Equity Markets Product Catalogue - Natixis
Transcription
Equity Markets Product Catalogue - Natixis
This document is exclusively intended for a client base consisting of professionals or qualified investors. It should not be transmitted without the prior written consent of Natixis. Equity Markets Product Catalogue EQUITY MARKETS CORPORATE & INVESTMENT BANKING / INVESTMENT SOLUTIONS / SPECIALIZED FINANCIAL SERVICES Product Catalogue Equity Research Macro Economic Research Cash Research Transverse Research Equity Quantitative Research Flow (Conv. bonds & Derivatives) Research ETF Research 5 7 11 13 15 28 Global Execution Services Cash Execution Global Alpha Trading Market Making 21 24 25 Equity Flow Derivatives Flow Products Equity Finance Products Equity Financing Solutions 29 31 51 Equity Solutions Income Products Growth Products Market Neutral Products Portfolio Protection Structures Fund-linked Structures Multi-Asset Structures 56 60 66 68 72 76 Equity Capital Markets ECM Corporate Broking Corporate Derivatives 79 83 85 Equity Research Macro Economic Research Cash Research Transverse Research Equity Quantitative Research Flow Research ETF Research Equity Research: http://equity.natixis.com/NetIs/af/aspx/actions.aspx Macro Research: http://cib.intranet/ebusiness/recherche/rechercheeco/accueil.aspx Macro-Economic Research (I) A team headed by Patrick Artus Product Description Flashes Flashes • Flashes provide commentary and analysis on all market and economy related subjects, covering both structural aspects and the latest developments • R elated subjects include Flash – Economy and Flash - Markets • D aily, most of them written by Patrick Artus, himself Economy Economy • T hese publications cover the main macroeconomics topics of the day: - Eco Hebdo provides a weekly summary of the latest developments. Only available in French - S pecial report is an occasional publication offering a brief analysis of a current development - G lobal Immo is a quarterly review of the global property market Market Strategy / Market Asset Allocation • Market Strategy publications analyse the exchange rate, foreign exchange and credit markets: - Daily Round-up (daily) - M arket Weekly News (weekly) - Natixis Emerging markets (monthly) - Weekly Commodities (weekly) - Relative Value (weekly) - Natixis Exchange Rate (monthly) - Hedge Fund Trends (monthly) - Inflation Linked (monthly) - Macro Credit Quantitative (monthly) - Quant Tool Box (occasional) - Weekly Forex (weekly) 5 Market Strategy Equity Research Macro-Economic Research (II) Market Technical Analysis Global Execution Services Product Description Market Technical Analysis • Provide Short Term and Middle Term/Long Term technical analysis on Fixed Income, forex, commodities and equities: - F ixed Income Technical (daily & weekly) - F orex Trends (daily & weekly) - E quity Index Futures (daily) - C ommo Technical weekly Equity Flow Derivatives Monthly • T hese publications use (periodically updated) scenarios and key economic indicators to examine the situation in major countries and economic regions: - Financial forecasts Monthly - E urozone - U nited States - U nited Kingdom - S weden - O PEC - E merging Asia - J apan Equity Solutions - L atin America Indicators • T hese publications provide analysis and tools for measuring the economic performance of a country or region: - N atixis leading indicator of France (monthly) - C ountry Wrap-up (quarterly) - E conomic indicators (occasional) Indicators & Academic Publications - Forecasts Tables (monthly) • This category presents detailed analysis on economic subjects of all kinds: - Working documents (occasional) - S pecial papers (occasional) 6 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Academic Publications Cash Research Strategy Product Description Strategy Morning News Strategy Morning News • 3 -4 page notes commenting a specific economic event or any modification in sector rating or entry/exit in the recommended stock list • No precise periodicity Trends Weekly • Focus report on one equity strategy topic judged relevant by equity cash strategy (sovereign debt crisis, theme rotation) and sector performance implications • Weekly Weekly Midcaps • Report highlighting a dedicated equity strategy for the midcaps space, actionable calls (buy / sells) on midcaps names, future Natixis events Weekly Midcaps – Trends Weekly • Weekly Monthly Review • Summary of main market relevant news with in depth analysis of sector performances and an SRI angle • Monthly Report and Action Note • W ide range of publications ranging from global strategy (themes of the year, sector and geo allocation) to specific topics (inflation, end of QE 2, € / $, Japan) implication on sector ratings and stock selection • No precise periodicity Cross Asset Allocation Report and Action Note, M&A Selector, Cross Asset • M onthly view on equity allocation vs. Natixis portfolio model. Report developed by Patrick Artus global macro team with other Natixis strategy teams as Cash, Bonds, Commodities etc… • Monthly M&A Selector • Q uant filter crossed with analysts views on the future probable candidates to M&A activity • Monthly 7 Contact: Sylvain Goyon +33 01 58 55 04 62 Equity Research Cash Research (I) Global Execution Services Product Description What’s new & Sector Mail What’s new? • Internal Document geared document geared to the Sales force as an introduction to the Cash Morning Meeting • Daily mail - 7:55 am Sector Mail • N ews analysis for 23 sectors covered by Equity Markets, geared to specialised buy-side analysts and portfolio managers Equity Flow Derivatives • Daily mail - 8:30 am Morning News Morning News (1 large caps and 1 Small & Midcaps) • Compilation of 3-4 page notes commenting on events impacting the 335 companies covered by Equity Markets sector analysts Equity Solutions • Daily mail – 8:45 am Weekly Preview • C ompilation of analysts’ projections for upcoming sales and earnings reports • Weekly mail – Thursday Contact: Francois Digard +33 01 58 55 03 40 8 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Weekly Preview (1 large caps and 1 Small & Midcaps) Cash Research (II) Product Description Company Action Notes and Reports Company Action Notes and Reports • F undamental research reports from 8 to ‘n’ pages reflecting sector analysts’ main convictions on 335 companies covered by Equity Markets sector analysts • No precise periodicity - mail or hard copy Sector Review Sector Review • A ction notes and reports from 8 to ‘n’ pages to highlight the main themes for the 23 sectors and sub-sectors covered by Equity Markets sector teams • No precise periodicity - mail or hard copy Weekly Preview Stock Guides (1 large caps and 1 Small & Midcaps) • Compilation of stock-market and financial data for: - 185 Large caps (Facts & Figures) and - 150 Small & Midcaps (Monthly Midcaps covered by Equity Markets sector analysts • Monthly hard copy -1st day of the month Contact: Francois Digard +33 01 58 55 03 40 9 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets 10 Equity Solutions Equity Flow Derivatives Global Execution Services Equity Research Cash Research Socially Responsible Investing - SRI Product Description SRI Daily Watch SRI Daily Watch • 1 5 pages of analysis on ESG financial subjects that are relevant to SRI investors, irrespective of their SRI processes (niche, thematic or mainstream), feeding a database accessible from a very simple online search engine • Daily mail – 1:00 pm Thematic Reports / SRI notes Thematic reports / SRI notes • R eports focusing on specific Environmental – Social – Governance (ESG) Issues (no precise periodicity - mail or hard copy), E.g. “BP Macondo seminar feedback: thought… action!” (December 2010) Monthly Market Review (in cooperation with the Strategy team) Monthly market Review / Company or Sector Reports • Carbon market comment & Focus on relevant SRI trends • Monthly mail - 1st week Company or Sector Reports (in cooperation with the Sector teams) • R eports highlighting SRI themes on companies or sectors covered by Equity Markets, e.g. Lufthansa “Defensive in a cyclical sector” • No precise periodicity - mail or hard copy Contact: Orith Azoulay +33 01 58 55 52 05 11 Equity Research Cash Research Transverse Research: Event-Driven Morning Mail Global Execution Services Product Description Morning Mail • C ompilation of news and events on announced public deals or any market talk involving pan-European equities Equity Flow Derivatives • Daily mail – 8:45 am Pre-event Research Pre-event Research • A ction notes and reports on potential sector consolidation, M&A operations, disposals, spin-offs, break-ups including strategic review, event rationale, stand alone and market valuation, deal dynamics such as shareholder structure, financials terms, transaction impact, sensitivity analysis Long / Short Equity Solutions • No precise periodicity- mail or hard copy Long / Short • S trategy implemented on pan-European companies, based on fundamental valuation, strong catalysts and basic technical analysis when available Contact: Gael Kessler +44 20 3216 9412 12 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • No precise periodicity – average one per month – mail or hard copy Equity Quantitative Research (I) Quantitative Models Product Description Sharpe Select Sharpe Select • R eport providing Sharpe Ratio evaluation in order to rank baskets with regard to investors’ expected performance and risk for particular geographical areas, sectors, assets • 1st report 02/12/2010 – mail or hard copy Dividend Forecasting Dividend Forecasting • Dividend modelling and strategy proposals for products based on their value, highlighting different types of risk such as concentration risk, using the Gini coefficient (calculates degree of inequality in revenue distribution in a company), correlation between the spot and dividend, using a normalized indicator and dividend volatility • 1st report 05/03/2011 Market Predictor Market Predictor • M odel providing highly reliable predictions of equity market trends. Market Predictor model based on quantization technique combined with generation of multidimensional Markov chains, aims to detect several market cyclical effects which reflect psychological effects presence and systematic behaviours of market players • 1st report 05/11/2010 and Daily mail – 7:00 am Contact: Adil Reghai +33 01 58 55 55 12 / Adel Ben Haj Yedder +33 01 58 55 11 24 13 Equity Research Equity Quantitative Research (II) Quantitative Models Product Description Model (Market Global Execution Services Hidden Markov Discoverer) Hidden Markov Model Regime • M odel providing market regime levels and changes. HMM applied to finance and more specifically to VIX brings valuable information for pricing and hedging purposes. It can also be applied successfully to asset allocation Equity Flow Derivatives • 1st report 07/16/2009 and Daily mail - 7:00 am Hidden Markov Model Hidden Markov Model (Sector Recommendation) • R eport identifying regime level changes for 10 sectors and 49 sub sectors via 578 stocks in the STOXX Europe 600® Equity Solutions • Monthly 1st week – mail or hard copy Kaizoji: Market Bubble Detector Kaizoji • 1st report 01/24/2011 and Daily mail – 7:00 am Contact: Adil Reghai +33 01 58 55 55 12 / Adel Ben Haj Yedder +33 01 58 55 11 24 14 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • T ool for detecting financial bubbles. The statistic used measures dispersion of performances with a fixed starting date for a large universe of assets. It shows explosive behaviour when a bubble is building up and dissipative behaviour during market crashes Convertible Bond Research Product Description Daily Convertibles News Convertible Daily News • 5 page document compiling: - A n analysis of last trading sessions in New York and Tokyo, a Convertible Bonds press review - A selection of main share upgrades/downgrades and the schedule of incoming release • Daily mail – 8:30 am New Issue Flash New Issue Flash • R eports on new Convertible Bonds issues in Europe (>€100M) including: - C onvertible Bonds valuation on the basis of issue terms - M ain elements Equity/Credit - O pinion on Convertible Bonds • No precise periodicity – mail or hard copy Special Focus and Thematic Special Focus and thematic • Provide a deep analysis of: - A specific Convertible Bonds or sector - Term sheets’ clauses analysis (takeover bid, dividends protection...) - Topics e.g. Impact of Solvency II on Convertible Bonds... • No precise periodicity – mail or hard copy Contact: Celine Clari +33 01 58 55 82 50 / Jean De Rochebouet +33 01 58 55 11 8 15 Equity Research Options Research (I) Regular publications Product Description Global Execution