Nexgen Financial Holdings Limited Annual Report and Audited … · 2015-03-12 · Nexgen Capital Limited (‘NCL’) and NATIXIS CORPORATE SOLUTIONS LIMITED (‘NCSL’) which are

Nexgen Financial Holdings Limited Annual Report and Audited Financial Statements For the year ended 31 December 2011

Nexgen Financial Holdings Limited

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CONTENTS

Page

NEXGEN GROUP PROFILE 2-3

CORPORATE GOVERNANCE AND RISK MANAGEMENT 4-5

DIRECTORS’ REPORT 6-8

STATEMENT OF DIRECTORS’ RESPONSIBILITIES 9

INDEPENDENT AUDITOR’S REPORT 10-11

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 12

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 13

COMPANY STATEMENT OF FINANCIAL POSITION 14

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY 15

CONSOLIDATED STATEMENT OF CASH FLOWS 16

COMPANY STATEMENT OF CASH FLOWS 17

NOTES TO FINANCIAL STATEMENTS INCLUDING RISK MANAGEMENT INFORMATION

18-46


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NEXGEN GROUP PROFILE

Nexgen Financial Holdings Limited (‘the Company’), a company incorporated in Ireland, is the holding company of the Nexgen Group (‘Nexgen’ or ‘the Nexgen Group’). The Company’s immediate parent company is NATIXIS S.A. (’NATIXIS’). Nexgen is part of the Corporate Solutions division of NATIXIS BFI (’NATIXIS CORPORATE SOLUTIONS’). NATIXIS CORPORATE SOLUTIONS and Nexgen (collectively ‘the Group’) offer risk based tailor-made financial solutions to corporate clients, insurance companies, banks and other financial services organisations and high net worth individuals, principally resident in Europe, the Middle East and Asia. The Group provides its clients with creative and robust solutions and executes transactions as principal counterparty, actively managing the risks assumed. The principal subsidiaries of the Company are Nexgen Capital Limited (‘NCL’) and NATIXIS CORPORATE SOLUTIONS LIMITED (‘NCSL’) which are both authorised by the Central Bank of Ireland under the European Communities (Markets in Financial Instruments) Regulations 2007 to conduct regulated businesses as investment firms. NCL undertakes capital market transactions. NCL’s role within the Nexgen Group is to act as a principal for many of the client solutions involving

financial instruments and to hedge or manage the resulting risks. The solutions offered include equity or credit derivative linked instruments designed to support mergers and acquisitions, treasury management, risk transfer, debt restructuring and private financing situations. Solutions may also include other derivative components. NCL is also the centre for active management of the risks assumed by the Nexgen Group. NCSL participates in the sourcing and structuring of transactions, products and services on behalf of the risk taking entities of the Nexgen Group (NCL and NATIXIS). Natixis Corporate Solutions (Asia) Pte Ltd (‘NCSA’), a subsidiary undertaking of NCSL, acts as the Singaporean marketing and structuring unit of the Nexgen Group. It also provides trading support, in the Singaporean time zone, to the Nexgen Group. NCSA holds a Capital Markets Services Licence granted by the Monetary Authority of Singapore. NCSL also carries out research and development of IT systems for the Nexgen Group. Nexgen Reinsurance Limited (‘NRL’), a reinsurance company authorised by the Central Bank of Ireland under the European Communities (Reinsurance) Regulations 2006, is also a subsidiary of the Company. NRL holds the Group’s portfolio of reinsurance business and provides finance and corporate services for the Nexgen Group. The portfolio of NRL is in run off.

NEXGEN GROUP CORPORATE STRUCTURE

*The Natixis Corporate Solutions Milan Branch was closed at the end of April 2011.

NATIXIS S.A. (France)

Natixis Corporate

Solutions Asia Pte Ltd

(Singapore)

Natixis Corporate Solutions Paris

Branch (France)


(Dublin)

Natixis Corporate Solutions Ltd

(Ireland)*

Nexgen Capital Limited (Ireland)

Nexgen Management

Services branch (Jersey)

Nexgen Reinsurance

Limited (Ireland)

Nexgen Mauritius Limited

(Dormant)

Ultima Trading & Global Strategies

(Cayman Is)

Ultima Trading & Global Strategies II

(Cayman Is)

Universe Holdings Limited

(Cayman Is)

Ultima Trading & Global Strategies III

(Cayman Is)


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DIRECTORS

Board of Directors as at 31 December 2011 Mr Peter Blessing Non-Executive (1) Irish Mr Christophe Lanne Executive Chairman French Mr Rodolphe Hubert Executive (1) French Ms Ghislaine Mattlinger Executive (1) French

(1) Member of the Audit Committee The following persons resigned from the Board of Directors during the year:

• Mr Luc Giraud resigned as Director and Joint Chief Executive Officer with effect from 24 June, 2011. • Mr Ravi Viswanathan resigned as Director and Joint Chief Executive Officer with effect from 16

September, 2011. The following persons were appointed to the Board of Directors during the year:

• Mr Christophe Lanne was appointed as Director and Chairman with effect from 18 March, 2011. • Mr Rodolphe Hubert was appointed as Director with effect from 18 March, 2011. • Ms Ghislaine Mattlinger was appointed as Director with effect from 24 June, 2011.

Ms Ghislaine Mattlinger was appointed to the Audit Committee on 31 May 2011. OTHER INFORMATION Company Secretary and Registered Office Bankers Ms Nicola O'Connell Natixis S.A. Ormonde House 30, avenue Pierre-Mendès 12 Lower Leeson Street 75013 Paris Dublin 2 Ireland

France

BNP Paribas London Registered Office Address 10 Harewood Avenue Ormonde House London NW16AA 12 Lower Leeson Street UK Dublin 2 Ireland Allied Irish Banks plc Westmoreland Street Registered Number Dublin 2 336054 Ireland Internal Auditors PricewaterhouseCoopers Chartered Accountants and Registered Auditors One Spencer Dock North Wall Quay Dublin 1 Ireland External Independent Auditors Deloitte & Touche Deloitte & Touche House Earlsfort Terrace Dublin 2 Ireland


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CORPORATE GOVERNANCE AND RISK MANAGEMENT There were no changes to the corporate governance structure during the year. The role of the main Board is to direct the business, strategy and policies of the Nexgen Group and to oversee the conduct of the Nexgen Group’s business and its control environment. The Committees responsible for corporate governance and their respective roles are as follows:

The Management Committee is responsible for running the day-to-day operation of the Nexgen Group and is comprised the Group Chief Operating Officer and the Group Chief Financial Officer.

The Audit Committee of the Board of directors reviews the financial information and risk management policies of the Nexgen Group and assesses the adequacy of the Nexgen Group’s operating and internal accounting controls and the quality of its internal and external auditors. It also monitors the Nexgen Group’s corporate governance and compliance procedures. PricewaterhouseCoopers assisted the Audit Committee in the execution of the internal audit function. Any member who is also a director is detailed on page 3. The Transaction Committee reviews all proposed structured client transactions at Nexgen Group level. The Screening Committee approves proposed counterparties (including clients, market counterparties and intermediaries) to ensure, as far as possible, that Nexgen is not exposed to regulatory or reputational risk in its dealings with such counterparties.

Nexgen is also subject to periodic reviews by Natixis’ General Inspection Teams. A Risk Controller , who is also in charge of Risk Control for NATIXIS CORPORATE SOLUTIONS and reports functionally to the Head of NATIXIS Risk Department, and his team supervise the risk management process and monitor compliance with all risk limits. The Risk Controller reports directly to the board of directors of the Company. Transactions which exceed the limits assigned to Nexgen are considered by the following NATIXIS Risk Committees: NATIXIS Market Risks Committee for transactions exceeding market risk limits and NATIXIS Credit Risk Committee for transactions exceeding credit risk limits.

RISK MANAGEMENT PRINCIPLES The Group’s business model is based on its ability to realise value efficiently and durably from the solutions implemented for its clients. The Group has the financial and organisational ability to act as principal, sharing risk with and/or acquiring risk from the client. The business model relies on the continuous operation of a rigorous risk management and valuation process. The Group’s risk management policy is designed to eliminate risk, as much as possible, arising from principal transactions it has entered into. This is done mainly through static or dynamic hedging where possible, or through statistical diversification. A proprietary valuation and reporting system measures the risks of each type of structure, whatever the underlying instrument, allowing them to be hedged effectively. Proposed financial solutions are individually approved. Present and anticipated risks are rigorously analysed and deliberated prior to the decision to enter into any transaction. Risks are hedged on an active market, where possible. During the decision process due consideration is given to forecast future hedging requirements and liquidity of the underlying market. Counterparty credit risk and concentration risks are mitigated through the use of credit cushions, margin calls and/or periodic or market price triggered resets in contracts. Credit protection may be purchased from external counterparties, including NATIXIS. Other factors taken into account during the proposal process include the size of individual risks within the Group’s diversification objectives, the availability of adequate sources of funding and the identification, minimisation and acceptability of non-financial risks. After the execution and initial hedging of the principal transactions, resulting risks are managed and controlled within a system of limits. THE SYSTEM OF LIMITS Nexgen’s risk limit framework is composed of several limits covering inter-alia market, credit and equity gap risks. The Risk Management department monitors the risks and executes the market transactions required to keep within the limits.


