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NATIXIS WEALTH MANAGEMENT LUXEMBOURG Annual accounts 2018

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Page 1: NATIXIS WEALTH MANAGEMENT LUXEMBOURG...4 NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUA ACCOUNTS 2018 Report on the annual accounts Opinion In our opinion, the attached annual accounts

NATIXIS WEALTH MANAGEMENT LUXEMBOURG

Annual accounts 2018

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 20182

MEMBERS OF THE BOARD OF DIRECTORS *

CHAIRMANGeorges-Éric Nivelleau de la BrunièreChief Executive Officer Natixis Wealth Management

DIRECTORSJacques-Antoine AllainDeputy General Manager Natixis Wealth Management

Olivier BouvetDeputy Chief Executive OfficerNatixis Wealth Management

Alain DemoustierSenior Banker BPCE’s networks Natixis

Nathalie Desreumaux Head of Financial Operations, Finance Natixis

Nicolas Dhonte Deputy Chief Executive Officer Natixis Wealth Management Luxembourg

Évelyne ÉtienneDeputy Chief Executive Officer Natixis Wealth Management Luxembourg

Audrey KoenigDeputy General ManagerNatixis Wealth Management

Patrick RougierDeputy Chief Executive Officer Natixis Wealth Management Luxembourg

Emmanuel Strauss Tax Division Director Natixis

Éric ThéronChief Executive Officer Natixis Wealth Management Luxembourg

SENIOR MANAGEMENTÉric ThéronChief Executive Officer

Nicolas DhonteDeputy Chief Executive Officer

Évelyne ÉtienneDeputy Chief Executive Officer

Patrick RougierDeputy Chief Executive Officer

STATUTORY AUDITORSPricewaterhouseCoopersCooperative Society Luxembourg * As of December 31, 2018

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MEMBERS OF THE BOARD OF DIRECTORS

ANNUAL ACCOUNTS 2018

MANAGEMENT REPORT 2018

8 Balance sheet and off-balance sheet items as at 31 December 2018

10 Profit and loss account for the year ended 31 December 2018

12 Appendix as at 31 December 2018

AUDIT REPORT

TABLE OF CONTENTS

3

2

7

29

4

Warning: this is a free translation of the French version. In the event of discrepencies between the French version and the translation, the French version prevails.

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 20184

Report on the annual accountsOpinionIn our opinion, the attached annual accounts give a true and fair view of the financial position of Natixis Wealth Management Luxembourg (formerly Natixis Bank) (the “Bank”) as at 31 December 2018, and of the results of its operations for the year then ended, in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the annual accounts.

What we have auditedThe Bank’s annual accounts comprise:• the balance sheet and off-balance sheet items as at

31 December 2018;• the profit and loss account for the year then ended;• the appendix to the annual accounts, including a summary

of the principal accounting policies.

Basis of the opinionWe conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (|SAs) as adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF). Our responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseur d’entre-prises agréé” for the audit of the annual accounts” section of our report.

We believe that the audit evidence we have obtained is suf-ficient and appropriate to provide a basis for our opinion.

We are independent from the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (the IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the annual accounts. We have fulfilled our other ethical res-ponsibilities under those ethical requirements.

To the best of our knowledge and belief, we declare that we have not provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014.

The non-audit services that we have provided to the Bank and its controlled undertakings, if applicable, for the year then ended, are disclosed in Note  32 to the annual accounts.

Key audit mattersKey audit matters are those matters that, in our professio-nal judgment, were of most significance in our audit of the annual accounts of the current period, and include the most significant assessed risks of material misstatement (whe-ther or not due to fraud). These matters were addressed in the context of our audit of the annual accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

AUDIT REPORT TO THE BOARD OF DIRECTORS OF NATIXIS WEALTH MANAGEMENT LUXEMBOURG(FORMERLY NATIXIS BANK)

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 LuxembourgT : +352 494848 1, F : +352 494848 2900, www.pwc.luCabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)R.C.S. Luxembourg B 65 477 - TVA LU25482518

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5

Other information The Board of Directors is responsible for the other informa-tion. The other information comprises the information stated in the management report but does not include the annual accounts and our audit report thereon.

Our opinion on the annual accounts does not cover the other information and we do not express any form of assu-rance conclusion thereon.

In connection with our audit of the annual accounts, our responsibility is to read the other information identified above and, in doing so, consider whether the other informa-tion is materially inconsistent with the annual accounts or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstate-ment of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Board of Directors for the annual accounts

The Board of Directors is responsible for the preparation and fair presentation of the annual accounts in accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the annual accounts, and for such internal control as the Board of Directors deter-mines is necessary to enable the preparation of annual accounts that are free from material misstatement, whe-ther due to fraud or error.

In preparing the annual accounts, the Board of Directors is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Key questions for the audit How our audit answered these key questions

Recognition of commission income

For the year ended 31 December 2018, the Bank has gene-rated commission incomes for EUR 15.2 millions as dis-closed on page 11. These revenues derived mainly from the services the Bank was rendering to its clients and are mainly resulting from a high volume of individual transac-tions. Moreover, these transactions are recorded based on different methods of computation, some of them being not fully automatised.

Although in most of the cases the value of each transaction is low, and as a result could indicate an individual error would be both difficult to detect and not material, it might happen that a failure impacting invariably a high number of transactions related to certain commission incomes might lead to a number of errors that could in aggregate, have a material impact on the annual accounts.

As a consequence, and considering that commission incomes represent a significant part of the total revenue earned by the Bank for the year ended 31 December 2018, we focused on the revenue recognition in commission incomes.

We assessed the Banks relevant internal control environ-ment regarding the commission income. We considered the respective business organisation (i.e.: segregation of duties applied in most of the tasks linked to income flows) and IT systems linked to the recognition of the commission incomes.

We performed the following procedures: • Inspection of the relevant information and supporting docu-ments (contract, broker statements, etc.) for a sample of transactions;• Tests of controls on the set-up of fee schedule in the IT system of the Bank;• Recomputation of some commission income based on a sample to ensure the computation was in line with what was agreed with the client and/or the general terms and condi-tions of the Bank and check that the amount computed was accurately booked in the accounting system of the Bank;• Test of details, based on a sample, on the underlying items used for the computation of commissions (e.g.: we have performed tests on the assets held by the Bank on behalf of client included in off-balance sheet items, since these assets are used as a basis of computation for the commissions);• Inspection, based on a sample, of controls performed by the back-office department on the assets held by the Bank on behalf of its clients and that are used as a basis of com-putation of commissions. Control tests on the configuration of the pricing schedules in the Bank’s IT system.

