The European Court of Justice has decided that the 25% withholding tax (30% since 1 January 2012) deducted by France on dividends paid to foreign UCITS is contrary to EU law, as it institutes a different tax treatment depending on whether UCITS are residents or non-residents.

At the end of 2011, around 2,500 withholding tax reclaims were presented before the Administrative Lower Court of Montreuil. The Court then referred 10 cases to France’s Supreme Administrative Court (including Santander AM, Allianz Global Investors, KBC, Generali, and Societe Generale funds). These foreign UCITS had invested in shares of French companies, and thus incurred this withholding tax on dividends paid to them, disputed the French legislation by alleging discrimination with regard to the free movement of capital guaranteed by EU law.

In view of this decision, the public authorities have a choice between two points of view:
1/ Elimination of the withholding tax to the sole benefit of foreign UCITS, with a need to offset the fiscal loss resulting from this elimination.
2/ Expansion of application of the withholding tax to all shareholders, both French and foreign.

In this second case, the performance of French funds would be impacted, as the dividends would be taxed at the rate in effect. This disadvantage could be partially made up for, as other countries of the European Union are also affected (Germany, for example). But the risk would be to favour foreign shareholders and further increase non-resident holding of the capital of French companies.

The withholding to be reimbursed by the Public Treasury in accordance with this decision is expected to total €4.2 billion, and the annual cost of eliminating the withholding should amount to around €1 billion per year.

SGSS will work with its clients to deal with the consequences of this decision, the details and procedures of which are not yet known.

Societe Generale Securities Services has obtained ISAE 3402 Type II certification for its internal control procedures. The internationally recognised ISAE 3402* standard, which relates to the internal control procedures of service providers, was published by the IAASB (International Auditing and Assurance Standards Board) in December 2009 and replacing the SAS 70** standard from 15 June 2011. SGSS, which already complied with SAS 70, has adapted its procedures in order to meet the international requirements of the ISAE 3402 standard.

The compliance and efficiency of SGSS' internal control procedures have been verified by two independent external bodies in four of its different geographical entities:

• by the audit and consulting firm Deloitte, for the custody, depository and trustee activities, and the fund administration services of SGSS in France and Luxembourg as well as its subsidiary, European Fund Services, Luxembourg ***.
• by the auditors Ernst & Young, covering the SGSS subsidiaries in Germany (SGSS KAG), for its fund administration and transaction processing systems****, and in Italy, for its custody, depository and trustee activities, as well as for fund administration and transfer agent services.

This certification underlines SGSS’ intention to regularly optimise its control procedures.

* ISAE 3402 (International Standard on Assurance Engagements 3402) is an international standard published by the IAASB (International Auditing and Assurance Standards Board), applicable from June 2011, involving the commitment of the certified entity’s management.

** SAS 70 (Statement on Auditing Standards n°70) is an auditing standard laid down by the AICPA (American Institute of Certified Public Accountants). Its aim is to draw up reports on the internal control procedures of a service provider for its users or auditors.

*** European Fund Services Luxembourg S.A.: Report on the internal control procedures drawn up in reference to ISAE 3402 Type II over the period from 1 December 2010 to 30 November 2011.

**** SGSS KAG: Report on the internal control procedures drawn up in reference to ISAE 3402 Type II over the period from 1 September 2010 to 31 August 2011.

Group Net Income of EUR 732M,

EPS(1) EUR 0.88

Strong Capital Generation:

Core Tier 1 Ratio of 9.4%(2), +35BP/Q4 11

Continued deleveraging

This mandate results from the local and international expertise that SGSS has built up in custody and trustee services in South Africa, where it has been providing local securities services to domestic clients for over 20 years. SGSS offers a full range of services to a client–base of asset managers, global custodians, investment banks and broker dealers in South Africa and its overall offering in the country now includes both local and global custody, clearing & settlement services across all asset classes, as well as securities lending and treasury solutions.

It also provides services for foreign institutions investing in South Africa and accompanies South African clients in their international development, where they have the support of SGSS’s global network and expertise across 80 countries.

Grindrod Bank Limited is a registered financial services provider, regulated by the South African Reserve Bank. Established in 1994, the Bank is a competitive niche bank offering a personalised approach to financial services through its genuine relationships with private, corporate and institutional investors.
With a particularly strong reputation in property finance, corporate lending and investment management, its operations are conducted out of Johannesburg, Durban, Cape Town and Pretoria.

* Preference shares in a company entitle holders to a fixed dividend but do not usually carry voting rights. Holders also have priority over ordinary shareholders if the company goes bankrupt and its assets are liquidated. Preference Share Exchange Traded Funds track the price and yield performance of a preferred stock index.