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CORPORATE GOVERNANCE AND RISK MANAGEMENT (continued) THE SYSTEM OF LIMITS (continued) The Risk and Result Reporting department is responsible for monitoring the limits and producing Profit and Loss analyses. The Risk Controller continuously monitors compliance with the limits and adherence to the risk management process. Nexgen Group uses a series of Value at Risk (VaR) measurements against which global limits have been allocated. The Nexgen Group currently tracks a Market VaR for equity, foreign exchange, interest rate and commodities. For credit risk, a NATIXIS internal credit rating system is used to calculate objective default probabilities, recoveries and credit spreads for each counterparty (i.e. client and market counterparties). Individual and global limits are assigned to counterparties based on rating classes and transaction maturities. OPERATIONAL RISK Due to the nature of Nexgen Group’s business, control of operational risk is fundamental. The basic principle implemented to achieve this control is to separate the various embedded risks and components of a principal transaction in such a way that specialised operational units, which are independent of the structuring and trading teams, can manage them. A number of procedures have been implemented to mitigate operational risk, including:

• Involvement of operational specialists in the structuring and approval phase, to verify Nexgen’s capacity to manage the approved transactions;

• Recourse to specialist external advice; and

• Strictly controlled coordination and cross checking when finalising documentation and executing transactions.

An important element of this control is having one common information system, from inception to reporting, with no dual input, combined with the capacity to access multi-dimensional views of the same transaction without sacrificing the integrity of the information. This system reinforces the efficiency of the segregation of duties and cross-unit control procedures. A constant effort is made to use standard, proven and reliable concepts and tools in the execution of transactions and management of the business risks. Standard market documentation, models

relying on widely-accepted financial theories and external software tools are used as appropriate. Each Nexgen Group location uses the same technology and infrastructure and the data is mirrored to provide rapid recovery solutions to any site disabled by a disaster. Nexgen Group is part of the operational risk framework of NATIXIS and operational risk events are reported, monitored and analysed within this framework. LEGAL AND REPUTATIONAL RISK Nexgen Group is involved in complex and innovative transactions. As such the Nexgen Group minimises the potential legal and reputational risks by taking various steps, including the following:

� The Screening Committee reviews each prospective counterparty and connected intermediaries from a reputational and “Client Due Dilligence” perspective, at the pre-transaction stage;

� Management seek to satisfy themselves

that transactions are structured to serve legitimate purposes of clients and that those clients are acting in accordance with local regulations and standard practices; and

� Special attention is also given to

compliance with local rules and regulations and prominent local law firms are systematically used to verify such compliance when structuring transactions.

� Legal documents and contracts are

reviewed in draft by the in-house legal department and the Review Committee.


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DIRECTORS’ REPORT The directors submit herewith their annual report together with the audited consolidated financial statements of the Nexgen Group for the year ended 31 December 2011. The comparative figures are for the year to 31 December 2010.

2011 ACTIVITY AND KEY PERFORMANCE INDICATORS

Update on the Group’s Activities In 2011, NATIXIS, the parent company of the Nexgen Group, decided to cease the European business covering France, Italy and Spain which had formerly been carried on by NCSL and NCL. As a result of this, a number of front office and operational personnel from the Paris and Milan branches of NCSL were transferred to NATIXIS. The NCSL Milan branch was also closed. It was also decided that the existing European transactions between NCL and French, Spanish and Italian corporate clients would be put in run off and transferred to NATIXIS. This process began in December 2011 with a target completion date of 31 March 2012. Income Generation The Nexgen Group’s operating income in 2011 was €65.7m compared with €113.3m for the prior year. Overall, there were approximately 34 new or restructured transactions executed during the year compared to 37 in the previous year. The transactions were mainly with clients based in Europe, Asia and Emerging Markets. Client transactions involving capital market activities accounted for most of the trading income during the year (2011: €66.9m, 2010: €114.6m). The deals were originated principally in Europe, Asia and Emerging Markets, mainly with large corporate clients but also with sovereign funds and family offices. Most of the transactions Nexgen structured for clients were of a private nature protected by established confidentiality rules. General and resources As at 31 December, there were 90 staff employed by the Nexgen Group compared to 118 as at the end of December 2010. This includes some NATIXIS employees seconded to work within Nexgen’s teams. Most of the decrease relates to the transfer of staff in the Paris and Milan offices to NATIXIS. The staff numbers by location are: Dublin 27

Paris 35 Singapore 20 Other 8 Total 90 Corporate Structure At the end of December 2010, a decision was made by the Board and management of NRL, in agreement with its parent NATIXIS, to put NRL into run off. The Board has notified the Central Bank of Ireland of its decision. NRL continues to provide finance and corporate services to the Nexgen Group. At the end of April 2011 the Milan branch was closed and the 3 staff employed by the branch were transferred to the NATIXIS Milan branch. Marketing Agreements with NATIXIS entities There were no new marketing agreements signed during the year. The Group continues to operate a marketing agreement with Natixis Asia (Hong Kong), a subsidiary of NATIXIS. Dividends

The Company did not pay a dividend to the Group’s parent company, NATIXIS, during the year (2010: nil). Results for the year and state of affairs at 31 December 2011 Nexgen’s positions are valued daily on a fair value basis whenever appropriate in accordance with IFRS. The valuation is measured against each risk incurred and variations are explained through an income attribution analysis, by reference to the actual risks being managed. The risk management systems and procedures have performed satisfactorily during the year. The net operating income for 2011 was €65.7m (2010: €113.3m).

Income was primarily derived from capital market client transactions (2011: €66.9m; 2010: €114.6 m).

Residual positions management showed a loss of €(1.2)m (2010: loss of €(2.8)m). Remuneration of Own Funds during the year (computed at a rate based on 3 month Euribor) was €2.2m (2010: €0.9m). Net Reinsurance income amounted to €1.5m (2010: income of €1.4m).


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DIRECTORS’ REPORT (continued ) Operating expenses were lower at €34.4m (2010: €54.9m):

o Staff costs were lower at €24.5m (2010: €45.1m) mainly due to a decrease in variable remuneration. Average staff numbers during the year were 104 (2010: 119).

o Other administrative expenses remained unchanged at €9.9m (2010: €9.9m).

Taxation amounted to €10.1m (2010: €8.4m). The effective rate of tax was 32.5% (2010: 16.8%) due to the impact of corporate tax in the Group’s foreign branches/subsidiaries. Overall, the net profit after tax for the year was €21.2m compared to €50.0m in the previous year. Statement of Financial Position The total assets as at 31 December 2011 are relatively unchanged from the previous year at €6,396m (31 December 2010: €6,454m), a decrease of around 1%. The main categories impacted were the loans to financial institutions on the asset side. However, this was offset by a reduction in trading securities, loans to customers and derivative financial assets. Shareholders’ funds at the end of 2011 were €266.3m compared to €245.0m at the end of 2010. The variation mainly comes from net profit after tax of €21.2m. Corporate governance and risk management The Management Committee, the Transaction Committee and the Screening Committee continued to operate on the same basis as 2010, in the framework of delegations received from relevant NATIXIS departments. The Audit Committee met regularly during the year and has reviewed the financial statements and other financial information provided by the Nexgen Group. PricewaterhouseCoopers (PwC) assisted the Audit Committee in the execution of Nexgen’s internal audit function. PwC’s regular review of systems and procedures conducted under the supervision of the Audit Committee did not raise any critical control issues. There has been no major change to the corporate governance and risk management framework. The Screening Committee (pre-approval of prospective clients and counterparties) and the Transaction Committee (individual approval of transactions) met or otherwise communicated regularly.

More details on financial risk measures are disclosed in note 4 to the financial statements. The Group continues to actively monitor developments within its regulatory framework. Specifically the firm continues to monitor new developments within the context of Basel 2/Basel 3 and any revisions to the Capital Requirements Directive for its investment firm activities and Solvency 2 for its reinsurance activities.

Outlook for 2012

From 2012, the Nexgen Group will cease to take on any new business in Asia and Emerging Markets. NCSL will, therefore, cease to market new transactions on behalf of NCL and the businesses of NCL and NCSL will be run off. All existing contracts will be fully managed by the Group and any commitments arising on those contracts will continue to be met with the full support of NATIXIS. The decision to put NCL and NCSL into run off has no impact on the accounting principles of the Group as adopted in the 2011 financial statements. The Group plans, with the support of its parent, to continue servicing the existing transactions and to meet all obligations as they fall due. The Group will continue to operate as a going concern.


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STATEMENT OF DIRECTORS’ RESPONSIBILITIES Irish company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit of the group for that period. In preparing those financial statements, the directors are required to:

• select suitable accounting policies for the Group and the Parent Company Financial Statements and apply them consistently;

• make judgements and estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union and comply with Irish statute comprising the Companies Acts, 1963 to 2009. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended Year ended 31 December 31 December 2011 2010 EUR'000 EUR'000 Profit attributable to ordinary equity holders 21,210 49,968 Currency translation difference on foreign net investments 118 169 Movement in shareholders’ funds 21,328 50,137 Balance at the beginning of the year 245,006 194,869 Balance at the end of the year 266,334 245,006 COMPANY STATEMENT OF CHANGES IN EQUITY Year ended Year ended 31 December 31 December 2011 2010 EUR'000 EUR'000 Profit attributable to ordinary equity holders 45 12,947 Movement in shareholders’ funds 45 12,947 Balance at the beginning of the year 120,228 107,281 Balance at the end of the year 120,273 120,228 See accompanying notes to the financial statements


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CONSOLIDATED STATEMENT OF CASH FLOWS Year ended Year ended