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 20186

Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the annual accountsThe objectives of our audit are to obtain reasonable assu-rance about whether the annual accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are consi-dered material if, individually or in the aggregate, they could reasonably be expected to influence the economic deci-sions of users taken on the basis of these annual accounts.

As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and with |SAs as adopted for Luxembourg by the CSSF, we exercise professional judg-ment and maintain professional scepticism throughout the audit. We also:• we identify and assess the risks of material misstatement of the annual accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appro-priate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepre-sentations, or the override of internal control; • obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appro-priate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Bank’s internal control;• evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and rela-ted disclosures made by the Board of Directors;• conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast signifi-cant doubt on the Bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our audit report to the related disclosures in the annual accounts or, if such disclo-sures are inadequate, to modify our opinion. Our conclu-sions are based on the audit evidence obtained up to the date of our audit report. However, future events or condi-tions may cause the Bank to cease to continue as a going concern;

• evaluate the overall presentation, structure and content of the annual accounts, including the disclosures, and whether the annual accounts represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we iden-tify during our audit.

We also provide those charged with governance with a sta-tement that we have complied with relevant ethical require-ments regarding independence, and to communicate with them all relationships and other matters that may reaso-nably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the annual accounts of the cur-rent period and are therefore the key audit matters. We des-cribe these matters in our audit report unless law or regulation precludes public disclosure about the matter.

Report on other legal and regulatory requirementsThe management report is consistent with the annual accounts and has been prepared in accordance with appli-cable legal requirements.

We have been appointed as “Réviseur d’Entreprises Agréé” of the Bank by the Board of Directors on 22 March 2017 and the duration of our uninterrupted engagement, including previous renewals and reappointments, is 3 years.

PricewaterhouseCoopers, Société coopérative Represented by Cyril Lamorlette

Luxembourg, 10 April 2019

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7

Annualaccounts

2018

8Balance sheet and off-balance sheet items

as at 31 December 2018

10Profit and loss account for the year ended

31 December 2018

12Appendix as at 31 December 2018

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 20188

ASSETS (IN EUR) Notes 2017 2018

Cash in hand, balances with central banks and post office banks

3, 5, 38, 39 396,260,778 390,805,442

Loans and advances to credit institutions 3, 6, 12, 38, 39 1,816,585,212 2,637,859,709a) repayable on demand 153,035,331 146,917,537b) other loans and advances 1,663,549,881 2,490,942,172

Loans and advances to customers 3, 6, 12, 38, 39 1,248,829,525 1,313,962,004

Bonds and other fixed-income transferablesecurities

3, 7, 12, 38, 39 33,311,369 19,987,420

Shares and other variable-yield securities 3, 4, 7, 38, 39 6,111,016 9,513

Intangible assets 3, 10, 11 16,652,603 15,383,941

Tangible assets 3, 10 373,476 564,491

Other assets 3, 8 1,089,436 2,332,291

Prepayments and accrued income 3, 9, 12 6,191,825 4,941,596

TOTAL ASSETS 13 3,525,405,240 4,385,846,387

The accompanying notes in the appendix form an integral part of the annual accounts.

BALANCE SHEET AND OFF-BALANCE SHEET ITEMS AS AT 31 DECEMBER 2018

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Annual Accounts

9

LIABILITIES (IN EUR) Notes 2017 2018

Amounts owed to credit institutions 3, 20, 38 2,088,124,052 2,688,433,655a) repayable on demand 37,497,738 1,730,792b) with agreed maturity dates or periods of notice 2,050,626,314 2,686,702,863

Amounts owed to customers 3, 20, 38 562,131,748 832,219,881a) other debts

aa) repayable on demand 526,851,916 760,899,975ab) with agreed maturity dates or periods of notice 35,279,832 71,319,906

Other liabilities 3, 14, 20 7,753,309 1,890,135

Accruals and deferred income 3, 15, 20 7,195,722 6,791,430

Provisions 3 4,312,697 5,353,542a) provitions for taxation 16 1,758,222 700,329b) other provisions 17 2,554,475 4,653,213

Subscribed capital 3, 18 810,542,500 810,542,500

Reserves 3, 19 30,639,464 33,487,145

Profit for the financial year 3, 19 14,705,748 7,128,099

TOTAL LIABILITIES 21 3,525,405,240 4,385,846,387

The accompanying notes in the appendix form an integral part of the annual accounts.

OFF-BALANCE SHEET (IN EUR) Notes 2017 2018

Contingent liabilities 3, 22, 38, 39 13,754,796 13,574,997of which: - guarantees and assets pledged as collateral security 13,754,796 13,574,997

Commitments 3, 23, 24, 38, 39 46,762,245 56,836,571

The accompanying notes in the appendix form an integral part of the annual accounts.

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 201810

PROFITS AND LOSS ACCOUNT

Year ended 31 December 2018

(IN EUR) Notes 2017 2018

Interest receivable and similar income 70,832,614 62,727,094of which: - arising from fixed-income transferable securities 1,121,165 247,819

Interest payable and similar charges (35,399,652) (36,102,723)

Income from transferable securities 207,014 207,834

Commissions receivable 18,843,877 15,239,741

Commissions payable (4,381,807) (2,208,869)

Net profit or loss on financial operations Commissions receivable

7 533,497 419,998

Other operating income 27 2,756,730 987,674

General administrative expenses (24,124,852) (27,530,289)a) staff costs 29, 30 (14,322,811) (16,818,869)of which: - wages and salaries (10,362,092) (12,342,913)- social security costs (2,344,346) (2,674,218)

of which: - social security costs relating to pensions (1,485,342) (1,774,422)

b) other administrative expenses 32, 35 (9,802,041) (10,711,420)

Value adjustments in respect of intangible and tangible assets

10 (2,323,601) (3,273,206)

Other operating charges 33 (6,415,151) (2,493,507)

Value adjustments in respect of loans and advances and provisions for contingent liabilities and for commitments

28 (2,499,860) (150,438)

CARRIED FORWARD 18,008,418 7,823,309

The accompanying notes in the appendix form an integral part of the annual accounts.

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Annual Accounts

11

(IN EUR) Notes 2017 2018

Carried forward: 18,008,418 7,823,309

Value re-adjustments in respect of loans and advances and provisions for contingent liabilities and for commitments 3,198,768 197,721

Tax on profit on ordinary activities 16 (4,568,571) (691,605)

Profit on ordinary activities after tax 16,659,006 7,329,425

Other taxes not shown under the preceding item (1,953,258) (201,326)

PROFIT FOR THE FINANCIAL YEAR 14,705,748 7,128,099

The accompanying notes in the appendix form an integral part of the annual accounts.

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 201812

Note 1 - General

1.1. INCORPORATION OF THE BANKNatixis Wealth Management Luxembourg (formerly Natixis Bank) hereafter “the Bank”, was incorporated in Luxembourg on 24 November 1989 as a Société Anonyme.

