Annual report 2006 - Dexia.com

no achievement without commitment

ANNUAL 

REPORT 

2006 

CONTENTS 

Management Report 2 

Consolidated Financial Statements 110 

Annual Financial Statements 214 

Additional Information 241 

Dexia / Annual Report 2006 | 1

FINANCIAL HIGHLIGHTS 4 

MESSAGE FROM THE CHAIRMEN 6 

GROUP PRESENTATION 10 

CORPORATE GOVERNANCE 25 

THE DEXIA SHARE 52 

HUMAN RESOURCES 56 

SUSTAINABLE DEVELOPMENT 62 

RISK MANAGEMENT 63 

FINANCIAL RESULTS 70 

OPERATION AND RESULTS OF THE BUSINESS LINES 76 

GENERAL INFORMATION 98 

2 | 

Dexia / Annual Report 2006

MANAGEMENT 

REPORT 


FINANCIAL HIGHLIGHTS 


GROUP – CONSOLIDATED FIGURES 

MANAGEMENT REPORT 

BALANCE SHEET TOTAL 

(in billions of EUR) 

1999 

2000 

2001 

2002 

2003 

2004 

01/01/2005 

31/12/2005 


245 

258 

351 

351 

350 

389 

405 

509 

567 

NET INCOME – GROUP SHARE 

(in millions of EUR) 

1999 

2000 

2001 

2002 

2003 

2004 

761 

01/01/2005 

31/12/2005 


1,001 

1,426 

1,299 

1,431 

1,772 

1,822 

2,038 

2,750 

Dexia Group accounting standards adopted 

until the publication on December 31, 2004. 

IFRS as adopted by the European Union for 

publications after January 1, 2005. 

COMPTES CONSOLIDÉS 

COMPTES SOCIAUX 

RETURN ON EQUITY (ROE) 

(in %) 

1999 

2000 

2001 

2002 

2003 

2004 

2004 

2005 


15.7 

17.7 

16.2 

16.5 

18.7 

17.2 

19.8 

20.0 

23.1 

EARNINGS PER SHARE 

(in EUR) 

1999 

2000 

2001 

2002 

2003 

2004 

2004 

2005 


0.98 

1.15 

1.25 

1.13 

1.24 

1.58 

1.63 

1.87 

2.49 

COST-INCOME RATIO 

(in %) 

1999 

2000 

2001 

2002 

2003 

2004 

2004 

2005 


53.9 

54.8 

59.0 

58.9 

59.2 

55.9 

54.4 

54.0 

49.6 

D E F 

E 

C 

A 

D 

A 

B 

C 

B 

BUSINESS LINE CONTRIBUTION 

TO THE UNDERLYING NET INCOME – 

GROUP SHARE 2006* 

A PUBLIC/PROJECT FINANCE AND 

CREDIT ENHANCEMENT 51% 

B PERSONAL FINANCIAL SERVICES 22% 

C TREASURY AND FINANCIAL MARKETS 14% 

D ASSET MANAGEMENT 5% 

E INVESTOR SERVICES 4% 

F INSURANCE SERVICES 4% 

* Excluding Central Assets and non-operating items. 

MEMBERS OF STAFF 

AS OF DECEMBER 31, 2006* 

33,321 OF WHICH 

A BELGIUM 15,270 

B FRANCE 2,639 

C LUXEMBOURG 3,513 

D TURKEY 6,290 

E OTHER COUNTRIES 5,609 

* Including the self-employed networks and RBC Dexia Investor Services. 

4 | 



RESULTS Dexia GAAP IFRS as adopted by EU 

(in millions of EUR) 1999 2000 2001 2002 2003 2004 2004 (1) 2005 2006 

Income 3,143 3,740 5,631 5,157 5,160 5,392 5,623 5,976 7,012 

Costs (1,694) (2,050) (3,323) (3,037) (3,056) (3,012) (3,057) (3,229) (3,481) 

Gross operating income 1,449 1,690 2,308 2,120 2,104 2,380 2,566 2,747 3,531 

Net income – Group share 761 1,001 1,426 1,299 1,431 1,772 1,822 2,038 2,750 

(1) The reconciliation between Dexia GAAP and IFRS as adopted by EU, is explained in the Dexia Annual Report 2005 “Accounts & reports”. 

BALANCE SHEET Dexia GAAP IFRS as adopted by EU 

(in billions of EUR) Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Jan. 1, (1) Dec. 31, Dec. 31, 

1999 2000 2001 2002 2003 2004 2005 2005 2006 

Total assets 245.1 257.8 351.4 350.9 349.9 389.2 404.6 508.8 566.7 

Loans and advances to customers 128.5 134.4 156.4 157.8 161.9 166.2 169.5 192.4 226.5 

Loans and securities 67.0 77.7 125.9 134.7 127.9 144.5 147.3 198.9 223.2 

Customer borrowings and deposits 46.9 52.4 84.0 85.3 92.3 97.6 87.1 97.7 109.5 

Debt securities 132.3 134.4 140.9 146.5 134.9 143.9 144.2 175.7 184.7 

Core shareholders’ equity (2) 6.9 8.1 10.3 10.9 11.6 12.3 10.5 11.5 14.4 

(1) The reconciliation between Dexia GAAP and IFRS as adopted by EU, and the impact of the first-time application of IFRS is explained in the Dexia Annual Report 2005 

“Accounts & reports”. 

(2) For the years 1999-2004: shareholders’ equity + general banking risks reserve. 

RATIOS Dexia GAAP IFRS as adopted by EU 

1999 2000 2001 2002 2003 2004 2004 2005 2006 

Profit margin (1) 25.9% 28.4% 27.1% 26.9% 29.3% 34.2% 33.6% 35.0% 40.5% 

Cost-income ratio (2) 53.9% 54.8% 59.0% 58.9% 59.2% 55.9% 54.4% 54.0% 49.6% 

Return on equity (3) 15.7% 17.7% 18.7% 16.2% 16.5% 19.8% 17.2% 20.0% 23.1% 

Tier 1 ratio (5) 9.0% 9.3% 9.3% 9.3% 9.9% 10.7% 10.0% 10.3% 9.8% 

Capital adequacy ratio (5) 12.8% 9.8% 11.5% 10.7% 11.2% 11.7% 11.1% 10.9% 10.3% 

(1) The ratio between the net income and the income. 

(2) The ratio between the costs and the income. 

(3) The ratio between net income – Group share and the weighted average core shareholders’ equity (estimated dividend for the period deducted). 

(4) Including EUR 236 million result on Dexia’s net asset contribution to the joint venture RBC Dexia Investor Services and EUR 280 million result on the sale of Banque Artesia 

Nederland. 

(5) The profit for the financial year minus the proposed dividend is included in the shareholders’ equity. 

QUALITY OF RISKS Dexia GAAP IFRS as adopted by EU 

1999 2000 2001 2002 2003 2004 2004 2005 2006 

(4) 

(4) 




Impaired loans (in millions of EUR) 672 905 1,897 1,942 1,708 1,722 1,722 1,473 1,359 

Assets quality ratio (1) 0.53% 0.68% 1.20% 1.23% 1.05% 1.04% 1.04% 0.78% 0.61% 

Coverage ratio (2) 79.3% 65.0% 66.7% 68.0% 72.8% 73.2% 73.2% 69.1% 69.3% 

(1) The ratio between the impaired loans and the gross outstandings loans. 

(2) The ratio between the portfolio impairments and the impaired loans. 

DATA PER SHARE Dexia GAAP IFRS as adopted by EU 

(in EUR) 1999 2000 2001 2002 2003 2004 2004 2005 2006 

Earnings per share (1) 0.98 1.15 1.25 1.13 1.24 1.58 1.63 1.87 2.49 (2) 

Gross dividend 0.39 0.43 0.48 0.48 0.53 0.62 0.62 0.71 0.81 (2) 

Net assets (3) 8.54 8.02 8.39 8.79 9.25 9.95 8.87 9.86 11.60 (2) 

Pay-out ratio (4) 41.4% 41.9% 39.3% 43.0% 42.1% 38.7% 37.6% 37.9% 34.3% 

(1) The ratio between the net income – Group share and the average weighted number of shares (undiluted for the years under IFRS as adopted by EU). 

(2) Proposed dividend. 

(3) The ratio between the core shareholders’ equity (estimated dividend for the period deducted) and the number of shares (after deduction of treasury shares) at the end of 

the period. Under Dexia GAAP : including GBRR – Group share. 

(4) The ratio between the total dividend and the net income – Group share. For 2006, based on proposed dividend. 

RATINGS (LONG TERM) (1) Dexia Dexia Dexia Financial Security Dexia Municipal 

Bank Crédit Local BIL Assurance Agency 

Moody’s Aaa Aaa Aaa Aaa Aaa 

Standard & Poor’s AA AA AA AAA AAA 

Fitch AA+ AA+ AA+ AAA AAA 

(1) Ratings as of February 24, 2007. 


MESSAGE FROM THE CHAIRMEN 

MESSAGE 

FROM PIERRE RICHARD 

CHAIRMAN OF 

THE BOARD OF DIRECTORS 




2006 was a year of contrasts. On the one hand, political crises 

and wars have escalated dangerously in the Middle East, 

on fronts wider today than ever before. Energy prices and 

supply, as well as global warming have become even more 

acute issues, not only for policy makers but for everyone in 

their day-to-day life. Economic imbalances have worsened 

rather than improved, and now require global solutions never 

previously conceived. On the other hand, the world economy 

continued to generate robust overall growth in 2006 in excess 

of 5% however and, along with the increasing supply of 

liquidities worldwide, this has fuelled intensive activity in the 

financial industry. The European Union has kept growing at a 

honorable pace of 2.9%, and on the strength today of 

500 million inhabitants in 27 countries, has a greater influence 

on the international scene. One satisfying feature is that the 

“economic engine” seems to have restarted in Germany, 

giving positive signals for the future. 

Dexia was able to share in this buoyancy, even though the 

market’s risk appetite kept growing, thus further increasing 

competitive pressure. 

Beyond the vibrant business origination activity, a great deal 

more has happened during Dexia’s tenth year in existence, 

which the Board of Directors has dealt with actively, either 

directly or through its specialized committees. Among the 

most important decisions, the first related to the double 

transition at the two highest levels of governance of Dexia: 

the Board of Directors and the Management Board. 

Having been appointed Chairman of the Board of Directors, 

I passed the baton to Axel Miller, who was appointed 

Chairman of the Management Board. The Board of 

Directors first of all proceeded with the appointment of new 

management team members and approval of the proposed 

organizational structures. Secondly, following the in-depth 

strategic review which was carried out during the first 

months of the year, the Board expressed its full support for 

proceeding with the proposed strategic plan, which was 

presented to the market in autumn. On this basis, Dexia will 

be able to stand ever more firmly on its two pillars, universal 

banking and public/project finance, and keep developing 

a solid business portfolio. The Board has also examined 

a number of projects, among which the acquisition of 

DenizBank in Turkey, and several divestiture proposals aimed 

at refocusing on the essential. The Board has given its full 

support to those initiatives announced during the course of 

the year. 

The Board has also followed the situation of Dexia Bank 

Nederland with close attention. It is particularly rewarding 

to see that Dexia’s management efforts to achieve a just and 

appropriate solution to this difficult problem eventually came 

to fruition, with the Duisenberg agreement being granted 

binding force by the Amsterdam Court of Appeal in January 

2007. 

Dexia has continued to regard corporate governance as an 

absolute essential, where the Group aims at being seen to 

6 | 




conduct best practices. Transparency is at a maximum on all 

items such as the compensation of Management and Board 

members, the tasks of the specialized committees and the 

Board’s agenda throughout the year. This year, the annual 

Board assessment was carried out with the aid of an external 

consultant, with a view to presenting useful references on 

how corporate governance is practiced elsewhere and to 

offering new future perspectives. 

Turning to the subject of sustainable development, Dexia’s 

commitment on this front did not diminish at all. This is 

true in the field of collective infrastructures, where Dexia is 

committed to finance projects which respect environmental 

needs. It is also true in the field of Socially Responsible 

Investments (SRI), a domain where Dexia Asset Management 

excels. Dexia was recently nominated at the international 

forum in Davos among the “global 100” companies 

awarded for their “best in class” socially responsible 

behavior, and is one of the ten financial institutions 

worldwide to be given the award. 

tribute to Francis Mayer, who passed away prematurely at 

the end of the year after intense suffering, when he was 

at the peak of his bright career. He made an immense and 

outstanding contribution to Dexia, for which he must be 

thanked. We shall miss him. 

This year again, the performance of Dexia was excellent, 

as shown by the greatly increasing volumes in most of our 

business lines, and by the growth of earnings per share 

(+33.2%), which come to EUR 2.49, a new record in Dexia’s 

history. After this latest very good vintage in 2006, the Board 

will be pleased to propose a dividend of EUR 0.81 per share, 

a rise of 14.1% on 2005, which reflects Dexia’s performance 

this year, and confirms our collective confidence in our ability 

to continue delivering value in the long term, on the strength 

of a robust capital base, superior ratings, and the quality of 

the franchise and of the teams. 



All this good work was done with the greatest 

professionalism and dedication. In my role as Chairman 

of the Board of Directors, I convey my thanks to all Board 

members, to the Management and the members of staff of 

Dexia for their contribution. I also want to pay a particular 

Pierre Richard 



MESSAGE 

FROM AXEL MILLER 

CHAIRMAN OF THE MANAGEMENT BOARD, 

CHIEF EXECUTIVE OFFICER 




2006 has been a year of achievements and progress on 

three essential fronts. 

The strategic review carried out during the first half by all 

the entities has led us to the elaboration of a very promising 

development plan, including a detailed 3-year plan 2006- 

2009 and a 10-year outlook. This exercise has reinforced our 

confidence in being able to deliver very healthy growth over 

the next decade. This ability of Dexia to set our ambitions 

over such a time span demonstrates that our commitment 

is long lasting. It rests not only on the excellence and 

motivation of our people, but also on very good visibility 

stemming from the very nature of our franchises. This gives 

us a strategic advantage which has proved its worth year 

after year. Each member of the staff now “owns” the plan, 

shares its ambitions and is set to move forward with Dexia 

into the next ten years. This means that all the talents in the 

Group are being deployed with energy and passion towards 

the achievement of our goals. Dexia is more than ever ready 

to progress and enrich its development on its two pillars: as 

a European banking group, world leader in Public/Project 

Finance. 

Another reason for great pride and excitement is that we 

have been able to shape a new organizational model which 

has already proved its power and efficiency. Dexia functions 

as one company, and our operation today in thirty different 

countries under business models that are not always similar, 

is entirely seamless. The common values are clear to all, and 

senior management has a perfect understanding that the 

priority is to work on Dexia’s success as a whole. Our key 

projects are led by the heads of the business lines and those 

of the strategic functions across the Board, all of whom 

are totally empowered. Similarly, the operating entities 

are clearly organized and focused towards the generation 

of business and the delivery of earnings on their local 

markets. Each executive is on a yearly management contract 

defining the objectives and means, and containing all the 

necessary provisions to reward achievements and sanction 

shortcomings. 

A final reason for pride is that all these profound changes 

have not precluded us from developing our day-to-day 

business, from fighting efficiently against fierce competition, 

and from continuing to deliver value and growth. Once 

again this year, activity has been excellent. Dexia succeeded 

in increasing its originations, income and earnings per share. 

Costs remained under good control overall, despite the fact 

that many developments, reorganizations and relocations 

were undertaken during the year, and that new closures 

and/or divestitures took place. In particular, activity in Public/ 

Project Finance continued to be buoyant in 2006, with longterm 

commitments jumping 14.5%, and net par outstanding 

insured by FSA rising 7.1% in one year. Net underlying 

income rose 14.1%, and with a return on economic equity 

of 22.9% the business line continued to deliver very high 

profitability. Similarly, Personal Financial Services achieved 

a very good commercial performance again this year, with 

customer assets growing by 5.3%, and loans by 11.8%. 

Net underlying income rose 13.1% in the business line, as 

8 | 




a result of robust revenue growth and well-contained cost 

progression. In the other business segments, results have 

been equally good: net underlying income was up 31.7% 

in Asset Management, 12.1% in Insurance Services, 51.4% 

in Investor Services and 11.2% in Treasury and Financial 

Markets. All these good underlying performances combined 

with a number of one-offs during the year to create a very 

healthy bottom line income amounting to EUR 2,750 million, 

34.9% above the very good performance of the previous 

year. 

Of course, the major change which occurred during the 

year was the acquisition of DenizBank which is now 99.8% 

owned by Dexia. As discussed on many occasions during 

the year, this is a move which almost perfectly reflects the 

strategic path Dexia is taking, and one opportunity which 

we expect will bring a great deal to Dexia in terms of 

growth and strategic penetration in a very important new 

market. From the fourth quarter of 2006, DenizBank is 

fully consolidated into Dexia, and the integration process is 

already well on its way. The acquisition was financed partly 

with the proceeds from divestitures, partly with excess capital 

available, and finally through the issuance of ordinary shares 

and hybrid Tier 1 instruments. This brings Dexia’s earnings 

per share in 2006 to EUR 2.49, up 33.2% on 2005. 

DenizBank, which has clearly triggered changes of portfolio 

allocations among certain types of shareholders. Dexia’s 

management is conscious of market attitudes in such 

circumstances, and, in this environment, assesses share 

performance in a long-term perspective. 

Turning to capital management, in 2006 Dexia has done 

what was announced on several occasions in previous years: 

at times when capital is in excess, shares are bought back, 

and when capital is needed for a project, we must turn 

to the market. After three years and a first quarter 2006 

marked by share buy-backs, Dexia raised share capital in 

the market in September 2006, under good timing and 

cost conditions. We intend to continue with such discipline, 

constantly bearing in mind our policy of maintaining a high 

level of solvency and superior credit ratings. 

I would like to close by conveying my warmest thanks to my 

33,000 colleagues, women and men, who worked very hard, 

often making sacrifices in their personal and family lives, 

contributing to all Dexia’s achievements in 2006. I know that 

2007 will be another year of excitement and pride for all of us. 



The Dexia share performance continued to make progress 

in 2006, with a rise of 6.5% over the year, but lower 

than the Eurostoxx Banks index (which rose +22.5%), 

the CAC 40 (+17.5%), or the BEL20 (+23.6%). The relative 

underperformance among industry peers results in part 

from intensive general M&A activity during the year, notably 

in Italy. As for Dexia, the share price was influenced by 

the announcement of the acquisition/financing scheme of 

Axel Miller 


GROUP PRESENTATION 

GROUP 

PRESENTATION 

CORPORATE PROFILE 

A EUROPEAN BANK, WORLD LEADER 

IN PUBLIC FINANCE 




Dexia was born of the alliance in 1996, of two major institutions 

in local public finance in Europe: Crédit local de France 

and Crédit Communal de Belgique. Both institutions, together 

with Banque Internationale à Luxembourg (BIL) were united in 

1999 into one publicly-quoted company named Dexia. This 

was one of the very first cross-border mergers in the European 

banking sector. Today, Dexia ranks among the top 20 largest 

banks in Euroland, and builds its strategy on two pillars: 

Universal Banking in Europe (Belgium, Luxembourg, Slovakia, 

Turkey) and a worldwide leadership in Public/Project Finance. 

Two pillars: Universal Banking in Europe and 

Public/Project Finance worldwide 

Dexia is a leading retail bank, and serves 5.5 million customers 

in Belgium, Luxembourg, Slovakia and Turkey. 

Over the years, Dexia has developed an entire range of banking 

services catering for individual customers, small and 

medium-sized enterprises and institutional clients and it is an 

active player in asset management, insurance, investor services 

and capital markets. 

Since its merger in 1999 and the acquisition in 2000 of 

Financial Security Assurance (FSA) in the United States, Dexia 

has become the world’s largest player in local public finance. 

Dexia’s high level of expertise, its long-term horizon and the 

very high solvency of its customers, grant a superior quality 

of franchise. Dexia develops its strategy in this area on a 

global scale. 

BUSINESS LINES 

Public/Project Finance and Credit Enhancement 

CORPORATE PROFILE 10 

STRATEGY 13 

ACTIVITIES OF THE BUSINESS LINES – 

CORPORATE MODEL 15 

GROUP ORGANIZATION 18 

MAIN ACTIVITIES AND EVOLUTION 

OF DEXIA IN 2006 AND THE BEGINNING OF 2007 22 

Dexia has a well-deserved reputation for global leadership 

in public finance. This business line is especially exercised by 

Dexia Crédit local and its branch offices, and by subsidiaries 

established in thirty countries worldwide. The main subsidiaries 

are located in France, Belgium, Italy, North America and 

Mexico, Germany, Spain, the UK, Scandinavia, Switzerland 

Austria, Slovakia, Poland, Romania, the Czech Republic, Australia, 

Israel, Bulgaria, Hungary and Japan. In this enormous 

market, characterized by high-quality borrowers seeking to 

finance vast and growing public infrastructure needs, Dexia 

has a wealth of profitable business opportunities and strong 

prospects for international growth. Scale, innovation, expertise 

and a long-term view are the key ingredients of Dexia’s 

success in this business line, which generates more than half 

of Dexia’s earnings. Dexia participates in this market through 

a variety of activities which include basic lending, bond execution, 

highly-structured projects and credit enhancement. 

In addition, Dexia offers insurance, payment, asset management 

and other services to its clients. 

10 | 



Personal Financial Services 

In Belgium, Dexia Bank is one of the country’s top players 

in retail banking. It offers a complete range of banking and 

insurance services to a clientele of households and small and 

medium-sized enterprises. Similarly, Dexia BIL is a major retail 

bank in Luxembourg. Dexia banka Slovensko is a retail bank in 

Slovakia. In 2006, Dexia acquired DenizBank, the sixth largest 

privately-owned bank in Turkey. 

An important private banking business has been developed 

over the years. Dexia has also acquired or developed units and 

joint ventures in a number of European countries including 

Belgium, Luxembourg, France, Spain and Switzerland. 

Treasury and Financial Markets 

Dexia’s principal businesses give the Group an intensive presence 

in the capital markets, both for funding and managing 

the Group’s balance sheet and for structuring sophisticated 

products and solutions for clients of the various business lines. 

This business segment not only provides key support to the 

entire Group, it also functions as an important profit center 

generating substantial earnings. 

Asset Management, Insurance and Investor 

Services 

Dexia Asset Management has built a strong reputation in 

Europe and today distributes more than a third of its products 

to institutions and through third-party channels. Dexia Insurance 

Services supplies all the life and nonlife insurance products 

sold in the retail networks of the Group in Belgium and 

Luxembourg and in France. In Investor Services, RBC Dexia 

Investor Services was set up as a joint venture with Royal Bank 

of Canada in 2006. Today it ranks among the ten largest custodian 

banks worldwide. 

EXPERTISE, PERFORMANCE AND RATING 

Dexia’s success lies not only in its well-established franchise 

and strong distribution skills, but also in its ability to conceive 

efficient products and develop innovative solutions to meet 

its clients’ financial needs. In all business lines, Dexia has 

been able to attract and deploy the best professional skills. 

It exercises the highest standards in terms of underwriting, 

risk monitoring, operational disciplines and product performance. 

Dexia has one of the highest credit ratings in the banking 

industry: its three main entities – Dexia Crédit Local, Dexia 

Bank and Dexia BIL – are AA/Aaa/AA+ rated; two of its subsidiaries 

in Europe issue AAA rated secured bonds; finally FSA, 

one of the four largest bond insurers in the US is a triple A 

rated company. 



SIMPLIFIED GROUP STRUCTURE 

Dexia SA 

Headquarters Brussels and Paris 


Financial 

Security 

Assurance 

99.7 % 

Dexia 

Crédit Local 

100% 

Dexia Banque 

Internationale 

à Luxembourg 

99.9% 


Bank 

Belgium 

100% 

DenizBank 

99.8 % 


Crediop 

70% 


Sabadell 

Banco Local 

60% 


Kommunalbank 

Deutschland 

100% 


Kommunalkredit 

Bank 

74.9% 


Municipal 

Agency 

100% 


Sofaxis 

100% 


Asset 

Management 

100% 

RBC 


Investor 

Services 

50% 


Insurance 

Belgium 

99.6% 

Percentages refer to direct and indirect holdings. 



HISTORY OF THE GROUP 




1860 Creation of Crédit Communal de Belgique. 

1987 Creation of Crédit local de France. 

1991 First listing of Crédit local de France on the Paris 

Stock Exchange. 

Crédit Communal de Belgique becomes majority 

shareholder of Banque Internationale à Luxembourg 

(BIL), the oldest established bank in Luxembourg 

(1856). 

1996 Creation of Dexia, through a business alliance 

between Crédit Communal de Belgique and Crédit 

local de France. The two partners begin operating 

as a Group under a structure organized around 

two holding companies; Dexia Belgium, listed on 

the Brussels Stock Exchange (BEL20-index), and 

Dexia France listed on the Paris Stock Exchange 

(CAC 40-index). 

1997 Acquisition of a 40% stake in Crediop, a leading 

player in the Italian local public finance market. 

1999 April: buyout of BIL’s minority shareholders. 

June: Dexia becomes majority shareholder of 

Crediop (60%). 

June: acquisition in Belgium of Elvia Assurances, 

renamed Dexia Insurance. 

November: Dexia becomes shareholder of Otzar 

Hashilton Hamekomi (Israel). 

December: creation of a single holding company, 

Dexia SA, by means of a public offer by Dexia Belgium 

on Dexia France shares. Dexia is quoted in 

Brussels, Paris and Luxembourg. A unified management 

structure is established for the entire Group. 

2000 Dexia acquires FSA, a leading company in credit 

enhancement for municipal bond issuers in the US, 

and Bank Labouchere in the Netherlands. 

2001 July: Dexia acquires Artesia Banking Corporation 

in Belgium through a capital increase reserved to 

Arcofin, Artesia BC’s shareholder. 

July: Dexia acquires Kempen & Co through a public 

tender bid. 

December: increase of the equity interest in Dexia 

Crediop from 60% to 70%. 

2002 January: Dexiam and Cordius Asset Management, 

Artesia BC’s subsidiary, merge to form Dexia Asset 

Management. 

April: Dexia Bank, Artesia Banking Corporation, 

BACOB and Artesia Services merge under the name 

Dexia Bank Belgium. 

May: increase of the equity interest in DVV Insurance, 

from 82% to 99%. 

2003 July: Dexia sells its monitory stake in Landbouwkrediet 

NV (Crédit agricole de Belgique). 

September: Dexia takes over the stake of the 

minority shareholders in its German subsidiary Dexia 

HypothekenBank Berlin (now Dexia Kommunalbank 

Deutschland), active in local public finance. 

2004 November: Dexia sells its shares in Kempen & Co. 

November: acquisition of FMS Hoche, a specialist 

fund-administration company based in France. 

2005 June: Dexia and Royal Bank of Canada announce 

the combination of their institutional investor services 

business in an equally-owned joint venture 

named RBC Dexia Investor Services (effective since 

January 1, 2006). 

June: DVV Insurance and Dexia Insurance merge 

to form a new insurance company named Dexia 

Insurance Belgium. 

October: Dexia sells its subsidiary Eural SA. 

December: Dexia has been granted a banking 

license in Canada and in Mexico. 

2006 May: Dexia acquires a controlling interest (75%) in 

DenizBank, the sixth largest privately-owned bank 

in Turkey. 

September: Dexia announces the successful completion 

of a EUR 1.2 billion capital increase through 

an accelerated book build offering, with a view to 

financing part of the acquisition of DenizBank. 

October: Dexia opens Dexia Public Finance (Switzerland), 

a “foreign bank representation in Switzerland” 

specializing in public finance. 

November: Dexia has been granted a banking 

license in Japan. 

December: Dexia sells its subsidiary Banque Artesia 

Nederland. 

December: Following a successful mandatory tender 

offer, the shareholding of Dexia in DenizBank 

stands at 99.74%. 

12 | 



STRATEGY 

A development strategy aligned to the Group’s two pillars: 

Universal Banking in Europe and Public/Project Finance 

worldwide. 

BUILDING ON TWO PILLARS 

That growth will be well sustained by demographic evolutions 

which will deeply influence the volumes and the nature of 

banking services to be provided to individual clients, both as a 

Retail Bank and as a Private Bank. Benefiting from its position 

as leader on these rich markets, in Belgium and in Luxembourg, 

and from a key position in Turkey, Dexia is uniquely 

positioned to continue its development by exploiting its 

know-how and its skills in this growing market. 

Since 1996, Dexia has developed a Universal Banking activity 

deeply anchored in Belgium, Luxembourg, Slovakia and Turkey, 

combined with a world leadership in Public/Project Finance. 

A pioneer in European cross-border consolidation and working 

to the maxim “no achievement without commitment”, 

during the first half year 2006 Dexia carried out a strategic 

review which allowed to elaborate a development plan for 

the next ten years. That plan was approved by the Board of 

Directors on September 5, 2006, and the main themes of this 

strategy were published on September 26, 2006. 

Dexia’s future will be built on the two pillars of its current 

activity: 

• the development of its Universal Banking activity beyond 

its traditional markets, so that it becomes a leading European 

operator. This strategic direction will not only enable the most 

to be made of the significant growth potential specific to this 

activity, but also greater advantage to be taken of the opportunities 

which exist in the field of Public/Project Finance; 

• the anchoring and constant strengthening of its world 

leadership in public/project finance, through continuing geographic 

expansion, based on an innovative and varied range 

of products. 

The Group’s ambition is therefore to give even greater power 

to its two principal growth drivers. The simultaneous strengthening 

of these two pillars gives the Group a balanced portfolio 

of activities, enlarges its sources of finance, enables optimum 

use to be made of capital, increases the client base and opens 

up even better development prospects. 

Dexia will continue to develop its business lines in an energetic 

but balanced manner, maintaining its founding values 

with regard to risk and financial soundness, and acting with 

the long term in view. 

Dexia’s strength will continue to rest in its ability to combine 

long-term commitment to its clients, financial stature, knowhow, 

reputation and historical local presence. 

A WIDE AND PROMISING HORIZON 

Dexia’s business lines give extremely good visibility of market 

growth and client needs. The strategic review carried out 

by Dexia demonstrates that its environment abounds with 

opportunities. 

Extending Universal Banking activities in Europe 

Continuing to develop services in Public/Project 

Finance 

The world market for local public debt is estimated at 

USD 5,000 billion at present, and this should grow by 

USD 1,500 billion (in constant currency) over the next ten 

years, a new business volume equal to or more than three 

times the current Dexia Group commitments in this field. 

In the developed regions of the world, demographic evolutions 

will result in the need for major infrastructure projects 

(hospitals, education, energy etc.). In the developing regions 

there will be requirements to construct or to update essential 

infrastructures (water, waste treatment, transport, energy 

etc.). 

The volumes involved will be considerable, and the sophistication 

of financial solutions will increase constantly. A world 

leader in this market, Dexia is already strongly positioned and, 

by virtue of its size and its innovation skills, it will be able to 

grasp the many opportunities which are sure to arise. 

Furthermore, Dexia has a particularly good knowledge of its 

clients, especially of their solvency and their future needs. 

As a consequence it has an unmatched ability on this market 

to design and to distribute savings and long-term investment 

products, relying on underlying assets of extremely high 

quality, in relation to the local public sector and essential 

infrastructures. 

Expertise in the service of growth 

As for Treasury and Financial Markets, a huge opportunity for 

Dexia in coming years will be grasped by combining its financial 

market expertise with its know-how in providing financial 

services to the public sector. This new field of opportunities, 

as well as the development of the sales force and institutional 

client base, will enable the Group even further to improve on 

its current strengths and to sustain its growth. 

New growth opportunities in Asset Management will be 

aligned principally to new institutional client segments, new 

pension products for the private and institutional markets and 

widening distribution via third parties outside Dexia’s own distribution 

networks. 

For Investor Services, the acceleration of growth on existing 

and recently-penetrated markets, and the enlargement of its 

range of products are all part of the strategy Dexia will follow 

in order to strengthen this flourishing sector of activity. 




In the field of Universal Banking, the growth of European markets 

will be robust, as a result of the convergence of equipment 

rates, banking penetration rates, the effects of scale and 

synergies in the consolidation of the banking sector, hailed 

both by the European Commission and by consumers. 






THE AIM OF SOLID FINANCIAL 

PERFORMANCE ON A THREE-YEAR HORIZON 

The objectives defined within the context of the strategic 

review on a 2009-horizon and communicated to the market 

on September 26, 2006 illustrate the Group’s confidence in 

its ability to deliver autonomously extremely good operational 

and financial performances, principally: 

• target underlying cost-income ratio of less than 52% in 

2009; 

• target return on equity (Core ROE) of a minimum 15% at an 

underlying level and 16% at an overall level; 

• deliver an average 10% annual gowth, both of underlying 

net income and earnings per share; 

• target earnings per share of EUR 2.47 in 2009 (EUR 2.35 

underlying); 

• a dividend per share increasing by at least 10% per annum. 

AMBITIONS FOR THE NEXT FIVE YEARS 

The strategic review carried out in 2006 also included an examination 

of the competitive environment on a longer horizon and 

led to the definition of Group ambitions at three levels. 

Geographic 

• Significantly improve Dexia’s position as a Universal Bank in 

Europe. 

• Acquire a very much larger international presence than 

at present in Public/Project Finance. The historical markets 

(France and Belgium), which these days represent about one 

half of the business line’s earnings, should forthwith only represent 

a third. 

Positions 

• Capitalize on a multi-channel distribution banking model, 

relying on high-performance production units, for the extension 

and deepening of goodwill in Retail and Private Banking. 

• Confirm Dexia’s world leadership in the field of Public 

Finance. 

• Maintain a place among the top ten world institutions for 

project infrastructure finance. 

• Become a benchmark operator for Asset Management in 

Europe, including a strategic presence at an international level 

(products and distribution). 

• Maintain a place among the top ten world institutions in the 

field of fund administration. 

Financial soundness 

• Maintain, or improve, the Group’s financial rating. 

PROSPECTS ON A TEN-YEAR HORIZON 

The strategic review carried out in 2006 also related to prospects 

on a ten-year horizon. Supported by its extremely good 

vision of future markets, Dexia is confident of its ability auton- 

omously to deliver an average annual income growth in the 

order of 10%, whilst by virtue in particular of the expected 

effect of the new Basel II regulations generating significant 

amounts of surplus capital compared to its own self-financing 

requirements. 

A FUTURE DEVELOPMENT 

ON TWO FRONTS 

The development project will be implemented on two fronts. 

It will continue to be organic 

• In Universal Banking, Dexia will continue to develop on 

those markets, extending the range of its retail and private 

banking services to individual clients and further improving 

the efficiency of its multi-channel approach to distribution, 

whilst investing in order to accentuate its privileged position 

on those growth markets. 

• In Public/Project Finance, Dexia can efficiently deploy its 

various intervention models, in the most appropriate manner, 

depending upon the markets concerned: representative 

offices, own branches, subsidiaries or joint ventures with local 

partners. 

It can also take other forms 

• In Universal Banking, Dexia will also take opportunities 

which will enable it, by capitalizing on its know-how and its 

current positions, to continue its development on a European 

scale, whether by concluding partnerships or by carrying out 

external growth transactions. 

• In Public/Project Finance, although acquisition opportunities 

are rare, developments are nonetheless bound to occur in 

the medium to long term. In fact, public or private actors on 

this market will have to deal with the effects of “standard” 

products becoming commonplace, if they cannot, as Dexia 

has already been doing for a long time, develop the tools 

enabling them to offer clients specific and complete solutions 

giving good added value. Major and long-term trends, 

observed at a world level, of disengaging public powers from 

the field of local authority finance will also offer significant 

opportunities. 

• In its capital market activities, Dexia will resolutely support 

Public/Project Finance and Universal Banking by developing 

its franchises on the capital markets, in particular with 

regard to origination, structuring and investment. By developing 

the access of institutional and individual clients to public 

and long-term infrastructure asset classes, Dexia will further 

strengthen its unique position as specialist intermediary in the 

field of public finance. 

