Markets is undertaking an operational risk project in accordance with principles set out by CDC IXIS’s Risk Department and with two main aims in mind: • facilitating control of operational risks, by drawing up action plans aimed at reducing the incidence of factors liable to cause risks (preventative action plans) and, where applicable, diminishing the impact of risks; •ultimately enabling the Company to calculate the amount of regulatory capital to be allocated to operating risk.
Operational risk cartography Operational risk control is founded on a qualitative estimate of operational risks. This estimate results from a process in which operational personnel make a self-assessment of the operational risks potentially arising from corporate procedures. The results of this self-assessment are then presented in the form of an operational risk cartography.
This self-assessment of potential operational risks provided an initial list of processes and causes of deficiencies. This list was then standardised into three levels – CDC IXIS Capital Markets, CDC IXIS and Basle – with the aim of facilitating exchanges between the CDC IXIS Group and the rest of the profession.
The incident database In order to allocate equity to operational risks, a quantitative estimate of operational risks is also required. To this end, CDC IXIS has developed a federal operational-risk collection tool (amount and frequency of losses), through which risks are classified into three levels – business line, CDC IXIS and Basle – so as to enable the database to be fed in a standardised manner.
In order to fine-tune calculation models, incidents will be collected over a three-year period, from 2003-06 (a minimum of three years of incident history is needed).
Operational risks CDC IXIS Capital Markets established a comprehensive cartography of its operational risks in 2002.
The Internal Control function ensures that the regulations related to CDC IXIS Capital Markets’ status as a credit institution and its obligations as a provider of investment services are respected.
Preventing operational risks: The Internal Control team was heavily involved in drawing up the cartography of capital markets operational risk, as part of the process initiated by CDC IXIS’s Risk Department for the different investment banking businesses. Detailed analysis was also undertaken on several processes, such as Tri-Party Repos and confirmation of derivative product trades. Once sources of risk are identified, action plans are then adopted. The results are then used both to develop the incident database and to install monitoring indicators, including for anti-money laundering purposes.
Targeted controls were also undertaken in the area of relations with counterparties and intermediaries (third-party database, master agreements, broking fees).
Internal Control continued to take part in CDC IXIS Group’s working parties (audit database, audit methodology).
New activities and products will continue to be monitored on a regular basis.
Team reinforced The Compliance team was expanded from five to seven during 2002. The two additional posts were necessitated by the growth in structured interest-rate products, with one of these new Compliance Officers located in the fixed-income trading room.
Fighting money-laundering The unit continued efforts to fight money laundering, notably by: • training over 250 trading room and back office personnel; • launching a computerised automatic transaction monitoring project; •extending the new-client referencing procedure established by a special unit in 2001 to the three branches in London, Frankfurt and Tokyo. This procedure is now also in force at CDC IXIS Securities and has been extended to CDC IXIS Capital Markets’ partners and contractors.
Other assignments The Compliance unit continued to oversee the separation of activities liable to create conflicts of interest and advocated organisational changes where necessary.
In order to increase staff awareness of compliance rules still further, the main regulatory documents, such as the Company’s Compliance Code and notably documents concerning the fight against money laundering, are now available online on the Company’s intranet.
Alongside these specific projects, the Compliance unit continued with its recurrent assignments, notably those concerning coordinating with branches, monitoring personnel declarations and taking part in market-wide projects. ■
Over 250 staff trained in the fight against money laundering in 2002
Most of this increase stemmed from the transfer of CNCEP’s capital markets personnel to CDC IXIS Capital Markets, i.e. 70 employees, 42 in the front office and 28 in the back office.
Efforts in 2002 focused on improving the reliability and efficiency of our technical infrastructure. To this end, numerous upgrades were undertaken on 1/ servers, by rationalising architecture and increasing calculating power; 2/ on the network, by installing a high-speed link between our operations in London, Paris and Frankfurt; 3/ on work stations, by migrating to XP® and implementing Kobra® real-time architecture; 4/ on applications, notably by migrating all SUMMIT ® applications to version 3.