The current name, Natixis Wealth Management Luxembourg, was adopted following a decision taken during the Extraordinary General Meeting of Shareholders on 18 October 2018.

The Bank opened a branch in Belgium in July 2014.

As at December 31, 2018, the Bank is a wholly owned sub¬sidiary of Natixis Trust, a company governed by the law of Luxembourg having ist registered office in Luxembourg, itself a subsidiary of the Natixis Group in France.

1.2. ADMINISTRATION OF THE BANKThe Bank’s Board of Directors is mainly composed of direc-tors of the Natixis Group. The Bank’s commercial policy and evaluation rules, inasmuch as they are not determined by Luxembourg laws and regulations, are decided and moni-tored by the Board of Directors.

1.3. NATURE OF THE BANK’S BUSINESSThe corporate object of the Bank is to undertake any ban-king and lending activities.

The Bank has developed a range of products and activities which it makes available to all its shareholders distributed over various geographic areas, as well as to its direct clients.

Note 2 - MAIN ACCOUNTING POLICIESThe Bank’s annual accounts have been prepared in accor-dance with legal requirements and with the accounting principles generally accepted in the banking sector in the Grand Duchy of Luxembourg.

The Bank’s accounting year coincides with the calendar year.

The group’s consolidated accounts are available as descri-bed in Note 34.

The principal valuation principles which have been applied are as follows:

2.1. THE DATE OF RECORDING OF TRANSACTIONS IN THE BALANCE SHEETAssets and liabilities are stated in the balance sheet accor-ding to when the amounts concerned become cleared funds, that is, their date of effective transfer.

2.2. FOREIGN CURRENCIESThe annual accounts are expressed in the Bank’s capital currency which is the Euro (EUR).

The Bank maintains the multi-currency accounting method that records all transactions in their original currency on the day on which the contract is concluded.

Revenues and expenses denominated in foreign currencies are translated into EUR at the exchange rates prevailing on the date they are recorded.

All asset or liability items denominated in foreign currencies, including assets which are recognised as financial assets and tangible and intangible assets, are converted into the currency of the share capital at the closing spot rate appli-cable at the balance sheet date.

Unsettled forward currency transactions are translated into EUR at the forward rate applicable for the remaining term ruling on the balance sheet date.

APPENDIX31 DECEMBER 2018

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Appendix

Uncovered forward transactions are valued individually on the basis of the forward rates applicable at the balance sheet date. Unrealised revaluation profits are ignored; whe-reas provision is set up in respect of unrealised revaluation losses on the liabilities side of the balance sheet under “Provisions: other provisions”.

2.3. FINANCIAL INSTRUMENTSThe Bank’s potential commitments deriving from financial instruments, such as interest rate swaps, forward rate agreements, financial futures and options are recorded on the transaction date as off-balance sheet items.

On the year end, a provision is set up in respect of unrea-lised losses resulting from the individual revaluation at the market rate of unsettled transactions. This provision is included on the liabilities site of the balance sheet under “Provisions: other provisions”. Unrealised revaluation profits are ignored. No provision is set up in those cases where a financial instrument is hedged by a reverse transaction so that no open position exists.

No provision is set up in those cases where a financial ins-trument clearly covers an asset or a liability item and where the economic unity is established.

2.4. SPECIFIC VALUE ADJUSTMENTS ON DOUBTFUL DEBTS AND UNRECOVERABLE DEBTSThe Bank makes specific value adjustments on doubtful debts and unrecoverable debts within the limits considered as appropriate by the Board of Directors.

The value adjustments are deducted from the asset items to which they relate.

2.5. LUMP SUM PROVISIONIn accordance with the Luxembourg tax legislation, the Bank’s policy consists of establishing a lump sum provi-sion as defined in the legislation governing prudential supervision of banks. The purpose of this provision is to cover probable risks but not yet being clearly indentified as at the date of the preparation of the annual accounts.

The maximum rate of the provision, in the form of a tax exemption, amounts to 1.25% of the risk exposures.

The lump sum provision is split in proportion to the com-ponents used to calculate the provision between:

- a value adjustment portion, which is presented as a reduction in the value of the assets that compose the risk exposures; and

- a provision portion, which is attributable to the credit risk resulting from the off-balance sheet items, the exchange rate risk and the market risks and which appears on the liabilities side of the balance sheet under “Provision: Other provisions” item.

As at 31 December 2018, the Bank has established a lump sum provision, which is presented as a reduction in the value of the asset upon the calculation of the provision is based, amounting to EUR 2,499,860 (2017: EUR 2,499,860).

2.6. OTHER PROVISIONSThe Bank may create provisions for risk and charges with the aim of:- covering losses or debts, the nature of which is clearly defi-ned and which at the date of the balance sheet, are either likely to be incurred or certain to be incurred but uncertain as to their amount or the date they will arise;

- covering charges which have their origins in the financial year under review or in a previous financial year, the nature of which is clearly defined and which, at the balance sheet date, are either likely to be incurred or certain to be incurred but uncertain as to their amount or the date on which they will arise.

2.7. SECURITIES AND FINANCIAL ASSETSSecurities and financial assets are recorded at their pur-chase price.

The Bank applies the weighted average cost method to determine the gains or losses realised or unrealised.

Variable yield securities, included in the categories invest-ment, structural and trading, are valued at the lower of cost or market value respectively the fair value.

2.8. SHARES AND OTHER VARIABLE-YIELD SECURITIESShares and other variable-yield securities are valued in accordance with the principles stated in note 2.7.

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NATIXIS WEALTH MANAGEMENT LUXEMBOURG I ANNUAL ACCOUNTS 201814

2.9. BONDS AND FIXED-INCOME TRANSFERABLE SECURITIESBonds and fixed-income transferable securities are valued in accordance with the principles stated in note 2.7.

2.10. FORMATION EXPENSESFormation expenses are written off on a straight-line basis over a period of maximum five years.

2.11. OTHER INTANGIBLE ASSETSThe value of other intangible assets with limited useful eco-nomic life is reduced by value adjustments calculated to write off the value of such assets over their useful econo-mic life.

Depending on the assets, the amortisation periods are spread over three to ten years.

2.12. TANGIBLE ASSETSTangible assets are recorded at their purchase price.

The value of tangible assets with limited useful economic life is reduced by value adjustments.

Depending on the assets, the amortisation periods are spread over three to eight years.

2.13. DEBTSDebts are recorded in liabilities side at their reimbursement value.

2.14. RECEIVABLESReceivables are recorded on the balance sheet at their nominal value, less any potential repayments and value adjustments. The Bank’s policy is to establish specific pro-visions for doubtful receivables, depending on the circums-tances and the amounts defined by the relevant governance bodies.