31 December 31 December 2011 2010 Notes EUR'000 EUR'000 Operating activities Operating profit on ordinary activities before tax 31,315 58,346 Depreciation and amortisation 8 178 478 Loss on disposal of property and equipment 41 1 Changes in operating assets and liabilities -net (increase)/decrease in loans to and receivables from financial institutions (332,888) 2,606,751 -net decrease/(increase) in loans to and receivables from customers 220,744 (175,048) -net decrease/(increase) in derivative financial assets, at fair value 100,314 (104,976) -net decrease in derivative financial liabilities' at fair value (164,684) (26,117) -net decrease in securities held long 289,620 602,923 -net decrease in securities sold short (1,341) (31,843) -net increase/(decrease) in loans from financial institutions 38,999 (3,214,814) -net movement in reinsurance assets and liabilities 47,223 44,652 -net decrease in other receivables 3,039 2,837 -net (decrease)/increase in other payables (5,158) 15,690 -currency translation difference 118 149 227,520 (220,971) Taxation paid (4,498) (1,126) Net cash inflow / (outflow) from operating activiti es 223,022 (222,097) Investing activities Additions to property and equipment 8 (70) (129) Net cash outflow from investing activities (70) (129) Increase / (Decrease) in cash and cash equivalents 222,952 (222,226) Opening cash and cash equivalents at beginning of year 221,542 443,768 Closing cash and cash equivalents at end of year 32 444,494 221,542 The following amounts are included within operating activities and classified within net gains or loss on financial instruments at fair value through prof it or loss :: Net interest received 54,399 44,117 Net dividends received* 1,246 848 * net of contractually required repayments of cash dividends to clients See accompanying notes to the financial statements


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COMPANY STATEMENT OF CASH FLOWS Year ended Year ended 31 December 31 December 2011 2010 Notes EUR'000 EUR'000 Operating activities Operating Profit on ordinary activities before tax 45 12,947 Changes in operating assets and liabilities -net (decrease) in financial liabilities - (9,223) -net decrease in other assets - 5 -net increase in other payables 114 128 159 3,857 Taxation paid - - Net cash inflow from operating activities 159 3,8 57 Increase in cash and cash equivalents 159 3,857 Opening cash and cash equivalents 10,306 6,449 Closing cash and cash equivalents 32 10,465 10,306 The following amounts are included within operating activities and classified within net gains or loss on financial instruments at fair value through prof it or loss :: Net interest received 126 69 Dividends received from subsidiaries - 13,000 See accompanying notes to the financial statements


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NOTES TO THE FINANCIAL STATEMENTS 1 General Information The Company and its subsidiaries, as part of NATIXIS CORPORATE SOLUTIONS, offer risk based tailor-made financial solutions to corporations, insurance companies, banks and other financial services organisations and high net worth individuals, principally resident in Europe, Middle East and Asia. The Nexgen Group has operations in 3 countries and employs 90 people including those seconded from related NATIXIS Group companies. The Company acts as a holding company and is domiciled and resident in Ireland. The address of the registered office is: Ormonde House, 12 Lower Leeson Street, Dublin 2, Ireland. The Company is a wholly owned direct subsidiary of NATIXIS S.A. which is a banking group registered in France and listed on the CAC 40 in Paris. The consolidated financial statements were approved by the Board of Directors on 22 February 2012. 2 Significant Accounting Policies These financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS’s”) as adopted by the European Union (“EU”). There were no changes to the accounting policies of the Group compared to the previous year. A summary of the principal accounting policies is set out below. 2.1 Basis of preparation The Financial Statements have been prepared on the historical cost basis modified to include revaluation of certain financial instruments. The group has taken advantage of the exemption provided in Section 148(8) of the Companies Act 1963, which permits a company that publishes its Company and Group Financial Statements together not to present to members, its Company Income statement and the related notes. Assets and liabilities are recorded on a settlement date basis. For those items recorded at fair value, income is recognised on a trade date basis. Going Concern The financial information contained in this report has been prepared on a going concern basis. In making its assessment of the Group’s ability to continue as a going concern, the Board of Directors recognises the plan for the orderly wind down of the business and the support provided by the Group’s parent, NATIXIS S.A. Standards and Interpretations adopted during the period Amendments to IFRS 7 Financial Instruments: Disclosures (part of improvement project), effective 1 January 2011: The amendments to IFRS 7 clarify the required level of disclosures about credit risk and collateral held and provide relief from disclosures previously required regarding renegotiated loans. The following relevant Standards and Interpretations adopted during the period did not have a significant effect on the financial statements of the Group:

• International Accounting Standard (“IAS”) 24 (revised): Related Party Disclosures, effective 1 January 2011;

• Amendments to IFRS 3 (2008) Business Combinations (IFRS improvement project), effective for financial periods commencing on or after 1 July 2010;

• Amendment to IAS 1 (IFRS improvement project) effective 1 January 2011 • Amendments to IAS 32: Classification of Rights Issues, effective for financial periods commencing on

or after 1 February 2010; and • IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments, effective for financial periods

commencing on or after 1 July 2010.


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NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.1 Basis of preparation (continued) Standards and Interpretations in issue not yet adop ted Amendments to IFRS 7 Financial Instruments: (Enhanced Derecognition Disclosure Requirements), effective for the financial periods commencing from the 1 July 2011: The amendments are designed to ensure that users of financial statements are able to more readily understand transactions involving the transfer of financial assets (for example, securitisations), including the possible effects of any risks that may remain with the entity that transferred the assets. IFRS 9 Financial Instruments, effective 1 January 2015: This Standard introduces new requirements for recognition, derecognition, classification and measurement of financial instruments with the exception of amortised cost measurements. The new requirements have not yet been endorsed by the European Union (“EU”). New requirements for impairment and hedge accounting are expected to be added to IFRS 9 in 2012. IFRS 10 Consolidated Financial Statements, effective 1 January 2013: This Standard requires a parent to present consolidated financial statements as those of a single economic entity, replacing the requirements previously contained in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities. The Standard identifies the principles of control, determines how to identify whether an investor controls an investee and therefore must consolidate the investee, and sets out the principles for the preparation of consolidated financial statements. The Standard introduces a single consolidation model for all entities based on control, irrespective of the nature of the investee (i.e. whether an entity is controlled through voting rights of investors or through other contractual arrangements as is common in 'special purpose entities'). Under IFRS 10, control is based on whether an investor has: • Power over the investee • Exposure, or rights, to variable returns from its involvement with the investee, and • The ability to use its power over the investee to affect the amount of the returns. IFRS 11- Joint Arrangements, effective from 1 January 2013: This standard provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities - Non-monetary Contributions by Venturers. IFRS 12 Disclosure of Interests in Other Entities, effective from 1 January 2013: This standard requires the extensive disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, interests in other entities and the effects of those interests on its financial position, financial performance and cash flows. The required disclosures are grouped into the following broad categories:

• Significant judgements and assumptions - such as how control, joint control, significant influence has been determined

• Interests in subsidiaries - including details of the structure of the group, risks associated with structured entities, changes in control, and so on

• Interests in joint arrangements and associates - the nature, extent and financial effects of interests in joint arrangements and associates (including names, details and summarised financial information)

• Interests in unconsolidated structured entities - information to allow an understanding of the nature and extent of interests in unconsolidated structured entities and to evaluate the nature of, and changes in, the risks associated with its interests in unconsolidated structured entities

IFRS 12 lists specific examples and additional disclosures which further expand upon each of these disclosure objectives, and includes other guidance on the extensive disclosures required. IFRS 13-Fair value measurement (effective to annual reporting periods beginning on or after 1 January 2013). This standard establishes a single source of guidance for fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (also referred to as “the exit price”). The standard also provides guidance for fair


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NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.1 Basis of preparation (continued) value determination and introduces consistent requirements for disclosure and measurement. The directors anticipate that the adoption of other standards and interpretations currently in issue will have no material impact on the financial statements of the Nexgen Group in the period of initial application. 2.2 Consolidation (i) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Nexgen Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Nexgen Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Acquisition related costs are generally recognised in the income statement as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the value of the Group’s previously held interest in the acquiree (if any) over the fair value of the identifiable net assets acquired would be recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference would be recognised directly in the income statement. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. The accounting policies of subsidiaries are consistent with the policies of the Nexgen Group. A list of subsidiaries is presented in note 33. (ii) Associates There were no associates at the date of the Statement of Financial Position. 2.3 Net gains on financial instruments at fair valu e through profit or loss Net gains on financial instruments at fair value through profit or loss comprise all gains and losses from changes in the fair value of financial assets and financial liabilities held for trading, together with related interest income, interest expense and dividends. 2.4 Financial instruments Financial Assets and liabilities are classified as at fair value through profit or loss where the financial asset or liability is held for trading or designated as at fair value through profit or loss at inception. Financial assets and liabilities are classified as held for trading if acquired principally for the purposes of selling in the near future or form part of an identified portfolio that the Group manages together and has a recent actual pattern of short-term profit taking. Derivatives that are not designated and effective as hedging instruments are also included in this category. Securities positions, liabilities and derivative instruments arising from structured finance and investment transactions are valued at fair value, using industry standard valuation principles as set out below. Movements in fair value are recognised in the Consolidated Statement of Comprehensive Income as they arise and incorporate any interest and dividends received or paid on the financial assets or liabilities.


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NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.4 Financial instruments (continued) Fair values of trading securities are based on quoted market prices, assuming current market conditions and an orderly disposition over a reasonable period of time. Fair values of over-the-counter (“OTC”) derivative financial instruments represent the net present value of amounts expected to be received from or paid to a third party in settlement of these instruments. The Nexgen Group derives fair value from the initial and continuing marking-to-market (or model) of positions using either observable market prices or, where not directly available, models based on widely-accepted financial theories and market practices applied to observable inputs. Trading assets are initially valued at the mid-market price. Adjustments are made for bid-offer spreads on the aggregate net offsetting positions. All actively traded instruments or all elements of customer transactions that can be readily decomposed into traded instruments are valued using quoted valuation parameters. These parameters are directly observed on the market as the market prices of reference traded assets or instruments. Where market prices are not available for some elements, those elements are marked-to-model using derived valuation parameters estimated from quoted valuation parameters or calculated from economic indicators (e.g. dividends, volatilities). Where parameters are deemed unobservable, profits relating to that parameter are deferred and allocated over the life of the exposure to that parameter or until the date at which the parameter is observable. The models used to perform the above valuations (and compute sensitivities to various risk factors) are summarised below:

� Interest Rate Model: Exposure to general interest rate risk arises mainly from customer transactions. To value these positions, a discount curve is extracted. This curve is applied to piecewise constant instantaneous forward rates. These rates are interbank and swap rates.

