In accordance with the decree of February 20, 2007, credit risk exposure can be measured using two approaches: V the “standardized” approach, based on external credit ratings and specific risk weightings according to Basel categories of exposure; V the “internal ratings based” (IRB) approach based on the financial institution’s internal ratings system, which consists of two categories: R the Foundation IRB approach, for which banks use only their probability of default estimates,
Regulatory capital is determined in accordance with CRBF Regulation No. 90-02 of February 23, 1990 relating to capital and is therefore divided into three categories: Tier 1 capital, Tier 2 capital and Tier 3 capital. Deductions are made from these categories relative to statutory consolidation data.
V Share capital; V r eserves, including revaluation reserves, and unrealized or deferred gains or losses.
R for other fi nancial instruments, including debt instruments or loans and receivables, unrealized capital gains or losses are also eliminated,
The following deductions are made: V treasury shares held and stated at their carrying value; V intangible assets, including set-up costs and goodwill; V unrealized capital gains and losses for own credit risk.
Core Tier 1 capital is defi ned as Basel 2 Tier 1 capital after deducting Tier 1-eligible hybrid securities and after applying the deductions to Tier 1 capital provided for by regulations (excluding CCIs if appropriate – see 4.2.4.4 Deductions).
V Capital resulting from the issue of subordinated securities or loans (perpetual subordinated securities); V Capital subject to the conditions of Article 4d of CRBF Regulation No. 90-02 of February 23, 1990 pertaining to capital (redeemable subordinated securities); V Equity instruments: 45% of pre-tax net unrealized capital gains recognized as Tier 2 capital; V Positive difference between the sum of value adjustments and portfolio-assessed impairment and projected losses calculated using internal ratings-based approaches.
Deductions include: V financial investments representing more than 10% of the share capital of a credit institution or investment firm, as well as subordinated loans and any other item constituting capital; V securitization positions with a rating of less than BB-; V total projected losses for equity exposure; V positive difference between projected losses calculated using internal ratings-based approaches and the sum of value adjustments and portfolio-assessed impairment relating to the exposures in question.
Since December 31, 2010 and in accordance with the Autorité de contrôle prudentiel (ACP), Natixis’ investments in the Caisse d’Epargne and Banque Populaire banks, in the form of Cooperative Investment Certifi cates (CCIs), are no longer deducted from capital but are included in risk-weighted assets. For further details on CCIs, see section [1.4.5] “Presentation of Natixis - Major contracts”.
Restatements, o/w: V Reclassifi cation of hybrids and fair value fi ltering (1.8) (4.3) 2.5
RISK MANAGEMENT4 Pillar III Core Tier 1 capital totaled €13.6 billion at December 31, 2012, up €1.5 billion over the year.
The decline in shareholders’ equity to €19.5 billion can be mainly attributed to the redemption of Deeply Subordinated Notes (DSNs) (including -€2.3 billion as part of the P3CI deal). This was offset by revenues of €0.8 billion for the year, net of interest paid on DSNs, and the decrease in unrealized and deferred losses (+€0.6 billion due to the change in reserves to be recycled in respect of CCIs, available-for-sale assets and cash fl ow hedging derivatives, a change that was partly fi ltered through prudential capital).
Operational risks increased by €2.3 billion due to the replacement of 2009 net revenues with 2012 net revenues (standard practice is to calculate operational risk using average net revenues for the previous three years).
Of which present value of residual exposure at default on fi nancial leases 11 9
Economic capital requirements are calculated, covering four areas of risk: credit, market (trading, ALM, investment portfolios and Private Equity, etc.), operational and businessrelated.
The Risk function was restructured in summer 2010. It is highly integrated, has short decision-making channels, and cross-business ties via dedicated teams, notably the Consolidated Risk Department, which adopts a comprehensive, cross-business approach to risks. A Service and Investment Solutions Risk Department coordinates the function and is in charge of the Heads of Risk in the two divisions.
It plays an essential role in the structure of c ommittees, the highest-level c ommittee being Natixis’ Global Risk Committee.
Lastly, it reports regularly on its work, submitting its analyses and fi ndings to Natixis’ executive and decision-making bodies, and to Groupe BPCE. A risk consolidation team generates an overview through the use of scorecards that report on risks and risk management.
Credit risk is the risk of fi nancial loss on Natixis’ loans due to a debtor’s inability to honor its contractual obligations. The assessment of the probability of a debtor’s inability to repay and projected recovery in this event are key factors in the measurement of credit quality. The debtor may be a bank, an industrial or a commercial company, a sovereign State and its various entities, an investment fund, or a natural person. Credit risk increases in periods of economic uncertainty, insofar as such conditions may lead to a higher rate of default.
Risk policies are tailored to each business line according to their development targets.
Natixis’ credit risk measurement and management procedures are based on: V a standardized risk-taking process, structured via a system of limit authorizations and decision-making Committees; V independent analyses carried out by the Risk Department during the loan approval review process; V rating tools and methodologies providing standardized and tailored assessments of counterparty risk, thereby making it possible to evaluate the probability of default within one year and loss given default; V information systems that give an overview of outstanding loans and credit limits.
Pursuant to regulatory requirements, all counterparties in the banking book and the related exposures must have an internal rating when they: V carry a loan or are assigned a credit limit; V guarantee a loan; V issue securities used as collateral for a loan.
The mechanism is based on: V internal rating methodologies specific to the various Basel asset classes and consistent with Natixis’ risk profile; V an IT system used for managing the successive stages of the rating process, from initiation of the process to validation and logging of the final rating; V procedures and controls that place internal ratings at the heart of the risk-management system, from transaction origination to ex-post analysis of defaulting counterparties and the losses incurred on the relevant loans; V periodic reviews of rating methodologies, the method of calculating LGD and underlying risk parameters.
Since September 30, 2010 Natixis has used internal rating methods specifi c to the different asset classes approved by the Autorité de contrôle prudentiel (ACP - French Prudential Supervisory Authority ), and that use the advanced internal ratings-based method (IRBA) to rate corporate, sovereign, banking, specialized lending and some categories of consumer fi nance exposures.
Natixis manages the risks associated with securitization positions through two mechanisms. The fi rst involves the daily identifi cation of all rating declines affecting the Group’s securitization positions as well as the associated potential risks and, if necessary, deciding on an appropriate course of action. The second is underpinned by a quantitative (ratings, valuations) and qualitative analysis of securitization positions for the purpose of segmenting the portfolio on the basis of risk levels. The results of these analyses are written up and discussed in a quarterly presentation at the meeting of the Group’s Watch List and Provisions Committee.
The Natixis Watch List and Provisions Committee meets once a quarter and covers all the Bank’s business lines (Wholesale Banking, Investment Solutions and SFS). It reviews all doubtful loans under watch that may give rise to provisions or adjustments to existing provisions, and decides on the amount of provisioning necessary.
For the latter, the search for objective evidence of impairment is undertaken through analysis and close monitoring of business sectors and countries. Such evidence typically arises from a combination of micro or macroeconomic factors specifi c to the industry or country in question. When necessary, an expert opinion is sought to refi ne the results of this review.
Other exposure recorded in the corporate entities category 131,786 88,417 96,024 104,016
SMEs recorded in the corporate entities category 6,473 6,039 6,352 6,471
SMEs recorded in the retail customer category 1,886 1,841 1,925 2,025
Other exposure recorded in the retail customer category 13,369 2,982 3,040 3,233
Other exposure recorded in the corporate entities category 15.0% 6.7% 3.8% 3.4% 29.0% 36.1%
Banks and investment fi rms 23.8% 7.8% 2.8% 1.1% 35.5% 32.3%
SMEs recorded in the retail customer category 0.5% 0.0% 0.0% 0.0% 0.5% 0.7%
SMEs recorded in the corporate entities category 339 642 578 1,758 2,721 6,039 6,471
Banks and investment fi rms 25,595 26,879 5,653 15,247 21,277 94,651 83,034
Central administrations and central banks 37,473 606 495 1,179 4,335 44,088 20,131
The standard approach is used for European subsidiaries, retail asset class exposures and real-estate leasing.
Other exposure recorded in the corporate entities category 66,563 15,458 6,396 88,417
SMEs recorded in the corporate entities category 1,773 1,764 2,502 6,039
Other exposure recorded in the retail customer category 615 - 2,368 2,982
RISK MANAGEMENT4 Pillar III Exposure at risk by rating (S&P equivalent) for IRB asset classes
The following table shows the breakdown of exposure at risk by internal rating (S&P equivalent) for asset classes measured using the IRB approach, after excluding: V exposure to equities (calculated using a simple weighting approach); V pool-based exposure (acquired portfolios); V securization positions ; V generic counterparties.
Presentation of Natixis Financement outstandings according to the IRBA retail method.
R IMPACT OF RISK-REDUCTION TECHNIQUES ON DERIVATIVES OTHER THAN CREDIT DERIVATIVES (DATA AS AT DECEMBER 31, 2012)
R EXPOSURES COVERED BY FINANCIAL AND TANGIBLE COLLATERAL BY CATEGORY OF EXPOSURE AS AT DECEMBER 31, 2012
Other exposure recorded in the corporate entities category 7,917 195 4,652 6,121
SMEs recorded in the retail customer category 2 - 2 -
Financial collateral encompasses securities and other instruments constituting tangible collateral in accordance with paragraphs b) to f) of Article 338.3 of the French decree of February 20, 2007.
R BREAKDOWN OF SECURITIZATION POSITIONS BY STANDARD & POOR’S EQUIVALENT RATING
V the risk associated with other operations, notably real estate, which is indirectly affected by changes in the value of tradable assets held in the normal course of business.
The market risk control mechanism is based on a delegation structure that is under the responsibility of the Global Risk Committee and in which the Market Risk Committee, chaired by the Chief Executive Offi cer or his/her delegated representative, plays an essential role.
In accordance with the recommendations of France’s Lagarde report, the Risk Department also ensures adherence to the limit notifi cation procedure, under which each trader sends email confi rmation that they belong to the desk where they are authorized to trade and that they respect their allocated limits.
Natixis’ market risk management is based on a risk metrics model that measures the risk run by each Group entity.
All decisions regarding risks factors are revised annually in Committee meetings attended by all parties concerned (Risk Department, front offi ce and P&L division). Quantitative, objective tools are used to measure the relevance of risk factors. The aim is to ensure consistency between VaR calculations, results and sensitivities (use of the same risk factors).
Overall stress tests are reviewed on a continuous basis. They are performed daily and can be grouped into two categories: V historic stress tests consist of reproducing sets of changes in market parameters observed during past crises in order to create an ex-post simulation of the P&L changes recorded. While stress tests do not have any predictive value, they do make it possible to gauge the exposure of the portfolio to known scenarios,
BPCE guarantees most of the workout portfolio management assets in Paris and New York. Nevertheless, the Market Risk Department continues to manage risks on all transactions on a standardized and exhaustive basis, whether these transactions are guaranteed or not by BPCE. A VaR, overall stress tests as well as a SVaR and IRC that take into account the effects of this guarantee are produced on a daily basis.
The 99% 1-day VaR level for Natixis’ trading portfolios averaged €12.5 million. It peaked at €20.5 million on September 7, 2012 and stood at €8.5 million at December 31, 2012.
RISK MANAGEMENT4 Pillar III R OVERALL NATIXIS Va R INCLUDING THE BPCE GUARANTEE – TRADING PORTFOLIO (1 DAY VAR 99%)
Overall VaR including the BPCE guarantee VaR GAPC including the BPCE guarantee VaR CIB/BGC
Overall stress test levels rose slightly compared to 2011, with an average loss of €46.7 million at December 31, 2012.
R REGULATORY CAPITAL REQUIREMENTS Regulatory capital requirements as at December 31, 2012, were as follows: (in millions of euros) Type and nature of risk
Like most of its competitors, Natixis relies heavily on its communication and information systems as its operations require it to process a large number of increasingly complex transactions. Any breakdown, interruption or failure of these systems could result in errors or interruptions to customer relationship management, general ledger, deposit, transaction and/or loan processing systems. If, for example, Natixis’ information systems failed, even for a short period of time, it would be unable to meet customers’ needs in a timely manner and could thus lose transaction opportunities. Likewise, a temporary breakdown of Natixis’ information systems, despite back-up systems and contingency plans, could result in considerable information retrieval and verifi cation costs, and even a decline in its business if, for instance, such a breakdown occurred during the implementation of hedging transactions. The inability of Natixis’ systems to accommodate an increasing volume of transactions could also undermine its business development capacity.
The principal legal proceedings in progress involving Natixis and its subsidiaries are described in section [4.5].
The department’s role is to maintain and actively improve the system that identifi es, monitors, controls and reduces the level of operational risk within all of Natixis’ entities. Its main tasks are defi ning methodologies, monitoring and reporting on operational risks, collecting and reporting incidents and building a risk culture within the Company.
The Operational Risk Department is divided into two control units, one covering risks specifi c to Natixis’ business lines and activities, and the other dealing with the overall risks to which the Company is exposed (loss of access to premises or information systems, or the availability of employees). The Business Line Risk division is divided into: V Wholesale Banking: covers capital market activities for Wholesale Banking and workout portfolio management assets (GAPC), and financing for Wholesale Banking activities; V Investment Solutions: covers Private Banking activities, Natixis Assurances, Private Equity as well as Natixis Global Asset Management; V Specialized Financial Services: covers subsidiaries Natixis Paiements, Natixis Interépargne, Natixis Intertitres, Cie Européenne de Garanties et Cautions, Natixis EuroTitres, Natixis Financement, Natixis Lease, Retail Services and Natixis Factor.
A single, overall information system has been deployed across all of the Company’s entities and hosts the all the components required to manage operational risk.
Mapping is based on the Company’s processes and is conducted in two phases: a qualitative phase for detecting and analyzing risks, and a quantitative phase for measuring these risks.
Total as at 12.31.2011 * Investments in insurance companies are included in EAD because they are now weighted as RWA.
Financial assets at fair value through profi t and loss (other than trading) 4,210 4,225 15 15 (0)
(in millions of euros) Assets Total amount of divestment gains or losses
R FRACTION OF AMOUNTS OF UNREALIZED GAINS OR LOSSES INCLUDED IN TIER 1 OR TIER 2 CAPITAL AS AT DECEMBER 31, 2012
Prudential restatement of unrealized gains or losses on available-for-sale equity instruments (27)
The ALM Committee’s monitoring scope includes: V the banking portfolios of Natixis S.A. and its credit subsidiaries for overall interest rate risk; V Natixis’ entire consolidation scope for liquidity risk (excluding insurance subsidiaries without intrinsic liquidity risks and which undergo specific asset/ liability management); V Natixis’ entire consolidation scope for structural foreign exchange risk.
As is the case for most c orporate and i nvestment banks, Natixis has very few assets and liabilities generating structural interest rate positions. Natixis’ overall interest rate risk is essentially linear, exposed to the euro and US dollar, and concerns mismatching positions between contractual transactions. The most signifi cant positions concern exposures to the short end of yield curves and are predominantly linked to the lag between IBOR reset dates. This is therefore classed as a secondary risk at the bank level.
It is not in Natixis’ interest to hold long-term structural interest rate positions in its banking portfolio. With a few exceptions, fi xed rate fi nancial assets and liabilities are returned for BOR via rate swaps and are mainly held in the Treasury portfolios which are subject to ongoing monitoring of interest rate risk.
Natixis’ overall interest rate risk is minor in respect to the volumes of the positions managed, and does not warrant any special comments. The regulatory “shock” resulting from the application of Basel 2 standards (+200 bp instantaneous variation in the yield curves) at December 31, 2012, would result in a change in the portfolio’s absolute value of €60 million (€24 million excluding accreting and P3CI transactions).
Liquidity risk is controlled, managed and monitored in the following manner: V management of each business line’s liquidity consumption: to manage the bank’s refinancing needs, liquidity budgets are allocated for each business line as part of the budgetary procedure and approved by the ALM Committee. Consumption is monitored weekly for Wholesale Banking business lines and monthly for other business lines; V supervision of short-term mismatching: this is measured on the basis of liquidity gaps. This indicator is produced daily for a 365-day horizon in intervals of one day, based on all the parent company’s transactions. It is governed by two permanent limits approved by the ALM Committee and monitored daily; one on overnight market exposure and the other on the 60-day liquidity gap. As of September 2012, a range for the five-month and 11-month plots governing the gap have also been implemented; V supervision of medium-term mismatching: this is measured on the basis of liquidity gaps and asset/ liability hedging ratios. These ratios include minimum hedging ratios approved by the ALM Committee and monitored monthly for Treasury’s long-term scope and that of credit institution subsidiaries with mismatch management mandates, and quarterly for Natixis’ entire scope of consolidation; V simulations of liquidity stress scenarios: the purpose of these scenarios is to measure the Group’s ability to continue to respect its commitments and operate in the event of a liquidity crisis. Natixis periodically simulates its contribution to the Group’s earnings based on different crisis scenarios (systemic, specific, combined etc.) and different levels of intensity (moderate, strong, extreme, etc.) over one-, two- and three-month periods for which assumptions are set by BPCE.
Overall interest rate, liquidity, structural foreign exchange risks 4.3.2.3 Structural foreign exchange risk
Net investments in currency are never hedged, in line with the “net investment hedge” principle as defi ned by IAS 39.
This coverage applies worldwide, except for professional civil liability, where the guarantee does not extend to permanent establishments in the United States (coverage for US operations is purchased locally by subsidiaries or branches).
In August 2004, three shareholders acting in the name of and on behalf of three investment funds (Oakmark Fund, Oakmark Equity and Income Fund and Oakmark Global Fund) fi led a complaint against Harris Associates L.P., a whollyowned subsidiary of Natixis Global Asset Management, before the United States District Court for the Northern District of Illinois. The plaintiffs alleged that Harris Associates L.P. billed services to these three funds at an excessively high rate in the light of applicable regulations. These proceedings are among numerous legal claims initiated in recent years against investment advisors. Harris Associates L.P. and the plaintiffs fi led motions for summary judgment.
On February 27, 2007, the judge accepted all aspects of the Harris Associates L.P. motion and rejected the motion of the plaintiffs. On March 20, 2007 the plaintiffs appealed that decision. Both parties fi led written arguments and appeared before the Court of Appeals on September 10, 2007.
On May 19, 2008, a panel of judges from the Court of Appeals for the Seventh Circuit issued a ruling upholding the ruling of the District Court in favor of Harris Associates L.P.
Legal risks brokers of municipal derivatives conspired to fi x prices, rig bids and allocate customers between 1992 and the present time. The various plaintiffs have also named more than 30 other US and European banks and brokers as defendants. Some plaintiffs seek to certify a class of all state, local and municipal government entities, independent government agencies and private entities that purchased municipal derivatives from the defendants or through brokers from 1992 to the present, and to recover damages to the class that result from the alleged anticompetitive activities. Most of the federal cases have been regrouped before the United States District Court for the Southern District of New York under the caption “Municipal Derivatives Antitrust Litigation.”
The class actions in which Natixis Funding is cited as one of 13 providers and brokers of derivatives will go forward, as the requests to dismiss the plaintiffs were rejected on March 25, 2010.
At December 31, 2012, Madoff assets net of insurance were estimated at €372 million and were fully provisioned. The actual impact of this exposure will depend on the amount of assets deposited on behalf of Natixis that are recovered and on the outcome of any action the bank may take, including legal action. Natixis has therefore retained the services of law fi rms to assist it in the collections process. Furthermore, a disagreement has arisen on the application of the terms of Natixis’ professional civil liability coverage in this matter.
On December 21, 2010, the Natixis branch in Milan received an order for preventive sequestration (Decreto Di Sequestro Preventivo) in the amount of €2.2 million. The sequestration was requested preventively in the context of proceedings launched against Natixis and other banks by the Florence public prosecutor in regard to derivative transactions between these banks and the Region of Tuscany and which were considered by the prosecutor to have generated illicit profi ts.
On December 27, 2011, the Region of Tuscany informed Natixis that it is seeking the termination with retroactive effect of the swaps set in place by Natixis with the Region in 2002 as well as the novation of one of these swaps.
On January 5, 2012, a complaint was fi led against Natixis Asset Management before the Paris District Court (Tribunal de Grande Instance de Paris) by 187 former employees of CDC Gestion (current name Natixis Asset Management.) The purpose of the complaint is the legal recognition of their rights to the common law profi t-sharing schemes from 1989 to 2001. The case is still in progress.