2.15. TAXESTax charges are recorded in accordance with the accruals principle and not during the financial year during which they are paid.

2.16. PREPAYMENTS AND ACCRUED INCOMEThis caption includes interests and commissions income accrued and not yet due, as well as expenses recorded during the financial year but related to a subsequent finan-cial year.

2.17. ACCRUALS AND DEFERRED INCOMEThis caption includes interests and commissions charges accrued and not yet due, as well as income received during the financial year but related to a subsequent financial year.

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Appendix

Primary non-trading financial instruments are shown as follows according to their residual maturity as at 31 December 2018:

(EUR MILLION) BOOK VALUE AFTER LUMP SUM PROVISION

Less than 3 months

3 months to 1 year

1 year to 5 years

More than 5 years

or no maturityTotal

2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Instrument class (financial assets)Cash in hand, balances with central banks and post office banks

396.3 390.8 - - - - - - 396.3 390.8

Loans and advances to credit institutions

repayable on demand 153.0 146.9 - - - - - - 153.0 146.9other receivables 136.5 443.1 323.9 743.2 1,203.1 185.3 - 1,119.3 1,663.5 2,490.9

Loans and advances to customers

98.2 134.1 229.4 251.0 218.1 192.3 703.1 736.6 1,248.8 1,314.0

Bonds and other fixed-income transferable securities

8.3 - 5.0 - 20.0 20.0 - - 33.3 20.0

Shares and other variable-yield securities

- - - - - - 6.1 - 6.1 -

Total financial assets 3,501.0 4,362.6

Non financial assets 24.4 23.2

Total assets 3,525.4 4,385.8

Note 3 - Breakdown of primary non-trading financial instruments according to the residual maturityPrimary financial instruments are shown in notes 3 and 4 depending on whether or not they belong to the trading portfolio, within the meaning of the current regulations on the definition of capital ratios pursuant to Article 56 of the amended Law of 5 April 1993 of the financial sector and as defined hereinafter.

The trading portfolio includes:

• The own positions, regardless of whether they are long or short, in:- money market instruments;- fixed-income transferable securities;- variable-yield securities, including in collective investment fund units;- commodities.

• Derivative instruments relating thereto, when they are taken or held with the intention of:- trading them short-term; or- profiting short-term from actual and/or discounted diffe-rences between their purchase and sale price; or- profiting short-term from other price or interest rate varia-tions.

• The positions resulting from simultaneous purchases and sales carried out on own account, the positions linked to underwritten securities or money market instruments com-mitments;

• Any other positions taken or held with a view to covering other trading portfolio positions.

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Note 4 - Breakdown of financial instruments included in the trading portfolioThe bank does not have a trading portfolio as at 31 December 2017 or 31 December 2018.

Note 5 - Cash in hand, balances with central banks and post office banksIn accordance with the requirements of the European Central Bank, the Luxembourg Central Bank (hereinafter “BcL”), effec-tive from 1 January 1999, implemented a system of manda-tory minimum reserves which applies to all Luxembourg credit institutions. As at 31 December 2018 out of a total amount of EUR  390,495,309 (2017: EUR  395,716,576) deposited with the BcL, the balance of the minimum reserve held by the Bank amounted to EUR  7,494,804 (2017: EUR 5,021,070).

As at 31 December 2018, the balance of the minimum reserve held by the Bank with the National Bank of Belgium, for its branch, amounted to EUR 182,466 (2017: EUR 416,209).

(EUR MILLION) BOOK VALUE AFTER LUMP SUM PROVISION

Less than 3 months

3 months to 1 year

1 year to 5 years

More than 5 years

or no maturityTotal

2017 2018 2017 2018 2017 2018 2017 2018 2017 2018

Instrument class (financial liabilities)Amounts owed to credit institutionsrepayable on demand 37.5 1.7 - - - - - - 37.5 1.7with agreed maturity dates or periods of notice

252.2 215.1 379.3 892.5 696.7 835.0 722.4 744.1 2,050.6 2,686.7

Amounts owed to customersrepayable on demand 526.9 761.0 - - - - - - 526.9 761.0with agreed maturity dates or periods of notice

6.9 45.5 2.4 7.0 19.2 10.0 6.8 8.7 35.3 71.2

Total financial liabilities 2,650.3 3,520.6

Non financial liabilities 875.1 865.2

Total liabilities 3,525.4 4,385.8

Contingent liabilities 0.1 - 0.7 1.0 6.4 6.1 6.6 6.5 13.8 13.6

Commitments 2.8 10.8 1.4 45.2 42.5 0.8 0.1 - 46.8 56.8

The split between “repayable on demand” and “whith agreed maturity dates or periods of notice” is made depending on the nature of the transaction and not according to the residual maturity as at 31 December 2017 or 2018.

This is also valid for the tables in the following notes.

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Note 6 - ReceivablesLoans and advances to customers and loans and advances to credit institutions are recognised at their nominal value and interests are prorated through the “prepayments and accrued income” and “accruals and deferred income” captions.

Loans and advances to customers subject of value adjustments amount, as at 31 December 2018, to EUR 1,753,903 (2017: EUR 1,800,984), of which EUR 0 (2017: EUR 71,913) are related to legal entities and EUR 1,753,903 (2017: EUR 1,729,071) are related to individuals.

Note 7 - SecuritiesThe securities recognised under the sections “Bonds and other fixed-income transferable securities” and “Shares and other variable-yield securities” are as follows depending on whether or not they are listed:

(IN EUR) 2018 Listed

Securities

2018 Unlisted

Securities

2018 Total

Shares and other variable-yield securities - 9,513 9,513

Bonds and other fixed-income transferable securities - 19,987,420 19,987,420

- 19,996,933 19,996,933

Unlisted shares and other variable-yield securities are classified in the structural portfolio as well as unlisted bonds and other fixed-income transferable securities.

As at 31 December 2018, value adjustments were recorded on the investment portfolio for an amount of EUR 36,592 (2017: EUR 4,003,518). The change in this item is mainly due to the sale of a security during the year and the write-back reversal recorded on this security for an amount of EUR 3,968,583. This reversal was recorded under “Income from financial tran-sactions”.

As at December 31, 2018, fixed-income transferable securities recorded in the “Bonds and other fixed-income transferable securities” caption amount to EUR 19,987,420 (2017: EUR 33,311,369), and are issued by Group’s entities.