� Equity Derivatives Pricing Model: Nexgen uses a generalised version of the Black-Scholes model. This model is generally accepted within the industry. The volatility input parameter is that implied by market data available.

� Credit:

(a) Models: For single name exposures, Nexgen uses reduced form models with probability of default and recovery rates being determined as explained below.

The credit margin is based on credit-default swap spreads or option-adjusted asset-swap spreads for that same name or, if not available, a similar one. The recovery rate for the instrument on which the credit margin is calculated is derived from the priority of the exposure and the economic sector of the name. In the case of unavailability of appropriate market data, these parameters may be adjusted using models and published default statistics from reputable rating agencies. (b) Recovery and probability of default: The calculation of an expected recovery rate is based on the assessment of historical data provided by reputable rating agencies. Nexgen’s assessment incorporates two major elements: 1) the assumption of the average recovery rate for senior unsecured debt instruments in the respective country of domicile of the name; and 2) the assumption of the average recovery rate for the respective industry in which the name operates. An additional recovery rate adjustment is made where deemed necessary.

The probability of default is assessed based on a name’s credit margin and the assumption of a recovery rate for the instrument on which the credit margin is calculated. The credit margin is based on Credit-Default Swap spreads or option-adjusted Asset-Swap spreads (bond spreads) for that same name (or comparable names, if not available), for the same or similar maturities, comparable


22

NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.4 Financial instruments (continued)

asset classes and same underlying credit events.

In all valuations, adjustments are made, where applicable, as follows:

• Bid-Ask – Bid Ask adjustments are made on a portfolio basis to cover both the implied bid ask spread within underlying exposures and their components and the bid ask spread of the cost of hedging / rebalancing the portfolio.

• Credit Risk adjustments are defined as the costs for protecting an exposure or a stream of exposures

against default. 2.4.1 Derivative financial instruments Derivatives are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and using valuation techniques, including discounted cash flow models and option pricing models, as discussed below. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative. Certain derivatives embedded in other financial instruments, are treated as separate derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the Statement of Comprehensive Income, although the Group may choose to designate the whole hybrid contract at fair value through profit or loss. 2.5 Hedge accounting Nexgen does not avail of any form of hedge accounting as would be permitted under IAS 39. 2.6 The fair value option In accordance with the amendments to IAS 39 made in June 2006 as approved by the EU, Nexgen commonly applies the fair value option to non-derivative financial instrument transactions that are not held for trading purposes. A transaction is designated by Nexgen at fair value through profit or loss when doing so results in more relevant information, or when the contract contains embedded derivatives that meet set criteria. Each transaction to which this is potentially applicable is judged on the following criteria:

- Carrying at fair value eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as 'an accounting mismatch') that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases; or - If the transaction is within a group of financial assets, financial liabilities or both that can be managed

and their performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity's key management personnel; or

- Where a contract contains one or more embedded derivatives, Nexgen has the option to designate the

entire hybrid (combined) contract as a financial asset or financial liability at fair value through profit or loss, unless:

- the embedded derivative(s) does not significantly modify the cash flows that otherwise would be required by the contract; or


23

NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.6 The fair value option (continued)

- it is clear with little or no analysis when a similar hybrid (combined) instrument is first considered that separation of the embedded derivative(s) is prohibited under IAS 39 as amended.

2.7 Recognition of deferred day one profit and loss The best evidence of fair value at initial recognition is the transaction price (i.e., the fair value of the consideration given or received). Alternatively, the fair value of that instrument is determined by comparison with other observable current market transactions, when appropriate, in the same instrument (i.e. without modification or repackaging) or based on a valuation technique whose variables include only data from observable markets. The Nexgen Group has entered into transactions where fair value is determined using valuation models for which not all inputs are market observable prices or rates. Such a financial instrument is initially recognised at the value related only to observable inputs. This may be a transaction price or a model value in which only observable inputs are used. The difference between this value and the model value fully inclusive of unobservable inputs, commonly referred to as ‘deferred day one profit and loss’, is not recognised immediately in profit and loss. The timing of recognition of deferred day one profit and loss is determined individually. Generally, it is amortised over the life of the transaction, but could be deferred until the instrument’s fair value can be determined using market observable inputs, or realised through settlement (see note 22). The financial instrument is subsequently measured at fair value, adjusted for the deferred day one profit and loss. Subsequent changes in fair value are recognised immediately in the Consolidated Statement of Comprehensive Income without reversal of deferred day one profits and losses. 2.8 Other financial assets and liabilities Other financial assets and liabilities are initially measured at fair value net of transaction costs. These are subsequently measured at amortised cost using the effective interest method and in the case of other financial assets, less provision for estimated irrecoverable amounts. 2.9 Credit risk on assets assessed for impairment At each year end, Nexgen reviews financial assets which are not classified as at fair value through profit or loss or assets that are at fair value through profit or loss for which market conditions have significantly changed in order to assess whether there is any objective evidence of impairment arising from one or more events occurring after initial recognition of the asset and having an impact on estimated future cash flows. This applies particularly to assets identified as potentially doubtful or non-performing. Where such evidence of impairment exists, Nexgen calculates the estimated recoverable amount discounted at the effective interest rate, taking into account the effect of any available guarantees. The difference between the net book value of the asset and the estimated recoverable amount is recorded in income as an impairment charge. The impairment provision is recorded in the Statement of Financial Position as an adjustment against the line where the impaired asset was originally shown, such that the asset is then shown at its net value. Impairment charges and releases are recorded in the Consolidated Statement of Comprehensive Income. 2.10 Offsetting financial assets and liabilities Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position if two conditions are fulfilled: - there is a legally enforceable right to set off the recognised amounts; and - there is an intention to settle on a net basis, or to realise an asset and settle the liability simultaneously.


24

NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.11 Repurchase and reverse repurchase agreements Securities lent to counterparties are retained in the financial statements. Securities sold or lent through repurchase or securities lending agreements (“repos”) are disclosed in the financial statements as pledged assets when the transferee has the right by contract or custom to sell or repledge the collateral; the liability to the counterparty is included in loans from financial institutions. The cash collateral given in respect of securities purchased / borrowed under agreements to resell / or re-lend are recorded as loans to and receivables from financial institutions and customers as appropriate. Securities borrowed (“reverse repos”) are not recognised in the financial statements, unless these are sold to third parties, in which case the purchase and sale are recorded. 2.12 Cash and cash equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise bank balances and short term deposits with less than or equal to three months’ maturity from the date of acquisition, including cash and non-restricted balances with central banks, treasury bills and other eligible bills, loans and advances to financial institutions, amounts due from financial institutions and short-term government securities. 2.13 Foreign currencies Monetary assets, liabilities and commitments denominated in other currencies are reported at the rates of exchange prevailing at the reporting date. Non–monetary assets and liabilities carried at fair value that are denominated in other currencies are retranslated at the rates prevailing at the date the fair values are determined. Gains or losses arising from changes in exchange rates are included in the Consolidated Statement of Comprehensive Income. Revenue, costs and non-monetary assets are translated at the exchange rates prevailing at the dates of the respective transactions. The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group entity are expressed in Euro (“EUR”), which is the functional currency of the Company and the presentation currency for the consolidated financial statements. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed in Euro using exchange rates prevailing at the date of the Statement of Financial Position. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in Other Comprehensive Income and accumulated in equity. 2.14 Accounting policies specific to reinsurance bu siness The technical result is determined annually using earned premium and incurred claims costs. Commissions and related expenses are charged against the earned proportion of the premium net of retrocessions. (i) Classification as reinsurance In accordance with IFRS 4 “Insurance Contracts”, contracts with a significant insurance risk are classified as (re)insurance. Insurance contracts with a financial derivative component are split into their component parts. The insurance component is valued on an accruals basis with technical reserves estimated in respect of losses from the insurance risk in the contract. The financial derivative component is separated and measured at fair value in accordance with the principles of IAS 39.


25

NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.14 Accounting policies specific to reinsurance bu siness (continued) (ii) Premiums written Premiums written relate to business incepted during the year, together with any difference between booked premiums for prior years and those previously accrued and include estimates of premiums due but not yet receivable or notified to the Group. All bookings are made based on the Group’s available information and estimates and are revised when final statements are received from the cedant. (iii) Unearned premiums Unearned premiums are those proportions of the premiums written that relate to periods of risk subsequent to the date of the Statement of Financial Position. Unearned premiums are computed using earning rates following the seasonality of the underlying exposure, or on a pro rata basis over the duration of the underlying reinsurance contract. The Group has no unearned premiums as at 31 December 2011 and 2010. (iv) Deferred acquisition costs Commissions which vary with, and are primarily related to, the acquisition and renewal of reinsurance contracts are deferred to the extent that they are attributable to premiums unearned at the date of the Statement of Financial Position. The Group has no deferred acquisition costs as at 31 December 2011 and 2010.

(v) Claims incurred Claims incurred include full provision for all claims notified but not settled at the date of the Statement of Financial Position. Provision is also made for the estimated cost of claims incurred but not notified at that date. (vi) Unexpired and actuarial risks A provision for unexpired risks and actuarial risks is made where the expected claims, related expenses and deferred acquisition costs are expected to exceed unearned premiums, taking into account future investment income. (vii) Derivatives embedded in reinsurance contracts To the extent that separable financial derivatives are embedded within reinsurance contracts, the Group separates the embedded derivative and values it in accordance with IAS 39. 2.15 Taxation Corporation tax is provided on taxable profits for the year. Deferred income tax is provided in full, using the liability method, on all material temporary differences arising between the tax bases of assets and liabilities used in the computation of taxable profit and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the date of the Statement of Financial Position and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred tax is not discounted. 2.16 Pension costs Employees may be members either of the Nexgen Group pension plans or of a personal pension plan. The Nexgen Group pension plans are defined contribution schemes. The Nexgen Group contributes directly to the appropriate pension plans. The amount charged to the Consolidated Statement of Comprehensive Income in respect of pension costs is the sum of contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown either as other payables or receivables in the Consolidated Statement of Financial Position.