The rapporteur designated by the AMF’s Enforcement Committee published his report in January 2012, recommending the exoneration of the parties with respect to form (statute of limitations) and content (consistency of sales documentation with the proposed investment, and compliance with applicable regulations in force at the time). On April 19, 2012, the Enforcement Committee rendered its verdict, ruling that the statute of limitations was reached in 2005.
At the end of April 2012, the collegiate body of the AMF decided to appeal the Enforcement Committee’s ruling to the Council of State.
SEEM On January 22, 2013, Natixis received a compulsory third-party joinder at the request of SEEM. This company seeks a joint sanction against Natixis and particularly Cube Energy S.C.A. for the payment of approximately €23 million, alleging that Cube Energy S.C.A. acted in breach of its duty of loyalty to its partner SEEM. Natixis believes the outcome of this case will be positive for Natixis and the companies in its Group.
The liability adequacy test carried out in accordance with IFRS 4 showed that insurance liabilities evaluated under local standards, for the year ended December 31, 2012, were greater than the fair value of these liabilities, taking into account the redemption option incorporated in the policies.
Mortality and morbidity risks are limited by the implementation of a pricing structure appropriate for the policyholders in question and guarantees that are insured, the use of experience tables and the upstream practice of medical history-based selection of new policyholders.
Traditionally, Coface distinguishes between frequency risk and event risk: V frequency risk represents the risk of a sudden and significant increase in delinquency from a multitude of debtors. This risk is measured for each region and country by monitoring the instantaneous loss ratio and the monthly indicator that breaks down the changes in domestic/export credit by DRA (Debtor Risk Assessment) and business sector, by acceptance rate on the DRA scale or by product line (deposit, single risks). Loss ratios for the different underwriting centers are also monitored at the consolidated Coface level. Missed payments are analyzed weekly by the Group Management Board and monthly by the Group’s Arbitration Committee; V event risk represents the risk of abnormally high losses recorded for the same debtor or group of debtors, or of an accumulation of losses for the same country.
RISK MANAGEMENT4 Insurance risks Exposure to debtor risk at end-December 2012
Tranches - Total Buyer Outstandings Outstandings (in millions of euros) Number of limits Number of buyers Outstanding
Coface is exposed to fi nancial risk related to variations in net investment income and risks related to different asset classes.
Compagnie Européenne de Garanties et Cautions is Natixis’ guarantee and surety platform for multiple business lines. Its primary risks include underwriting risk, market risk, operational risk and reinsurer default risk.
Underwriting risk is the main risk incurred by CEGC. The volume of outstandings at risk amounted to €85,106 million at December 31, 2012 (up 8% compared to fi scal year 2011). Underwriting risk is essentially a type of counterparty risk, as the commitments given by CEGC to benefi ciaries of guarantees give direct exposure to subscribers (policyholders).
The counterparty risk selection procedure is deployed according to the type of activities and guarantees issued.
Natixis was exposed to the following risks at December 31, 2012.
Subprime ABS CDOs represented gross exposure of €723 million as at December 31, 2012. €24 million in impairments were recognized (excluding the effect of the BPCE guarantee) in 2012, bringing total impairments to €597 million.
Value adjustments fell by €1,222 million during 2012 (excluding the effect of the BPCE guarantee) to €351 million at December 31, 2012, versus €1,573 at December 31, 2011, primarily due to the commutation of transactions with the monoline insurer MBIA.
Net exposure as at 12.31.2012 AAA AA A BBB BB B CCC CC
Asset portfolio (fair value option) 0 - 6 6 - 6 - - - - - -
V The conventions applied in determining the ear nings generated by the various business lines are as follows: R the business lines record the return on regulatory capital allocated to them; R the return on share capital of the entities comprising the divisions is eliminated; R the carrying cost of goodwill is borne entirely by the Corporate Center; R the divisions are invoiced for an amount representing the bulk of the Group’s overheads. The costs associated with the Wholesale Banking adaptation plan are covered by the Corporate Center; R GAPC is presented as a business line in its own right.
The revaluation of senior debt is recognized by the Corporate Center.
V Income from the r etail b anking business is measured on the basis of its contribution to Natixis’ earnings: income from equity method accounting of networks, accretion profit, revaluation adjustments, any impact of the P3CI value adjustment and CCI carrying cost (1).
V The impact of the P3CI value adjustment, linked to the change in the prudential value of the CCIs, is allocated to retail banking before taxes on the equity method accounting line.
V The regulatory capital allocations required for the operation of Natixis’ businesses amounted to 9% of average Basel 2.5 risk-weighted assets. Furthermore, the consumption of capital relative to securitizations deducted from Tier 1 regulatory capital is allocated to the business lines. Equity allocations were specifically made to the insurance subsidiaries, which have their own capital requirements.
(1) CCIs are funded with capital, in the amount of their regulatory capital consumption (excluding P3CI), and the rest is funded with long-term debt.
At the same time, Natixis continued its commercial development efforts in its businesses, geared toward the Groupe BPCE networks as well as its own clients. Its positions in its core businesses were enhanced throughout the year.
Finally, in the interest of adapting the Group to the economic environment and creating additional room for maneuver, Natixis launched an Operational Effi ciency Program with the goal of cutting costs by over €300 million by 2014 (compared to end-2011).
The new structure of the Wholesale Banking division was set up, offering more comprehensive coverage of Natixis’ clients via the Coverage Department and more extensive advisory activities. This structure rounds out the range of Natixis’ solutions. This new approach has already met with success: the bank advised Paris Orléans, the holding company of the Rothschild Group, on its restructuring program, as well as Siclaé, the agribusiness holding company of the Vivescia cooperative, on the 100% takeover of Nutrixo.
In 2012, Structured Financing consolidated its positioning with major negotiators and producers in the oil and agricultural sectors. In aviation fi nance, Natixis was recognized as the “Aircraft Finance House of the Year” in 2012 by Global Transport Finance. In infrastructure and PPP fi nancing, Natixis – the leading fi nancial advisor and arranger in France (2 ) – entered into an innovative partnership with insurance company Ageas that boosted its distribution capacity. Real Estate Finance expanded its offer by creating a mortgage bank, Natixis Pfandbriefbank, specialized in fi nancing commercial real estate transactions in Europe.
In July 2012 Natixis created a new line of Global Transaction Banking products designed to better meet the needs of its corporate and institutional clients in terms of account administration, treasury products, cash management, trade fi nance and correspondent banking.
Finally, the Americas platform broadened its offer in targeted markets and extended its geographic coverage, opening a representative offi ce in Canada at the end of 2012.
In 2012’s unsupportive business climate, Investment Solutions expanded the synergies of its four business lines in 2012 (Asset Management, Insurance, Private Banking and Private Equity) with Natixis’ other core businesses and the Groupe BPCE networks.
Natixis Global Asset Management (NGAM) furthered its development and continued adapting its approach in 2012: V in the first quarter, Loomis opened two new offices in London and Singapore; V in the second quarter, NGAM Distribution launched the DPC (Durable Portfolio Construction) platform to answer the increasing concerns of individual and institutional investors, as well as growing concerns surrounding risk and volatility on the international markets; V Natixis Asset Management (NAM) launched its strategic plan aimed at reorganizing the activity into six centers of expertise by creating dedicated business units; the deployment of this new structure led to the official launch of two new centers of expertise at NAM: Mirova (ISR funds) and Seeyond (structured and volatility products); V in the third quarter, NAM and AEW Europe launched a senior property debt fund (Senior European Loan Fund); V McDonnell Investment Management was bought in the United States, representing $13.2 billion in assets.
2012 was fi lled with acquisition and product development opportunities for the Private Equity business: V acquisition of Atria Capital Partenaires, which manages several LBO funds, by Naxicap Partners in the first quarter; (2 ) Magazine des Affaires, ranking of main PPP projects or public service delegations over the 2010-2012 period.
Specialized Financial Services stepped up its relations with the BPCE networks, in the specialized fi nancing and fi nancial services activities alike. The division also kept up its rigorous management efforts.
The Finance Services activities furthered their development, mainly by distributing innovative products such as prepaid payment cards and the “Systempay” e-commerce payment offer.
In Proprietary Private Equity, Natixis further reduced its exposures by selling or cutting down its holdings in various funds, particularly abroad (Spain, South Africa) and pro-actively monitoring the portfolios in run-off.
GAPC sold off more assets and further reduced its liquidity consumption. €3.6 billion in guaranteed assets were sold over the year. Risk-weighted assets (post-guarantee) decreased by €1 billion during the year. It should be noted that GAPC’s impact on Natixis’ net income (Group share) fell by 43% in 2012 to -€45 million.
Based on the income generated in fi scal year 2012, the General Shareholders’ Meeting scheduled for May 21, 2013 will propose a dividend payout of €0.10 per share, i.e. 37% of earnings available for distribution.
Workout portfolio management (GAPC), net income from discontinued operations and net restructuring costs were transferred to n et income (group share). This presentation facilitates comparisons between reporting periods and makes it easier to interpret business performances.
Wholesale Banking’s net revenues were relatively stable compared to 2011, refl ecting the adaptation and resilience of its activities in the radically different environment of 2012 versus 2011: consumption of liquidity (-15% vs. 2011) and riskw eighted assets (RWA) (-12%) were optimized.
Financing activities saw revenues dip by 6% due to the decline in outstandings. On a positive note, the diversity of activities and revision of margins helped limit the drop in net revenues to 4% for structured fi nancing activities.
Revenues from capital market activities rose by 10% compared to 2011, driven primarily by the momentum of FIC-T’s debt platform.
2012 expenses were impacted by a sharp increase in taxes (systemic bank tax, expansion of the salary tax base, increase in the social security contribution rate, etc.). The Operational Effi ciency Program generated savings of €97 million in 2012.
At year-end, the headcount totaled 20,136 FTEs (excluding GAPC), down 1% year-on-year.
Gross operating income amounted to €1,193 million in 2012, down 40% compared to 2011. Excluding the impact of the revaluation of own senior debt and the P3CI deal, gross operating income (excluding GAPC) picked up by 3%. On the same bases, the cost/income ratio was stable at 73%.
The provision for credit losses came to €373 million in 2012 (excluding GAPC activities), refl ecting an increase of 11 % over 2011, in keeping with the Group’s provisioning policy for current developments in the economic environment. Restated for provisions recorded on Greek debt, this increase was more than 50% compared to 2011.
Change in value of goodwill refl ected a loss of €16 million resulting from the write-down of the “non-core” CGU Coface.
The recurring tax expense was €292 million in 2012 and the effective tax rate stood at 35.5%, refl ecting current operating conditions.
After taking into account minority interests totaling -€45 million, recurring net income (g roup share) was €947 million.
In 2012, Wholesale Banking posted net revenues of €2,829 million, which were relatively stable compared to 2011 (€2,847 million). This change refl ected the adaptation and resilience of the division’s activities in the radically different environment of 2012 versus 2011. Consumption of resources was optimized, both in terms of liquidity and capital, with a decrease of 15% in liquidity consumption (at constant exchange rates) and 12% in RWAs. Asset disposals accounted for €1.9 billion and their impact on net revenues remained limited to -€25 million.
V Acquisition Finance’s net revenues dropped by 16%; 2011 net revenues were boosted by the non-recurring contribution of a special transaction.
Revenues from capital market activities rose by 10% compared to 2011. Sales results for 2012 were also up 10% versus 2011, driven by the Debt Platform, Fixed Income activities and Equity Finance business.
V Debt Platform activities recorded a 14% rise in income compared to 2011, driven by the momentum in the primary bond market. Natixis maintained its position as leader in covered bonds and the No. 9 spot in “All bonds in euros”. Natixis also developed its relations with SAS (SovereignAgencies -Supra) during the year, and came in at No. 4 in the “All Agency bonds in euros” ranking (versus No. 11 in 2011) (source: IFR-Thomson Reute rs).
V With sales activity up 29% and a more supportive market in 2012, Fixed Income activities soared over the year (+73%). It should be noted that FI’s contribution in 2011 was strongly impacted by tensions in euro zone sovereign debt.
V Income derived from Investment Banking & Brokerage activities fell 18%: primary market revenues (+31%) failed to offset the decline in the Brokerage contribution, undermined by low volumes.
V Growth in net revenues from Derivatives activities was linked to a solid showing by Equity Finance (+11%) and flow operations, subject to significant market effects in 2011. Solutions activities fell by 46%, however.
This led to a negative scissor effect on gross operating income, which came out at €1,139 million, down €33 million year-on-year. The cost/income ratio worked out to 59.7% in 2012.
The provision for credit losses increased by nearly €160 million due to the worsening of the economic environment, especially in Europe.
Excluding the effect of the P3CI deal (€1.2 billion), total capital was virtually stable, posting a slight increase of €0.1 billion: the reduction of RWA in fi nancing activities was offset by the higher contribution of capital market activities stemming from the application of Basel 2.5 rules as from the end of 2011.
Expenses rose by 12.4% (+7.7% at constant exchange rates). Asset Management’s expenses increased with the implementation of new projects (mainly stepped-up distribution) and strong development in the United States.
The provision for credit losses was virtually nil for the division. In 2011, it consisted of a provision of €82.9 million for Greek bonds in the Insurance portfolio.
Pre-tax profit totaled €519 million, up 12.1% at constant exchange rates.
NGAM expanded its development throughout the year, both geographically and in terms of the product range. This development was refl ected in the gaining of positions in the professional rankings and awards received.
For NGAM: V on the Cerulli Associates ranking at December 31, 2011, Natixis Global Asset Management took the No. 13 spot among the world’s leading asset management companies, gaining two places since the last ranking; V IPE (Investments and Pensions Europe) ranking: at December 31, 2011, NGAM was ranked the No. 8 asset management company for external institutional clients.
In the United States: V Loomis, Sayles & Company was named “American Fixed Income Manager of the Year” at the Global Investor/ISF Investment Excellence Awards; V at Lipper Fund Awards, Dan Fuss received the 2012 award for excellence in fund management. Two Loomis funds were also recognized at the ceremony.
In Europe: V AEW Europe SGP took first place over all other portfolio management companies authorized to manage OPCIs (real estate mutual funds); V Natixis Asset Management: R Natixis Asset Management received three awards at Le Revenu 2012 “Trophées des meilleurs SICAV et fonds” fund management awards, including the top prize, the “Trophée d’Or”, for the best range of diversifi ed funds and the No. 3 spot, the “Trophée de Bronze”, for the best international equity fund range,
R at the 13th annual “Grands Prix de la Gestion d’Actifs” asset management awards handed out by Agefi , the Livret Bourse Investissements fund, managed by Natixis AM, took fi rst place in the “Equities France” category,
R at the 2012 Lipper Fund Awards, Natixis Souverains Euro RC2 was the third of the Group’s funds to be recognized; it was named best fund over 3, 5 and 10 years in the euro zone bond category,
FINANCIAL DATA5 Management Report at December 31, 2012 V at AGEFI’s 2012 “Actifs du Patrimoine” awards, Ossiam took second place (“Actif d’Argent”) for its equal-weight strategy ETFs. At the Global Investor/ISF Investment Excellence Awards, Ossiam was also named “ETF Issuer of the Year”.
At the end of December 2012, assets under management stood at €591.2 billion, up €51.0 billion (+9.4%) compared to December 31, 2011, at constant exchange rates, driven by a signifi cant market effect (€52.8 billion) in Europe and the US.
Assets under management benefi ted from several scope effects totaling €13.8 billion, including €10.0 billion from the acquisition of McDonnell in the US, €3.7 billion from the Natixis Multimanager/1818 Gestion merger and €1.6 billion from Wholesale Banking (NEI and NEIL).
R CHANGE IN ASSETS UNDER MANAGEMENT OVER THE YEAR (IN BILLIONS OF EUROS)
Net outflows amounted to -€15.5 billion (of which -€15.1 billion in money market funds) with uneven trends depending on the region: V Europe posted net outflows of -€20.2 billion including -€14.0 billion in money market products, undermined by the Eonia level and the change in sales policy of the networks in favor of balance- sheet inflows; V in the United States, net inflows of €4.5 billion were mainly attributable to Loomis in bond products, Gateway in alternative products, and Harris in equity products.
At €559.8 billion, average outstanding assets under management were up 2.6% in 2012 versus 2011 (in constant euros).
Expenses totaled €1,252.1 million, up 14.7% on 2011 (+8.8% at constant exchange rates).
Sales activity in personal protection insurance was robust, with revenue up by nearly 16.5% compared to 2011, both in terms of payment protection insurance (+20.2%) and individual personal protection insurance (+10.7%).
V PPI (payment protection insurance) developed on the networks, with revenue climbing by 24.2% for the Banque Populaire network (re-internalization of PPI of 18 banks and positive impact of multiple generations) and 17.3% for the Caisse d’Epargne network. This range of products benefits also through partnerships with Natixis’ revolving credit activity (SFS Division’s Consumer Finance business).
V Individual personal protection insurance improved, primarily in delegated management of insurance products against financial losses and under the impact of the sales coordination policy targeting the networks.
The Insurance division’s net revenues dropped by 23.3% on 2011 to €202.6 million.
Assets under management at December 31, 2012 (totaling €20.8 billion) included a scope effect of €1.6 billion linked to the contribution of Natixis Multimanager’s assets under management to the creation of Vega Investment Management. Excluding the scope effect, the increase in assets under management is issued to 1.7% year-on-year due to outfl ows recorded over the year.
The division’s net revenues rose by 9.4% to €109.4 million (+€9.4 million) compared to 2011. In France, fees on assets under management climbed on the back of higher average AuM.
Assets under management, including fund commitments, came to €3,676 million at December 31, 2012, up 26.6% relative to 2011. Assets under management for third parties accounted for 74.0% of the total (69.5% in 2011), refl ecting Natixis’ gradual withdrawal from managed funds. Funds of funds accounted for 46.4% of total capital under management, private equity 41.8% and venture capital 11.8%.
FINANCIAL DATA5 Management Report at December 31, 2012 Specialized Financing posted solid momentum overall in 2012.
CEGC, however, recorded a 12% revenue drop in its main client segments: the individual customers market and the singlefamily home builders market. Sales performance improved by 34%, however, in the social economy and social housing segments, by 19% in the real estate development market and by 18% in the professionals market.
Leasing saw new business turn around in the real estate segment in the fourth quarter, after a sharp decline over the fi rst three quarters, while non-real estate leasing continued to fall in a challenging environment.
Thanks to major sales efforts in Employee Savings Plans Natixis won calls for tenders in the major corporate clients segment and increased assets under management by 10% to €19.4 billion at end- 2012. Service Vouchers furthered its development, with meal vouchers up 1.4 points to 13.4% in 2012 thanks to penetration of the local authorities market and the public sector in general.
Securities Services activity was impacted by decreased retail customer appetite for equity products and an 18% drop in the number of transactions during the year. Assets under custody decreased 2% to €4.5 b illion, predominantly in investment funds. However, the successful expansion of the range of services for the networks was promising.
Net revenues amounted to €1,188.1 million in 2012, up 4.4%. Growth was driven by Specialized Financing, which posted an 8.7% increase in net revenues in 2012, while Financial Services revenues were relatively stable.
All Specialized Financing businesses saw an improvement in net revenues, with a particularly strong increase in consumer fi nance (+12% driven by solid sales momentum toward the networks) and for CEGC (+18% thanks to the rise in earned premiums and fi nancial products). The stability of Financial Services revenues stemmed from the upturn in P ayments revenues (+2%) and E mployee S avings S chemes (+5%), offsetting the drop in net revenues in Securities Services (-8% due to lower transaction volumes).
Coface posted turnover of €1,571 million in 2012, up 1.4% over 2011 (-0.3% at constant exchange rates and scope of consolidation). Credit insurance revenue rose by 1.2% during 2012 (at constant exchange rates and scope of consolidation), drawing on robust sales at the start of the year. Factoring revenue declined by 21.7% (at constant exchange rates and scope of consolidation) in 2012 versus 2011, due to the refocusing of the business and an increase in refi nancing costs.
Revenue fell in Northern European countries, and particularly in Germany (-13.1%), with credit insurance revenue down 10.8% and factoring revenue down 20.8%. Revenue was stable in France compared to 2011 and gained 3.1% in Italy. Revenue growth in other countries remained very strong at 10.1%, led by North America, Latin America and Asia.