(IN EUR) 2017 Listed

Securities

2017 Unlisted

Securities

2017 Total

Shares and other variable-yield transferable securities - 6,111,016 6,111,016

Bonds and other fixed-income transferable securities - 33,311,369 33,311,369

- 39,422,385 39,422,385

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Note 10 - Movements in fixed assetsMovements in the Bank’s fixed assets during the financial year were as follows:

(IN EUR) Gross value at the

beginning of the year

Additions Disposals Transfers Gross valueat year-end

Cumulative value

adjustmentat year-end

Net book value

at year-end

1. Tangible Assets 7,239,408 373,435 (36,176) - 7,576,667 (7,012,176) 564,491- Plant and equipment 4,199,940 214,480 - - 4,414,420 (4,220,322) 194,098- Other fixtures and fitting,

tools and equiment3,039,468 158,955 (36,176) - 3,162,247 (2,791,854) 370,393

2. Intangible assets 29,396,023 1,822,125 - - 31,218,148 (15,834,207) 15,383,941- Formation expenses 743,147 - - - 743,147 (743,147) -- Software and computer

licences25,343,439 369,299 - 3,317,933 29,030,672 (14,900,809) 14,129,862

- Merger premium 190,251 - - - 190,251 (190,251) -- Assets under development* 3,119,186 1,452,826 - (3,317,933) 1,254,079 - 1,254,079

* The assets under development item relates to IT tools developed internally.

Depreciation begins on the date of start of use of the asset.

Note 11 - Intangible assets Intangible assets not fully depreciated include mainly computer licence and other items related to the migration project to the banking software as well as developments in the IT system.

Note 8 - Other assets

(IN EUR) 2017 2018

Tax advance, tax conso-lidation claims and VAT to receive

923,426 1,695,293

Others 166,010 636,998

1,089,436 2,332,291

Note 9 - Prepayments and accrued income

(IN EUR) 2017 2018

Accrued interest 4,315,930 4,182,898

Accrued income 1,346,522 289,968

Prepaid expenses 529,373 468,730

6,191,825 4,941,596

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Note 12 - Receivables from affiliated undertakings and undertakings with which the bank has a participating interestAs at 31 December 2018, receivables from affiliated undertakings and undertakings with which the Bank has a participating interests are recognised under the following items (excluding lump sum provision):

(IN EUR) Affiliatedundertakings

2017

Affiliatedundertakings

2018

Loans and advances to credit institutions 1,688,962,961 2,544,762,378

Loans and advances to customers 738,074,509 769,566,851

Bonds and other fixed income transferable securities 33,311,369 19,987,420

Prepayments and accrued income 1,991,319 2,463,895

2,462,340,158 3,336,780,544

At the Bank’s request, the CSSF has approved the total exemption of the exposures towards the Natixis / BPCE Group in the computation of the large exposures, in accordance with Article 20 of the CSSF Regulation No. 14-01.

Note 13 - Foreign currencies assetsAs at 31 December 2018, the aggregate amount of assets denominated in foreign currencies (excluding EUR), translated into EUR, amounts to EUR 883,810,041 (2017: EUR 847,377,297).

Note 14 - Other liabilities

(IN EUR) 2017 2018

Preferential creditors 472,070 672,456

Sundry creditors 599,680 307,440

Others 6,681,559 910,239

7,753,309 1,890,135

The “Preferential creditors” caption includes in particular social security debts and VAT payable.

The “Sundry creditors” caption mainly includes transitional accounts in respect of SEPA transfers.

The “Others” caption mainly the assets of client dormant account. In 2017, this item also included the tax consolidation debt for an amount of EUR 5,253,695.

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Note 15 - Accruals and deffered income

(IN EUR) 2017 2018

Accrued interest 2,073,948 3,487,645

Accrued expenses 5,121,774 3,303,785

7,195,722 6,791,430

Note 16 - Provisions for taxationThe Bank is included for tax purposes into a tax unity inclu-ding Natixis Trust, Natixis Wealth Management Luxembourg and other companies part of the Natixis Group. Natixis Trust (consolidating company) is at the head of this tax unity. The tax charge is determined by applying the tax rules applicable to each entity and recorded at the level of the different members of the group. The integrating company is liable for the Income Tax (corporate income tax, commu-nal business tax and tax contribution to the employment fund).

Provisions for taxation include provisions in the amount of EUR 700,329 for current tax expenses (2017: EUR 1,758,222).

Note 17 - Other provisions The other provisions mainly relate to a provision for an admi-nistrative fine and variable income for staff and provisions for risk and operating charges.

Note 18 - Subscribed capital and share premium accountAs at 31 December 2018, the Bank’s share capital amount to EUR 810,542,500 represented by 324,217 shares, each with a nominal value of EUR 2,500.

Note 19 - Change in reserves and profit brought forward

(IN EUR) Subscribedcapital

Legal reserve

Other reserves

Dividends Profit for the financial

year

Total

Balance as at 1 January 2018 810,542,500 6,816,260 23,823,204 - 14,705,748 855,887,712

Allocation of 2017 profit - 735,287 2,112,394 11,858,067 (14,705,748) -

Distribution of dividends - - - (11,858,067) - (11,858,067)

Profit as at 31 December 2018 7,128,099 7,128,099

BALANCE AS AT 31 DECEMBER 2018

810,542,500 7,551,547 25,935,598 - 7,128,099 851,157,744

The allocation of profit was decided by the General Meeting of 20 April 2018.

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19.1. LEGAL RESERVEIn accordance with Luxembourg law, the Bank must appro-priate to a legal reserved amount equivalent to 5% of the net profit for the financial year on an annual basis, until this reserve equals 10% of the subscribed capital. Distribution of the legal reserve is not permitted.

19.2. OTHER RESERVESIn accordance with the tax law in force, the Bank reduced its Net Wealth Tax (NWT) charge. As a result, the Bank decided to allocate under non-distribuable reserves an amount that corresponds to five times the amount of reduced NWT according to the applicable law.

Note 20 - Amounts owed to affiliated undertakingsAs at 31 December 2018, amounts owed to affiliated undertakings are recorded under the following items:

(IN EUR) 2017 2018

Amounts owed to credit institutions 2,066,258,460 2,688,397,603

Amounts owed to customers 70,110,870 113,887,360

Other liabilities (note 14) 5,253,695 79,949

Accruals and deferred income 1,597,287 3,490,628

2,143,220,312 2,805,855,540

Note 21 - Foreign currencies liabilitiesAs at 31 December 2018, the aggregate amount of liabilities denominated in foreign currencies (excluding EUR), translated into EUR, amounts to EUR 884,570,441 (2017: EUR 846,727,463).

Note 22 - Contingent liabilities

(IN EUR) 2017 2018

Guarantees and assets pledged as collateral security 13,754,796 13,574,997

For 2018 and 2017, contingent liabilities do not include guarantees and other direct credit substitutes with regard to rela-ted parties.