Services Daily Morning Mail Daily Morning Mail • Information and analysis of indices and equities, macro and stock news, tech analysis of indices and event-driven news flow, options market activity Equity Flow Derivatives • Daily mail Mid-Week Report Mid-Week Report • Reporting by sectors for equities volatility with a publications schedule Equity Solutions • Weekly mail Weekly Derivatives Weekly Derivatives • S ynthetic and weekly overview of volatility movements for indices and equities at short and long maturities, sector approach, macro analysis of fixed income and equity markets, index technical analysis, structured product pricing Contact: Gilles Leclerc +33 01 58 55 12 81 / Geoffrey Babiarz +33 01 58 55 83 68 16 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • Weekly mail Options Research (II) Sectors & Thematic Product Description Tactical Derivatives: single stock or indexes Tactical Derivatives: Single stock or Index • S ingle stock equity (micro) or index (macro) investment cases, transverse volatility research, technical analysis resulting in one or several strategy proposals on the underlying or on spreads on different underlyings • Opportunistic - mail and hard copy Sector Overview Sector Overview • A nalysis and sector report from a volatility perspective combined with sector vision from the equities research bureau. Idea suggestions (2 to 3) born of this sector approach • Weekly mail Contact: Gilles Leclerc +33 01 58 55 12 81 / Geoffrey Babiarz +33 01 58 55 83 68 17 Equity Research ETF Research Regular Publications Zoom ETF: Flash and Action Note Global Execution Services Product Description Zoom ETF • Following our Equity Strategy specialists’ sector outlook & perspectives, this Flash is aiming at suggesting which ETF shall be bought or sold by the client Equity Flow Derivatives • N o precise periodicity. Depends on Equity Cash Research Action Note and Reports ETF Mapping ETF Mapping • A product catalogue mapping available ETF on European countries and European indices Contact: Gilles Leclerc +33 01 58 55 12 81 / Geoffrey Babiarz +33 01 58 55 83 68 18 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Equity Solutions • Every quarter, following Macro Research Publications 19 Global Execution Services Cash Execution Global Alpha Trading Market Making 20 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Cash Execution Offer (I) Product Description Algorithmic execution Product Brochure available upon request • In-house algorithms with a proven track record: vwap, twap, participate, close, iceberg, hunt, Dark pools, value etc • Direct Market Access (DMA) • Direct Capital Access (DCA) • Direct Strategic Access (DSA) Program trading • A Program is a list of orders to be executed a priori with the same execution strategy • Proposed Strategies: Pre-trade Analysis/Specific View - Index Rebalancing, Portfolio re-weighting - L ists: VWAP, POV, Implementation Shortfall, Target Open / Close • Technological services: - Various files integration (FIX, CSV, Bloomberg, Excel,…) - Pré-Trade & Post-Trade Analysis • Various benchmarks • Global and Specific Views are provided • Illiquid, risky or main lines are underlined and a specific trading strategy can be discussed (estimated time to trade before the auction, market impact,…) Contact: Sebastien Yousri +33 01 58 55 05 09 21 Equity Research Cash Execution Offer (II) Global Execution Services Product Description Pair trading – Market-making Single stocks & ETF • Dedicated teams for each activity • A comprehensive customized range Customized single order execution • Institutional and corporate dealing thanks to a 14 pan-European traders-dealers team: - 7 dedicated to Institutional - 3 dedicated to Corporates providing Corporate liquidity and share buy back Equity Flow Derivatives - 4 dedicated Program Traders Order routing • Dedicated to retail network and small asset managers Smart order router Equity Solutions • Access to a broad spectrum of alternative platforms Our Offer We provide clients with Broad Access to Equity Offer - Direct access or via external brokers - Algorithmic or voice execution - Long standing markets and alternative platforms - Institutional, corporate and retail network clients >> 50 specialist team Contact: Sebastien Yousri +33 01 58 55 05 09 22 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets >> High value-added tailor made services Cash Execution Offer (III) Execution Product Marketing Product Description Contact CSA Management (Commission Sharing Agreement) • A rrangements that allows a distinction between the portion of commissions paid for order execution services and the portion paid for investment support services, in particular investment research • T he CSA must provide that the firm responsible for order execution services shall pay the portion of the brokerage fees relating to investment research to the third party selected by the investment manager Contact Magaly Laborie: +33 01 58 55 92 66 General e-mail address: [email protected] Unbundling • Client paying investment research by cheque European Markets Trend – CAC 40 focus Best Execution Analysis • Providing clients Best Execution evidence on demand • M onitoring regulation, technological and competitive developments (emergence of new MTFs, Systematic Internalizers, dark pools) • Publication on regular bases of a “Market watch” • Managing the broker relationship (broker reviews, commissions…) • Reviewing of execution policy and execution venues Trade Cost Analysis – Institutional Report Analysis Trade Cost Analysis – TCA • F ollowing growing regulatory scrutiny on best execution, reduced liquidity and liquidity fragmentation, cost of trading evaluation emerged as a new priority • In-house Equity Market – Cash Equity TCA tool features: - P erformance calculation against up to 10 benchmarks: Participate, VWAP, TWAP, Implement shortfall, …(mono/multi venue) - D aily automatic process applied to every single deal traded for Institutional (cash) Client - A nalysis and investigation of best/worst performance to implement best practice and enhance trading tools Source: Natixis, Bloomberg 23 Contact: Jean Philippe Gourdon +33 01 58 55 82 56 Equity Research Global Alpha Trading A Facilitator for the whole Equity Market Division • Trades up to 6 month positions “Don’t fight Market Cycle, mono strategy approach underperforms market. Why? • An expert team able to: - D igest market information - P erceive hidden information • A key internal added value for all Equity Capital Market Pole Traders and Salespeople to be used for: - A more adjusted market pricing Equity Flow Derivatives - A better assessment of market or underlying risk Risk recycling for the whole floor – short term • P rovides all of our Equity Capital Markets Pole Market operators with fluidity and “market backup” Global Alpha Track Record Equity Solutions Third Party Asset Management (to be developed) • Asset Management expertise to be offered to external clients Source: Natixis Contact: Sebastien Boucher +33 01 58 55 12 01 24 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Event Driven Awareness and Special Situation Global Execution Services Product Description Market Making Product Description Convertible Bonds • Primary deals trading • M arket maker to provide liquidity on secondary market on a various number of Asian and European convertible bonds • C ross-selling with volatility trading team: find convertible bonds owned by clients to provide volatility to the trading desk Contact: Julien Majoux +33 01 58 55 11 39 Index & Options Derivatives • L iquidity provider for institutional clients and Equity Market internal trading desks on Eurex options on Euro STOXX 50® and Dax Contact: Sylvain Botbol +33 01 58 55 80 30 Solutions Products – Primary and Secondary Markets • Providing daily liquidity on secondary market on each equity structured products issued and traded by Natixis Equity Markets (EMTN, warrants, certificates, OTC) • D ealer activity: issuing structured equity notes by Natixis SA or Natixis Structured Products on primary market Contact: Eric Valezy +33 01 58 55 07 44 ETF • A liquidity provider: - P roviding continuous liquidity on European listed ETFs on various trading benchmarks - C overage includes European/US equity indices and emerging markets. The next step will be to broaden our scope adding commodity and fixed income underlyings - O ffering borrowing and lending capacities, leveraging the strong setup of the equity finance desk • An « Authorized Participant »: - N atixis is an « Authorized Participant » with the main European ETF issuers (iShares, Lyxor, db-x, Amundi, Easy ETF, Source, SPDR and Ossiam. - T his status enables Natixis to create and redeem any ETF directly with the issuer at the NAV Contact: Isira Perera +33 01 58 55 84 11 25 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets 26 Equity Solutions Equity Flow Derivatives Global Execution Services Equity Research 27 Equity Flow Derivatives Flow Products Delta One Products Delta One Financing Solutions 28 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Convertible Bonds Primary and secondary Primary Convertible Bonds European Markets Trend – CAC 40 focus • In 2011 Natixis was ranked No. 1 for convertible issues by transaction number and by amount • In 2011, Natixis was ranked No. 3 overall in France by number of lead-managed transactions • cf. ECM section Primary: Pricing Example Secondary Market Soitec 6.25% 2014 Secondary Convertible Bonds • Issue date: 01/09/2009 • C onvertible bonds are bonds that may be converted at the request of their holders into shares (of the issuing company), at a predetermined ratio at maturity. Conversion is thus initiated by the investor • Equity spot: EU6.384 • Issue/Redemption price: par/par • Issuer Call: 130%/at par, after 3Y • Size: EU150M • A s a convertible bond embeds a call Option on the company’s Equity, convertibles carry much lower rates of interest than traditional debt and are therefore a cheap way for companies to raise debt • Convertible bonds’ holder risk exposure: - E quity (Delta) - Volatility (Vega) - M aturity of the bonds (Thêta) - Interest rate (Rhô) - C redit spread (Ksi) Final terms Option sensibility Bond sensibility - C urrency • Coupon : 6.25% • Premium : 32.5% • Nominal CB : EU8.55 (Ref price EU6.45) • Size EU150M (17 543 860 cb x EU8.55) • Ratio 1/1 • If all investors were hedged, they would had to sell 11M shares on the 01/09/2009 • P otential dilution, if conversion: 17.5M new shares (20% of outstanding) Source: Bloomberg 29 Contact: Olivier Lasserre +33 01 58 55 24 03 Equity Research Options and Volatility Products Global Execution Services Product Description Long call vs. Short call Vanilla Options (Put/Call) on Indexes or Stocks • A n option is the right to buy or sell an asset (the underlying asset) at a price defined in advance (strike price) and in a date (European option) or until a date (American option) defined in advance Long put vs. Short put Equity Flow Derivatives • V anilla option strategies, which allows an hedging of a large part of the classical asset management portfolio needs, and which could be split in two families : directional strategies and volatility based strategies • Available on Listed and OTC markets Var Swaps on Indexes • O n OTC markets, it allows to buy, sell or hedge risks associated with the magnitude of a volatility or index movement • Available on OTC markets Correl Swaps on Indexes • O n OTC markets, it allows to buy, sell or hedge risks associated with the observed average correlation of a collection of underlying products Equity Solutions • Available on OTC markets Light Exotics on Indexes or Stocks • U nlike Vanilla Options, exotic options are more complex as they may include other components and complex payoffs. e.g. Barrier, Asian, ratchet: - S imple Knocks (Put Down and In, Call Up and Out - D ouble Knocks (Double Knock In, Double Knock Out…) - L ook back Options • Available on OTC markets Contact: Olivier Lasserre +33 01 58 55 24 03 30 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets - Autocalls Equity Finance Overview What is a Delta One activity elta One products – reporting to the flow derivatives entity - are equity derivatives with a linear, symmetric payoff profile which D closely track their underlying asset performance. Natixis Delta One Team A team of Sales and Traders based in Europe, US and Asia. Delta One scope of skills • Stock Financing Optimization (REPO, Security Lending, Total Return Swap, Future and Synthetic). • Yield Enhancement (REPO, Security Lending, Total Return Swap, Future, Synthetic, Certificate and Scrip Dividend management). • S ynthetic Exposure or Hedging on