The work undertaken in 2002 also ensured that CNCEP’s capital markets personnel were incorporated smoothly and that CDC IXIS Capital Markets’ IT systems were able to take on the transactions transferred from CNCEP, especially at the back office level.
MIT Bonds B/O for short-to-medium term loan processing). These two tools increase the efficiency of transaction processing via STP techniques (straight-through-processing), and led to changes in processes and work organisation. They are fully integrated with CDC IXIS Capital Markets’ overall IT system and improve consistency between businessline strategies and IT systems.
Work will start in 2003 on overhauling the equity back-office IT channel and will begin with OTC trades and securities lending/borrowing. These extensive projects will draw heavily on front office and back-office IT personnel resources. ■
CDC IXIS Capital Markets underlined its ability to resist tough market conditions in 2001 and 2002, and these are liable to last for a good part of 2003 as well.
Furthering the efforts made in 2002, CDC IXIS Capital Markets will strive to develop further services for the Caisses d’Epargne Group. We will continue to unlock synergies between the different elements of CDC IXIS’s Capital Markets and Financing Division, via close collaboration between personnel, especially as regards large corporates and local government financing.
The Outlook for 2003 CDC IXIS Capital Markets will continue to expand its specialist activities in a number of high value-added businesses and will strive to strengthen international alliances.
Amount of capital, shares issued: The parent company has total capital of €457,500,000, divided into 30,000,000 shares each with a nominal value of €15.25, all of the same category.
SHAREHOLDERS SITUATION AS AT 31/12/2002 SITUATION AS AT 31/12/2001 SITUATION AS AT 31/12/2000
•Double voting rights: nil •As far as the Company is aware, no shareholding pacts have been signed.
CDC IXIS FINANCIAL GUARANTY SA F Censor since 18 October 2002; previously Chairman of Supervisory Board (resigned 25 September 2002)
CDC IXIS FINANCIAL GUARANTY HOLDING SA F Censor since 18 October 2002; previously Member of Supervisory Board (resigned 25 September 2002)
CDC IXIS CAPITAL MARKETS SA F Chairman of Executive Board; Director of Central Functions CDC IXIS LCF ROTHSCHILD MIDCAPS SA F Vice-Chairman of Supervisory Board CDC IXIS SECURITIES SA F Chairman of Supervisory Board FILINKS SAS F Member of Supervisory Committee
(resigned 19 December 2002) CDC COMMERCIAL PAPER CORP. USA Chairman CDC DERIVATIVES INC. USA Chairman CDC FINANCIAL PRODUCTS INC. USA Chairman CDC FUNDING CORP. USA Chairman CDC INVESTMENT MANAGEMENT CORP. USA Member of Board of Directors (resigned May 2002) CDC IXIS CAPITAL MARKETS NORTH AMERICA USA Chairman CDC IXIS NORTH AMERICA USA Member of Board of Directors CDC MORTGAGE CAPITAL INC USA Chairman CDC MUNICIPAL PRODUCTS INC. USA Chairman CDC SECURITIES INC. USA Member of Board of Directors CDC SERVICING INC. USA Chairman NEXGEN FINANCIAL HOLDING LIMITED IRL Chairman of Board of Directors (since 11 December 2002) NEXGEN RE LIMITED IRL Chairman of Board of Directors (since 11 December 2002)
(mandate ended on 25 February 2002) THESORA SICAV F Member of Board of Directors
Remuneration and benefits received in 2002 in exchange for responsibilities and functions exercised within CDC IXIS Capital Markets: €637,194.29 2002 MR ALAIN PREVOT
CDC IXIS CAPITAL MARKETS SA F Member of Executive Board; Chief Executive Officer; General Secretary FILINKS SAS F Vice-Chairman of Supervisory Committee