26

NOTES TO THE FINANCIAL STATEMENTS (continued) 2 Significant Accounting Policies (continued) 2.17 Share-based payment plans In 2010 the Group’s immediate parent, Natixis, introduced various new variable compensation schemes for employees for services rendered in 2009 and 2010. The compensation scheme’s payment is subject to various conditions relating to the beneficiary’s presence and performance. The scheme’s operated within the Nexgen Group are cash-settled and are indexed to the value of the Natixis share price. For cash-settled variable compensation plans indexed to the value of the Natixis share, the accounting treatment is governed by IFRS 2 “Share-based payment”. 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 full cost of the scheme is accrued at the end of 2011. All payments due under these schemes are expected to be paid by the end of 2012. There was no share based payment scheme operated by the Nexgen Group for services rendered in 2011. 2.18 Property and equipment Property and equipment are stated at cost net of accumulated depreciation and any accumulated provisions for impairment. Depreciation is provided on all tangible fixed assets at rates calculated to write-off the cost or valuation, less estimated residual value, of each asset on a straight-line basis over its expected useful life, as follows: Computer Equipment 3 years Office Equipment 3 years Other Assets 3 years 3 Critical accounting estimates and judgements The Nexgen Group makes judgements, estimates and assumptions that affect the reported values of assets and liabilities within the next financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 3.1 Fair value The fair value of financial instruments that are not quoted in active markets are determined by using valuation techniques. Where valuation techniques (for example, models) are used to determine fair values, they are validated and periodically reviewed by qualified personnel independent of the area that created them. All models are approved before they are used, and models are calibrated to ensure that outputs reflect actual data and comparative market prices. To the extent practical, models use only observable data. Areas such as credit risk, volatilities and correlations may require management to make estimates based on assumptions. Changes in assumptions about these factors could affect reported fair value of financial instruments. 3.2 Income taxes The Nexgen Group is subject to income taxes in numerous jurisdictions (See page 2 – Nexgen Group Corporate Structure). Estimates are required in determining the provision for income taxes in each jurisdiction of operation. The Nexgen Group recognises liabilities for anticipated taxes based on estimates of taxes due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.


27

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management The following risk information is presented at Group level only as Nexgen Financial Holdings company risks are not material. 4.1 Market risk

Market risk is defined as those risks arising from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices that affect market-risk-sensitive financial instruments. Market Risk VaR Value-at-Risk (“VaR”) estimates the potential decline in the value of a position or a portfolio over a ten-day holding period, at a 99% confidence level. The VaR indicator incorporates the sensitivities of the trading portfolio with the volatilities and correlations of those factors. Nexgen measures equity, equity volatility, foreign exchange, interest rate and commodity VaR at a 99% confidence level based upon a ten day holding period. The VaR measure uses market data for spot prices, interest rates, foreign exchange rates and volatilities for all instruments. A convergence of measurement and valuation methodologies used by Nexgen towards those used by NATIXIS has been progressively implemented. For example, the NATIXIS methodology for statistical estimators used in the VaR calculation was adopted in June 2009 (see VaR numbers below). The chosen VaR model is a market standard which allows for both accuracy on simple or complex positions and an time efficient computation. It is calibrated on extreme scenarios to ensure that the 99% percentile results are accurate. The Market VaR used within Nexgen is the sum of the Equity/Volatility VaR, the Foreign Exchange / Interest Rate VaR and the Commodity /Volatility VaR. The limit was €22.1m for the full year (equivalent to €7m 1-day VaR). 12 months to 31 December 2011 (in EUR millions) Average High Low end Dec 11 Equities risk 8.6 13.0 4.2 8.9

Foreign currency risk & interest rate risk

1.5 2.3

1.0 2.3 Commodity risk 0.0 0.0 0.0 0.0 Total Market VAR 10.1 15.3 5.2 11.2 12 months to 31 December 2010 (in EUR millions) Average High Low end Dec 10

Equities risk

10.6 15.1 6.5 12.9

Foreign currency risk & interest rate risk

2.7 5.9

1.2 2.0 Commodity risk 0.2 0.7 0.0 0.0 Total Market VAR 13.5 21.7 7.7 14.9 Market VaR is computed at the NCL level only. NRL’s market exposures are not material as positions are hedged with NCL. The market VaR indicator does not include counterparty or credit spread risk. The following graph illustrates the movement of the Market VaR during the year:


28

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management (continued) 4.1 Market Risk (continued) Market Risk VaR

10 Day [99%] Market VaR [in EUR]

VaR Limit

0.00

5.00

10.00

15.00

20.00

25.00

Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11

Milli

ons

In addition to VaR, several other market risk limits are monitored daily by the Risk Controller and are based on risk indicators such as the delta, gamma, vega, foreign currency exposures and gap exposures. These sub limits can be exceeded but the excess must be temporary and limited in magnitude. Gap risk limit The Group’s market risk framework also covers the risk of a gap in stock prices related to certain types of limited recourse equity based transactions. This is defined as the risk that a sudden drop in the underlying stock price exceeds the value of the collateral in place. The exposure both for the portfolio of transactions and for each individual transaction is measured with a VaR based approach which simulates transaction unwinds at a 99% percentile over a one calendar year horizon. Parameters used include stock volatilities and correlations, stock liquidity or percentage of transactions held. A stress-test is also applied to quantify the risk of the portfolio in adverse market conditions, calibrated to the most adverse in recent times (September-November 2008). Foreign exchange risk The Group undertakes certain transactions in foreign currencies. Hence, exposures to exchange rate fluctuations arise. These currency exposures are actively managed by Risk Management. As at 31 December 2011 the Group had the following net exposures in foreign currencies:


29

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management (continued) 4.1 Market Risk (continued) Foreign exchange risk 31 Dec 2011 31 Dec 2010 EUR’000 EUR’000 USD 37,521 2,852 JPY (1,836) (728) INR (33,535) (325) Other (1,600) 1,679

Interest rate risk Interest rate risk is the risk that the value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group is exposed to interest rate risk which is managed mainly through the use of interest rate swap contracts. As at 31 December 2011 the Group had the following net exposures subject to interest rate risk (by currency): 31 Dec 2011 31 Dec 2010 EUR’000 EUR’000 EUR 1,105 861 USD 816 558 JPY 6,311 7,037 Other 1,186 1,286 Net position subject to interest rate risk 9,418 9,742

4.2 Credit risk Credit risk is defined as the risk of loss due to an obligor's non-payment of the principal or interest repayable on a loan, bond or guarantee or due to a non-payment of an obligation under a derivative contract or due to an increase in credit spreads. The Nexgen Group measures its credit risk exposures using a Loss-Given-Default methodology. Loss Given Default is computed, assuming an immediate default of the counterparty, as the difference between the cash left after the default occurrence, including estimated recovery and the value of the transaction and its hedge as shown in Nexgen records before the default. A loss is estimated based upon the relationship between the counterparty and the underlying in stressed market conditions. The following table shows the maximum exposure to credit risk before collateral held or other credit enhancements unless such credit enhancements meet the offsetting requirements as set out in note 2.10. It does not include the effect of standard ISDA master netting agreements which, if applied, would greatly reduce the amount reported below. For a net reflection of the Group’s credit risk see the ‘Concentration Risk’ section below. Maximum Exposure As at December 31 (Eur '000) 2011 2010 Cash at Bank 75,665 63,154 Loans to and Receivables from Financial Institutions -unsecured 1,694,880 1,221,634 -collateralised 152,479 82,395 Loans to and Receivables from Customers -collateralised 461,343 682,087 Trading Securities* 895,938 1,068,983


30

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management (continued) 4.2 Credit risk (continued) As at December 31 (Eur '000) Maximum Exposure 2011 2010 Derivative assets, at fair value 1,110,737 1,211,051 Other Assets** 1,588 4,861 Total On Balance Sheet Exposures 4,392,630 4,334,165

* excludes listed securities hedging derivative transactions. **includes non-financial assets amounting to €145k (2010:€193k). Included in the above analysis are exposures to our parent company, NATIXIS, of approximately €1.9bn in 2011 and €1.5bn in 2010. Collateral and other credit enhancements The amount and type of collateral required depends on the assessment of the credit risk of the counterparty and the structure of the transactions. The main types of collateral obtained are cash or securities for repurchase (“repo”) or reverse repo transactions and pledges of securities in relation to share forward agreements and equity derivative transactions. The Group uses credit derivatives to mitigate its credit risk. The Group also obtains guarantees from parent companies for transactions executed with their subsidiaries, but the benefits are not included in the tables above. These guarantees are valued at nil. Management monitors the market value of collateral and requests additional collateral in accordance with the underlying agreement, usually when a trigger level has been reached. Concentration risk Counterparty credit risk and concentration risks are mitigated through the use of credit cushions, margin calls and/or periodic or market price triggered resets in contracts. In addition, manufactured protection, credit default swaps, guarantees and special purpose entity (SPE) structures may be used. On many occasions credit risk protection is purchased from NATIXIS. The following table shows the Group’s exposure to credit risk by industry before and after taking account of collateral, ISDA master netting agreements and other credit enhancement such as credit derivatives:

Gross Maximum Exposure

Net Maximum Exposure



31/12/2011 31/12/2011 31/12/2010 31/12/2010 Financial institutions 2,061,050 188,171 1,663,863 391,251 Other corporate entities 2,331,580 74,886 2,670,302 74,238 Total 4,392,630 263,057 4,334,165 465,489