stocks, indices and funds (REPO, Security Sending, Total Return Swap, Future, Synthetic, Certificate, Dividend Swap and ETF). Why such a positive trend on Delta One activity? • Banks continue to reduce their proprietary desks activities and monitor carefully their VaR consumption. • B y using collateralized financing type of products, a Delta One Team ensures very competitive price level for customers while not impacting Natixis & Groupe BPCE liquidity. • B y consequence, banks propose Delta One products solutions to their clients which offer recurring revenues and less risk consumption. Our scope of expertise goes from standard products to more complex solutions Stock Financing Optimization • This activity enables customers to monetize their stock holding at a competitive price while keeping the exposure. • Yield Enhancement embedded in collateral financing allows the Delta One Team to offer better pricing than any other team. Delta One Team provides • Financing for worldwide stocks, while being particularly aggressive on Euro and US stocks. • Financing from overnight to 8 years, while keeping an effective monitoring of the re-use of the stocks. Yield Enhancement • Delta One Team’s worldwide structure offers various and competitive Delta One Yield Enhancement Solutions to our clients. • D elta One Team’s large scope of expertise enables to provide our clients with “taylor-made” tax solutions. • A broad range of products is available. Natixis Delta One Sales Olivier Lasserre +33 (1) 58 55 24 03 / Philippe Quiniou +33 (1) 58 55 81 65 / Lydia Linan +33 (1) 58 55 11 20 / Sandrine Guirao +33 (1) 58 55 83 18 / Christian Nucci +33 01 58 55 05 76 31 Equity Research Equity Finance Overview Global Execution Services Our scope of expertise goes from standard products to more complex solutions (continued) Synthetic Exposure or Hedging • D elta One Team has the capacity to offer client long/short Synthetic Exposure to any underlying: stocks, baskets, indices, funds and also dividends. • Products: REPO, Security Lending, Total Retrun Swap, Future, Synthetic, Certificate, Dividend Swap and ETF. Scope of products • C ertificate • Security Lending • S crip Dividend • Total Return Swap (TRS) • D ividend Swap • Future • E TF Equity Flow Derivatives • Synthetic (Put/Call Combination) Clients • Asset Managers • P rivate Banks • Insurance Companies • M arket Makers • Hedge Funds • C orporates • Family Offices • P ension Funds • High Net Worth Individuals Expertise & products Delta One Products Stock Financing Optimization (collateral upgrade and specific REPO) Yield Enhancement Synthetic Exposure or Hedging Equity Solutions Delta One Expertise REPO Security Lending Total Return Swap (TRS) Future/Forward Synthetic (Put/Call Combination) Certificate N/A Scrip Dividend N/A Dividend Swap N/A N/A ETF N/A N/A product adapted N/A (on dividend) N/A product non adapted 32 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • REPO Security Lending 1. What is a Security Lending? • A Security Lending (or “prêt-emprunt”) is an OTC contract which implies a temporary transfer of securities from a lender to a borrower duly collateralised by acceptable assets (cash, stocks or other assets) agreed between the parties. • Asset is the principal of the transaction and collateral can be cash or securities (with usually a haircut). • T he borrower will benefit from beneficial ownership (dividends, corporate actions…) but he is under a contractual obligation to make equivalent payments to the lender. The lender surrenders its rights of ownership (voting rights). • The borrower is obliged to return the securities, either on demand, or at the end of any agreed term. • A Security Lending within Delta One activity can be used for Stock Financing Optimization, Yield Enhancement, and Synthetic Exposure or Hedging. 2. The Structure Asset (principal) Interest, If cash collateral LENDER BORROWER Rental Fees % Dividends / Corporate actions Cash / Securities (collateral) Initial CF Final CF 3. Key Features • Portfolio Optimization: Stock Financing Optimization and Yield Enhancement. • Portfolio Hedging: Short position coverage when it is legally feasible. • L egal documentations: AFTI (Association Française des Professionnels du Titre) / HL 1987 / OSLA (Overseas Securities Lending Agreement) / GMSLA (Global Master Securities Lending Agreement) / EMA (European Master Agreement) / CPMA 33 Equity Research Security Lending Global Execution Services 4. Example • C ontext: A non-French resident (beneficial owner) client is holding 1,000,000 shares of Total (FP FP) and is entitled to a withholding tax of 15%. Natixis will offer to the client the opportunity to enhance his dividend in addition to a financing deal of thirty-day. • P arameters: Duration is from 04/20/11 to 05/20/11 (30 days) Spot price €42 Euribor 1 month rate: 1.116% Dividend: €1.14 // retrocession rate: 98% // payment date: 05/11/2011 • A ll-in calculation: Commission rate * 42 000 000 * (30/360) = (1.14 * 1,000,000) * (98% - 85%) Commission rate = 4.2343% At the maturity of the contract, Natixis will pay €148,200 to the client (i.e. €4,940 per day during 30 days). Initial CF Stock loan (5% of haircut) Natixis Client - €44,100,000 €44,100,000 Payment date Dividends €1,140,000 Dividends retrocession (85% - €969,000 Final CF Interest on cash Fee (all-in) Stock return Total Equity Flow Derivatives • Cash flow (client is the lender of the Stock): €969,000 €41,013 €41,013 - €148,200 €148,200 €44,100,000 - €44,100,000 €63,813 €1,076,187 Client 2% dividend €22,800 98% dividend Interests on cash €41,013 Interests on cash Total €63,813 Total Source: Natixis Structuration STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION €1,117,200 €41,013 €1,0760187 34 Equity Capital Markets Natixis Equity Solutions • P&L (net of cash interests) of this transaction: Client will receive 98% of the dividend amount and Natixis will receive 2%. REPO (Sale & Repurchase Agreement) 1. What is a REPO? • A REPO (sale and repurchase agreement or “pension livrée”) is an OTC contract between two parties whereby one party sells to the other a security at a specified price with a commitment to buy back the security at a future date and at a specified price. • T he principal of the transaction is the cash leg (REPO is usually motivated by the desire to borrow cash) and the underlying is the collateral (a haircut is usually applied). • O ther structures of REPO exist (less standard) as tri-party REPO (a custodian bank or international clearing organization, the triparty agent, acts as an intermediary between the two parties of the REPO). • A REPO within Delta One activity implies Yield Enhancement, Stock Financing Optimization and Synthetic Exposure or Hedging. 2. The Structure Cash (principal) Interest on cash SELLER BUYER REPO Reverse REPO Rental % Dividends / Corporate actions Assets (collateral) Initial CF Final CF 3. Key Features • Stock Financing Optimization, Yield Enhancement and Synthetic Exposure or Hedging tool. • REPO can be traded through fixed rate and floating rate. • Legal documentations: AFTB (Association Française des Trésoriers de Banques) / GMRA (Global Master Repurchase Agreement). 35 Equity Research REPO (Sale & Repurchase Agreement) Global Execution Services 4. Example • C ontext: A non-French resident (beneficial owner) client is holding 1,000,000 shares of Total (FP FP) and is entitled to a withholding tax of 15%. Natixis will offer to the client the opportunity to enhance his dividend in addition to a financing deal of thirty-day. • P arameters: Duration is from 04/20/11 to 05/20/11(30 days) Initial spot price: €42 and final forward price: €42.0389 [42 * (1+1.116%) ^ (30/360)] Euribor 1 month rate: 1.116% Dividend: €1.14 // retrocession rate: 98% // Payment date: 05/11/2011 Natixis Client Cash leg - €42,000,000 €42,000,000 Payment date Dividends €1,140,000 Final CF Cash leg return Dividends retrocession (85%) Dividends retrocession (13%) Total - €969,000 €969,000 €42,038,900 €42,038,900 - €148,200 €148,200 €61,700 €1,078,300 • P&L (net of cash interests) of this transaction: Client will receive 98% of the dividend amount and Natixis will receive 2%. Client 2% dividend €22,800 98% dividend Interests on cash €39,060 Interests on cash Total €61,860 Total Source: Natixis Structuration STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION €1,117,200 Equity Solutions Natixis -€39,060 €1,078,140 36 Equity Capital Markets Initial CF Equity Flow Derivatives • Cash flow (client is buyer of the REPO): Total Return Swap (TRS) 1. What is a Total Return Swap? • A Total Return Swap (TRS) is a bilateral OTC contract enabling the client to benefit from a funding by Natixis (usually Euribor rate + spread) in exchange of an underlying return (single stock/index) and potentially Yield Enhancement. • No dividend risk for both parties, usually long duration contract and ISDA agreement is needed. • A TRS within Delta One activity implies Yield Enhancement, Stock Financing Optimization and Synthetic Exposure or Hedging. 2. The Structure Cash FINANCING CLIENT Stocks TRS Performance if positive underlying performance Euribor + Spread % dividends CLIENT Performance if negative underlying performance 3. Key Features • Objectives: Stock Financing Optimization, Yield Enhancement and Synthetic Exposure or Hedging. • Legal documentation: AFTB (France) or ISDA (international) agreement needed (+ CSA with margin call). • C ash flow structure: Cash flows can be exchanged at the end of the contract (if short-term maturity) or can be reseted during the contract (if long-term maturity). Dividends can be paid at the payment date or at the next reset date. • T imetable: Usually long-term duration but period can be very flexible (from 1 week to 8 years). Natixis’ taxes guidelines require at least a 2 months minimum duration, depending on client’s profile. • Risks: No dividend risk for both parties but counterparty risk (except with a CSA contract). • Other types of strategies: - Leverage: Get exposure to an underlying without buying it – this generates leverage. - Portfolio Hedging: Hedge an exposure by implementing a short strategy while keeping the position in the stock. - Financing for monetary funds: Natixis is buying the TRS from the fund and selling an asset to it in return for a funding spread. 37 Equity Research Total Return Swap (TRS ) Global Execution Services 4. Example • Context: A non-French resident (beneficial owner) client is holding 1,000,000 shares of Total (FP FP) and is entitled to a withholding tax of 15%. Natixis will offer to the client the opportunity to enhance his dividend in addition to a thirty-day financing deal. • P arameters: Duration is from 04/20/11 to 06/20/11 (61 days) Spot price at the beginning: €42 and at the end: €41 Euribor 1 month rate: 1.116% Dividend: €1.14 // retrocession rate: 98% // Payment date: 05/11/2011 • Cash Flows (client is the TRS buyer): Client Cash leg - €42,000,000 Payment date Dividends €1,140,000 Retrocession (85%) - €1,117,200 €1,117,200 Final CF Interests on cash legs - €79,422 €79,422 Stocks return €41,000,000 - €41,000,000 Equity performance neutralization - €1,000,000 - €1,000,000 €102,222 €1,037,778 Total €42,000,000 • P&L (net of cash interests) of this transaction: Client will receive 98% of the dividend amount and Natixis will receive 2%. 