Remuneration and benefits received in 2002 in exchange for responsibilities and functions exercised within CDC IXIS Capital Markets: €183,918.10 2002 MR NICOLAS FOURT
CDC FINANCE-CDC IXIS SA F Chairman of Executive Board; Director of Central Functions SOGEPOSTE SA F Permanent representative of CDC Finance-CDC IXIS
CDC IXIS FINANCIAL GUARANTY HOLDING SA F Chairman of Supervisory Board CDC IXIS FINANCIAL GUARANTY NORTH AMERICA INC. USA Chairman
ANATOL INVEST SA F Permanent representative of CDC Finance-CDC IXIS on the Board of Directors (mandate ended on 17 October 2002)
CDC IXIS ASSET MANAGEMENT SA F Vice-Chairman of Supervisory Board and permanent representative of CDC Finance-CDC IXIS on the Supervisory Board
SPID SA F Permanent representative of CDC Finance-CDC IXIS on the Board of Directors (mandate ended on 3 February 2003 following dissolution of the company)
CNP ASSURANCES (listed) SA F Member of Supervisory Board COMPAGNIE FINANCIERE EULIA SA F Member of Board of Directors (since January 2002) SOLSTICE SICAV F Permanent representative of CDC on the Board of Directors
(mandate ended 6 March 2002) SOCIETE DE GESTION DE CDC EURO OBLIGATIONS LUX Chairman of Board of Directors,
ACCOR (listed) SA F Member of Supervisory Board CNCEP SA F Permanent representative of CDC on the Supervisory Board COMPAGNIE DE SAINT-GOBAIN (listed) SA F Member of Board of Directors SAN PAOLO IMI (listed) ITA Member of Board of Directors (since March 2002)
CDC FINANCE-CDC IXIS SA F Member of Executive Board; Chief Executive Officer; Director of Support Functions and Steering
CDC IXIS FINANCIAL GUARANTY HOLDING SA F Permanent representative of CDC Finance-CDC IXIS on the Supervisory Board
CDC IXIS FINANCIAL GUARANTY EUROPE SA F Permanent representative of CDC IXIS Financial Guaranty on the Supervisory Board
CDC IXIS FINANCIAL GUARANTY SERVICES INC. USA Member of Board of Directors CDC IXIS FINANCIAL GUARANTY NORTH AMERICA INC. USA Vice-Chairman
CDC IXIS ASSET MANAGEMENT SA F Chairman of Supervisory Board IXIS AEW EUROPE (EX-CDC IXIS IMMO) SA F Permanent representative of CDC Finance-CDC IXIS
CDC IXIS PRIVATE EQUITY SA F Member of Board of Directors (resigned 16 December 2002)
DC HOLDING FINANCE (EX-SODEVE) SA F Member of Board of Directors (from 26 August to date of resignation on 16 December 2002); previously Chairman of Board of Directors (until 26 August 2002)
(resigned 29 March 2002) CNCEP SA F Member of Supervisory Board
(resigned 16 December 2002) DEXIA (listed) SA F Member of Supervisory Board
(resigned 4 July 2002) THALES (listed) SA F Member of Board of Directors
Director’s fees received in 2002 in exchange for responsibilities exercised within CDC IXIS Capital Markets: nil 2002 MR ANTOINE LISSOWSKI
CDC FINANCE-CDC IXIS SA F Member of Executive Board (since 29 May 2002), Chief Financial Officer
CDC IXIS FINANCIAL GUARANTY HOLDING SA F Member of Supervisory Board CDC IXIS FINANCIAL GUARANTY SA F Chairman of Supervisory Board
(since 25 September 2002) CDC IXIS FINANCIAL GUARANTY EUROPE SA F Chairman of Supervisory Board
CDC IXIS CAPITAL MARKETS SA F Member of Supervisory Board MARTIGNAC FINANCE SA F Chairman of Supervisory Board CDC IXIS NORTH AMERICA USA Member of Board of Directors
CDC HOLDING FINANCE (EX-SODEVE) SA F Member of Board of Directors (resigned 21 January 2002) CDC IXIS ITALIA HOLDING SA F Chairman of Executive Board (resigned 11 July 2002) SOCIÉTÉ FONCIÈRE MOGADOR SA F Permanent representative of CDC on the Board of Directors
CNCEP SA F Member of Supervisory Board ECUREUIL ACTIONS FUTUR SICAV F Permanent representative of CDC Finance-CDC IXIS