Natixis Private Equity predominantly holds shares of funds and is currently comparable to a fund of funds. Natixis’ share of assets under management (or cash at risk) was €457 million at the end of December 2012, up 1.0% on the end of December 2011, while off-balance sheet commitments were down 15.2% to €186 million.
2012 net revenues came out at €6.7 million versus -€20.1 million for 2011. Year-on-year, capital gains from disposals and unrealized capital gains picked up by 3.2%. The net charge to provisions for 2012 was €4.9 million versus €34 million in 2011.
A number of transactions were carried out over the course of the year with a view to scale down the portfolios and the related risks.
GAPC recorded the positive impact of commutations with the monoline insurers. In particular, it entered into a commutation agreement concerning CDS deals with MBIA in May 2012, reducing gross exposure by €1.4 billion.
It also carried out disposals which reduced Assets under the BPCE guarantee by €3.6 billion.
Finally, it set up hedges in complex interest rate derivatives, continued the liquidation of structured fund portfolios and closed its equity derivatives portfolio.
Net revenues (612) 217 n/m o/w Issuer spread (352) 239 n/m
Corporate Center expenses comprised expenses that were not re-invoiced to the Natixis business lines. They deteriorated in 2012, due to the doubling of the systemic bank tax from €23 million in 2011 to €44 million in 2012 and the cost of the Wholesale Banking adaptation plan (€34 million).
The provision for credit losses in 2012 included the fi nal loss of €19 million on the sale of Greek bonds.
V Net revenues came out at €6,170 million excluding PEL/CEL impacts in 2012 (-2.2% versus 2011). The net interest margin picked up slightly (+2.0% excluding PEL/CEL effects), thanks to the higher volumes, but was slowed by low interest rates, while fees fell by 4.5% due to the drop in prepayment fees and financial savings fees, and despite the solid performance of bank transaction fees.
V The increase in the provision for credit losses was linked to an expense of -€183 million arising from losses on completion of a specific project.
FINANCIAL DATA5 Management Report at December 31, 2012 R CAISSES D’EPARGNE
V The Caisse d’Epargne network recorded satisfactory sales activity in 2012, despite adverse economic conditions.
V Funds continued to be shifted from money market funds to on-balance sheet savings, resulting in a 13.5% year-on-year decline in fund AuM. AuM invested in life insurance products grew a modest but noticeable 1.3% over the period. Growth in on-balance sheet outstandings (+6.3%) was driven by all vehicles, and particularly liquid vehicles: demand deposits (+6.1%), Livret A passbook savings accounts (+6.4%) and other passbook savings accounts (+9.2%).
V The provision for credit losses increased 16.3% due to the highly deteriorated economic environment.
V Overall, the Caisse d’Epargne network generated combined net income of €1,253 million in 2012, down 9.6% on 2011.
The provision for credit losses (excluding GAPC) was -€373 million at December 31, 2012, which included -€373 million in individual risks and 0 million for portfolio-based provisions. At December 31, 2011, the provision for credit losses (excluding GAPC) totalled -€335 million.
OVERALL PROVISION FOR CREDIT LOSSES FOR THE WHOLESALE BANKING BUSINESS (265) (106)
Liquidity abounded on the euro zone money markets in 2012, thanks to the success of the ECB’s three -year refi nancing operations, set up at the end of 2011 (over €1,000 billion disbursed).
The recapitalization of the Spanish banking sector and the initiatives taken by the central banks (especially the implementation of the ECB’s OMT program) went a long way to restoring confi dence in the solidity of the euro zone banking system.
Against this backdrop, Natixis continued to focus on enhancing its relations with business customers and expanding its commercial presence in certain geographic areas, with the aim of securing alternative resources to those traditionally obtained through its short-term debt programs.
(in millions of euros or euro equivalents) EMTN BMTN USMTN Bond issues 5.1.6 POST-CLOSING EVENTS
The provision for credit losses reached -€298 million for 2012, i.e. a €177 million increase over 2011.
At December 31, 2012, the balance sheet totaled €402,177 million, down from €343,031 million at December 31, 2011.
The third resolution that will be put before the General Shareholders’ Meeting on May 21, 2013 proposes to: V allocate €45,358,621.50 to the legal reserve; V allocate a dividend of €308,621,479.40; V allocate the remaining distributable profits to retained earnings, i.e. €1,076,373,885.36.
FINANCIAL DATA5 Management Report at December 31, 2012 5.1.7.3 Payment terms
R 2 - MANAGEMENT RESULTS RECLASSIFIED AS CONSOLIDATED RESULTS IN 2011
Financial assets at fair value through profi t and loss 6.1 231,870 245,625
Customer loans and receivables 6.4 99,418 111,820 o/w institutional operations 550 549
Net income/(loss) for the period 947 1,601 of which: V Attributable to equity holders of the parent 901 1,562
Consolidated net income/(loss) – group share – per share, calculated on the basis of the average number of shares over the period excluding treasury shares and including shares that could be issued on the exercise of stock options and bonus shares 5.24 0.27 0.43
NET INCOME/(LOSS) AND GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY 1,412 1,075 o/w group share 1,366 1,037 o/w minority interests share 46 38
Total activity related to relations with shareholders 0 0 0 0 (5)
Issuance and redemptions of Deeply Subordinated Notes and preference shares (829)
Issuance and redemptions of Deeply Subordinated Notes and preference shares (2, 537)
(b) Other equity instruments issued: refers to the undated Deeply Subordinated Notes and preference shares that were reclassifi ed as equity instruments. In January 2012, Natixis reimbursed BPCE with deeply subordinated notes for an amount of €2.3 billion; (c) Additional goodwill related to buyback commitments granted to the minority shareholders of fully consolidated subsidiaries and buybacks of minority interests subsequent to the exclusive takeover are booked to equity; (d) Of which €267 million concerning the change in capital of the SLEs (local savings companies).
+/- Net charge to depreciation and amortization of property, plant and equipment and intangible assets 306 306
+/- Net charge to other provisions (including insurance companies’ technical reserves) 286 1,696
+/- Other cash provided/(used) by fi nancing operations (b) (5,003) (2,726)
Impact of exchange rate changes on cash and cash equivalents (149) (43)
(a) Decrease/(increase) in fi nancial assets and investments in associates, including in particular: V fl ows related to assets held to maturity (+€601 million); V fl ows related to investments in consolidated affi liates (-€140 million including the acquisition of the MacDonnell entity for -€28.8 million, SO Bail for -€3.3 million and Natixis Financement for -€92 million following the exercice of a put by minority shareholders; of which disposal of TKB stock for €14 million and -€20 million in cash removed from the consolidation scope on Coface); V fl ows related to affi liates accounted for by the equity method (-€71 million, including an increase in the subscription for BP and CEP CCIs of -€299 million and dividends deposited totaling +€216 million).
(b) Flows from fi nancing activities can be broken down as follows: V redemption of deeply subordinated notes for -€2, 537 million; V interest paid related to deeply subordinated notes for -€251 million; V redemption and interest related to subordinated debts for -€2, 215 million.
NOTE 8 STATEMENT OF NET INCOME/(LOSS), GAINS AND LOSSES RECORDED DIRECTLY IN EQUITY 298
The fi nancial statements presented for comparative purposes were published by Natixis in the 2011 registration document fi led with the Autorité des Marchés Financiers (AMF – French Financial Markets Authority) on March 23, 2012.
In accordance with European regulation 809/2004 relating to information contained in prospectuses, the fi nancial statements for the year ended December 31, 2010, that were published in the 2010 registration document fi led with the AMF on April 5, 2011, are incorporated for reference into this registration document.
On January 1, 2012, Natixis fi rst applied the amendment to IFRS 7 “Financial Instruments: Disclosures” regarding the information to be provided on “transfers of fi nancial assets” adopted by the European Commission on November 22, 2011. This amendment, applied on a prospective basis, requires qualitative and quantitative information on transferred assets that have not been partially or fully derecognized, as well as on fully derecognized assets with which there is continued involvement, to be supplied in the notes to the fi nancial statements. This amendment has no impact on Natixis’ consolidated fi nancial statements, but results in the disclosure of additional information in Note 6.6.4, “Transferred Financial Assets.”
As indicated in the footnote to the table in the “Statement of net income/(loss), gains and losses recorded directly in equity”, gains and losses booked directly to equity at December 31, 2012 and December 31, 2011 are recyclable to net income; V amendment to IAS 19, “Employee benefits”, adopted by the European Commission on June 5, 2012, with mandatory retroactive application to financial years beginning on or after January 1, 2013. This amendment makes changes to the recognition and presentation of pension obligations and similar items, particularly as regards actuarial differences, which will be fully and immediately booked to non-recyclable “Other comprehensive income,” and past service cost, which will be immediately booked to income. This amendment will have an impact on Natixis’ consolidated financial statements for financial years beginning on or after January 1, 2013.
IFRS 10 replaces IAS 27, “Consolidated and Separate Financial Statements,” for the section on consolidated financial statements and the SIC 12 interpretation on special purpose entities. It defines a single audit model applicable to all entities, whether or not they are structured entities. IFRS 11 replaces IAS31, “Interests in Joint Ventures,” and SIC 13, “Jointly Controlled Entities – Non-Monetary Contributions by Venturers.” It bases the recording of partnerships on their substance, thereby making it necessary to analyze the rights and obligations of the joint agreement.
(1) The complete body of standards adopted by the European Union may be consulted on the European Commission website at:
FINANCIAL DATA5 Consolidated fi nancial statements and notes As a result of these new standards, the IASB has also published amended versions of IAS 27, “Separate Financial Statements,” and IAS 28, “Investments in Associates and Joint Ventures,” which were adopted by the European Commission on December 11, 2012 and is subject to mandatory application for the annual periods beginning on January 1, 2014; V amendments to IFRS 7 and IAS 32, entitled “Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities” and “Financial Instruments: Presentation – Offsetting Financial Assets and Financial Liabilities” were published on December 16, 2011 and adopted on December 13, 2012. The amendment to IFRS 7 is retroactively applicable to the fiscal periods beginning on January 1, 2013. It requires the disclosure of new information on financial instruments offset on the balance sheet and those that are the subject of a legally enforceable master netting agreement or similar agreement. The amendment to IAS32 is retroactively applicable to the fiscal periods beginning on January 1, 2014. It specifies the terms of presentation offset in the balance sheet of financial instruments. The new information to be produced per the amendment to IFRS 7 and the scope of the clarifications made by the amendment to IAS32 are being catalogued; V IFRS 13, «Fair Value Measurement,» published by the IASB on May 12, 2011 and adopted by the European Commission on December 11, 2012, is applicable prospectively as of January 1, 2013. This new standard creates a uniform IFRS financial information framework for determining fair value, and provides indications on how to evaluate the fair value of assets and liabilities, both financial and non-financial. It applies when another IFRS standard provides or authorizes fair value measurement or the disclosure of fair value measurements. The impacts of this standard on Natixis’ accounts are currently being determined; V the amendment to IAS 12, «Income Taxes,» entitled «Deferred Taxes: Recovery of Underlying Assets,» published by the IASB on December 20, 2010 and adopted by the European Commission on December 11, 2012. The purpose of the amendment is to introduce a rebuttable presumption that the book value of an investment property will be recovered by its sale and the entity will be taxed at the rate applicable to the sale of the underlying asset. The application of this amendment will not have a significant impact on Natixis’ accounts.
In addition, in drawing up the consolidated fi nancial statements as at December 31, 2012, Natixis also took into account: V with regard to the valuation of financial instruments, the recommendation published on October 15, 2008, by the AMF, the Conseil National de la Comptabilité (CNC – French National Accounting Board), the Commission Bancaire (French Banking Commission) and the Autorité de Contrôle des Assurances et des Mutuelles (ACAM – French insurance regulator), and the guide published by the IASB on October 31, 2008, entitled “Measuring and disclosing the fair value of financial instruments in markets that are no longer active”. These two texts underline the importance of using judgment to determine fair value in illiquid markets. As a result of this recommendation, as at December 31, 2012, Natixis does not systematically apply models using observable data, as with previous reporting periods, in view of the lack of market liquidity affecting some asset classes; V with regard to financial reporting on risk exposure, the recommendations applicable in France resulting from the Financial Stability Forum (FSF). Details of risk exposure, presented in the format recommended by the Commission bancaire in its May 29, 2008, statement “Presentation note regarding the French application of the FSF’s recommendations for financial transparency”, have been incorporated in section 4.7 of the “Risk management” chapter of the registration document.
Ownership of the Banque Populaire and Caisse d’Epargne Cooperative Investment Certifi cates (CCIs), representing 20% of the share capital of each entity, gives Natixis signifi cant infl uence over the Banque Populaire banks and Caisses d’Epargne. The fi nancial statements of these entities are therefore accounted for using the equity method in Natixis’ consolidated fi nancial statements.
Since the Banque Populaire CCIs and the Caisse d’Epargne CCIs do not carry any voting rights, Natixis’ signifi cant infl uence over the issuers results from (i) de jure infl uence arising from its involvement in the operational and fi nancial management of the Banque Populaire and Caisse d’Epargne networks, and (ii) de facto infl uence deriving from operational and technical cooperation by the Banque Populaire banks and Caisses d’Epargne with Natixis.
Natixis and the Banque Populaire banks have also agreed to maintain any existing industry and commercial relationships for a minimum period of 10 years as from the 2006 subscription date for the Banque Populaire CCIs: V provision of IT infrastructure; V supply of industry services (custodial services, payment systems, operational management of foreign currency accounting); V design and management of customer products on behalf of the Banque Populaire banks (Asset Management, insurance products, factoring, lease financing, financial engineering, expansion capital, employee benefits planning, international operations, credit insurance and business information).
When the Caisse d’Epargne and Banque Populaire bank accounts were brought into those of Natixis using the equity method, the securities of the central institution, entered in those accounts as «available-for-sale assets,» are measured at fair value, with the corresponding changes in fair value impacting Natixis’ recyclable reserves. The valuation method used depends on the net asset value method, which is based on a revaluation of the main subsidiaries, determined on the basis of discounted multi-year cash fl ow forecasts (the DDM – Dividend Discount Model – for banks). These calculations are made from the entities’ multi-year business plans resulting from strategic plans approved by management. These plans factor in the prudential constraints applicable to the activities in question, including the primary effects expected of Basel 3. BPCE’s restated net asset value includes the intangible assets held by BPCE S.A., the structural charges of the central institution, and the valuation of Natixis (for the various subsidiaries – see above). In this regard, changes in value of the central institution’s securities that would be attributable to Natixis are neutralized and are not observed in Natixis’ accounts.
€63 million was booked for 2012, versus €64 million in 2011.
The following accounting treatment is applied to business combinations giving rise to control: V IFRS 3 before revision because they are prior to January 1, 2010, except for those that occurred before January 1, 2004. On the initial application date of the IFRS, Natixis chose the option offered by IFRS 1 – First-Time Adoption to not retroactively restate business combinations previous to January 1, 2004 pursuant to IFRS 3; V the revised IFRS 3 (IFRS 3R) if they are realized after January 1, 2010. Indeed, IFRS 3 can be applied prospectively to business combinations whose acquisition date is the same or later than the adoption date of IFRS 3R.
Entities considered to be under joint control include, in particular, two entities controlled by Natixis and those involving an entity controlled by Natixis and an entity controlled by BPCE.
At December 31, 2007, goodwill arising on the CCIs had been defi nitively allocated to the following valuation adjustments: V valuation adjustments on Banque Populaire land and buildings in the amount of €102 million (Banque Populaire CCIs); V valuation adjustments on Caisse d’Epargne land and buildings in the amount of €47 million (Caisse d’Epargne CCIs).
The main changes are described below: V within the Asset Management business line in the United States: acquisition of McDonnell Investment Management LLC, generating €19 million in goodwill; V within Coface’s «non-core» business, disposal of the TKB structure reducing goodwill by €10 million. Prior to that disposal, there was an additional €5 million depreciation of goodwill during FY 2012.
All items of goodwill are impaired, based on the value in use of the cash-generating units (CGUs) to which they have been allocated, except for the “Private Equity” CGU, which is evaluated using the restated net asset value, as all of the assets of the entities included in that CGU are recognized at fair value.
As a result of these tests, the Coface “non-core” CGU wrote down goodwill of €11 million. The net amount of goodwill after writedown is €106 million.
2.6 Dilutive/accretive impact resulting from ownership of the CCIs issued by the Caisses d’Epargne and Banque Populaire banks
The granting of put options to minority shareholders has no impact on Natixis’ interest in the subsidiary in question unless the put option is associated with Natixis’ holding a call option, and the call and put options give immediate entitlement to the economic benefi ts attached to the underlying shares.
Policies managed by the insurance subsidiaries of the Coface, Compagnie Européenne de Garanties et Cautions (CEGC) and Natixis Assurance sub-groups meet the defi nitions of insurance policies and investment contracts with a discretionary participation feature set out in IFRS 4. Accordingly, they result in the recognition of technical reserves in liabilities. These reserves are measured in accordance with French GAAP pending publication of an IFRS standard dealing with technical liabilities of insurance companies.
Deferred participation assets and liabilities arise mainly on: V the remeasurement of available-for-sale financial assets and financial assets at fair value through profit and loss; V the remeasurement of real estate assets held to cover insurance policies; V the restatement in the consolidated financial statements of the capital reserve and the liquidity risk reserve.
In accordance with a recommendation from the Conseil National de la Comptabilité dated December 19, 2008, the amount of the deferred participation asset at December 31, 2011 was recorded at its recoverable value in the consolidated balance sheet. For the most part, it had been noted for Assurances Banque Populaire Vie and the investment vehicles it holds, which carry most of the life insurance assets within the scope of Natixis Assurances. The recoverability test had been performed on this same scope.
Deferred participation may be recovered depending on the intention and ability of companies to steer future compensation of contracts according to resources. These are sensitive to: V changes in the equity and bond markets; V changes in net inflows, which result from the commercial appeal of policies and the propensity of policy holders to renew their contracts; V available reserves and own resources within companies to hold assets for a period compatible with changes in liabilities and consistent with market cycles.
In practice, a recoverability test had been carried out by drawing on the calculation engine of the liability adequacy test, based on a temporary collection over four consecutive years. In order to have a truly forward-looking approach and promote implicit options, the fair value of contract liabilities was calculated stochastically as the average of cash fl ows in different fi nancial scenarios. This calculation required: V the generation of several hundred financial scenarios (longterm rates, equity, etc.);
R the insurer’s behaviour: choice of asset allocation, policy on realization of capital gains, steering of reserves.
It had resulted that the average of results produced by stochastic scenarios did not challenge the recoverability of the deferred participation asset seen at end-2011. The net deferred participation amount recognized as assets on Natixis’ balance sheet as at December 31, 2011, was €830 million.
From an accounting standpoint, the P3CI issue is considered a fi nancial liability issued at par with a maturity of 10 years, accompanied by a BPCE guarantee (indexation embedded in the bonds), treated as a redemption right; consequently, in the event of a decline in the prudential equity-method value of the CCIs, the value of the guarantee held by Natixis, i.e. the right to compensation, increases accordingly, thus resulting symmetrically in a decrease in the value of the corresponding fi nancial liability. These value changes are recorded on the balance sheet under “Debt securities” (see Note 6.13) and on the income statement under “Share in income from associates” (see Note 7.8).
V Entities created: Nomura Resecuritization Trust 2012-1R, Lombarde LLC and Nordet LLC under the resecuritization of RMBS held by Natixis. The Group holds the junior shares of this entity, thus keeping the majority of the risks and benefits; V FCT Natixis Corporate Financement (securitization fund); V Quail Ridge LLC, an entity holding a real estate asset acquired after the implementation of the guarantee relating to the funding of said asset (West Covina/Quail Ridge shopping center) in May 2012; V Natixis Pfandbriefbank, the purpose of which is to realize the issues of Pfandbriefs (mortgage-backed covered bonds) on the German market; V Newly consolidated entities of Natixis Brazil after thresholds were exceeded.
V Deconsolidation of Quail Ridge LLC became insignificant because of the October 2012 disposal of the property it was carrying; V Liquidation of ICMNA International Holding, ICMNA Acceptances LLC, ICMNA IP Assets Holdings (Luxembourg) SCA and ICMNA Australia Holding following the maturity of the BGL and St Georges structures; V Liquidation of Summer Commons LLC and Ixis LT Investor LLC.