• In the activities of Asset Management, Insurance and 

Investor Services, Dexia will continue its strong growth 

observed over recent years, and continue to position those 

activities in relation to market evolution, specific developments 

in each of those industries, and their specific investment 

requirements. 

14 | 



All these projects will be examined in observance of strict 

internal rules taking account of the careful examination of 

risks, return of investment for projects, and the creation of 

strategic value for Dexia, its members of staff, its clients and 

its shareholders. 

ACTIVITIES OF THE BUSINESS LINES 

CORPORATE MODEL 

The alliance between Crédit local de France and Crédit Communal 

de Belgique in 1996 aimed at creating a universal bank 

on a European scale with, inter alia, the ambition to become 

the world leader in public finance. By pooling the respective 

domestic leaderships of the two founding institutions, Dexia 

was able to develop such a strategy most successfully. 

Following the effective merger in 1999, Dexia has thus become 

one of the twenty largest banks in the euro zone (by market 

capitalization), and today it addresses two main markets: 

• on a European scale, individuals, small and medium-sized 

enterprises and institutional clients; 

• on a global scale, local public authorities, borrowers with a 

similar profile (hospitals, schools, social housing institutions 

and other institutions of the non-profit sector) and essential 

infrastructure project finance sponsors. 

The alliance has fulfilled and even exceeded its initial ambitions. 

Dexia was able to expand all its activities in several 

directions: the product offer is now wide-ranging in the two 

markets it serves; the client base has been strongly developed 

both in number and type; lastly, the geographic scope of the 

Group is now much broader, with a presence in 33 countries. 

Today, Dexia counts among the very few banking institutions 

which hold a global leadership position in one specific business 

(Public/Project Finance) whilst being a strong local retail 

player in some European countries: Belgium, Luxembourg, 

Slovakia and, since 2006, Turkey. 

This presence gives Dexia a unique spread in terms of portfolio 

mix and geographic contributions to earnings. After a decade 

of existence, Dexia has not only increased its size – net income 

and market capitalization have quadrupled since inception 

– but it has also built a renowned worldwide franchise in the 

area of Public/Project Finance, a very strong regional presence 

in Personal Financial Services, and established its name very 

soundly on the financial markets. 

• In the Public/Project Finance arena, Dexia can today engineer 

and execute all forms of transactions: long and short-term 

credit facilities, ranging from traditional to more sophisticated 

schemes; debt management services; credit enhancement of 

municipal bonds and asset-backed securities; arrangement 

and underwriting of infrastructure projects. As an illustration 

of the latter capability, Dexia is regularly listed among the 

“Top Ten” worldwide league of project finance players. 

• In terms of international development, Dexia’s presence 

has been dramatically enlarged, to a large extent in the 

United States following the acquisition of FSA in 2000, and 

also through several moves in European countries, and more 

recently in Canada, Mexico and Japan. The Group has constructed 

its presence in various ways, either through branches, 

wholly-owned subsidiaries or joint ventures. 

• In Personal Financial Services, Dexia is today one of the three 

largest universal banks in Belgium and Luxembourg, and, 

through DenizBank, one of the six largest privately-owned 

banks in Turkey. In all the above markets, Dexia’s position is 

significant in asset-gathering and lending. 

• In the financial markets, the marriage of the two institutions 

has given Dexia a considerably greater visibility: the Group is 

one of the largest private issuers of long-term bonds and one 

of the very large counterparts in interest rate derivatives. The 

growing sophistication of the products offered to clients has 

developed a substantial business flow and revenue base for the 

Group. 

• Initially established to support the commercial efforts of 

Dexia in its two main markets, some specialist subsidiaries 

have been successfully developed in the areas of Asset Management 

and Insurance Services. Their products show good 

performances and are sold both in the proprietary distribution 

networks of the Group and now more importantly through 

third party channels. In the area of Investor Services, Dexia has 

constructed a strong franchise in Europe which was brought 

into a joint venture with the Royal Bank of Canada a year and 

a half ago, to form RBC Dexia Investor Services. This young 

company already boasts a very high profile and global ranking 

among global institutions offering custodian and fund administration 

services. 

The Dexia business model is today comparable to that of its 

European peers, with a spread of contributions from retail 

networks, institutional clientele, and capital market and specialist 

activities. Like any other bank, Dexia generates value 

on the strengths of its multi-million client base in Belgium, 

Luxembourg, Slovakia and Turkey, where it enjoys good market 

shares and offers “state of the art” products and services. 

But Dexia is also a unique player in the financial services industry, 

as the world leader in Public/Project Finance. In this area, 

its business model is in fact a combination of several business 

models: it can be a “retail” approach – as in Belgium and now 

Turkey – where the complete range of services is offered to 

local authorities and/or project finance sponsors; it can also be 

a “wholesale/investment banking” approach – as adopted in 

France, Italy or the United States – where only some products 

or services, with high added value, are offered to selected segments 

of the market. 

This capacity to carry on the business in different ways gives 

Dexia a major competitive advantage in the deployment of 

its international strategy. For instance, Dexia has established 

successfully in Spain and Austria by establishing a joint, highly 

specialized, public finance subsidiary with a local retail bank 

which operates on the local market. In other cases, following 

an acquisition, Dexia wholly or partly owns a company conducting 

specialist activities (e.g. Dexia Crediop in Italy; FSA, 

a US major in the credit enhancement of municipal bonds; 

or Dexia Kommunalbank Deutschland – formerly Dexia 

HypothekenBank Berlin –, a holder and manager of German 

public authority funding instruments). Lastly, Dexia may own 

and directly operate a fully-fledged “bank of the municipalities”, 

such as Dexia Banka in Slovakia, which operates a similar 

business model to that of Dexia Bank in Belgium. 









Not only has Dexia all the means to deploy its strategy by 

applying the right business model in the right place, but its 

established experience in public finance has also allowed it, in 

many countries, to transform a “demand-side” market – where 

the products are quasi-commodities and where winning a 

transaction is only a matter of price – into a “supply-side” 

market where public finance customers are willing to discuss 

all possible solutions to their overall financial and risk management 

needs. 

Dexia is organized in business lines, managed as profit 

centers for strategy, marketing, budgeting and reporting 

purposes. 

• Public/Project Finance and Credit Enhancement covers 

the activities of Municipal Finance, Project Finance, Credit 

Enhancement and Corporate Lending. Municipal Finance 

consists of financing the needs of local public authorities or 

other public service organizations, in the form of direct loans, 

signed commitments, liquidity guarantees or the purchase of 

securities issued by customers. Dexia offers its clients an entire 

range of products – including structured loans as well as debt 

management – to optimize their debt portfolio profile and 

efficiency. As indicated above, Dexia is also one of the major 

players worldwide in Project Finance. Its approach is selective, 

in line with the Group’s risk policy: priority is given to essential 

infrastructures (transportation, environment etc.) and 

the renewable energy sector. As one of the largest banks in 

Belgium, Dexia also supplies finance to corporate borrowers. 

Through its New York based AAA-rated subsidiary, Financial 

Security Assurance (FSA), Dexia insures municipal bonds and 

infrastructure deals, as well as asset-backed securities (ABS) 

essentially in pooled corporate, consumer loans and mortgage 

sectors. 

• Personal Financial Services. The strategic focus of this 

segment is the distribution of its own products and services 

as well as those created in other business lines of the Group 

(primarily Dexia Asset Management, Dexia Insurance Services 

and Treasury and Financial Markets – TFM), to a clientele predominantly 

composed of individuals (including affluent and 

high net worth individuals, professionals and self-employed), 

as well as small and medium-sized companies. The largest 

part of this activity is conducted in Belgium and Luxembourg, 

and since 2006, in Turkey, all countries where a broad and 

comprehensive distribution apparatus exists. The networks, as 

they now stand in Belgium, stem from the integration of the 

Dexia Bank network and the BACOB/Artesia network acquired 

in 2001. The scaling-down objective set at that time for 2005 

has been exceeded. The network now has 802 branches operated 

by independent agents, and 217 branches run by bank 

employees. The integration of Artesia Banking Corporation 

was aimed at releasing substantial cost synergies, and that target 

has been achieved and even exceeded. The business line 

also operates units outside Belgium and Luxembourg. These 

involve various types of approach and/or product focus. 

The main areas are: 

– Turkey where the Group owns a 99.8% participation in Deniz- 

Bank, the sixth largest privately-owned bank in the country; 

– France where the Group holds a 20% participation in 

Crédit du Nord, and Dexia Epargne Pension, a specialist life 

insurance business; 

– Switzerland through Dexia Private Bank Switzerland; 

– Slovakia through Dexia banka Slovensko a bank with 

52 branches, which caters both for local public clients and the 

personal sector; 

– Spain where Dexia holds a 40% participation in Popular 

Banca Privada, a private banking joint venture with Banco 

Popular. 

• Treasury and Financial Markets (TFM) is a segment where 

the aim is in part to give support to the other business lines of 

the Group, and which is also partly run as a profit center in its 

own right. TFM provides short-term money market products 

and long-term funding for the Group, supporting the growth 

of the Group’s balance sheet. Through permanent innovation, 

TFM teams also develop the offer of a large range of capital 

market products (fixed income, structured products based on 

interest rates and equity derivatives, foreign exchange, securitization) 

to customers of the commercial business lines (local 

authorities, corporate customers, retail and private clients, 

institutional investors, central banks, fund managers etc.).TFM 

also runs a securitization business, both on the American and 

the European markets. Lastly, TFM manages a bond portfolio 

(Credit Spread Portfolio), which contributes to ensuring a high 

level of liquidity for the Group and brings in a sizeable proportion 

of the business line’s earnings. 

• Asset Management. In this area, Dexia has successfully 

developed its own production capacity. In the first place this 

has related to mutual funds, considering the retail networks’ 

growing demand for this kind of product, with increasing levels 

of sophistication. This expertise has then been extended to 

institutional investors, among Dexia’s traditional clients – for 

instance public sector institutions – but also to other institutions 

such as pension funds, endowments and foundations, 

via a professional distribution sales force. Today, Dexia Asset 

Management is the organization where asset management 

skills are concentrated. It is a significant European player, with 

four production centers in Belgium, Luxembourg, France and 

Australia, and client coverage in these four countries plus Italy, 

Spain, Switzerland, Germany, Austria, the United Kingdom, 

the Scandinavian countries. Dexia Asset Management manages 

a complete range of products including equity, fixed 

income, money market and diversified funds. The company 

holds strong positions in specific areas such as alternative 

investment management and socially responsible investment 

funds. Products or mandates are distributed either through 

the various distribution channels (Retail and Private Banking 

networks, Public Finance customer base), through third 

party networks, or via its own pan-European sales force. More 

than half of the business comes from institutional mandates. 

Dexia Asset Management’s main objective is to keep delivering 

outstanding performances in its product range (60% of 

Dexia Asset Management’s products have been in the first 

two quartiles of sector peer group classification by Standard & 

Poor’s over the last three years), whilst achieving superior productivity 

(one of the best in Europe), through a strict control 

16 | 



of operating costs. Dexia Asset Management will continue to 

leverage on the Group’s distribution networks, retail and private 

clients, public finance institutions, and will continue successfully 

to develop its activity towards institutional clients. 

• Insurance activities occupy an important place in Dexia’s 

business portfolio, with approximately 7.3% contribution 

to total revenues (excluding the business of FSA and Dexia 

Sofaxis, which are reported separately, within the Public/ 

Project Finance business line, due to their specific nature). 

Insurance business is originated throughout the entire commercial 

organization, but mostly in Personal Financial Services 

(64% of the total premium amount collected), and the balance 

of premiums is collected among the institutional clients 

of the Public/Project Finance business line (16%), and from 

third party networks which distribute Dexia products among 

their own clients (20%); this latter part of the commercial 

production is reported in the Asset Management, Insurance 

and Investor Services segment; this is also the segment where 

the operational (administration, back office, IT), financial 

and statutory management of the insurance company units 

is conducted. Within Dexia, insurance activity is largely a life 

business (89% of the total premiums collected in 2006). Geographically, 

the majority of premiums are collected in Belgium 

(66%), and the balance comes essentially from France (mainly 

under the brand of “Dexia Epargne Pension”), and Luxembourg 

(mainly via “Dexia Life & Pensions”). 

• Investor Services. This business encompasses the custody 

and other administrative tasks relating to securities and 

funds. Through its joint venture with Royal Bank of Canada, 

RBC Dexia Investor Services, Dexia offers three types of 

services: custody and related services, central administration 

(fund bookkeeping, legal work, providing periodic valuations 

etc.), and transfer agent services (keeping registers and managing 

subscriptions and redemptions of fund shares). Dexia 

has long been a leading player in this industry in Europe owing 

to its premier position in the Luxembourg market, which is the 

second largest in Europe. Over the years, Dexia has developed 

a renowned expertise in the central administration and transfer 

agent businesses and is now a European leader in these 

two activities. Dexia has developed outside Luxembourg and 

now operates in many other European countries. In 2005, the 

joint venture with Royal Bank of Canada established one of 

the first global players in this area with over USD 2 trillion of 

funds under custody. 






GROUP ORGANIZATION 

MANAGEMENT BOARD (1) – 

ORGANIZATIONAL STRUCTURE 



BOARD OF DIRECTORS (1) 

The Board of Directors of Dexia SA, chaired by Pierre Richard, 

defines, on behalf of all the shareholders and on the recommendation 

from or on the advice of the Management Board, 

the strategy and the general policy of the Dexia Group. It controls 

and orients the management of the Group and monitors 

risks. The Board also ensures that its obligations to its shareholders 

are properly met and accounts to the shareholders for 

the exercise of its responsibilities. 

(1) The composition, competences, responsibilities, operation and 

compensation of the Board of Directors and its specialized committees as 

well as of the Management Board are described in detail in the chapter 

dealing with corporate governance in this Annual Report. 

At the beginning of 2006, Dexia put a new organizational 

structure in place with the aim, ten years after its creation, of 

strengthening the integration of the Group. This had a twofold 

objective: to define the Group’s strategy for the next ten 

years and to adapt its modes of operation in order to rally all 

staff members to the Group’s mission, values and development 

plan. 

At the end of the year, those objectives having been broadly 

achieved and Dexia being set to move to the next stages, the 

organizational structure was adapted, on three axes: 

• a strong decision center at Group level, which ensures unity 

of command and speed in decision-taking without unnecessary 

intermediate management levels; 

• robust local entities, close to their clients, active in the field, 

and with a clear mandate to implement Group strategy on the 

territory assigned to them; 

• a framework which enables Dexia to make the best use 

of all the skills in the Group, wherever they are, without 

duplications. 


Group Management Board 

1 / Alain Delouis 

2 / Bruno Deletré 

3 / Hugo Lasat 

4 / Claude Piret 

5 / Marc Huybrechts 

6 / Jacques Guerber 

7 / Axel Miller 

8 / Xavier de Walque 

9 / Dirk Bruneel 

10 / Rembert von Lowis 

1 2 3 

4 

18 | 



This evolution led, as from January 1, 2007, to the following 

organization. 

• Dirk Bruneel 

Supervision of DenizBank, RBC Dexia Investor Services 

and Dexia Bank Nederland 

Group Management Board 

• Axel Miller 

Chairman of the Management Board 

Chief Executive Officer 

• Jacques Guerber 

Vice Chairman 

General coordination, ALM Committee, Credit Committee 

and Sustainable Development 

• Xavier de Walque 

Chief Financial Officer 

Supervision of Dexia Insurance Services 

• Rembert von Lowis 

Strategy and Development 

Investor and Rating Agencies Relations 

• Bruno Deletré 


• Hugo Lasat 

Personal Financial Services (Retail and Private Banking) 

Asset Management 

• Alain Delouis 


• Claude Piret 

Risk Management 

• Marc Huybrechts 

Operations & IT 




5 6 7 

8 9 

10 



Group Executive Committee 

The Management Board regularly meets in an enlarged formation, 

referred to as the Group Executive Committee, with 

the following executives. 

• Guy Roelandt 

Chairman of the Management Board – Dexia Insurance 

Services 


• Stefaan Decraene 

Chairman of the Management Board – Dexia Bank Belgium 

• Gérard Bayol 

Chairman of the Management Board – Dexia Crédit Local 

• Frank Wagener 

Chairman of the Management Board – Dexia Banque 

Internationale à Luxembourg 

• Naïm Abou-Jaoudé 

Chairman of the Executive Committee – Dexia Asset 

Management 

• Luc Auberger 

Head of the Finance Department, in charge of Accounting, 

Management Control and Mergers & Acquisitions 



1 2 3 4 5 6 

7 

8 

20 | 



Lastly, the executives in charge of the five following functions 

at Group level report directly to the Chairman of the 

Management Board: 

• Nicolas Meire 

Head of Human Resources 

• Robert Boublil 

Head of Corporate Communication 

• Véronique Thirion 

General Auditor 

• Marie Bourlond 

Chief Compliance Officer 

• Olivier van Herstraeten 

Secretary General, in charge of Legal & Tax functions 

Group Executive Committee 

1 / Guy Roelandt 

2 / Luc Auberger 

3 / Frank Wagener 

4 / Naïm Abou-Jaoudé 

5 / Stefaan Decraene 

6 / Gérard Bayol 

7 / Alain Delouis 

8 / Bruno Deletré 

9 / Hugo Lasat 

10 / Jacques Guerber 

11 / Axel Miller 

12 / Dirk Bruneel 

13 / Xavier de Walque 

14 / Rembert von Lowis 

15 / Marc Huybrechts 

16 / Claude Piret 




9 10 11 12 13 

14 

15 16 



MAIN ACTIVITIES AND EVOLUTION 

OF DEXIA IN 2006 AND 

THE BEGINNING OF 2007 

Dexia is one of the two banks selected to arrange this finance 

and also acts as credit agent. This operation is one of the biggest 

PPP financing deals so far in Canada for a “green field” 

project. 





January 

Finalization of the joint venture RBC Dexia Investor 

Services 

Dexia and Royal Bank of Canada announce the finalization 

of the joint venture aimed at combining institutional investor 

services. RBC Dexia Investor Services offers an integrated 

range of products, including global custody, fund and pension 

administration, securities lending, transfer agent, analytics and 

other related services, to institutional investors worldwide. 

RBC Dexia Investor Services appears in the Top Ten of world 

custodian banks, and employs 4,400 people in 15 countries 

on 4 continents. 

Based in London, RBC Dexia Investor Services is the holding 

company which defines the strategic orientations and which 

supervises the two operating entities, RBC Dexia Investor 

Services Bank in Luxembourg and RBC Dexia Investor Services 

Trust in Canada. 

Sale of private banking activities in the United 

Kingdom 

As a part of its policy of concentrating its private banking 

activities in certain on-shore and off-shore markets where the 

Group already has a sound footing, Dexia transfers its UK private 

banking activities and signs an agreement with Rathbone 

Investment Management Limited (a fully-owned subsidiary 

of Rathbone Brothers Plc). The transaction was finalized in 

April 2006. 

March 

Sale of the holding in Créatis 

Dexia announces the sale of its 25% holding in Créatis to 

Cofidis, subsidiary of 3 Suisses International Group. The activities 

of Créatis, a French specialist in structured loans to individuals 

operating through a network of business providers, no 

longer fall within the strategy followed by Dexia. 

Arrangement of a bond issue to refinance a PPP project 

in Hungary 

Dexia Capital Markets acts as lead arranger for a bond issue 

of EUR 212 million to refinance a PPP road project in Hungary, 

for the project company M6 Duna. The refinance has an 

unconditional and irrevocable payment guarantee granted by 

Financial Security Assurance (FSA), giving it a rating of Triple- 

A. It is the first enhanced bond issued ever put in place to 

finance a project in Central Europe. 

May 

Acquisition of DenizBank in Turkey 

Dexia acquires a majority holding in the Turkish bank Deniz- 

Bank by signing a purchase agreement with Zorlu Holding 

in relation to 75% of the capital of DenizBank, for a total 

amount of USD 2.4 billion. 

This acquisition is a remarkable opportunity for Dexia in a 

major banking market which is developing rapidly, given that 

DenizBank has both the size (tenth bank in Turkey, and sixth 

privately-owned bank) and the positioning (sustained universal 

and commercial activities, existing activities in project 

finance) sought by Dexia. With approximately 1.9 million 

retail clients, important niches in the SME and large company 

segments (sectors of health, agriculture, tourism, energy and 

so on), the bank constitutes the best possible platform from 

which to develop Dexia’s strategy in Turkey. 

Structuring of the finance for the main hospital in the 

Madrid region 

For the first time in Spain, finance of EUR 222.6 million for the 

Puerta de Hierro hospital has been structured in the form of 

a Private Finance Initiative (PFI). Dexia Sabadell is one of the 

co-arrangers of this finance. 

After structuring the biggest PPP in the history of the Spanish 

banking system in 2005 (financing the Madrid Ring Road), 

Dexia Sabadell again plays a leading role in structuring the 

first PFI in Spain. Dexia Sabadell thus confirms its position as 

market leader in Public/Private Finance models. 

Financing the Golden Ears Bridge in Canada 

Three months after the opening of its branch in Canada, 

Dexia Crédit Local signs to finance the Golden Ears Bridge in 

British Columbia. This finance consists of an enhanced principal 

debt of CAD 963 million (EUR 687 million), as well as a 

bridging loan on the capital in an amount of CAD 52 million 

(EUR 37 million). 

June 

Transfer of the activity of Flexia 

Dexia transfers the activity of Flexia to Winterthur Group 

Belgium. 

The Dexia strategy for development of its insurance activity 

on the Belgian market relies on the distribution of insurance 

products via the banking network of Dexia Bank Belgium, the 

network of exclusive DVV Insurance advisors and the direct 

insurer Corona Direct. Flexia, which markets its insurance 

products through brokers, does not fall within that strategy 

anymore. 

22 | 



July 

Dexia positioning in Romania 

Dexia decides not to lodge a bid for a holding in the capital of 

the Romanian bank CEC and informs the Romanian authorities 

of this. 

This market, which Dexia considers extremely promising in 

view of its growth prospects and its entry into the European 

Union (particularly in the field of financial services to the local 

public sector and project finance), will be developed directly 

from the Dexia establishment in Bucharest. 

The transfer of Banque Artesia Nederland, which is finalized 

in December 2006, falls within the context of assessing the 

Dexia portfolio of activities and strategy. 

Opening of a new branch in Germany 

Dexia Asset Management opens a branch in Frankfurt. In 

Germany, fund manager attention is focused on sustainable 

portfolios, pension funds and funds managed according to 

quantitative models for institutional and individual investors. 

The opening of this branch also provides a platform for a new 

dynamic of growth towards Central and Eastern Europe. 

September 

Dexia Crédit Local obtains ISO 9001 certification 

Dexia Crédit Local obtains an ISO 9001 certificate, and thus 

becomes the first bank on French territory to be certified for 

all its activities in that country. This certification fits perfectly 

into the dynamics of Dexia, which considers client satisfaction 

and operational risk management to be the drivers of 

its strategy. 

Capital increase successfully concluded 

On September 6, Dexia launches a capital increase as part of 

its plan to finance the acquisition of DenizBank (see above), 

by the issue of new ordinary shares placed with institutional 

investors via an accelerated book build offering. 

This transaction is successfully closed the same day, as a consequence 

of significant demand from institutional investors. 

Dexia thus places 62,176,166 new shares with institutional 

investors at a price of EUR 19.30 per share; the offer enables 

Dexia to gather an amount of EUR 1.2 billion. 

Strategic review – Moving forward into the next 

10 years 

On September 26, Dexia presents its strategy and ambitions 

for the next ten years. Its future will be built on two pillars: 

Dexia intends, on a ten-year horizon and on an autonomous 

basis, to post an income growth in the order of 10% per 

annum. 

• the development of its universal banking activity beyond its 

traditional markets, in order to become a top-level European 

operator; and 

• further anchoring Dexia’s position as world leader in Public/Project 

Finance, through the continuation of its geographic 

expansion, based on a range of innovative and varied 

products. 

For more information on this strategic review, see the section 

of this annual report entitled “Strategy”. 

October 

Transfer of Banque Artesia Nederland 

Dexia signs an agreement with GE Commercial Finance with 

a view to transferring 100% of its subsidiary Banque Artesia 

Nederland. This institution has an international reputation, 

in particular in the field of loans to large and medium-sized 

companies. 

Creation of Dexia Public Finance (Switzerland) 

Through its subsidiary Dexia Crédit Local, Dexia creates Dexia 

Public Finance (Switzerland), a foreign bank representation in 

Switzerland specializing in local public sector finance. 

Dexia Public Finance (Switzerland) offers finance products from 

the Dexia Group to Swiss public corporations (communes and 

cantons) as well as institutions of which they are shareholders 

or guarantors (municipal and cantonal enterprises, cantonal 

banks), or even companies under Private Law involved in local 

public sector projects. 

EUR 500 million issue of Tier 1 hybrid capital 

Dexia successfully launches the issue of indefinite-term subordinate 

securities responding to the conditions for qualification 

as Tier 1 equity funding for an amount of EUR 500 million. 

The issue product is directly re-loaned in the form of Tier 1 

capital to the Group’s banking subsidiaries. 

This issue forms part of the Dexia finance plan for acquisition 

of DenizBank. 

November 

Financing the acquisition of the first British harbor 

company 

Dexia acts as one of the four lead arrangers for the financing 

to acquire the company Associated British Ports, a leading 

harbor company in the United Kingdom, by a consortium of 

financial investors. 

A senior debt of GBP 2.37 billion (approximately EUR 3.6 billion) 

was arranged on this occasion and subscribed by the 

four lead arrangers including Dexia Crédit Local. The transaction 

was successfully syndicated with a total of 31 banks. 

Obtaining a banking license in Japan 

The Japanese banking regulator FSA (Financial Services 

Agency) grants a banking license to the branch of Dexia 

Crédit Local located in Tokyo. The decentralization currently 

taking place in Japan will give greater power and responsibility 

to Japanese local authorities in the management of their 

finances. Dexia intends constantly to develop its activity providing 

financial services and project finance to the public sector 

in Japan through its banking subsidiary. 

Structuring the biggest underground railway finance 

ever realized in Spain 

Jointly with three other banks, Dexia Sabadell structures the 

finance of 142 trains (for a total amount of EUR 1.2 billion) to 

serve the network in Madrid and its surrounding region. 






December 

Opening of an information office in Bahrain 

Dexia Asset Management confirms its strategy of growth 

towards the Middle East by officially opening its information 

office in the Kingdom of Bahrain. This new office in the Middle 

East covers nine countries: Lebanon, Jordan, Egypt and the 

Gulf Cooperation Council consisting of Saudi Arabia, Bahrain, 

the United Arab Emirates, Kuwait, Oman and Qatar. 




Evolution of the Dexia Group organizational structure 

In 2006, Dexia put a new organizational structure in place, 

aimed ten years after its creation at strengthening the integration 

of the Group. One year later, Dexia is in a position 

to move on to the next phase in the evolution of its organizational 

structure (which will be implemented from January 1, 

2007), based on three axes: 

• a strong decision center at Group level; 

• sound local entities close to clients on the ground; and 

• a framework which enables it best to capitalize on all the 

skills present within the Group. 

For more information on the evolution of the organizational 

structure, see the section of this annual report entitled “Group 

organization”. 

Entry into exclusive discussions concerning 

Dexia Banque Privée France 

Dexia and BNP Paribas enter into exclusive discussions concerning 

a plan to transfer Dexia Banque Privée France, which 

is a 100% subsidiary of Dexia BIL, offering private banking 

services to private and associative clients. 

These discussions take place after the announcement by Dexia 

of a study into the various strategic options open with regard 

to the future of Dexia Banque Privée France as a part of the 

ongoing assessment of its portfolio of activities and its policy 

of focusing on some of them. 

Success of the compulsory bid for the shares 

of DenizBank 

Following the purchase of 75% of the shares of DenizBank 

from Zorlu Holding (see above), a compulsory bid is launched 

for the remaining shares of DenizBank listed on the Istanbul 

Stock Market. The majority of shareholders having responded 

in favor of the bid, the Dexia holding rose to 99.74% when 

the bid closed. 

First public securitization transaction of enhanced 

infrastructure bonds 

Dexia successfully completes a synthetic securitization transaction 

of enhanced bonds. This is the first ever public securitization 

of enhanced infrastructure bonds. The securitized 

portfolio comprises 7 bonds issued in relation with PFI projects 

and 21 bonds issued by regulated utilities in the water, electricity 

or gas sectors. The total amount of the securitized portfolio 

is GBP 1.47 billion (approximately EUR 2.19 billion). 

24 | 


CORPORATE GOVERNANCE 

CORPORATE 

GOVERNANCE 

INTRODUCTION 

THE CORPORATE GOVERNANCE 

CHARTER OF DEXIA SA 

INTRODUCTION 25 

SHAREHOLDERS RELATIONS 26 

MANAGEMENT OF THE 

DEXIA GROUP 28 

DEXIA GROUP CONTROL 48 

The Belgian code on corporate governance (hereinafter the 

“Lippens Code”), which replaces the recommendations of the 

Banking, Finance and Insurance Commission, the Federation of 

Enterprises of Belgium and Euronext Brussels, became effective 

on January 1, 2005. The Lippens Code includes nine mandatory 

principles for listed companies. Dexia, which has always placed 

an emphasis on corporate governance, intends to comply with 

these nine principles. 

During its meeting on February 3, 2005, the Board of Directors 

of Dexia SA established a “corporate governance sub-committee”, 

composed of directors of Dexia SA, who are responsible 

for assessing and formulating proposals pertaining to the 

various corporate governance topics addressed by the Lippens 

Code, and for considering appropriate modifications to the 

existing situation at Dexia SA. 

The work of this committee resulted in the development of a 

corporate governance charter, internal rules for the audit committee 

and a revision of the internal rules of the Board of Directors 

and the Management Board. 

During its meeting on March 1, 2007, the Board of Directors 

of Dexia SA altered its internal rules primarily in order to reflect 

the actual assessments and specific proposals arising from the 

Board’s self-assessment process in 2006, which was conducted 

with the assistance of an external consultant. This part of the 

charter also describes the competencies of the departments 

which were created on January 1, 2006 at Group level and are 

exercised by Management Board members since January 1, 

2007, and of central functions within Dexia SA. 

The Corporate Governance Charter of Dexia SA (hereinafter, 

the “Charter”) provides a detailed review of the principal 

aspects of the company’s governance. This document, which 

the Board of Directors wanted to be complete and transparent, 

contains 5 sections. The first section deals with the structure 

and organizational chart for the Dexia Group. It also provides 

a brief review of the Group’s history since it was established 

in 1996. The second section describes Dexia’s corporate governance 

structure, and includes all necessary information concerning 

the composition, characteristics and operating modes 

of the decision-making entities, which consist of the Ordinary 

Shareholders’ Meeting, the Board of Directors and the Management 

Board. The internal rules of the Board of Directors and 

the Management Board are also provided in their entirety. The 

third section discusses the shareholders and the Dexia share. 

It describes Dexia’s relations with its shareholders and summarizes 

the features of Dexia capital and shares. The fourth 

section summarizes the control exercised over and within the 

Dexia Group. The “internal control” portion of this section 

contains information on the internal audit, ethics and compliance, 

and the report of the Chairman of the Board of Directors 

concerning the operations of the Board of Directors and the 

internal control procedures implemented by the company. The 

“external control” section deals with the Board of the Statutory 

Auditors and the protocol concerning prudential management 

of the Dexia Group signed with the Banking, Finance and Insurance 

Commission. The final section of the Charter describes 






Dexia’s compensation policy for directors of the company and 

members of the Management Board. Several elements of the 

Corporate Governance Charter are restated, as recommended 

by the Lippens Code, in this chapter of the annual report of 

Dexia SA. 

In accordance with the Lippens Code, the Charter has been 

posted on the company’s website (www.dexia.com) since 

December 31, 2005 and is updated on a regular basis. 

Relations with individual shareholders 

Over the years, Dexia has developed a rigorous, regular and 

interactive system for providing information to individual 

shareholders. This system is based on the European club for 

individual shareholders and the European advisory committee 

for individual shareholders, who can also take advantage of a 

call center and the dedicated tabs on the website, which are 

updated on a real time basis. 




SHAREHOLDERS 

RELATIONS 

SHAREHOLDERS’ BASE 

The major shareholders of Dexia SA as of December 31, 2006 

are as follows: 

Name of shareholder 

Percentage of existing 

shares of Dexia SA held 

as of December 31, 2006 

Arcofin 17.52% 

Holding Communal 16.44% 

Caisse des dépôts et consignations 11.82% 

Ethias Group 6.36% 

CNP Assurances 1.98% 

As of December 31, 2006, Dexia SA held, directly and indirectly, 

0.04% of treasury shares. Employees of Dexia SA 

owned 4.27% of the company’s equity. 

As of the same date, and to the company’s knowledge, no 

individual shareholder, with the exception of Arcofin, Holding 

Communal, Caisse des dépôts et consignations and Ethias 

Group held more than 3% of Dexia SA. 

As of December 31, 2006, the directors of Dexia SA held 

116,755 shares of the company. 

RELATIONS AMONG SHAREHOLDERS 

Dexia is not aware of any agreements linking its shareholders 

or of any concerted activities among them. 

RELATIONS WITH SHAREHOLDERS 

Dexia is attentive to the quality of its relations with both individual 

and institutional shareholders. These relations are a priority 

for the Group, which wants to strengthen dialogue and 

transparency in relations with shareholders. 

The European club for individual shareholders 

The European club for individual shareholders today has nearly 

16,000 members, primarily Belgian and French shareholders. 

The club is a center for the distribution of the financial information 

to shareholders who want to follow the evolutions in 

the Group through the publications and documents designed 

specifically for them. Registration for the European Club of 

Dexia shareholders can be made by telephone, e-mail or 

through the website www.dexia.com. 

Meetings with individual shareholders 

Dexia regularly meets with its shareholders to discuss the businesses, 

the Group’s strategy, its results and financial outlook. 

In 2006, Pierre Richard and Axel Miller presided over a shareholders’ 

meeting on May 11 in Paris. Axel Miller also met with 

shareholders in the Lille area, during a panel forum organized 

in partnership with a major investment publication. 

Together with other companies, Dexia also participated in 

meetings organized by the Fédération française des clubs 

d’investissement and the Cercle de liaison des informateurs 

financiers en France, which allowed it to meet numerous 

shareholders in Lille, Clermont-Ferrand, La Rochelle and Nice. 

Together with other partners, primarily investment publications, 

and following the same approach, Dexia met with many 

shareholders in Rouen, Toulouse, Nantes, Bordeaux, Marseilles, 

Tours and Lyon. Dexia is also present at Actionaria in 

Paris every year. This important exposition, which is designed 

for savers and held in Paris, attracts over 35,000 visitors over 

a 2-day period and gives Dexia the opportuinty to engage in 

direct dialogue with its shareholders. 

Information media 

Three times a year, Dexia publishes a letter to shareholders in 

French and Dutch. Individual shareholders are thus regularly 

updated on developments within the Group and its current 

situation, and receive information on financial results in addition 

to the reports made to the Shareholders’ Meetings of 


The letters to shareholders are sent to club members and to 

shareholders who request it. They are also available on the 

website. 

Dexia’s annual report is available in three languages: French, 

English and Dutch. Dexia also publishes a financial notice 

on its quarterly, half-year and annual results on its website 

(www.dexia.com). 

26 | 



Dexia SA Shareholders’ Meeting 

The Ordinary Shareholders’ Meeting, a high point of the company 

year, benefits from a special information system: in official 

notices published in the Belgian Gazette in Belgium, and 

in the legal announcement bulletin, the BALO, in France; in 

notices published in the national press media in Belgium and 

France; with information provided by the toll-free number; in 

a notice of meeting available in English, French and Dutch 

that can also be downloaded from the internet. 

Shareholders’ meetings are broadcast live on the internet, 

allowing shareholders who cannot attend to follow the 

debates and resolutions at the meetings. 

As requested by the Belgian Company Code, the level of 

shareholding for the submission of proposals during a shareholders’ 

meeting by a shareholder is 20%. 

