NATIXIS - 2018 Registration document and annual financial report

FINANCIAL DATA Consolidated financial statements and notes

Distinction between debt and equity 6.16 In accordance with IAS 32, issued financial instruments are classified as debt or equity depending on whether or not they incorporate a contractual obligation to deliver cash to the holder. deeply subordinated notes and preference shares are classified a in equity in light of the 2009 renegotiation of a clause making the payment of interest non-optional in the event of positive consolidated income and which has since become discretionary; the change over the fiscal year is presented in Note 6.17 a “Changes in subordinated debt over the period”, and in Note 13.3 “Capital management”; however, if an instrument is considered equity: a its compensation is treated as a dividend and therefore j affects equity, as do the taxes related to this compensation, if issued in foreign currencies, it is fixed at its historical value j resulting from converting it to euros on the date it was initially classified under equity; the share of third party investors in the net assets of dedicated a mutual funds included in Natixis’ consolidation scope comprises a financial liability recorded on the balance sheet under “Financial liabilities at fair value through profit or 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 or loss” in the consolidated income statement; the units held by third party investors in dated funds, which are a 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 consolidated 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. Stock options offered to employees under the Employee Savings Plan, with a discount compared with the average market price for a given period (called the reference price), are encumbered with a lock-up period of five years. The advantage granted is measured as the difference between the fair value of the acquired share, taking into account the lock-up condition and the purchase price paid by the employee on the subscription date, multiplied by the number of shares subscribed. The lock-up valuation method is based on the cost of a two-step strategy consisting of a five-year forward sale of the locked-up shares and purchasing the same number of shares in cash, by financing the purchase with a loan ultimately repayable at the end of the five years with the income from the forward sale. The loan interest rate is that which would have been granted to a market player seeking a non-affected cash loan repayable in five years with an average risk profile. Share-based payments 6.17 Capital increases reserved for employees

The main assumptions applied for valuing the advantages related to capital increases reserved for employees are provided in Note 12.2.4.

Share-based employee retention and performance recognition plans

The variable compensation policy is in keeping with the regulatory framework, including the European regulation CRD IV. It also meets transparency requirements with regard to the ACPR, the ECB and the AMF. Some plans are settled in Natixis shares, while others are settled in cash indexed to the Natixis share price. Employee retention and performance plans settled in shares Under IFRS 2 “Share-based payment”, employee free share awards give rise to an expense representing the fair value of the goods or services received at the grant date. This payroll expense is recognized against equity. The fair value of the services received is calculated by reference to the fair value of the shares at the grant date, less the present value of dividends forfeited by employees during the vesting period, taking into account the presence conditions. The expense is recognized on a straight-line basis over the vesting period. The expense is adjusted over the vesting period to reflect any losses of rights. Cash-settled employee retention and performance plans indexed to the value of the Natixis share The accounting treatment applicable to cash-settled share-based payments is governed by IFRS 2 “Share-based payment”. Under IFRS 2, the services acquired and the liability incurred are measured at fair value. Until the liability is settled, debt is remeasured at each reporting date and at the date of settlement, with any changes in fair value recognized in income for the period. The remeasurement of the liability at the reporting date takes into account any changes in the value of the underlying shares, as well as whether or not the presence conditions and performance criteria have been met. Where the payment of compensation is subject to a continuing service requirement, the corresponding expense is recorded over the vesting period on a straight-line basis. When no service requirement exists, the expense is recognized immediately as a debt. The latter is then remeasured at each reporting date taking into account performance criteria and any changes in the value of underlying shares. Changes to the terms and conditions of a cash-settled employee retention and performance plan indexed to the value of the Natixis share which would lead to the latter being reclassified as an employee retention and performance plan settled in shares would trigger the derecognition of the debt recorded for the initial plan indexed to the value of the Natixis share and the recognition of a debt equivalent to the services provided for the new employee retention and performance plan settled in shares as at the date of modification. The difference between the recognition in equity and the derecognition of the debt is taken directly to profit or loss. Detailed information about these plans and their quantified impacts over the period are provided in Note 12.2.2.

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Natixis Registration Document 2018