V Liquidation of Natixis ABM LLC, whose RMBS U.S. Agencies portfolios had previously been sold to third-party investors.
V Deconsolidation of Absolute Asia Dynamic Equities Fund-40 act Fund, which exceeded the consolidation threshold; V Following their liquidation, the following entities were also deconsolidated: R Natixis Global Associates Italia,
V Newly consolidated in the ABP Alternatif Offensif fund after the consolidation threshold was exceeded.
V Liquidation of the Kompass Luxembourg branch; V Disposal of TKB by Natixis HCP in the second quarter of 2012; V Deconsolidation of the following entities, which fell below the consolidation thresholds: R Coface Austria Bank,
In addition, Coface Belgium Services and Natixis Ho-Chi Minh are undergoing disposal and have been treated per IFRS 5 in the accounts of December 31, 2012.
The various legal entities specifi cally created to manage a transaction or group of similar transactions (special purpose entities – SPEs) and substantially controlled by Natixis, even where there is no equity relationship, are consolidated if they make a material contribution to the consolidated fi nancial statements. The main criteria for assessing the existence of such control as defi ned by SIC 12 are as follows: V Activity: the SPE’s activities are substantially conducted on behalf of Natixis which, directly or indirectly, has created the SPE to meet its specific business needs.
V Risks: Natixis substantially retains the majority of the residual risks or risks inherent in ownership of the SPE or its assets in order to obtain benefits from its activities.
The analysis differs depending on whether Natixis is a guarantor of the fund: 1. Non-guaranteed mutual funds: Acting as manager of the Asset Management company does not in itself transfer the majority of a fund’s risks and benefi ts to the NGAM sub-group. In fact, the Asset Management company does not guarantee and is not exposed to risk in respect of the fund’s assets, and any provision for profi t-sharing with the Asset Management company only applies to a small part of the gains. NGAM’s compensation as manager is marginal compared to the returns generated for investors.
SIC 12’s “risks” and “benefi ts” criteria must therefore be assessed in terms of any interest of the Asset Management company or any other Natixis entity in the funds. As neither NGAM nor any other Natixis entity have a majority interest in the funds, Natixis neither retains a majority of the benefi ts nor incurs a majority of the risks associated with these nonguaranteed mutual funds. Accordingly, these mutual funds are not consolidated.
Consolidated fi nancial statements and notes 2. Guaranteed mutual funds: Natixis guarantees the capital and/or performance of certain Mutual Funds. An analysis of the risks incurred by Natixis as a result of such guarantees shows that such risks are controlled, either via the management policies and control procedures applied, via the composition of the funds (money market assets), via rigorous monitoring of counterparty risk, or via systematic hedging of swaps in the market (when Natixis is the counterparty to the performance swap set up by the fund). Accordingly, these mutual funds are not consolidated.
At December 31, 2012, the Natixis Assurances sub-group held a majority interest in six funds which are material to the consolidated fi nancial statements and were thus consolidated in the Natixis consolidated fi nancial statements: R ABP ACTIONS,
V unit-linked policies are policies under which the insured party selects the funds in which the insurer invests on its behalf. The value of the insurer’s interest in such funds in the form of unit-linked policies is reflected in the insurance policies, the remuneration of which is not guaranteed. The risks and benefits inherent to these investments are borne by the insured party. Such funds do not therefore require consolidation.
R NPE Caspian IB, LP; V Natexis Investment Corp., a wholly-owned Natixis subsidiary, holds a series of interests in Private Equity funds. The vehicles are not consolidated given that they represent marginal interests (generally under 1%) in each fund and thus do not meet all the SIC 12 criteria (activities, decision-making powers, majority of benefits and majority of risks).
4.2.5 SPES FOR WHOLESALE BANKING ’S STRUCTURED FINANCING OPERATIONS (EXCLUDING FINANCIAL ENGINEERING)
Such entities do not meet any of the SIC 12 consolidation criteria because: V the SPEs activities are conducted first and foremost on behalf of the customer; V Natixis is rarely a shareholder in such entities and when it is, it generally holds a minority interest. Auto-pilot mechanisms are generally in place and Natixis has not structured them for its benefit; V Natixis merely acts as a lender to such structures; most credit facilities are syndicated and the risks are equitably shared between the lenders in proportion to the amounts they have lent.
Accordingly, none of these entities had been consolidated as of December 31, 2012.
V SPEs may be used to hold securities on behalf of a customer.
R SEP-type structures. These entities are not consolidated inasmuch as each partner recognizes its share of the SEP’s assets, liabilities and results,
R other structures under which a separate legal entity (SCI, SAS, SNC, etc.) acquires the assets. Natixis Immo Développement does not have any interest in structures that could have a material impact on Natixis’ consolidated fi nancial statements. Accordingly, no such entity was consolidated as of December 31, 2012; V Natixis controls a certain number of SPEs designed to own or lease real estate assets intended to be re-let or otherwise made available to other Group subsidiaries or third parties. Such SPEs are consolidated once Natixis has a majority interest in these vehicles and where they are material to the consolidated financial statements. Three SPEs meet these criteria and were thus consolidated as of December 31, 2012: R Natixis Immo Exploitation,
FINANCIAL DATA5 Consolidated fi nancial statements and notes NOTE 5 ACCOUNTING PRINCIPLES AND VALUATION METHODS
On initial recognition, available-for-sale fi nancial assets are measured at fair value including transaction costs. After initial recognition, loans and receivables are measured at amortized cost using the effective interest rate method, and tested for impairment at each reporting date. Where necessary, an impairment charge is recorded in income under “Provision for credit losses”. An impairment charge was recorded for Greek securities held in the portfolio using the methods described in Note 10.4.3.1. Transactions intended to hedge interest rate risk on these securities are not permitted under IFRS.
Loans outstanding with a theoretical syndication date expired as at December 31, 2012 , were analyzed on a case-by-case basis in order to take into account the market discounts observed at the end of the reporting period. Changes in the discounts recognized for the period are shown in “Net gains or losses on available-for-sale fi nancial assets” and are discussed in Note 7.4.
Specifi c case of loans restructured due to the debtor’s fi nancial situation
In the case of a restructured loan that is partially or wholly converted into securities (debt instruments or equity instruments issued by the counterparty): V the new instruments are booked at fair value; V the difference between the book value of the derecognized loan (or portion of the loan) and the fair value of the securities received in exchange is entered as a loss as a provision for credit losses; V any previous provision created on the loan is adjusted on the basis of the discounting of the new recoverable flows from the non-derecognized portion of the loan and is reversed in full if the loan is converted into securities.
Available-for-sale fi nancial assets are non-derivative fi nancial assets that are not classifi ed as loans and receivables, heldto -maturity investments or fi nancial assets at fair value through profi t and loss. Assets in this category include Natixis’ investments in non-consolidated companies. They are initially classifi ed at fair value. Subsequently, and at each reporting date, the assets are remeasured to fair value based on the bid price for listed instruments.
The fair value of listed non-consolidated investments corresponds to their last listed price prior to the reporting date. The fair value of unlisted non-consolidated investments is obtained using the P/E (price/earnings ratio) or DCF (discounted cash fl ow) valuation methods or share in revalued equity.
FINANCIAL DATA5 Consolidated fi nancial statements and notes Determining whether there is objective evidence of impairment is based on a multi-criteria approach and independent expert opinions, particularly in the case of debt instruments. Evidence of impairment includes: V for debt instruments: default on interest or principal payments, existence of mediation, warning or legal reorganization procedures; counterparty bankruptcy and any other indicator pointing to a material decline in the counterparty’s financial position, such as losses on completion projected by discounted cash flow models or stress tests; V for equity instruments (excluding investments in unlisted companies): indicators suggesting that the entity will not be able to recover all or part of its initial investment. Securities presenting an unrealized capital loss of over 30% on their face value, or presenting an unrealized capital loss for a period of more than six months, are systematically tested for impairment. The test involves a qualitative analysis considering a variety of factors such as share price performance over a given period or information relating to the issuer’s financial position. Where necessary, an impairment loss is recognized based on the market price at the reporting date. Irrespective of this analysis, an impairment loss is systematically recognized when securities present an unrealized capital loss of over 50% at the reporting date, or an unrealized capital loss on their face value for a period of more than 24 months; V for investments in unlisted, non-consolidated companies: unrealized capital losses of over 20% on their face value for a period of more than 18 months, or significant changes in the technological, market, economic or legal environment having an unfavourable impact on the issuer, suggesting that the amount invested in the equity instrument may not be recoverable.
V t hese general criteria are not applicable to BPCE securities held by the Caisses d’Epargne and Banque Populaire banks and entered on the line, “Investment in associates”; V for shares in venture capital funds (FCPRs), net asset value alone is not enough to determine whether there is any evidence that the initial investment might not be recovered. This is because net asset value during the investment phase is reduced by start-up costs (structuring and brokerage fees, etc.). Accordingly, for investments of this type which are not quoted on an active market, the following impairment principles apply: R no impairment is recognized if, at the reporting date, the position and results of the fund are in line with the business plan,
IAS 17 also describes three indicators that individually or in combination could also lead to a lease being classifi ed as a fi nance lease: V if the lessee can cancel the lease, the lessor’s losses associated with the cancellation are borne by the lessee; V gains or losses from the change in the fair value of the residual value accrue to the lessee; V the lessee has the ability to continue the lease at a rent that is substantially below the market rent.
On its transition to IFRS, Natixis analyzed the substance of its lease contracts in accordance with the provisions of IAS 17, which are more specifi c than French GAAP. This led to certain “fi nance leases” being reclassifi ed as “operating leases”.
After initial recognition, changes in fair value are recorded in the income statement under “Net gains or losses on fi nancial instruments at fair value through profi t and loss”. The interest accrued on such instruments is also included on this line.
When the hybrid instrument (host contract and derivative) is not measured at fair value through profi t and loss, the embedded derivative is separated from the host contract if it meets the criteria for defi nition as a derivative and its economic characteristics and associated risks are not closely related to those of the host contract.
The subsidiary Natixis Financial Products LLC (formerly Natixis Capital Markets North America) documents overall hedging of its interest rate risk in accordance with fair value hedging rules. To account for these transactions, the subsidiary applies the carve-out provisions of IAS 39 as adopted by the European Union. The accounting treatment of derivative fi nancial instruments designated for accounting purposes as structural fair value hedges is similar to that applied to fair value hedging derivatives. Changes in the fair value of portfolios of hedged instruments are reported on a specifi c line of the balance sheet (“Revaluation adjustments on portfolios hedged against interest rate risk”), with a corresponding entry in income.
Natixis uses plain vanilla interest rate swaps lending at fi xed rates to protect itself against the impact of unfavourable changes in interest rates on its fi xed-rate borrowings and issues. Plain vanilla swaps borrowing at fi xed rates are used to protect it from the impact of unfavourable changes in interest rates on its fi xed-rate loans and securities.
Changes in the fair value of hedging derivatives excluding accrued interest are recorded in income under “Net gains or losses on fi nancial instruments at fair value through profi t and loss”. Accrued interest relating to these instruments is recorded under “Interest and similar income” or “Interest and similar expenses”.
The following criteria are used to determine whether or not a market is active: V a significant drop in market activity; V the length of historical data of prices observed in similar market transactions; V scarcity of prices recovered by a service provider; V disappearance of the primary market; V sharp bid-ask price spread; V steep price volatility over time or between different market participants.
Inputs relating to all such instruments were demonstrated to be observable. From a methodology perspective, observability is based on four inseparable criteria: V inputs are derived from external sources (a recognized contributor wherever possible); V they are updated periodically; V they are representative of recent transactions; V their characteristics are identical to the characteristics of the transaction. If necessary, a proxy may be used, provided that the relevance of such an arrangement is demonstrated and documented.
In accordance with the decree of February 20, 2007 on requirements resulting from the Pillar 3 of Basel 2, a description of crisis simulations and ex-post controls (validation of the accuracy and consistency of internal models and modeling procedures) is provided for each model used in the “Risk Management” section of the registration document.
In the absence of observable market data, directly-held ABS CDO portfolios with subprime exposure are measured using a valuation method based on a discounted cash fl ow approach using Intex modeling.
The current method for determining provisions for contracts with CDPCs (Credit Derivatives Product Companies) was refi ned by applying a transparency-based approach to the underlying assets, based on an estimate of exposure at the time of default, with the PD and LGD based on the tranche’s maturity. A stress factor of 1.2 was applied to the probabilities of default thus determined for the underlyings, based on a recovery rate of 27%. Counterparties are associated with a probability of default whenever the losses resulting from the calculation exceed the CDPC’s net available assets.
The valuation model used to determine the fair value of nonagency U.S. RMBS (with or without a subprime component) held by Natixis is based on fi nal loss levels for each structure, estimated using a formula taking into account cumulative losses at maturity and defaults recognized. Unrealized losses are determined by projecting fi nal losses based on estimated losses to date, as calculated by the “delinquency pipeline”, the severity of loss given default and the losses already incurred based on assets and pool vintages; these parameters may, where applicable, be stressed according to the inherent characteristics of the assets.
The credit stress approach for CREs, established using a valuation model based on future cash fl ow projections, was refi ned during FY 2012, by adopting an approach for U.S. CMBS included in the collateral that is identical to the one applied for European CMBS and described below. For other categories of underlying assets, the previous model, based on loss tables determined according to the rating and the vintage, is retained.
In the fi rst half of 2012, Natixis modifi ed the existing model. This model depends on detailed knowledge of the features of the transactions and a credit risk evaluation that includes several parameters including: V the benchmarked average cumulative default rate, the level of which is determined according to changes in inventory; V the collection rate; V and the correlation rate.
In the fi rst half of 2012, a valuation model was established for Private Finance Initiative (PFI) CDS. PFI is a type of public-private partnership aimed at implementing public infrastructures. This model is based on an approach calibrated on the market prices of underlying PFI bonds and the use of a uniform collection rate.
The valuation method for U.S. RMBS including subprime RMBS, European RMBS, CMBS, and CLOs reclassifi ed to “Loans and receivables” is the same as that used for identical instruments classifi ed as “Instruments at fair value through profi t and loss” and “available-for-sale assets”.
FINANCIAL DATA5 Consolidated fi nancial statements and notes Investment property recognized at cost
Instead, the premium is initially recognized on the accruals line and taken to income over the same period, in the same amount and on the same line as: V reversals of provisions for impairment (in Provision for credit losses); V the deferred recognition of the discount (under net revenues) arising on October 1, 2008 on assets reclassified within “Loans and receivables” at that date pursuant to the amendment to IAS 39 and IFRS 7 published on October 13, 2008.
Purchased software is amortized on a straight-line basis over its estimated useful life, which in most cases is less than fi ve years. Internally generated software is amortized over its estimated useful life, which cannot exceed fi fteen years.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 5.9 Non-current assets held for sale and associated liabilities
A provision is a liability of uncertain timing or amount. A liability is a present obligation arising from past events, the settlement of which is expected to result in an outfl ow of resources embodying economic benefi ts that can be reliably measured.
R and the date the plan will be implemented; V the Group has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features on the closing date to those affected by it.
In accordance with IAS 19, employee benefi ts are classifi ed in one of four categories: V “short-term benefits”, including salaries, social security contributions, annual leave, employee profit-sharing, incentive plans, top-up contributions and bonuses payable during the fiscal year in which they are granted;
FINANCIAL DATA5 Consolidated fi nancial statements and notes V “termination benefits”, which should be recognized when the entity is demonstrably committed to terminating the employment of an employee before the normal retirement date, or to providing termination benefits as a result of an offer made in order to encourage voluntary redundancy; V “post-employment benefits”, such as pensions, other supplementary retirement benefits applicable to the banking industry, end-of-career awards and other contractual benefits payable to retirees; V “other long-term employee benefits”, including longservice awards and deferred compensation payable in cash under Employee Retention and Performance Recognition Plans.
The annual payroll costs recognized in respect of defi ned benefi t plans consist of: V rights vested by beneficiaries over the period; V the interest cost reflecting the impact of unwinding the discount on the obligation; V the expected return on plan assets; V amortization of actuarial gains and losses and past service costs; V the effects of plan curtailments and settlements.
Other long-term benefi ts are valued using the same actuarial method as that applied to post-employment benefi ts under defi ned benefi t plans, except that actuarial gains and losses are not subject to the corridor method and past service costs are recognized directly as an expense. The estimated amount of the expense related to cash-settled variable compensation, subject to the employee’s continued service in accordance with the Employee Retention and Performance Recognition Plans, is recognized over the vesting period.
V the share of third party investors in the net assets of dedicated mutual funds included in Natixis’ consolidation scope comprises a financial liability recorded on the balance sheet under “Financial liabilities at fair value through profit and loss”. The share of third party investors in the profits of the mutual funds is recorded in “Net gains or losses on financial instruments at fair value through profit and loss” in the consolidated income statement; V the units held by third party investors in dated funds, which are fully consolidated by Natixis, entitling the unit-holders to the repayment of a share of the fund’s net assets upon its liquidation, are classified in liabilities on the balance sheet under “Accruals and other liabilities”. The share of third party investors in the fund’s profits is recorded under “Interest and similar expenses” on the consolidated income statement.
The variable compensation plan set up by Natixis in early 2010 for some of its employees complies with the professional standards issued by the Fédération Bancaire Française and the provisions of the decrees of November 3, 2009 and December 13, 2010, amending CRBF Regulation No. 97-02. Some plans are settled in Natixis shares, while others are settled in cash indexed to the Natixis share.
Fees and commissions that form an integral part of the effective yield on an instrument, such as e.g. loan set-up fees, are recognized and amortized as an adjustment to the effective interest rate over the estimated term of the applicable loan. These fees and commissions are recognized as interest income rather than fee and commission income.
All fi nancing commitments granted by Natixis give rise to loans granted at market rates at the grant date. The drawndown portion of these commitments is classifi ed in “Loans and receivables”. These fi nancing commitments are contingent liabilities and are recognized in accordance with IAS 37. On initial recognition, they are not entered in the balance sheet. A provision is recognized in liabilities if the cost of the commitment exceeds the associated revenues.
FINANCIAL DATA5 Consolidated fi nancial statements and notes Accounting estimates which require assumptions to be made are mainly used to measure the items set out below: FINANCIAL INSTRUMENTS RECORDED AT FAIR VALUE
The fair value of hybrid market instruments not traded on an active market is calculated using valuation techniques. Valuations produced using valuation models are adjusted, depending on the instruments concerned and the associated risks, to take account of the bid and offer price for the net position, modeling, counterparty and input risks. The fair values obtained from these methods may differ from the actual prices at which such transactions might be executed in the event of a sale on the market.
Unlisted equity instruments classifi ed as available-for-sale fi nancial assets primarily consist of investments in nonconsolidated companies. The fair value of investments in unlisted non-consolidated companies is obtained principally by valuation methods using multiples and DCF (discounted cash fl ow) . Use of these methods requires certain choices and assumptions to be made in advance (in particular, projected expected future cash fl ows and discount rates).
Natixis calls on independent actuaries to calculate its principal employee benefi ts. The discount rates and rates of return on plan assets used are based on observed market rates at the reporting date, for example the yield curve on AA Corporate bonds for discount rates. When applied to long-term benefi t obligations, these rates introduce uncertainty into the valuations.
The participation rate adopted for calculating deferred participation is determined by observing past pay-out ratios, but also by taking into account assumptions on projected net future cash fl ows from fi nancial products and assumptions on expected returns on policies to be granted to policyholders. In highly fragile and competitive market conditions, the sources of concern weighing on these estimates are signifi cant.
As a precaution, Natixis records a net deferred tax asset linked to its ability to generate taxable income over a given period (10 years maximum), while tax loss carry forwards are deductible with no time limitation in France and the UK or over very long periods (20 years in the U.S.).
Net income/(loss) attributable to shareholders (in millions of euros) (a) 826 1,301
Average number of treasury shares issued and outstanding over the period 5,891,124 4,639,042
Average number of shares used to calculate earnings/(loss) per share 3,093,182,851 3,012,609,104
(a) The difference corresponds to the interest generated on Deeply Subordinated Notes and on preference shares, i.e. -€76 million after tax savings.