on the Board of Directors (mandate ended on 6 June 2002) ECUREUIL CAPITALISATION SICAV F Member of Board of Directors (resigned 22 May 2002) ELANCIEL EURO SICAV F Member of Board of Directors (resigned 22 May 2002) ELANCIEL FRANCE SICAV F Member of Board of Directors (resigned 22 May 2002)
CDC IXIS CAPITAL MARKETS SA F Member of Supervisory Board (since March 2002) MARTIGNAC FINANCE SA F Vice-Chairman of Supervisory Board
A3C SAS F Representative of CNCEP on the Board of Directors ARESE SA F Member of Board of Directors COMPAGNIE FINANCIERE EULIA SA F Member of Board of Directors INGEPAR SA F Permanent representative of CNCEP
on the Board of Directors GROUPEMENT D’ACHATS DES CE OD@CIA SA F Permanent representative of CNCEP
on the Board of Directors HOLGEST SA F Chairman of Board of Directors LES EDITIONS DE L’EPARGNE SA F Member of Board of Directors REVENUS TRIMESTRIELS SICAV F Permanent representative of CNCEP
CDC IXIS CAPITAL MARKETS SA F Member of Supervisory Board (resigned 1 January 2002)
CDC FINANCE-CDC IXIS SA F Permanent representative of Compagnie financière EULIA on the Supervisory Board (since 28 February 2002; previously Vice-Chairman of Supervisory Board)
CAISSE DES DEPOTS DEVELOPPEMENT C3D SA F Member of Board of Directors CDC IXIS ITALIA HOLDING SA F Chairman of Supervisory Board CNP ASSURANCES (listed) SA F Member of Supervisory Board COMPAGNIE FINANCIERE EULIA SA F Deputy Chief Executive Officer, in charge of finance
CDC FINANCE-CDC IXIS SA F Member of Supervisory Board (since 28 February 2002)
CDC IXIS CAPITAL MARKETS SA F Permanent representative of CNCEP on the Supervisory Board
CDC IXIS ASSET MANAGEMENT SA F Permanent representative of CNCEP on the Supervisory Board
CDC IXIS PRIVATE CAPITAL MANAGEMENT SA F Permanent representative of CNCEP on the Supervisory Board
CAISSE D’EPARGNE FINANCEMENT SA F Member of Board of Directors CNCEP SA F Member of Executive Board; Chief Executive Officer CREDIT FONCIER DE FRANCE (listed) SA F Vice-Chairman of Supervisory Board ECUREUIL ASSURANCE IARD SA F Chairman of Board of Directors (until October 2002) ECUREUIL GESTION SA F Chairman of Supervisory Board (until August 2002) ECUREUIL VIE SA F Chairman of Board of Directors (until October 2002) HOLASSURE SA F Chairman and Chief Executive Officer LA MUTUELLE DU MANS ASSURANCES IARD (MMA IARD) MUT F Permanent representative of CNCEP
on the Board of Directors SOPASSURE SA F Chairman and Chief Executive Officer
Having heard the reports of the Executive Board, the Supervisory Board and the Auditors, the Shareholders ’ Meeting approves the parent company financial statements for the year ended 31 December 2002, as presented.
The Shareholders’ Meeting decides not to pay a dividend, but to allocate the total amount of profit for the year to retained earnings after assigning the appropriate sum to the legal reserve: Calculation of distributable profit: Net profit for 2002 €90,614,206.31 5% to the legal reserve (€4,530,710.32)
During the last three years, the following dividends have been paid: • 2000: a dividend of FF247,800,000, plus a tax credit of FF123,900,000 (approved by the Shareholders’ Meeting of 19 May 2000, convened to vote on the financial statements for the year ended 31 December 1999).
• 2002 : a dividend of €27,200,000, plus a tax credit of €13,600,000 (approved by the Shareholders’ Meeting of 17 May 2002, convened to vote on the financial statements for the year ended 31 December 2001)
The Shareholders’ Meeting sets the total fees allocated to the members of the Supervisory Board at €20,800 for financial year 2002.