The following table shows the Group’s exposure to credit risk by region before and after taking account of collateral, ISDA master netting agreements and other credit enhancement such as credit derivatives:





31/12/2011 31/12/2011 31/12/2010 31/12/2010 Europe 2,690,684 194,698 2,573,987 425,590 Middle East & Asia 1,557,133 10,056 1,616,644 7,725 Other 144,813 58,303 143,534 32,174 Total 4,392,630 263,057 4,334,165 465,489


31

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management (continued) 4.2 Credit risk (continued)

The assets assessed for impairment are in respect of a reclassification to receivables of financial assets and liabilities falling due as a consequence of the default of market counterparties. The impairment of these assets is based on management’s estimate of potential recovery taking into account circumstances existing at the year end. 4.3 Liquidity risk Liquidity risk is the risk that a financial institution will experience difficulty in financing its assets and meeting its contractual payment obligations, or will only be able to do so at substantially above the prevailing market cost of funds. Liquidity distress is generally associated with a severe deterioration in financial performance, but it can also result from unexpected adverse events or systemic difficulties. Liquidity and cashflows are evaluated within limits set on a transaction by transaction basis and allowances made for the impact of possible future price deviations in underlying instruments before entering into the transaction. The Nexgen Group relies on funding provided by NATIXIS. The table below analyses the non-derivative financial liabilities and corporation tax payable of the Group into relevant maturity groupings based upon the remaining period to the contractual maturity date as at the date of the financial statements. All borrowings maturing before the associated assets are funded by the immediate parent as referred to above. This allows the Group to meet all liabilities as they fall due. The tables have been compiled using fair values of the non-derivative financial liabilities and corporation tax payable based on the earliest date on which the Group can be required to pay. The table include both interest and principal cash flows. The Group does not monitor long term liquidity risk on an undiscounted basis. Liabilities

< 1 month

1 - 3 months

3 - 12 months

1 - 5 years

> 5 years

Total

As at December 31 2011 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Non interest bearing 111,431 5,195 7,901 18,134 163,806 306,467 Variable interest rate instruments 161,608 400,111 937,098 667,851 - 2,166,668 Fixed interest rate instruments 2,821,580 37,575 - - - 2,859,155 3,094,619 442,881 944,999 685,985 163,806 5,332,290 Liabilities

< 1 Month

1 - 3 months

3 - 12 months

1 - 5 Years

> 5 years

Total

As at December 31 2010 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Non interest bearing 122,542 318 - 60,362 116,861 300,083 Variable interest rate instruments 159,653 - 800,063 899,418 - 1,859,134 Fixed interest rate instruments 3,069,239 18,588 - - - 3,087,827 3,351,434 18,906 800,063 959,780 116,861 5,247,044

Non performing assets 31 December 31 December 2011 2010 EUR’000 EUR’000 Amounts included in loans and receivables at amorti sed cost Gross Amount 16,733 14,794 Impairment (13,851) (12,575) Net Amount 2,882 2,219


32

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management (continued) 4.3 Liquidity risk (continued) The following table details the Group’s expected maturity for its non-derivative financial assets. The table has been drawn up based on the fair values of contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group’s liquidity risk management as the liquidity is managed on a net asset and liability basis. Assets

< 1 Month

1 - 3 months

3 - 12 months

1 - 5 years

> 5 years

Total

As at December 31 2011 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Non interest bearing 2,080,776 - 3,792 - - 2,084,568 Variable interest rate instruments 174,243 34,546 1,089,739 840,068 61,010 2,199,606 Fixed interest rate instruments 213,023 10,240 542,677 235,301 - 1,001,241 2,468,042 44,786 1,636,208 1,075,369 61,010 5,285,415 Assets

< 1 Month

1 - 3 months

3 - 12 months

1 - 5 years

> 5 years

Total

As at December 31 2010 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Non interest bearing 2,187,918 - 59,236 3,872 - 2,251,026 Variable interest rate instruments 159,277 63,613 1,010,063 1,173,806 55,343 2,462,102 Fixed interest rate instruments 21,149 117,465 248,671 142,605 - 529,890 2,368,344 181,078 1,317,970 1,320,283 55,343 5,243,018 The amounts included above for variable interest rate instruments for both non-derivative financial assets and liabilities is subject to change, if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period. The following table details the Group’s liquidity analysis for its derivative financial instruments. The table has been drawn up based on the fair values of contractual net cash inflows and outflows on derivative instruments that settle on a net basis and the discounted gross inflows and outflows on those derivatives that require gross settlement. The net liabilities are presented within brackets. Liabilities are funded as they fall due with funds from Group’s parent, Natixis S.A. or from the proceeds of associated hedge asset sales. As at December 31 2011

< 1 month

1 - 3 months

3 - 12 months

1 - 5 years

> 5 years

Total

EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Net settled - Equity derivatives 127,344 43 412,054 (410,505) 153,202 282,138 - Credit default swaps - (17) (570) (1,219) (350) (2,156) - Interest rate swaps (29) (765) (2,821) 4,556 20,849 21,790 - Foreign exchange contracts 109 1,272 - (57) (22,902) (21,578) Gross settled - Equity derivatives - - 565 32,450 - 33,015 127,424 533 409,228 (374,775) 150,799 313,209


33

NOTES TO THE FINANCIAL STATEMENTS (continued) 4 Risk Management (continued) 4.3 Liquidity risk (continued) As at December 31 2010

< 1 Month

1 - 3 months

3 - 12 months

1 - 5 years

> 5 years

Total

EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 EUR’000 Net settled - Equity derivatives 56,332 (51,780) 343,015 (108,397) (5,321) 233,849 - Credit default swaps (904) (12) (63) (5,108) - (6,087) - Interest rate swaps 230 (1,343) (4,228) (15,051) 19,217 (1,175) - Foreign exchange contracts 6,266 (3,345) - 2,385 (16,627) (11,321) Gross settled - Equity derivatives - - - 33,573 - 33,573 61,924 (56,480) 338,724 (92,598) (2,731) 248,839 Reinsurance risks The Nexgen Group, via NRL, has undertaken contracts in the life business. NRL provides clients with protection in respect of the hybrid market and mortality risks embedded in guarantees associated with savings contracts, (for example Guaranteed Minimum Death Benefits or similar GMxB contracts). The market risks are primarily related to the level of equity and bond markets, which risks are comprehensively hedged internally to NCL. The net retained risks in NRL are predominantly related to mortality contingences and any related hedging shortfalls or gaps. 5 (i) Net gains on financial instruments at fair value through profit or loss:

This line records gains and losses on financial assets and liabilities employed for trading purposes or accounted under the fair value option through profit or loss, including the interest and dividends generated by these instruments. Year ended Year ended 31 December 31 December Group: 2011 2010 EUR’000 EUR’000 - European Union client transactions held for trading 79,420 58,818 - Non European Union client transactions held for trading (35,072) (404) - European Union client transactions at fair value through profit or loss 2,481 4,061 - Non European Union client transactions at fair value through profit or loss 20,073 52,113 - Residual positions management (1,173) (2,754) - Remuneration of own funds 2,234 879 67,963 112,713 Amounts include : - related parties – Parent 55,530 (8,959)

Net gains or losses on related party items relate to unrealised and realised gains or losses on financial instruments held for hedging purposes. 5 (ii) Net reinsurance income Year ended Year ended 31 December 31 December 2011 2010

EUR’000 EUR’000 - Premium income 9,183 8,969


34

NOTES TO THE FINANCIAL STATEMENTS (continued) 5 (ii) Net reinsurance income (continued) - Movement in technical reserves (47,222) (43,915) - Change in value of derivatives held for hedging purposes and other reinsurance related income 39,503 36,341 1,464 1,395 5 (iii) Other trading income/(expense) Year ended Year ended 31 December 31 December 2011 2010 EUR’000 EUR’000 - Transaction related professional fees (2,106) (1,486) - Other (expense) / income (1,622) 713 (3,728) (773) 6 (i) Operating expenses Year ended Year ended 31 December 31 December Group: 2011 2010 EUR’000 EUR’000 Operating expenses comprise: Staff Costs 24,503 45,105

Auditors’ remuneration:

-Audit of financial statements 167 200

-Other services 15 - Depreciation 178 478 Other administrative expenses - Professional fees 3,491 2,482 - Non executive directors fees 170 184 - Travel and subsistence 1,383 1,531 - Rent and office expenses 2,150 2,725 - Data information and research 791 937 - Other administrative expenses 1,536 1,347 34,384 54,889 Staff costs comprise: Wages and salaries 20,964 40,047 Social welfare costs 1,589 1,604 Pension costs 1,065 1,394 Other staff costs 885 2,060 24,503 45,105 6 (ii) Directors’ emoluments (included in staff co sts) 31 December 31 December 2011 2010 EUR’000 EUR’000 Directors Fees 198 258 Other emoluments 643 1,569 841 1,827 The number of persons employed by the Group at 31 December 2011 was 90 compared to 118 at 31 December 2010 (average 2011: 104, 2010: 119). No other fees were charged by the external independent auditor during 2011 and 2010 with respect to tax advisory or other assurance services.