The internet site (www.dexia.com) 

With 64,500 visitors per month, a 33% increase from 2005 

levels, www.dexia.com strengthened its role as a major source 

of information on the Dexia Group for individual shareholders, 

journalists and institutional investors. The site is practical 

in structure, giving quick access to all information on the life 

of the Group, its activities, its latest news, a list with prices and 

values of all the Group’s investment funds and ethical funds, 

and the Dexia share price. 

During 2006, there were more than 46,000 visitors to the 

“You are a shareholder” section, with visits up approximately 

33% compared to 2005. 

The site provides access to the Group’s main publications 

such as annual and quarterly reports, as well as press releases, 

information letters to shareholders, and daily and monthly 

reports on the Dexia share. 

In French, Dutch and English, the trilingual Dexia site is consulted 

for the most part by European surfers, principally Belgian 

and French. 

The European Advisory Committee of Individual 

Shareholders 

Created in June 2001, Dexia’s European Advisory Board of 

Individual Shareholders took over from the shareholders’ advisory 

board of Dexia France, formed in 1997. Its composition 

reflects the Group’s European identity: the committee is composed 

of four shareholders from Belgium, five shareholders 

from France and three shareholders from Luxembourg. 

Its role is to advise the Group in its communication policy with 

regard to individual shareholders. 

The Advisory Committee met two times in 2006 to review the 

Group’s results. The Committee was strongly urged to comment 

on the new edition of the Individual Shareholder Guide 

that was issued during that year. Each year, one of the Committee’s 

members participates in the Ordinary Shareholders’ 

Meeting and reports on the Committee’s activities over the 

past year. 

Telephone information service for shareholders 

The service is available in France free of charge at 

0800 35 50 00, Monday through Friday from 9:00 AM until 

7:00 PM. Shareholders regularly make use of it for questions 

relating to the share price, the tax status of Dexia shares, dividend 

amounts and method of taxation, VVPR strips and the 

Ordinary Shareholders’ Meeting of Dexia SA. 

As from 2007, a bilingual (French-Dutch) toll-free number 

for shareholders in Belgium and Luxembourg is available at 

00 800 33 942 942 (only from a fixed telephone line). 

Relations with institutional shareholders 

Relations with institutional shareholders, who hold about 

30% of the capital, are extremely important to Dexia. For this 

purpose, the Investor Relations department deploys a team 

based partly in Brussels and partly in Paris, which is specifically 

responsible for relations with investors and analysts. 

Regular information channels 

In 2006, Dexia organized an important meeting in Paris for 

analysts and investors of all nationalities; the goal of this 

meeting, 10 years after the creation of Dexia, was not only 

to provide information on the last decade’s activities, but also 

to outline the Group’s outlook over 3, 5, and 10 year time 

horizons. 

During the year, Dexia regularly publishes information through 

quarterly and annual activity reports, theme presentations and 

press releases on the business, financial results and Group 

news. All this information is available as from publication on 

the website www.dexia.com on the page “You are an Investor”. 

It can also be obtained by e-mail. 

In 2006, there was a wealth of financial news from Dexia, 

which resulted in the preparation of 69 publications, including 

4 activity reports, 34 ad hoc presentations and 31 press 

releases. 

Contact with institutional shareholders 

After each presentation of results or in other circumstances, 

information meetings are organized throughout the world 

with the major institutional investors, who can then ask questions 

about the Group’s results or strategy directly to the 

members of the Management Board or Dexia’s management. 

In 2006, the Management of the Group, assisted by the Investor 

Relations team, met several hundred investors in 17 countries 

and 20 cities. 

CIRCULAR FMI/2003-02 FROM THE BANKING, 

FINANCE AND INSURANCE COMMISSION 

A Royal Decree of March 31, 2003 “concerning the obligations 

of issuers of financial instruments listed for trading on a 

Belgian regulated market” stipulates the obligations of issuers 

with regard to the information to be provided to the public 

and their obligations to holders of financial instruments. In 

July 2003, the Banking, Finance and Insurance Commission 

published a circular explaining and interpreting this Royal 

Decree. 








NAME 

The decree and the circular had a certain number of practical 

implications for Dexia SA, particularly Dexia’s choice to use its 

internet site to meet its obligations to publish the information 

stipulated by the decree and the circular. 

In making this choice, Dexia SA made a commitment to meet 

several conditions, particularly the creation of a distinct section 

on the website reserved for the financial information 

stipulated in the circular. 

Maximum use of the website for the communication of the mandatory 

financial information is one component of Dexia’s policy 

to ensure transparency for its shareholders and institutional 

investors. Information required by Circular FMI/2003-02 of the 

Banking, Finance and Insurance Commission appears under the 

“Legal Information” tab on Dexia’s website. This same policy of 

transparency for shareholders and institutional investors is also 

found in the Dexia SA Corporate Governance Charter. 

COMPLIANCE WITH CURRENT LEGISLATIONS 

As a company under Belgian law, whose shares are listed for 

trading in Belgium, France and Luxembourg, Dexia ensures 

compliance with the principle of equality among shareholders 

and respect for its legal and regulatory obligations to provide 

periodic and regular information. 

SPECIALIZED 

COMMITTEES 

BEGINNING 

AND END 

OF CURRENT 

MANDATE 

PRIMARY 

FUNCTION 

MANAGEMENT 

OF THE DEXIA GROUP 

INTRODUCTION: GROUP ORGANIZATION 

The organization of the Dexia Group is described in the chapter 

Group Presentation in this annual report (see page 19). 

The Board of Directors of Dexia SA 

Composition of the Board of Directors 

(as of December 31, 2006) (1) 

The bylaws of Dexia SA stipulate that the Board is composed 

of between sixteen and twenty directors. 

As of December 31, 2006, the Board of Directors is comprised 

of 18 members. The Board of Directors of Dexia SA reflects 

the Group’s European identity: i.e. five nationalities are represented 

at Board level. The composition of the Board also 

reflects the Franco-Belgian statutory character of Dexia SA. 

Indeed, the Board has as many Belgian members as it has 

French members. And each nationality represents at least one 

third of the Board. 

OTHER MANDATES 

AND FUNCTIONS 

BIOGRAPHY 


PIERRE 

RICHARD 

65 years old 

French 

Director since 

1996 

Holds 25,710 

Dexia shares 

Chairman of the 

Strategy Committee, 

member of the 

Compensation 

Committee and of 

the Appointments 

Committee 

2006-2010 Chairman of the 

Board of Directors, 


Director: 

• Air France/KLM, 

Le Monde,Generali 

France, EDF Energies 

nouvelles, Crédit du 

Nord (departure in 

Febuary 2007) 

• Companies belonging 

to the Dexia Group 

(Dexia Bank Belgium, 

Dexia Crédit Local, Dexia 

Banque Internationale à 

Luxembourg) 

Graduate from Ecole Polytechnique 

and Ecole nationale des Ponts et 

Chaussées. General Director for Local 

Governments, French Ministry of the 

Interior from 1978 to 1982. 

Deputy Managing Director of the 

Caisse des dépôts et consignations 

from 1983 to 1993. Chairman of Crédit 

local de France from 1987 to 1996. 

Co-Chairman of the Dexia Group 

from 1996 to 1999. Between 1999 

and 2006, Chairman of the Management 

Board and Chief Executive Officer 

of Dexia SA. Since January 2006, 

Chairman of the Board of Directors, 


AXEL MILLER 

41 years old 

Belgian 



Holds 100 


Member of 

the Strategy 



Committee 

2006-2010 Chief Executive 

Officer and 


Management Board 

of Dexia SA 

Director: 

• Ethias Vie (until January 

2007), Crédit du Nord, 

Director of the “Raad van 

Commissarissen” of LVI 

Holding NV (Carmeuse 

group) 

• Companies belonging 

to the Dexia Group 

(Dexia Bank Belgium, 

Dexia Crédit Local, Dexia 

Banque Internationale à 

Luxembourg, Financial 

Security Assurance 

Holdings Ltd) 

Law degree. After a 14-year career as 

a lawyer specialized in financial law, 

mergers and acquisitions and in international 

commercial law, he joined 

the Dexia Group in 2001 as General 

Counsel. Member of the Management 

Board of Dexia Bank Belgium in 

January 2002, he became Chairman 

of the Management Board of Dexia 

Bank Belgium and head of Personal 

Financial Services in January 2003. 

He became Chief Executive Officer of 

Dexia SA on January 1, 2006. 

(1) Article 2 of the Law of August 6, 1931 (Belgian Gazette of August 14, 1931) forbids ministers, former ministers, and State ministers, as well as the members or former 

members of Legislative Assemblies to mention their status as such in acts and publications of profit-making companies. 

28 | 



NAME 

SPECIALIZED 

COMMITTEES 

BEGINNING 

AND END 

OF CURRENT 

MANDATE 

PRIMARY 

FUNCTION 


AND FUNCTIONS 

BIOGRAPHY 

GILLES BENOIST 

Independent 

director 

60 years old 

French 


1999 

Holds 300 Dexia 

shares 

RIK BRANSON 

62 years old 

Belgian 


2001 

Holds no Dexia 

shares 


Audit Committee 

Member of 

the Strategy 



Committee 


Management Board, 

CNP Assurances 



Arcofin 

Member of the 


• Groupe Caisse des dépôts 



• Arcopar 

• Arcoplus 

• Auxipar 

Censor: 

• National Bank of Belgium 

Law degree. Graduate of Institut 

d’Etudes Politiques and student of 

Ecole nationale d’administration. 

He became in 1987 member of the 

Management Board and Secretary- 

General of Crédit Local de France 

as of 1987. Then Secretary-General 

Member of the Executive Board of 

Caisse des dépôts et consignations 

from 1993 to 1998. 

Graduate degree in economics. 

Several functions at the Regional 

Investment Company of Flanders from 

1980 to 1989. Joined the Arco Group 

in 1989, Chairman of the Management 

Board as of 1992. 


GUY BURTON 

58 years old 

Belgian 


2001 

Holds 2,000 


ANNE-MARIE 

IDRAC 

Independent 

director 

55 years old 

French 


2004 


shares 

Member of the 

Compensation 

Committee 

2003-2007 Chief Executive 

Officer and 



Ethias 

2004-2008 Chairwoman of 

SNCF 

Chairman of the Board of 

Directors: 

• Union des associations 

d’assurance mutuelle 

• Nateus 

• NRB (Network Research 

Belgium) 

• AME LIFE LUX 

• MNEMA ASBL 

Member of Conseil 

économique et social 

(France) 

Law degree. Joined Société mutuelle 

des administrations publiques (now 

Ethias) in 1974; Secretary-General 

in 1991; Chief Executive Officer in 

1995. 

Graduate of the Institut d’Etudes 

politiques de Paris. Law degree. Former 

student of ENA. Director of Land 

Transport at the Ministry of Equipment, 

Transport and Tourism (from 1993 to 

1995). State Secretary for Transport 

(from 1995 to 1997). Deputy for the 

Yvelines region. Elected to the Regional 

Council of Ile-de-France. Retired 

from her political mandates in order 

to be named Chairwoman and CEO of 

RATP in 2002. Appointed chairwoman 

of SNCF in July 2006. 



FABIO 

INNOCENZI 

Independent 

director 

45 years old 

Italian 




shares 

2006-2010 Chief Executive 

Officer of the Banca 

Popolare di Verona 

e Novara 

Vice Chairman: 

• Credito Bergamasco 

• Banca Aletti & C. 

• Banca per il Leasing 

Italease 

Member of the ABI 

(Associazione Bancaria 

Italiana) 

Fabio Innocenzi is the Chief Executive 

Officer of Banca Popolare di Verona e 

Novara. He is also Vice-Chairman of 

Credito Bergamasco, of Banca Popolare 

di Novara, of Banca Aletti & C and 

Banca per il Leasing Italease. 



NAME 

SPECIALIZED 

COMMITTEES 

BEGINNING 

AND END 

OF CURRENT 

MANDATE 

PRIMARY 

FUNCTION 


AND FUNCTIONS 

BIOGRAPHY 




DENIS KESSLER 

Independent 

director 

54 years old 

French 


1999 

Holds 15,285 


SERGE KUBLA 

59 years old 

Belgian 


2005 


shares 

ANDRÉ 

LEVY-LANG 

Independent 

director 

69 years old 

French 


2000 

Holds 38,000 


BERNARD LUX 

57 years old 

Belgian 


2005 


shares 

Member of the 

Strategy Committee 


Appointments 

Committee and 

member of the 


2006-2010 Chairman and Chief 

Executive Officer, 

SCOR 

2006-2010 Burgomaster 

of Waterloo 

2006-2010 Associate Professor, 

Université 

Paris-Dauphine 

2005-2009 Rector-Chairman 

of the Université de 

Mons 

Chairman: 

• SCOR Global Life 

(ex SCOR Vie) 

• SCOR Global P&C 

• SCOR Life US Re Insurance 

Company (US) 

• SCOR Reinsurance 

Company (US) 

• SCOR US Corporation (US) 

• SCOR Italia Riassicurazioni 

S.p.A. (Italy) 

Director: 

• BNP Paribas. 

• Bolloré Investissement 

• Dassault Aviation 

• Cogedim SAS 

• AMVESCAP Plc (UK) 

• SCOR Canada 

Reinsurance Company 

Director: 

• IP Trade 

• ASBL “Les Amis du Musée 

Wellington“ 

Director: 

• AGF 

• Schlumberger Ltd 

• SCOR 

Member of the Supervisory 

Board: 

• Paris Orléans 

• Lecturer at the Warocqué 

faculty of Economic 

Sciences, in charge of 

strategic management 

and human resource 

management courses 

• Chairman of the Board of 

Directors of WHESTIA 

• Member of the Board 

of Directors and of the 

Compensation Committee 

of SOGEPA 

• Member of the Board of 

Directors and Chairman 

of finances and human 

resources at SWL 

• Federal member of the 

Conseil supérieur de 

l’emploi 

University Professor of Economics 

and Social Sciences, Doctor of Economics, 

graduate of the Ecole des 

Hautes Etudes Commerciales. Today 

he is a member of the Economic and 

Social Council, the Council of the 

Association of Geneva, the Insurance 

Company Committee, the National 

Economic Commission and the Medical 

Research Foundation and Global 

Advisor of the Conference Board. 

Solvay business school (partial cycle: 

three years out of four). Burgomaster 

of Waterloo since 1982. He is currently 

active in national politics. 

Graduate of Ecole Polytechnique. 

Ph.D. in Business Administration from 

Stanford University. 

Former Chairman of the Supervisory 

Board of Paribas, Associate Professor 

at Université Paris-Dauphine and company 

director. 

PhD in applied economic sciences, 

author of studies and scientific 

articles. 

30 | 



NAME 

SPECIALIZED 

COMMITTEES 

BEGINNING 

AND END 

OF CURRENT 

MANDATE 

PRIMARY 

FUNCTION 


AND FUNCTIONS 

BIOGRAPHY 

DOMINIQUE 

MARCEL 

51 years old 

French 


2005 


shares 

JAN RENDERS 

57 years old 

Belgian 


2001 


share 

GASTON 

SCHWERTZER 

Independent 

director 

74 years old 

Luxembourer 


1999 

Holds 30,660 


2006-2010 • Director of 

Finances and 

Strategy at the 

Caisse des dépôts 

et consignations 

• Finance Director 

of Groupe Caisse 

des Dépôts 

• Member of the 

Management 

Board of the 

Caisse des dépôts 

et consignations 

• Chairman of the 

Supervisory Board of the 

Compagnie des Alpes 

• Chairman of Financière 

Transdev 

• Director of Accor, Icade 

and Transdev 

• Member of the 

Supervisory Board of 

the CNP, the Société 

nationale immobilière and 

the Caisse nationale des 

Caisses d’Epargne (CNCE) 

• Other posts in the 

companies of the Dexia 

Group: Vice-Chairman of 

the Supervisory Board of 

Dexia Crédit Local 

2004-2008 Chairman of ACW Chairman of the Board of 

Directors: 

• HIVA (Hoger Instituut 

voor de Arbeid) 

• Arcopar 

• Arcofin 

Member of the 


• IDEWE (Externe Dienst 

voor Preventie en 

Bescherming op het Werk) 

• IBEVE (Instituut voor 

Bedrijfsveiligheid) 



• Huis van de Arbeid 

2006-2010 • Law PhD 

• Company director 

• Chairman of 

Luxempart 

• Chief Executive 

Officer Audiolux 

Chairman: 

• Luxempart 

• Foncier et Participations 

(previously Sichel) 

• Presta-Gaz 

• Luxempart Energie 

• Energus 

• Socipar 

• Orchimont 

• Immobilière Ville Haute 

Degree in politics and economics, former 

student of the ENA. After occupying 

various posts in the Treasury 

Department, Dominique Marcel was 

Economic Advisor to the President of 

the Republic, Director of the Cabinet 

of the Ministry of Labour and Solidarity 

from 1997 to 2000, Deputy 

Director of the Cabinet of the Prime 

Minister from 2000 to 2002; Inspector 

General of Finances; and since 2003 

Director of Finances and Strategy for 

the Caisse des dépôts et consignations, 

Finance Director of the Group 

Caisse des Dépôts and member of the 

Management Board of the Caisse des 

dépôts et consignations 

BA in sociology. He started his career 

in 1972 as advisor in the research 

department of ACV. From 1990 to 

1997, he was national secretary of 

ACW. In 1997 he became deputy 

general-secretary of ACW. He was 

appointed general chairman in 2002. 

Career in the gas industry and active 

in real property projects in Luxembourg. 

Director of Dexia BIL since 

1984. Cofounder of BIL Participations 

(now: Luxempart). Honorary Consul 

of the Republic of Nicaragua. 




Director: 

• Société électrique de l’Our 

• Foyer Finance 

• Dexia Banque 

Internationale à 

Luxembourg 

• TRIEF Corporation 

(Groupe Wendel) 

• Winvest Sicar (Wendel) 

• Centre Bourbon 

• Immobilière de l’Alzette 



NAME 

SPECIALIZED 

COMMITTEES 

BEGINNING 

AND END 

OF CURRENT 

MANDATE 

PRIMARY 

FUNCTION 


AND FUNCTIONS 

BIOGRAPHY 


ANNE-CLAIRE 

TAITTINGER 

Independent 

director 

57 years old 

French 


2001 

Holds 1,000 


Chairwoman of 

the Compensation 

Committee 

2001-2007 Member of the 

Supervisory Board: 

• Carrefour 

Member of the 

Supervisory Board 

and of the Strategy 

Committee: 

• Club Méditerranée 

Director: 

• Baccarat 

Senior Advisor 

of Wefcos-Women’s Forum 

Graduate of the Institute of Political 

Studies in Paris, Master of Urban 

Sociology, Higher Diploma in Urban 

Planning from the Advanced Business 

Centre. Member of the Supervisory 

Board of the Carrefour group and the 

Club Méditerranée group, she was 

chairman of the Management Board 

of the Groupe du Louvre and she held 

the post of Managing Director of the 

Groupe Taittinger, when there was a 

splitting of the posts of Chairman and 

Managing Director until 2006, after 

assuming various operational responsibilities 

within those two groups at 

the same time as posts in the holding 

company. She also assumed executive 

responsibility for the Baccarat group 

from 1993 to 2006. 


MARC TINANT 

52 years old 

Belgian 


2001 


shares 

Member of the 


2006-2010 Member of the 


• Arcofin 

Member of the 

Management Board 

(Executive Director): 

• Arcoplus 

• Auxipar 

• Arcopar 

Chief Executive Officer and 

Vice Chairman of the Board 

of Directors: 

• EPC 

Graduate and Master’s degree in 

economics. 

Before joining the Arco Group in 

1991, he was General Adviser to the 

Management Board of the Walloon 

Regional Investment Company. 


SIR BRIAN 

UNWIN 

Independent 

director 

71 years old 

British 


2000 


shares 

Member of the 

Compensation 

Committee 

2006-2010 Chairman of 

Assettrust Housing, 

Limited 

Director: 

• Retail Estates (Sicafi listed 

in Brussels) 

• SRIW (Société régionale 

d’investissement de 

Wallonie) 

• Chairman of the European 

Center for Nature 

Conservation 

• Director of the English 

National Opera Company 

• Director of the Federal 

Trust for Education & 

Research 

Studied at Oxford and Yale. Former 

diplomat, also worked for the Chancellor 

of the Exchequer and on the 

Prime Minister’s staff in the United 

Kingdom. Chairman of the European 

Investment Bank in 1993; Honorary 

Chairman in 2000. 

FRANCIS 

VERMEIREN 

70 years old 

Belgian 


2004 

Holds 1,700 


Member of 

the Strategy 



Committee 

2005-2009 Burgomaster 

of Zaventem 

Chairman of the Board of 

Directors: 

• Holding Communal 

• Publi-T 

Director: 

• Elia 

• Asco Industries 

Former insurance inspector. Former 

manager of a tax office. Now active in 

politics at a national level. 

OBSERVER: 

FRANK BEKE 

60 years old 

Belgian 

Observer since 

2001 

Holds 1,400 


2002-2006 Burgomaster 

of Ghent 

Director of Dexia Bank 

Belgium 

(until December 31, 2006) 

Graduate degree in philology and 

communication sciences. 

Was municipal councilor and alderman 

before being Burgomaster of 

Ghent from 1995 to the end of 2006. 

32 | 



Eligibility criteria 

The internal rules of the Board of Directors stipulate that 

directors are elected by the shareholders’ meeting because 

of their expertise and the contribution they can make to the 

administration of the company. 

In this context, the Appointments Committee created within 

the Board is responsible for establishing profiles of expertise 

that will be reviewed on a regular basis to take into account 

changes in the Dexia Group and its businesses. 

Any member of the Board of Directors must have the time 

required to perform his obligations as a director. 

Non-executive directors may not hold more than five directorships 

in publicly-traded companies. 

Procedure for appointing and assessing members of 

the Board of Directors 

Appointment 

The Appointments Committee is responsible for proposing 

to the Board of Directors the appointment of a new director. 

It submits a detailed report to the Board on the factors that 

justify this recommendation. 

For this purpose, the Appointments Committee reviews the 

candidates’ expertise, knowledge and experience. The candidate 

attends an interview conducted by the members of this 

committee or a delegation of committee members. 

Assessment 

Every year, the Board of Directors conducts a self-assessment 

of its operation which is conducted by the Chairman of the 

Board of Directors. This self-assessment process may also be 

carried out by an external consultant, as was the case in 2006. 

During this process, the issue of each director’s contribution to 

the Board’s activities is also assessed. 

The Lippens Code also states that the non-executive directors 

of a company should assess their interaction with executive 

management on a regular basis, and meet at least once a 

year without the Chief Executive Officer and the other executive 

directors. The non-executive members of the Board of 

Directors of Dexia SA discussed this matter, in the absence of 

the Chief Executive Officer, when the Board met on March 2, 

2006, in connection with setting the Chief Executive Officer’s 

compensation for the 2005 fiscal year (variable portion) 

and for the 2006 fiscal year (fixed compensation, setting the 

system for calculating the Chief Executive Officer’s variable 

compensation in 2006, and the distribution of stock options 

in 2006). 

Changes in the composition of the Board of Directors 

of Dexia SA in 2006 

The significant changes that occurred during 2006 concerning 

the composition of the Board of Directors of Dexia SA are as 

follows. 

1. The following decisions were made by the Ordinary Shareholders’ 

Meeting of May 10, 2006: 

• Fabio Innocenzi was appointed as director for a four year 

period ending at the conclusion of the 2010 Shareholders’ 

Meeting. Mr. Innocenzi’s appointment replaced out-going 

director Roberto Mazzotta, whose term expired at the end of 

the 2006 Ordinary Shareholders’ Meeting; 

• the definitive appointment as a director for a new four-year 

term to expire at the end of the 2010 Ordinary Shareholders’ 

Meeting of Dexia SA, of Axel Miller, who was appointed by the 

Board of Directors of Dexia SA on November 17, 2005, effective 

as of January 1, 2006, replacing François Narmon, who 

resigned; 

• the definitive appointment as a director for a new four-year 

term to expire at the end of the 2010 Ordinary Shareholders’ 

Meeting of Dexia SA, of Serge Kubla, who had been appointed 

by the Board of Directors of Dexia SA on November 17, 2005, 

to replace Eric André, deceased; 

• the definitive appointment as a director of Bernard Lux, 

appointed provisionally by the Board of Directors on November 

17, 2005, in order to complete the term as director of 

Elio Di Rupo, who resigned. Mr. Lux’s term will expire at the end 

of the 2009 Shareholders’ Meeting; 

• The renewal of the terms of the following directors, each for 

a new four-year term, expiring at the end of the 2010 Ordinary 

Shareholders’ Meeting of Dexia SA: Messrs. Pierre Richard, 

Rik Branson, Gilles Benoist, Denis Kessler, André Levy-Lang, 

Dominique Marcel, Gaston Schwertzer, Marc Tinant and Brian 

Unwin. 

2. Francis Mayer, who had been a director of Dexia SA since 

2003, died on December 9, 2006. 

3. At its meeting on November 16, 2006, the Board of Directors 

accepted the resignation of Frank Beke as observer effective 

December 31, 2006. 

New directors 

As indicated above, a new director, Mr. Fabio Innocenzi, was 

appointed during the 2006 fiscal year. 

Fabio Innocenzi is the Chief Executive Officer of Banco Popolare 

di Verona e Novara. He is also Vice-Chairman of Credito 

Bergamasco, La Banca Popolare di Novara S.p.A., Banca Aletti 

& C. and Banca per il Leasing Italease S.p.A. 









Independent members of the Board of Directors 

The Lippens Code contains a list of criteria on the basis of which 

directors may be classified as independent. 

With a few exceptions, the criteria adopted in 2004 by the 

Board of Directors of Dexia SA (based on Article 524 of the 

Belgian Company Code and on the governance principles 

recommended by the Bouton report, which is the reference in 

France) were identical or stricter than those recommended by 

the Lippens Code. 

At its meeting of February 7, 2006, the Board of Directors 

decided, on the recommendation of the Appointments 

Committee, to modify Dexia SA’s criteria for independence by 

including the most demanding rules from the Lippens Code. 

Pursuant to this decision, the independence criteria applied by 

Dexia SA to its directors are as follows: 

1. For a period of 3 years preceding his or her appointment as 

an independent director, the nominee may not have held office 

or served as a director, manager, member of the Management 

Board, Chief Executive Officer, executive officer or employee 

of Dexia SA or a company or a person affiliated with Dexia SA 

or which is part of its consolidated group (this condition does 

not apply when the term of office of an independent director 

is renewed). 

2. The independent director may not be a director of Dexia 

SA for more than 12 years (termination of an independent 

directorship for this reason only occurs at the expiry of 

the current term in which the 12-year period is exceeded); 

termination of an independent directorship at the end of the 

12-year period does not preclude renewal of the appointment 

as a non-independent director. 

3. The independent director may not have, either at Dexia SA 

or in an affiliated company, a spouse or person with whom 

he or she lives under a common law marriage, an immediate 

family member or a relative up to two removes, who is a 

director, manager, member of the Management Board, Chief 

Executive Officer, executive officer, or has a financial interest 

as specified in point 4 below. 

4. Neither the independent director, nor his or her spouse, or 

the person with whom he or she lives under a common law 

marriage, or an immediate family member or a relative up 

to two removes, may hold shares representing 3% or more 

of the capital or of a class of shares of Dexia SA. If these 

persons hold rights representing less than 3% of the capital 

or a class of shares of Dexia SA, these rights may not exceed 

said limit of 3% when added to those held by the companies 

controlled by the independent director; lastly, the transfer 

deeds for these shares or the exercise of the rights attached 

to them may not be subject to any contractual agreements 

or unilateral commitments to which the independent director 

has subscribed. 

5. The independent director may not be an executive director 

of a company in which Dexia SA directly or indirectly holds a 

position as director. 

6. The independent director may not be (or be directly or 

indirectly affiliated with) a client, a supplier, an investment 

banker, a commercial banker 

• that is significant to Dexia SA or a company affiliated with 

Dexia SA; or 

• for which Dexia SA or a company affiliated to it represents a 

significant proportion of its business. 

7. The independent director may not serve as auditor of Dexia 

SA or an affiliated company at any time during the previous 

five years. 

8. The independent director may not represent a shareholder 

who alone, or with one or more other shareholders, holds 

more than 5% of the capital of Dexia SA. 

9. The independent director may not receive, or have received, 

substantial additional compensation from the company or an 

affiliated company, other than the compensation received as 

a non-executive director. 

10. The independent director may not be an executive 

director or managing director of another company in which 

an executive director or managing director of Dexia SA is a 

non-executive director or a managing director, and may not 

have other significant ties with the executive directors of Dexia 

SA through an interest in other companies or entities. 

11. A director is independent if he or she has no relations of any 

kind whatsoever with Dexia SA, a company affiliated to Dexia 

SA or the management of Dexia SA, which might compromise 

the exercise of his or her freedom of judgment. He or she may 

not maintain any relations with any other company which 

might call into question his or her independence. 

According to these criteria, the Board of Directors of Dexia SA 

has eight independent directors as of December 31, 2006. 

They are: 

• Anne-Marie Idrac 

• Anne-Claire Taittinger 

• Gilles Benoist 

• Denis Kessler 

• André Levy-Lang 

• Fabio Innocenzi 

• Gaston Schwertzer 

• Sir Brian Unwin 

Non-executive members of the Board of Directors 

A non-executive member of the Board of Directors is a member 

who does not exercise management functions in a company 

of the Dexia Group. The internal rules of the Dexia SA 

Board of Directors stipulate that at least half of the Board must 

be non-executive directors. It should be noted that, with the 

exception of the Chief Executive Officer, all members of the 

Board of Directors of Dexia SA are non-executive directors. 

34 | 



Separation of the functions of Chairman of the Board 

of Directors and Chief Executive Officer 

The bylaws of Dexia SA, as well as the internal rules of the 

Board of Dexia SA, specifically define the rule for separation 

of the functions of Chairman of the Board of Directors and 

Chief Executive Officer. They must necessarily be entrusted to 

different individuals of different nationalities, even when the 

Chairman of the Board of Directors is unable to preside and is 

replaced by another member of the Board. 

Term of office 

The term of office for Board members elected on or after 

May 7, 2002 is a maximum of four years. 

Duties and responsibilities of the Board 

of Directors 

The internal rules of the Board of Directors describe the 

expertise and responsibilities of the Board of Directors in three 

areas: 

• strategy and general policy; 

• management control and monitoring risks; 

• relations with shareholders. 

Strategy and general policy 

The Dexia Board of Directors defines, in the name of all 

shareholders and on the recommendation from or on the 

advice of the Management Board, the strategy and general 

policy of the company and the Dexia Group. 

It also sets the standards for the Group and ensures the 

implementation of the strategy for the Group. 

The Board also ensures compliance with the principles of 

good governance. 

Dexia’s internal rules therefore require that the Board of 

Directors: 

• meets at least once a year to evaluate the challenges and 

strategic stakes facing Dexia; 

• reviews the strategic recommendations made by the 

Management Board; 

• defines the strategy for the different Dexia businesses, which 

is implemented by the Management Board, sets the priorities, 

approves the annual budget and ensures that the resources 

committed are adequate for the strategy chosen; 

• defines the values of the Dexia Group on the advice of the 

Management Board. 

The internal rules give the Board specific responsibilities for 

major acquisitions and disposals of assets. 

• assesses the performance of the members of the Board of 

Directors; 

• supervises the performance of the statutory and internal 

auditors; 

• establishes the organization of the Management Board in terms 

of its composition, its activities, and its duties as recommended 

by the Chief Executive Officer; the Board sets the compensation 

of the members of the Management Committee based on the 

recommendations of the Compensation Committee and the 

Chief Executive Officer with regard to the compensation of 

members of the Board of Directors, other than himself. 

The role of the Board of Directors towards 

the company shareholders 

The Board’s actions are guided solely by the interest of the 

company with respect to the shareholders, customers and 

employees. 

The Board ensures that its obligation toward its shareholders 

are understood and met and reports to the shareholders on 

the performance of its duties. 

Operation of the Board of Directors 

Bylaws 

The company’s bylaws set forth the following rules that govern 

the operation of the Board of Directors: 

• All deliberations require the presence or representation of at 

least half of the members of the Board. 

• Decisions are approved by a majority vote of all members 

present or represented. If there is a tie vote, the chairman or 

the member replacing him shall cast the deciding vote. 

• Decisions concerning the operations described below 

require the presence or representation of at least two thirds of 

the members of the Board, and a two-thirds majority vote of 

all members present or represented: 

• any decision to employ authorized capital or to submit to 

the Ordinary Shareholders’ Meeting a resolution to approve 

the issue of shares, convertible bonds or redeemable in 

shares, warrants or other financial instruments eventually 

conferring the right to shares, when the amount of the capital 

increases that would result from the issue of such shares or 

the conversion or redemption of such bonds or the exercise of 

such warrants or other financial instruments exceeds 10% of 

the amount of capital existing prior to these decisions; 




Management control and risk management for the 

company 

The Board of Directors controls and directs the management 

of the company and the Group and monitors risks. 

For this purpose, the internal rules of the Dexia Board of 

Directors provide that the Board: 

• evaluates the implementation of strong and independent 

control systems, which most notably include risk management, 

and internal audit and compliance procedures on a centralized 

basis; 

• takes all appropriate measures to ensure that the financial 

statements are accurate; 






• any decision relating to the acquisition or sale of assets 

representing more than 10% of the company’s equity; 

• any decision to submit to the Ordinary Shareholders’ 

Meeting a resolution to amend the company’s bylaws; 

• any decision relating to the appointment or dismissal of the 

Chairman of the Board of Directors and the Chief Executive 

Officer. 

Internal rules of the Board of Directors of Dexia SA 

The internal regulations of the Board of Directors of Dexia SA, 

which have been in existence since 1999 and which specify all 

the rules that allow the Board to fully carry out its duties and 

strengthen the contribution made by each director, has undergone 

significant changes in 2005 and early 2006, particularly 

with regard to the new organization structure of the Dexia 

Group and the implementation of the Lippens Code. 

The major elements of the rules concern: 

• general organizational principles of the Board of Directors; 

• confidentiality obligation for members of the Board; 

• training of Board members; 

• conflicts of interest; 

• transactions between a company of the Dexia Group and 

Board members; 

• proprietary trading in Dexia securities. 

General organizational principles 

The Board of Directors is organized to achieve the best exercise 

of its expertise and responsibilities. 

The meetings of the Board are frequent enough to allow the 

Board to perform its responsibilities. Board members agree to 

participate actively in the work of the Board and the committees 

on which they sit. Attendance at meetings of the Board 

and committees is the first condition of this participation and 

attendance at least three fourths of the meetings is desired. 

The agenda lists the items to be discussed and specifies if they 

are listed for information purposes, for discussion, or for a 

vote. 

The minutes report discussions and record the decisions made, 

specifying reservations issued by some directors, if applicable. 

Obligation of confidentiality 

The information provided to the directors in the performance 

of their duties, during Board meetings, meetings of the specialized 

committees, or during private interviews, is provided 

intuitu personae; they shall ensure that the confidentiality of 

such information is strictly maintained. 

The knowledge of privileged information leads to the prohibition 

against executing, on his own behalf or on behalf of 

third parties, transactions on the securities of the companies 

in question and a ban on disclosing this information to third 

parties. 

by outside experts as needed. The missions of these specialized 

committees are also clearly defined in the internal rules 

of the Board of Directors. 

Conflicts of interest 

Directors make sure that their participation on the Board of 

Directors is not a source of direct or indirect conflict of interest, 

either personally or because of the professional interests 

they represent. 

They must ensure that their membership on the Board reflects 

complete independence from interests outside the company 

itself. In particular, cross-exchanges of directors are to be 

avoided. 

Directors report to the Board if there is a significant change 

in their duties and the Board decides whether to accept their 

resignation in such cases, after an opinion from the Appointments 

Committee. They must resign if a change in their situation 

creates an incompatibility with their office as a Dexia 

director. 