The Shareholders’ Meeting confirms the Supervisory Board’s decision relative to the transfer of the company’s head office within the same administrative subdivision of the French territory (département) from 51, rue de Lille 75007 Paris to 47, quai d’Austerlitz
CUSTOMER TRANSACTIONS Other loans to customers 3 7,065 5,294 3,387 Current account overdrafts
INTERBANK AND EQUIVALENT TRANSACTIONS Central banks, giro accounts 13 - 33 Amounts due to credit institutions 8 80,788 71,985 66,375
CUSTOMER TRANSACTIONS Current account deposits - - Other amounts due to customers 9 4,203 4,776 2,894
DEBTS REPRESENTED BY SECURITIES Interest-bearing notes - - Interbank market securities and negotiable debt instruments 10 12,392 10,737 8,016
+ Interest and equivalent income on bonds and other fixed-income securities 17 542 485 484
- Interest and equivalent expenses on customer transactions 16 (76) (100) (44)
FINANCING COMMITMENTS Commitments granted to credit institutions 6,191 - 125 Commitments to customers
GUARANTEE COMMITMENTS Commitments to credit institutions 11,616 11,204 10,869 Commitments to customers
COMMITMENTS ON SECURITIES Securities sold with a repurchase of transfer option Other commitments received 1,789 1,833 1,916
The consolidated financial statements have been drawn up in accordance with French accounting principles applicable to the consolidated statements of credit institutions, as specified in regulation No. 99-07 of the French Accounting Regulation Committee (Comité de la Réglementation Comptable - CRC).
The consolidated financial statements have been prepared in accordance with the provisions of CRC regulation 2000-04.
In accordance with the measures relative to special purpose vehicles defined in regulation CRC 99-07, the Clea 2 and Pangaea entities were fully consolidated in CDC IXIS Capital Markets’ consolidated accounts for the first time on 31 December 2002. The consolidation of these two entities had no significant impact on the consolidated accounts.
3 - Accounting and valuation principles 3.1 Foreign-exchange transactions In accordance with CRB regulation 89-01 on foreignexchange accounting, assets, liabilities and off-balance sheet commitments are translated at the spot rate on the last day of the accounting period.
Securities purchased or sold under resale or repurchase agreements Securities purchased under resale agreements are included under other loans to credit institutions or loans to customers in accordance with regulation 89-07 of the French Banking Regulation Committee. Securities sold under repurchase agreements are booked as debt.
The revenues and expenses on repurchase and resale agreements are recorded on a pro-rata temporis basis in the profit & loss statement.
Whenever CDC IXIS Capital Markets acts as marketmaker and the security is traded in sufficient volumes, these securities may be held in the portfolio for longer than the six-month maximum period as stipulated by the regulations. This also applies to securities held as specialised hedges of instruments that are marked-tomarket.
3.4 Futures and options CDC IXIS Capital Markets performs transactions using the entire spectrum of financial futures instruments on fixed income, foreign exchange and equity markets, in order to: •hedge transactions, •or employ specialised trading portfolio management techniques.
Futures and options are recorded off-balance sheet at their nominal value.
Fixed-income and currency swaps In accordance with regulation No. 90-15 (as amended by No. 92-04) of the French Banking Regulation Committee, fixed-income or currency swaps are classified as follows: • micro-hedging: the gain or loss is recorded on a symmetric basis to the gain or loss on the hedged item; • specialised management of a trading portfolio: these contracts are marked to market. In accordance with regulations, the value is adjusted to take into account counterparty risks and the discounted present value of future management costs. The adjusted marked-to-market gain or loss is recorded in the profit & loss statement.
Gains or losses are considered globally so as to reflect the economic nature of the transactions. Management intentions will dictate treatment of the overall result: •Results of transactions carried out for hedging purposes are apportioned on a straight-line basis over the relevant period. In the case of an overall negative market value of a complex transaction with its hedging component, a provision is booked; •Results of transactions carried out for trading portfolio management purposes or whose results are deemed to be equivalent to a financial engineering commission are recorded at the origin. A discount is applied to take into account the future management expenses and any possible counterparty risks.