(b) This number of shares refers to the shares granted under the deferred share-based bonus plans (2009, 2010, 2011 and 2012 plans). In 2012, based on the average share price, the 2008 stock option plan presented in Note 11.2.4 is not considered as potential dilutive shares.
FINANCIAL DATA5 Consolidated fi nancial statements and notes NOTE 6 NOTES TO THE BALANCE SHEET
At December 31, 2012, fi nancial assets at fair value primarily comprised securities and derivative instruments.
Securities designated at fair value through profi t and loss 6.1.1.3 97,559 81,008
Loans and receivables due from customers 2,821 27 211 2,583 380 28 314 38 6.1.2 FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
Securities classifi ed as instruments held for trading essentially comprised short sales of fi nancial assets.
The use of the fair value option is considered to provide more pertinent information in two situations: V where there is an accounting mismatch between economically linked assets and liabilities. This arises for example in the case of an asset and a hedging derivative when the criteria for hedge accounting are not met; V where a portfolio of financial assets and liabilities is managed and recognized at fair value as part of a documented policy of asset and liability management.
Instruments designated at fair value through profi t and loss 6.1.2.1 and 6.1.2.2 87,041 81,517
(a) The fair value, determined using the method described in Note 5.6, recorded in respect of internal credit risk on Natixis issues totaled €323 million at December 31, 2012 versus €674 million at December 31, 2011 (see Note 7.3). Besides changes in the outstanding amount, this difference refl ects changes in the Natixis spread since the close of the previous year’s accounts.
(b) Other payables comprise a portfolio of structured pensions managed according to a dynamic approach.
(a) Natixis has contracted Total Return Swaps (TRS) with BPCE. These instruments are used to hedge changes in the fair value of GAPC instruments carried at fair value through profi t and loss at December 31, 2012 and are included on this line for an amount of €108 million in assets (versus €104 million at December 31, 2011) and €194 million in liabilities (versus €108 million at December 31, 2011).
(b) Natixis has contracted a call option with BPCE for the purpose of recovering, 10 years after its implementation, any net gains in fair value transferred to BPCE via TRS. The call option was recognized on this line in assets for €549.1 million (versus €474 million at December 31, 2011).
Derivatives may only be designated as hedges if they meet the criteria set out in IAS 39 at inception and throughout the term of the hedge. These criteria include formal documentation that the hedging relation between the derivatives and the hedged items is both prospectively and retrospectively effective. Hedging relationships are presumed to be effective when, retrospectively, changes in the value of the hedging instrument offset changes in the value of the hedged item in a range of 80%-125%.
Fair value hedging is used to hedge changes in the fair value of fi xed-income securities on an individual basis, as well as comprehensive hedging of the interest-rate risk of Natixis Financial Products LLD (formerly Natixis Capital Markets North America) according to the carve-out provisions of IAS 39.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.4.2 CUSTOMER LOANS AND RECEIVABLES
The fair value of loans and receivables due from customers totaled €100, 077 million at December 31, 2012, compared with €112, 169 million at December 31, 2011.
Loans that have been restructured due to the debtor’s fi nancial situation stand at €1.794 billion at December 31, 2012.
Customer lease fi nancing outstandings 6,717 4,148 10,865 6,507 4,100 10,607
No fi nancial assets were reclassifi ed in 2012 by Natixis pursuant to the IASB’s “Reclassifi cation of fi nancial assets” amendment to IAS 39 and IFRS 7 published on October 13, 2008.
The fi nancial instruments reclassifi ed in accordance with the October 13, 2008 amendment were measured using the valuation models described in Note 5.6. Changes in the fair value of reclassifi ed assets that would have had an impact on income for 2012 if the October 1, 2008 reclassifi cation had not taken place, are summarized in the table below.
Loans and receivables 1,358 3,122 * Amounts adjusted compared to fi nancial statements published on December 31, 2011.
These instruments are considered transferred assets because they are the underlying assets of transactions that organize a transfer between Natixis and the assignee of ownership of the assets and the attached cash fl ows.
Financial liabilities at fair value through profi t and loss 23,271 23,262
At December 31, 2012, continuing involvement in a securitization vehicle maintained by Natixis stands at: V €86 million in shares held in the vehicle; V €129 million in liquidity lines granted that have been drawn down; V €65 million in liquidity lines granted that have not yet been drawn down.
This heading covers fi nancial assets received as security under fi nancial guarantee agreements with the right to reuse the assets in the absence of any default on the part of the owner of the guarantee.
Amounts less than 90 days past due represent 94% of the total.
Amounts less than 90 days past due represent 50 % of the total.
Consolidated fi nancial statements and notes 6.6.7 FAIR VALUE OF FINANCIAL ASSETS CARRIED AT FAIR VALUE IN THE BALANCE SHEET
Financial assets held for trading 131,211 51,146 74,874 5,191 164,200 26,056 129,629 8,515
Derivative instruments not eligible for hedge accounting (positive fair value) 67,137 1,759 64,106 1,271 122,049 1,520 117,838 2,691
Available-for-sale securities – Equity investments 1,326 166 401 760 1,545 166 537 842
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.6.7.1 Financial assets at fair value measured using level 3 of the fair value hierarchy
Financial assets at fair value through profi t and loss - Trading 8,515 (638) (136)
Other fi nancial assets designated at fair value through profi t and loss 300 (21) 1
TOTAL FINANCIAL ASSETS RECORDED AT FAIR VALUE 10,988 (698) (123) 15
Financial assets at fair value through profi t and loss - Trading 11,207 477 (17)
Securities designated at fair value through profi t and loss 569 (36) 5
Other fi nancial assets designated at fair value through profi t and loss 762 (14) 42
V a flat variation of: R +/-10% in the estimated loss rates on underlying assets to model the valuation of ABS CDO tranches; R or +/-1% for CLO underlyings; R or +/-10% for the LTV used to calculated the CMBS collateral loss rate; i.e. a sensitivity impact representing a valuation increase of €41.6 million (refl ecting an improvement in the abovementioned inputs) or a valuation decrease of €69.1 million (refl ecting a deterioration in said inputs) (2).
Total deferred tax recognized 3,010 2,887 - o/w deferred tax assets 3,153 3,217 - o/w deferred tax liabilities (144) (329)
Consolidated fi nancial statements and notes 6.8 Accrual accounts, other assets and liabilities
(a) Including Day One P&L for €48 million at December 31, 2012 compared to €50 million at December 31, 2011 (cf. Note 6.8.2).
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.8.2 RESTATEMENT OF DAY-ONE P&L
The table below shows the deferred day-one margin on instruments priced using valuation techniques drawing on non-observable inputs or market models not commonly used classifi ed as level 3 in the fair value hierarchy: at the start of the period, at the end of the period, and changes during the period.
DEFERRED MARGIN AT THE END OF THE PERIOD 48 50 6.8.3 INSURANCE ACCRUAL ACCOUNTS
Consolidated fi nancial statements and notes 6.9 Property, plant and equipment, intangible assets, investment property 6.9.1 CHANGES IN PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS OVER THE PERIOD
(a) Insurance company investments. Changes in fair value give rise to the symmetrical recognition of a deferred profi t-sharing reserve, equal to 100% of the related base amount on average (see Note 2.10).
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.10 Assets obtained by taking possession of guarantees
The fair value of customer deposits amounted to €54, 533 million at December 31, 2012, compared with €44, 483 million at December 31, 2011.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.13 Debt securities
(a) This item includes the P3CI bond issue for an amount of €6.9 billion carried out in the fi rst half of 2012.
(a) At December 31, 2011 , net deferred profi t-sharing assets amounted to €830 million, compared with a deferred profi t-sharing liability of €1, 674 million at December 31, 2012 (see Notes 2.10 ).
Consolidated fi nancial statements and notes 6.15 Provisions and impairment 6.15.1 SUMMARY OF PROVISIONS
Impairment losses taken on availablefor -sale fi nancial assets 1,332 512 (184) 2 134 1,797
They are shown without the impact of changes in insurance company technical reserves.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.16 Subordinated debt
This table does not include: V preference shares; V accrued interest.
(b) Loan repayments and securities redemptions comprised: V in advance: repayments of subordinated loans issued in September 2006 and June 2007 for €1 billion each, as well as 7, 000 undated Subordinated Notes issued in November 1985 for an impact of -€5 million; V at term: repayment of subordinated loans concerning December 2001 and March 2002 issues for €9.7 million and €20.5 million, respectively.
Other fi nancial liabilities held for trading 1,165 6 1,159 1,401 7 1,394
Financial liabilities designated at fair value through profi t and loss 87,041 87,041 81,517 548 80,970
Other fi nancial liabilities designated at fair value through profi t and loss 73,781 73,781 64,348 64,348
Financial liabilities at fair value through profi t and loss - Trading 188 232 (54)
Derivative instruments not eligible for hedge accounting (negative fair value) 188 232 (54)
FINANCIAL DATA5 Consolidated fi nancial statements and notes 6.19 Breakdown of financial liabilities by contractual maturity
Interest accrued on impaired loans and receivables (including restructured items) 15 0 15 10 0 10
Less than 1 month 1 to 3 months 3 months to 1 year 1 to 5 years Over 5 years Total 7.2 Net fee and commission income
Financing, guarantee, securities and derivative commitments (a) 185 (235) (50) 184 (300) (115)
FINANCIAL DATA5 Consolidated fi nancial statements and notes 7.3 Gains and losses on financial instruments at fair value through profit and loss
Net gains/(losses) on fi nancial assets and liabilities excluding hedging derivatives 2,042 651
Net gains/(losses) on other fi nancial assets and liabilities designated at fair value through profi t and loss (b) 455 415
(a) “Net gains/(losses) on fi nancial assets and liabilities held for trading” include: V The valuation of unhedged ABS CDOs with subprime exposure (see Note 5.6), resulting in the recognition of an expense of €24 million in 2012 (excluding the impact of the BPCE guarantee), versus an expense of €36 million at December 31, 2011, for a net exposure of €126 million at December 31, 2012; V Impairments taken against the fair value of CDS entered into with monoline insurers (see Note 5.6), which led to a decrease of €1, 222.5 million in cumulative impairments in 2012, versus income of €529.5 million in 2011 (excluding the impact of exchange rate fl uctuations and the BPCE guarantee), bringing cumulative impairments to €351 million at December 31, 2012 versus €1, 573 million at December 31, 2011; V Impairments taken against credit derivatives contracted with Credit Derivatives Product Companies (see Note 5.6), reversed in the amount of €13.7 million in 2012 to reach €1.1 million, versus a writeback of €0.5 million in 2011 (excluding the impact of the BPCE guarantee and exchange rate fl uctuations), for an economic exposure of €6.1 million at December 31, 2012.
This line item also includes market discounts on syndicated loans. In fact, loans outstanding with a theoretical syndication date expired as at December 31, 2012 were analyzed on a caseby -case basis in order to take into account any market discounts observed at the end of the reporting period.
Other insurance income and expenses 7.5.2 1,359 (4,120) (2,761) 1,676 (4,162) (2,486)
Other related income and expenses 7.5.3 705 (436) 269 620 (304) 317
Gains or losses on sales 3 (22) (19) 4 (13) (9)
Other related income and expenses 198 (167) 31 188 (162) 27 7.5.2 OTHER INSURANCE INCOME AND EXPENSES
“Impairment of individual loans” includes impairment recognized against securities classifi ed as “Loans and receivables” (including items reclassifi ed following the October 13, 2008 amendment) and fi xed-income securities classifi ed within available-for-sale fi nancial assets.
Provisions for risks and other costs (38) 20 0 0 (17) (60) 23 0 0 (37)
= Consolidated net income/(loss) before tax, goodwill, amortization and share in income from associates 751 1,570
+ Losses for the period not recognized for deferred tax purposes (49) (189)
Coface, Private Equity businesses (proprietary, sponsored funds and third party management slated for disposal) and Natixis Algérie are managed as fi nancial holdings due to their lower synergies with Natixis’ other businesses and with BPCE.
It is structured into two sub-divisions with complementary objectives: V the Coverage & Advisory Department whose mission is to develop customer relationships and contribute to strengthening synergies between Natixis business lines. It includes M&A Advisory Services, Primary Equity, Economic Research, Conventional Loans and Coverage. Coverage, in partnership with all of Natixis’ business lines, designs innovative, tailored solutions adapted to the specific requirements of each one of its customers - from conventional loans to the most sophisticated structures; V the Financing & Market Solutions Department in charge of the Originate to Distribute model and product development. It combines: R market Solutions, which includes the Equity, Credit Rate, Commodities and Global Structured Credit and Solutions,
FINANCIAL DATA5 Consolidated fi nancial statements and notes 9.2 Specialized Financial Services
Together, these specialized management companies enable the Group to provide a full range of expertise meeting demand from all customer segments. Coverage of the various customer segments is optimized by the organization of distribution around the Global Associates platform and the business franchises developed over the long term by the Asset Management companies, mainly with various client groups. The management companies continue to handle distribution via the shareholder retail banking networks in France.
Coface reorganized its business in 2011, refocusing on strategic activities (credit insurance and factoring in Germany and Poland), while non-strategic, service activities were grouped under Coface non-core.
At the end of 2008, Natixis ring-fenced its most illiquid and/ or high-risk fi nancial markets exposures within GAPC (Gestion Active des Portefeuilles Cantonnées, or Workout Portfolio Management). Segregated assets include convertible arbitrage, complex equity and interest rate derivatives, trading correlation derivatives, structured fund-based derivatives, proprietary credit activities and residential ABS.
The GAPC 6 “Convertible Arbitrage” and GAPC 7 “Complex Equity Derivatives” were closed in 2010 and 2012, respectively.
The Corporate Center operates alongside the operating divisions. As such, it recognizes the central funding mechanisms and income from the Group’s asset and liability management. It also records income on the bank’s portfolio of equity investments not belonging to a division, and the revaluation of the Group’s own debt. Lastly, it books interest on the P3CI deal to net revenues. This interest is reallocated to the pre-tax profi t of the different businesses (Wholesale Banking, SFS, Investment Solutions and Retail Banking) in the income statement segment analysis (see Note 9.9).
This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2012.
This information is determined based on the accounting principles applied in accordance with IFRS as adopted by the European Union at December 31, 2011. This information is presented according to the new structure of businesses adopted by Natixis at December 31, 2011. It notably includes the incorporation of Coface’s non-core activities in “other activities” and the allocation of a contribution to the P3CI deal to each business.
Loans and receivables to fi nancial institutions 32,811 1,354 1,483 263 1 3,386 22,634 61,932
Financial liabilities at fair value through profi t and loss 140,852 139 4 59,850 68 200,913
Deposits from fi nancial institutions 66,661 5,502 14,083 577 141 15,088 25,702 127,754
Assets at fair value through profi t and loss 166,912 9,997 2 285 509 67,879 42 245,625
Available-for-sale fi nancial assets 2,077 26,580 1,451 1,311 116 479 3,129 35,143
Deposits from fi nancial institutions 65,239 2,103 14,285 2,301 86 21,628 2,988 108,630
Assets at fair value through profi t and loss 211,380 9,978 8,841 1,190 480 231,870
Assets at fair value through profi t and loss 219,061 15,673 9,853 538 501 245,625
The capital adequacy ratio encompasses credit risk, market risk, settlement risk and operational risk. This ratio measures the adequacy of regulatory capital in relation to risk. The numerator represents the bank’s consolidated equity, calculated in accordance with CRBF Regulation no. 90-02. The denominator represents all of the bank’s weighted credit and market risks, its settlement risk and its operational risk. Natixis complied with the 8% minimum capital adequacy ratio at December 31, 2012.
FINANCIAL DATA5 Consolidated fi nancial statements and notes OTHER REGULATORY RATIOS
The following table sets out the exposure of all the Natixis’ fi nancial assets to credit risk. This exposure does not take into account guarantees, sureties, credit default swaps, collateral OTC fi nancial instruments, the impact of netting agreements and other credit enhancements. It corresponds to the net value of the fi nancial assets on the balance sheet, after taking all impairments into account (individually or collectively assessed).
Loans and receivables due from EC 61,833 323 (223)* 61,932 48,643
Loans and receivables due from banks 53,847 321 (221) 53,947 65 170 34,841 275 (229) 34,887 2 376
Africa and the Middle East 243 1,563 1,806 127 41 168
Consolidated fi nancial statements and notes 10.2.4 BREAKDOWN OF COLLECTIVE PROVISIONS BY BUSINESS SECTOR
At December 31, 2012: 90% of collective provisions on the Finance sector comprise provisions covering CDPCs (credit derivative product companies), compared with 87% at December 31, 2011.
The sector reversal includes a €98.4 million reversal in respect of CDPCs.
Banking book Trading book Residual maturity o/w other loans and receivables o/w availablefor -sale assets o/w other fi nancial liabilities designated at fair value through profi t and loss Direct net exposure (a)
(d) The difference of €8 million in fi nancial assets at fair value through profi t and loss is linked to securities at maturity for €31 million on Portugal and the acquisition of new securities for €23 million on Spain and Italy.
Furthermore, at December 31, 2012, Natixis was also exposed to sovereign risk linked to these same countries, in respect of its insurance activities, for the following amounts: (in millions of euros)
On July 21, 2011, Europe reaffi rmed its support for Greece with a private sector rescue package. The implementation of this plan was confi rmed by the European Summit on 26-27 October, 2011. The fi nal conditions were enacted on February 21, 2012, with the approval of the representatives of the Eurogroup, the Greek government and private sector investors.
FINANCIAL DATA5 Consolidated fi nancial statements and notes of securities eligible for trade. In addition, warrants indexed to Greece’s GDP and attached to the newly issued securities were received under the terms of the exchange.
Regarding the accounting treatment of this exchange plan, Natixis fully derecognized the previous assets, which were replaced by the newly issued securities comprising a whole whose above-mentioned characteristics are very different from those of the initial securities. The value of the previous securities was adjusted prior to the exchange via an additional provision, the previous securities were derecognized and the new securities were recorded in the balance sheet at their fair value, i.e. €65.2 million. As a result of this exchange, an additional capital loss of -€40.6 million was recorded on the banking, trading and insurance books, after reversing provisions for permanent impairment and applying the profi t-sharing rules governing the relevant insurance portfolios.
The warrants were valued at December 31, 2012, based on market price, for an amount of €0.5 million.
The European Summit of 28-29 June, 2012 enhanced the support measures for struggling countries, by easing the rules of intervention for the European Stability Mechanism (ESM). The ESM came into force on September 27, 2012 with a fi nancing capacity of up to €700 billion. Its purpose is to issue securities on the markets in order to provide loans, with conditions, to ailing countries, once a supervisory organization is established in the eurozone.
Regarding Spain, Spanish and European authorities enacted an aid package for the Spanish banking sector on July 20, 2012. This package, for a maximum of €100 billion, will be disbursed in several tranches by the ESM to the Spanish government. The funds received will then be transferred to the relevant fi nancial institutions.
The sovereign debt securities of these countries classifi ed in the “Available-for-sale assets” or “Financial assets at fair value through profi t or loss” categories were recorded at their market price at December 31, 2012.
Consolidated fi nancial statements and notes 10.4.5 Fair value of held-to-maturity fi nancial assets
(a) Net carrying value, excluding accrued interest, after impairments and without applying the profi t-sharing rules on life insurance portfolios; (b) Position redeemed in H1,2012; (c) Positions subject to trade. The resulting new securities were classifi ed as available-for-sale, then sold in H1,2012.
Number of employees* 20,198 20,451 * Full-time equivalent current employees of Natixis at the reporting date.
On March 18, 2009, Natixis set up a retention plan for Wholesale Banking employees, designed to foster loyalty among key employees and encourage them to continue contributing to Wholesale Banking’s activities. The rights to deferred compensation vest gradually over a period running from the grant date (March 18, 2009) to July 1, 2012. The amount settled in cash at each payment date depends on changes in performance-linked ratios relating to Wholesale Banking and more generally Natixis, as well as the holding period.
Regarding the plan approved by the Board of Directors on February 17, 2013, as these allocations had not yet formally been carried out at the reporting date, these expenses have been estimated using best available estimates of inputs at the reporting date. These inputs relate to the share value and dividend assumptions.
October 2015 * The expected number of units at the acquisition date is funded by equity swaps.
The corresponding expense associated with the short-term plan, estimated based on the probability of the presence condition being met, is fully recognized in the 2012 fi nancial statements in the amount of €28.3 million.