Note 23 - Assets pledged by the bank as collateral security for its own commitmentsAs at 31 December 2018 and 2017, the Bank has not pledged any asset as collateral securtity for its own commitments.

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Note 24 - CommitmentsThe Bank’s commitments include mainly confirmed credits not used that amounts to EUR  56,836,571 (2017: EUR 46,762,245).

The Bank has no commitments with regard to undertakings with which it has a participating interest, or with regard to rela-ted parties.

The Bank has entered into certain other commitments that are not disclosed either in the balance sheet or in the off-balance sheet items but which are significant for the purpose of assessing the financial situation of the Bank. Details of such other commitments are as follows:

(IN EUR) 2017 2018

Commitments in respect of fix rental payments contracted on buildings or of assets leased under a leasing contract 12,216,174 10,701,953

Note 25 - Operations linked to currency exchange rates, interest rates and other market ratesThe types of forward transactions during 2018 are as fol-lows:

Transactions linked to currency exchange rates- Forward exchange transactions (payment deferred).Transactions linked to currency exchange rates are made for the purpose of covering the effects of fluctuations in exchange rates.

Operations linked to interest ratesAs at 31 December 2018, there are no operation linked to interest rates in the Bank’s books.

Note 26 - Investment manage-ment services and underwriting servicesThe Bank proposes the following services:- Portfolio management or advice;- Custody and administration of transferable securities;- Rental of safe-deposit boxes;- Custody of collective investment funds.

Note 27 - Other operating income

(IN EUR) 2017 2018

Operating income and revenue 1,491,279 752,957

Management fees Natixis Trust 294,290 210,816

Others 971,161 23,901

2,756,730 987,674

Note 28 - Value adjustments in respect of loans and advances and provisions for contingent liabilities and for commitments

As at 31 December 2017, the Bank had recorded an allocation to the lump sum provision of EUR 2,499,860. There was no additional endowment for 2018.

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Note 29 - Staff numbersDuring the financial year 2018, the average number of persons employed by the Bank is as follows:

2017 2018

General Management 5 5

Senior Management 68 69

Employees 42 46

115 120

The category “Senior Management” includes the members of the authorized senior management of the bank and its branch in Belgium.

Note 30 - Emoluments granted and commitments in respect of retirement pensions to the members of the supervisory bodies of the bank

30.1. EMOLUMENTS GRANTED TO THE MEMBERS OF THE SUPERVISORY BODIES(EUR MILLION) Payments made

in 2017 in relation to their positions

Payments made in 2018 in relation to their positions

Members of the supervisory bodies - -

General Management 1.6 1.7 mio

5 membres 5 membres

30.2. PENSION COMMITMENTS FOR THE MEMBERS OF THE SUPERVISORY BODIES OF THE BANK

(IN EUR) Pension commitments as at 31 December 2017

Pension commitments as at 31 December 2018

Members of the supervisory bodies - -

General Management 34,076 89,604

1 membre 2 membres

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Note 31 - Advances, loans and commitments for members of the supervisory bodies of the bankAs at 31 December 2018 and 2017, the Bank has not granted any advances, loans or commitments to the members of the supervisory bodies of the Bank.

Note 32 - Auditor’s feesThe fees excluding taxes invoiced to the Bank by the “réviseur d’entreprises agréé” and its network are as follows:

(IN EUR) 2017 2018

Annual audit fees 270,000 321,675

Audit-related fees 45,000 49,000

Tax-related fees 17,600 31,850

Other services 168,160 100,910

500,760 504,435

Note 33 - Other operating chargesThis caption mainly includes an allowance for the provi-sion of an administrative fine as well as operating costs and expenses.

Note 34 - Parent companyThe Bank is a subsidiary of Natixis Trust, which has its registered office in Luxembourg.

Natixis Trust is itself consolidated within NATIXIS, a Bank established in France.The consolidated accounts of these two entities may be obtained from the address below:30, avenue Pierre-Mendès FranceF-75013 Paris

Note 35 - Deposit guarantee and investor compensation schemesThe law related to the resolution, reorganisation and win-ding-up measures of credit institutions and certain invest-ment firms and on deposit guarantee and investor compensation schemes (“the Law”), transposing into

Luxembourgish law the directive 2014/59/EU establishing a framework for the recovery and resolution of credit insti-tutions and investment firms and the directive 2014/49/EU related to deposit guarantee and investor compensation schemes, was passed on 18 December 2015.

The deposit guarantee and investor compensation sche-mes in place through the “Association pour la Garantie des Dépôts Luxembourg [Association for the Guarantee of Luxembourg Deposits]” (AGDL) has been replaced by a new contribution based system of deposit guarantee and inves-tor compensation scheme. This new system covers eligible deposits of each depositor up to an amount of EUR 100,000 and investments up to an amount of EUR 20,000. The Law also provides that deposits resulting from specific transac-tions or fulfilling a social objective or other purpose are covered over and above EUR  100,000 for a period of 12 months.

Provisions which were booked in the annual accounts of the Bank’s throughout the years in order to respect the obligations of the AGDL, are reversed in proportion to the contributions paid to the new “Fonds de résolution Luxembourg” [Luxembourg Resolution Fund] (FRL) and “Fonds de garantie des dépôts Luxembourg” [Luxembourg Deposit Guarantee Fund] (FGDL).

The funded amount of the FRL shall reach by the end of 2024, reach at least 1% of covered deposits, as defined in Article 1 number 36 of the Law, for all authorized credit institutions all participating Member States. This amount will be collected from the credit institutions through annual

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contributions during the years 2017 to 2024.

The target level of funding of the FGDL is set at 0.8% of covered deposits, as defined in Article 163 number 8 of the Law, of the relevant credit institutions and is to be reached by the end of 2018.

When the level of 0.8% will be reached, the Luxembourgish credit institutions are to continue to contribute for 8 addi-

tional years in order to constitute and additional safety buffer of 0.8% of covered deposits, as defined in Article 163 number 8 of the Law.

The contributions paid by the Bank in 2018 in relation to the above schemes amounted to EUR  895,841 (2017: EUR 543,486) and are recorded in the item “Other adminis-trative expenses”.

Note 36 - Information about the credit riskThe financial information presented in this note corresponds to the amounts used when calculating the capital adequacy ratio which is established on the basis of the FinRep reporting and not from the annual accounts under Lux GAAP.

