NATIXIS - Universal registration document and financial report 2019

5 FINANCIAL DATA

Consolidated financial statements and notes

Note 5

Structured entities

A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are managed by means of contractual agreements. Structured entities generally have one or more of the following characteristics: restricted and narrowly-defined activities and objectives; V limited or non-existent equity that is insufficient to allow it to V finance its activities without subordinated financial support; financing in the form of multiple contractually linked instruments V that create concentrations of credit or other risks (tranches); few or no employees. V 5.1.1 In accordance with IFRS 12, Natixis discloses information for all of the structured entities in which it holds interests and for which it acts in one or more of the following roles: originator/structurer/arranger; V placement agent; V manager of relevant activities; V or any other role in which it has a decisive impact on the V structuring or management of the transaction. Interest in an entity is understood to mean a contractual or non-contractual relationship that exposes the entity to the risk of variable returns associated with the performance of another entity. Interests in other entities may be evidenced by, among other things, ownership of equity instruments or debt securities, as well as by other links, such as financing, cash loans, credit enhancement and the issuing of guarantees or structured derivatives. Consequently, the following are not included in the consolidation scope (IFRS 10) or in the scope applicable to the disclosure of additional information (IFRS 12): structured entities linked to Natixis solely through an ongoing V transaction. This corresponds to an unstructured financial instrument which does not generally have a material impact on the variability of the structured entity’s returns and which may be concluded by Natixis with structured entities or with traditionally-governed entities alike. Ongoing transactions are most commonly: vanilla fixed-income/currency derivatives, derivatives with other V underlying assets, the lending/borrowing of securities and repos, guarantees and plain vanilla financing granted to family SCIs V or certain holding companies; external structured entities for which Natixis acts simply as an V investor. This mainly includes: investments in external mutual funds not managed by Natixis, V with the exception of those in which Natixis owns virtually all of the units, Scope of the structured entities with which Natixis has dealings General principles 5.1

interests held in external securitization vehicles for which Natixis V acts simply as a minority investor, a restricted scope of interests held in real estate funds and V external Private Equity funds for which Natixis acts simply as a minority investor. The structured entities with which Natixis has dealings can be categorized into four groups: entities created within the context of Structured Financing, Asset Management funds, securitization vehicles and entities established for other types of transactions. In accordance with IFRS 10, consolidation analyses of structured entities are performed taking into account all of the criteria referred to in Note 3.2.1. 5.1.2 In order to meet financing requirements for movable assets (involving air, sea or land transportation), real estate, corporate acquisitions (LBO financing) or commodities, Natixis may be required to create structured entities for a specific financial transaction on behalf of a customer. Auto-pilot mechanisms are generally in place for these structures. In the case of lease contracts, the transaction must be structured such that its income always amounts to zero. This means that only default events are able to modify the structured entity’s income, by leading to the disposal of the rights over the assets once the guarantees have been exercised. Natixis has the power to have the assets sold in the case of a default event, acting either alone or via the bank syndicate’s agent. This right equates to a protective right because Natixis would never benefit from the income from the sale beyond the amount of the balance due under the loan agreement. Natixis does not therefore have power over such entities’ relevant activities. If auto-pilot mechanisms are not in place for these structures, it is generally the sponsor who oversees activities which are relevant and which generate returns. As previously, Natixis’ rights as lender are protective rights limited to the amount of its receivable. Natixis does not therefore have power over such entities’ relevant activities. In addition, Natixis is rarely a shareholder in such entities and, when it is, it generally holds a minority interest. The entities for which Natixis is the majority shareholder are limited in number and do not have a material impact on the consolidated financial statements. 5.1.3 Mutual funds In general, seed money investments held for less than one year were not consolidated. Non-guaranteed mutual funds 1. In the context of mutual funds, relevant activities are investment and divestment activities involving securities in fund assets. These activities are managed in a discretionary manner on behalf of investors by Natixis Investment Managers’ and Natixis Wealth Management’s management companies. The compensation of Natixis Investment Managers and Natixis Wealth Management as managers is marginal compared with the returns generated for investors. Indeed, the management and incentive fees are obtained on the market and are consistent with the services rendered, since the Asset Management activity takes place on a competitive and international market. Structured finance transactions Asset Management transactions

258

NATIXIS UNIVERSAL REGISTRATION DOCUMENT 2019