If a director directly or indirectly has a financial interest in a 

decision or operation to be decided by the Board of Directors, 

he must inform the other members of the Board before they 

deliberate. His declaration, including the reasons for his conflicting 

financial interest, must be recorded in the minutes of 

the Board meeting that must make the decision. In addition, 

he must inform the company’s auditors. 

For publication in the annual management report, the Board 

of Directors describes in the minutes the type of decision or 

operation in question and the reasons for the decision made 

and the financial consequences for the company. The management 

report contains a copy of the minutes described 

above. 

The auditors’ report must also include a separate description 

of the financial consequences resulting for the company from 

the decisions made by the Board of Directors which include 

a conflicting interest as defined by the provisions set forth 

above. 

The director with a conflicting interest may not participate in 

the Board’s deliberations on the transactions or decisions in 

question or vote on these issues. 

Transactions between a company of the Dexia Group 

and Board members 

The transactions between a company within the Dexia Group 

and the directors must be entered into under normal market 

conditions. 

Training of Board members 

In order to acquire a solid understanding of the Dexia Group, 

the new members of the Board of Directors are invited, when 

they take office, to one or two days of contacts and visits 

within the Group. 

The Board members who sit on the specialized committees 

are chosen on the basis of their specific skills. They are assisted 

36 | 



Own-account transactions on Dexia securities 

In order to promote the transparency of transactions in Dexia 

securities, the internal rules stipulate that the directors declare 

the following to the Chief Compliance Officer: 

• at the time they take office, the Dexia shares or financial 

instruments that they hold; 

• after each transaction, the details of that transaction in 

order to make the appropriate publications; 

• at the end of each year, an update of the Dexia shares or 

financial instruments that they hold. 

Before any transaction involving the Dexia shares, the directors 

inform the Chief Compliance Officer of the transaction that 

they are planning to execute. 

In any event, directors shall not execute the following 

transactions without the prior agreement of the Chief 

Compliance Officer: 

• any transaction on Dexia shares for a period of 1 month 

prior to the publication of the financial results (“restriction 

period”); 

• any transaction on Dexia shares during sensitive periods of 

which they are notified by the Chief Compliance Officer and 

which are determined by the officer on the basis of a general 

policy defined in collaboration with the Audit Committee 

(“black period”); 

• any transaction in the opposite direction of a previous 

transaction, with the exception of the sale of shares following 

the exercise of options within a period of 6 months from the 

date of exercise. 

Board members also agree to hold the Dexia shares they have 

acquired or plan to acquire in a securities account opened 

in their name in one of the credit institutions of the Dexia 

Group or in an institution approved by Dexia, or to register 

their shares. 

The preceding obligations for Dexia shares apply to directors, 

their spouses (if there is no legal separation) and their minor 

children. 

The various obligations set forth in these rules also apply to 

observers as defined in the Dexia SA bylaws. 

The Chief Compliance Officer ensures compliance with the 

rules set forth in the previous paragraphs by the directors. 

In addition to the publication of total holdings of shares in 

the company’s annual report, individual transactions are 

notified to the Banking, Finance and Insurance Commission, 

for publication on its website; this provision has been in effect 

since the Belgian Royal Decree of March 5, 2006, which 

transposed the European directives on market abuses into 

Belgian law. 

Activity and operation of the Board of Directors of 

Dexia SA in 2006 

Attendance by Board members 

The Board of Directors met seven times in 2006. The directors’ 

attendance rate at Board meetings was 87%. 

ATTENDANCE RATE TO THE MEETINGS 

OF THE BOARD OF DIRECTORS 

PER DIRECTOR 

Richard, Pierre 100% 

Miller, Axel 100% 

Benoist, Gilles 100% 

Branson, Rik 100% 

Burton, Guy 100% 

Idrac, Anne-Marie 057% 

Innocenzi, Fabio 100% (1) 

Kessler, Denis 086% 

Kubla, Serge 086% 

Levy-Lang, André 086% 

Lux, Bernard 100% 

Marcel, Dominique 071% 

Mayer, Francis 014% (2) 

Mazzotta, Roberto 100% (3) 

Renders, Jan 086% 

Schwertzer, Gaston 100% 

Taittinger, Anne-Claire 100% 

Tinant, Marc 086% 

Unwin, Brian 100% 

Vermeiren, Francis 100% 

Beke, Frank (Observer) 100% 

(1) In a total of 4 meetings. 

(2) Francis Mayer was excused for medical reasons. 

(3) In a total of 3 meetings. 









Activities of the Board of Directors 

In addition to the items belonging to the ordinary competence 

of the Board of Directors (follow-up of the results, approval of 

the budget, appointment and compensation of the members 

of the Management Board), the Board concentrated in 

particular on the following matters: 

• the definition of Dexia’s strategic direction over the next 

3, 5 and 10 year periods and communication of the Group’s 

strategy; 

• the composition of the Board of Directors and its specialized 

subcommittees; 

• the Board of Directors’ self-assessment process and 

the implementation of the specific recommendations for 

improvement; 

• compliance with the Lippens Code; 

• the criteria for independent directors; 

• the termination of private banking activities in the United 

Kingdom; 

• the sale of the Group’s ownership stake in Créatis; 

• the sale of Banque Artesia Nederland, Flexia, Belstar and 

Dexia Banque Privée France; 

• the review and approval of the 2005 audit plan; 

• the process for privatizing CEC; 

• the equity investment in Banca Comerciala Romana; 

• the acquisition of DenizBank; 

• the report from the Chairman of the Board of Directors of 

Dexia SA concerning the operations of the Board and the 

internal controls for the Group; 

• the discussion and reading of the internal audit report and 

the report on risk assessment and monitoring in 2005; 

• the monitoring of the Dexia Bank Nederland operation; 

• the status of various procedures underway in connection 

with the Lernout & Hauspie situation; 

• the discussion on Dexia’s positioning and strategic stake in 

the asset management area; 

• the shareholding program for employees and Group staff, 

as well as the 2006 stock option plan; 

• the strategy for the buy-back of the company’s treasury 

shares; 

• discussion on Dexia’s management policy for its strategic 

portfolio; 

• the evaluation of the Group’s new organization, which 

was implemented in 2006, and the changes in the Group’s 

operational structure; 

• the discussion of the Dexia Group’s policies on 

subcontracting. 

Conflicts of interest in 2006 

As indicated previously, if a director has a proprietary interest 

that is directly or indirectly opposed to a decision or transaction 

that comes within the competence of the Board of Directors, 

the director must notify the other Board members before the 

matter is discussed by the Board. In addition, both the Board 

member’s notification and the reasons justifying the conflicting 

interest included in the notification heading must be recorded 

in the minutes of the Board meeting during which a decision 

must be made regarding the matter in question. 

Below are extracts of the minutes of the Board of Directors’ 

Meeting on March 2, 2006, relating to the application of the 

provisions of Article 523 of the Belgian Company Code. 

During the meeting of March 2, 2006, the Board considered 

the amount of compensation to be paid to members of the 

Management Board. Since Axel Miller, the Chief Executive 

Officer, is also Chairman of the Management Board, and since 

the Board of Directors also decided the compensation of Pierre 

Richard in his capacity as Chairman of the Management Board 

in 2005, these two individuals abstained (in compliance with 

Article 523 of the Company Code) from participating in the 

Board of Directors’ deliberations and vote concerning their 

own compensation. An excerpt of the minutes relating to the 

matters concerning Pierre Richard and Axel Miller is provided 

below. 

A. Variable compensation 2005 

The Meeting of the Board of Directors in February 2005 

approved the principles for calculation of the variable 

compensation 2005 of members of the Management Board. 

The criterion retained for calculation was the 2004/5 evolution 

of Dexia SA’s underlying net income* (the objective being 

to compensate the ability of teams to respect the budget 

provided to that effect last year). The year 2005 now over, the 

Compensation Committee calculated and fixed the amount 

of variable compensation 2005 for each member of the 

Management Board applying those principles. 

[...] 

It is proposed to grant Pierre Richard an amount of EUR 950,000 

and to grant Axel Miller an amount of EUR 587,080. 

*The 2004/2005 evolution of the underlying met income is +11.3%. 

[...]. 

C. Variable compensation 2006 

It has been observed that the former system for calculation of 

variable compensation does not permit any individualization 

of personal situations (single formula applicable to all) and 

only resulted year after year in a rather relative variability (the 

result of the formula leading each year to percentages varying 

between 65% and 75%). The Compensation Committee 

therefore wishes to suggest a new system for calculation 

of the variable compensation payable to members of the 


The variable compensation would be calculated according to 

three equally important criteria: 

• an initial Group criterion based on a formula linked to the 

results of Dexia SA which would be applicable in an identical 

manner to all the persons concerned; 

• a second criterion specific to the Management Board 

based on the achievement of (joint) objectives of members. 

Those objectives (for instance the completion of projects, 

levels of indicators of performance achieved, strategy 

implemented, priorities for 2006 and so on) would be fixed 

by the Compensation Committee on proposals from the 

Management Board; 

38 | 



• a third individual criterion based on the achievement of personal 

objectives specific to each member of the Management 

Board. Personal objectives would be fixed by the Chief Executive 

Officer except in the case of his own objectives which 

would be fixed by the Compensation Committee. 

Each of these criteria would give rise to a percentage (from 

0% to 100%) depending upon an assessment made by the 

Compensation Committee with a pivot rate of 50%. 

It is further proposed to fix a maximum amount of variable 

compensation, which assumes that each criterion represents 

between 0 and a percentage of the compensation fixed for calculation 

of the total amount of the variable compensation. 

A-C Taittinger comments on a table listing the proposals for 

maxima formulated by the Compensation Committee. 

This new system is intended not to increase the variable compensation 

but to make it more individual, more variable and 

to involve not only the performance of the company but also 

of the members concerned. 

The Compensation Committee asks the Board of Directors to 

grant it a mandate effectively to implement these principles, 

including in particular the fixing during the first half of 2006: 

• the objectives for the second “Management Board” criterion; 

and 

• the personal objectives for the third criterion. 

[...] 

G. Dexia stock option plan – attribution to members of 

the Group Management Board 

As part of the global package of options issued in 2006, it 

is proposed to attribute the following options to Axel Miller: 

120,000. 

Decisions 

With the exception of P. Richard and A. Miller who did not 

take part in the deliberations and vote on the points relating 

to them, the Board approves all the proposals made by the 

Compensation Committee. 

Compensation paid by Dexia SA to its directors 

in 2006 

Review of the principles applied 

Dexia SA’s 2006 Ordinary Shareholders’ Meeting decided to 

pay a total maximum compensation amount of EUR 1,300,000 

to the directors for their services, effective January 1, 2005. 

This Meeting also authorized the Board to determine 

the practical procedures and individual allocation of this 

compensation. 

At its meeting on May 23, 2002, the Board of Directors 

decided to grant each director a fixed compensation of 

EUR 20,000 (EUR 5,000 per quarter – fixed compensation), 

and directors’ fees (variable compensation) of EUR 2,000 per 

Board meeting or specialized committee meeting. Directors 

who have been in office for less than one full year shall earn 

a proportion of this fixed fee based on the number of quarters 

during which they have effectively been in office. These 

principles were retained by the Board of Directors and were 

therefore also applied in 2006. 

Compensation paid to the Chairman 

of the Board of Directors 

On April 26, 2005, the Board of Directors set the 2006 gross 

annual compensation for the Chairman of the Board of 

Directors at EUR 400,000. This amount is included in the 

total amount of compensation for Board members described 

above. 






DIRECTORS’ AND OTHER FEES FOR SERVING AS A DIRECTOR OF DEXIA SA 

AND THE OTHER ENTITIES OF THE GROUP (GROSS AMOUNTS) 

Board of Board of Strategy Audit Compensation Appointments Total Other 

Directors Directors Committee Com- Committee Committee entities 

(fixed comp.) (variable comp.) mittee of the Group 




P. Richard 400,000 0 0 0 0 0 400,000 0 

A. Miller 0 0 0 0 0 0 0 0 

G. Benoist 20,000 14,000 0 8,000 0 0 42,000 0 

R. Branson 20,000 14,000 0 0 0 4,000 38,000 22,500 (1) 

G. Burton 20,000 14,000 0 0 2,000 0 36,000 0 

A.M. Idrac 20,000 8,000 0 0 0 0 28,000 0 

F. Innocenzi 15,000 8,000 0 0 0 0 23,000 0 

D. Kessler 20,000 12,000 2,000 0 0 0 34,000 0 

S. Kubla 20,000 12,000 0 0 0 0 32,000 0 

A. Levy-Lang 20,000 12,000 0 0 0 4,000 36,000 0 

B. Lux 20,000 14,000 0 0 0 0 34,000 0 

D. Marcel 0 0 0 0 0 0 0 (2) 0 

F. Mayer 0 0 0 0 0 0 0 (3) 0 

R. Mazzotta 5,000 4,000 0 0 0 0 9,000 0 

J. Renders 20,000 12,000 0 0 0 0 32,000 0 

G. Schwertzer 20,000 14,000 0 0 0 0 34,000 61,973.38 (4) 

A.C. Taittinger 20,000 14,000 0 0 4,000 0 38,000 0 

M. Tinant 20,000 12,000 0 8,000 0 0 40,000 0 

B. Unwin 20,000 14,000 0 0 4,000 0 38,000 0 

F. Vermeiren 20,000 14,000 2,000 0 0 4,000 40,000 0 

F. Beke 

(Observer) 20,000 14,000 0 0 0 0 34,000 22,500 (5) 

(1) Directors’ and other fees earned as a director of Dexia Bank Belgium. 

(2) Dominique Marcel does not wish to receive directors’ or other fees as a director. 

(3) Francis Mayer does not wish to receive directors’ or other fees as a director. 

(4) Directors’ and other fees received as a director of Dexia Banque Internationale à Luxembourg. 

(5) Directors’ and other fees received as a director of Dexia Bank Belgium. 

Payment of social security contributions 

Every Board member of Dexia SA is considered in Belgium as an 

independent worker and consequently must join an independent 

workers’ fund and, in principle pay the social insurance and 

related items. Now, some Board members already benefit from 

social insurance under another system and may therefore be 

required to pay contributions in Belgium simply because of the 

mandate carried out at Dexia SA without benefiting from social 

insurance payments. 

That is the case for, for example, Board members not resident 

in Belgium who already benefit, in their country of residence, 

from social insurance and who are required to contribute in 

Belgium to an unrecovered annuity. This is also the case for a 

Board member resident in Belgium who is subject to the salaried 

employees system or to the system applicable to public 

servants as a principal activity and who is required to contribute 

as an independent worker additionally because of the mandate 

carried out in Belgium without benefiting from increased social 

insurance compared to what he already qualifies for because of 

his principal activity. 

In order to offset the unrecovered social security cost paid by 

directors who are in this position (subject to an annual review 

in order to reflect changes in status), the Ordinary Shareholders’ 

Meeting of May 10, 2006 decided that Dexia SA will pay the 

unrecovered social security contributions and the late penalties 

and other amounts owed for serving as a director of Dexia and, 

therefore, raised the maximum ceiling for directors’ compensation 

from EUR 700,000 to EUR 1,300,000. 

The beneficiaries of this payment are any persons who were 

directors of the company as of January 1, 2005 and who meet 

the aforementioned conditions for all social security contributions 

owed on or after January 1, 2000, as well as any new 

director who meets the conditions stipulated, and Frank Beke 

in his position as observer. The amount of the contributions 

owed for the years 2000 to 2006 and paid by Dexia totaled 

EUR 121,040.69 in 2005 and EUR 119,400.67 in 2006. 

Compensation paid to the Chief Executive Officer 

The Chief Executive Officer does not receive any fee for his 

position as director. He is only paid for his functions as Chief 

Executive Officer responsible for day-to-day management and 

Chairman of the Management Board (see below). 

40 | 



Specialized committees created by the Board of 

Directors 

In order to review in detail the matters submitted to the 

Board of Directors, it has established four specialized Board 

committees (the Compensation Committee, the Audit 

Committee, the Strategy Committee and the Appointments 

Committee) which are charged with preparing its decisions, 

those decisions remaining under the sole responsibility of 

the Board. Unless they have been specially delegated by 

the Board, the specialized committees effectively have no 

decision-making powers. 

These committees are composed of three to six Board members 

appointed by the Board of Directors for a period of two years, 

which may be renewed. After each meeting, a report on the 

committee’s work is submitted to the Board of Directors. 

Strategy Committee 

Membership 

The strategy committee is composed of six directors, including 

the Chairman of the Board of Directors, who chairs the 

committee, and the Chief Executive Officer. 

The members of the Strategy Committee (as of December 31, 

2006) were*: 

• Pierre Richard, Chairman of the Board of Directors 

• Axel Miller, Chief Executive Officer 

• Denis Kessler, independent director 

• Rik Branson, director 

• Francis Vermeiren, director 

(*) Francis Mayer, who was a member of this committee, died on 


Responsibilities (as of December 31, 2006) 

The Strategy Committee meets annually to assess the 

strategic position of the Dexia Group in view of changes in 

the Group’s environment, its markets and its medium-term 

growth strategies and to prepare for the annual meeting of 

the Board of Directors that will consider this issue. 

The Strategy Committee may also meet as needed, on the 

initiative of the Chief Executive Officer, to study, before a 

review by the Board of Directors, major projects that require a 

particular level of confidentiality because of their repercussions 

on the financial markets. 

Any of its members may also request a meeting of the Strategy 

Committee. 

The Group’s strategy is developed on the basis of the following 

principles: 

• it is the responsibility of the Management Board to take the 

initiative to study and propose projects of a strategic nature to 

the Strategy Committee and to the Board of Directors; 

• the Board of Directors and the Strategy Committee of the 

Board may ask the Management Board to study a strategic 

option; 

• projects that meet at least one of the following criteria are 

considered to be of a strategic nature: 

– a project of acquisition or disposal of assets for an amount 

equal to or greater than EUR 300 million; 

– a project of joint venture, consortium or partnership with a 

third party that could have a significant impact on the scope 

of consolidation of the Group and/or on its results or the 

results of one of its businesses; 

– a project of alliance or partnership that implies a significant 

change in the shareholding structure of Dexia SA. 

Operation and activities in 2006 

The Strategy Committee met on May 15, 2006 and reviewed 

the various opportunities for growth in Turkey and the proposed 

acquisition of DenizBank in particular. 

Attendance of each individual director at the meeting 

of the Strategy Committee 

The individual attendance rate for directors at the meetings 

of this committee was 100% in 2006, with the exception of 

Rik Branson who was excused because he was unable to be 

present at the annual meeting of the Strategy Committee. 


Membership 

The Audit Committee is composed of three to five directors, 

all non-executive. To the extent possible, the majority of the 

Audit Committee members are independent directors, which 

has been the case since February 7, 2006, since André Levy- 

Lang, an independent director, was appointed as a member of 

the Audit Committee as of that date. The most important criterion 

in the choice of committee members remains, however, 

the member’s expertise and independence of mind. 

The Chairman of the Board of Directors may attend meetings of 

the Audit Committee. The Chief Executive Officer may attend, 

but may not be a member of the Audit Committee. 

The members of this committee (as of December 31, 2006) 

were: 

• Gilles Benoist, independent director and chairman of the 

committee 

• André Levy-Lang, independent director 

• Marc Tinant, director 

Responsibilities 

The role of the Audit Committee is, on the one hand, to 

review the projects of the annual, quarterly, corporate and 

consolidated financial statements of the Group in order to 

verify, from those transmitted documents, in particular the 

conditions under which they were established and to ensure 

the relevance and continuity of the accounting principles and 

applied methods, and, on the other hand, to monitor the 

performance of the internal control system put in place by 

the Management Board and more particularly the system to 

manage the risks to which the Group is exposed as a result 

of its activities. 

The Audit Committee has free access to the Statutory Auditors, 

as well as to the General Auditor and the Chief Compliance 

Officer. It informs the Chief Executive Officer of any such 

contacts. 









In the context of its responsibilities, the Audit Committee: 

• analyzes the financial information and the accounting procedures 

and, in particular: 

– is informed of the work of the Statutory Auditors and discusses 

their findings, comments and recommendations by 

giving them the opportunity during each meeting to express 

their views in the presence of the members of the committee 

only; 

– may suggest further work if deemed appropriate; 

– ensures that the policy on the independence of Statutory 

Auditors is respected and gives advice on their appointment. 

• reviews the existence and implementation of the procedures 

to assess and control credit, market and operational risks; for 

this purpose, the Audit Committee reads the conclusions of 

internal audits and ensures that the recommendations made 

are effectively followed; 

• may also recommend additional audits; 

• approves by proxy the audit charter, the audit universe, the 

audit plan and the resources available to the internal audit 

and compliance departments; 

• is consulted regarding the rules of ethics in force within the 

Group. 

The Audit Committee ensures the performance and the independence 

of the operations of the compliance department. 

The Audit Committee meets at least four times a year. Three 

of these meetings take place prior to the Board of Directors’ 

meetings called to approve the annual and quarterly financial 

statements. The committee may meet at the request of one 

of its members, or the Chairman of the Board of Directors. It 

reports the results of its work and its comments to the Board 

of Directors. 


In 2006, the Audit Committee met four times: January 13, 

February 23, May 11 and September 1 to study the following 

issues: 

• presentation of the Dexia corporate and consolidated financial 

statements and results for the year ended December 31, 

2005; 

• follow-up of recommendations of the audit as of September 

30, 2005; 

• quarterly risk review as of December 31, 2005; 

• 2005 report on risk measurement and monitoring; 

• 2005 activity report on internal audit; 

• annual report on internal controls and on internal audit 

activities in 2005; 

• presentation of the report of the Chairman of the Board of 

Directors on the activities of the Board of Directors and of the 

internal report in 2005; 

• audit program for 2006 and the multi-year 2006-2009 

plan; 

• presentation of the results as of March 31, 2006; 

• quarterly report on internal audit activities and the followup 

to recommendations as of March 31, 2006; 

• progress in the Basel II process; 

• situation in the Netherlands; 

• important legal issues, including Lernout & Hauspie; 

• monitoring the independence process for the auditors; 

• review of the Dexia corporate and consolidated financial 

statements and results for the period ended June 30, 2006; 

• monitoring the Compliance situation in the Group; 

• quarterly risk review as of June 30, 2006; 

• renewal of the term of office and compensation for the 

Group’s auditors. 

Attendance of each individual director at 

Audit Committee meetings 

The individual attendance rate of directors at the meetings 

of this committee was 100% in 2006, with the exception of 

André Levy-Lang, who was excused because he could not 

attend the Audit Committee meetings in 2006. 

Compensation Committee 

Membership 

The Compensation Committee is composed of four non-executive 

directors who have no relationship that might directly 

or indirectly influence their judgment. In this respect, careful 

attention is given to the relations that exist on the Boards of 

Directors between the officers of Dexia and the companies to 

which members of this committee may belong. 

If he is not a member, the Chairman of the Board of Directors 

attends the meetings of this committee. The Chief Executive 

Officer may also attend the meetings of the Compensation 

Committee, but may not be a member (as he is not a nonexecutive 

director). 

The members of the Compensation Committee (as of December 

31, 2006) were: 

• Anne-Claire Taittinger, independent director and Chairman 

of the Compensation Committee since February 7, 2006 

• Brian Unwin, independent director 


• Guy Burton, director 


The responsibilities of the Committee include: 

• the elements of the compensation of the Chairman of the 

Board and the Chief Executive Officer and, on the recommendation 

of the Chief Executive Officer, the compensation for 

the members of the Management Board; 

• the stock options granted in application of the general principles 

defined by the Board of Directors. 

It is also consulted on the compensation and incentives for 

the Group top executives, as well as on the employee shareholding 

policy. 

It also makes recommendations on the fees paid to directors 

and the allocation of those fees to directors. 


The committee meets at least twice a year, no later than 

the date of the Board of Directors’ meeting that closes the 

accounts for the year. It may also be convened at the request 

of the Chairman of the Board of Directors or two of its 

members. 

It reports to the next meeting of the Board of Directors concerning 

the results of its work and its meetings. On request, 

it provides copies of the minutes of its meetings to the Board 

of Directors. 

42 | 



In 2006, the Compensation Committee met on February 28 

and July 6 to review the following issues: 

• the compensation of the Group’s executives; 

• the publication in the annual report of the information on the 

compensation of the Chairman of the Board of Directors, the 

Chairman of the Management Board, and the other members 

of the Management Board as required by the Lippens Code; 

• the 2006 employee share plan; 

• the 2006 stock option plan. 


Compensation Committee meetings 

The individual attendance rate of directors at the meetings of 

this committee was 100% in 2006, with the exception of Guy 

Burton, who was excused because he could not attend one of 

the two Compensation Committee meetings in 2006. 

Appointments Committee 

Membership 

The Appointments Committee is composed of six directors 

including the Chairman of the Board of Directors, the Chief 

Executive Officer and four other non-executive directors. 

The most important criterion for selecting committee members 

is expertise and independence of mind. The committee 

meets at least once a year, before the Board of Directors’ 

meeting that prepares the resolutions to be submitted to the 

shareholders’ meeting, and during the year on a motivated 

request from one of its members. 

The members of this committee (as of December 31, 2006) 

were*: 

• André Levy-Lang, Chairman of the committee, independent 

director 


• Axel Miller, Chief Executive Officer 

• Francis Vermeiren, director 

• Rik Branson, director 

(*) Francis Mayer, who was a member of the committee, died on 



The Appointments Committee prepares the decisions of the 

Board of Directors relating to: 

• the appointment or renewal of directors’ terms proposed by 

the Board to the shareholders’ meeting, as well as proposal 

for the co-opting of directors to the Board of Directors; 

• the determination of the criteria for independence used to 

qualify a director as “independent”; 

• the qualification of an existing or new member of the Board 

of Directors as “independent”; 

• the appointment of the members and the chairperson of the 

specialized committees of the Board of Directors; 

• the appointment or renewal of the term of the Chief Executive 

Officer; 

• the appointment or renewal of the term of the Chairman of 

the Board of Directors; 

• the recommendations of the Chief Executive Officer concerning 

the membership, organization and operations of the 

Management Board of Dexia SA; 

• the changes to the internal rules of the Board of Directors. 

For these purposes, the Committee is responsible for monitoring 

procedures adopted by major listed companies in terms 

of membership and operations of Boards of Directors. The 

Committee nominates one of its members to ensure proper 

completion of the Board’s self-assessment. 


The Appointments Committee meets at least once a year, 

before the meeting of the Board of Directors that prepares the 

resolutions submitted to the shareholders’ meeting and during 

the year, following a request from one of the members. 

In 2006, the Appointments Committee met on January 30 

and on October 17 in a committee-format expanded to 

include the directors who are not members of the Appointments 

Committee. 

This committee primarily dealt with the following issues: 

• the membership of the Board of Directors; 

• the membership of the specialized committees; 

• the compliance with the Lippens Code; 

• the launch of the self-assessment process for the Board of 

Directors; 

• the criteria for independence; 

• the recommendations made by the Chief Executive Officer 

concerning the second stage of the reorganization of the 

Group’s governance initiated on January 1, 2006 (expanded 

committee meeting on October 17); 

• the concrete measures proposed to improve the operation 

of the Board of Directors at the end of the self-assessment 

process (expanded committee meeting of October 17). 


Appointments Committee meetings 

The individual attendance rate of directors at the meetings of 

this committee was 100% in 2006. 






THE MANAGEMENT BOARD OF DEXIA SA 

Following the second phase of the reorganization of the 

Group’s governance initiated on January 1, 2006, which was 

approved by the Board of Directors on November 16, 2006 

(see page 28), new appointments were made to the Management 

Board, effective January 1, 2007. In order to report on 

the changes in relation to the situation as of December 31, 

2006, the following table shows the situation as of December 

31, 2006 and January 1, 2007. 

Membership 

The Management Board is chaired by the Chief Executive 

Officer to whom the Board of Directors has entrusted the daily 

management of Dexia. The members of the Management 

Board, other than the Chief Executive Officer, are appointed 

and dismissed by the Board of Directors on the recommendation 

of the Chief Executive Officer and on the advice of the 

Management Board. Members are appointed for a term of 

four years, which may be renewed. 




MEMBERS AS OF DECEMBER 31, 2006 

Axel MILLER 

Chairman of the Management Board, 


Director and member of the Management Board of 

Dexia Bank Belgium 

Member of the Management Board of 



Dexia Banque Internationale à Luxembourg 

Vice Chairman of the Board of Directors of Financial 

Security Assurance Holdings Ltd (FSA) 

Jacques GUERBER 

Vice Chairman of the Management Board 




Dexia Crédit Local (Chairman until January 11, 2006) 



Director of Financial Security Assurance Holdings Ltd (FSA) 

Xavier de WALQUE 





Chairman of the Board of Directors of 

Dexia Insurance Services 

Vice Chairman of the Board of Directors of 

Associated Dexia Technology Services (DTS) 


MEMBERS AND NEW RESPONSIBILITIES 

AS OF JANUARY 1, 2007 

Axel MILLER 

Chairman of the Management Board, 


Jacques GUERBER 

Vice Chairman of the Management Board 

General Coordination, ALM Committee, Credit 

Committee and Sustainable Development 

Xavier de WALQUE 


Supervision of Dexia Insurance Services 

Rembert von LOWIS 

Strategy & Development 

Investor and Rating Agencies Relations 

Dirk BRUNEEL 

Supervision of DenizBank, RBC Dexia Investor Services 

and Dexia Bank Nederland 

Bruno DELETRÉ 


Hugo LASAT 

Personal Financial Services (Retail and Private Banking) 


Alain DELOUIS 


Rembert von LOWIS 







Dirk BRUNEEL 





Chairman of the Management Board of 

Dexia Bank Nederland 


Claude PIRET 

Risk Management 

Marc HUYBRECHTS 

Operations & IT 

44 | 



Responsibilities 

The Management Board is charged by the Board of Directors, 

which delegates powers for that purpose, with the management 

of the company and the Dexia Group, for which it 

directs and coordinates the various businesses and specialized 

activities that support those businesses within the framework 

of the objectives and general policy defined by the Board of 

Directors. 

Operation 

Since the creation of Dexia SA in 1999, the Management Board 

has operated according to a set of internal rules (hereinafter the 

“Regulations”). Amended on several occasions, these Regulations 

define its role and mode of operation. In 2006, as in previous 

years, the Management Board was run on the basis of the 

provisions of those Regulations. The collegial decision-making 

process, the Board’s powers and certain rules governing the 

status of members are also subject to specific provisions in the 

protocol on the prudential structure of the Dexia Group signed 

with the Belgian Banking, Finance and Insurance Commission. 

In addition to rules governing the membership of the Management 

Board (see above), the Regulations include the following 

rules. 

• Powers of the Management Board in its dealings with the 

Board of Directors 

The Regulations first define the powers of the Management 

Board in its dealings with the Board of Directors. The Management 

Board must formulate a preliminary opinion regarding 

any proposals debated by the Board of Directors or the 

Strategy Committee in terms of strategy or general policy of 

the Group. It may make recommendations to the Board of 

Directors through the Chief Executive Officer. 

If the Chief Executive Officer takes part in discussions by the 

Board of Directors or its specialized committees, for which the 

Management Board has an acknowledged right of opinion or 

initiative, the Chief Executive Officer presents to and defends 

with the Board of Directors the points of view previously 

debated by the Management Board. 

• Decision-making 

The Management Board operates in a collegial manner and its 

decisions result from a consensus of its members. It assumes 

joint responsibility for such decisions. If applicable, the Chairman 

of the Management Board may, on his own initiative or 

on request from two other members, submit the issue under 

debate to a vote. Resolutions are adopted by a majority vote 

of all members present or represented. In the event of a tie 

vote, the Chairman shall cast the deciding vote. 

• The Regulations also specify the basic principles for compensation 

of the members of the Management Board (see 

below). 

Compensation 

Management Board’s compensation 

Fixed and variable compensation 

The compensation of members of the Management Board 

is fixed by the Board of Directors of Dexia SA on proposal 

from the Compensation Committee. The compensation of 

the members of the Management Board is subject to periodic 

study carried out by the Compensation Committee with the 

support of a specialist external consultant. 

The compensation of members of the Management Board 

consists of a fixed and a variable quota. 

The fixed compensation is determined by considering the 

nature and the importance of the responsibilities of each 

member (taking account of market references for posts of 

comparable dimension). 

The variable compensation consists of three parts: 

• A first Group part, based on a formula linked to the results 

of Dexia SA, applicable in an identical manner to all persons 

concerned within the Dexia Group. The formula is based on 

four indicators (the underlying gross operating income, the 

underlying net income, the total net income and the relative 

PER (average PER of the DJ EuroStoxx Banks Index). For the 

first three indicators, Dexia performance is determined by reference 

to the budget target. 

• A second part specific to the Management Board, based on 

the achievement of joint objectives by its members. These 

objectives have been fixed by the Compensation Committee 

and revolve around four major lines: (1) the interaction with 

the Board of Directors, (2) the financial markets, (3) the commercial 

markets and (4) internally. More precise criteria have 

been established within each of these major lines which 

constitute the basis on which the Compensation Committee 

assesses the performance of the Management Board as 

a whole. These criteria have been established in relation to 

everything to be expected of a Management Board, considering 

the context in which the company evolves. 

• A third individual part, based on the achievement of personal 

objectives specific to each member of the Management 

Board. The fixing and assessment of achievement of these 

personal objectives is made by the Chief Executive Officer 

except in his own case when the assessment is made directly 

by the Compensation Committee. 

Each of these three parts gives rise to the application of a percentage 

from 0% to 100% (with a target rate of 50%). 




• Rules governing meetings 

The Management Board meets in principle at least once a 

week when convened by the Chairman. If necessary, meetings 

can be convened at any time by the Chairman or if two 

or more members so desire. Any member of the Management 

Board may be represented by another member of the Board, 

but a member may not represent more than one other member. 

Each member of the Board may propose an item for the 

agenda which is set by the chairman. 



The maximum amount of variable compensation is fixed for each member of the Management Board, which assumes that each 

criterion represents between 0 and a maximum percentage of the fixed compensation. These maximum amounts have been 

fixed as follows: 

(% of fixed compensation) Maximum amount Maximum Maximum Maximum 

for Group part amount for amount for total amount 

Management individual part 

Board part 



Chief Executive Officer 75% 75% 75% 225% 

Vice-Chairman 60% 60% 60% 180% 

Other members 50% 50% 50% 150% 

Any attendance allowance or percentage paid by a company 

in the Dexia Group to a member of the Management Board is 

deducted from the fixed or variable compensation of the latter. 

Pensions 

Members of the Management Board benefit from extralegal 

supplementary pensions put in place by Dexia. Various 

schemes are applicable to each of its members: 

• Jacques Guerber and Rembert von Lowis are entitled, under 

certain conditions, to an annual retirement pension when they 

retire, in an amount equivalent to 75% of their average gross 

fixed compensation over the two years prior to retirement. 

That amount is nonetheless reduced by amounts received by 

way of legal pension of private origin. 

• Axel Miller, Dirk Bruneel and Xavier de Walque are entitled, 

under certain conditions, to an annual retirement pension 

when they retire, in an amount equivalent to a certain percentage 

of a reference compensation (the percentage varies 

depending upon length of service in the Dexia Group). That 

amount is nonetheless reduced by amounts received by way 

of legal pension and, if necessary, other extra-legal pensions 

acquired within the Dexia Group. 

In the case of a career of 35 years in the Dexia Group, that 

percentage would be equal to 80% of an annual fixed gross 

reference compensation of EUR 665,233* for the Chairman 

of the Management Board and, unless there is an exception, 

of EUR 434,707* for other members of the Management 

Board. 

A supplementary survival pension is also provided for the 

beneficiaries of all members of the Management Board in the 

event of their death. 

* These amounts are indexed each year. 