FINANCIAL INSTRUMENTS (EUR MILLION)

Weighted amount risk-equivalent*

2017

Risk exposures

2018

Weighted amount risk-equivalent*

2018

Balance sheet itemsRisk exposures 1,690.2 4,365.4 1,790.9

Off-balance sheet items other than derivatives

Contingent liabilities and commitments 34.5 70.4 44.2

OVER-THE-COUNTERDERIVATIVE INSTRUMENTS (IN EUR MILLION)

Weighted amount risk-equivalent*

2017

Risk exposures

2018

Weighted amount risk-equivalent*

2018

Transactions linked to interest rate - - -

Transactions linked to currency exchange rates - - -

TOTAL CREDIT RISK 1,724.7 4,435.8 1,835.1

*The credit risk is weighted using the standard method in accordance with EU Regulation 575/2013.

The Bank holds no derivative instruments as at 31 December 2018.

Note 37 - Breakdown of derivative financial instruments by categories of instruments and residual maturity

As at 31 December 2018, the Bank has no derivative financial instruments. Idem as at 31 December 2017.

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Note 38 - Breakdown of balance sheet and off-balance sheet items by country groupThe table below shows the breakdown of primary financial instruments by country group as at 31 December 2018 and 2017.

(EUR MILLION) Country zone 2017 2018

Asset itemsCash in hand, balances with central banks and loans and advances to credit institutions

European Union 2,136.7 2,997.0Other Zone A countries 1.1 31.7Others 75.0 -

Loans and advances to customers European Union 532.0 574.1Other Zone A countries 674.8 706.8Others 42.0 33.1

Bonds and fixed income securities and shares and other variable yield securities

European Union 39.4 20.0

Liability itemsAmounts owed to credit institutions European Union 2,087.0 2,687.0

Other Zone A countries 1.1 1.4

Amounts owed to customers European Union 494.6 730.4Other Zone A countries 28.8 23.0Others 38.7 78.8

Off-balance sheet itemsContingent liabilities European Union 13.8 11.7

Other Zone A countries - 1.9

Commitments European Union 46.8 56.8

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Note 39 - Breakdown of asset and off-balance sheet items by economic sectorThe breakdown of asset items by economic sector is shown for the most significant items as follows:

(EUR MILLION) ECONOMIC SECTORS

Assets items (book value)

2017 2018

Central Banks Receivables 396.1 390.7

Other Banks Receivables 1,816.6 2,637.9FITS* 33.3 20.0

Investment funds Receivables 24.5 43.2VYS** 6.1 -

Holdings Receivables 892.0 937.8

Other Financial Institutions Receivables 71.0 70.9

Other Companies Receivables 133.3 129.4

Private households Receivables 128.0 132.7

* Fixed-income transferable securities. ** Variable-yield securities.

The table below displays the off-balance sheet items by economic sector as at December 31, 2018 and 2017.

(EUR MILLION) ECONOMIC SECTORS Type outstanding 2017 2018

Holdings Contingent liabilities - 7.8Commitments - 15.8

Other Companies Contingent liabilities 10.6 0.8Commitments 40.8 34.9

Private household Contingent liabilities 3.2 5.0Commitments 6.0 6.1

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Note 40 - Foreign exchange positionsThe main foreign exchange positions as at 31 December 2018 are as follows (“short” positions into brackets):

(EUR MILLION)

Net positionsequivalent value

2017

Net forwardpositions

2018

Spot positions

2018

Net positionsequivalent value

2018

EUR (0.6) - (1.0) (1.0)

USD 0.4 - 0.8 0.8

POSITION NETTE GLOBALE (0.2) - (0.2) (0.2)

Note 41 - Return on assetsThe return on assets of the Bank as at 31 December 2018 stands to 0.16% (2017: 0.42%).

The return on assets is calculated as being the net profit for the financial year divided by the total balance sheet.

Note 42 - Subsequent eventsOn 9 April 2019, the Board of Directors approved the sub-mission, at the agreement of the European Central Bank-ECB, of a request for capital reduction of the Bank by the sole shareholder in the amount of EUR 127,000,000.

This capital reduction will, after agreement by the ECB, be approved by the General Meeting of Shareholders, to be held on a date to be specified later.

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Management report

30Management report

by the board of directors to the ordinary general meeting of shareholders

Managementreport2018

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In accordance with the Articles of Association, we have the honour of presenting to you the Balance Sheet and the Profit and Loss Account as at 31 December 2018, as well as our Management Report.

1. 2018 Accounts

1.1. ALLOCATION OF THE PROFIT Subject to your approval on the allocation of the profit, the retained earnings and the available wealth tax reserves as shown in the table below:

Profit for the financial year EUR 7,128,099.28

Retained earnings -

Available net wealth tax reserve -

TOTAL EUR 7,128,099.28

Allocated as follows:

Legal reserve (allocation) EUR 356,404.96

2019 net wealth tax reserve EUR 6,771,694.32

Distribution of dividends -

TOTAL EUR 7,128,099.28

For information:

Balance of the Net Wealth Tax reserve 2017 EUR 25,935,598.00

The Bank’s Net Equity (Capital, Reserves and Profit for the period) amounts to EUR 851,157,744 compared with EUR 855,887,712 at the end of 2017, with a total balance sheet of EUR 4,385,846,387 compared with EUR 3,525,405,240 at the end of 2017.

MANAGEMENT REPORT BY THE BOARD OF DIRECTORS TO THE ORDINARY GENERAL MEETING OF SHAREHOLDERS

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1.2. BALANCE SHEET ANALYSISThe main evolutions on the balance sheet are as follows:

In assets“Cash, assets with central banks and post office giro insti-tutions”: the decrease of EUR 5.4 million, compared to the end of 2017, mainly relates to the deposit made with the Luxembourg Central Bank. This deposit enables a “high quality” asset structure to be maintained, in respect of com-pliance with the LCR ratio (Liquidity Coverage Ratio) and the amount in respect of the statutory reserve to be adhered to.

“Receivables from credit institutions”: the increase of 45.2% of these outstanding debts, the total of which amounts to EUR 2,638 million at end 2018, corresponds mainly to new loans granted to Natixis Paris.

“Bonds and other fixed income securities”: the reduction of EUR 13.3 million comes from the maturity of securities issued by entities of the group.

“Shares and other variable yield securities”: the reduction of EUR 6.1 million corresponds to a disposal of share held on own account.

“Intangible assets”: The decrease of the net value in these assets results from the impact of depreciation during the year 2018.

In liabilities“Amounts owed to credit institutions”: These deposits are progressing by 28.7%, ie EUR 600.3 million. They mainly relate to the Natixis and BPCE scope.“Customer deposits”: the setting up of new term deposits, the conversion of monetary assets into securities and external transfers explain the change in this item, an increase of 48.0%, for EUR 270 million.

“Other liabilities”: the decrease of this item by -75.6%, ie EUR 5.9 million corresponds, as part of the Luxembourg horizontal tax consolidation, to the payment of the Bank’s tax liability to the integrating company.