FINANCIAL DATA5 Consolidated fi nancial statements and notes 11.2.3 PENSIONS AND OTHER LONG-TERM
The annual defi ned-benefi t plan expense comprises: V additional entitlements vested by all employees; V interest cost (impact of unwinding the discount); V the expected return on plan assets; V amortization of actuarial gains and losses (application of the “corridor” method) and past service costs; V the impact of any plan curtailments or settlements.
For Natixis, 82% of gross liabilities relating to these plans arise in France.
Supplementary pension benefi ts and other End-of-career awards Long-service awards Other Total
Benefi ts vested over the period 3 12 4 42 62
Recognized actuarial gains and losses over the period 6 2 (1) 0 7
Change in obligation taken to income (2) 20 2 16 35
Other items (change in consolidation scope, etc.) 7 0 0 (2) 5
Change in actuarial gains and losses not recognized 36 (2) (0) 33
Expected return on plan assets 16 1 17 18 1 19
Impact of changes in consolidation scope d) Breakdown of assets held to fund post-employment benefi ts granted to employees
Consolidated fi nancial statements and notes f) Analysis of sensitivity to assumptions applied to defi ned-benefi t plans and other long-term employee benefi ts recognized at December 31, 2012
Impact on present value of gross benefi t obligations at December 31 ( 16.19)% ( 10.09)% ( 8.54)% ( 3.37)% ( 15.86)% ( 8.96)% ( 8.63)% ( 3.53)%
Impact on present value of gross benefi t obligations at December 31 21.10% 11.29% 9.78% 3.57% 20.62% 10.68% 10.00% 4.12%
Impact on present value of gross benefi t obligations at December 31 ( 2.45)% ( 2.08)%
(a) Based on the Bank’s standard yield curve for interbank swaps.
The capital increase in 2012 is linked to the allocation of bonus shares to some Natixis employees, authorized by the Combined General Meeting of May 27, 2010, under the 2010 conditional share allocation plan (see Note 5.18 and Note 11.2.2).
Natixis adapts the management of its capital structure in line with changes in economic conditions and in the risk profi le of its operations. Its objectives, policies and procedures remained unchanged in 2012.
Changes in these items over the period are presented below: (in millions of euros) 01.01.2012 Issues Redemptions Translation adjustments 12.31.2012
This authorization is based on the 10th resolution of the General Meeting of May 29, 2012, which supersedes the 10th resolution of the General Meeting of May 26, 2011. It authorizes Natixis to acquire, at a maximum price of €5 per share, a number of shares not exceeding 10% of the shares making up the capital of Natixis
Pursuant to this contract, Natixis holds 6.510.765 shares representing €16.6 million as at December 31, 2012.
On November 12, 2009, BPCE provided Natixis with a guarantee covering 85% of the nominal value of the debt portfolio carried by GAPC and classifi ed in “Loans and receivables” and “Available-for-sale fi nancial assets” as at July 1, 2009. Under the guarantee, an indemnity is due in the event of any default (on principal, interest, fees, costs and any other amount due in accordance with the contractual documentation for the asset in question) relating to one of the assets in the guaranteed portfolio. Natixis is covered as from the fi rst euro in default and up to 85% of the default amount. This guarantee is shown on the line “Guarantee commitments received from banks” for 85% of the nominal amount of the assets guaranteed.
A fi nancing commitment given is a contingent liability, defi ned by IAS 37 as: V a potential obligation arising from past events whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the entity; or
V a present obligation arising as a result of past events but not recognized because: R it is not likely that an outfl ow of economic benefi ts will be required to settle the obligation, or
R the amount of the obligation cannot be measured with suffi cient reliability.
At December 31, 2012, none of these vehicles was consolidated as Natixis does not exercise control and is not exposed to the majority of the risks and rewards associated with the securitized assets.
On February 17, 2013, Natixis and Groupe BPCE announced their plan to simplify the structure of Natixis, which would mean: V selling all CCIs (Cooperative Investment Certificates) to the Banque Populaire banks and Caisses d’Epargne that issued them, for the price of €12.1 billion in cash. This price will be assessed by independent experts; V repaying the loan covering the CCIs (P3CI) and the related lending/borrowing transactions; V carrying out an exceptional contribution of €2 billion; V replacing the liquidity resulting from the previous actions.
All of these elements make up the Transaction, which should be completed in FY 2013.
The planned Transaction would increase the equity allocation to the core business lines to 83% of the total and improve solvency.
Loans and receivables to fi nancial institutions 39,801 2,773 1,270 16,218 4,606 1,451
Net fee and commission income (143) (205) 81 (216) (262) 70
Relations with other proportionally-consolidated entities and entities accounted for by the equity method are not material.
FINANCIAL DATA5 Consolidated fi nancial statements and notes SUMMARY FINANCIAL INFORMATION FOR AFFILIATES
Net gains or losses on fi nancial instruments at fair value through profi t and loss 307 (82)
Net income (Group share) for 20% shareholdings in CCIs 157 251
Restatements on consolidation: V Profi t from the increase in the share in income 20 40
(a) In 2012 attendance fees paid to members of the Board of Directors included a fi xed portion (€10, 000 per year per person) and a variable portion (€2, 000 per Board Meeting per person). The members of the Audit Committee and the Compensation Committee received a fi xed payment (€5, 000 and €3, 000 respectively, €20, 000 for the President of the Audit Committee and €10, 000 for the Present of the Compensation Committee) and a variable payment of €1, 000 per meeting per person.
FINANCIAL DATA5 Consolidated fi nancial statements and notes COMPENSATION OF EXECUTIVE CORPORATE OFFICERS
Compensation in relation to the fi scal year €1, 539, 010 €1, 477, 906
The insurance industry companies within Natixis’ scope of consolidation are: Coface core (strategic activities) and its subsidiaries, Natixis Assurances and its subsidiaries (life insurance, personal risk insurance, property and casualty insurance) and CEGC (Compagnie Européenne de Garanties et de Cautions).
The following table shows a reconciliation between insurance companies’ fi nancial statements as presented and how they would translate into the banking format.
Tranche B corresponds to the fraction of annual compensation between €37, 032 and €148, 128.
Tranche C corresponds to the fraction of annual compensation between €148, 128 and €296, 256.
Net gains or losses on fi nancial instruments at fair value through profi t and loss 617 (336)
Depreciation, amortization and impairment on property, plant and equipment and intangible assets (36) (30)
The pro forma information presented does not include the contribution of the non-strategic activities of Coface, but does include CEGC’s contribution in the 2010 results in “insurance” format, which was not the case for the information published at December 31, 2010.
The bank’s fi nancial statements are audited by three independent accounting fi rms.
V Deloitte & Associés – 185, avenue Charles-de-Gaulle – 92524 Neuilly-sur-Seine cedex; V KPMG Audit, Département de KPMG S.A. – 1 cours Valmy – 92923 Paris La Défense Cedex; V Mazars – Immeuble Exaltis 61, rue Henri-Régnault – 92075 La Défense Cedex.
The Statutory Auditors were paid the following amounts in return for their work: In thousands of euros
Legal, tax and employee related 773 690 7% 6% 576 777 12 % 14% 36 1 1% 0%
In addition, the fees paid to Price Waterhouse Coopers, auditors for BPCE, stand at €3,461,000 for audit services and €1,476,000 for other services.
TRUST (a) Secondary markets fi nance FC 100 100 100 100
CM REO TRUST (a) Secondary markets fi nance FC 100 100 100 100
FINANCIAL DATA5 Consolidated fi nancial statements and notes Business Companies included in the scope of consolidation Activity
Management of venture capital mutual funds FC 100 100 0 0 France
Rendement 2018 (l) Private Equity FC 89 89 0 0 France
BANQUE PRIVEE 1818 Credit institution FC 100 100 100 100 France
(g) TKB disposed of by Natixis HCP at June 7, 2012.
(i) Total asset transfer to Natixis S.A. at September 30, 2012.
(n) Total asset transfer to NGAM P1 at September 30, 2012.
(o) NEI Luxembourg and NEI merged into NGAM at October 1, 2012.
In compliance with the assignment entrusted to us by your General meeting, we hereby report to you, for the year ended December 31, 2012, on: V the audit of the accompanying consolidated financial statements of Natixis; V the justification of our assessments; V the specific verifications required by law.
In our opinion, the consolidated fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Group as at December 31, 2012 and of the results of its operations for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union.
In accordance with the requirements of article L.823-9 of the French Commercial Code (“Code de commerce”), we bring to your attention to the following: Guarantee mechanism for GAPC assets
The Group revises its measurement of intangible assets and goodwill carried in its consolidated balance sheet (Notes 2.5, 5.8 and 6.11 to the consolidated fi nancial statements). We reviewed the methodology used to perform this work as well as the main assumptions and parameters.
Assets 3 Cash and balances with central banks 34,652 5,499 3 Government securities and equivalent 40,317 22,091 3 Advances to banks 127,365 115,757 24 o/w institutional operations: 5 Bonds and other fi xed-income securities 25,410 30,135 5 Shares and other variable-income securities 14,450 9,246 7 Investments and other long-term securities 11,038 10,802 7 Investments in related subsidiaries and affi liates 14,694 15,849 4 Leasing 4 Operating leases 12 Intangible capital assets 367 373 12 Property, plant and equipment 217 178
Commitments received from banks 4,268 6,785 24 o/w institutional operations: 37 Commitments on securities 5,036 8,082 37 Other commitments received 12,356 9,082
FINANCIAL DATA5 Parent company fi nancial statements and notes (in millions of euros)
Commitments given to customers 21,028 18,750 24 o/w institutional operations: 37 Commitments on securities 4,883 8,013 37 Other commitments given 25,399 19,959
Write-down, amortization and impairment of property, plant and equipment and intangible assets (85) (114)
GROSS OPERATING INCOME (LOSS) 1,384 862 33 Provision for credit losses (298) (121)
Funding/reversal of funding for general banking risks and regulated provisions 7 1
NOTE 2 CHANGES IN ACCOUNTING METHODS AND COMPARABILITY OF FINANCIAL STATEMENTS 357
NOTE 9 DISCLOSURES REGARDING SHAREHOLDINGS EXCEEDING THE INVESTMENT THRESHOLD IN FRENCH COMPANIES DURING THE YEAR 366
NOTE 30 GAINS (LOSSES) ON SECURITIES HELD FOR SALE AND SIMILAR 385
NOTE 37 OFF-BALANCE SHEET - FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS COMMITMENTS 389
NOTE 40 ESTABLISHMENTS AND OPERATIONS IN NON-COOPERATIVES STATES OR TERRITORIES WITHIN THE MEANING OF ARTICLE 238-0A OF THE FRENCH GENERAL TAX CODE 392
Loans declared in default, restructured loans on which the borrower has once again defaulted and loans classifi ed as non-performing for more than one year for which a write-off is planned are deemed to be irrecoverable.
Where there is a risk of partial or total non-recovery of loans or of borrowers breaching their covenants, impairment charges or provisions corresponding to the amount of the probable loss are recognized on the income statement under “Provision for credit losses”. Impairment is assessed quarterly on a caseby -case basis taking into account an analysis of the risk and available collateral.
In accordance with banking regulations: V accrued interest due on loans to borrowers subject to legal proceedings is deducted from the interest account in which it was initially recorded. If the interest is subsequently recovered, it is credited to this line upon collection; V interest on non-performing loans three or, where applicable, six or nine months overdue is also written down in full by deduction from the interest account in which it was initially recorded; V all other loans made to these customers are automatically also classified as non-performing, even when the risk appraisal does not require an impairment charge against the outstanding principal.
Each group of assets is assessed for objective evidence of impairment based on observable data indicating a likely decrease in the estimated recoverable cash fl ows for that group of assets. A collective writedown in the balance sheet liabilities is taken against any group of assets showing objective evidence of impairment. Assets belonging to that group, which are subsequently specifi cally identifi ed as impaired (specifi c risk), are removed from the collective writedown calculation base.
V Securities held for trading: securities that are originally bought or sold with the intention of reselling or repurchasing them in the short term, securities held as part of a market making operation, and securities bought or sold for the purposes of the specialized management of a trading portfolio. When initially recognized, these securities must be traded on an active market with easily obtainable prices representing actual and regularly occurring market transactions on an arm’s length basis. On acquisition, securities held for trading are recognized at the price paid including any accrued interest. Transaction costs are recognized in expenses. At each balance sheet date, they are measured at market value and the grand total of any valuation differences is recognized on the income statement under the heading, “Balance of transactions on securities held for trading”; V Securities held for sale: securities that are not classified as held for trading, held for investment, other long-term investments, investments in associates or investments in related companies. They are reported on the balance sheet at their purchase price, excluding acquisition costs. Any difference between the purchase price (excluding accrued interest) and the redemption price is recognized in income over the remaining life of the securities. They are valued at year end at the lower of their carrying amount and their market value. Unrealized losses give rise to the recognition of an impairment loss, whose calculation factors in gains from any hedging transactions conducted. Unrealized gains are not recognized; V Securities held for investment: fixed-income dated securities acquired with the stated intention of holding them to maturity. They are reported on the balance sheet at their purchase price, excluding acquisition costs. Any difference between the purchase price and the redemption price is recorded in income over the remaining life of the securities.
In line with regulatory requirements, unrealized losses are not subject to impairment unless there is a strong likelihood that the instruments will be sold before maturity due to unforeseen circumstances and without prejudice to impairments included in provisions for credit losses pursuant to CRC Regulation 2002-03 as amended, if there is a risk of default by the issuer of these instruments. Unrealized gains are not recognized; V Investment securities: investments made on a regular basis with the sole aim of generating a capital gain in the mediumterm, without any intention to invest sustainably in the issuing company or to actively participate in its operational management. This business is operated within a separate, specialized and structured department of Natixis.
Investment securities are recognized at their acquisition date at the purchase price excluding acquisition costs. They are included in the balance sheet at the lower of their historical cost and their value in use, which is determined based on the issuer’s general development outlook and the projected holding period. In particular, for the determination of this value, Natixis refers to the International Private Equity and Venture Capital Valuation Guidelines published in September 2009 by the Association Française des Investisseurs en Capital (AFIC - French Private Equity Investors Association), the British Venture Capital Association (BVCA) and the European Private Equity and Venture Capital Association (EVCA).
The measurement approaches used are the following, as the case may be: R the net asset value method,
Income, value adjustments and proceeds on disposal of securities portfolios are recognized as follows: V Income from variable-income securities is recognized as and when received; V Income from fixed-income securities is recognized based on the accrual method; V Value adjustments and proceeds from the disposal of securities are recognized under different headings depending on which portfolio they belong to: R under “Net revenues” for securities held for trading and securities held for sale,
R under net gains/(losses) on fi xed assets: R for adjustments in the value of securities held for investment (excluding impairment for risk exposure to a counterparty) when there is a high probability of disposal of such securities held for investment due to unforeseen circumstances and for all proceeds from the disposal of securities held for investment; R for investments in associates and related companies and other long-term securities.
Natixis has carried out no such transfers in its individual fi nancial statements.
In the fi rst half of 2012, Natixis implemented a transaction with BPCE called P3CI (CCIs hedged by a loan) to optimize the Core Tier 1 ratio via a guarantee mechanism based on the prudential value of the cooperative investment certifi cates (CCIs) issued by the Banque Populaire banks and the Caisses d’Epargne.
Alongside this transaction, Natixis also redeemed €2.3 billion in deeply subordinated notes subscribed by BPCE.
Parent company fi nancial statements and notes 1.6 Forward financial instruments (futures and options)
“Outright” foreign currency futures or transactions hedging other foreign currency futures are measured based on the forward foreign exchange rate remaining to run on the currency in question. Differences in interest rate or contango/ backwardation associated with hedged foreign currency futures are recognized in stages as interest expense or income over the effective term of the transaction.
Commitments likely to be given within this framework to banks that extend export credits denominated in foreign currencies, with the aim of guaranteeing the exchange rate of their foreign currency borrowings, are not included in published off-balance sheet commitments. Income and expenses from institutional operations (exchange rate swaps and guarantees) are charged or paid to the French Treasury in accordance with the agreedupon terms and conditions.
They fall into four categories: V “Short-term benefits” including salaries, social security contributions, annual leave, employee profit-sharing, incentive plans, top-up contributions and bonuses payable in the 12 months after they are attributed are expensed in the period in which the corresponding services were rendered; V “Termination benefits” granted to employees upon the termination of their employment and prior to retirement. A provision is accrued for these benefits; V “Post-employment benefits” such as pensions, other supplementary retirement benefits applicable to the banking industry, end-of-career awards and other contractual benefits payable to retirees.
Natixis distinguishes between two types of post-employment benefi ts: V defined contribution plans, which mainly consist of the social security basic pension scheme and the supplementary schemes AGIRC and ARCO, under which an entity has no obligation to pay a specified benefit amount. Contributions paid under defined contribution plans are expensed in the corresponding period; V defined benefit plans under which Natixis has a legal or constructive obligation to pay a specified benefit amount are valued and funded.
FINANCIAL DATA5 Parent company fi nancial statements and notes A provision is set aside for defi ned benefi t plans based on an actuarial assessment of the benefi t obligation using the projected unit credit method. This method draws on demographic and fi nancial assumptions. The value of any plan assets is deducted from the obligation to determine the provision to be recognized on the balance sheet. This valuation is carried out on a regular basis by independent actuaries.
In accordance with the “corridor” method, Natixis does not recognize the portion of net cumulative actuarial gains and losses that is lower than the greater of (i) 10% of the present value of the defi ned benefi t obligation and (ii) 10% of the fair value of any plan assets at the end of the previous reporting period. The portion of actuarial gains and losses outside the 10% “corridor” is therefore recognized over the average remaining working lives of the employees participating in the relevant plan.
“Other long-term benefits” including long-service awards and deferred compensation payable in cash under Employee Retention and Performance Recognition Plans are valued using the same actuarial method as that applied to post-employment benefi ts under defi ned benefi t plans, except that actuarial gains and losses are not subject to the corridor method and past service costs are recognized directly as an expense.
Cash-settled plans indexed to the share price give rise to the recognition of a payroll expense that is measured taking account of the share price on the balance sheet date and the likelihood of satisfying performance/and or service requirements. Where a service requirement exists, the calculated expense is recognized on a straight-line basis over the vesting period, unless the payment takes place in the year of granting, in which cash the expense is recognized immediately on the income statement.
There was no provision set aside for expenses related to sharebased payment plans at December 31, 2012, as these plans will be settled through the issue of new shares.
Parent company fi nancial statements and notes between amounts resulting from the valuation of eurodenominated foreign exchange positions and amounts reported in equivalent euro denominated foreign exchange positions is reported on the income statement.
Due to the 5% increase in the corporate income tax, the tax expense recognized in respect of fi scal year 2012 comprises taxes payable in France at the rate of 36.10%, and at the local corporate tax rate applicable to foreign branches.