2% dividend Client €22,800 98% dividend Interests on cash €79,422 Interests on cash Total €102,222 Total Source: Natixis Structuration STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION €1,117,200 Equity Solutions Natixis -€79,422 €1,037,778 38 Equity Capital Markets Initial CF Equity Flow Derivatives Natixis Future (on both Single Stock and Index) 1. What is a Future? • A Future is a listed exchange traded contract enabling to buy or sell a specific underlying (single stock or index) at a predetermined price on a given date in the future. • K ey features: Dividend risk for both parties but no counterparty risk (margin is paid through margin call during the total duration of the contract) and usually short term duration contract. • A Future within Delta One activity implies Yield Enhancement, Stock Financing Optimization, and Synthetic Exposure or Hedging. • T he pre-determined price is: FUTURES PRICE = SPOT STOCK PRICE * [1 + (r * tx/360)] – % DIVIDEND * [1 + (r * ty/360)] with r = short-term interest rate (typically Euribor) tx = Number of days remaining until expiration ty = Number of days between dividend payment and contract expiration 2. The Structure Client is short stocks and long Futures 1. At the beginning Future @ F0 Future @ F0 Stock Exchange Stocks @ S0 Initial margin deposit Stocks @ S0 Cash Clearing House CLIENT Initial margin deposit 1. During Daily margin call Clearing House Daily margin call CLIENT 1. At the end Stocks @ ST Payoff: F0 - S0 39 Final daily margin call Stock Exchange Cash Clearing House Stocks @ ST CLIENT Final daily margin call Payoff: F0 - S0 Equity Research Future (on both Single Stock and Index) Global Execution Services 4. Key Features • S trategies: - P ortfolio Optimisation (holding a stock): Yield Enhancement and possibly Stock Financing Optimization. - P ortfolio Hedging (holding a stock): Hedge an exposure by implementing a short strategy while keeping the position in the stock. The investor can hedge his position through selling Futures. - Leverage (without holding a stock): Get exposure to an underlying without buying it – this generates leverage. - Product mainly used for Yield Enhancement and possibly Stock Financing Optimization. • Legal documentation: No legal documentation needed. • R isks: Futures bear no counterparty risk. We trade via a clearing house and are subject to initial deposit and daily margin calls. Clearing house (Bclear, Eurex…) is acting as a central counterpart and implies anonymity. The client must have a clearer through its Custodian Agent. Futures bear dividend risk for both parties. Equity Flow Derivatives 4. Example • C ontext: A non-French resident (beneficial owner) client is holding 1,000,000 shares of Total (FP FP) and is entitled to a withholding tax of 15%. Natixis will offer to the client the opportunity to enhance his dividend in addition to a financing deal of thirty-day. • P arameters: Duration is from 04/20/11 to 05/20/11(30 days) Spot price at the beginning: €42 and at the end: €41 Euribor 1 month rate: 1.116% Dividend: €1.14 // retrocession rate: 98% // Payment date: 05/11/2011 • Future price calculation: €42 * [1+ (1.116% * 30/360)] – (€1.14 * 98%) * [1+(1.116% * 9/360)] = €40.92 Natixis Client Cash leg - €42,000,000 €42,000,000 Payment date Dividends €1,140,000 Dividends retrocession (85%) - €969,000 €969,000 Final CF Cash leg return €42,038,900 €42,038,900 - €148,200 €148,200 €61,700 €1,078,300 Initial CF Dividends retrocession (13%) Total Equity Solutions • Cash Flows (client is long Future): Natixis Client 2% dividend €22,800 98% dividend Interests on cash €39,060 Interests on cash Interests on 2% dividend Total €6 €61,860 Interests on 98% dividend Total Source: Natixis Structuration STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION €1,117,200 -€39,030 €312 €1,078,452 40 Equity Capital Markets • P&L (net of cash interests) of this transaction: Client will receive 98% of the dividend amount and Natixis will receive 2%. Synthetic (Put/call combination) 1. What is a Put/Call Combination? • A Synthetic (Put/Call Combination) is an option strategy (OTC or listed) which gives a long Synthetic Equity Exposure (buy a call and sell a put with the same strike and the same maturity) or short Synthetic Equity Exposure (buy a put and sell a call with the same strike and the same maturity). • F lexible maturity and various strategies (Yield Enhancement, Stock Financing Optimization and Synthetic Exposure or Hedging). 2. The Structure Profit/loss Long equity exposure: Buy Call/Sell Put Long Synthetic Equity Exposure Buy Call Sell Put Stock K Profit/loss Short equity exposure: Buy Put/Sell Call Long Synthetic Equity Exposure Stock K But Put Sell Call 41 Equity Research Synthetic (Put/call combination) Global Execution Services 4. Key Features • Underlying: Synthetic is based on single stocks and indices. • Timetable: From 2 weeks to 4 years on single stocks / from 3 months to 8 years on indices. • Legal documentation: ISDA + CSA if OTC options combination. No contract if listed options. 4. Example • C ontext: A non-French resident (beneficial owner) client is holding 500,000 shares of Total (FP FP) and is entitled to a withholding tax of 15%. Natixis will offer to the client the opportunity to enhance his dividend in addition to a financing deal of 142 days. Equity Flow Derivatives • P arameters: Duration is from 06/06/2011 to 10/26/2011 (142 days) Reference price: €39.70 Swap Euribor 1 month rate: 1.40% Dividend: €0.57 // retrocession rate: 97% // payment date: 09/22/2011 Client sells put / buy call (put over): €0.6309 Strike price (exercise): €40 • Cash Flows (the client buys a call and sells a put): Stocks Final CF Exercise Dividends - €19,850,000 €42,000,000 - €315,450 €315,450 €285,000 Total €20,000,000 - €20,000,000 €61,700 €1,078,300 Equity Solutions Payment date PCC Client • P&L (net of cash interests) of this transaction: Client will receive 97% of the dividend amount and Natixis will receive 3%. Natixis 3% dividend Interests on cash (pcc+stocks) Interests on 3% dividend Total €8,550 €111,358 €11 €119,919 Client 97% dividend €276,450 Interests on cash (pcc+stocks) - €111,358 Interests on 97% dividend Total Source: Natixis Structuration STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION €366 €165,458 42 Equity Capital Markets Initial CF Natixis Certificate 1. What is a Certificate? • A Certificate is a listed medium term note with an ISIN code fully linked to an equity underlying performance (dividend payment included). • C haracteristic of Certificate: - S ubject to Natixis credit risk. - U sually for short-term duration. - N o legal contract is needed. - S ettlements instructions: Euroclear and domestic accounts for the assets. • A Certificate within Delta One activity implies Yield Enhancement and Synthetic Exposure or Hedging. 2. The Structure Step 1: Initial Flows (Certificate/Stock/Cash) cate Certifi CLIENT Cash Certificate Price = Stock Spot Price Stock Cash BROKER Step 2: Step 1: Initial Flows (Certificate/Stock/Cash) cate Certifi CLIENT Cash Certificate Price = Stock Spot Price + Premium* Stock Cash BROKER * The Premium is realized under specific circumstances described in the Certificate Final Terms 43 Equity Research Certificate Global Execution Services 4. Key Features • Risks: - B eing a note, subject to Natixis credit risk. - Issued by Natixis Structured Products Ltd, Jersey and guaranteed by Natixis (S&P: A ; Moody’s: Aa3 ; Fitch: A+ - long term ratings as of 17/02/2012). • Liquidity: - C an be traded at any time. - P rice made by Natixis market making. - L isted on the Luxembourg Stock Exchange. • Legal documentation: - N o legal master agreement needed. • Equity portfolio return: Equity Flow Derivatives N o economic exposure to the underlying for the client. C lient is benefiting from the Yield Enhancement embedded by the premium return. The client purchases the Certificate with the net cash proceeds from the sale of the stock Asset is replaced by a debt security. • Investment profile: - S uggested investment duration: between 1 month and 3 months. - N otional: minimum €5 million / maximum depending on Certificate notional amount (defined by Natixis). 4. Example • C ontext: A non-French resident (beneficial owner) client is holding 500,000 shares of Total (FP FP). Client wants to enhance his dividend via a premium return Certificate during one week period. • P arameters: Trade period is from 05/16/2011 (initial price €40.555) to 05/23/2011 (final price €39.49). Natixis issues a Certificate for a notional amount of €20,277,500 (€40.555 * 500,000). Dividend: €1.14 Equity Solutions • P remium Calculation: Premium: €1.12005 (€1.14 * 98.25%) Redemption/Unwind price: €40.61005 • Cash flow (client buys Certificates): Natixis Client Stocks - €20,277,500 €20,277,500 Payment date Certificates - €20,277,500 €20,277,500 Final CF Stocks Initial CF Dividends Certificates Total €570,000 €19,745,000 - €19,745,000 - €20,305,025 €20,305,025 €9,975 €560,025 • P &L (net of cash interests) of this transaction: Client will receive 98.25% of the dividend amount and Natixis will receive 1.75%. 44 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets - Dividend Swap 1. What is a Dividend Swap? • A Dividend Swap is a contract whereby the parties agreed to exchange a pre-agreed dividend level, the fixed leg (level traded) versus the realized dividend (confirmed) paid by the company for an agreed period. • D ividend Swap for the year n is from Decembern-1 to Decembern, objective is hedging or trading for the client and an ISDA agreement is needed. 2. The Structure Hedging for the client Realized (paid) dividend Long Dividend Swap Fixed Leg (level traded) CLIENT Short Dividend Swap and long stock Hedging for the client Fixed Leg (level traded) Short Dividend Swap Realized (confirmed) dividend CLIENT Long Dividend Swap and short stock • T he buyer of a Dividend Swap (long Dividend Swap) will profit if the underlying delivers a higher dividend amount than the fixed leg of the swap. • T he seller of a Dividend Swap (short Dividend Swap) will profit if the underlying delivers a lower dividend amount than the fixed leg of the swap. 45 Equity Research Dividend Swap Global Execution Services 4. Key Features • Maturity is from Decembern-1 to Decembern (Dividend Swap is for the year n). • Legal documentation: ISDA agreement is needed if OTC structure / none if listed product (Eurex). • Underlying: single stocks and indices. • Hedging: with a Dividend Swap short position, client freezes the amount of dividend. • T rading: Dividend Swap trading (short position if you expect a drop in dividend and long position if you expect a rise in dividend) offers a direct exposure to the coming dividends paid by an underlying (stock or index). • T here are some listed dividend Futures which also offers a direct exposure to the dividends paid by an underlying (for example SX5E : Index and components). As listed instruments (Eurex), they have the same features as a standard Future contract (deposit/daily margin call …). Equity Flow Derivatives 4. Example Hedging: A client is holding 500,000 shares of Total (FP FP) and wants to freeze a level of dividend for 2010 • A t trade date: - N atixis agrees to buy from the client 500,000 Dividend Swap Total 2010 at a level of €2.18 (fixed leg). The client is therefore seller/short Dividend Swap. No cash flow is exchanged at this stage. - R ealized dividend by Total 2010 is €2.28. • A t maturity of the Swap (17/12/10): - C lient pays the realized dividend to Natixis: €2.28. - N atixis pays the fixed leg: €2.18. • C ash flow: Client pays €50,000 to Natixis (500,000 * 0.10). Short Dividend Swap -> Long Stocks -> Fixed Leg Trading: A client wants to take a long exposure on 500,000 Dividend Swap Total 2010 • A t maturity of the Swap (17/12/10): - C lient pays to Natixis the fixed leg (level traded): €2.18 - N atixis pays to the client the declared dividend (realized): €2.28. • C ash flow: Client receives €50,000 from Natixis (500,000 * 0.10). Buy Dividend Swap -> Short Stocks -> Realized Dividend 46 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Equity Solutions • At trade date: - N atixis agrees to sell to the client 500,000 Dividend Swaps Total 2010 at a level of €2.18 (fixed Leg). The client is therefore buyer/long Dividend Swap. No cash flow is exchanged at this stage. - R ealized dividend by Total 2010 is €2.28. Exchange-traded fund (ETF) 1. What is an ETF? • A n Exchange-traded Fund (ETF) is an open-ended fund which is traded on exchanges like stocks. An ETF tracks the performance of an asset. • E TFs underlying can be equities, bonds or commodities. ETFs are traded on primary market (creation/redemption mechanism at the Net Asset Value with the issuer) or on exchange and ETFs offer transparency, flexibility, cost-effectiveness, diversification, and liquidity. • E TF within Delta One activity implies 1. Market making on European listed ETF. 2. ETF creation/redemption (Natixis is an Authorized Participant among major European issuers). Mutual Fund + Share = Exchange Tarded Fund 1. Key Features • An ETF tracks any equities, bonds or commodities underlying. • Primary market: - T he creation/redemption mechanism operates within the primary market. The primary market allows Authorized Participants (AP) to exchange baskets of securities or cash for ETF shares - A n AP is a financial institution with the ability to create and redeem ETF units directly with ETF issuers. Natixis is an Authorized Participant among major European issuers. - C reation/redemption process takes place usually at the closing of ETF exchange and at the Net Asset Value (NAV). - T he NAV is the official valuation of the fund (usually, issuers use the closing price of underlying securities minus daily accruals of the management fee or Total Expense Ratio, divided by the number of shares outstanding). - As international exchanges close at different times, some global funds are unable to provide a same day NAV (T+1 basis). • Benefits: Transparency, flexibility, cost-effectiveness, diversification, and liquidity. 