3.8 Credit derivatives Credit derivatives are instruments designed to transfer the existing credit risk on assets from one coun-
3.9 Treatment of income and expenses Interest and related commissions are recorded prorata temporis.
3.12 Fixed assets Fixed assets are recorded in the balance sheet at acquisition cost.
Depreciation is calculated over the estimated life of the tangible asset using the straight-line or diminishing -balance method.
3.15 Corporate tax This line item includes current tax for the fiscal year after deduction of any tax credits which may be offset against the amount due, together with deferred tax.
By applying the new methodology to the consolidated accounts, all timing differences can be identified. The corresponding deferred tax assets are released to the profit & loss statement when recuperation appears probable based on the principle of prudence.
3.16 Special purpose vehicles Special purpose vehicles are structures that have been created specifically to manage one or more transactions on behalf of a company.
Term loans 3,326.30 855.02 Securities received under repurchase agreements (1) 2,993.60 2,676.18 Accrued interest 7.34 1.12
Including as at 31/12/2002: (1) €665m of public securities and equivalents. (2) €12.651bn of loans to CDC IXIS Group companies.
Overdrafts on current accounts 9,176.61 7,140.17 Overnight accounts and loans 5,943.20 2,281.54 Accrued interest 0.24 0.53
Including as at 31/12/2002 : (1) €12.588bn of public securities and equivalents. (2) €27.679bn of loans to CDC IXIS Group companies.
BONDS AND OTHER FIXED-INCOME SECURITIES 31,204.67 8,711.46 4,287.05 44,203.18 26,834.41 5,458.38 2,027.97 34,320.76 o/w securities issued by public bodies 4,674.80 147.34 995.03 5,817.17 2 132.87 123.60 558.38 2,814.85
(1) Market value of €9.339bn as at 31/12/2002; marketable securities are included in portfolios when they are associated with fixed-income instruments and provisions are calculated in accordance with the principles set out in note 1 section 3.3
(4) Including €239.49m of trading securities reclassified as marketable securities and €84.33m of marketable securities reclassified as investment securities
(1) This item notably includes margin calls and guarantee deposits paid to market counterparties or clearing houses.
Current accounts in credit 1,716.88 855.54 Overnight loans 6,130.04 2,175.72 Accrued interest 0.50 2.19
Negotiable loan notes, including accrued interest 12,392.09 10,737.46 - Non-euro currencies 9,174.14 9,148.34
Term: Borrowing from financial institutions 0.22 Securities sold under repurchase agreements (1) 4,177.01 4,769.06 Accrued interest 25.29 6.05
Settlement accounts on securities transactions 28.55 8.20 Debts on borrowed securities 5,915.80 3,907.34 Other debts on securities (2) 10,436.51 11,433.52
Personnel expenses 2.86 0.72 2.14 Depreciation of fixtures and fittings - - Other administrative expenses - - Risks on long-term investments - - Risks on complex transactions - - -
(1) As at 31/12/2002, other risks and charges notably included provisions for risks (see note 27b) and transfers of provisions linked to the consolidation of SPV CLEA2 (goodwill and provision for value impairment of stake).
Perpetual subordinated loan (1) 457.35 457.35 Fixed-term subordinated securities (2) 250.00 250.00 Accrued interest 22.04 23.65
(1) The perpetual subordinated loan was granted to CDC IXIS Capital Markets by Caisse des dépôts et consignations on 1/9/1996 (CDC IXIS then replaced CDC retroactively on 1 January 2000). CDC IXIS Capital Markets has the option to reimburse all or part of the loan, providing that prior agreement is received from the general secretary of France's Commission Bancaire. In the event that CDC IXIS Capital Markets is liquidated, the outstanding principal and interest on the loan will only be reimbursed after amounts due to all creditors, whether preferred or unsecured, have been settled in full.