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 3 INTERBANK AND SIMILAR TRANSACTIONS
Securities held for investment 154 101 o/w accrued interest 0 o/w non-performing 0
o/w accrued interest 595 250 o/w non-performing 254 208 o/w write-downs of non-performing (155) (161)
Subordinated loans 982 995 o/w accrued interest 4 8 o/w non-performing o/w write-downs of non-performing
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 5
D) Investments with a book value less than or equal to €150,000 1,483,844.94
FINANCIAL DATA5 Parent company fi nancial statements and notes (amounts in euros) Number of shares Book value
CEP ILE DE FRANCE - formerly CEP IDF PARIS 11,578,685 779,486,059.00
CEP NORD FRANCE EUROPE - formerly PAS DE CALAIS 6,220,793 450,494,278.00
CEP LOIRE CENTRE - formerly VAL DE FRANCE ORLÉANAIS 3,822,199 281,406,091.00
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 9
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 10 DISCLOSURES CONCERNING SUBSIDIARIES AND INVESTMENTS
COFACE HOLDING 30 RUE PIERRE MENDES-FRANCE 75013 PARIS EUR784,207 EUR716,694 100.00%
CIE EUR GARANTIE CAUTION 128 RUE DE LA BOÉTIE 75008 PARIS EUR160,996 EUR168,626 100.00%
NATIXIS ALTERNATIVE ASSETS (NNA) 41, AVENUE DE LA LIBERTÉ L-1931 Luxembourg EUR58,769 EUR(36,217) 100.00%
NATIXIS CONSUMER FINANCE 30 AV PIERRE MENDES FRANCE 75013 PARIS EUR35,340 EUR318,373 100.00%
NATIXIS FACTOR 30 AV PIERRE MENDES FRANCE 75013 PARIS EUR19,916 EUR183,611 100.00%
NATIXIS FONCIÈRE 30 AV PIERRE MENDES FRANCE 75013 PARIS EUR685 EUR62,859 100.00%
NATIXIS FUNDING 30 AV PIERRE MENDES FRANCE 75013 PARIS EUR67,555 EUR(3,317) 100.00%
NATIXIS INTERÉPARGNE 30 AV PIERRE MENDES FRANCE 75013 PARIS EUR8,891 EUR18,577 100.00%
NATIXIS PAIEMENTS 30 AV PIERRE MENDES FRANCE 75013 PARIS EUR53,559 EUR48,393 100.00%
NATIXIS CORPORATE SOLUTIONS 12 Lower Leeson Street Dublin 2 Dublin EUR100,000 EUR1,087 100.00%
NATIXIS GLOBAL ASSET MANAGEMENT 30 RUE PIERRE MENDES FRANCE 75013 PARIS EUR156,344 EUR2,990,599 100.00%
(in millions of euros) End 2011 Acquisitions Disposals Others End 2012
INTERBANK AND SIMILAR TRANSACTIONS 157,853 140,790 * o/w repurchased securities: 49,013 47,493 o/w accrued interest 7 40
CUSTOMER TRANSACTIONS 85,480 64,866 * o/w repurchased securities: 38,546 31,549 o/w accrued interest 3 20
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 18 PROVISIONS FOR RISKS AND OTHER EXPENSES
Benefi ts vested over the period 8 3 26 37 1 6 2 42 51
Expected return on plan assets, gross (5) (1) (6) (6) (1) (7)
Plan amendments recognized over the period 4 4 2 3 5
Actuarial gains and losses on benefi t obligations 24 (6) 8 26 16 11 2 2 31
Actuarial gains and losses/return on plan assets (12) (1) (13) 3 1 4
Unrecognized actuarial gains and losses 39 8 15 62 37 15 7 59
Total net obligation at December 31 79 113 30 95 317 83 105 29 54 271
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 21 REGULATED PROVISIONS
The share capital is composed of 3,086,214,794 shares, each with a par value of €1.60. All shares confer the same rights on their holders, except for treasury shares which have no voting rights.
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 33 PROVISION FOR CREDIT LOSSES
NOTE 37 OFF-BALANCE SHEET - FOREIGN CURRENCY COMMITMENTS AND TRANSACTIONS COMMITMENTS
(in millions of euros) ≤ 1 month 1-3 months 3-6 months
Cash and balances with central banks 34,652 0 0 0 0 0 0 34,652
Shares and other variable-income securities 870 116 52 6 185 13,221 0 14,450
FINANCIAL DATA5 Parent company fi nancial statements and notes NOTE 39 STATUTORY AUDITORS’ FEES
Natixis hereby reports, in accordance with the abovementioned article, that no Natixis entity operates in a noncooperative state or territory.
Income before tax, depreciation, amortization and provisions (2,548,305,710.82) (1,664,174,176.79) 644,584,484.60 (72,975,180.54) 861,041,488.98
Income after tax, depreciation, amortization and provisions (5,053,779,558.57) (2,046,308,381.66) 284,641,699.57 873,436,574.80 907,172,429.97
Social security and other employee benefi ts 273,921,026.89 264,166,185.19 322,453,719.64 334,569,060.30 364,133,590.12
FINANCIAL DATA5 Statutory Auditors’ report on the company fi nancial statements 5.5 Statutory Auditors’ report on the company financial statements
In compliance with the assignment entrusted to us by your General Meeting, we hereby report to you, for the year ended December 31, 2012, on: V the audit of the accompanying financial statements of Natixis S.A.; V the justification of our assessments; V the specific verifications and information required by law.
In our opinion, the fi nancial statements give a true and fair view of the assets and liabilities and of the fi nancial position of the Company as at December 31, 2011 and of the results of its operations for the year then ended in accordance with French accounting principles.
As described in Note 1.10 to the company fi nancial statements, a guarantee mechanism with by BPCE has been in place since July 1, 2009 covering certain assets ring-fenced in the Workout Portfolio Management structure (GAPC). We reviewed the monitoring of this mechanism and the corresponding accounting treatment.
Natixis revises the valuation of investments in subsidiaries (Notes 1.2, 7 and 34 to the company fi nancial statements). We reviewed the methodology used to perform this work as well as the main assumptions and parameters.
In accordance with French law, we have verifi ed that the required information concerning the purchase of investments and controlling interests and the identity of the shareholders and holders of the voting rights has been properly disclosed in the management report.
FINANCIAL DATA5 Statutory Auditors’ special report on related party agreements and commitments 5.6 Statutory Auditors’ special report on related party agreements and commitments
General Shareholders’ Meeting to approve the fi nancial statements for the year ended December 31, 2012
In our capacity as the Company’s statutory auditors, we hereby submit our report on related party agreements and commitments.
We are required to inform you, on the basis of the information provided to us, of the key features and terms and conditions of the contractual agreements and commitments indicated to us or that we may have identifi ed in the performance of our engagement. It is not our role to comment as to whether they are benefi cial or to ascertain the existence of any other agreements and commitments. It is your responsibility, in accordance with Article R.225-31 of the French Commercial Code, to assess the benefi ts resulting from these agreements and commitments prior to their approval.
We performed the procedures we considered necessary to comply with the professional code of the Compagnie Nationale des Commissaires aux Comptes (France’s national association of statutory auditors) relating to this assignment. Our work consisted of verifying that the information provided to us is consistent with the underlying documents from which it was extracted.
1.1. Agreements and commitments authorized during the past fi nancial year
We hereby inform you that we have not been advised of any agreements or any commitments authorized during the year and submitted for approval by the General Shareholders’ Meeting in accordance with Article L.225-38 of the French Code of Commerce.
We have been informed of the following agreements and commitments authorized since the year end, which were subject to the prior approval of your Board of Directors.
1.2.1 “3A2” DEBT ISSUANCE PROGRAM IN THE UNITED STATES IMPLEMENTED BY BPCE
On February 17, 2013, the Board of Directors authorized the guarantee given by Natixis NY Branch to BPCE, which was granted in Natixis’ corporate interest provided BPCE relends all or part of the US dollar fi nancing raised to Natixis.
Statutory Auditors’ special report on related party agreements and commitments 1.2.2 AMENDMENT NO. 1 TO THE P3CI SUBSCRIPTION AGREEMENT BETWEEN NATIXIS AND BPCE
This fi nancial guarantee took the legal form of risk participation to cover Natixis Real Estate Capital Inc., in proportion to a share of a portfolio of assets held by Natixis Real Estate Capital Inc. at June 30, 2009, following the clear failure to pay sums due in relation to the assets on the contractually agreed payment date.
2.1.2 TRIPARTITE AGREEMENTS BETWEEN NATIXIS, SOCIÉTÉ DE FINANCEMENT DE L’ECONOMIE FRANÇAISE (SFEF) AND, RESPECTIVELY, BFBP AND CNCE
FINANCIAL DATA5 Statutory Auditors’ special report on related party agreements and commitments 2.1.3 AGREEMENT BETWEEN NATIXIS
AND BPCE REGARDING THE PURCHASE OF SECURITIES AS WELL AS THE ISSUANCE AND SUBSCRIPTION OF UNDATED DEEPLY SUBORDINATED NOTES
Expenses recognized by Natixis in respect of this agreement amounted to €1,904,129.32 for the fi scal year ended December 31, 2012.
2.1.4 PRELIMINARY AGREEMENT BETWEEN NATIXIS AND BPCE REGARDING THE GUARANTEE MECHANISM COVERING CERTAIN GAPC ASSETS AND THE AGREEMENTS PERTAINING TO THE GUARANTEE
On August 5, 2010, the Board of Directors approved amendment No. 1 to the fi nancial guarantee of November 12, 2009 (risk participation) between Natixis and BPCE.
The premium pertaining to Natixis was spread out and reported on the income statement in the amount of €21,798,749.80 for the fi scal year ended December 31, 2012. The deferment of the premium pertaining to the “Miroirs” guarantees with the subsidiaries had a neutral impact on Natixis’ income statement.
The change in fair value of the total return swaps led to income of €83,898,755.22 for the fi scal year ended December 31, 2012 in respect of Natixis’ activities and an expense of $224,415,385.92 in respect of the subsidiaries’ activities. The latter expense was neutralized in Natixis’ accounts by recognizing an offsetting expense vis-à-vis the subsidiaries.
As the premium was recognized immediately in the balance sheet, its revaluation led to the recording of income of €75,484,271.58 for the 2012 fi scal year.
Income recognized for the activation of guarantees totaled €453,737.85 in the 2012 fi scal year.
2.1.6 CREDIT AND FINANCIAL GUARANTEE MASTER AGREEMENTS BETWEEN NATIXIS AND NATIXIS LEASE
The fi nancial guarantee will remain in force until the date on which all guaranteed liabilities with respect to the Lender have been paid, reimbursed or satisfi ed in full.
Statutory Auditors’ special report on related party agreements and commitments 2.1.7 NATIXIS’ ROLE AS ARRANGER IN THE €25,000,000,000 COVERED BOND ISSUE PROGRAM LAUNCHED BY BPCB UPDATED IN 2009
On February 22, 2011, the Board of Directors approved an agreement relating to a performance-based severance payment in the event of the termination of the Chief Executive Offi cer, in favor of Mr. Laurent Mignon, capping it at one year of maximum potential compensation (fi xed and variable).
2.1.9 AUTHORIZATION OF A RELATED PARTY AGREEMENT BETWEEN NATIXIS AND BPCE ON THE CHAPEL DEAL
Expenses recognized by Natixis in respect of this agreement totaled €18,543,908.84 for the fi scal year ended December 31, 2012.
FINANCIAL DATA5 Statutory Auditors’ special report on related party agreements and commitments Simultaneously, plans for the buyback or early redemption by Natixis of six lines of deeply subordinated notes held by BPCE at their nominal value, i.e., $577,250,000 and €1,926,806,000, plus interest accrued at the date of said buyback or redemption.
2.1.12 NATIXIS’ ROLE AS ARRANGER OF AN ISSUE OF €25,000,000,000 IN COVERED BONDS BY THE CAISSE D’EPARGNE GROUP
To enable Natixis to act as Collateral Agent for the €25 billion issue of covered bonds by the Caisse d’Epargne group, the Supervisory Board on March 5, 2008, approved the following agreements: the Receivables Pledge Agreement, the Issuer Accounts Pledge Agreement, the Asset Monitor Agreement, and the Master Defi nitions and Constructions Agreement.
On December 18, 2008, the Supervisory Board: V adopted regulations for the closed collective pension scheme insofar as those regulations define the potential rights of Members of the Executive Board eligible to benefit from the scheme, provided that the Members were appointed to the Board between November 27, 2006 and December 15, 2008. It also closed the scheme to any new Members of the Executive Board (the regulations exclude any compensation resulting from the termination of professional relations with Members of the Executive Board); V regarding the collective scheme, agreed to continue offering in 2009 the provident insurance scheme available to the Chief Executive Officers of the Banques Populaires banks to Members of Natixis’ Executive Board, it being noted that the scheme adapts the guarantees applicable to all former Natixis Banques Populaires personnel to the specific situation of each Member; V regarding severance pay and retirement compensation, approved the decision not to apply the provisions regarding early termination or retirement compensation arrangements for the Chief Executive Officers of the Banques Populaires banks to Natixis’ corporate officers appointed after May 1, 2005.
2.1.15 “CLICK’N TRADE” SERVICE AND PARTNERSHIP AGREEMENT BETWEEN IXIS CIB, CNCE AND BANQUE PALATINE
On June 6, 2007, the Supervisory Board approved a service agreement between Ixis CIB, CNCE and Banque Palatine pertaining to CNCE’s transfer to Banque Palatine of the operating and technical management of the “Click’n Trade” website, with CNCE continuing to own the website and remaining the counterparty in forward and cash currency transactions vis-à-vis Ixis CIB.
Income recognized by Natixis in respect of this agreement totaled €158,500.00 for the fi scal year ended December 31, 2012.
2.1.16 LETTERS OF JOINT AND SEVERAL GUARANTEES AND COMMITMENTS CANCELED OR COMPLETED
From 1996 to 2004, Ixis CIB (previously called CDC Marchés, then CDC Ixis Capital Markets) signed a number of letters of joint and several guarantees and commitments with its various successive shareholders, including Caisse des Dépôts (CDC), CDC Finance - CDC Ixis (CNCE took over the latter’s rights and obligations following the merger-absorption of December 31, 2004) and CNCE.
The expenses recognized by Natixis in respect of these agreements came to €3,594,964.60 for the fi scal year ended December 31, 2012.
2.1.18 DE FACTO ASSOCIATION AGREEMENT BETWEEN CDC, CNCE (THE SUCCESSOR IN TITLE TO CDC IXIS) AND IXIS CIB (FORMERLY CDC IXIS CAPITAL MARKETS)
A joint stock company (société anonyme) with a Board of Directors with share capital of €4,943 ,850 ,243 .2 0
Article 1 – Legal form – Name – Registered offi ce and duration
The Board may also be convened by the Chairman at the request of at least one-third of the directors, or at the request of the Chief Executive Offi cer, on the basis of a specifi c agenda. The Chairman is bound by the requests made in this manner.
Article 12 – Powers of the Board of Directors 12.1 The Board of Directors defi nes the guidelines for the Company’s activities and oversees their implementation. Within the limits of the corporate purpose and the powers expressly granted by law or these bylaws to General Shareholders’ Meetings, the Board concerns itself with any matter relating to good business practice and governs the business of the Company through its deliberations. The Board of Directors performs the controls and checks it deems appropriate.
Directors’ fees may be allocated to the Board of Directors by the General Shareholders’ Meeting. The Board distributes them freely among its members.
The choice between these two Executive Management procedures is made by the Board of Directors which may take valid decisions only if: V the agenda containing this item has been sent out at least 15 days in advance of the Board Meeting; V at least two-thirds of the directors are present or represented at the meeting.
By way of exception, the fi rst Board Meeting will be held immediately after the Combined General Shareholders’ Meeting of April 30, 2009, and the choice of the Executive Management procedure will be made with an ordinary quorum (at least one-half of the directors present or represented).
The Chief Executive Offi cer may delegate a portion of his powers to any corporate offi cer of his choosing, with or without the option of substituting one for another.
When a Deputy Chief Executive Offi cer is a director, his term in offi ce shall not exceed his term on the Board.
General Shareholders’ Meetings are convened by the Board of Directors or, failing this, under the conditions of Article L.225103 of the French Commercial Code. Notices are made under the conditions determined by the regulations in force.
Shareholders’ Meetings include all the shareholders whose securities have no outstanding payments due.
In accordance with Article R.225-85 of the French Commercial Code, the right to take part in the General Shareholders’ Meeting is subject to the registration of the shares in the accounts in the name of the shareholder or broker registered on his behalf on the 3rd business day preceding the General Shareholders’ Meeting at twelve midnight, Paris time, or in the accounts of registered shares kept by the Company, or in the accounts of bearer shares kept by the authorized brokers.
The share capital amounted to €4,937,943,670.40 at December 31, 2012, divided into 3,086,214,794 fully paid-up shares of €1.60 each.
None of the capital increase authorizations granted to the Board of Directors by the Combined General Shareholders’ Meeting of May 26, 2011 had been used as of December 31, 2012 .
In order to set the issue price in the event of an issue with cancellation of shareholders’
preferential subscription rights, subject to a limit of 10% of the capital 10% of the share capital (a)
In order to carry out a capital increase, through the issue – with preferential subscription rights maintained – of shares and/or securities providing access to the capital of the Company and/or the issue of securities entitling holders to the allotment of debt securities €3 bn 26 months None None
In order to carry out a capital increase through the issue – without preferential subscription rights maintained – of shares and/or securities giving access to the capital of the Company and/or the issue of securities entitling holders to the allotment of debt securities €3 bn (b) 26 months None None
In order to carry out a capital increase through the issue - without preferential subscription rights maintained - of shares and/or securities giving access to the capital of the Company through an offer as set out in Article L.411-2 (II) of the French Monetary and Financial Code €3 bn (b) 26 months None None
In order to increase the share capital by issuing shares or securities giving access to capital in the
Company as remuneration for contributions in kind involving securities of unlisted companies 10% of the share capital (b) 26 months None None
In order to increase the share capital via the incorporation of premiums, reserves, retained earnings or other items €3 bn (b) 26 months None None
In order to increase the number of securities to be issued in the event of capital increases with or without preferential subscription rights 15% of initial issue(b) 26 months None None
No stock options were granted in fi scal years 2009, 2010, 2011 nor 2012.
SUMMARY OF STOCK OPTION PLANS GRANTED TO NATIXIS CORPORATE OFFICERS AT DECEMBER 31, 2012
LEGAL INFORMATION6 Distribution of share capital and voting rights 6.3 Distribution of share capital and voting rights 6.3.1 DISTRIBUTION OF SHARE CAPITAL AT DECEMBER 31, 2012
Board members, including natural and legal persons, owned 72.17 % of Natixis’ capital at December 31, 2012 (almost all of this being owned by BPCE).
The table below shows the number and percentage of shares held as treasury shares at December 31, 2011 and December 31, 2012.
LEGAL INFORMATION6 Information from Article L.225-100-3 of the French Commercial Code 6.4 Information from Article L.225-100-3 of the French Commercial Code
Contracts relating to the Cooperative Investment Certifi cates (CCIs) provide that, i n the event that BPCE should no longer control Natixis following a takeover , Banques Populaires,
Caisses d’Epargne or BPCE, depending on the case, would have the right to buy back Natixis’ 20% stake in Banques Populaires and Caisses d’Epargne ( see section [1.4.5] “Major contracts”).
6.5 Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013(1)
Nineteen resolutions will be submitted to the shareholders at the Combined General Shareholders’ Meeting to be held at 3 p.m. on May 21, 2013 at the CNIT Paris La Défense, 2 place de la Défense – 92053 Paris La Défense Cedex.
APPROVAL OF THE FINANCIAL STATEMENTS FOR FISCAL YEAR 2012 (RESOLUTIONS ONE AND TWO)
For individual benefi ciaries who are residents for tax purposes in France, this dividend will be taken into account automatically by law to determine total gross income subject to the progressive income tax scale, and will be eligible for an allowance of 40% of the gross amount received (Article 158-32 of the French General Tax Code).
* Terms followed by an asterisk are subject to a defi nition in the index below.
Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013(1)
At the time of printing this registration document, the name of the independent director whose appointment will be submitted to shareholders for voting has not yet been approved. Please refer to the Notice of Meeting for the Natixis General Shareholders’ Meeting, which will be available on the Natixis website (www.natixis.com).
The maximum share price cannot exceed fi ve (5) euros per share.
Thus, resolutions Ten and Eleven seek to grant the Board of Directors the authority to decide to increase the share capital, with preferential subscription rights* and with waiving of preferential subscription rights* respectively.
* Terms followed by an asterisk are defi ned in the index below.
LEGAL INFORMATION6 Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013(1) “Preferential subscription rights” are the rights that each shareholder has, for a period of at least fi ve trading days after the opening of the subscription period, to subscribe for a quantity of new shares proportionate to his/her existing interest in the capital. These rights are transferable during the subscription period.
If the Board of Directors were to use one of the delegations of authority granted by your Shareholders’ Meeting, it would prepare, where appropriate and in accordance with laws and regulations, an additional report setting out the fi nal conditions of the transaction and describing its impact on shareholders and holders of securities granting entitlement to the capital, in particular in terms of their share of shareholders’ equity. This report as well as, where appropriate, the Statutory Auditors report will be made available to the the shareh olders no later than fi fteen days after the Board makes its decision and then made known to them during the next Shareholders’ Meeting.
Resolution Eighteen asks the Extraordinary Shareholders’ Meeting to grant the Board of Directors the authorization to award free shares to employees of Natixis and related companies or groups as well as to corporate offi cers limited to 5% of the share capital and for a period of 38 months from this Extraordinary Shareholders’ Meeting.