COMPENSATION AND OTHER ADVANTAGES OF MEMBERS 

OF THE MANAGEMENT BOARD FOR THE YEAR 2006 

(in thousands of EUR) Gross fixed Gross variable Pension Cover for Other 

compensation (A) compensation plan (B) death, advantages (C) 

disability, 

medical 

2005 2006 2005 2006 treatment 

Axel Miller 550 725 587.08 989.63 175.76 

(D) 

26.2 (E) 

Jacques Guerber 550 625 538.15 671.25 202.18 

(D) 

/ 

Dirk Bruneel 560 560 572.33 439.60 148.64 

(D) 

5.8 (F) 

Xavier de Walque 420 500 328.50 525 112.65 

(D) 

6.3 (F) 

Rembert von Lowis 450 500 366.94 410 115.93 

(D) 

/ 

(A) For Jacques Guerber, Rembert von Lowis and Dirk Bruneel (for his period of activity in the Netherlands), “employer’s” social contributions have been paid, 

in addition to the amounts indicated in this section, by the Dexia Group. 

(B) Amount borne by Dexia in 2006 for supplementary pension plans. 

(C) An official car is provided to each member of the Management Board for professional and private use. Related costs are not included in the amounts 

indicated in this section. 

(D) Annual collective premiums of EUR 32,320 were paid in 2006 in favor of Belgian members of the Management Board for additional cover for death, 

permanent disability and the costs of medical treatment, and EUR 14,160 in favor of the French members of the Management Board for additional cover 

for death and disability. 

(E) Annual lump-sum indemnity for costs of representation and hire of a car for private use. 

(F) Annual lump-sum indemnity for costs of representation. 

46 | 



Stock option plan 

Since its unification, the Dexia Group has put stock option plans in place each year in favor of certain members of its staff. The 

options issued under the plan are subscription rights giving each person the right, within a limited exercise period, to acquire a 

new Dexia share at an exercise price equal to the value of the Dexia share at the time of attribution of the options. 

Members of the Management Board received Dexia options under the plan in 2006. 

2005 2006 

Number Exercise Number Exercise 

of options price (1) of options price (2) 

attributed 

attributed 

Axel Miller 90,000 EUR 18.03 120,000 EUR 18.62 

Jacques Guerber 90,000 EUR 18.03 90,000 EUR 18.62 

Dirk Bruneel 70,000 EUR 18.03 80,000 EUR 18.62 

Xavier de Walque 45,000 EUR 18.03 80,000 EUR 18.62 

Rembert von Lowis 75,000 EUR 18.03 80,000 EUR 18.62 

(1) The exercise price is equal to the average of 30 closing prices of the Dexia share on Euronext Brussels preceding June 30, 2005, without that price being 

lower than 95% of the average of the 20 opening prices of the Dexia share on Euronext Brussels preceding June 30, 2005. 

(2) The exercise price is equal to the average of 30 closing prices of the Dexia share on Euronext Brussels preceding June 30, 2006, without that price being 

lower than 95% of the average of the 20 opening prices of the Dexia share on Euronext Brussels preceding June 30, 2006. 

Employee share plan 

Since 2000, Dexia has put employee share plans in place each year. The share plan is offered to all the Group’s members of staff 

and enables them to subscribe to new Dexia shares at a discount of 20%, with a period during which they are locked-up for 

five years. 

Certain members of the Management Board participated in the 2006 employee share plan. 

Number of shares Subscription Amount 

subscribed price of discount 

under 

the 2006 plan 

Axel Miller - N/A N/A 

Jacques Guerber 1,174 EUR 17.03 (1) EUR 4.26 

Dirk Bruneel 11,176 EUR 17 (2) EUR 4.25 

Xavier de Walque 10,294 EUR 17 (2) EUR 4.25 

Rembert von Lowis - N/A N/A 

(1) The subscription price is equal to the average of the 20 opening prices of the Dexia share on Euronext Brussels preceding November 16, 2006, reduced 

by approximately 20%. 

(2) The subscription price is equal to the average of the 30 closing prices of the Dexia share on Euronext Brussels preceding November 17, 2006, reduced 

by approximately 20%. 




Conditions relating to departure 

Axel Miller, Jacques Guerber, Dirk Bruneel, Xavier de Walque 

and Rembert von Lowis are entitled, in the event that Dexia 

terminates their contract, to an indemnity equal to the fixed 

and variable compensation and other advantages corresponding 

to a period of 24 months, without prejudice to rules of 

Common Law which might if necessary be applicable. 

Principles of compensation of top executives 

Compensation is examined once per annum during the first 

quarter of the year. It is determined for top executives of the 

different subsidiaries or under-subsidiaries of the Group in relation 

to the general principles and orientations drawn up by the 

Group Compensation Committee. 

Fixed salaries are determined by taking account of local market 

references and relevant responsibilities. 

Variable compensation takes account both of Group performance 

criteria and also performance criteria specific to the activity 

of the top executive and his business line. 

Individual performances are taken into account through the 

annual assessment to which each top executive is subject. In fact, 

each top executive is assessed with regard to the achievement 

of objectives, particularly financial and commercial, assigned to 

them within the context of annual budget procedures. 

A comparative analysis is carried out annually with competitive 

practices observed in the different activities of the Group (financial 

markets, private banking, asset management, commercial 

banking and so on) in comparable groups. The compensation 

systems of the principal subsidiaries are subject to validation 

at Group level, in order to ensure their consistency with the 

general principles drawn up at a global level. 






DEXIA GROUP CONTROL 

INTERNAL CONTROL 

Internal audit 

Dexia has a homogenous internal audit function that meets 

the highest standards. The mission of this function is to promote 

internal control within the Group and to ensure continuous 

performance and effective application of the control 

system in force. 

This requirement is consistent with the Group’s desire to 

ensure that the protection of its reputation and the efficiency 

and integrity of its structures are priority values. 

In this context, the internal audit team evaluates whether the 

risks incurred by Dexia in its activities and in all its entities 

are identified, analyzed and adequately covered. The internal 

audit team must also ensure continuous improvement in the 

operations of the Group. 

Organization 

The internal audit organization is based on three fundamental 

principles: 

• the strategy, requirement level and operating rules for the 

internal audit are set by the Management Board in a framework 

approved by the Audit Committee of Dexia SA; 

• the internal audit mission is performed by a network of 

audit departments that perform their mission under the direction 

of the Group’s General Auditor, who reports directly to 

the Chief Executive Officer, and Chairman of the Management 

Board. The General Auditor has direct access to the 

Audit Committee, to which he regularly reports on the internal 

audit operations within the Group. At the same time, the 

Audit Committee and the Chairman of the Board of Directors 

may assign certain missions or request some information from 

the General Auditor; 

• each audit department in the subsidiaries is responsible for 

the performance of its mission towards the Chairman of the 

Management Board of the entity in question and also reports 

functionally to the Group General Auditor. 

In 2006, a reorganization of the internal audit team was 

decided in order to meet the needs of the new organization 

of the Dexia Group. Since January 1, 2006, the strategic direction 

of the businesses has been conducted transversally by 

business/support functions. 

In terms of organization, five segment managers were named 

(the deputy auditors of Dexia SA and of the Group’s three 

operating entities) in order to strengthen the global visions of 

risks by business/support function throughout the Group. Risk 

control for each entity continues to be provided by the Chief 

Auditors of the entities. 

A “planning, tools and reporting“ function was also identified 

within Dexia SA and the operating entities, and is now 

organized as a unit. 

Risk assessment, back testing and the development of the 

2007-2009 audit plan covered the entire scope of Dexia SA, 

the operating entities and their subsidiaries. This effort ensured 

the development of a single audit plan, with an increased 

number of synchronized and transversal missions throughout 

the entities concerned, which results in an improved transversal 

and global vision of the risks within the Dexia Group. 

2006 Missions 

As is the case every year, a portion of the audit plan of Dexia 

SA and the entities was conducted in the form of “horizontal 

mission“, i.e. missions conducted simultaneously at 

Dexia SA and in the Group’s principal entities: Dexia Crédit 

Local, Dexia Bank Belgium and Dexia Banque Internationale 

à Luxembourg. 

A major component of those missions was dedicated to various 

issues related to the Basel II project: the framework of all internal 

credit models for the default probability axis was audited, 

and transversal audits were also conducted on the credit risk 

information system constructed around the Fermat application; 

the implementation of the loss axis in the event of default (Loss 

given default-LGD) in the internal rating systems, and the use 

of credit risk mitigation (CRM) instruments. 

Other horizontal missions looked at the organization, risk 

management and control mechanisms that frame the activity 

lines of the principal businesses. Thus, the “Money Market 

and liquidity management“ line or Wealth Management were 

audited as part of the 2006 horizontal missions. 

The support functions (accounting, management control, IT, 

human resources) are also regularly audited within the context 

of the multi-year audit plan. Finally, Dexia’s audit department 

conducted “joint“ missions with the audit departments of certain 

subsidiaries, including Financial Security Assurance in the 

United States, RBC Dexia Investor Services, the joint venture 

formed in 2006 with Royal Bank of Canada, and Dexia Bank 

Nederland. 

The audits completed in 2006 gave rise to the establishment 

of various action plans to correct weaknesses detected in the 

internal control system. Each action plan was approved by the 

Management Board of the entity concerned and is monitored 

on a regular basis in order to ensure that the recommendations 

made are effectively implemented. 

Methods 

The global approach to the risk universe, the joint audit methodology, 

the conducting of “horizontal“ missions and “joint“ 

missions, and the procedures for reporting and tracking at the 

very top of the Group’s structure give Dexia an effective internal 

control system. 

Beginning in 2007, the objectives of the “planning, tools and 

reporting“ unit within the audit department are to strengthen 

the tools and methods used and to produce performance indicators 

in conducting its missions, and risk indicators. 

In addition, the audit tool intended to promote harmonization 

and improved quality in the work within the operating entities 

was deployed in 2006. 

48 | 



Ethics and compliance 

Since its creation at the beginning of 2003, the ethics and compliance 

function has been consolidated to form a true Compliance 

unit composed of all Compliance Officers within each 

entity, subsidiary or branch that performs an activity within the 

Dexia Group. The unit is directed by a coordination committee 

composed of the Compliance Officers for the three operating 

entities under the chairmanship of the Chief Compliance Officer 

of Dexia. 

The role of the committee is, first, to coordinate the regulatory 

watch mechanism, and to establish, disseminate and ensure 

compliance with Group policies and, second, to control, through 

information, awareness, training and audits, compliance risks, 

which are the risks resulting from failure to comply with the laws, 

regulations or standards of the profession. 

Principles 

Dexia’s integrity policy is based on the following principles: 

• the application of the same principles of ethics and conduct 

within all of Dexia’s entities; 

• compliance with both domestic and international laws and 

regulations; 

• the promotion of a climate of transparency and confidence 

with customers, employees and shareholders; 

• the definition of a policy to prevent fraud or any other misuse 

of assets, systems, information or procedures; 

• continued integrity, particularly in conducting transactions or 

providing information to the financial markets. 

In order to combat money laundering and the financing of terrorism, 

Dexia follows the highest international standards and 

is transposing those standards into its internal policies. More 

particularly, Dexia adheres to the recommendations published 

by FATF (the Financial Action Task Force on money laundering) 

and the Wolfsberg principles for private and correspondent 

banking, and fund administration. These principles are being 

reinforced by the implementation within the Group of common 

prevention, tracking and surveillance tools. 

Thus, in 2005, the Group continued to develop internal standards 

and to deploy the shared transaction analysis software to 

fight money laundering and the financing of terrorism. 

In the areas of market manipulations, conflicts of interest, 

investment services and other regulated areas, Dexia complies 

with and is progressively transposing the directives, 

laws and circulars as they are issued and become effective. 

Detailed rules govern personal transactions by employees and 

executives, which are carefully monitored, in order to prevent 

insider trading. 

Organization 

The Compliance unit is organized on the basis of the Compliance 

Charter, which defines the missions of the compliance 

unit as well as its powers and objectives. The code of ethics 

translates the general obligations of all Group employees into 

practical instructions. Special codes define the rules that apply 

more specifically to certain businesses, such as the financial 

markets, private banking, and asset management. 

The Compliance Officers meet regularly with regulators and 

supervisory authorities in the various countries in which Dexia 

operates in order to identify and apply best ethical practices. 

Since 2005, the compliance unit has extended the availability, 

for the entire team, of a single communication and data 

exchange application that offers functionalities for the identification 

of laws, regulations, policies and internal procedures, 

the distribution and follow-up for instructions, as well as consolidated 

reporting and periodic studies. 

Report from the Chairman of the Board of 

Directors on the conditions for the preparation 

and organization of the work of the Board of 

Directors and the internal control procedures 

established by the company 

The French Financial Security Act of August 1, 2003, which is 

intended to increase security for savers and insurance policyholders 

(particularly by improving the quality of the financial 

information), requires the Chairman of the Board to present 

a report on the conditions for preparing and organizing the 

work of the Board and the internal control procedures established 

by the company. 

This obligation is imposed on all issuers offering financial 

instruments to the public in France, regardless of their country 

of origin, and therefore applies to Dexia SA. In addition, given 

the Belgian-French profile of the Dexia Group, it complies with 

our practices of taking the French situation into consideration 

in the area of good governance. 

This report can be found on Dexia’s website at www.dexia.com. 









EXTERNAL CONTROL 

Board of Statutory Auditors 

In accordance with Article 14 of the company’s articles of 

association of Dexia SA, the audit of the company’s financial 

situation and annual financial statements is entrusted to one 

or more auditors who are appointed by the Ordinary Shareholders’ 

Meeting for a maximum of three years on the recommendation 

of the Board of Directors. 

Since 2000, a college of Statutory Auditors comprised of two 

audit firms has audited Dexia: 

• PricewaterhouseCoopers SCCRL, an audit firm, represented 

by Robert Peirce, a certified public accountant. This firm 

was re-appointed by the Ordinary Shareholders’ Meeting of 

May 11, 2005 for a period of 3 years ending after the Ordinary 

Shareholders’ Meeting in May 2008; 

• Mazars & Guérard SCCRL, an audit firm, represented by 

Xavier Doyen, a certified public accountant. The mandate 

of Mazars & Guérard was renewed by the Ordinary Shareholders’ 

Meeting of May 10, 2006, for a period of 3 years ending 

after the Ordinary Shareholders’ Meeting in May 2009. 

Independence of the auditors 

The 8th Directive 2006/43/EEC of the European Parliament 

and the Council of May 17, 2006 concerning legal audits of 

annual and consolidated financial statements entered into 

effect on June 29, 2006. This directive was transposed into 

Belgian law in the Law of July 20, 2006. 

In order to comply with the new legislative framework resulting 

from the transposition of this directive, Dexia has adapted 

its internal procedures to ensure the independence of the 

auditors. A new policy in this area was adopted by the Executive 

Committee of the Dexia Group on December 19, 2006, 

effective immediately. 

Compensation of the Board of Auditors 

This table gives a summary of the compensation paid to the 

members of the Dexia SA Board of Auditors for their services 

in 2006. 

PRICEWATERHOUSECOOPERS Services Services provided 

provided 

for the Dexia Group 

for Dexia 

(consolidated 

(in EUR) amounts) 

a) Account audit tasks 100,000 7,413,702 

b) Certification tasks 798 486,869 

c) Tax advice 46,363 675,750 

d) Due diligence 0 94,800 

e) Other (non-certification) tasks 268,497 801,300 

e-1) entrusted by the Law to Auditors 0 16,243 

e-2) not entrusted by Law to Auditors 268,497 785,057 

- Accounting advice (ex-IFRS) 0 84,003 

- Legal advice 0 0 

- Assistance: IFRS implementation 0 1,269 

- Assistance: Basel II implementation 0 0 

- Assistance: other tasks 235,535 644,970 

- Other (non-assistance) 32,962 54,815 

TOTAL 415,658 9,472,422 

50 | 



MAZARS & GUÉRARD Services Services provided 

provided 

for the Dexia Group 

for Dexia 

(consolidated 

(in EUR) amounts) 

a) Account audit tasks 100,000 2,826,295 

b) Certification tasks 56,070 175,026 

c) Tax advice 0 0 

d) Due diligence 0 0 

e) Other (non-certification) tasks 15,400 18,623 

e-1) entrusted by the Law to Auditors 0 0 

e-2) not entrusted by Law to Auditors 15,400 18,623 

- Accounting advice (ex-IFRS) 0 0 

- Legal advice 0 0 

- Assistance: IFRS implementation 0 0 

- Assistance: Basel II implementation 0 0 

- Assistance: other tasks 15,400 18,623 

- Other (non-assistance) 0 0 

TOTAL 171,470 3,019,944 


Protocol on the prudential structure of the Dexia 

Group 

In accordance with the provisions of European Directives on 

banking coordination, the prudential supervision of the Dexia 

Group is exercised on the consolidated basis of the Dexia SA 

financial company which is the parent company. That supervision 

is exercised by the Banking, Finance and Insurance Commission, 

in concert with the Banking commission and the Committee for 

Credit Establishments and Investment Companies (France) and 

the Financial Sector Supervisory Commission (Luxembourg). 

The Banking, Finance and Insurance Commission signed a 

protocol with Dexia SA in 2001 relating to the prudential 

structure of the Dexia Group. This protocol, which contains 

important agreements between the Banking, Finance and 

Insurance Commission and Dexia SA in terms of corporate 

governance, deals in particular with the status of company 

executives (honesty and professional experience, treatment of 

conflicts of interest, loans to executives), the quality of Dexia 

SA shareholders, the joint nature and authority of the Dexia 

SA Management Board, and control of the Dexia Group. A 

copy of the protocol may be obtained from the company’s 

corporate offices. The text of the protocol, which was slightly 

modified in 2003, is also available on the Dexia website 

(www.dexia.com). 




THE DEXIA SHARE 




EVOLUTION OF THE STOCK MARKET 

PRICE IN 2006 

The year 2006 marks a further rise of world stock markets, 

particularly in Europe. The upward and downward trends of 

the year were strongly correlated on the one hand to the price 

of oil, which exceeded USD 70 a barrel at one point in the 

year, with its negative impact on economic growth, and on 

the other hand to the monetary policies of the Fed and the 

ECB as well as the weakness of the US dollar, which lost 12% 

of its value against the euro in one year. During the year a 

large number of mergers and acquisitions in all sectors influenced 

the stock market prices and volumes. 

Against that background stock market indices climbed, with 

the EuroStoxx50 up 15.2%, the CAC 40 17.5%, the BEL20 

23.6% and the banking sector (EuroStoxx Banks) 22.5%. The 

latter benefited from excellent results posted by banks as a 

consequence of a favorable economy and the merger transactions 

taking place in the sector. 

The Dexia share began the year well and on May 11, 2006 

had hit a high of EUR 22.20, but some of that ground was lost 

at the end of May when the markets reversed. 

The announcement at the same time of the acquisition of 

DenizBank and the need of a capital increase to finance it also 

weighed on the share price which ceded a maximum 9.4% 

compared to the end of 2005. When the capital increase was 

announced in September, the share took off, rising 17.6% to 

the end of the year. 

The Dexia share closed the year 2006 at EUR 20.75 in Brussels 

and Paris, thus posting a rise of 6.5% in the whole year. 


STOCK EXCHANGE DATA 

Dec. 31, 2005 Dec. 31, 2006 

Share price (1) (in EUR) 19.49 20.75 

Stock market capitalization (in millions of EUR) 21,579 24,136 

(1) Average closing prices on Euronext Brussels and Euronext Paris. 

DEXIA’S STOCK MARKET PERFORMANCE 

Brussels 

Paris 

Share price as of Dec. 31, 2005 (in EUR) 19.48 19.49 

Share price as of Dec. 31, 2006 (in EUR) 20.75 20.75 

Highest price/Lowest price (in EUR) 22.04/17.66 22.04/17.64 

Average daily trading volume (in millions of EUR) 33.05 37.57 

Average daily trading volume (in thousands of shares) 1,456 1,866 

DEXIA’S POSITION IN THE PRINCIPAL EUROPEAN INDICES 

Weighting in index 

Position 

BEL20 10.01% 5 

CAC 40 1.97% 18 

Euronext 100 1.14% 26 

Next CAC 70 1.26% 26 

FTSE EuroTop 100 0.46% 96 

FTSE EuroFirst 80 0.84% 51 

Dow Jones EuroStoxx Banks 2.48% 13 

52 | 



DEXIA’S STOCK MARKET PERFORMANCE (FROM NOVEMBER 1996 TO THE END OF DECEMBER 2006) 

Average Dexia EuroStoxx Banks EuroStoxx 50 

24 EUR 

21 EUR 

18 EUR 

15 EUR 

12 EUR 

9 EUR 

6 EUR 

20/11/96 

20/03/97 

20/07/97 

20/11/97 

20/03/98 

20/07/98 

20/11/98 

20/03/99 

20/07/99 

20/11/99 

20/03/00 

20/07/00 

20/11/00 

20/03/01 

20/07/01 

20/11/01 

20/03/02 

20/07/02 

20/11/02 

20/03/03 

20/07/03 

20/11/03 

20/03/04 

20/07/04 

20/11/04 

20/03/05 

20/07/05 

20/11/05 

20/03/06 

20/07/06 

20/11/06 

29/12/06 


DEXIA’S STOCK MARKET PERFORMANCE IN PARIS AND TRADING VOLUMES 

(FROM NOVEMBER 1996 TO THE END OF DECEMBER 2006) 

25 EUR 

20 EUR 

15 EUR 

Monthly trading volume Dexia CAC 40 

90,000,000 

80,000,000 

70,000,000 

60,000,000 

50,000,000 


10 EUR 

5 EUR 

0 EUR 

20/11/96 

20/03/97 

20/07/97 

20/11/97 

20/03/98 

20/07/98 

20/11/98 

20/03/99 

20/07/99 

20/11/99 

20/03/00 

20/07/00 

20/11/00 

20/03/01 

20/07/01 

20/11/01 

20/03/02 

20/07/02 

20/11/02 

20/03/03 

20/07/03 

20/11/03 

20/03/04 

20/07/04 

20/11/04 

20/03/05 

20/07/05 

20/11/05 

20/03/06 

20/07/06 

20/11/06 

29/12/06 

40,000,000 

30,000,000 

20,000,000 

10,000,000 

0 


DEXIA’S STOCK MARKET PERFORMANCE IN BRUSSELS AND TRADING VOLUMES 

(FROM NOVEMBER 1996 TO THE END OF DECEMBER 2006) 

25 EUR 

Monthly trading volume 


BEL20 

50,000,000 

45,000,000 

20 EUR 

40,000,000 

35,000,000 

15 EUR 

30,000,000 

25,000,000 

10 EUR 

20,000,000 

15,000,000 

5 EUR 

10,000,000 

5,000,000 

0 EUR 

0 

20/11/96 

20/03/97 

20/07/97 

20/11/97 

20/03/98 

20/07/98 

20/11/98 

20/03/99 

20/07/99 

20/11/99 

20/03/00 

20/07/00 

20/11/00 

20/03/01 

20/07/01 

20/11/01 

20/03/02 

20/07/02 

20/11/02 

20/03/03 

20/07/03 

20/11/03 

20/03/04 

20/07/04 

20/11/04 

20/03/05 

20/07/05 

20/11/05 

20/03/06 

20/07/06 

20/11/06 

29/12/06 



MAIN SHAREHOLDERS OF DEXIA (1) 

Percentage of Dexia SA capital held 

Arcofin 17.5% 

Holding Communal 16.4% 

Caisse des dépôts et consignations 11.8% 

Group Ethias 6.4% 

CNP Assurances 2.0% 

(1) As of December 31, 2006. 




NUMBER OF SHARES 

Dec. 31, 2002 Dec. 31, 2003 Dec. 31, 2004 Dec. 31, 2005 Dec. 31, 2006 

Number of shares 1,181,685,852 1,175,222,680 1,145,261,366 1,107,469,030 1,163,184,325 

of which Treasury shares 20,082,005 32,546,412 40,050,935 20,550,020 490,607 

Number of options 31,809,349 43,301,416 50,684,800 55,903,030 58,697,872 

Total number of current/ 

potential future shares (1) 1,213,495,201 1,218,524,096 1,195,946,166 1,163,372,060 1,221,882,197 

(1) For more details, refer to “Legal Information” on www.dexia.com. 

DATA PER SHARE 

2002 2003 2004 2005 2006 

Earning per share – EPS (in EUR) 

- basic under Dexia GAAP (1) 1.13 1.24 1.58 - - 

- basic under EU GAAP (1) - - 1.63 1.87 2.49 

- diluted under EU GAAP (2) - - 1.62 1.85 2.45 

Average weighted number 

of shares (3) 

- basic 1,150 867,134 1,157,363,982 1,118,723,767 1,091,316,100 1,104,950,054 

- diluted - 1,124,050,279 1,103,413,861 1,120,893,987 

Net assets per share (in EUR) (4) 

- under Dexia GAAP (5) 8.79 9.25 9.95 - - 

- related to core shareholders’ equity (6) - - 8.87 (8) 9.86 11.60 

- related to total shareholders’ equity (7) - - 10.32 (8) 12.25 13.21 

Dividend (in EUR) 

Gross dividend 0.48 0.53 0.62 0.71 0.81 

Net dividend (9) 0.36 0.40 0.47 0.53 0.61 

Net dividend for shares with 

a VVPR strip (10) 0.41 0.45 0.53 0.60 0.69 

(11) 

(11) 

(11) 

(1) The ratio between the net income – Group share and the weighted average number of shares. 

(2) The ratio between the net income – Group share and the weighted average diluted number of shares. 

(3) Excluding shares held in treasury stocks. 

(4) The ratio between the shareholders’ equity (estimated dividend for the period deducted) and the number of shares (after deduction of treasury shares) 

at the end of the period. 

(5) Including GBRR – Group share. 

(6) Without AFS, CFH reserve and cumulative translation adjustments. 

(7) With AFS, CFH reserve and cumulative translation adjustments. 

(8) As of January 1, 2005. 

(9) After deduction of a 25% Belgian withholding tax. 

(10) After deduction of a 15% Belgian withholding tax (as the deduction is reduced to 15% for securities with a VVPR strip). 

(11) Proposed dividend; net dividends are rounded for the purpose of this publication. 

STOCK MARKET RATIOS 

2002 2003 2004 2005 2006 

Payout ratio (in %) (1) 

- under Dexia GAAP 43.0 42.1 38.7 - - 

- under EU GAAP - - 37.6 37.9 34.3 

Price-earnings ratio (3) 10.4x 11.0x 10.7x 10.4x 8.3x 

Price to book ratio (4) 1.3x 1.5x 1.7x 2.0x 1.8x 

Annual yield (in %) (5) 4.1 3.9 3.7 3.6 3.9 

(1) The ratio between the total dividend and the net income – Group share. 

(2) Based on proposed dividend. 

(3) The ratio between the average share price as of December 31 and the earnings per share for the year. 

(4) The ratio between the average share price as of December 31 and the net assets per share as of December 31 (related to core shareholders’ equity for 

2005 and 2006). 

(5) The ratio between the gross dividend per share and the average share price as of December 31. 

(2) 

54 | 



SHAREHOLDERS’ CALENDAR IN 2007 

Thursday March 8 Marseilles In partnership with FFCI (1) 

Wednesday March 14 Mons In partnership with INVESTA 

Wednesday April 4 

Brussels 

Meeting of the European Consultative Committee of Individual 

Shareholders 

Thursday April 5 Orléans In partnership with FFCI (1) 

Wednesday May 9 Brussels Shareholders’ meetings 

Thursday May 10 

Paris – Méridien Etoile 

Wednesday May 23 Lille In partnership with Le Revenu 

Thursday June 7 Strasbourg In partnership with FFCI (1) 

Thursday June 21 Nancy In partnership with FFCI (1) 

Meeting chaired by Axel Miller and Pierre Richard in partnership 

with Investir 


Thursday September 13 Toulouse In partnership with FFCI (1) 

Thursday September 27 Montpellier In partnership with La Vie Financière 

October 2007 

Paris 

Thursday October 4 Dijon In partnership with FFCI (1) 

Thursday October 18 Lyon In partnership with FFCI (1) 

Monday October 22 Nantes In partnership with FFCI (1) 

Friday November 16 – 

Saturday November 17 

Paris – 

Palais des Congrès 

Meeting of the European Consultative Committee of Individual 

Shareholders 

Actionaria Convention 

Monday November 19 Bordeaux In partnership with Investir 

(1) Fédération française des clubs d’investissement. 




HUMAN RESOURCES 


Dexia has clearly underlined the importance of the undertaking 

by offering to assign 10 secondees. Most of them as senior 

advisors and two of them as executive members of the Board 

of Directors of DenizBank. So Dexia has very rapidly started 

to explore DenizBank culture and local mentality. In addition 

to their bridging function, the secondees have a twofold mission: 

identifying new DenizBank business opportunities and 

ensuring that processes and policies are harmonized wherever 

it makes sense. 




The Human Resources vision of Dexia is reflected in eight strategic 

axes which aim to: 

• reinforce the strategy and structure of Dexia; 

• align the HR structure on Dexia’s strategy; 

• install and manage one common Dexia HR model for all 

entities and departments; 

• make Dexia an “Employer of Choice” in the Financial Services 

Industry in Europe; 

• develop and deploy talents in the Group in an optimal manner 

and in an international context; 

• develop a dynamic Dexia leadership model; 

• align the reward package to motivate and retain talents 

within the Group; 

• position the social dialogue. 

The Human Resources department provides Group managers 

with tools and processes enabling them to optimize their HR 

decisions and creates the fundamentals to leverage human 

talents in realizing business challenges. 

INTEGRATING NEW ENTITIES 

In 2006 DenizBank became part of Dexia. This Turkish bank 

started more or less from scratch 9 years ago under leadership 

of its chairman and a couple of employees and rapidly grew 

to employ 6,342 people by the end of 2006. Hiring more than 

1,000 employees per year, providing 4-5 training days per 

person, keeping the turnover below market level while dealing 

with a high inflation rate, in an increasingly competitive 

market environment has become an operational day-to-day 

reality for DenizBank managers as well as the 20 people in its 

HR department. In addition to the usual challenges DenizBank 

has to manage the challenge of finding the correct balance 

between continuing successful DenizBank HR practices on the 

one hand and leveraging new Dexia practices on the other 

hand. Following the principle that change is agreed and not 

imposed, a variety of projects in the sphere of Learning and 

Development, Talent Management and Compensation & Benefits 

have been jointly initiated. 

MEMBERS OF STAFF AT DEXIA 

• At the end of 2006, Dexia had 33,321 members of staff 

(including the joint venture RBC Dexia Investor Services and 

the self-employed networks of Dexia Bank Belgium and Dexia 

Insurance Belgium) against 24,418 in 2005, an increase in global 

workforce of 36.5%. 

• The year 2006 was marked by significant geographic expansion 

with the acquisition of DenizBank (6,342 members of 

staff as of December 31, 2006) and the setting up of the joint 

venture RBC Dexia Investor Services (4,411 members of staff 

as of December 31, 2006). In 2006, Dexia employed members 

of staff in 33 countries. 

• More than 62% of members of staff have joined the Group 

since less than ten years, which proves the strong development 

recorded since the creation of Dexia in 1996. 

• In 2006, the overall division of workforce between men 

and women was well balanced, at 51.7% and 48.3% 

respectively. 

• Group members of staff are young: in total, 42.9% are less 

than 35 and 58.8% less than 40 years of age. 

• The average age is 38.9 for men and 36.2 for women. The 

overall average age is 37.6. 

• The average length of service of Group members of staff 

is 10.7. 

• Turnover is 6.17% of workforce on indefinite-term 

contract. 

• 14.8% of Group members of staff work part time. 

• The average number of days of training per employee is 

1.94 per annum. 

B 

GENDER BREAKDOWN 

A 

A MEN 51.74% 

B WOMEN 48.26% 

56 | 



33,321 MEMBERS OF STAFF IN 33 COUNTRIES 

Belgium (1) (2) 15,270 

Turkey 6,290 

Luxembourg (2) 3,513 

France (2) 2,639 

Canada (2) 1,738 

> 59 

55-59 

50-54 

45-49 

40-44 

35-39 

30-34 

25-29 

20-24 

< 20 

20% 15% 10% 5% 0% 5% 10% 15% 20% 

AGE PYRAMID 

■ MEN 

■ WOMEN 

> 40 

36-40 

31-35 

26-30 

21-25 

16-20 

11-15 

6-10 

0-5 

40% 30% 20% 10% 0% 10% 20% 30% 40% 

Slovakia 812 

United States 518 

United Kingdom (2) 478 

Italy (2) 302 

Australia (2) 301 

Netherlands (2) 254 

Spain (2) 225 

Switzerland (2) 220 

Ireland (2) 200 

Singapore (2) 125 

Germany 84 

China (2) 61 

Russia 52 

Jersey 40 

Danemark 38 

Israel 38 

Japan 34 

Poland 26 

Sweden 18 

Mexico 10 

Czech Republic 8 

Other countries 27 

Total workforce 

as of December 31, 2006 33,321 




SENIORITY PYRAMID 

(1) Including the self-employed networks. 

(2) Including RBC Dexia Investor Services. 

■ 

■ 

MEN 

WOMEN 






RECRUITING 

Dexia’s growth ambitions and its international expansion 

require a coordinated recruitment approach anchored soundly 

at a local level. In 2006 Dexia recruited more than 1,200 new 

talents (excluding recruitment for the self-employed networks 

and more than 1,000 at DenizBank) through the recruitment 

portals of the local entities and via external search. 

DIVERSITY 

Diversity has been a very important subject for Dexia over 

the last couple of years. Several internal and external documents 

can illustrate this (internal documents: Principles of 

Social Management in 2002 and HR Quality Charter in 2005; 

external documents: diversity charters in France and Belgium 

co-signed by Dexia). 

Three diversity topics received special attention in 2006. 

First of all, the place of women in the Dexia Group was further 

developed as a topic. In 2004, a White Paper was written 

on the place of women and in 2005 an action plan was put 

in place to implement the recommendations of that White 

Paper. 2006 was the year in which this action plan reached full 

speed. Examples of actions were: 

• awareness of managerial staff: integration of a section dedicated 

to the issues involved in diversity in some of the management 

training programs at Group level; development of a 

new program for the Dexia Corporate University, i.e. “From 

individual to team coaching across diversity“; 

• ban on direct or indirect discrimination in internal/external 

recruitment: advertisements and processes will not be indirectly 

discriminating in their wording or their presentation; 

• a better balance of private and professional life: enabling 

access to professional mail or files from a distance if unexpected 

events occur. 

In mid-2006 a work group was formed on demand of the 

Management Board to assess the results of the White Paper 

and the associated action plan. The results show a certain positive, 

though dissimilar, evolution in the different Group entities. 

That is why it was decided to continue this work group as 

a “Sponsor Group” in charge of: 

• actively encouraging the implementation of the action 

plan; 

• animating a Dexia Women’s Network; 

• assuming the role of Mentor; 

• continuously monitoring progress. 

Secondly, the older employees of Dexia were also analyzed 

in detail. Dexia is facing a large number of retirements in the 

next ten years and should be prepared for this: human capital 

should be passed on to the younger colleagues and Dexia 

should guide employees with a clear career plan. 

Thirdly, Dexia analyzed the place of employees with a disability 

within Dexia and the national labor markets. Particular 

effort is made in this field by Dexia Crédit Local which has an 

action plan in place to increase the number of staff members 

with disabilities. 

All diversity commitments have to be integrated into daily HR 

and managerial practices by HR staff training, by HR team 

deployment, and a clear awareness of the importance of 

diversity in Dexia’s new leadership principles. 

MANAGING TALENTS 

Yearly employee talent reviews are an important aspect of 

HR strategy in all entities. For the future management of 

the Group, monitored career management is necessary at a 

Group level: 

• to obtain a clear overview at Group level of all talents in all 

entities/regions at executive level and above; 

• to detect high potentials for future management positions 

and to develop proactive succession planning; 

• to develop a common methodology in detecting and developing 

potentials for their future career progression, based on, 

and aligned with the Dexia Leadership Competence Model. 

A uniform Assessment Center methodology will be deployed 

as from 2007 throughout the Group for the positions at executive 

level. Internal and external candidates, applying for an 

open position, will be evaluated in an assessment center on a 

set of criteria, based on the Leadership Competence Model. In 

all entities/regions, candidates will be evaluated on the same 

criteria, with the same methodology. 