35

NOTES TO THE FINANCIAL STATEMENTS (continued) 6 (iii) Share-based payments Cash settled variable compensation indexed to the value of Natixis shares: 31 December 31 December 2011 2010 EUR’000 EUR’000 Balance at the beginning of the year 15,605 - Charged to expenses during the year - 15,605 Paid during the year (5,277) - Balance at the end of the year 10,328 15,605

7 Taxation 31 December 31 December 2011 2010 EUR’000 EUR’000 Group: Corporation tax charge for the period 10,020 8,336 Deferred tax charge 85 42 10,105 8,378 Movement in deferred tax asset on the Consolidated Statement of Financial Position Deferred Tax Deferred Tax

31 December 31 December 2011 2010 EUR’000 EUR’000At 1 January 11 52Charged to the Income Statement (85) (42)Other movements - 1At 31 December (74) 11

31 December 31 DecemberThe tax charge for the year can be reconciled to the accounting profit as 2011 2010follows: EUR’000 EUR’000 Profit on ordinary activities before taxation 31,315 58,346 Profit on ordinary activities multiplied by the standard rate of Corporation tax in Ireland of 12.5% (2010: 12.5%) 3,914 7,293 Passive income taxed at 25% 32 -Disallowed expenses 35 339Exempt Income (1,956) (1,057)Adjustment in respect of previous years 461 (1,917)Differences due to foreign tax 7,643 3,716Depreciation in excess of capital allowances (24) 4 10,105 8,378


36

NOTES TO THE FINANCIAL STATEMENTS (continued)

8 Property and Equipment Computer Equipment

Office Equipment

Other Assets Total

Cost EUR’000 EUR’000 EUR’000 EUR’000 At 31 Dec 2010 3,061 1,266 52 4,379 Additions 55 15 - 70 Disposals (263) (673) - (936) Foreign currency gains/losses 92 67 - 159 At 31 Dec 2011 2,945 675 52 3,672 Accumulated Depreciation At 31 Dec 2010 2,901 1,245 51 4,197 Charge for the year 104 73 1 178 Disposals (237) (658) - (895) Foreign currency gains/losses 34 13 - 47 At 31 Dec 2011 2,802 673 52 3,527 Net Book Value At 31 Dec 2010 160 21 1 182 At 31 Dec 2011 143 2 - 145

9 Loans to and receivables from financial insti tutions, 31 December 31 December at fair value 2011 2010 EUR’000 EUR’000 Group - unsecured 1,694,881 1,221,633 - collateralised 149,596 80,177 1,844,477 1,301,810 Company - unsecured 10,251 10,094

10,251 10,094

Amounts include : - due from related parties – Parent 1,786,515 1,255,559

10 Loans to and receivables from customers, at f air value 31 December 31 December 2011 2010 EUR’000 EUR’000

Held for trading - collateralised 109,553 214,208

Designated at fair value through profit or loss - collateralised 351,790 467,879

461,343 682,087 The maximum exposure to credit risk on loans and receivables designated at fair value at 31 December 2011 was €351,790k (2010: €467,879k). The amount by which credit derivatives and similar instruments mitigate the exposure to credit risk was €196,677k (2010: €210,811k). The change in fair value attributable to credit risk for loans designated at fair value was not significant in 2011 or 2010.


37

NOTES TO THE FINANCIAL STATEMENTS (continued) 11 Securities held long, at fair value 31 Decemb er 31 December 2011 2010 EUR’000 EUR’000 Held for trading Shares: - listed 2,003,522 2,120,097 Bonds and convertibles - listed and/or indexed to listed shares 167,324 241,535 - corporate bonds – unlisted 177,155 160,595 Designated at fair value through profit or loss Bonds and convertibles - corporate bonds – unlisted 551,459 666,853 2,899,460 3,189,080

Included in the above note are client deals with a fair value of €167,324k which will be novated to NATIXIS during 2012. 12 Derivative financial assets, at fair value 31 December 31 December 2011 2010 Held for trading EUR’000 EUR’000 Analysed by categories of counterparty: - financial institutions 112,766 282,748 - other institutions 997,971 928,303 1,110,737 1,211,051

Analysed by maturity: Less than 1 year 970,548 990,382 between 1 and 5 years 109,595 164,023 greater than 5 years 30,594 56,646 1,110,737 1,211,051

Amounts include : - due from related parties – Parent 133,442 278,763

Included in the above note are client deals with a fair value of €23,255k which will be novated to NATIXIS during 2012. 13 Receivables 31 December 31 December 2011 2010 EUR’000 EUR’000 Group Other receivables 1,443 4,668 Deferred tax asset - 11 1,443 4,679


38

NOTES TO THE FINANCIAL STATEMENTS (continued) 14 Securities sold short, at fair value 31 Decem ber 31 December 2011 2010 EUR’000 EUR’000 Held for Trading Shares - listed 72,789 84,486 Listed options sold short 31,173 20,817 103,962 105,303

15 Derivative financial liabilities, at fair val ue 31 December 31 December 2011 2010 Held for trading EUR’000 EUR’000 Analysed by categories of counterparty: - financial institutions 341,761 511,744 - other institutions 455,767 450,468 797,528 962,212

Analysed by maturity: less than 1 year 230,953 635,984 between 1 and 5 years 522,098 266,850 greater than 5 years 44,477 59,378 797,528 962,212

Amounts include :

- due to related parties – Parent 332,810 479,104 Included in the above note are client deals with a fair value of €163,121k which will be novated to NATIXIS during 2012. 16 Loans from financial institutions 31 December 31 December 2011 2010 EUR’000 EUR’000 Group: - unsecured 3,264,625 3,617,092 - collateralised loans 1,761,198 1,329,869 5,025,823 4,946,961

Amounts include : - due to related parties – Parent 4,992,464 4,939,740

17 Accruals and other payables including taxe s 31 December 31 December 2011 2010 EUR’000 EUR’000 Group: Accrued expenses 23,761 29,575 Other creditors 999 416 24,760 29,991 Current Corporation tax payable 7,017 1,495 Deferred tax 74 - 31,851 31,486


39

NOTES TO THE FINANCIAL STATEMENTS (continued) 17 Accruals and other payables including taxe s (continued) Company: Due to group undertakings 1,271 1,181 Current Corporation tax payable 24 - 1,295 1,181

18 Debt securities in issue – held for trading 31 December 31 December 2011 2010 EUR’000 EUR’000 Debt securities in issue repayable: between 1 and 5 years - 39,863 - 39,863

19 Fair value measurements recognised in the st atement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for

identical assets or liabilities. • Level 2 fair value measurements are those derived from inputs other than quoted prices included within

Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the

asset or liability that are based on unobservable market data. Level 1 Level 2 Level 3 Total EUR’000 EUR’000 EUR’000 EUR’000 31 December 2011 Financial assets at fair value through profit or loss

Loans to and receivables from financial institutions 149,804 1,694,673 - 1,844,477 Loans to and receivables from customers - 461,343 - 461,343 Securities held long 2,003,523 892,145 3,792 2,899,460 Derivative financial assets, at fair value - 1,110,737 - 1,110,737

Total 2,153,327 4,158,898 3,792 6,316,017 Level 1 Level 2 Level 3 Total EUR’000 EUR’000 EUR’000 EUR’000 Financial liabilities at fair value through profit or loss

Loans from financial institutions 117,496 4,908,327 - 5,025,823 Securities sold short 72,789 31,173 - 103,962 Derivative financial liabilities’ at fair value 86,868 635,180 75,480 797,528

Reinsurance liabilities - - 170,654 170,654 Total 277,153 5,574,680 246,134 6,097,967


40

NOTES TO THE FINANCIAL STATEMENTS (continued) 19 Fair value measurements recognised in the st atement of financial position (continued)

Level 1 Level 2 Level 3 Total EUR’000 EUR’000 EUR’000 EUR’000 31 December 2010 Financial assets at fair value through profit or loss

Loans to and receivables from financial institutions 80,231 1,221,579 - 1,301,810 Loans to and receivables from customers - 682,087 - 682,087 Securities held long 2,093,604 1,091,605 3,871 3,189,080 Derivative financial assets, at fair value - 1,211,051 - 1,211,051

Total 2,173,835 4,206,322 3,871 6,384,028 Level 1 Level 2 Level 3 Total EUR’000 EUR’000 EUR’000 EUR’000 31 December 2010 Financial liabilities at fair value through profit or loss

Loans from financial institutions 12,463 4,934,498 - 4,946,961 Securities sold short 84,486 20,817 - 105,303 Derivative financial liabilities’ at fair value - 858,551 103,661 962,212 Debt securities in issue - 39,863 - 39,863

Reinsurance liabilities - - 123,431 123,431 Total 96,949 5,853,729 227,092 6,177,952 There were no transfers between Level 1 and 2 in the period. 20 Reconciliation of Level 3 fair value measure ments of financial assets

Fair value through profit or loss

Securities held long

2011 2010 EUR’000 EUR’000 Opening balance 1 January 3,871 3,751 Total Gains or Losses: - in profit or loss (79) 120

Closing balance 31 December 3,792 3,871


41

NOTES TO THE FINANCIAL STATEMENTS (continued)

20 Reconciliation of Level 3 fair value measure ments of financial liabilities (continued)


31 December 2011

Derivative financial

liabilities’ at fair value

Reinsurance liabilities

Total

EUR’000 EUR’000 EUR’000 Opening balance 1 January 103,661 123,431 227,092 Total Gains or Losses: - in profit or loss (39,889) 38,507 (1,382) - Settlements 11,708 8,716 20,424 Closing balance 31 December 75,480 170,654 246,134


31 December 2010

Derivative financial

liabilities’ at fair value

Reinsurance liabilities

Total

EUR’000 EUR’000 EUR’000 Opening balance 1 January 63,636 80,342 143,978 Total Gains or Losses: - in profit or loss 26,942 34,965 61,907 - Settlements 13,083 8,124 21,207 Closing balance 31 December 103,661 123,431 227,092 Significant assumptions used in determining fair value of financial assets and liabilities Volatility Assumptions are made about implied volatility levels. The volatility assumption is the one significant input to the valuation of Level 3 assets and liabilities. All other significant inputs are observable. These volatilities are continually monitored internally by management based on actual experience. The following table shows the sensitivity of fair values to a +/- 10% relative shift in volatilities as at 31 December 2011: Impact on Profit or Loss