SGSS in Italy was retained by Financiere de l’Echiquier for its recognised international expertise as a Transfer Agent and its ability to provide personalised services tailored to the specific needs of its clients, alongside a wide network of placing agents.

SGSS in Italy offers a complete range of securities services, including clearing, custody and trustee services, fund administration, liquidity management and transfer agent services.

Created in 1991, Financiere de l’Echiquier is one of the leading investment management companies in France. It is wholly owned by its managers and employees. Financiere de l’Echiquier manages a small range of mutual funds invested in the main equities and bonds markets for private and professional investors.

Societe Generale Securities Services in Italy has been appointed by METROPOLE Gestion to act as its local Transfer Agent in Italy, providing it with paying agent and investor relations management services.  

SGSS in Italy was retained by METROPOLE Gestion for its recognised international expertise as a Transfer Agent, its ability to provide personalised services tailored to the specific needs of its clients, alongside a wide network of placing agents.

SGSS in Italy offers a complete range of securities services, including clearing, custody and trustee services, fund administration, liquidity management and transfer agent services.

METROPOLE Gestion is an independent asset management company based in Paris and specialized in stock-picking (European equities, euro zone and Japanese equities) and bond-picking (euro zone bonds and convertibles).

Societe Generale Securities Services and Orient Capital have signed an agreement to cooperate whereby Orient Capital will offer its industry-recognised suite of investor relations services to SGSS’s registry clients.

Following an extensive review of potential providers, SGSS selected Orient Capital for its capacity to provide a suite of the highest quality investor relations services based around its unique share register analysis (SRA) service, which is delivered through its proprietary online platform, “miraqle®”. Providing its French issuer clients with access to this state-of-the-art method will enable SGSS to offer them even more detailed information and analysis of the identity of who owns their shares, including foreign shareholders.

SGSS already offers a wide range of services to issuers, including employee stock plan administration, shareholder meetings services, share registry services, corporate events services.

Societe Generale Securities Services has been designated by the Board of Directors of the fund « Emergence », following a request for proposal, to provide trustee and valuation services to the delegated asset manager NewAlpha AM. « Emergence », which has 120 million euros in assets under management, is the first seed-money fund launched with the support of the Paris financial marketplace.

As a delegated fund manager, NewAlpha’s mission will be to select young asset management companies to help them reach critical mass by acquiring institutional references which will facilitate their development. SGSS will thus provide the reporting required to highlight to investors the management capabilities of these companies.
 
In this context, SGSS has been retained, notably, for its capacity to respond to the information and reporting constraints required by institutional investors, including the requirement for transparency imposed by the Solvency II directive*.

Against the background of this directive, SGSS is developing a multiple offering with its asset management and insurer clients, where the first step is to recover financial information. This offering includes, in particular, transparent inventories, allowing for a highly accurate assessment of the investment profile of the whole portfolio, as well as the associated risk criteria.

Created in 2003, the asset manager NewAlpha is today a fully-owned subsidiary of OFI Group. With 47.2 billion euros in assets under management (as at the end of December 2011), it is one of the leading players in the French asset management market. It is recognised as the European specialist in seed-capital, an original investment solution which enables qualified investors to participate in the launch and growth of funds managed by entrepreneurial asset management companies.


* Solvency II is a European directive which aims to better adapt the solvency requirements of insurance and reinsurance companies to the real economic risks incurred by their activities.

Societe Generale Securities Services has set up a package of services to enable institutional investors and asset managers, in the context of their asset management activities, to meet the requirements imposed by the provisions of the Solvency II directive*, which is due to come into effect on 1st January 2014.

This directive will result in a significant increase in the information that needs to be provided to regulators. The frequency and level of data to be provided mean that new requirements for information, both quantitative and qualitative, will have to be met. 
Using its experience as a custodian and valuer of financial assets, its control over risk calculation and its expertise in cash management, SGSS has designed a package of services for its clients:

1. A transparent inventory of funds and portfolios of assets
2. Assistance with SCR (Solvency Capital Requirement) calculations, stress tests and multiple risk indicators
3. Monitoring and management of the risks linked to financial assets
4. Preparation of reports dedicated to Solvency II covering financial assets

Thanks to this services offering, SGSS’ dedicated teams of experts will advise and accompany their institutional investor and asset management clients throughout the procedures required in order to be fully compliant with the requirements of traceability, auditability and transparency imposed by the Solvency II directive.


* Solvency II is a European directive which aims to better adapt the solvency requirements of insurance and reinsurance companies to the real economic risks incurred by their activities.