In the context of people development and career planning, 

Dexia wants to develop an identified pool of talented executives 

who could act as successors to senior executive positions. 

Executives who have been identified as confirmed high 

potentials at entity level participate in a Development Center 

at Group level. The outcome of a development center is a 

personal development plan that prepares the high potential 

executive for a role as senior executive. 

DEXIA CORPORATE UNIVERSITY 

Since its creation in January 2005, the University has hosted 

more than 2,000 participants and has been offering highquality 

learning and development opportunities. 

Strongly supported by senior Group management, and as 

an important part of the cross-entity service provided by the 

Human Resources Department, the University facilitates the 

implementation of Dexia’s strategy and development. In this 

context, the University is conducting the leadership process 

initiated in 2005 and is actively involved in the implementation 

of the new Group culture and values. 

Through their learning programs, the six Learning Faculties 

of the University are contributing to the development of the 

Group’s identity and facilitating the creation of an international 

management community at Group level, sharing and 

“speaking” a common language. 

58 | 



The Dexia Corporate University has increased and enhanced 

its program in 2006 in order to help the Dexia managers to 

evolve, promote the exchange of knowledge and professional 

experiences and facilitate bottom-up strategic reflection 

through training courses and seminars demanding the 

full involvement of participants. 

As an example, the “Sales & Business Development” faculty 

successfully launched the first edition of “Marco Polo”. The 

program was spread over a period of 18 months including 

an international assignment of 6 months; “Discovering Dexia 

America” was organized in New York (second edition outside 

Europe). 

All the training courses of the “Management & Leadership“ 

faculty were adapted to the new Dexia Leadership Model and 

two new programs were created: “Change and Team“ and 

“First Management Skills“. 

The “Finance & Risk Management“ faculty enlarged its training 

portfolio with programs like “Finance for Non-Financial 

Managers“, “General Risk Management“, “Economic Capital“, 

“Credit Management Strategies“ and “Basel II“. 

Two new training courses on IFRS have been added to the 

program of the “Tax & Legal“ faculty. 

Furthermore, in 2006 the Dexia Corporate University launched 

its e-learning platform, thus opening its doors to all members 

of staff of the Group (except, for the moment, those 

in DenizBank and FSA). Currently the e-learning program 

not only includes IT but also financial markets courses. Language 

courses will come online in 2007. All Dexia members 

of staff can follow training packages online in their office or 

at home. 

A total of 81 training sessions have been organized 

(49 in 2005). 

HIGHLIGHT ONE NEW AND SUCCESSFUL 

PROGRAM: “FIRST MANAGEMENT SKILLS” 

“First Management Skills”, the course for new team leaders 

developed this year, is the first Dexia Corporate University 

labeled program: it is a course elaborated at Group level and 

given at a local level in the language of the country concerned. 

A working party consisting of HR representatives of the main 

entities has developed the contents of this course. 

The program’s aim is to prepare new team leaders for the 

assumption of their tasks by assimilating Group strategy and 

the leadership model. 17 further sessions are planned in 2007 

in Paris, Brussels and Luxembourg. 

FAVORING MOBILITY 

Mobility – internal and international mobility – has become 

part of the Dexia culture. 

The HR Quality Charter lays down the commitments of Dexia 

in the field of internal mobility. 

The Passport for Dexia provides a set of common rules and 

principles applicable to international mobility and contributes 

to the integration of employees and to the development of a 

feeling of belonging to the Group. In order to be as close as 

possible to the international evolution of the Group and to 

integrate the great diversity of international mobility, seven 

important categories of mobility have been identified. 

In 2006, 1,006 members of staff moved to another company 

within the Group. 245 of them experienced an individual 

internal mobility, while the remaining 761 members of staff 

were involved in a collective transfer of staff (into RBC Dexia 

Investor Services Luxembourg, RBC Dexia Investor Services 

Switzerland and Dexia SA). 

INTEGRATED PERFORMANCE 

MANAGEMENT 

Performance Management starts with the definition of objectives 

and priorities. In 2006, each member of the Executive Committee, 

as well as directly reporting to the CEO, has a clear management 

contract, including the objectives and priorities for 2007. 

By 2007, the aim is to extend the management contract to 

the entire strategic management team. Ultimately, this performance 

management approach will be cascaded throughout 

the organization in the next few years. 

NEW LEADERSHIP CULTURE 

Moving from an entity-driven organization to a more crossentity 

organization and becoming a “true European banking 

group“ means going further in putting in place an international 

organization with a new operating mode, decisionmaking 

processes and budget management. This has an 

impact on the required leadership skills. The Dexia leaders of 

tomorrow must be able to operate effectively in this new and 

challenging environment and to demonstrate the necessary 

leadership and communication skills. 






INITIATING AND CASCADING 

THE LEADERSHIP CULTURE 

EMPLOYEE SHAREHOLDING PLAN: 

A VERSATILE UNIFYING TOOL 




In 2005, leadership development was placed high on the 

management agenda. A leadership vision was drafted and 

the divergence from current reality assessed. 

In 2006, Dexia started to close the gap between vision and 

reality by developing a leadership model and implementing it 

through a “360° feedback“ process at top management level. 

Additionally, Dexia has initiated work around the values and 

the mission of the Group. 

LEADERSHIP MODEL AND COMPETENCES 

A leadership model determines which competences are expected 

from leaders by describing those competences through specific 

forms of behavior. The leadership model is the anchor point for 

all management development initiatives and Human Resource 

tools such as the “performance management“ process, the 

“talent review“, the “360° feedback“ (see below), the “assessment 

& development centers“ and training programs. 

Five principal axes of corporate culture have been defined: 

client, vision, team management, innovation and cross-entity 

approach. 

360° FEEDBACK PROCESS 

The first step in the implementation of a leadership culture 

consists in setting an example and applying a 360° feedback 

assessment at Management Board and Executive Committee 

level. The 360° feedback is aimed at providing an employee 

with the opportunity to receive feedback on his/her leadership 

behavior within the organization. 

GROUP CULTURE 

Dexia triggered a four-phase plan in order to create a real 

Group culture. 

The first level is top management. Indeed, it is essential that 

the 360° feedback be applied to all members of the Management 

Board and the Executive Committee. 

The second level relates to all the real initiatives which illustrate 

the change of direction such as for instance the setting 

up of cross-entity competence centers. 

The third level involves the development of the competences 

necessary for the implementation of this new culture, within 

the entire management population. This stage includes 

putting the appropriate training programs in place. 

To conclude, at a fourth and final level, the objective is to 

suit these changes to the long term whether in recruitment, 

assessment or differentiated compensation. 

At the same time, in order to consolidate the unique and integrated 

identity of the Group, considerable work was done on 

giving a precise and assertive definition of the Group’s mission 

and values, these elements being the visible bond of the 

Group culture. 

Since its creation, the percentage of capital held by members 

of staff of Dexia has been one of the major unifying elements 

throughout the Group. In fact, in 2000 when the first shareholding 

plan was launched, the target set by the chairman of 

the Board of Directors was that within five years 5% of the 

capital should be held by members of staff. 

That target was achieved in June 2005 with the proportion of 

capital held by members of staff evolving between 4% and 

5% depending upon previous plans reaching maturity. 

With these results, Dexia is positioned in the Top 30 of the 

“European Employee Shareholding“. 

UNWINDING THE 2001 PLAN 

In 2006 Dexia members of staff were able to unwind the 2001 

shareholding plan. The plan had several innovative features: 

• that year, for the first time, a classic offer and a leveraged 

offer were put to all members of staff in every country in 

which the Group had a presence; 

• subscriptions to the different offers were for almost 

EUR 170 million; 

• 6 members of staff out of 10 took advantage of the plan. 

When exit transactions were completed for the 2001 plan, 

Dexia members of staff could see how attractive those plans 

had been. Indeed the classic offer posted a return of more 

than 70%, out-performing the classic BEL20, CAC 40 and 

EuroStoxx 50 indices. Similarly, the leveraged offer gave a 

return of more than 160% to those members of staff who 

had chosen it. 

NEW 2006 PLAN 

As in previous years, there are two offers: classic and leveraged. 

The latter takes three forms in 2006: the standard option, the 

averaged option and the click option. The shares subscribed 

under each of these offers are locked up for five years. 

The classic offer 

In the classic offer, the member of staff finances all of the 

Dexia shares he or she wishes to acquire, with a maximum 

discount of 20%. 

The leveraged offer 

In the leveraged offer, by virtue of a specific financial mechanism, 

a member of staff who acquires a share (discounted by 

20%) becomes the holder of 10 Dexia shares. At the end of the 

five years, if the stock market price has increased, the member 

of staff receives shares or cash to the amount of his or her 

initial investment increased by a percentage of that increase 

calculated on 10 shares. If on maturity the share price is lower 

than the reference price (before the discount is applied), the 

60 | 



amount of the member of staff’s initial investment is guaranteed. 

The innovation in 2006 was the introduction of a click 

option enabling any gain which might be observed from one 

year to the next to be frozen at points of time predetermined 

in the plan. In that way Dexia is able to offer its members of 

staff different investment profiles corresponding to the diversity 

of all their financial approaches. 

EVOLUTION OF EMPLOYEE SHAREHOLDING 

At the end of these two major operations, considering the 

fact that a capital increase took place during the year for the 

financing of the acquisition of DenizBank, Dexia members of 

staff held more than 49.6 million shares, or 4.27% of the 

capital as of December 31, 2006. 

FOSTERING THE SOCIAL DIALOGUE 


The European Works Council (EWC) of Dexia has 28 permanent 

and 26 substitute staff representatives from 10 entities 

of Dexia with more than 150 staff members. 

2006 was a very busy year for the European Works Council: 

• with three plenary meetings; 

• with three extraordinary meetings: one on the acquisition of 

DenizBank, one on the new organization and one on the new 

strategy of the Group; 

• with several preparatory meetings between the staff members 

preparing the plenary and extraordinary meetings; 

• with nine Board meetings together with the HR management 

of the Group. The EWC Board consists of seven members 

of the EWC who take day-to-day responsibility for the 

EWC between plenary meetings; 

• with a broadening of the social scope by the visit of the 

EWC Board to Dexia banka Slovensko. 

Social dialogue was intensive not only at Group level. A 

number of entities concluded collective agreements between 

the management and the staff representatives in 2006. No 

fewer than 42 different collective agreements were concluded 

throughout 12 entities with a staff representative structure 

in place. These agreements dealt mainly with compensation, 

statutes, shareholding, union rights and working time. 

Dexia also chose to transfer the IT infrastructures of Dexia 

Bank Belgium and Dexia Banque Internationale à Luxembourg 

to a new company called Associated Dexia Technology Services. 

The transfer of the staff members of both entities was 

negotiated together with the staff representatives. 




SUSTAINABLE DEVELOPMENT 

SUSTAINABLE 

DEVELOPMENT 

Our commitments and our achievements 

• Our shareholders: performance and responsibility 

• Our clients: innovation and quality relations 

• Our members of staff: personal support and development 

• Society: citizen commitment and transparency 


Appendices 

• 2007 Calendar of Dexia Group sustainable development 

actions 

• Reporting indicators 

• Application of the Global Reporting Initiative and the New 

Economic Regulations (France) 

• Application of the principles of the Global Compact and the 

Unep-Fi 

• Questions frequently asked by society 

• External audit opinion 

• Glossary 

• Continuing dialogue 

• Legal information and contacts 



THE DEXIA SUSTAINABLE 

DEVELOPMENT REPORT 2006 

A new format for the report 

Within the context of its “corporate environmental responsibility” 

action plan, the Dexia Group has undertaken to reduce 

the global consumption of paper per Group member of staff 

by 2010 compared to their consumption in 2006. 

For its 2006 report, Dexia has chosen to limit paper copies and 

to favor an on-line version on its website www.dexia.com. The 

2006 Dexia sustainable development report is also available 

on CD-ROM. 

Main subjects dealt with in the Sustainable 

Development Report 2006 

Dexia: one group, one strategy, one culture 

• Our vision 

• Our missions and our values 

• Our commitments 

Sustainable development: a process integrated into the 

Group’s strategy 

• The integration of sustainable development into the Group’s 

organization 

• Our actions in 2006 

• The Sustainable Development Report 2006 

The fight against climate change at the heart of 

the Dexia Group sustainable development strategy 

To ensure that its direct environmental impacts are managed 

responsibly, the Dexia Group has set the fight against climate 

change at the heart of its sustainable development strategy. 

An original strategy of carbon neutrality 

In 2007 the Dexia Group will follow a carbon neutral 

policy combining the reduction and offsetting of its CO 2 

emissions. 

• The Group strategy is aimed at neutralizing the majority 

of its 2006 emissions associated with energy consumption 

and professional journeys undertaken by members of 

staff, or approximately 35,000 tons of CO 2 

. 

• This revolves around two projects linked to Dexia activity 

in the two countries in which it is historically established, 

namely France and Belgium. 

– Reduction of CO 2 

emissions: investment in a renewable 

energy project and the acquisition of green electricity. 

– Offsetting the non-reducible emissions quota. 

To learn more about the Group’s offsetting policy and the 

projects retained: www.dexia.com. 

62 | 


RISK MANAGEMENT 


MAJOR PROJECTS IN 2006 

The main achievement of the year 2006 was the continuation 

of the effort allowing to implement the required methodologies 

and procedure in relation to the advanced approach of 

Basel II, leading the Group at the end of 2006 to present the 

regulators with a complete application file for the advanced 

approach. After validation by the regulators, this should allow 

Dexia to implement the full internal rating-based approach 

(IRBA) approach from January 1, 2008. 

CREDIT RISKS 

ORGANIZATION 

Risk Management Group (RMG) oversees Dexia’s risk policy 

under the guidance of Dexia’s Management Board or 

specialized risk committees. It sets Group guidelines on 

limits and delegations, sets and manages the risk surveillance 

function and decision processes and implements 

Group-wide risk assessment methods for each of Dexia’s 

activities and operating entities (Dexia Crédit Local, Dexia 

Bank Belgium, Dexia Banque Internationale à Luxembourg, 

DenizBank). 

The organization of all risk committees has been completely 

reviewed in 2006, in particular to reflect the new Group governance 

and to adjust to Basel II requirements. Several specialized 

committees dealing with risk management exist at Group 

level. The two main ones are: 

• the Risk Policy Committee which defines the Group’s risk 

profile and risk guidelines; 

• the Management Credit Committee which rules on questions 

that are beyond the scope of the delegations granted to 

business lines or entities. 

In general, all limits are set directly by the Management 

Board, but delegations are also given to specific committees 

to oversee the risks of specialized portfolios (i.e. Credit Spread 

Portfolio...). 

DEXIA’S CONSOLIDATED EXPOSURE 

AS OF DECEMBER 31, 2006 

The credit exposure evaluation rules are in point 4.2. of the 

note 1 “Accounting principles and rules of the consolidated 

financial statements“ on page 134. 

Exposure by category of counterpart 

The Group’s total exposure increased to EUR 794.3 billion as 

of December 31, 2006, against EUR 742 billion one year earlier 

(increase of 7.0%). 

The mix of counterpart in Dexia’s portfolio is very stable. Half 

of the exposure is on the local public sector (EUR 396.4 billion, 

up 5.6% compared to year-end 2005). 

G 

F 

E 

D 

C 

H 

I 

A 

BREAKDOWN OF DEXIA 

EXPOSURE BY CATEGORY 

OF COUNTERPART 

(AS OF DECEMBER 31, 2006) 

CONSOLIDATED EXPOSURE: 

EUR 794.3 BILLION 

B 




A CENTRAL GOVERNMENTS 7.1% 

B LOCAL PUBLIC SECTOR 49.9% 

C CORPORATE 4.6% 

D MONOLINE 2.2% 

E ABS/MBS 16.2% 

F PROJECT FINANCE 2.5% 

G INDIVIDUALS, PROFESSIONALS, 

SELF-EMPLOYED, SMEs 4.6% 

H FINANCIAL INSTITUTIONS 12.4% 

I OTHER 0.5% 





Exposure by geographical region 

As of December 31, 2006, the Group’s exposure was concentrated 

in the European Union (53.7%, EUR 426.9 billion 

at year-end 2006 against EUR 384 billion one year earlier), 

particularly in France (12.4%) and in Belgium (11.9%). The 

Group’s exposures in the United States and Canada represented 

40.0% of total exposure, slightly lower than as of 

December 31, 2005. 

FSA RISK MANAGEMENT 

Financial Security Assurance (FSA) restricts its business to 

market sectors characterized not only by low probability of 

default but also by low loss severity and high recovery rates in 

the unlikely event of a claim on its guarantee. All transactions 

must be at least investment-grade quality before FSA insures 

them; they must meet FSA’s legal and structuring requirements 

and fit within single and aggregate risk limits. 

Before insuring a municipal revenue bond, FSA typically 

requires a pledge of tax revenues or a claim on a dedicated 

revenue stream from essential public services. In the assetbacked 

market, FSA guarantees senior tranches structured 

to withstand substantial deterioration in the underlying asset 

performance, before FSA would be called upon to pay a 

claim. Most of its asset-backed securities (ABS) transactions 

are structured to have collateral protection that increases 

over time, and to have self-correcting mechanisms that are 

triggered to restore protection if collateral performance falls 

below established minimums. For example, cash flows may be 

shifted from subordinate to senior insured tranches or accumulated 

in a reserve fund. Where circumstances warrant, FSA 

transfers servicing or replaces collateral management. 

Thorough due diligence is the hallmark of FSA’s underwriting 

process. FSA routinely conducts site visits and file reviews to 

verify issuer information. Internal legal staff review documents 

and, in many cases, solicit opinions from outside counsel to 

ensure that structures perform as intended. Once a transaction 

is guaranteed, FSA monitors the issue throughout its life, 

so that potential problems can be spotted and action taken 

before they become serious. 

Reinsurance also plays a key role in the overall risk management 

program. Just as banks syndicate loans in order to 

address single-risk concerns, FSA reinsures transactions with 

a group of AA and AAA reinsurance companies. 

Through its disciplined underwriting approach, FSA has assembled 

an extremely conservative insured portfolio, as evidenced 

by the underlying credit quality of its insured portfolio: 87% 

of net par insured is of A quality or higher, and 55% is AA or 

higher (see charts). 

THE BASEL II PROJECT 

2006 was a year of stabilization for Basel II organization, a year 

of transition from project status to implementation and day-today 

operation. At year-end, most of our internal models were 

developed, documented, internally validated and implemented. 

Dexia officially applied in December 2006 to use the advanced 


H 

LM 

JK 

I 

G 

F 

A 

B 

C 

D 

E 

K LM N A B 

C 

J 

I 

H 

G 

D 

F 

E 

Public Finance (67%) 

Asset-backed (33%) 

BREAKDOWN OF DEXIA 

EXPOSURE BY GEOGRAPHICAL 

REGION (AS OF DECEMBER 31, 2006) 

CONSOLIDATED EXPOSURE: 


A FRANCE 12.4% 

B BELGIUM 11.9% 

C GERMANY 5.3% 

D ITALY 7.5% 

E LUXEMBOURG 1.3% 

F OTHER EU COUNTRIES 15.4% 

G REST OF EUROPE 1.1% 

H UNITED STATES AND CANADA 40.0% 

I JAPAN 1.1% 

J SOUTH EAST ASIA 0.3% 

K SOUTH AND CENTRAL AMERICA 0.1% 

L TURKEY 1.1% 

M OTHER 2.5% 

FSA INSURED PORTFOLIO 


TOTAL NET PAR OUTSTANDING: 

USD 376.5 BILLION 

A COLLATERIZED 

BOND OBLIGATIONS (CBOs) 2% 

B COLLATERIZED 

LOAN OBLIGATIONS (CLOs) 6% 

C POOLED CORPORATE CREDIT 

DEFAULT SWAPS (CDS) 9% 

D CONSUMER RECEIVABLES 3% 

E RESIDENTIAL 6% 

F OTHER ASSET-BACKED 7% 

G GENERAL OBLIGATIONS OF CITIES, 

STATES AND SCHOOL DISTRICTS 28% 

H TAX-SUPPORTED NON-GENERAL 

OBLIGATIONS 12% 

I HOUSING 2% 

J UTILITY 10% 

K HEALTH CARE 3% 

L TRANSPORTATION 4% 

M EDUCATION/UNIVERSITY 1% 

N OTHER MUNICIPAL 6% 

64 | 



IRBA approach for regulatory capital calculation from January 

1, 2008. As part of our application file, an impact study has 

been carried out, estimating the capital requirement with the 

new methods at different levels of consolidation. This study has 

been carried out using our final IT method and infrastructure, 

proving that Dexia’s Basel II organization is up and running for 

future regulatory calculations. The result of this study confirmed 

the magnitude of regulatory capital saving estimated in previous 

quantitative impact studies. 

2007 will see intense relations with the different regulatory 

authorities as our application is examined. Two official exercises 

will be performed for the purpose, consisting of calculating 

capital requirements under Basel I and Basel II regulations 

(double runs). Additional projects linked to Basel II will also 

be commissioned, such as the new integrated tool for limit 

monitoring or the common reporting platform. 

MARKET RISKS 

Market risk comprises the Group’s exposure to adverse movements 

in market prices (general and specific interest rates, 

exchange rates, share prices, spreads) stemming from its 

Treasury and Financial Market activities. As a general rule, the 

market risks generated by the other businesses are hedged. 

The market exposure evaluation rules are explained in point 4.1. 

of note 1 “Accounting principles and rules of the consolidated 

financial statements” on page 133. 

Dexia’s exposure to market risk arises mainly from European 

interest rates. Its market risk exposure generated by equity, 

foreign exchange and spread (trading only) positions remains 

much lower. 

Dexia Group has adopted the Value at Risk (VaR) measurement 

methodology as one of the leading risk indicators. 

The VaR calculated by Dexia is a measure of the potential 

loss that can be experienced with a 99% confidence level 

and for a holding period of 10 days. Dexia has developed 

and employs multiple VaR-approaches which are based on 

their ability to accurately measure the market risk inherent 

in the different portfolios. General interest rate & forex risks 

are measured through a parametric VaR-approach. Specific 

interest rate risk in trading books and equity risk are 

moreover measured by means of an historical VaR approach. 

Nonlinear and particular risks are measured through specific 

and historical VaR methodologies, with a view to a better 

apprehension and measurement of the sensitivity of those 

positions to market volatilities. 

As a complement to VaR risk measures, market risk exposure 

is captured by nominal volume limits, limits on basis point 

interest rate sensitivity and spread sensitivity and limits on 

option sensitivities (delta, gamma, vega, thêta, rhô). 

Dexia Group uses its internal VaR model for the capital requirement 

calculus on general interest rate risk and foreign exchange 

risk exposure within the Dexia Bank Belgium and Dexia Banque 

Internationale à Luxembourg trading scope. 



C 

D 

E 

A 

B 

C 

D 

E A 

B 

C 

B 

D 

E 

A 


OVERALL (PUBLIC FINANCE + 

ASSET-BACKED SECURITIES) (FSA) 



A AAA 23% 

B AA 32% 

C A 32% 

D BBB 12% 

E NON-INVESTMENT GRADE < 1% 

PUBLIC FINANCE (FSA) 



A AAA 2% 

B AA 39% 

C A 46% 

D BBB 12% 


ASSET-BACKED SECURITIES (FSA) 



A AAA 66% 

B AA 18% 

C A 3% 

D BBB 13% 







ORGANIZATION OF THE CONTROL 

Dexia’s Management Board, advised by Risk Management 

Group (RMG), retains ultimate responsibility to set the strategic 

direction of Market Risk Management (overall risk 

appetite, methodological choices, organization of reporting 

and of the decision processes). 

It is the task of RMG, in collaboration with the Risk Management 

teams of the different entities, to translate these 

decisions into precise and written policies, guidelines and procedures 

and to oversee their effective application. RMG is also 

in charge of defining the calculation methods that are to be 

applied at Group level as to P/L and risk measurement. 

Day-to-day responsibility for ensuring sound and robust market 

risk management and follow-up lies within the entities 

(computation of the risk indicators, control of the limits...). 

Each entity is responsible for the follow-up of its market activities 

(subsidiaries included), for their monitoring and reporting 

to local authorities. The entire process is coordinated at Group 

level to ensure the coherence and the quality of risk control 

within the entire Group. 

As a next step, risk indicators are consolidated at the level of 

each activity line by the Risk Competence Center. Since the 

beginning of 2006, market risk management has been organized 

by specialized Competence Centers (CC). The CC are transversally 

responsible for the analysis, follow-up and reporting of 

risks and results of their activity line on a Group-wide basis. In a 

final stage, Risk Management Group consolidates the risk and 

P/L-data per activity line into Group-wide figures. 

The Market Risk and Guidelines Committee, which is composed 

of the members of the Management Board of the Group 

in charge of “Treasury and Financial Markets” and “Risk Management”, 

the Activity Line Heads and Group and Local Heads 

of Market Risk Management and ALM meets at least monthly 

and deals with all the topics related to market risk. 

Moreover, the Management Board of the Group is informed 

by RMG of any change in the risk profile at least every three 

months or more frequently if necessary. 

RISK EXPOSURE 

The Treasury & Financial Markets activities of Dexia are mainly 

oriented as a support function for the Group. The detailed 

VaR usage of Dexia Group is in the table below. The risk consumption 

of the financial activities of Dexia is EUR 29.8 million 

VaR on average in 2006 (not including DenizBank). 

ASSET AND LIABILITY 

MANAGEMENT (ALM) 

Structural interest rate, forex, equity and liquidity risks are 

managed and supervised by the Group’s Asset and Liability 

Management function (or ALM). 

The ALM interest rate risk management is split into two 

categories: 

• short-term ALM (up to 2 years and longer on some delegated 

currencies), which is delegated and captured by the 

market risk management driven approach (VaR limits, sensitivity 

limits, triggers, stop loss, daily follow-up...); 

• long-term ALM, which is not delegated and subject to a 

dedicated follow-up by the ALCO Group (ALM Committee), 

which meets on a monthly basis. 

Measurement of balance-sheet risks is harmonized among the 

Group’s various entities. 

Regarding the interest rate risk management of Dexia balance 

sheet, a calculation of the sensitivity of the net present value 

of the ALM positions is used as the main ALM indicator. The 

risk exposure is primarily on long-term interest rates in Europe 

and results from the structural difference between the amortization 

profiles of the fixed-rate assets and liabilities. 

The Basis Point Value (BPV) measures the change in the balance 

sheet net economic value if interest rates rise by 1% 

across the entire curve. The BPV of the Dexia Group (insurance 

companies and pension funds excluded) amounts to 

EUR -494 million as of December 31, 2006. 

Regarding the equity investment portfolio of Dexia, it is also 

the role of Dexia ALM to follow it up. This portfolio contains 

available-for-sale equities managed by the ALM committees 

with the VaR model. 

The Equity Value at Risk (VaR) measures the potential change in 

market value, whereas the Equity Earnings at Risk (EaR) measures 

the impact in the P/L statement if the VaR materializes. 

The Equity VaR calculated by Dexia is a measure of the potential 

loss that can be experienced with a level of confidence of 

99% and for a holding period of 10 days. 

The Equity EaR is much lower than calculated Equity VaR exposures 

as most of the listed shares have a positive AFS reserve 

cushion. Dexia’s impairment procedure is activated whenever 

the market value falls beneath 75% of the initial purchase 

price and/or when there is a lasting decline in the fair value. 

EVOLUTION OF VALUE AT RISK 


IR&FX EQ IR&FX EQ Spread Trading 


(only fourth quarter) 

Individual Avg 24.2 Avg 2.8 Avg 25.2 Avg 2.3 Avg 11.7 

Max 34.5 Max 7.6 Max 43.7 Max 6.6 Max 16.0 

Global Avg 26.9 Avg 29.8 

Max 38.5 Max 58.9 

Limit 75 Limit 142 

IR = interest rate; EQ = equities; FX = forex. 

66 | 



Even though the operational Asset and Liability Management 

remains decentralized in Dexia’s three major entities, ALM 

risks are supervised and managed globally by the Dexia Group 

ALM Committee, which includes the members of the Management 

Board. The ALM Committee monitors the overall 

consistency of the Group’s Asset and Liability Management 

process, decides on the methodologies and the risk measurement 

guidelines, notably on the investment of shareholders’ 

equity and on internal transfer pricing mechanisms and also 

decides on investment strategies in local entities (interest, 

forex, equities). 

In addition, the Management Board is kept periodically 

informed of ALM main risks and positions. 

CURRENCY RISK 

Currency risk is the risk of loss resulting from changes in 

exchange rates. 

TRADING 

Dexia is an active participant in currency markets and carries 

currency risk from these trading activities, conducted primarily 

in the Treasury and Financial Markets business line. These trading 

exposures are subject to VaR (Value at Risk) and are included 

in the VaR mentioned on page 208 of this annual report. 

NON-TRADING 

Dexia's reporting currency is the euro but its assets, liabilities, 

income and expense are denominated in many currencies 

with significant amounts in USD. Reported profits and 

losses are exchanged at each closing date into euro or into 

the company's functional currency, reducing the exchange 

rate exposure. 

Within its Assets & Liabilities Committee, Dexia proactively 

decides on the opportunity to hegde expected foreign currency 

risks in its results in the main currencies (mainly in USD). 

HOLDINGS 

Dexia analyzes the opportunity to hedge all or part of the 

currency risk relating to participation investments in foreign 

currencies. 

In 2006, Dexia hedged the payment of the acquisition of 

DenizBank in foreign currencies, i.e. the payment in USD of 

the amount due to the majority shareholder and the payment 

in TRY of the amount due to the minority shareholders in 

accordance with the mandatory tender offer. The holding in 

DenizBank is not hedged due to the cost of the transaction. 

LIQUIDITY MANAGEMENT 

Dexia adopts a sound and prudent policy on liquidity management. 

The balance between its available funding sources 

and their use is carefully managed and supervised. In practice, 

particular attention goes to: 

• assessing the adequacy of expected new lending production 

(in terms of maturity and amount) as opposed to available 

resources; 

• assuring Dexia’s liquidity, within distressed market circumstances. 

The first question is addressed in the annual planning process. 

Each year, the forecasts for the new lending production 

are compared with the funding capacity. The purpose is to 

preserve an acceptable liquidity gap profile for the Group. In 

order to reflect the funding cost of the transactions originated 

by the business lines more accurately, whether they require 

funding or bring funding, the Group has improved its analytical 

accounting process. The purpose of this kind of “internal 

market“ for liquidity is to provide the right incentive to the 

business lines to achieve a natural match between the lending 

and the funding capacities. 

The second question is addressed by assessing Dexia’s liquidity 

profile under various distressed liquidity scenarios. The 

results and impacts observed under the different scenarios 

are analyzed and subsequently translated into a set of limits 

and ratios. The Dexia liquidity framework is conceived in 

such a way that by virtue of its liquidity reserve (notably the 

Credit Spread Portfolio), Dexia can withstand a total squeeze 

of funding and a stress on deposits for one year whilst maintaining 

its lending activity. The liquidity position is monitored 

and controlled from one day up to several months. Hence 

great care is paid to the forecast of expected liquidity needs in 

the main currencies as well as to the estimate of the liquidity 

reserve. Special attention is also paid to the Group’s off-balance-sheet 

liquidity commitments. 

Given their importance, all the main issues regarding the 

liquidity of the Group are directly managed by the Group’s 

ALM Committee, which includes all the members of the 


A global liquidity contingency plan is part of the guidelines 

and is tested on a regular basis. 




EQUITY INVESTMENT PORTFOLIO AS OF DECEMBER 31, 2006 

Market Equity % Equity 

(in millions of EUR) Value VaR VaR/MV (1) EaR 

Banking companies 1,527 106 7.0% -1.8 

Insurance companies 1,795 100 5.6% -1.1 

(1) % VaR/MV represents the percentage loss that can be experienced on the market value, excluding DenizBank. 






OPERATIONAL RISK MANAGEMENT 

The Operational Risk Management framework set up in 2003 

relies mainly on the following elements. 

Strong Operational Risk Governance with clearly defined Roles 

and Responsibilities: 

• the Management Board regularly reviews the evolution of 

the risk profile of the different activities of the Group and 

takes the required decisions; 

• the Operational Risk Policy Committee, a strategic committee 

with representatives of the Management Board, approves 

the Group-wide policies; 

• the Operational Risk Guidelines Committee, chaired by 

the Group Chief Risk Officer, details the approved policies 

in guidelines adapted to business activities and transversally 

reviews the operational risk events and related analysis; 

• the Operational Risk Committee, chaired by the Head of 

Group Operational Risk, ensures the development of a consistent 

Group-wide Operational Risk framework involving the 

production of regular reporting to the Management Board; 

• the Operational Risk Management function is also responsible 

for the development of Business Continuity & Crisis Management, 

Information Security and Insurance; 

• the Line Management function is primarily responsible for 

the Operational Risk Management. For their activity field they 

appoint an Operational Risk Correspondent whose role is to 

coordinate the collection of risk event data and the Risk & 

Control Self-Assessment. Furthermore they receive support 

from their local Operational Risk Management function. 

Dexia Group has continued for the third year to gather operational 

risk events in a central database. The Line Management 

also receives a report of exhaustiveness for the risk events 

gathered in their scope. The Management Board receives the 

Quarterly Operational Risk Reporting on the most significant 

events including a risk mitigation action plan defined by the 

Line Management. 

The Risk & Control Self-Assessment exercise, as required by the 

Basel II reform, was delivered by the end of 2006 in a coherent 

way for the main entities and subsidiaries. The total scope will 

be covered in 2007. The results will be integrated in the Quarterly 

Operational Risk Reporting to the Management Board. 

Finally, the Dexia Group will use the Standardized Approach 

to calculate the regulatory capital for Operational Risk. The 

Information File will be sent to the regulators by the end of 

June 2007. 

ECONOMIC CAPITAL 

The amounts of economic capital required by each business 

line were as follows: 

• Public/Project Finance and Credit Enhancement: 

EUR 5.2 billion (EUR 4.4 billion as of year-end 2005). This 

growth results mainly from the increase in size of the portfolio, 

with longer maturities. 

• Personal Financial Services: EUR 1.8 billion (EUR 1.8 billion 

as of year-end 2005). 

• Asset Management, Insurance and Investor Services: 

EUR 1.0 billion (EUR 0.8 billion as of year-end 2005). The 

growth results mainly from equity investments made by insurance 

business. 

• Treasury and Financial Markets: EUR 1.4 billion (EUR 1.1 billion 

as of year-end 2005), largely explained by the increasing 

size of the Credit Spread Portfolio. 

• Equity not allocated to the business lines: EUR 1.5 billion 

(EUR 1.2 billion from year-end 2005). This growth comes from 

the increases in size and value of the equity portfolio. 

Total equity is in excess of the total economic capital needed 

by the business lines to cover unexpected losses of extreme 

severities. 

CAPITAL ADEQUACY AND 

RISK-WEIGHTED ASSETS 

CAPITAL ADEQUACY 

At the end of 2006, Tier 1 capital amounted to EUR 13,028 million 

(compared to EUR 11,894 million at the end of 2005). The 

main factors which influenced the increase were: 

• the capital increase of EUR 1,200 million for the purpose of 

financing part of the acquisition of DenizBank; 

• the issuance by Dexia Funding Luxembourg of EUR 500 mil lion 

of perpetual subordinated notes qualifying as Tier 1 capital 

(partly aimed at redeeming EUR 275 million similar instruments 

issued by Dexia BIL in 2001); 

• the impact of the goodwill and the identified intangible 

assets linked to the acquisition of DenizBank (respectively 

EUR 1,710 mil lion and EUR 239 million) and the retained 

earnings. 

Tier 1 ratio decreased from 10.3% at the end of 2005 to 

9.8% at the end of 2006 due to the combined effects, in 

opposite directions, of several factors, the main ones being 

the increase of the risk-weighted assets, the capital increase 

and the issuance of hybrid Tier 1 capital. These ratios are well 

above the regulatory requirements. 