47 Strategy Objective Controlling equity exposure Manage large or unpredictable cash inflows Reducing concentration / risk Diversify away from a single security or asset class concentration Strategic international exposure Tactical investment to gain exposure towards global sector, regional or Equity Research Global Execution Services Exchange-traded fund (ETF) single country markets Managing sector exposure Investors have a wide selection of ETF to choose from to control the sector and industry exposure of their portfolios Shorting ETF Hedging a portfolio Equity Flow Derivatives 4. Example • An investor wants to have an exposure to Russia trough DJ RusIndex Titans 10 (USD). • An easy way to get this exposure is to buy shares of DJ RusIndex Titans 10 (USD) Lyxor ETF (ISIN: FR0010339457). 48 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Equity Solutions • O ur market maker is able to 1/ make a price on this ETF and 2/ create ETF shares (if ETF shares aren’t sizeable enough on the secondary market) and therefore trade at NAV: - M ake a price on ETF - C reate ETF shares (if ETF shares are not sizeable enough on the secondary market - Trade at Net Asset Value Scrip Dividend 1. What is a Scrip Dividend? • A Scrip Dividend is the option to receive dividends either in cash or in stock. If the client chooses to exercise the scrip option (during the subscription duration), he will receive Nscrip stocks at the strike price (average stocks price during the reference duration). If he doesn’t exercise, the client will receive cash at the payment date. Nscrip = (N* dividends) / Reference price with N scrip = number of shares received if you exercise the scrip option N = number of shares hold by the client ( 201 ∑ (P ) - D ( 20 Reference price = (100% - discount) * i i=1 with Reference period = 20 days before the AGM • Natixis can manage Scrip Dividend with a broad range of products (REPO, TRS and term swap). • N atixis will freeze the profit for the client (i.e. neutralizing the stock price evolution) and offers a fixed percentage of dividends amount. 2. The Timeline • Veolia Environnement (VIE FP) example: Ex date 23/05/2011 Reference period from 04/15/11 – 05/16/11 Scrip subscription duration from 05/23/11 – 06/07/11 Reference price Scrip Dividend announcmenet 49 AGM 05/17/2011 Dividend payment date 06/17/2011 Equity Research Scrip Dividend Global Execution Services 3. Example • C ontext: The client is long of 100,000 Veolia Environnement (VIE FP). Veolia offers a dividend of €1.21 with a scrip option with 10% discount announced. • P arameters: Average price during the reference period: €20.82 Reference price: €18.74 Nscrip : 6,456 stocks Client’s profit VIE FP < Reference price VIE FP = €19 VIE FP = €21 €121 000.00 € €122 664.00 € €135 576.00 Equity Flow Derivatives • C ash flow Without Natixis Scrip Dividend management: The client’s profit will depend on Veolia Environnement share price performance evolution. 50 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Equity Solutions • With Natixis Scrip Dividend management : The client will freeze his profit at €134,414 (6,456 * 20.82). Margin Loan Margin Loan Definition • A Margin Loan is a bilateral OTC contract enabling the client to benefit from a funding by Natixis (usually Euribor rate + spread) secured by a pledged granted by a client over an equity underlying (single portfolio). • A Margin Loan is simply a loan collateralized by a pledge over an underlying. Pursuant to the pledge agreement, the client remains the full owner of the underlying equity (no transfer of ownership), and is thus dully entitled to vote and to benefit from the dividends. • M argin calls are posted on the pledged account in case of decrease of the pledge underling. Margin calls can be posted either by transfer of additional pledged stocks, in cash or in other stocks to be agreed. The Structure Interest Rate Cash CLIENT Pledge Dividend On the pledged underlying • No transfer of ownership • M argin Calls are posted on the pledged account either with underlying stocks, in cash or in other stocks to be agreed 51 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets 52 Equity Solutions Equity Flow Derivatives Global Execution Services Equity Research 53 Equity Solutions Income Products Growth Products Market Neutral Products Portfolio Protection Structures Fund-linked Structures Multi-Asset Structures www.equitysolutions.natixis.com 54 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Income Products An alternative to fixed-income Investments, offering a higher return potential. The investor gets a high annual or quarterly income. Capital can be at risk when Investment pays maximum coupons, or partly/fully protected for risk-averse investors 55 Equity Research Equity Incremental Autocall Euro STOXX 50®, 1 year, Quarterly Autocall, 14% p.a. Favourable Scenario Global Execution Services Product Description Conditional coupon of 3.50% each quarter • O n each quarterly observation date, if the level of the index is greater than its initial level, the product delivers a coupon of 3.50% Memory effect on the coupons • A ll the coupons previously not delivered are received on the next quarterly observation date if the level of the index is greater than its initial level Early redemption mechanism Median Scenario Equity Flow Derivatives • If on any quarterly observation date (except the first one), the level of the index is greater than its initial level, the capital is immediately redeemed at 100% Conditional protection of the capital at maturity If during the investment period, there was no early redemption and : • t he index level is above the protection barrier, the capital is entirely redeemed at par at maturity • t he index level has breached the protection barrier but the final level is above its initial level, the product offers a 100% capital back • t he index level has breached the Protection barrier and the final level is below its initial level, the capital will be impacted by the negative performance of the index Characteristics Issuer Natixis Structured Products Ltd. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Product EMTN Currency EUR / USD Coupon 3.50% Protection Barrier 60%, Continuous monitoring Coupon Barrier 60%, Quarterly observations Autocall Barrier 100%, Quarterly observations Advantages Disadvantages • • • • • T he capital is not guaranteed at maturity • The maturity is undefined uarterly conditional coupon of 3.50% Q Early redemption mechanism Buffer protection up to 60% Memory effect on the coupons Contact: Michel Orban +33 01 58 55 11 45 56 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Equity Solutions Unfavourable Scenario Equity Sweet Reverse Convertible Euro STOXX 50®, 10%, 14 months, EUR Highlights Scenarios • E quity Sweet Reverse Convertible is designed for investors who seek higher yield investment and would like to monetise the volatility of the Euro STOXX 50® Optimistic Scenario : • T he capital is 100% guaranteed at maturity, if the final level of the index is equal or greater than 75% of its initial level • T he coupon of 10% is fixed and payable regardless of the Euro STOXX 50® performance at maturity At maturity, if the index level is equal or greater than 75% of its initial level, the investor will receive 100% of the nominal amount and the unconditional coupon of 10% Pessimistic Scenario : At maturity, if the index level is lower than 75% of its initial level, the capital will be impacted by the negative performance of the index and the 10% coupon will be paid Redemption at maturity : 100 % * [ SX5E Final / SX5E Initial ] + 10% Characteristics Issuer Natixis S.A. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Strike 100% Strike Date 12 October 2010 Maturity 30 December 2011 Currency EUR Underlying Euro STOXX 50® (SX5E) Barrier Level 75% Barrier Type European Coupon 10% Payoff at maturity Advantages • U nconditional coupon payable regardless of the Euro STOXX 50® performance at maturity • Buffer protection up to 75% Disadvantages • Maximum capital gain is capped to the coupon • Capital is not protected at maturity • T he coupon may not be sufficient to compensate the capital loss when there is a sharp decrease in the Euro STOXX 50® Contact: Michel Orban +33 01 58 55 11 45 / Olivier Cohen +33 01 58 55 11 42 57 Equity Research Digitals A 6.50% example Scenarios Global Execution Services Highlights • T otal protection of your capital at the end of the product life whatever the Euro STOXX 50® index evolution • A 6.50% annual coupon if the Euro STOXX 50® index is equal or greater than its initial level at its observation date • B oost your investments thanks to a product, offering a 3 times higher yield compared to 6 year Government Bonds (currently 1.90%) Maximum yield rate: Equity Flow Derivatives 1.90% 6.50% Characteristics Natixis S.A. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Issue Price 100% Maturity 6 years Currency EUR Underlying SX5E Coupon 6.50% Payoff at maturity Bullish trend : 6x 6.50% payable coupons 6 coupons paid and total capital reimbursed at maturity 6.50% yield rate Bell-shaped Trend : 4x 6.50% payable coupons Advantages 4x coupons paid and total capital reimbursed at maturity 4.52% yield rate • A 6.50% coupon in case of index stability or growth at each annual observation date Bearish Trend : no coupon paid • Capital guaranteed at maturity Equity Solutions Issuer Entire reimbursement of your initial capital (which is not the case for a direct investment) 0 % yield rate • T he capital is only guaranteed at maturity. In case of withdrawal during the product life, the price will be correlated to market conditions and may be lower than the initial capital • T he investor does not receive the dividends of the shares comprising the index Contact: Diana Chikova +33 01 58 55 80 42 58 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Disadvantages Growth Products Investments providing exposure to Equity Markets, with some capital protection. They are built to express directional bias on equity underlying (bull or bear) They often incorporate leverage, i.e. higher risk than traditional equities, so they can be sold with full capital protection and minimal returns. 59 Equity Research Example: Vol Cap on Emerging Basket Highlights The Volatility Target Strategy • V ol Cap on Emerging Basket offers the opportunity to benefit from the growth of emerging countries • T he Volatility Target Strategy on BRIC indices provides the framework to adjust the risky allocation depending on the total risk of the basket, the exposure to risky assets falling when the historical volatility level is higher Characteristics Issuer Natixis Structured Products Ltd. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Product EMTN Currency EUR / USD Coupon 3.50% • T he maximum allocation on BRIC indices is equal to 100% and decreases when the realized volatility increases • A fall on equity markets goes with a higher level of volatility. The Allocation Mechanism is based upon trends in recent volatility, thereby capturing the market’s perception of nearterm risk. Finally, the level of risk in the Volatility Target Strategy will decrease when the market’s perception of risk is rising • B esides, the control of the underlying volatility with the Volatility Target Strategy decreases the cost of a call which is favourable with a low funding Equity Flow Derivatives • T he product makes use of volatility as a risk indicator, and responds objectively and automatically to any signals that emerge over a pre-determined observation period Global Execution Services price as 4 years, USD, 100% capital guaranteed Protection Barrier 60%, Continuous monitoring Coupon Barrier 60%, Quarterly observations Autocall Barrier 100%, Quarterly observations The Allocation Mechanism • O n any rebalancing day, the proportion of the portfolio held in Risk Asset will be set equal to: Ticker Underlying Country EWZ US Ishares MSCI Brazil Index Fund Brazil RSX US Market Vectors Russia ETF Russia INP US Ipath MSCI India index ETN India FXI US Ishares FTSE / Xinhua China 25 China Advantages Risk Asset Allocation = Min (Maximum Risk Asset Allocation, Target Volatility / Realised Volatility) Equity Solutions Basket Redemption at maturity • A t maturity, the redemption amount is determined by a daily algorithm process. On each day, the strategy is recalculated depending on the Risk Asset Allocation, based on the Realised Volatility Disadvantages • Re-allocation mechanism not preventive Contact: Olivier Cohen +33 01 58 55 11 42 60 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • T he capital is fully redeemed by the issuer at maturity • Re-allocation of assets depending on risk levels Example: 90% CPN Equity Worst of World Indices, 3 years, USD, 110% participation Highlights Favourable Scenario This is a growth product linked to the performance of three indices (MSCI Brazil, Hang Seng China Ent Indx and S&P 500) 110% participation • If the final levels of all indices are above a predefined barrier of 90%, the product offers at maturity a capital return of 90% plus 110% participation in the positive performance of the worst performing index from 90% of its strike 90% capital guaranteed to maturity Median Scenario • A t maturity, if the final level of at least one index is at or below the barrier, the product offers a minimum capital return of 90% Characteristics Issuer Natixis Structured Products Ltd. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Product Type EMTN Basket See composition below Currency USD Capital Guaranteed 90% Maturity 3 years Unfavourable Scenario Basket Composition Ticker Index EWZ US iShares MSCI Brazil Index Fund HSCEI Hang Seng China Ent Indx SPX S&P 500 Advantages Disadvantages • 110% participation on the worst performing index • Capital is not totally guaranteed at maturity • Capital gain is not capped • T he performance retained is the one of the worst performing index • A t maturity, the repayment of the capital is protected at 90% by the issuer Contact: Olivier Cohen +33 01 58 55 11 42 61 Equity Research Turbo note Underlying, xx% indexation, xx months, CHF Favourable Scenario Global Execution Services Product Description xx% Leverage on the positive performance • A t maturity, if the underlying is above its initial level, you receive xx% of the positive performance of the underlying. This performance is capped at xx% (i.e. maximum redemption is xx%) Underlying performance on the downside Median Scenario Equity Flow Derivatives • A t maturity, if the underlying is at or below its initial level, the capital will be impacted by the negative performance . Capital is not guaranteed at maturity Characteristics Natixis Structured Products Ltd. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Product Type EMTN Maturity xx months Currency xx Underlying xx Cap xx% Indexation xx% Re-Offer xx% Unfavourable Scenario Equity Solutions Issuer Advantages • Investor benefits from XX% of the underlying’s positive performance but only risks XX% on the downside Disadvantages • Capital is not guaranteed a maturity • Capital gain is capped Contact: Michel Orban +33 01 58 55 11 45 62 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • Short maturity Example: Outperformance Note Nestlé, 170% gearing, 15 months, CHF Product Description Favourable Scenario 170% Gearing on the positive performance • A t maturity, if the stock is above its initial price, you receive 170% of the positive performance Delivery of the Shares on the downside • A t maturity, if the stock is below its initial price, you will be redeemed 1 share, which means you accept the downside risk on NESN VX Median Scenario Characteristics Issuer Natixis Structured Products Ltd. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Product Type EMTN Maturity CHF Currency Underlying Strike 15 months Nestlé (NESN VX) CHF TBD 170% Unfavourable Scenario Advantages • Investor benefits from 170% of the stock’s positive performance • Maximum potential gain in uncapped Disadvantages • Capital is not guaranteed at maturity • If the share price closes at maturity below the Strike price, the product offers a capital return paid out in shares Contact: Structuration Team +33 01 58 55 98 14 / 2842 63 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets 64 Equity Solutions Equity Flow Derivatives Global Execution Services Equity Research Market Neutral Products Investments built to take advantage of non-directional Markets. They can be designed to perform either in low volatility/flat Markets or in very volatile ones. They can also include full or partial capital protection. 65 Equity Research Strangles Highlights Scenarios • B enefit from a bullish trend thanks to a full indexation to the increase in the Euro STOXX 50® index (up to 50%)… Highly bullish trend: • … but also from a bearish trend thanks to a full indexation to the decline in the Euro STOXX 50® index (-50% in absolute terms) The index closes above 150% of its initial level at maturity. You receive 90% of your capital and 100% of the index increase up to 50%, i.e. 140%. TRA: 6.96% • 90% capital guarantee at maturity Global Execution Services Twin Win Bearish trend: Natixis S.A. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Issue Price 100% Maturity 5 years Currency EUR Underlying SX5E Steep downward trend: The index closes below 50% of its initial level at maturity. You receive 90% at maturity TRA: -2.09% Advantages Payoff at maturity • 1 00% of the performance of the index taken in absolute terms, either increase or decrease from -50% to +50% • G et 90% of your capital and 100% of the performance of the Euro STOXX 50® index, taken in absolute terms, if it finishes between 50% to 150% of its initial • 90% capital guarantee at maturity 90% Equity Flow Derivatives Issuer Equity Solutions Characteristics The index closes at 55% of its initial level at maturity. You receive 90% of your capital and 100% of the decline of the index taken in absolute value, i.e. 135%. TRA: 6.19% • If the index ends above 150% of its initial level, the reimbursement is 90% of your capital and 100% of the index increase up 50%, i.e. 140% Disadvantages • W hatever the evolution of the Euro STOXX 50® Index, your capital is guaranteed at 90% at maturity • Reimbursement limited to 140% • If the index ends below 50% of its initial level, your capital is guaranteed at maturity • Capital risk by 10% at maturity Contact: Diana Chikova +33 01 58 55 80 42 66 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets • T he investor does not receive the dividends of the shares comprising the index Portfolio Protection Structures Investments designed to hedge or protect an Equity portfolio. They are mainly structured with various put option combinations. Also, Financing solutions are included. 67 Equity Research Example: Hybrids: 6 year Note boosted coupon Lock in CMS 10 years / Euro STOXX 50® Description Global Execution Services Favourable Scenario Conditional coupon : 7% p.a. minimum Each year, if the Euro STOXX 50® Index closes above 50% of its initial level, the investor receives the best of: • 7% • CMS10Y + 3% Lock-in effect : guaranteed Capital and coupons On annual observation date, if the Euro STOXX 50® Index closes above 120% of its initial level, the Lock-in effect is activated and: Median Scenario • 100% of the capital is guaranteed et maturity Equity Flow Derivatives • All the future coupons are guaranteed Conditional capital protection at maturity If the Lockin effect did not happened and the Euro STOXX 50® Index closes above 50% of its initial price, the capital is entirely redeemed at par Otherwise, if the lockin effect did not happened and the Euro STOXX 50® Index closes below 50% of its initial level, the capital will be impacted by the negative performance of theEuro STOXX 50® Index Unfavourable Scenario Issuer Natixis S.A. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Maturity 6 years Currency EUR Underlying Euro STOXX 50 ® Index (Bloomberg Ticker: SX5E Index) Equity Solutions Characteristics CMS 10-year Index (Bloomberg Ticker: CMS10Y Index) Lock-in Level 120% of the Euro STOXX 50® initial level Protection Barrier 60% of the Euro STOXX 50® initial level 60% of the Euro STOXX 50® initial level Advantages Disadvantages • • • • • C apital is not guaranteed at maturity • The maximum return is limited to CMS10Y +3% ncapped conditional coupon U Minimum conditional coupon of 7% p.a. Lockin Effect: guarantees capital and future coupons Buffer protection up to 50% Contact: Michel Orban +33 01 58 55 11 45 68 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Coupon Barrier Low-cost protection: 1 Year Euro STOXX 50® Timer Straddle - Euro STOXX 50® Vanilla Straddle Highlights Scenarios Rationale: • S ell volatility on today’s high volatility levels via a Vanilla Straddle Sale • B uy a Timer Straddle neutralises the position against high short term volatility movements - B uy a Timer Straddle vanilla position allows a perfect replication of the index without paying today’s volatility - T he Timer Straddle maturity depends on realised volatility to come as far as client’s budget is concerned • T he position is hedged as long as the Timer Straddle has not expired; No short term delta nor gamma • M onetisation of the spread between implied volatility and the Timer Straddle budget volatility • In an opposite scenario, when the Timer budget is almost fully used, the position will be unwound (Timer exercise and vanilla straddle buyback with a residual maturity) Characteristics • T he Index is far from the strike low time value and intrinsic values offset themselves Format OTC Option Maturity 1 year Currency EUR Underlying Euro STOXX50® Index (Bloomberg Ticker: SX5E Index) • T he Index is close to the strike the vanilla straddle residual time value depends both on the ATM vol and remaining maturity. Hence the position shall be wining if the residual maturity is low and/or if there is a decrease of implied volatilities • P roduct rationale relies on the assumption that realised volatility will be lower than the budgeted so the Timer effective maturity will be 1 year Advantages • Sale of implied volatilities (currently high) • Perfectly hedged position till the Timer Straddle expiry Disadvantages • R eturn capped to the spread between implied and budgeted volatilities • T he Vanilla Straddle Buyback become necessary in case of anticipated expiry of the Timer Straddle Contact: Michel Orban +33 01 58 55 11 45 / Arnaud Chaumont +33 01 58 55 11 02 69 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets 70 Equity Solutions Equity Flow Derivatives Global Execution Services Equity Research Fund-linked Structures Protected products linked to Mutual Funds or Hedge Funds, that offer exposure to attractive investments, or easy access to alternative assets, with a reduced risk 71 Equity Research Example: Fund Derivatives ScenariOS • U pon 8 year maturity, the investor is entitled to receive 70% of the best performance recorded annually since the beginning. The gains are acquired and protected continuously Optimistic scenario: Optimistic case Median scenario: A moderate increase of the fund Expert Premium If a recorded performance is positive, the investor receives at the maturity date: The full initial capital + 70% of the the best performance recorded • T he best annual performance since inception was recorded in year 5. It’s sets to 45%. The investor receives the principal (its capital) plus 70% of 45%, i.e. a total of 131.5%. The TRA is 3.48% Pessimistic case Pessimistic scenario: If no performance is found positive, the investor receives at the maturity date: The full initial capital Decline of the Expert Premium fund Advantages Disadvantages • The principal is guaranteed in full at maturity of 8 years • T he capital guarantee only benefits the investors who invested only until 23 December 2011 and maintaining the financial instrument until maturity, i.e. January 3, 2020 • T he indexing to the Expert Premium fund’s performance is done each year • E xpert Guaranteed Premium II is based on a formula for repayment at maturity, which has only one mechanism Equity Flow Derivatives • D escription of the reimbursement formula: Every year we see the fund’s performance since Expert Premium inception • The best annual performance since inception was recorded in year 8. It’s sets to 118%. The investor receives the principal (its capital) plus 70% of 118%, i.e. a total of 182.6%. The TRA is 7.82% • A ll annual performance since inception are negative. The investor receives his entire capital. The TRA is 0% Equity Solutions • U pon 8 year maturity, the investor benefits from a full capital guarantee. He is certain to recover at least all of its investment Significant increase of the Expert Premium fund • Indexing to the Expert Premium fund’s performance is partial, up to 70% • T he resale of the security on the secondary market takes place at market value and the holder may record a gain or loss on the initial invested amount Contact: Christophe Hilaire +33 01 58 55 82 94 72 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Highlights Global Execution Services Expert Premium Garantie II Example: Vol Cap Funds Equiplus Europe Active Control 4: structured by Natixis Highlights Scenarios • A n example of structured product that reacts actively to volatility on Euro