2011 2010

Favourable

Change Unfavourable

Change Favourable

Change Unfavourable

Change EUR’000 EUR’000 EUR’000 EUR’000 All assets and liabilities 2,043 (2,244) 1,495 (1,631)


42

NOTES TO THE FINANCIAL STATEMENTS (continued) 21 Fair value of derivative financial instrumen ts - Notionals

Dealing in derivative financial instruments forms a fundamental part of the Group’s activities. Accordingly, the Group had a number of interest rate swaps, equity swaps, equity forwards, equity options, equity index futures, foreign exchange spot and forward contracts and credit default swap contracts at 31 December 2011 and 31 December 2010. Gains and losses arising on marking these financial instruments to market are included in Net Gain in Financial Instruments at Fair Value through Profit & Loss in accordance with the Group’s accounting policies. The notional and fair value amounts of the contracts are shown below: 31 December 2011 Notional Fair Fair Amount Value Value Asset Liability EUR’000 EUR’000 EUR’000 Interest rate contracts 6,800,117 67,780 45,991 Foreign exchange contracts 313,951 1,820 23,398 Equity contracts 11,735,612 1,039,001 723,847 Credit derivative contracts 2,143,848 2,136 4,292 Total contracts 20,993,528 1,110,737 797,528 31 December 2010 Notional Fair Fair Amount Value Value Asset Liability EUR’000 EUR’000 EUR’000 Interest rate contracts 9,740,658 74,683 75,858 Foreign exchange contracts 791,975 9,063 20,385 Equity contracts 12,320,245 1,126,424 859,001 Credit derivative contracts 2,270,150 881 6,968 Total contracts 25,123,028 1,211,051 962,212 22 Fair Value of financial instruments – Deferred d ay 1 profit 31 December 31 December 2011 2010 EUR’000 EUR’000 Balance at 1 January 7,149 7,958 Deferral of profit on new transactions 317 745 Recognised in the income statement during the period (2,405) (1,554) Balance at 31 December 5,061 7,149


43

NOTES TO THE FINANCIAL STATEMENTS (continued) 23 Ordinary share capital

Authorised Number of

Shares

Ordinary shares of EUR 1 each at the beginning of the year 100,000,000 Ordinary shares of EUR 1 each at the end of the year 100,000,000

Issued Number of

Shares

Ordinary shares of EUR 1 each at the beginning of the year 100,000,000 Ordinary shares of EUR 1 each at the end of the year 100,000,000 The ordinary shares carry one vote per share and carry a right to dividends. 24 Reserves

Group Other

Reserves

Foreign Exchange Reserves

Retained Earnings

Total EUR ‘000 EUR ‘000 EUR ‘000 EUR ‘000 At 1 January 2011 683 227 144,096 145,006 Profit retained for the year - - 21,210 21,210 Currency translation difference on foreign currency net investments - 118 - 118 At 31 December 2011 683 345 165,306 166,334

Company Other

Reserves Retained

Earnings Total EUR '000 EUR '000 EUR '000 At 1 January 2011 683 19,545 20,228 Profit retained for the year - 45 45 At 31 December 2011 683 19,590 20,273 25 Foreign exchange reserve 31 December 31 December 2011 2010 EUR'000 EUR'000 At beginning of year 227 58 Exchange translation adjustment during the year 118 169 At end of year 345 227 Foreign exchange reserve represents exchange differences relating to the translation from the functional currencies of the Group’s foreign subsidiaries into Euro. 26 Reconciliation of movement in number of issu ed shares

There were no movements during the year. 27 Dividends proposed and paid The Company did not propose or pay a dividend to its parent during the year (2010: Nil).


44

NOTES TO THE FINANCIAL STATEMENTS (continued) 28 Reinsurance – liabilities 31 December 31 December 2011 2010 EUR'000 EUR'000 Fair value of derivatives embedded in life contracts (including market risk and other reserves) 170,654 123,431 170,654 123,431 29 Related party transactions The Group has carried out a number of transactions during the period with NATIXIS. All of the transactions with the shareholders of the Group and its affiliates are carried out in the normal course of business and encompass loans, deposits, repurchase and reverse repurchase agreements, purchase and sale of securities, fees (paid and received), derivative transactions and guarantees. Details of the amounts due to and from related parties by other Group companies at 31 December 2011 are disclosed in the relevant notes above. (See notes 5, 9, 12, 15, 16). The amount of Key Management Personnel Compensation paid by the Group for the year was:

31 December 31 December 2011 2010

EUR'000 EUR'000 Short term employee benefits 1,289 3,003 Post employment benefits (employer payments to pension scheme) 68 105 Total 1,357 3,108 30 Commitments and guarantees The Company issued a letter of undertaking on 6 October 2007 to the Monetary Authority of Singapore (MAS) in respect of all present and future obligations of its indirect 100% subsidiary Natixis Corporate Solutions (Asia) Pte Ltd ("NCSA"). The maximum amount of the undertaking as at 31 December 2011 is EUR11.6m (SGD20m); 2010: EUR11.6m (SGD20m). As at 31 December 2011 the Group had a commitment to buy €1m worth of marketable securities (31 December 2010: buy a net €1.5m worth of marketable securities). This commitment was settled within the standard settlement period shortly after the Group’s year end date. 31 Off Balance Sheet Collateral & Pledges Securities Borrowing and Lending, Repurchase and Reverse Repurchase Agreements The Group enters into collateralised reverse repurchase, repurchase agreements, securities borrowing and securities lending transactions that may result in credit exposure in the event that the counterparty to the transaction is unable to fulfil its contractual obligations. The Group controls credit risk associated with these activities by monitoring counterparty credit exposure and collateral values on a daily basis and requiring additional collateral to be deposited with or returned when deemed necessary.


45

NOTES TO THE FINANCIAL STATEMENTS (continued) 31 Off Balance Sheet Collateral & Pledges (continue d) Assets sold / lent subject to repurchase agreements 31 December

2011 31 December

2010 EUR 000 EUR 000 Fair value of securities lent which can be sold or repledged: 150,763 8,051 Value of collateral taken: 110,707 5,242 Liabilities covered by reverse repurchase or stock borrow agreements 31 December

2011 31 December

2010 EUR 000 EUR 000

Fair value of securities borrowed which can be sold or repledged: 484,387 515,045 Value of collateral placed 258,587 305,677 Other Pledged securities The company has also entered into a number of transactions with counterparties who have pledged securities to the Group in a third party bank account as security for the transactions, usually through share forward agreements. These shares cannot be sold or re-pledged.

31 December 2011

31 December 2010

EUR 000 EUR 000

Fair Value of shares pledged to Group 207,894 592,360 32 Cash and Cash Equivalents For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances: 31 December 31 December 2011 2010 EUR'000 EUR'000 Group Cash at bank and in hand 75,665 63,154 Loans to and receivables from financial institutions 368,829 158,388 (with a maturity at date of acquisition of less than 3 months) 444,494 221,542 31 December 31 December 2011 2010 EUR'000 EUR'000 Company Cash at bank and in hand 214 212 Loans to and receivables from financial institutions 10,251 10,094 (with a maturity at date of acquisition of less than 3 months) 10,465 10,306


46

NOTES TO THE FINANCIAL STATEMENTS (continued) 33 Companies consolidated in the Nexgen Group Financial Statements

% Interest % Interest Nexgen Financial Holdings Limited 31

December 31

Decembe2011

r2010

Amount of Investment

(Original Currency)

Amount of Investment (Euro

Equivalent)

Country of incorporation and principal

area of operation

Nature of Business

Nexgen Reinsurance Limited

100% 100% EUR 5,000,000 EUR 5,000,0001 Ireland Reinsurance

Universe Holdings Limited

100% 100% EUR 523,440 EUR 523,4401 Cayman Islands

Financial Structures

Nexgen Mauritius Limited

100% 100% USD 2

EUR 11 Mauritius Dormant

Nexgen Capital Limited

100% 100% EUR 101,355,632 EUR 101,355,632 1 Ireland Financial Structures

Natixis Corporate Solutions Limited

100% 100% EUR 4,223,814 EUR 4,223,8141 Ireland Financial Structuring

Natixis Corporate Solutions (Asia) Pte Ltd2

100% 100% NIL

NIL Singapore Financial Structuring

Ultima Trading & Global Strategies (UTGS 1)2

100% 100% NIL

NIL Cayman Islands


Ultima Trading & Global Strategies II (UTGS 2)2

100% 100% NIL

NIL Cayman Islands


Ultima Trading & Global Strategies III (UTGS 3)2

100% 100% NIL

NIL Cayman Islands


1 Company Holdings. Total cost amounts to EUR 111,102,887 as at 31 December 2011 and 2010. 2 Indirect holdings 34 Immediate and Ultimate Holding Company The Company’s immediate parent company is NATIXIS S.A. which is a banking group registered in France and listed on the CAC 40 in Paris. The Company’s ultimate parent is BPCE, a French banking group created from the merger of the Banque Populaire and Caisse d'Epargne cooperative banking groups which hold a combined 72% share in NATIXIS. The largest group for which group accounts are prepared is BPCE. 35 Events after the year end date Following a decision by the Group’s parent company, NATIXIS S.A., in January 2012 the Irish regulated entities have been placed into run off. Specifically, this decision affects Nexgen Capital Limited and Natixis Corporate Solutions Limited. These events, however, are not deemed to have any impact on the 2011 results and the Group continues to operate as a going concern with the support of NATIXIS. Please see the Directors Report on pages 6 and 7 for more information. 36 Approval of Financial Statements The directors approved and authorised the 2011 Financial Statements for issue on 22 February 2012.

Nexgen Financial Holdings Limited Annual Report and Audited … · 2015-03-12 · Nexgen Capital Limited (‘NCL’) and NATIXIS CORPORATE SOLUTIONS LIMITED (‘NCSL’) which are

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