Economic capital figures produced in the year 2006 are based 

on the same methodology as 2005 figures. It notably includes 

most of the Basel II Pillar 2 prescriptions. 

The framework allows for a thorough coverage of all the risks 

facing the Dexia Group. It is based upon a high severity level 

(99.97%, one-year), corresponding to the AA/Aa2 criteria of 

rating agencies. 

At year-end 2006, total economic capital amounted to 

EUR 10.9 billion (1) (EUR 9.2 billion as of year-end 2005). This 

difference of EUR 1.7 billion is split among all business lines. 


Dexia’s total risk-weighted assets amounted to 

EUR 133.4 billion at year-end 2006, up 16.0% in one year. 

This evolution is mainly explained by the organic growth. 

(1) Including DenizBank in the fourth quarter of 2006. 

68 | 



ASSET QUALITY 

The asset quality ratio (i.e. the ratio between the impaired 

loans to the gross outstanding loan ratio) stood at 0.61% at 

the end of 2006 (0.78% at the end of 2005). 

The bad debt coverage ratio remained stable at 69.3% 

(against 69.1% in 2005). 

RATINGS 

The high rating levels reflect the financial strength of the Dexia 

Group.The current ratings by Moody’s, Standard & Poor’s and 

Fitch are Aaa/AA/AA+. 

The ratings of FSA and Dexia Municipal Agency are the best 

financial ratings that could be given to a counterpart (Aaa/AAA/ 

AAA respectively by Moody’s, Standard & Poor’s and Fitch). 

CAPITAL ADEQUACY 

(in millions of EUR, except where indicated) Dec. 31, 2005 March 31, 2006 June 30, 2006 Sept. 30, 2006 Dec. 31, 2006 

Tier 1 capital 11,894 12,291 12,591 13,922 13,028 

Total regulatory capital 12,510 12,815 13,173 14,214 13,754 

Tier 1 ratio 10.3% 10.3% 9.9% 10.8% 9.8% 

Capital adequacy ratio 10.9% 10.7% 10.4% 11.0% 10.3% 

Nota bene: for the calculation of the above ratios, the shareholders’ equity is considered after income appropriation. 


(in millions of EUR) Dec 31, 2005 March 31, 2006 June 30, 2006 Sept. 30, 2006 Dec. 31, 2006 

20% weighted counterparts 40,120 42,410 43,366 45,325 45,102 



Trading portfolio 5,261 5,994 6,898 7,283 8,091 



TOTAL 115,002 119,236 127,106 128,936 133,369 

QUALITY OF RISKS 

in millions of EUR, except where indicated Dec. 31, 2005 Dec. 31, 2006 

Impaired loans 1,473 1,359 

Portfolio impairments (1) 1,018 942 

Asset quality ratio (2) 0.78% 0.61% 

Coverage ratio (3) 69.1% 69.3% 


(1) Does not include the collective impairment set aside to cover potential loss on share-leasing products. 

(2) The ratio between impaired loans and gross outstanding loans. 

(3) The ratio between portfolio impairments and impaired loans. 

Dexia Dexia Dexia FSA Dexia 

Bank Crédit Local BIL Municipa 

Agency 

Moody’s Aaa Aaa Aaa Aaa Aaa 

Standard & Poor’s AA AA AA AAA AAA 

Fitch AA+ AA+ AA+ AAA AAA 

(1) Ratings as of February 24, 2007. 


FINANCIAL RESULTS 





PRELIMINARY NOTES TO THE 

CONSOLIDATED FINANCIAL STATEMENTS (1) 

Changes in the scope of consolidation 

The main changes which took place in 2005 concerned the sale 

of Eural Banque d’Epargne (effective from the fourth quarter), 

the liquidation of Rekord in Germany, and the acquisition of 

FMS Hoche, a fund administration Company in France. 

In 2006, the following changes took place: 

• the fund services activity of Dexia (mainly Dexia Fund Services) 

was transferred to the newly-created RBC Dexia Investor 

Services (joint venture with Royal Bank of Canada), effective 

from January 1, 2006; 

• the Private Banking activities in the UK were sold, effective 

in the second quarter of 2006; 

• Banque Artesia Nederland was sold and left the scope of 

consolidation in the last quarter of 2006. 

• DenizBank was acquired in two tranches (75% in October 

and the balance in December). In the fourth quarter it was 

fully consolidated but minority interests were present for 

25%, as the mandatory tender offer on that tranche of shares 

became effective on December 22, 2006. From 2007, there 

will be only a small amount of minority interests, as Dexia now 

owns 99.8% of DenizBank’s shares. 

Pro forma financial statements 

The changes in the scope of consolidation were taken into 

account to establish pro forma financial statements for 

2005 so as to enable comparisons. In absolute figures, the 

difference between the reported and pro forma 2005 net 

income – Group share is EUR +16 million (income higher by 

EUR 81 million; costs higher by EUR 55 million; cost of risk 

lower by EUR 2 million; taxes higher by EUR 7 million). 

(1) The analysis of Dexia SA’s financial statements can be found in the note 4 

to the annual financial statements on page 220 of this annual report. 

“Underlying“ and “non-operating“ items 

“Underlying“ results exclude the effects of the change of 

scope of consolidation, and also exclude the non-operating 

factors. Those comprise both the nonrecurring elements of 

the period, described and quantified individually, and the 

variations of the marked-to-market value of FSA’s CDS portfolio. 

The latter instruments being classified as derivatives, the 

variation of their market value during the reporting period is 

taken as a trading result; this treatment under IAS 39 does not 

allow a good understanding of the economic results, as this 

portfolio is composed of AAA-rated instruments, which FSA 

is committed to insure until maturity. Therefore, the positive 

or negative marked-to-market variations on this book in any 

period are not underlying results, as they will eventually add 

up to zero. Non-operating items are detailed on page 73 of 

this report. 

ANALYSIS OF THE CONSOLIDATED 

STATEMENT OF INCOME 

Foreword 

In 2006, many changes took place in the scope of Dexia, principally 

linked with the acquisition of DenizBank, and the disinvestments 

from several business units. The most significant 

changes in scope took place in the last quarter of the year, 

with a 75% participation in DenizBank being fully consolidated 

into Dexia, and Banque Artesia Nederland (BAN) leaving 

the scope of consolidation. Hence, the full year 2006 reported 

net income – Group share includes the results of DenizBank in 

the fourth quarter (EUR 32 million), and those of BAN in the 

first three quarters (EUR 18 million). They also include a very 

high net amount of non-operating items (EUR 703 million). 

In many cases, in order to underscore the essential economic 

trends, the comparisons between the reporting periods are 

made on a like-for-like basis. The net income – Group share 

pro forma 2005 shows EUR +16 million difference with the 

reported number. 

Net income – Group share 

Net income – Group share amounted to EUR 2,750 million 

in 2006, up EUR 712 million (+34.9%) over 2005. The 

contribution of DenizBank to the net income – Group share 

was EUR 32 million in the fourth quarter of 2006. The net 

contribution of the non-operating factors was EUR +703 million 

in 2006 – detailed on page 73 – compared to EUR +263 

million in 2005, thus accounting for EUR 440 million of the 

increase. Taking into account the pro forma 2005 figures, 

the underlying net income – Group share progressed by EUR 

+256 million, or +14.3% overall. It was strong in all business 

lines, with underlying progressions respectively of +14.1% in 

Public/Project Finance and Credit Enhancement, +13.1% in 

Personal Financial Services, +31.7% in Asset Management, 

+51.4% in Investor Services, +12.1% in Insurance Services, 

and +11.2% in Treasury and Financial Markets. As in the 

previous year, the currency exchange impact on net income 

– Group share was very limited in 2006 (EUR -5 million). 

70 | 



Income 

Costs 

Total income amounted to EUR 7,012 million in 2006, 

EUR 1,036 million higher than in 2005 (+17.3%). At constant 

scope of consolidation and excluding non-operating 

items, the increase was EUR 479 million (+8.2%) in one 

year, stemming from the growth of underlying revenues 

in all the business lines: respectively EUR +222 million in 

Public/Project Finance (+9.9%); EUR +48 million in Personal 

Financial Services (+2.1%); EUR +55 million in Asset Management 

(+28.2%); EUR +59 million in Investor Services (+18.9%); 

EUR +13 million in Insurance Services (+6.1%); and EUR +58 million 

in Treasury and Financial Markets (+11.5%). For the rest, 

the combined revenues of Central Assets and non-operating 

items went up EUR 498 million, a sizeable amount largely 

explained by the capital gains achieved during the year. 

Costs stood at EUR 3,481 million in 2006, up 7.8% (or 

EUR +252 million) compared to 2005. At constant scope, and 

excluding non-operating items (EUR 4 million in 2006 compared 

to EUR 7 million pro forma in 2005) the progression 

was +6.1%, i.e. 2.1 percentage points lower than that of 

revenues. The analysis hereunder of individual business line 

performances underscores that in those businesses where the 

development momentum is strong, costs have progressed at 

a relatively high rate, but at a much slower pace than revenues, 

in line with such stated objective. It is to be noted that, 

in Personal Financial Services, the underlying cost base was 

up only 1.2%, i.e. almost half the growth pace of the business 

line’s revenues year on year, and an effective decrease in 

real terms. Also, as in the previous years, those costs related 

CONSOLIDATED STATEMENT OF INCOME 

(in millions of EUR) 2005 2006 Variation 

Income 5,976 7,012 +17.3% 

of which net commissions 1,172 1,307 +11,5% 

Costs (3,229) (3,481) +7.8% 

Gross operating income 2,747 3,531 +28.5 % 

Cost of risk (52) (124) x2.4 

Impairment on (in)tangible assets 0 0 n.s. 

Tax expense (602) (569) -5.5% 

Net income 2,093 2,838 +35.6 % 

Minority interests 55 88 +60.0% 

Net income – Group share 2,038 2,750 +34.9% 

CONSOLIDATED STATEMENT OF INCOME (FROM REPORTED TO UNDERLYING (1) PRO FORMA (2) ) 



Changes in scope of consolidation 82 - n.s. 

Income pro forma 6,058 7,012 +15.8% 

Non-operating items 224 698 x3.1 

Underlying income 5,835 6,314 +8.2% 

Costs (3,229) (3,481) +7.8% 

Changes in scope of consolidation (56) - n.s. 

Costs pro forma (3,285) (3,481) +6.0% 

Non-operating items (7) (4) n.s. 

Underlying costs (3,278) (3,478) +6.1% 

Gross operating income pro forma 2,773 3,531 +27.3% 


Underlying gross operating income 2,557 2,836 +10,9% 

Cost of risk pro forma (50) (124) x2.5 

Non-operating items 7 (35) n.s. 

Underlying cost of risk (57) (89) +55.4% 

Net income – Group share 2,038 2,750 +34.9% 

Changes in scope of consolidation 16 - n.s. 

Net income – Group share pro forma 2,053 2,750 +33.9% 


Underlying net income – Group share 1,790 2,047 +14.3% 




(1) i.e. excluding the non-operating items (described on page 73 of this report). 

(2) Pro forma as defined on page 70. 



to business development projects and geographic expansion 

were identified, respectively EUR 25 million and EUR 14 million, 

representing together 20% of the underlying cost base 

drift, year on year. 

The cost-income ratio was 49.6% in the full year 2006, much 

below that of 2005 (54.0%). The underlying cost-income 

ratio stood at 55.1% (down compared to 56.2% in 2005). 

This reduction is satisfactory when considering the expenditures 

engaged to develop the business and franchise of Dexia 

both domestically and internationally during the year along 

with the projects which took place in 2006. 

Minority interests 

Minority interests went strongly up in 2006, largely because 

the costs on hybrid Tier 1 instruments are classified in that 

rubric, and as the volumes thereof have increased in the 

fourth quarter of 2006 and in 2006. Besides, DenizBank 

was fully integrated in the financial statements but, as only 

75% was owned by Dexia in the fourth quarter, 25% of the 

results belong to minority interests. From 2007, Dexia will 

own 99.8% of DenizBank’s shares and there will be very few 

minority interests to remunerate. 




Gross operating income 

The gross operating income amounted to EUR 3,531 million 

in 2006, up 28.5%. At constant scope of consolidation 

and on an underlying basis, the growth was +10.9%. This 

number sums up the very good underlying performances 

of the business lines, with Public/Project Finance delivering 

a +11.8% growth year on year, Personal Financial Services 

going up 4.4%, Asset Management achieving +32.5%, Investor 

Services progressing by a strong +48.3%, Treasury and 

Financial Markets by +17.3%, whilst Insurance Services went 

down slightly (-2.3%) but this small slippage has no economic 

meaning in view of the current analytical treatment of this 

segment (see detailed analysis on pages 91-92). Overall, the 

exchange rates fluctuations in 2006 had a small influence on 

the gross operating income (EUR 5 million negative impact). 

Cost of risk 

The cost of risk (impairments on loans and provisions for 

credit risks) amounted to EUR 124 million in 2006, compared 

to EUR 52 million in 2005. Excluding the provision movements 

at Dexia Bank Nederland, the underlying cost of risk went up 

to EUR 89 million in 2006 from EUR 57 million in 2005, Deniz- 

Bank representing EUR 11 million of this increase. Overall, the 

cost of risk remained nevertheless at a very low level (2.4 basis 

points on average outstanding banking commitments). Concerning 

the situation of Dexia Bank Nederland, a full disclosure 

is made on pages 99-101 of this annual report. 

Overall financial performance 

The profit margin (net income before minority interests 

related to total revenues) stood at 40.5% in 2006, compared 

to 35.0% in 2005. 

Return on equity stood at 23.1% (compared to 20.0% in 

2005) partly pulled in 2006 – and to a lesser extent in 2005 

– by the influence of the non-operating items. 

Earnings per share (EPS) reached EUR 2.49 in 2006 (undiluted), 

up 33.2% over the previous year. Of note, the number 

of shares has varied considerably during the course of the year, 

with a buy-back program during the first quarter (amounting 

to EUR 50 million), then new shares issued in the second part 

of the year in connection with the acquisition of DenizBank 

and the employee share plan. The daily average number of 

shares increased by 1.2%. 

Group Tier 1 ratio stood at 9.8% at year end (10.3% as of 

December 31, 2005). Taking into account only 50% of the 

hybrid Tier 1 capital instruments, the ratio stood at 9.2% at 

year end. 

Proposed dividend 

In view of the good 2006 results, the Board of Directors will 

propose a gross dividend of EUR 0.81 per share. Subject to 

shareholders’ meeting approval thereon, the dividend will be 

paid on May 24, 2007. 

Outlook 

Taxes 

Tax expense (comprising both current and deferred tax) 

amounted to EUR 569 million in 2006, down 5.5% compared 

to 2005. The variation of the tax charge is largely explained 

by the higher amount of capital gains in 2006, compared to 

2005, having in mind that such gains are not taxable in Belgium. 

The effective tax rate in 2006 was 17.2% (compared 

to 23.1% in 2005) on the basis of reported earnings, and 

it was 23.2% (compared to 27.0% in 2005) on the basis of 

underlying earnings. In the forthcoming reporting periods, 

the effective underlying tax rate is likely to stabilize, on average, 

around the current level. 

Given the very strong commercial momentum experienced in 

2006 and before, Dexia is confident to continue achieving its 

financial objectives, as set and communicated to the market 

on September 26, 2006. 

Post-balance-sheet event 

In the third week of February 2007, Dexia announced the 

signing of the sale of Dexia Banque Privée France. This will 

generate a capital gain of about EUR 42 million (after taxes). 

72 | 



MAIN ITEMS REPORTED AS NON-OPERATING IN 2005 AND 2006 

The non-operating factors comprise both the nonrecurring items and the variations of the marked-to-market value of FSA’s 

CDS portfolio. The latter instruments being classified as derivatives, the variation of the market value during the reporting 

period is taken as a trading result; this treatment under IAS 39 does not allow a good understanding of the economic 

results, as this portfolio is composed of AAA-rated instruments, which FSA is committed to insure until maturity. Thus, 

the positive or negative marked-to-market variations on this book in any period are not underlying results, as they will 

eventually add up to zero. 

Income 

In Q1 2005: interest discount on loans accepting “Dexia Offer“ (EUR +9.2 million); capital gains (EUR +11.2 million); 

marking to market of FSA’s CDS portfolio (EUR -2.2 million). 




marking to market of FSA’s CDS portfolio (EUR +34.8 million). 


capital gains on disposal of properties (EUR +9.2 million); marking to market of FSA’s CDS portfolio (EUR -12.4 million). 

In Q1 2006: interest discount on loans accepting “Dexia Offer“ (EUR +4.3 million); capital gains (EUR +236.6 million); 

marking to market of FSA’s CDS portfolio (EUR +24.1 million). 





In Q4 2006: interest discount on loans accepting “Dexia Offer“ (EUR +1.8 million); capital gains net of provisions 

(EUR +221.4 million); marking to market of FSA’s CDS portfolio (EUR +5.7 million). 

Costs 

In Q4 2005: costs related to the creation of the joint venture RBC Dexia Investor Services (EUR -2.9 million). 

Cost of risk 

In Q1 2005: net charge for Legiolease at Dexia Bank Nederland (EUR -83.0 million). 

In Q2 2005: net release of prior provisions for Legiolease at Dexia Bank Nederland (EUR +56.0 million). 

In Q3 2005: net release of prior provisions for Legiolease at Dexia Bank Nederland (EUR +36.5 million). 

In Q4 2005: net charge for Legiolease at Dexia Bank Nederland (EUR -2.5 million). 

In Q1 2006: net release of prior provisions for Legiolease at Dexia Bank Nederland (EUR +13.0 million). 

In Q2 2006: net charge for Legiolease at Dexia Bank Nederland (EUR -42.0 million). 

In Q3 2006: net release of prior provisions for Legiolease at Dexia Bank Nederland (EUR +13.8 million). 

In Q4 2006: net charge for Legiolease at Dexia Bank Nederland (EUR -19.8 million). 




Taxes 

All the items above are before tax. The amount of corresponding taxes, at appropriate rates, is treated as a non-operating 

item in the total amount of taxation. The individual tax incidence of some items is specified below, as well as particular tax 

entries. 

In Q1 2005: reimbursement of taxes following the settlement of a tax dispute (EUR +15.4 million); tax credit caused by the 

impairment of a participation (EUR +17.0 million); write-back of a tax provision (EUR +6.5 million). 

In Q2 2005: tax credit caused by the impairment of a participation (EUR +3.4 million). 

In Q3 2005: reimbursement of taxes following the settlement of a tax dispute (EUR +5.4 million); differed taxes following 

the change in tax rate in Luxembourg (EUR -7.0 million). 

In Q4 2005: reimbursement of taxes following the settlement of a tax dispute (EUR +7.6 million). 

In Q2 2006: reimbursement of taxes following the settlement of a tax dispute (EUR +6.8 million). 



ANALYSIS OF THE CONSOLIDATED 

BALANCE SHEET 

Total consolidated balance-sheet footings as of December 31, 

2006 amounted to EUR 566.7 billion, an 11.4% increase 

compared to December 31, 2005, due to dynamic commercial 

activity. Loans and advance to customers explain 58.8% 

of the raise. 

DenizBank Group. Reverse repurchase agreements grew by 

EUR 14 billion, loans by EUR 20 billion of which mortgage 

loans rose by EUR 2 billion. 

Loans and securities reached EUR 223.2 billion as of December 

31, 2006 of which EUR 212 billion in securities (+13%). 

Interbank assets slightly increased by 4.2%. 

Total equity 



Liabilities 

The amount of customer deposits and debt securities (savings 

bonds, certificates and bonds) reached EUR 294.2 billion at 

the end of 2006 (+7.6%). Their relative share in the total of 

the balance sheet amounted to 51.9%. 

Customer deposits stood at EUR 109.5 billion at the end of 

2006, an increase of +12.0%, due to several factors, mainly 

the evolution of the deposits and the consolidation of Deniz- 

Bank Group. Debt securities increased to EUR 184.7 billion, 

up 5.1% mainly due to issuance of non-subordinated securities 

while certificates of deposits and savings certificates 

decreased respectively by EUR 1.7 and 1.3 billion. 

Subordinated and convertible debt declined -12.4%, to 

EUR 4.4 billion, partly due to the redeeming in July 2006 of the 

hybrid Tier 1 capital instrument for an amount of EUR 275 million 

issued by Dexia BIL in 2001, and partly to the reimbursement 

of other subordinated loans for EUR 245 million. 

The interbank liabilities increased by 29.7%, mainly under the 

growth of sight accounts and deposits. 

Assets 

Total shareholders’ equity of the Dexia Group amounted to 

EUR 16.3 billion as of December 31, 2006 against EUR 14.1 billion 

as of December 31, 2005, i.e. a growth of +15.7%. 

Total shareholders’ equity is composed of core equity (capital, 

additional paid-in capital, reserves, profit for the year 

before allocation) and gains and losses not recognized in 

the statement of income. The gains and losses represent 

the fair value on available-for-sale portfolio, the fair value of 

cash-flow hedge derivatives and the translation reserve for a 

total amount of EUR 1.9 billion, down EUR 730 million. This 

decrease comes from the AFS reserve on bonds mainly due to 

the increase of interest rates. 

Core shareholders’ equity amounted to EUR 14.4 billion, 

i.e. a growth of 25.6% mainly due to capital increases 

(EUR 1.4 billion), the net income of the period (EUR 2.75 billion), 

the payment of dividend done in May 2006 (EUR -0.8 billion) 

and the deduction of the goodwill related to the purchase 

of minority interests of DenizBank (EUR 0.4 billion). 

Minority interests, at EUR 1.7 billion progressed by EUR 527 million. 

This was mainly due to the issuance by Dexia Funding 

Luxembourg of perpetual subordinated notes qualifying as 

Tier 1 capital, for an amount of EUR 500 million. 


Loans and advances to customers increased by +17.7% and 

stood at EUR 226.5 billion as of December 31, 2006 due to 

good commercial activity and to the first consolidation of 

CONSOLIDATED BALANCE SHEET 


Total liabilities and equity 508,761 566,743 +11.4% 

Total liabilities 493,061 548,308 +11.2% 

Due to banks 134,793 174,754 +29.7% 

Customer borrowings and deposits 97,738 109,484 +12.0% 

Negative value of derivatives 37,652 30,489 -19.0% 

Debt securities 175,685 184,726 +5.1% 

Subordinated and convertible debt 4,985 4,365 -12.4% 

Total equity 15,700 18,435 +17.4% 

Core shareholders’ equity 11,488 14,433 +25.6% 

Total shareholders’ equity 14,084 16,299 +15.7% 

Minority interests 1,183 1,710 +44.5% 

Assets 508,761 566,743 +11.4% 

Due from banks 75,053 78,215 +4.2% 

Loans and advance to customers 192,402 226,502 +17.7% 

Loans and securities 198,941 223,207 +12.2% 

Positive value of derivatives 28,632 24,032 -16.1% 

74 | 


OPERATION AND RESULTS 

OF THE BUSINESS LINES 




Public/Project Finance and Credit Enhancement 76 

Personal Financial Services 85 

Asset Management 88 

Insurance Services 90 

Investor Services 93 

Treasury and Financial Markets 95 


PUBLIC/PROJECT FINANCE 





AND CREDIT ENHANCEMENT 

Dexia is the global leader in Public/Project Finance and Credit 

Enhancement with subsidiaries and branches in more than 

30 countries worldwide. 

The key elements of Dexia’s success on this market, which 

represent around a half of its net result, are basically its longterm 

relationship with local players along with its innovation 

capability. The vast range of products Dexia offers to its public 

sector clients allows the bank to address all their needs, taking 

advantage of a multi-product offer: loans or structured 

loans, capital markets solutions, insurance services, debt 

management, insurance products... Furthermore, for several 

years, the bank has been establishing a diversification policy 

by seeking: 

• to widen its customer base by developing new franchises in 

line with cautious underwriting criteria. This diversification in 

clientele helps to deliver Dexia’s high average margins without 

impairing the low Group profile (social housing, hospitals, 

non-profit organizations...); 

• to expand its geographical scope towards promising markets 

which in the medium term will play the role of growth 

relay. 

In Project Finance business, where Dexia holds a worldwide 

lead in terms of PPP/PFI, the bank is deliberately focusing on 

specific sectors where it has a recognized know-how and 

expertise: transportation, environment, social infrastructure 

(health, education, etc.), energy (including renewables) and 

telecoms, and deliberately refraining from operating in all the 

other sectors such as mining, manufacturing, and so on. 

For the year 2006, Dexia was ranked by Dealogic (a Euromoney 

database) as a top 10 lead arranger of project finance 

loans in both Europe and North America. 

Dexia is also one of the major players in credit enhancement 

business, thanks to its American subsidiary FSA, which began 

its activity in the Eighties and now holds about one quarter of 

the insured municipal bond market. FSA’s activity outside the 

United States is also significant and developing rapidly. 

The expected long-term real growth of the global public 

finance market (2%-4%) will stem from several factors, like the 

increase of population and GDP, the decentralization process 

engaged around the world, an ageing population which will 

generate new demand, and increasing infrastructure needs in 

developing countries. Despite this moderate annual growth 

rate at global level, the total increase of debt over the next 

ten years is estimated at more than USD 1.5 trillion, i.e. more 

than three times the total public finance commitments of 

Dexia today. 

As global leader in Public/Project Finance, Dexia is best positioned 

to capture this growth and will maintain its leadership 

on this market capitalizing on its unique know-how. 

THE SITUATION REGARDING PUBLIC/ 

PROJECT FINANCE IN THE EUROPEAN UNION 

MEMBER STATES 

As world leader in Public/Project Finance, Dexia likes to share 

its expertise and knowledge of the European sub-national 

public sector. Thus, each year the Research Department publishes 

an economic outlook report concerning Public Finance in 

the European Union. For the sixth consecutive year, this study 

(published in French, English and now German) is a reference 

tool for decision-makers in Europe. It is accompanied by a set 

of “information sheets” which provide detailed financial data 

by country and also offer key data on the structural and cohesion 

funds as well as twinning in Europe. This latter document 

was prepared in partnership with the Council of European 

Municipalities and Regions. Both publications are available for 

download on the www.dexia-creditlocal.fr website. 

With the use of five indicators (expenditure, investment, fiscal 

revenue, budget balance and debt), the last edition of the 

Economic Outlook, published in December 2006, provides 

an overview of the 25 EU Member States’ subnational public 

finances over the period 2000-2005 and presents the highlights 

of the year 2006. 

Although the situations of the 89,200 local and regional governments 

vary considerably all over Europe, a certain number 

of general trends can be identified on the European scale. 

The strengthening of decentralization, 

regionalization and municipality merging or 

grouping 

Offering a great diversity in terms of territorial and institutional 

organization, the European territorial landscape is constantly 

evolving. Three major fundamental trends seem to be 

emerging: an increase in decentralization, a strengthening of 

the regional level and the encouragement to inter-municipality 

cooperation and municipality mergers. 

76 | 



A regular increase of territorial public 

expenditure 

Local and regional authorities occupy an increasingly important 

position in the European economy. Their expenditure 

increased in volume by +3.6% per year on average between 

2000 and 2005 and by +3.0% in 2005. With a spending 

amount of EUR 1,374 billion in 2005, it represented 12.7% 

of the EU GDP and 26.8% of total public expenditure. This 

momentum is due to a large extent to the deepening of 

decentralization which led to important transfers of competence 

in favor of local and regional authorities in various 

countries of the EU15 (Spain, Italy, etc.) as well as additional 

competences in several new Member States (Slovakia, Czech 

Republic, Estonia, etc.). This dynamism also results from the 

increased weight of current operating expenditure in local 

and regional budgets (health, education, social aid) and the 

increasing needs of populations for local public services. 

The territorial sector remains the driving force in 

public investment 

Over the years, local and regional public authorities have consolidated 

their role as prime public investors. From 2000 to 

2005, investment remained solid (+3% per annum on average). 

It was the new Member States in particular which implemented 

very dynamic investment policies (+4.2% per year 

in average). In 2005, EU territorial investment amounted to 

almost EUR 170 billion, representing 1.6% of EU GDP, 12.3% 

of the local and regional budgets and, above all, 63.9% of 

total public investment. That year, local and regional investment 

regressed in some countries – the result of otherwise 

augmenting operating expenditure and of stricter budgetary 

discipline to fulfil the Maastricht criteria. In other countries, 

the implementation of the 2004-2006 European Union Programs 

concerning the structured funds (EU10 Member States) 

and the municipal electoral cycle (Belgium, Slovakia, Greece, 

Poland, etc.) had a positive influence on investments. 

Increased fiscal decentralization 

Transfers of competences to subnational governments have 

often been accompanied by transfers of State taxation and/or 

by the creation of new specific local and regional own-source 

taxes. Between 2000 and 2005, territorial authority fiscal revenues 

rose by +4.5% per year on average (+3.1% in 2005), 

although this particularly strong increase is partly to be attributed 

to the significant fiscal transfers in favor of the Spanish 

autonomous communities. In 2005, territorial governments’ 

tax revenues represented 37.8% of total territorial revenues 

and 4.7% of EU GDP. 

A number of major tax reforms concerning EU territorial public 

finances were implemented or voted in 2005 and 2006. 

Reforms concerning shared taxes such as the increase in 

the VAT rates in Germany, the revisions of the personal or 

company income taxes in several countries (Austria, Lithuania, 

Estonia, Finland, etc.) or the introduction of new shared 

taxes (France) often had a significant impact on the overall 

structure of local governments’ financial resources. Reforms 

also concerned own-source territorial tax system such as in 

the Netherlands (property tax), France, Latvia, Belgium and so 

on. Global reforms, completely reshaping the systems of local 

finance, were voted in Denmark and Slovakia. 

Sound budgetary health of the territorial public 

sector 

Although in the year 2000 the global EU territorial budget 

balance indicated a slight surplus, a mild erosion has occurred 

since then. In 2005, the public deficit of local and regional 

authorities, approximately EUR 25 billion, increased slightly. 

However, established at 0.23% of EU GDP, it remains very 

modest compared to that of the public sector as a whole 

(2.3% of GDP). 

Local and regional public debt increased by +2.4% per annum 

in volume over 2000-2005 with a slight acceleration in 2005 

(+4.9%) to reach EUR 633 billion. This growth was stronger in 

the EU10 countries (+13.6% in volume per year on average) 

because of the impact of EU accession and their investment 

needs. The debt-to-GDP ratio remains stable over the 2000- 

2005 period (5.8% of GDP in 2005 compared to 5.6% in 

2000). Again, this debt level, allocated solely to investment 

finance, remains low compared to total public sector debt 

(63.2% of GDP in 2005). 

These indicators have been kept under control with the help 

of budgetary and prudential rules which provide a framework 

for local management. These rules have recently been reinforced 

in several countries which have chosen to associate the 

subnational sector with the control and governance of public 

finance, for example through internal stability pacts. 

THE US MUNICIPAL MARKET IN 2006 

The financing market of the local US public sector is characterized 

by its very strong disintermediation. Indeed, more than 

95% of financing is arranged and sold through the US bond 

markets. After the 2005 record year, 2006 was nevertheless 

a strong year in terms of volume for the US municipal bond 

market. Low interest rates during the year encouraged municipalities 

to continue a relatively high level of new borrowing for 

a broad range of public services and infrastructure projects. 

With issuers motivated to tap the market because they anticipated 

a rise in interest rates, US municipalities issued approximately 

USD 384 billion of municipal bonds, 6% less than 2005, 

but 6% more than 2004. The amount of bonds issued exclusively 

for refunding was 40% less than in 2005, which was however 

characterized by particularly favorable refunding conditions. 

Slightly more than two-thirds of the municipal bonds issued 

in 2006 were general obligation bonds issued by states, 

counties, cities, school districts and other municipal entities. 

The rest were primarily revenue bonds in the transportation, 

health care, utility, housing, education and other sectors. 

The penetration of bond insurance in this market, which 

reached 56% in 2005, was down to 50% in 2006. 

The year was still marked by growing interest in Public Private 

Partnership (PPP) financing in North America. Indeed, a 

number of US states, facing budget deficits and huge infrastructure 

needs, have adopted PPP laws this year, which allow 

private entities to invest in public infrastructure. 






WORLD LEADER 

As for geographic development, 2006 was a very active year, 

with inter alia, Dexia obtaining a banking license in Poland 

last May, the opening of a representative or commercial 

office in Budapest, in China, in India and of a subsidiary in 

Switzerland. 

In Japan Dexia is delighted to have been granted a banking 

license in November, as, in terms of volumes, this country is 

the deepest market for public finance in the world. The Japanese 

local public debt amounts to EUR 1,500 billion. 

A significant portion of the total new production of Dexia in 

2006 (10% or EUR 5.7 billion) was made in countries where 

a banking license was obtained in 2005 or 2006: Dexia Kommunalkredit 

Bank in Central and Eastern Europe, Canada, 

Mexico, Switzerland and Japan. 




ACTIVITY (1) Long-term originations Long-term commitments (2) 

2005 2006 Variation Dec. 31, Dec. 31, Variation 

(in millions of EUR) 2005 2006 

Fully-consolidated subsidiaries 

Belgium (3) 5,290 5,210 -1.5% 30,981 30,845 -0.4% 

France 10,832 12,810 +18.3% 60,599 65,026 +7.3% 

Luxembourg 598 98 -83.6% 1,933 2,085 +7.9% 

United Kingdom 2,224 2,261 +1.7% 6,756 9,480 +40.3% 

Sweden 916 1,062 +15.9% 3,597 3,932 +9.3% 

Italy 8,714 5,787 -33.6% 34,140 37,253 +9.1% 

Iberia (Spain & Portugal) 1,749 2,146 +22.7% 6,452 8,854 +37.2% 

Central and Eastern Europe 2,680 2,687 +0.3% 3,060 5,119 +67.3% 

America 10,871 10,350 -4.8% 42,487 46,136 +8.6% 

Other (4) 11,927 13,002 +9.0% 18,365 28,504 +55.2% 


without Germany 55,801 55,413 -0.7% 208,370 237,234 +13.9% 

Germany (5) 6,176 6,354 +2.9% 25,974 30,975 +19.3% 


with Germany 61,978 61,768 -0.3% 234,344 268,209 +14.5% 

of which public sector 49,753 48,593 -2.3% 209,853 235,546 +12.2% 

of which corporate & project finance 12,225 13,175 +7.8% 24,491 32,663 +33.4% 

Equity-accounted companies 

Austria (Kommunalkredit Austria) (6) 6,045 9,933 +64.3% 17,694 24,222 +36.9% 

TOTAL MANAGED 

BY THE DEXIA GROUP 68,023 71,701 +5.4% 252,038 292,431 +16.0% 

(1) All statistics of this table relate to the final take of underwritings, acceptance or purchase of public/project finance sector debt obligations, in the form 

of long-term loans, notes and bonds, liquidity guarantees, all forms of credit procurement as applicable in those countries where Dexia operates. In view of 

the specific features of business in Germany, production statistics are reported excluding that country. Short-term facilities are not included. 

(2) These amounts are stated at current exchange rate. The above amounts exclude DenizBank. As of December 31, 2006 the long-term commitments of 

DenizBank amounted to EUR 1.2 billion. 

(3) The 2005 commitments of Belgium are restated (about EUR +2.6 billion) mainly as the roll-over credits of the corporates are now considered as longterm 

commitments (previously treated as short term). 

(4) “Other” includes the activities of the Pacific area, Mexico, Israel, Japan, Switzerland, as well as the transactions carried out by head office in countries 

where the Group has no direct presence. 

(5) The segment reporting of Dexia Kommunalbank Deutschland has been finetuned. The 2005 figures are therefore restated. 

(6) Corresponding to 100% of originations/commitments of Kommunalkredit Austria, which is 49%-owned by Dexia. 

78 | 



Long-term commitments and originations 

Long-term commitments of the fully-consolidated subsidiaries 

reached EUR 268.2 billion, up 14.5% year-on-year, and 

up 16% at a constant exchange rate, a dynamism especially 

noticeable in France, Italy, America, Germany, the United 

Kingdom and Central and Eastern Europe, and the Iberian 

Peninsula. 