STOXX 50® The volatility of the Euro STOXX 50® index (DJES50) during the previous month determines the extent to which the subfund will participate in or be exposed to this index in the month ahead • T he extent to which the sub-fund tracks this renowned stock market index is actively adjusted each month and also takes account of how much volatility there has been in the most recent period High Volatility : • T he volatility of the stock market index during the previous month determines the extent to which the sub-fund will be exposed to or will participate in the index in the month ahead: - C alm (minor fluctuations): more exposure to the index (maximum participation of 150%) - T urbulent (major fluctuations): less exposure to the index (minimum participation of 25%) Advantages Lower Volatility : • C apital protection • Limited volatility Disadvantages • Investment/Disinvestment delay as relies on historic volatility Payoff at maturity • A t maturity, you will receive 100% of the potential increase (end value minus starting value divided by starting value) in the calculated value • T his starts at 100 and is adjusted each month to take account of movements in the index and also the extent of the exposure to or participation in this index. The potential increase will therefore not be the same as the potential increase in value of the Euro STOXX 50® index • The initial capital is 100% protected if held to maturity Contact: Frank Cherbe +44 20 3216 9221 73 Equity Research Example: Prop Index Funds Sérénité Premium Risk perception indicator: • T he management approach known as ‘portfolio insurance’ consists of regularly adjusting the distribution of assets between an asset category considered ‘at risk’ (Sélection Premium) and another ‘not at risk’ category with the aim of protecting the original capital at the maturity date of 1st August 2019 • T he risk perception indicator enables the fund manager to detect any sharp changes in financial market trends • If the value of the assets in Sélection Premium declines, the fund’s exposure to these assets will be reduced in order to protect the portfolio against any continued equity market decline • T he fund manager optimises this management by using a risk perception indicator when the at-risk asset category is potentially exposed • With the aid of this indicator, the Fund Manager is able to: - A dopt a defensive approach by reducing the proportion of funds allocated to the At-Risk Asset Category (Sélection Premium), in favour of a Not-At-Risk Asset Category during perceived periods of ‘high risk’ Equity Flow Derivatives • If the value of the assets in Sélection Premium increases, the fund’s exposure to these assets will be increased in order to derive maximum benefit, albeit temporarily, from equity market growth • T he indicator is based on objective market parameters which are continuously monitored by the fund management teams. It determines the level of risk perception on the part of financial markets - Increase the proportion of funds in the At-Risk Asset Category (Sélection Premium) during perceived periods of ‘low risk’ Advantages Disadvantages • T he bearer purchasing shares in the Investment Funds benefits from a guarantee of the highest selling price observed during the Subscription Period on the Guarantee Maturity Date • O nly bearers who retain their shares until the Guarantee Maturity Date benefit from the Capital Guarantee • T he bearer can participate partially in any possible increase in the value of listed international companies via possible returns from the At-Risk Category. This Category is subject to continuous monitoring in terms of its make-up and to a proactive asset selection approach conducted by the Management Company Equity Solutions • In the light of the management technique used (portfolio insurance) the Investment fund’s exposure to the AtRisk Asset Category can be reduced to zero up to the maturity date. However, in this case, the Investment fund will no longer benefit from any possible recovery in the At-Risk Asset Category in question • E xposure to the At-Risk Category can become nil and remain nil until the Guarantee Maturity Date, due to Investment Fund monetisation with the view to guaranteeing the capital. In this case, the Investment Fund will no longer be in a position to profit from a possible recovery in the At-Risk Category • T he investment strategy used by the Investment Fund manager to guard against the effects of any rise in risk and volatility by reducing exposure to the At-risk Category as and when required, does not allow bearers to benefit systematically and entirely from the rise in the value of the At-Risk Category Contact: Stephane Leve +33 01 58 55 81 33 74 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Portfolio insurance’ management: Global Execution Services Highlights Multi-Asset Structures Hybrid underlying allow you to build risk-diversified structures which provides exposure to non-equity linked assets, such as gold, inflation or interest rates, to optimize overall returns when an asset-class consolidates over a long period of time. Various Mutli-asset strategies can be structured. 75 Equity Research Inflation Linked Hybrid Note European Inflation ex Tobacco & Euro STOXX 50® / 5 years / EUR A 100% CAPITAL PROTECTED PRODUCT Global Execution Services Favourable Scenario Each year, the product pays a coupon depending on the year on year European Inflation ex tobacco and on the performance of the Euro STOXX 50®: >> On each annual observation date, if the level of the Euro STOXX 50® is equal to or greater than 75% of its initial level, and: • If the YoY inflation is positive, the investor receives the maximum between 4% and the YoY inflation • Otherwise, in case of deflation, the investor do not receive any coupon • The investor do not receive any coupon Median Scenario Equity Flow Derivatives >> On each annual observation date, if the level of the Euro STOXX 50® is lower than 75% of its initial level: >> A t maturity, the capital is 100% protected, regardless the performances of the inflation or the Euro STOXX 50® Characteristics Natixis Structured Products Ltd. Ratings S&P: A ; Moody’s: Aa3 - as of 17/02/2012 Capital Protection 100% capital protected at maturity Currency EUR Maturity 5 years Underlyings HICP Ex-Tabacco Inflation (Bloomberg Ticker: CPTFEMU Index) Euro STOXX 50® (Bloomber Ticker: SX5E Index) Unfavourable Scenario Equity Solutions Issuer Conditional coupon MAX (4%; Inflation yoy) Advantages • U ncapped coupon • 100% capital protected Disadvantages • Potential minimum coupon of 4% Contact: Stephane Leve +33 01 58 55 81 33 76 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Capital Markets Description 77 Equity Capital Markets ECM Corporate Broking Corporate Solutions 78 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION ECM Equity Capital Raising for Corporates and Financial Institutions Product Description A High quality Track Record Equity Capital Markets products designed for Equity Issuers • In 2011 Natixis was ranked No. 1 for convertible issues by transaction number and by amount • T he Lazard-Natixis Equity Capital Markets team, a partnership pooling expertise of Lazard and Natixis teams, offers to its clients, both in France and internationally, financing solutions and access to the equity market through the following products: • Initial Public Offerings (IPO): First sale of stocks by a private company to the public Objectives: - Raising equity share capital as a mean of organic and/or external growth financing - O ptimisation of balance sheet structure: fund raising leading to deleveraging • In 2011, Natixis was ranked No. 3 overall in France by number of lead-managed transactions • A mid cap expertise: Natixis ranked 1st in France, both in volume and in number of issues, for IPOs lead-managed as a Bookrunner since 2005 • A 10-year mid-caps expertise Selected 2011 Track Record - T otal or partial monetization of shareholders’ participations (VC, family, etc.) - Acquisitions financing - Increasing visibility A 4-6 month process from preparation & documentation, structuring, marketing (starting 1 month prior to pricing) to offer & listing Source: Bloomberg 79 Contact: Florent Mahe +33 01 58 55 92 44 / Benjamin Tran +33 01 58 55 02 27 Equity Research ECM Equity Capital Raising for Corporates and Financial Institutions Product Description Global Execution Services 2011 Spin-off Track Record Equity Capital Markets products designed for Equity Issuers • S pin-off: - Isolate a listed group’s business unit or subsidiary and create two separate listed entities • Objectives: - R efocusing of the parent company on its core business - D evelopment of an independent strategy for the split subsidiary - B etter clarity of the independent structures for the investors Equity Flow Derivatives - R edistribution policy of wealth to the shareholders Contact: Florent Mahe +33 01 58 55 92 44 / Benjamin Tran +33 01 58 55 02 27 80 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Equity Capital Capital Markets Markets Equity Solutions - B etter visibility for the spun-out subsidiary ECM Equity Capital Raising for Corporates and Financial Institutions Product Description Equity Capital Markets products designed for Equity Issuers • Capital increases: - 2 main structures may be considered: rights issue (pre-emptive rights for shareholders), Accelerated Bookbuilding (no preemptive rights) - Objectives: • Financing organic and/or external growth • Financial structure optimisation • Increasing free float and liquidity - A 1-3 month process from preparation & documentation, structuring to the offer & listing of new shares • Disposal of block of shares: Accelerated Bookbuilding - O bjectives: • Sale of non-core listed or unlisted participation by companies • Privatisation • Sale of large/illiquid stake by institutional shareholders - U sually a few hour process • Equity-linked products: convertible or exchangeable bonds issue (cf. convertible bond section in Flow Research) - Issue of a debt product, combined with a conversion option in equity • Existing mechanism to limit the dilution - O bjectives: • Lower financing cost for the issuer: the embedded value of the option reduces the interest rate paid • Diversification of financing sources: disintermediation and interest charges inferior to a bond of same maturity • Opportunistic financing in a context of volatile markets - A one month process from preparation, structuring, pricing to placement Contact: Florent Mahe +33 01 58 55 92 44 / Benjamin Tran +33 01 58 55 02 27 81 Equity Research ECM Equity Capital Raising for Corporates and Financial Institutions Global Execution Services Product Description • Public Offers: - V arious possible Public Offers depending on the corporate situation: Acquisition Public Offer (“OPA”): can be standard or simplified depending on the controlling acquisition stake scenario (“OPAS”= Simplified Public Tender Offer or “Garantie de cours” = Standing Market Offer, i.e. with guaranteed share price at the same level of the acquisition stake) - E xchange Public Offer: using shares to pay for the acquisition - M ixed Public Offer: using shares and cash to pay for the acquisition - P ublic Tender Offer followed by a compulsory Squeeze-Out (“OPR-RO”): acquiring the remaining shares, get 95% of voting rights, squeeze-out remaining shareholders and delist company Equity Flow Derivatives • Objectives: - C onsolidation in some sectors: stakes of critical sizes - J oining together two groups and synergies creation: earning and/or cost synergies - C ost opportunities: when the share price is under-valuated Contact: Florent Mahe +33 01 58 55 92 44 / Benjamin Tran +33 01 58 55 02 27 82 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Equity Capital Capital Markets Markets Equity Solutions Lazard-Natixis’ offer can meet any type of issuer’s need, whatever its size or sector, thanks to an integrated distribution platform and a recognized know-how Corporate Broking Access to Corporate and Holdings secondary equity and derivative markets Product Description 29 Liquidity Contracts end of 2011 Liquidity contracts: Heading for improved liquidity • L iquidity is a continuous concern for issuers and investors alike, not only for valuation reasons, but also in terms of visibility, index membership, possibilities for derivative products and potential use of secondary market offers • H igh service standards required during the implementation of an accepted market practice by our dedicated team: - A significant and measurable improvement in liquidity - O ngoing advice on the amount of funding to be allocated - A critical view of the results