“Reserves”: the increase of 9.3% of this item, for EUR 2.8 mil-lion, is mainly linked to the provision to the specific reserve in respect of the wealth tax.

2. Key events in 2018 and change and prospects

2.1. KEY EVENTSThe year 2018 was dominated by:

The change of name: On 27 November 2017, Natixis’ two wealth management subsidiaries acquired a common brand: Natixis Wealth Management.

In order to allow immediate identification of the Bank and ensure better visibility, the Extraordinary General Meeting of 18 October 2018 decided to change the name of:

Natixis Bank in Natixis Wealth Management Luxembourg

The Belgian branch takes the name of Natixis Wealth Management Luxembourg, succursale de Belgique.

New taking office – new administrators- Nicolas Jan joined the Bank on June 1, 2018, as Risk Officer in replacement of Olivier de Coussemaker;- Michael Nottaris was nominated on 28 May 2018, Director of the Belgian branch in replacement of Xavier Ceulemans;- Nathalie Desreumaux was nominated on 31 July 2018, as administrator.

2.2. CHANGE AND PROSPECTSWithin this context of regulatory and technological innova-tion, although 2018 was marked by persistent volatility over extremely low levels across all assets and markets, Natixis Wealth Management Luxembourg assets under manage-ment rose significantly (33%) with:- a total of 352 management mandates as at 31 December 2018, 238 under discretionary management and 114 under advisory management;- average assets per mandate of EUR 2.25 million under discretionary management and EUR 3.44 million under advisory management.

As at 31 December 2018, Natixis Wealth Management Luxembourg’s gross asset inflow is EUR 1.146 million, EUR 688 million of which is in respect of private clients (EUR 250 million in respect of non-Group clients and EUR 438 million of which is in respect of Group clients) and EUR 458 million (investment funds + third party managers) in respect of institutional clients. In respect of the net assets inflow, this amounts to EUR 318 million on the same date, of which EUR 169 million is in respect of private clients and EUR 149 million in respect of institutional clients.

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In respect of outstanding amounts and credit margins, the cumulative balance as at 31 December 2018 amounts, in EUR million to:- 534.9 in respect of outstanding amount drawn at the end of the period;- 513.0 in respect of average outstanding amounts drawn;- 4.0 in respect of annualised margins, being 0.72% in res-pect of the annual margin.

The Net Banking Income (“NBI”) (in analytical view) of the Wealth Management business line in Luxembourg and in Belgium amounts to EUR 21.7 million at the end 2018. For their part, expenses amount to EUR -27.7 million. The Earnings before Interest and Taxes (“EBIT”) amount to EUR -6.0 millions. It is specified that during 2017, one new file was agreed in respect of the activity of the Corporate and Investment Banking (CIB).

Natixis Wealth Management Luxembourg’s 2019 budget reaffirms the Bank’s drive and strategy for the Wealth Management business.

For 2019, the Bank intends to maintain its development by implementing a strategy focused on an international clien-tele target.

3. Risk managementThe actions rolled out in respect of risk management, sys-tems monitoring and control ensure transactions are secure.

3.1. RISK CONTROLThe main task of risk control is to ensure that all risks are managed, continuously in order to ensure that risks are indentified, assessed, mitigated and monitored. To this end, policies and procedures specifically define the control fra-mework for all types of risks and limits:

Credit and counterparty riskThe credit risk is managed within its review, decision-making and risk monitoring functions within the framework defined by the policy and procedures consistent with the Bank’s risk appetite.

The Bank remains selective in the granting of credit.

Although fairly concentrated, receivables represent a mini-mal level of exposure towards a few first class counterpar-ties, the duration of the investments and the exposure (non-Group) mainly within the European Economic Area limit the potential risks.

The Bank carried out continuous assessment and monito-ring of the credit risk in respect of commitments and the change and quality of its counterparties through the review of the legal and financial documentation.

Market riskMarket risk are identified, reviewed and monitored through various indicators, as follows: the selection of currencies, the loss-alert system, the foreign exchange-rate risk and securi-ties positions are monitored regularly.

Operational riskThe Bank’s operational risks management system enables:- operational incidents to be recorded;- key indicators for monitoring risks to be set-up;- risks and controls self-assessment exercises to be super-vised;- action plans to be monitored.Furthermore, the “Operational Risk Committee” function raises awareness in all staff through department managers and contributes practical actions for resolving the causes of losses.

The Bank is determined to continue this prudent policy for the 2019 financial year.

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Management report

4. Capital adequacyThe Bank’s capital adequacy ratios and its regulatory capital are fairly stable, sound and well in excess of regulatory requi-rements.

(IN EUR) 31/12/2017 31/12/2018

Equity capitalIssued capital (or endowment capital) 810,542,500 810,542,500Total equity capital after deduction elements (CET 1) 823,896,674 821,426,622Others capital elements (T2) 2,499,861 -TOTAL CAPITAL (T1 + T2) 821,426,622

Risk weightedCredit risk 1,724,713,442 1,816,128,586Operational risk 70,881,874 77,953,349Market Risk - -Capital adequacy ratio (Basel III) 46.02% 43.37%

Capital conservation bufferTotal risk exposures 1,795,595,316 1,894,081,935Capital conservation buffer (2.5% of risk exposures) 44,889,883 47,352,048

AssetsTotal assets (Finrep Local) 3,524,836,631 4,380,799,084

Large ExposuresLimit of 25% of the capital 206,599,134 205,356,656

The total regulatory capital requirement covers the credit, foreign exchange and operational risks; in respect of the 2018 financial year, it amounts to EUR 151,5 million compa-red with EUR 143,6 million at the end 2017.

Article 73 of Directive 2013/36/EU, which defines the ICAAP process, stipulates that credit institutions must implement a package of “healthy, effective and comprehensive strate-gies and processes to continuously assess and safeguard the amount, type and distribution of the internal capital which they consider to be appropriate to cover the nature and degree of risks to which they are or could be exposed”.

In order to guarantee continuous capital adequacy, the ICAAP forms an integral part of the decision-making pro-cess, the Bank’s strategies and the management of the risk and the control systems.

5. Subsequent eventsOn 9 April 2019, the Board of Directors approved the sub-mission, at the agreement of the European Central Bank-ECB, of a request for capital reduction of the Bank by the sole shareholder in the amount of EUR 127,000,000.

This capital reduction will, after agreement by the ECB, be approved by the General Meeting of Shareholders, to be held on a date to be specified later.

The Board of Directors would like to thank the Bank’s General Management and all its Staff for the efforts they have contributed during the 2018 financial year.

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Natixis Wealth Management Luxembourg51, avenue J. F. KennedyL-1855 LuxembourgPhone: + 352 46 38 16 1Fax: + 352 46 37 [email protected]