This award would round out the compensation and employee retention packages that already exist within the Company and link the interests of benefi ciaries and shareholders.
Finally, resolution Nineteen relates to the granting of the powers required to complete the legal formalities and publications relating to ordinary and extraordinary business.
LEGAL INFORMATION6 Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013
No. Subject Duration Reasons for possible uses of the delegated power 8 Authorization to trade in shares of the Company 18 months Possible objectives for share buybacks by your Company: V Implementing option plans to buy shares of the Company or similar plans V Awarding or transferring shares to employees V Awarding free shares to employees or corporate offi cers V Generally, honoring obligations related to stock option programs or other share allocations to employees or corporate offi cers of the issuer or a related company
V Canceling all or a portion of the securities bought back V Tendering shares in connection with acquisitions, mergers, spin-offs or asset transfers V Promoting the share in the secondary market or the liquidity of the Company’s share through an investment services provider in connection with a liquidity contract that meets the terms of the compliance charter recognized by the AMF
V Any other goal authorized or that may be authorized by law or regulations in effect 9 Cancellation of treasury shares 26 months V May be used to reduce the capital of your Company 10 Issue of shares and/or securities giving access to the Company’s capital* and/or securities granting a right to debt instruments with PSRs*
26 months V May be used by your Board of Directors to decide on these issues, on one or more occasions 11 Issue of shares and/or securities giving access to the Company’s capital* and/or securities granting a right to debt instruments with PSRs* waived 26 months V May be used by your Board of Directors to decide on these issues and proceed with these allocations to shareholders with waiving of preferential subscription rights , in France or in foreign countries, by public offer
V Maximum purchase price of €5 per share (adjustable particularly in the case of a reverse split)
V The Board of Directors will ensure that these buybacks are executed in accordance with prudential requirements, such as those established by regulation and by the Autorité de Contrôle Prudentiel (ACP – French Prudential Supervisory Authority).
V Limited to 10% of the capital in a 24-month period
V Three (3) billion euros V Ceiling included in the Overall Ceiling* V Ceiling excludes any additional amounts issued in order to preserve the rights of holders of securities giving access to the capital*
26 months V May be used to relaunch a capital increase at the same price as that set for the initial transaction in the event of over-subscription (“Greenshoe” clause)
17 Issue of shares or securities giving access to share capital* reserved for members of an employee savings plan with waiving of PSRs 26 months V May be used to develop employee share ownership, in France or in foreign countries 18 Awarding of free shares to employees or corporate offi cers of Natixis and related companies 38 months V Authorization granted to the Board of Directors to issue free shares to employees of Natixis and related companies or groups as well as to corporate offi cers * Terms followed by an asterisk are defi ned in the index below.
V 10% of the capital, adjusted for any transactions on the share capital subsequent to this Shareholders’ Meeting
V Included in the ceiling set out in resolution Eleven and in the Overall Ceiling*
V Ceiling excludes any additional amounts issued in order to preserve the rights of holders of securities giving access to the capital*
V At the same price as that set for the initial transaction
V Two-hundred forty-six (246) million euros V Ceiling included in the Overall Ceiling*
V Issue of free shares limited to 5% of the Company’s capital at the date on which the Board of Directors decided to allocate them
LEGAL INFORMATION6 Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013 Independent director/ Independent member of the Board of Directors
Pursuant to Articles L.225-38 et seq. of the French Commercial Code certain agreements are subject to prior authorization by the Board of Directors. The Statutory Auditors prepare a special report on these agreements which is presented to the General Shareholders’ Meeting for its approval (“Related Party Agreements Procedure”). These agreements are those, either directly or through an intermediary, between the Company and the following persons: V its Chief Executive Offi cer; V one of its Deputy Chief Executive Offi cers; V one of its directors, one of its shareholders holding a fraction of the voting rights greater than 10% or, if it is a corporate shareholder, the company that controls it within the meaning of Article L.233-3 of the French Commercial Code.
In return for the waiving of PSRs*, your Board of Directors may introduce a priority subscription right, which may be reducible*. When it has been established, this right allows shareholders, as is the case with PSRs*, to subscribe to the proposed issue proportionally to the number of old shares that they hold. However, unlike with PSRs*, this priority subscription right may only be exercised during a priority period, which is currently set at a minimum of three trading days shorter than the period set for PSRs, and is non-negotiable. This priority period will not be applied to all issues: in the same way as for PSRs*, it could be preferable, even necessary, not to apply this priority period in order to issue common shares under the best conditions, for example, when speed is essential to the success of an issue or when an issue is made on foreign fi nancial markets.
Subsidiaries Companies in which your Company owns, either directly or indirectly, more than 50% of the share capital.
Overall Ceiling Total limit for capital increases carried out pursuant to resolutions Ten through Eighteen, equal to three (3) billion euros .
V For securities giving access to the share capital*: price set in such a way that, for all shares issued as securities giving access to the share capital*, the total amount received by the Company in exchange for these securities giving access to the share capital* is at least equal to the regulatory minimum price per share as determined in the preceding point (as it was on the date on which the securities giving access to the share capital* were issued).
Reference Price Average of the Company’s opening share prices on the Euronext Paris regulated exchange during the twenty trading days preceding the decision of your Board of Directors to determine the opening date for subscriptions by members of the employee savings plan, with a maximum discount of 20%.
Your Board of Directors may, in certain cases, introduce a reducible subscription right to shareholders. In the event of its introduction, if the irreducible subscriptions (i.e. through the exercising of preferential subscription rights) were insuffi cient, the unsubscribed share capital will be granted to shareholders with reducible rights to a number of shares that is higher than those they subscribed for as of right, proportionately to the rights which they enjoy and in any event within the limit of their requests.
Features of securities granting a right to debt securities, conditions for the issuing of the shares to which the securities issued entitle holders and dates on which these rights may be exercised: Resolutions Ten, Eleven and Thirteen submitted for the approval of this Shareholders’ Meeting would authorize your Board of Directors to issue securities granting a right to debt securities, such as bonds with share warrants attached or bonds convertible into or redeemable for a different debt security, or shares with a bond subscription warrant attached. Where applicable, these securities may carry warrants providing entitlement to the allotment, purchase or subscription of bonds or other debt securities. If these resolutions were adopted, your Board of Directors would be able to determine the nature and characteristics of the securities granting a right to debt securities, in particular their interest rate, maturity and the possibility of reducing or increasing the par value of the securities. Where applicable, your Board of Directors may, in particular, provide that at the issue date or during the life of the securities in question: V these securities carry warrants providing entitlement, either during set periods or at set dates, to the allotment, purchase or subscription of bonds or other debt securities; or
V these securities take the form of complex bonds within the meaning of the stock market authorities (e.g., as a result of their terms of redemption or remuneration or of other rights such as indexation or options possibilities); or
V the securities are subject to early redemption, including through delivery of assets of the Company or amortization; or
RESOLUTIONS OF THE COMBINED GENERAL SHAREHOLDERS’ MEETING OF MAY 21, 2013
V Report of the Board of Directors and of the Statutory Auditors on the Company’s activities during the year ended December 31, 2012; V Report of the Chairman of the Board of Directors; V Approval of the 2012 parent company financial statements; V Approval of the 2012 consolidated financial statements; V Appropriation of earnings; V Statutory Auditors’ special report and approval of the agreements and commitments covered by Articles L.225-38 et seq. of the French Commercial Code; V Approval of the co-opting of Thierry Cahn as Director; V Approval of the co-opting of Pierre Valentin as Director; V Appointment of a director; V Trading by the Company in its own shares: powers delegated to the Board of Directors.
The shareholders hereby resolve to appropriate the distributable earnings as follows: To the legal reserve (5% of the earnings for the fi scal year) €45,358,621.50
(a) The total distribution amount mentioned in the table above is calculated on the basis of the number of shares comprising the capital as of December 31, 2012 and may vary depending on changes in the number of treasury shares held and options exercised from January 1st, 2013 to the date the dividend is detached.
The dividend is set at €0.10 (10 cents) per share for each of the 3,086,214,794 shares entitling holders to dividends. For individual benefi ciaries who are residents for tax purposes in France, this dividend will be taken into account automatically by law to determine total gross income subject to the progressive income tax scale, and will be eligible for an allowance of 40% of the gross amount received (Article 158-3-2 of the French General Tax Code).
In accordance with legal provisions, the shareholders hereby note that for the three fi scal years prior to fi scal year 2012, the following dividends were distributed: Fiscal year Number of shares on which a dividend was paid Dividend per share
All the amounts mentioned in the table above in the “dividend per share” column are eligible for the 40% allowance.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, having reviewed the special report of the Statutory Auditors on the agreements and commitments subject to the provisions of Articles L.225-38 and L.225-40 to L.225-42 of the French Commercial Code, hereby approves all provisions of this report and the new agreements mentioned therein, previously authorized by the Board of Directors during the fi scal year ended December 31, 2012 and after this date up until this Shareholders’ Meeting.
Resolution six (Approval of the co-opting of Pierre Valentin as Director)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for ordinary business, approves the co-opting on January 28, 2013 by the Board of Directors of Pierre Valentin as Director, to replace Olivier Klein, who resigned, for the remainder of the term of offi ce of the latter, i.e. until the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending December 31, 2014.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority for ordinary business, hereby appoints XX as Director, replacing Vincent Bolloré, who resigned, for a term of six (6) years ending at the close of the General Shareholders’ Meeting called to approve the fi nancial statements for the fi scal year ending December 31, 2018.
R award or transfer shares to employees in connection with their share of Company profi ts or implement any Company or group employee savings plan (or similar plan) under the conditions provided for by law, in particular Articles L.33321 et seq. of the French Labor Code; or
R remit shares in connection with the exercise of rights attached to securities convertible into the Company’s shares, by way of redemption, ordinary conversion, exchange, presentation of a warrant or any other manner; or
R cancel all or a portion of the shares bought back accordingly; or
4) resolves that the aggregate amount allocated to the share buyback program authorized above may not exceed €1,543,107,397; 5) fully empowers the Board of Directors, with the right to sub-delegate said power under the conditions established by law, to decide upon and implement this authorization, to specify its final terms and conditions if necessary and to determine its procedures, in order to carry out the buyback program and, in particular, to place any stock market order, enter into any agreement, allocate or reallocate the shares acquired to the objectives sought under the applicable legal and regulatory provisions, establish the terms and conditions according to which the rights of holders of securities or options will be protected, if appropriate, in accordance with legal, regulatory or contractual provisions, make any filings with the AMF and any other competent authorities, and complete all other formalities and, in general, do whatever is necessary.
The Board of Directors will ensure that these buybacks are executed in accordance with prudential requirements, such as those established by regulation and by the Autorité de Contrôle Prudentiel (ACP – French Prudential Supervisory Authority) .
This authorization is granted for a period of eighteen (18) months from this meeting. It voids, from this day, as applicable, any unused part of any prior delegated power given to the Board of Directors for the purpose of trading in the Company’s shares, particularly that given by the shareholders in the General Shareholders’ Meeting of May 29, 2012 in resolution Ten.
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for extraordinary business, having reviewed the Board of Directors’ report and the special report of the Statutory Auditors, hereby authorizes the Board of Directors to reduce share capital, on one or more occasions, in the proportions and at the time of its choosing, by canceling any number of treasury shares, up to the maximum permitted by law, and in accordance with the provisions of Articles L.225-209 et seq. and Article L.225-213 of the French Commercial Code.
R allot all or part of the shares or, in the case of securities giving access to the share capital, said securities the issue of which has been decided on but not yet subscribed,
LEGAL INFORMATION6 Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013 established by reference to more than one currency, by issuing shares (with the exclusion of preference shares) or securities giving access to the capital of the Company (in new or existing shares), issued for valuable consideration or free of consideration, governed by Articles L.228-91 et seq. of the French Commercial Code, it being stipulated that subscription for such shares or other securities may be in cash, by offset of debt, or by capitalization of reserves, retained earnings or premiums or, under the same conditions, to decide to issue securities granting a right to debt securities governed by Articles L.228-91 et seq. of the French Commercial Code. These securities may in particular be issued as consideration for securities contributed to the Company in connection with a public exchange offer carried out in France or foreign countries under local rules (for example in connection with a reverse merger) relating to securities meeting the conditions set out in Article L.225-148 of the French Commercial Code; 2) approves the delegation of authority to be granted to the Board of Directors, which it may in turn delegate in accordance with the provisions of law, to issue shares or securities giving access to the Company’s capital to be issued further to the issue, by companies in which the Company either directly or indirectly owns more than half of the capital, of securities giving access to the capital of the Company; This decision unconditionally and expressly waives, in favor of the holders of the securities that may be issued by companies belonging to the Group , the shareholders’ preferential subscription rights in respect of the shares or securities giving access to the capital of the Company to which said securities will give entitlement; 3) approves the delegation of authority to be granted to the Board of Directors, which it may in turn delegate in accordance with the provisions of law, to decide to issue securities giving access to the capital in companies in which it holds, either directly or indirectly, more than half of the share capital; 4) decides to set the following limits to capital increases authorized in the event of use by the Board of Directors of this delegation: R the total par value of capital increases which may be effected pursuant to this delegation of powers, immediately or in the future, may not exceed three (3) billion euros , with this amount subject to the overall limit set out in paragraph three of resolution Ten of this Shareholders’ Meeting or, where applicable, to the amount of an overall limit stipulated by any similar resolution that may supersede said resolution during the period of validity of this delegation; R where applicable, the par value of shares that may be issued, in the event of new fi nancial transactions, to maintain the rights of bearers of securities giving access to the share capital, will be added to the limits set above; 5) establishes the effective period of the authorization provided in this resolution at twenty-six (26) months from this Shareholders’ Meeting; 6) decides to waive preferential subscription rights to the securities that are the subject of this resolution, allowing the Board of Directors discretion, under the terms of Article L.225-135, paragraph 2 of the French Commercial Code, to grant to the shareholders, for a period and on terms to be set by the Board of Directors in compliance with the applicable law and regulations and for some or all of any issue, a priority subscription period which does not constitute a negotiable right and which must be exercised in proportion to the quantity of shares owned by each shareholder and may be supplemented by a reducible application to subscribe for shares, it being stipulated that securities not subscribed for in this way will be the subject of a public placement in France or in foreign countries; 7) recognizes that if the subscriptions, including, where applicable, those of shareholders, do not absorb the entire issue, the Board of Directors may limit the issue to the amount of subscriptions received providing that this amount reaches at least three quarters of the issue decided upon; 8) recognizes that this delegation of authority unconditionally and expressly waives, in favor of the holders of the securities to be issued giving access to the Company’s capital, the shareholders’ preferential subscription rights in respect of the shares to which said securities will give entitlement; 9) recognizes that, pursuant to Article L.225-136 1, paragraph 1 of the French Commercial Code: R the issue price of shares issued directly will be at least equal to the minimum stipulated by the applicable regulations on the date of the issue (currently, the average weighted market price during the three trading days on the Euronext Paris regulated exchange prior to the date on which the subscription price for the capital increase is determined less, where necessary, a maximum discount of 5%), after, where applicable, any corrections to this average in the event of a difference in the effective dates; R the issue price of securities giving access to the share capital and the number of shares to which the conversion, redemption or other transformation of each such security giving access to the share capital may give rise will be such that the amount immediately received by the Company together with any amount it may later receive is, for each share issued as a consequence of the issue of these securities, at least equal to the minimum subscription price as provided for in the previous paragraph;
Purpose and draft resolutions submitted to the Combined Shareholders’ Meeting of May 21, 2013 10) decides that the Board of Directors will have all necessary powers, which it may in turn delegate in accordance with the provisions of law, to put this delegation of authority into effect, and in particular to: R decide on a capital increase and determine the securities to be issued; R decide on the amount of the capital increase, the issue price as well as the amount of any premium that may be required on issuance; R set the dates and terms of the capital increase, the nature, amount and characteristics of the securities to be created; additionally, in the case of bonds or other debt securities (including securities granting a right to debt securities set out in Article L.228-91 of the French Commercial Code), to decide whether they should be subordinated or not (and, if applicable, their level of subordination, in accordance with the provisions of Article L.228-97 of the French Commercial Code), set their interest rates (fi xed or variable rate of interest, zero coupon or indexed) and provide for obligatory or optional cases for the suspension or non-payment of interests, fi x their maturity (fi xed-term or perpetual securities), the possibility of reducing or increasing the par value of the securities and the other terms of their issue (including the granting of guarantees or security interests) and amortization (including redemption by delivery of assets of the Company); where applicable, these securities may carry warrants providing entitlement to the allotment, purchase or subscription of bonds or other debt securities, or provide for an option for the Company to issue debt securities (fungible or non-fungible) as a consideration for interest the payment of which may have been suspended by the Company, or take the form of complex bonds within the meaning of the stock market authorities (e.g., as a result of their terms of redemption or remuneration or of other rights such as indexation or options possibilities); amend, during the term of the securities concerned, the terms referred to above, in compliance with applicable formalities; R determine the procedure for paying up the shares or the securities giving access to the share capital to be issued immediately or in the future; R set terms for the exercise of rights (rights to conversion, exchange or redemption as the case may be, including by delivery of Company assets such as treasury shares or securities already issued by the Company) attached to the shares or securities giving access to the share capital and, in particular, set the date, which may be retrospective, from which the new shares will rank for dividend, and all other terms and conditions for the completion of the capital increase; R set terms under which the Company may buy back or exchange on the market, at any time or during specifi c time periods, the securities issued or to be issued immediately or in the future, with the view to canceling such securities or not, taking into account the applicable legal provisions; R allow for the option of suspending the exercise of the rights attached to securities issued in conformity with the relevant laws and regulations; R in the event of an issue of securities as consideration for securities contributed in connection with a public offer including an exchange component, establish a list of the securities contributed in exchange, establish the conditions for the issue, the exchange ratio as well as, where applicable, the amount of the cash adjustment to be paid without triggering the terms for setting the issue price set out in paragraph nine of this resolution and determine the terms and conditions of the issue whether in connection with a public exchange offer, an alternative takeover bid or tender offer or a public offer covering the acquisition or exchange of the relevant securities against settlement in securities or cash, or a principal takeover bid or tender offer combined with a subsidiary tender offer or takeover bid, or any other form of public offer in compliance with the applicable law and regulations of said public offer; R at its sole discretion, charge expenses relating to capital increases to the premiums on these transactions and drawing from the same amounts the necessary sums for the legal reserve; R make all adjustments as may be required as a result of changes in the capital of the Company, in particular changes in the par value of shares, capital increases by capitalization of reserves, free share allocations, splitting or reverse-splitting of shares, distribution of reserves or of any other assets, redemption of capital, or any other transaction affecting the equity or share capital (including in the case of a public tender offer and/or in the event of a change of control), and set the other terms on which any rights of holders of securities giving access to the share capital are to be preserved; R duly record the completion of each capital increase and modify the bylaws accordingly; R in general, enter into any agreement, in particular, to successfully complete the proposed issues of shares or securities, take all measures and carry out all formalities appropriate for the issue, listing and fi nancial servicing of the shares or securities issued pursuant to this delegation of authority and for the exercise of the rights attached thereto; 11) recognizes that this delegation of authority voids, from this day, as applicable, any unused part of any prior delegated power for the same purpose, i.e. all delegated powers to increase capital through a public offer with waiving of preferential subscription rights, covering the securities and transactions mentioned in this resolution, in particular the delegation of authority granted by the Combined General Shareholders’ Meeting on May 26, 2011 in resolution F ourteen;
Resolution twelve (Determine the issue price of the shares, within the limit of 10% of the share capital per year, as part of a capital increase with waiving of preferential subscription rights)
The General Shareholders’ Meeting, deliberating in accordance with the quorum and majority requirements for extraordinary business, having reviewed the Board of Directors report and the special report of the Statutory Auditors, in accordance with the provisions of Article L.225-136 1, paragraph 2 of the French Commercial Code, and up to 10% of the share capital per year (it being specifi ed that such 10% limit is set, at any time, based on a share capital fi gure adjusted to refl ect transactions affecting the share capital subsequent to this Shareholders’ Meeting), authorizes the Board of Directors, which it may in turn delegate in accordance with the provisions of law, to set the issue price as follows: With regards to securities which will equate with Company shares admitted for trading on a regulated market, the issue price may not be lower than the average of the last three trading days before the determination of the issue price, less a possible maximum discount of 15%.