obtained through regular reviews - A responsive market watch - T he added value of a team experienced in stockmarket issues (indices, roadshows, hedging) Contact: Cedric Richard +33 01 58 55 90 60 83 Equity Research Corporate Broking Access to Corporate and Holdings secondary equity and derivative markets Global Execution Services Product Description Share buybacks: a constantly updated range of solutions • R egulated execution is constantly changing and the solutions on offer, whether cash or derivatives, are tailored to new opportunities for buying back shares for cancellation, hedging Stock Options, or the constitution of a stock of treasury shares to finance subsequent external growth • The most appropriate solutions are chosen among the following: - D irect buyback orders - Independent buyback mandates - Vanilla calls Equity Flow Derivatives - P erformance calls (reproducing the conditions for allocating Stock Options to managers insofar as is possible). Investment – Hedges – Divestment of strategic or financial shareholdings • Investment: Shareholding acquisition mandates, access to the broker’s liquidity and to the full range of capacities offered by our execution teams: single stocks, baskets of stocks, foreign markets, SRD, member buyer in the event of a public share offering and acquisitions in offer periods • H edging: Full or partial insurance of a shareholding (purchases of puts, put spreads, tunnels), targeting outperformance, futures contracts (call option sales, call spreads) Contact: Cedric Richard +33 01 58 55 90 60 84 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Equity Capital Capital Markets Markets Equity Solutions • D ivestment: Direct disposal of securities on the market, independent irrevocable sales mandates, scheduled disposal mandates, blocks Corporate Derivatives Derivative solutions for corporate clients Product Description Dilutive Share based Instruments hedging Stake holding & Treasury shares Management • H edging of Stock-options’ plans: Selling of hedging Calls Acquisition, monetization, hedging or disposal of equity stakes or treasury shares through: • Hedging of Free-shares’ plans: Equity Swaps ; hedging Conditional Buy Programs • P urchase/Sale of optional strategies: Calls, Puts, Calls spread, Puts spread, Collars… • H edging of Convertible bonds, Bonds with equity warrants attached, Bonds with redeemable equity warrants etc.: Selling of hedging Calls • Equity Swaps / Protected Equity Swaps (embedded Put) Using Derivatives as a way of financing • Indexed bonds: The redemption amount is linked to the performance of the underlying asset, due to the embedded option • F orwards/ Prepaid forwards / Prepaid forwards with protection (embedded Put) • C onditional Buy/Sell Programs: Shares’ acquisition/disposal programs at improved price conditions, on a given period of time, thanks to embedded derivatives Employee Share Ownership Plans Credentials Shareholding schemes • E mployee Share Ownership Plans (ESOPs) with leverage and/or capital guarantee: - S aving schemes provided by the company for its employees at attractive conditions - P erformance motivation tool - S hareholding stabilization mechanism • Management Buy-In schemes: - Variable remuneration instruments - S trong performance incentive - Way to retain key managers Contact: Yves Aboudaram +33 01 58 07 38 85 Equity Research DISCLAIMER This document is for discussion and information purposes only. It is highly confidential and it is the property of Natixis. It should not be transmitted to any person other than the original addressee(s) without the prior written consent of Natixis. This document is a marketing presentation. It does not constitute an independent investment research and has not been prepared in accordance with the legal requirements designed to promote the independence of investment research. Accordingly there are no prohibitions on dealing ahead of its dissemination. Global Execution Services The distribution, possession or delivery of this document in, to or from certain jurisdictions may be restricted or prohibited by law. Recipients of this document are therefore required to ensure that they are aware of, and comply with, such restrictions or prohibitions. Neither Natixis, nor any of its affiliates, directors, employees, agents or advisers nor any other person accept any liability to anyone in relation to the distribution, possession or delivery of this document in, to or from any jurisdiction. This Document is only addressed to Investment Professionals as set out in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 or to persons regarded as professional investors under equivalent legislation under a jurisdiction of the European Economic Area. This document is not for distribution to retail client. This document is communicated to each recipient for information purposes only and does not constitute a personalised recommendation. It is intended for general distribution and the products or services described herein do not take into account any specific investment objective, financial situation or particular need of any recipient. It should not be construed as an offer or solicitation with respect to the purchase, sale or subscription of any interest or security or as an undertaking by Natixis to complete a transaction subject to the terms and conditions described in this document or any other terms and conditions. Any guarantee, funding, interest or currency swap, underwriting or more generally any undertaking provided for in this document should be treated as preliminary only and is subject to a formal approval and written confirmation in accordance with Natixis’ current internal procedures. Natixis has neither verified nor independently analysed the information contained in this document. Accordingly, no representation, warranty or undertaking, express or implied, is made to recipients as to or in relation to the accuracy or completeness or otherwise of this document or as to the reasonableness of any assumption contained in this document. The information contained in this document does not take into account specific tax rules or accounting methods applicable to counterparties, clients or potential clients of Natixis.Therefore, Natixis shall not be liable for differences, if any, between its own valuations and those valuations provided by third parties; as such differences may arise as a result of the application and implementation of alternative accounting methods, tax rules or valuation models. Equity Flow Derivatives Prices and margins are deemed to be indicative only and are subject to changes at any time depending on, inter alia, market conditions. Past performance and simulations of past performance are not a reliable indicator and therefore do not predict future results. The information contained in this document may include results of analyses from a quantitative model, which represent potential future events that may or may not be realised, and is not a complete analysis of every material fact representing any product. Information may be changed or withdrawn by Natixis at any time without notice. More generally, no responsibility is accepted by Natixis, nor by any of its holding companies, subsidiaries, associated undertakings or controlling persons, or any of their respective directors, officers, partners, employees, agents, representatives or advisors as to or in relation to the characteristics of this information. The statements, assumptions and opinions contained in this document may be forward-looking and are therefore subject to risks and uncertainties. Actual results and developments may differ materially from those expressed or implied, depending on a variety of factors and accordingly there can be no guarantee of the projected results, projections or developments. Natixis makes no representation or warranty, expressed or implied, as to the accomplishment of or reasonableness of, nor should any reliance be placed on any projections, targets, estimates or forecasts, or on the statements, assumptions and opinions expressed in this document. Nothing in this document should be relied on as a promise or guarantee as to the future. It should not be assumed that the information contained in this document will have been updated subsequent to the date stated on the front page of this document. In addition, the delivery of this document does not imply in any way an obligation on anyone to update the information contained herein at any time. Natixis shall not be liable for any financial loss or any decision taken on the basis of the information contained in this document and Natixis does not hold itself out as providing any advice, particularly in relation to investment services. In any event, you should request any internal and/or external advice that you consider necessary or desirable to obtain, including any financial, legal, tax or accounting advice, or any other specialist advice, in order to verify in particular that the investment(s) described in this document meets your investment objectives and constraints, and to obtain an independent valuation of such investment(s), and the risk factors and rewards. Options are not suitable for all investors. The risks of options trading should be weighed against the potential rewards. The Options Clearing Corporation has issued some guidance in “Characteristics and Risks of Standardized Options”, it is available at http://www.theocc.com/about/publications/character-risks.jsp Equity Solutions Natixis may trade as principal in instruments identified herein and may accumulate/have accumulated a long or short position in such instruments or derivatives thereof. Financial instruments referred to herein may involve a high degree of risk, may not be transferable or traded on any exchange and are intended for sale only to sophisticated investors capable of understanding and assuming the risks involved. Prior to entering into any transaction related to such financial instruments in the United States, any investor should first contact a US registered broker-dealer. In addition, investors should be aware that some of the financial instruments referred to in this presentation can only be purchased in the United States from a US registered broker-dealer. Natixis is authorized by the Autorité de Contrôle Prudentiel (ACP) as a Bank – Investment Services Provider. Natixis is regulated by the AMF in respect of its investment services activities. Natixis is subject to the supervision of the ACP. Natixis is authorised by the Autorité de Contrôle Prudentiel (ACP) in France and subject to limited regulation by the Financial Services Authority (FSA) in the United Kingdom. Details on the extent of our regulation by the Financial Services Authority are available from us on request. Natixis is authorised by the ACP and regulated by the BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) for the conduct of its business in Germany. Natixis is authorised by the ACP and regulated by Bank of Spain and the CNMV for the conduct of its business in Spain. Natixis, a foreign bank and broker-dealer, makes this presentation available solely for distribution in the United States to major U.S. institutional investors as defined in Rule 15a-6 under the U.S. Securities Act of 1934. This document shall not be distributed to any other persons in the United States. All major U.S. institutional investors receiving this document shall not distribute the original nor a copy thereof to any other person in the United States. Natixis Securities Americas LLC did not participate in the preparation of this publication and as such assumes no responsibility for its content. 86 STRATEGIES AND PRODUCTS ARE INDICATIVE ONLY AND DO NOT CONSTITUTE AN OFFER OR SOLICITATION Equity Equity Capital Capital Markets Markets Natixis is authorised by the ACP and regulated by Bank of Italy and the CONSOB (Commissione Nazionale per le Società e la Borsa) for the conduct of its business in Italy. ©Natixis 02/2012 - Photo credit: Shutterstock (Renkshot) Natixis, Paris 47, Quai d’Austerlitz 75013 Paris France Tel: +33 1 58 55 91 93 Natixis, Frankfurt Im Trutz Frankfurt 55 60322 Frankfurt am Main Germany Tel: +49 69 97 153 342 Natixis, London Cannon Bridge House EC4R 2YA London United Kingdom Tel: +44 2 53 26 9296 30, avenue Pierre Mendès France 75013 Paris Tél : +33 1 58 32 30 00 www.equity.natixis.com Natixis, Madrid Paseo de Recoletos 79 28004 Madrid Spain Tel: +34 91 791 75 17 Natixis, Milan Via Disciplini, 3 20123 Milano Italy Tel: +39 02 00 66 71 62 Natixis, Asia Level 72, ICC 1 Austin Road West Hong Kong Tel: +852 39 00 86 86 Natixis, New York 1345 Avenue of the Americas 10105 New York USA Tel: +1 212 891 1903