Originations (excluding Germany) amounted to EUR 55.4 billion, 

i.e. a slight decrease compared to last year explained by a 

methodology change (the final take objective of the structured 

finance transaction instead of the total amount is taken into 

account as of December 31, 2006). On a same methodology 

basis, the increase of the originations would have been 3%. 

In Public Finance alone, production reached the high level of 

EUR 48.6 billion, with Dexia even named “Best Lead Manager 

on Regional/Municipal Bonds” in 2006 according an award 

given by EuroWeek online magazine. 

In addition, debt management activity was again very dynamic 

in 2006, with a special mention for France and Italy, where historical 

levels of respectively EUR 10.6 billion and EUR 3.9 bi llion 

have been reached (see dedicated paragraph on page 82). 

The Corporate and Project Finance sector recorded good 

progress, +7.8% to EUR 13.2 billion, relying on large-scale 

deals in infrastructure/PPP and also on a very satisfying 

increase of the bond portfolio. On a same methodology basis, 

the increase would have been 27% compared to last year. 

Dexia was lead arranger with other banks of a number of 

major-league deals in 2006: the GBP 2.4 billion debt package 

for the acquisition of the largest port company in the UK by a 

pool of financial investors, the EUR 1.2 billion Madrid subway 

rolling stock financing or the CAD 1 billion Golden Ears Bridge 

project in Vancouver, which received the “North American 

Deal of the Year 2006” award from Thomson Financial. 

It was also a satisfying year for advisory mandates, with key 

mandates successfully closed, such as the Q7 offshore wind 

farm project in the Netherlands or the Elwood Energy power 

plant acquisition in the USA. 

As testimony to its rising profile in this sector, Dexia received 

in 2006 the “Bank of the Year” award from Thomson Financial’s 

Project Finance International magazine for the Europe- 

Middle East-Africa area. And for the second year in a row, 

Dexia reached the top ten league of banks acting as arrangers 

of project finance loans ranked by Euromoney/Dealogic 

(#1 for PPP/PFI’s, #4 for Europe, #6 for North America) with 

7 projects receiving various sectorial/regional “Deals of the 

Year” awards. 

7.0%, reaching a record level of EUR 62.0 billion. The volume 

of long-term originations increased by a very satisfying 13.5% 

to EUR 11.7 billion. 

A number of important deals were closed in 2006, among 

them loans granted to the Conseil général de la Réunion, du 

Nord, de la Seine-Maritime, des Alpes-Maritimes for an individual 

amount above EUR 100 million, and the participation in 

various city transport financing deals (Grenoble and Le Mans 

street cars). 

Dexia’s policy of increasing activity with clients from the 

non-profit sector has been successful: business increased significantly 

by 27%, and market share increased from 33% to 

37%. 

Several activities were particularly noticeable. 

• Public Health Sector is still buoyant, and Dexia’s activity 

increased by 69% year-on-year, reaching a EUR 1.7 billion 

production. The “Hospital 2007” plan, which encourages 

hospitals to use debt financing for modernization, is notably 

supporting this sector trend. Dexia won several major bids 

(Metz, Dijon and Toulon hospitals). In this particular segment, 

Dexia’s market share rose significantly with Dexia holding the 

lead with around one bid won out of two. 

• Housing activity is also encountering a net increase: +23%, 

to EUR 1.7 billion, partly by virtue of the “Borloo Plan”, which 

requires the increase of annual construction of social housings 

from 80,000 in 2006 to 120,000 in 2009. 

Regarding Project Finance, 2006 was also a very good year, 

with production doubling to EUR 1.2 billion, up 106.5% 

(135% on a same methodology basis). Among the deals confirming 

Dexia as a major player on the French PPP market, 

Dexia co-financed the largest PPP in the country, a hospital 

near Paris, underwriting one third of the EUR 345 million debt 

and as financial advisor and co-arranger (as well as equity 

investor in the winning consortium) successfully closed the 

EUR 205 million financing of the second PPP launched by the 

Ministry of Justice to design, build, and maintain three prisons. 

Dexia has also won several significant advisory mandates, 

for instance with the Ministry of Justice regarding the renovation 

of the Prison de la Santé in Paris. 

Dexia has also co-led a EUR 500 million re-financing of car 

parks and underwritten EUR 350 million of the financing for 

the acquisition of Autoroutes Paris-Rhin-Rhône. 




Regionally the performances were as follows. 

France 

2006 was a very dynamic year, with long-term commitments 

increasing by 7.3%, to EUR 65.0 billion, a remarkable growth 

experienced both in public finance and in project finance. 

In Public Finance, where Dexia holds a 42% market share, 

the bank made the best of a favorable environment: transfer 

of financial responsibilities from Central Government to local 

authorities, expectation of a rate increase, and the pre-election 

period. Long-term outstanding commitments were up 






Belgium 

Long-term commitments amounted to EUR 30.8 billion, 

almost stable over 2005. 2006, an election year, was difficult 

for Public Finance activity in Belgium, but even so Dexia succeeded 

in maintaining its leadership. 

In Public Finance, originations amounted to EUR 3.0 billion, 

down 21.1%. This decrease is the consequence of a very 

buoyant 2005 first half (driven inter alia by the inter-municipal 

associations in the field of energy) and also of the traditional 

slowdown generated in the local authorities segment by the 

election period. In the social profit segment, total originations 

reached EUR 404 million, up 11% year-on-year, enhanced by 

a catch-up of investments in national health. Of note, the Walloon 

Region selected Dexia to finance its economic recovery 

plan. The bank also launched a secured electronic reporting 

system for its clients in the public and social profit sector. 

The Corporate and Project Finance activities benefited from 

a revitalised commercial approach and a favorable economic 

climate. In terms of long-term commitments, production was 

very buoyant with originations increasing significantly by 

49.4% to EUR 2.2 billion. Production was strong in most areas 

of Belgian corporate banking, in particular: 

• general corporate banking with important transactions 

in the utility sector, but also a substantial number of 

transactions in the so-called midcorporate and corporate 

segments; 

• in the area of project finance where Dexia was able to consolidate 

its strong position in shipping finance and harbour 

infrastructure finance. Moreover, Dexia confirmed its role as 

financial advisor in the major infrastructure PPS-transaction 

for Oosterweel since its client Noriant was being withheld as 

sole candidate to continue into the next phase. In addition, 

the bank took part in the financing of three wind farms and 

a biomass plant; 

• several real estate transactions have been pursued, often with 

clear links to local, federal or supranational government; 

• in asset finance (mainly leasing and renting) a substantial 

55% gain in long-term financing was realized, up to a level 

of EUR 357 million. 

• finally it should be noted that the Belgian corporate finance 

department worked on the IPO’s of, inter alia, Aedifica and 

Metris. 

Luxembourg 

Steady growth of the long-term commitments was observed 

to EUR 2.1 billion, up 7.9%. On the origination side, the 

year was correct, taking into account the significant transaction 

(EUR 0.4 billion) closed in 2005, with the Luxembourg 

Railways. 

above, Dexia co-led a GBP 2.4 billion debt package for the 

acquisition of the biggest harbor company in the United Kingdom 

by a consortium of financial investors. This transaction 

was successfully syndicated to a total of 31 banks. As sole 

arranger, Dexia also closed several significant PFI transactions 

in the health, education and public lighting sectors, including 

a GBP 212 million hospital project in Glasgow, the largest ever 

bank-financed PFI project in the UK and the largest PFI project 

ever in Scotland. 

Sweden 

Activity was sustained, reaching EUR 1.1 billion, up 15.9%, 

and Dexia recorded gains in market share. Long-term commitments 

saw a 9.3% rise, to EUR 3.9 billion. 

Italy 

In 2006, Dexia Crediop reached EUR 37.3 billion in long-term 

commitments, up 9.1% over the last twelve months. On the 

Public Finance front, the comparison is biased by a number 

of exceptionally large-scale operations in 2005. Nevertheless, 

the activity was sustained for local authorities, in the international 

issues and securitization transactions segment where 

production was up 16%. In 2006, it is worth mentioning the 

EUR 160 million loan to the municipality of Turin, co-arranged 

by Dexia Crediop, and also the underwriting of a EUR 1.8 billion 

securitization mandated by the Lazio Region. 2006 was 

marked by the largest Eurobond ever issued by an Italian local 

authority: the loan issue by the Piedmont Region, which was 

joint booked and joint lead-managed by Dexia Crediop for a 

final take of EUR 765 million. Dexia Crediop was also joint 

bookrunner, joint lead and co-arranger of a EUR 327 million 

transaction with the Abruzzi Region. These deals, along with 

a significant loan volume for instance with the Province of 

Turin (EUR 121 million in two transactions) enabled Dexia Crediop 

to keep its market share above 40% (excluding Cassa di 

Depositi e Prestiti) in the public sector segment, consolidating 

its leadership among non-State-owned Public Finance actors 

in the country. 

Originations in Project Finance were down 62.1%, to 

EUR 664 million, in a very tough and competitive environment, 

and in the absence, this year, of large-scale deals in the 

infrastructure sector. Dexia Crediop nevertheless appears very 

well positioned in this market in Italy. 

United Kingdom 

Long-term commitments reached EUR 9.5 billion, a 40.3% 

growth in one year. This increase stems from very buoyant 

Project Finance activity, and a more mixed trend in the public 

sector: originations in social housing were strong (+74%), but 

the local authorities segment was less buoyant. As discussed 

80 | 



Iberia 

In a context of rather subdued demand in Public Finance, 

long-term commitments for this segment were up 26.5%, to 

EUR 7.1 billion, a rise all the more remarkable since 2005 was 

punctuated by large-scale deals (including two bonds issues 

by the Generalitat de Catalonia for a total amount of EUR 

3.0 billion). Originations reached EUR 2.1 billion, a 22.7% 

increase. Among the main deals closed in 2006, two book 

runner mandates with the Madrid region and one with the 

Aragon Region were won by Dexia. 

In Portugal, Dexia financed a EUR 150 million loan for EGREP, 

a State-owned entity in charge of building up and managing 

the national strategic oil stocks. 

Regarding Project Finance, Dexia Sabadell Banco Local (DSBL) 

co-led the financing of many landmark transactions in the 

infrastructure and energy sectors: the Madrid subway rolling 

stock (EUR 1.2 billion), the first hospital PPP project in Spain 

(EUR 222 million), the first thermal solar power project financing 

outside the US (EUR 497 million) and two of the largest 

photovoltaic projects in the world (EUR 367 million). Five years 

after its creation, the remarkable achievements of 2005 and 

2006 establish DSBL as a prominent actor in the Iberian infrastructure 

market. 

Central and Eastern Europe 

Dexia operates in this region via its subsidiary Dexia Kommunalkredit 

Bank (DKB), based in Vienna and held 75% by Dexia 

Crédit Local (directly and indirectly). 

Long-term commitments were up 67.3% at EUR 5.1 billion 

and total originations kept steady at EUR 2.7 billion in a context 

of competition mainly with local banks. 

In Public Finance, commitments stood at EUR 4.4 billion 

(+57.1%) and DKB was particularly active in the two most 

populated countries of the area, Poland and Romania. In 

Poland, DKB was especially active in the health sector as well 

as with local authorities. In Romania, the bank has been the 

lender of several major cities, among them Bucharest, and of 

the Finance Ministry with a EUR 34 million contract closed in 

September. The first developments of structured products in 

Slovakia and the Czech Republic were also commenced. 

On the Corporate and Project Financing side, commitments 

reached EUR 0.7 billion from EUR 0.3 billion one year earlier. 

DKB arranged its first deal in the Czech Republic for a wind 

farm financing. In the transport segment, several transactions 

were closed with the national rail companies in Hungary 

(EUR 114 million), Poland (EUR 50 million) and Slovakia (EUR 

42 million). DKB also granted a EUR 37 million loan for the 

construction of a power plant in Bulgaria. 

America (excluding FSA) 

America saw a contrasted market in 2006, with a very dynamic 

trend in Project Finance and a much less active market in the 

municipality bond issues. In this context, long-term commitments 

reached EUR 46.1 billion, up 8.6% in one year, but 

originations decreased by 4.8% to EUR 10.4 billion. 

In the Public Finance sector, the market was weaker than the record 

year of 2005. Among numerous deals closed in 2006, the liquidity 

guarantees of the State of Mississippi (USD 224 million) and of the 

State of Georgia (USD 314 million) are to be noted. In the meantime, 

investments in the taxable and tax exempt (through the TOB 

program initiated in 2004) markets developed markedly. 

In Project Finance, a large number of deals were closed, including 

the co-arrangement of the USD 4.1 billion Indiana Toll 

Road concession and the USD 320 million Buffalo Gap II wind 

farm. The Indiana Toll Road deal confirms Dexia’s prominent 

positioning in the nascent but rapidly growing infrastructure 

financing market in the US. In the meantime, Dexia affirms its 

leading position in the renewable energy sector in the US. 

Dexia’s Canadian subsidiary, which only began its activity 

at the end of 2005, co-arranged CAD 1 billion financing in 

2006 for the Golden Ears Bridge project near Vancouver, the 

biggest PPP closed in Canada to date and also the first loan 

credit enhanced by monoline insurers in North America. This 

appears as a very promising start in this new market. 

Other countries and head office 

The activity conducted in other countries and carried out from 

head office increased at a more than satisfying pace; outstanding 

commitments rose by 55.2% in 2006 to EUR 28.5 billion. 

In Switzerland, in November 2006, Dexia opened a subsidiary 

in Geneva which has allowed the bank further to diversify 

transactions with its customers range, for instance with hospitals. 

One of the main transactions was a EUR 256 million loan 

for the Canton of Geneva. 

Also in November 2006, Dexia was granted a banking license 

in Japan, allowing the bank to work directly with Japanese 

customers and make the best of the largest market in local 

public finance worldwide. At the end of December 2006, 

commitments in Japan amounted to EUR 704 million, excluding 

an amount of EUR 1.8 billion of Japanese bonds booked 

at international headquarters before obtaining the banking 

license. 

In Mexico, Dexia’s most recent subsidiary had a very promising 

start: long-term commitments reached EUR 486 million, 

compared to EUR 36 million one year ago. 

Significant transactions were closed, among them a 

MXN 650 million loan to the State of Guerrero and a 

MXN 2,200 million loan to the City of Mexico. Also to be 

mentioned is the refinancing of the entire debt of the State of 

Queretaro, which is AA rated (local rating), for an amount of 

MXN 1,340 million on a 20-year term. 

The Corporate and Project Finance activities also saw significant 

growth, with long-term commitments reaching EUR 11.6 billion. 

Important transactions were closed, among them the 

EUR 431 million dual wrapped bond/loan refinancing of the 

Hungarian M6 motorway and the WISE CBO, a GBP 1.47 billion 

securitization of wrapped PFI and utility bonds, the first 

transactions of their kind, combining Dexia’s expertise in capital 

markets and project/infrastructure finance. 









Germany 

Long-term commitments reached EUR 31.0 billion, a 19.3% 

increase. The Frankfurt office of Dexia Kommunalbank Deutschland 

increased its originations by 23%, to EUR 3.8 billion, 

with a large attraction for structured products. Additionally, 

a credit portfolio purchase was made for a total amount of 

EUR 2.4 billion, compared to EUR 1.6 billion for the year 

2005. Numerous deals have been made during the year 

2006, among which the transactions with the City of Aachen 

(EUR 110 million). 2006 also witnessed the development of a 

new customer segment, the “private satellites” (Stadtwerke 

– i.e. non-profit organizations linked to the State), with a total 

origination of EUR 0.2 billion. 

Debt Management 

Debt management activity was extremely buoyant in 2006, 

with a total amount of EUR 17.3 billion, one billion above the 

level of 2005, which was itself very high. 

In France, the amount of managed debt was EUR 10.6 billion, 

up 30%. This performance, accentuated in the last quarter 

of the year, is all the more remarkable since the two previous 

years had already set records. This amount represents 18% 

of Dexia outstanding commitments in France and this activity 

now relates to all segments: local authorities and also the 

health and social housing sectors. 

Debt management activity was also very satisfactory in 

Belgium, where it represented EUR 2.2 billion, a very good 

level for a pre-election year. 

Italy also recorded a very good performance, reaching a level 

of EUR 3.9 billion, against EUR 1.3 billion one year ago by 

virtue, for instance, of the management of international 

bonds for an amount of EUR 821 million for the Piedmont 

or Abruzzi Regions. 

Germany recorded a very promising start in this activity: 

EUR 431 million in 2006. 

Short-term commitments 

Short-term commitments amounted to EUR 19.3 billion at the 

end of 2006, up 15% on 2005. They were mainly located in 

France, Belgium and Germany where Dexia has recently developed 

short-term structured loans. 

Deposits and assets under management 

Deposits and assets under management increased at a steady 

pace of +17.7% given the level recorded at the end of last 

year and amounted to EUR 34.6 billion. This increase is particularly 

marked in France (+26% to EUR 5.8 billion, about 

half of it mutual funds) and in Italy, which more than doubled 

the level of commitments to EUR 1.8 billion. In Belgium, 

which represents 63% of the total Group amount, commitments 

were up 6%, with a notably good performance in the 

intermunicipal associations and regional segments. 

Insurance services 

Dexia Sofaxis, the only French operator specializing in insuring 

the statutory obligations of local authorities and hospital establishments 

with regard to their staff, collected EUR 367 mil lion 

in premiums (up 4%) as of December 31, 2006. 

Dexia Insurance’s premiums reached the 2005 level, with 

EUR 621 million premiums collected, of which EUR 350 million 

originated in France and EUR 271 million in Belgium. 

Dexia Epargne Pension, in another dynamic year, collected 

EUR 271 million, up 4.5% on 2005. Dexia Epargne Pension 

is a life insurance subsidiary of Dexia Insurance Services, the 

company in charge of developing Dexia’s insurance activities. 

It markets high quality and tailor-made collective life insurance 

products to local institutional clients (social housing 

bodies, semi-public companies, chambers of commerce and 

so on): end of career indemnities, supplementary pensions, 

save-as-you-earn schemes. It also offers an entire range of 

life-insurance products and capitalization contracts to private 

customers. 

The social engineering products are distributed directly by 

Dexia Credit Local, whereas the classical life insurance products 

are distributed through partnerships with third parties. 

Of note, in 2006, Dexia Epargne Pension has signed about 

15 new partnerships, reaching a total of around 60, among 

which two thirds were signed with private banks and fund 

management companies. 

Financial Security Assurance 

Financial Security Assurance (FSA), acquired by Dexia in 2000, 

carries on the activities of credit enhancement for municipal 

bonds and asset-backed securities (ABS) in North America and 

also in Europe. Credit enhancement of municipal bonds consists 

of guaranteeing bonds issued primarily by municipalities. 

By giving the benefit of its excellent AAA rating, FSA enables 

them, by way of a premium, to access the bond market under 

the most advantageous conditions. Credit enhancement of 

asset-backed securities is a guarantee similar to that granted 

for bond issues refinancing different asset classes (consumer 

credits and so on). 

Within the context of a 6% decrease of the overall volume of 

new issues and refunding in the municipal market and despite 

a highly competitive environment, in 2006 FSA managed to 

keep its market share at around 25%, and reach a still remarkable 

progression in the international market, with net par 

outstanding up 72%. On the asset-backed securities (ABS) 

side, given the competitive environment, FSA preferred not 

to sacrifice margins on volumes. On the whole, gross present 

value originations reached USD 910 million, down 10.2% 

compared to 2005, which was a record year. 

In US municipal business, the level of insurance penetration 

in the market was lower (50% versus 57% one year ago), 

against a background of low risk environment and narrow 

spreads. FSA’s gross present value was down 36.1%, 

a decrease also explained by the contribution of the Chicago 

Skyway transaction in 2005. Directly linked to the US 

interest rate environment, the level of refunding was down 

(-40% year-on-year). 

82 | 



Two transactions are worth being mentioned: the enhancement 

of the bond issued by the hospital Scottsdale Healthcare 

in Arizona, for a total amount of USD 200 million, and the 

enhancement of a USD 313 million bond issued by Philadelphia 

Gas Works. 

FSA’s international business saw a booming year with PV premiums 

originated at USD 318 million (+71.5% over the last 

twelve months). This performance is due to a number of largescale 

transactions, among them the guarantee of an obligation 

issue of GBP 200 million by United Utilities Water plc in 

United kingdom and the enhancement of a AUD 482 million 

issue by Monetary Policy Committee Funding in Australia. 

In the US asset-backed securities sector, the very high quality of 

the business originated and the tight spread environment led 

to a decrease of originations (-17%), to USD 234 million. FSA 

identified limited opportunities to deliver fair rates of return, 

although the trend seemed to start reversing slightly at the end 

of 2006. The market for car loans securitization has been very 

active, along with CDO (collateralized debt obligations) activity. 

Finally, the amount of USD 4.8 billion guaranteed generated 

premiums of USD 19 million. FSA has continued to develop 

the HELOC type transactions (Home Equity Lines of Credit). 

Outside the United States, FSA has been granted a license to 

open a subsidiary in Tokyo. 

UNDERLYING (1) RESULTS 

Net income – Group share for the full year amounted to 

EUR 1,140 million, a very solid 14.1% increase. Excluding the 

negative exchange rate impacts (EUR -9 million), the increase 

would have been 15.0%. This business line comes up with 

double-digit annual growth again this year, with progress 

made in all subsegments (the public sector, project finance 

and corporate activities, and credit enhancement), and successes 

experienced in almost every country. Dexia’s ambitions 

of diversifying its revenues into countries outside its historic 

markets are being achieved year after year: net income - 

Group share originated in France and Belgium now represents 

42% (44% in 2005); FSA presents 25% of the business line’s 

earnings, and the banking activities outside France and Belgium 

amount to 33%. 

The total income of the business line, at EUR 2,478 million, 

was up EUR 222 million compared to 2005, i.e. +9.9% 

(+10.6% at a constant exchange rate). Those very good 

numbers stem from the conjunction of several factors: high 

originations this year, adding up to a very substantial book 

of assets constituted throughout the years in the different 

entities of Public/Project Finance, and funding costs continued 

to improve. FSA’s income rose 9.7% (at EUR 543 mil lion), 

a good performance in a contrasted environment leading to 

reduced ABS revenues in the USA, a lower level of refunding, 

and in the opposite direction, higher originations in public 

finance, solid revenues on financial products and some 

exchange gains (appearing as additional revenues only under 

the IFRS treatment). The business line, excluding FSA, experienced 

exactly the same positive trend with EUR 175 million 

(+9.9%) additional revenues compared to 2005, due to: 

• a positive volume effect in many countries (i.e. France, UK, 

Spain, Central Europe, America...); 

• the positive influence on margins of the debt management 

activity; 

• a good level of commissions in view of the many transactions 

for which Dexia has lead-arranger mandates (inter alia 

in America, Spain and the UK); 

• the increasing contribution of countries where Dexia has 

recently established offices (for instance in Central and Eastern 

Europe, Canada, Mexico and Japan). Particularly noteworthy 

were the progressions experienced in France and 

Belgium (6% more revenues), Italy (+9%), the USA (+16%), 

the UK (+67%), Iberia (+59%) and Central Europe (+82%) 

where the yearly revenues now stand at EUR 47 million. Of 

note, the contribution to the business line revenues of DenizBank 

was EUR 48 million (+46% on the fourth quarter of 

2005 pro forma) bearing in mind that this came in only one 

quarter. 




(1) As described on page 70. 






Costs were up EUR 47 million compared to 2005, a 6.1% 

increase (6.7% at a constant exchange rate), but still 

3.8 percentage points lower than the revenues’ increase. This 

progression is largely explained, as previously exposed, by the 

significant development of the franchise and book of assets 

worldwide. But among the other reasons for the increase, it 

should be noted that the cost base increased at FSA due to the 

fact that expenses on Credit Default Swaps (CDS) transactions 

can no longer be deferred (impact of EUR 7 million on 

the annual cost line), and that, on the other categories of 

products, the proportion of deferred costs keeps decreasing. 

In the other units of Dexia in America, costs progressed as 

a consequence of increasing staffing requirements linked to 

business expansion and developments, as it was the case in 

many other countries such as France, the United Kingdom 

and Italy. At headquarters level, costs also rose, in relation to 

the opening of Dexia Japan, Dexia Switzerland and the other 

international developments of the activity (i.e. representative 

office in China and India). 

As a result, gross operating income amounted to 

EUR 1,669 million in 2006, an 11.8% increase compared to 

2005, and +12.6% at a constant exchange rate. This has led 

to the continuing slightly declining trend of the business line 

cost-income ratio, from 33.8% in 2005 to 32.6% in 2006. 

The cost of risk in 2006 amounted to EUR 56 million, above 

the level reached in 2005, but still at a low level. The increase 

is marginally related to the rising proportion of corporate and 

project finance transactions within the book, but also because 

there were a number of provision write-backs in 2005, and 

fewer in 2006. 

Tax expense rose slightly (+1.7%) to EUR 426 million in 2006. 

It should be noted that this rather small progression in one 

year stems from various factors going in opposite directions: 

• a more coordinated tax management at Group level; 

• a better corporate tax environment in Belgium; and 

• in the opposite direction, increased taxable earnings. 

On the whole, the performance in Public/Project Finance and 

Credit Enhancement produced a very robust return on economic 

equity (ROEE) of 22.9%. 

UNDERLYING STATEMENT OF INCOME (EXCLUDING NON-OPERATING ITEMS) 

(in millions of EUR, except where indicated) 2005 (1) 2006 Variation 


of which net commissions 160 191 +19.5% 

Costs (762) (809) +6.1% 

Gross operating income 1,493 1,669 +11.8% 

Cost of risk (30) (56) +88.6% 

Impairments on (in)tangible assets 0 0 n.s. 

Tax expense (419) (426) +1.7% 

Net income 1,044 1,187 +13.6% 

Minority interests 45 47 +4.2% 

Net income – Group share 999 1,140 +14.1% 

Cost-income ratio 33.8% 32.6% 

ROEE (2) 23.4% 22.9% 

Total allocated equity (average) 4,384 5,199 

(1) Pro forma. 

(2) Return on economic equity (net income – Group sahre/allocated equity – Group share). 

84 | Dexia / Annual Report 2006

PERSONAL FINANCIAL SERVICES 

PERSONAL FINANCIAL 

SERVICES 

Personal Financial Services is an activity historically carried out in 

Belgium and in Luxembourg where Dexia is among the top two 

or three leading banks and has the necessary scale (4 million customers) 

to consolidate its position further. With the acquisition of 

DenizBank in Turkey in 2006 (1.9 million of retail and SME customers), 

Dexia has an additional dynamic platform from which 

to capture growth in one of the fastest growing markets: Turkey, 

with 71 million of inhabitants, has a high GDP growth prospect 

combined with fast-increasing banking penetration. 

Personal Financial Services focuses on the distribution of own products 

and services as well as those developed in the Group’s other 

business lines (mainly Dexia Asset Management, Dexia Insurance 

Services and also Treasury and Financial Markets for structured 

products) to a customer base predominantly consisting of individuals 

and households, but also private banking clients, self-employed 

persons and small and medium-sized enterprises. 

Belgium is served by a broad retail distribution network: 

1,019 branches, of which 80% are managed by self-employed 

agents and 20% by bank employees. In addition private clients 

are served by 9 private houses. 

In Luxembourg, with 40 retail branches, Dexia BIL is active in 

retail banking and has an extensive private banking business 

both in Luxembourg and abroad. 

In Turkey, DenizBank is the sixth privately-owned Turkish bank, 

with a wide territory covered by a network of 262 branches, 

96 of which are located in Istanbul. DenizBank also has a 

branch presence in Russia, Germany and Austria. 

Dexia is also present in Slovakia through Dexia banka Slovensko 

with its 52 branches, a bank active both in the local public 

sector and the retail market. Today, Dexia banka Slovensko 

has 200,000 retail customers. 

Dexia is also established in Switzerland, through Dexia Private 

Bank Switzerland, which has representative offices in Bahrain 

and Montevideo. 

Finally, Dexia has a 20% holding in Crédit du Nord in France, 

and a 40% holding in Popular Banca Privada in Spain, a 

joint venture with Banco Popular active in the field of private 

banking. 

ACTIVITY 

The overall positive climate in 2006 reinforced households 

confidence and their propensity for consumption, and their 

appetite for real estate which has sustained the production of 

mortgages. Within a context of low interest rates, customer 

assets were more oriented towards off-balance-sheet investments 

and insurance products. The trends prevailing in 2006 

were: 

• a remarkable dynamism of the off-balance-sheet products, 

which grew twice as quickly as the balance-sheet products 

and now represent 50% of the total customer assets (balancesheet 

products decreased to 42% and insurance products 

remained stable at 8%); 

• transfers from savings accounts towards term deposits; 

• more adequate mortgages margins in the second half of 

the year, and 

• extremely buoyant activity in the Private Banking sector. 

Customer assets 

Retail Banking 

Total customer assets amounted to EUR 83.0 billion at the 

end of 2006, a 1.7% progression in one year explained by 

contrasting evolutions. 

Bonds issued by the Group and placed through over Dexia 

Retail Banking networks were up 14.7%, reaching EUR 7.5 

billion as of December 31, 2006. 

Savings accounts, in contrast, which amounted to EUR 24.9 

billion at the end of 2006, were down 2.7% in a generally 

subdued environment as customers preferred term deposits 

following an upward trend in money market rates. Together, 

savings bonds and term deposits were up by a satisfying 4.8% 

to EUR 10.1 billion. 

Mutual funds were stable, at EUR 20.8 billion. These products 

suffered from the retail market effect during the second quarter 

of the year and recovered slowly. In contrast, life insurance 

products and more precisely Branch 21 (guaranteed yield) 

products recorded a satisfying rise, sustained by an advertizing 

campaign in October. Life insurance technical reserves 

increased by +7.6%, to EUR 7.8 billion. Branch 23 products 

suffered, like the mutual funds, from adverse market trends 

from May. The negative effect of the introduction of a new 

tax on insurance products since January 1, 2006 has been partially 

offset by several commercial actions. 

There were a number of successful commercial and innovative 

initiatives in 2006 such as: 

• “Axion”, the brand developed by Dexia Bank to attract 

young customers, allowed Dexia to be number one bank in 

Belgium, with a 31% market share in the 18-24-year-old segment, 

an absolute Market Leadership position; 







• the debit cards with personalized pictures were very successful: 

200,000 applications since their launch in June 2006. 

Dexia’s personalized cards were the first issued on the Belgian 

market. 

• “Dexia Direct Net”: more than 500,000 customers are now 

handling their banking transactions via the internet. The 

number of contracts has risen by 50% in 2006. 

Since 2006 Dexia has been making intensive preparations for 

the forthcoming introduction of the unified payment system 

known as the Single Euro Payments Area (SEPA) in 2008. 

Private Banking 

2006 was again a good year for Private Banking. Total customer 

assets reached EUR 45.4 billion, up 12.5%, double digit 

growth being experienced in many products. For instance, the 

cash management activity was up 24.3% and the structured 

products were up 12.5%. Mutual funds were a little weaker 

as a consequence of the negative market effect in the second 

quarter of 2006, but nevertheless recorded a very satisfying 

5.7% increase. 

Customers particularly appreciated bond issues tailored to 

meet their needs in terms of duration and return rates. 

A dedicated call center – “Dexia Direct Private” – for customers 

willing to manage their funds by themselves was put in 

place. This service provides access to accurate and up to date 

market information. 

Customer liabilities 

With the overall positive climate of 2006 reinforcing household 

confidence, loans to retail and private customers saw a 

significant 11.8% increase, to EUR 30.9 billion. The rise in 

private banking was even greater (+21.5% to EUR 3.3 billion). 

Mortgage loan activity, which benefited from a stronger 

client appetite as a result of increasing confidence, rose by 

13.6% to EUR 18.6 billion. The fourth quarter witnessed a 

return to a more normal competitive environment. Consumer 

loans amounted to EUR 2.5 billion at the end of 2006, a 9.8% 

growth. 



CUSTOMER ASSETS & LIABILITIES (1) 

(in billions of EUR) Dec. 31, 2005 Dec. 31, 2006 Variation 

TOTAL CUSTOMER ASSETS & LIABILITIES 149.5 159.2 +6.5% 

Total customer assets 121.9 128.3 +5.3% 

of which 

Balance-sheet products 51.8 53.3 +2.9% 

Off-balance-sheet products 60.5 64.5 +6.7% 

Life Insurance technical reserves 9.6 10.5 +9.4% 

of which in retail banking 81.5 83.0 +1.7% 

Deposits 31.2 30.4 -2.5% 

Savings bonds & term deposits 9.6 10.1 +4.8% 

Bonds issued by the Group 6.5 7.5 +14.7% 

Mutual funds 20.7 20.8 +0.4% 

Life insurance technical reserves 7.2 7.8 +7.6% 

of which in private banking 40.3 45.4 +12.5% 

Total customer liabilities 27.6 30.9 +11.8% 

of which in retail banking 25.0 27.6 +10.8% 

Mortgage loans 16.3 18.6 +13.6% 

Consumer loans 2.3 2.5 +9.8% 

of which in private banking 2.7 3.3 + 21.5% 

(1) Pro forma as Banque Artesia Nederland left the Group in the fourth quarter of 2006. 

The above amounts exclude DenizBank. As of December 31, 2006 the total assets of DenizBank amounted to EUR 3.1 billion and the total customer loans 

amounted to EUR 2.0 billion (including the retail, private and SME activities of DenizBank). 

86 | 




Personal Financial Services posted another satisfying year 

despite the competitive environment in Belgium, particularly 

around the middle of the year in the area of mortgages. Cost 

discipline, good commercial activity and the more advantageous 

effective tax rate altogether brought a satisfactory rise 

of net income – Group share (+13.1%). The additional EUR 

58 million net earnings produced this year came mainly from 

Belgium (EUR 34 million or +11%), Luxembourg (EUR 18 million 

or +14%) and Turkey (EUR 4 million in one quarter only, 

i.e. +68% on the pro forma 2005). 

Total income for the full year reached EUR 2,319 million, an 

increase of EUR 48 million or +2.1% on 2005. This increase 

came from a contrasted environment, both in terms of 

geography and nature of activities. Income grew in Luxembourg 

(EUR +31 million), in Turkey (EUR +13 million pro forma, 

bearing in mind that the contribution was for one quarter 

only), and countries other than Belgium (EUR +13 million), 

whilst it went down in Belgium (EUR -9 million). The slight 

decline in Belgium (-0.5% of the country’s revenue base) was 

caused by the following factors: 

• on the customer asset side, increased volumes generated 

higher revenues which have been slightly mitigated by a low 

margin reduction overall, some products becoming more profitable 

and others less; 

• sight accounts performed very well, pulled both by volume 

increases and higher margins; 

• on the loan side the situation deteriorated as a consequence 

of the negative effect of refunding on the average 

margin on mortgages outstanding, and also because of the 

narrow spreads on originations during the months of intense 

competition. 


Costs rose slightly to EUR 1,627 million, a EUR 19 million 

increase, or 1.2%, which in effect means negative growth in 

real terms. Dexia Bank Belgium continued to reduce the number 

of its branches, which now stand at 1,019 in Belgium, with 

18 branches closed in the second half of the year. The positive 

effects of the integration of Artesia BC being now largely met 

and even exceeded, the bank is now seeking efficiency gains, 

mainly in back office operations. It should be noted that the sale 

of the London based private banking operations has caused a 

EUR 3 million cost increase which will disappear as from 2007. 

Gross operating income reached EUR 692 million, up 4.4% 

in one year. The cost-income ratio continues to improve, from 

70.8% in 2005 pro forma to 70.2% in 2006. 

The cost of risk remained at a very low level, to EUR 32 million 


Tax expense was down 20.2%, to EUR 151 million, mainly 

thanks to the lower effective tax rate. 

The return on economic equity (ROEE) continued to 

improve from 24.6% in 2005 to a very robust 28.8% for the 

full year 2006. 





Costs (1,608) (1,627) +1.2% 

Gross operating income 663 692 +4.4% 

Cost of risk (26) (32) +22.8% 


Tax expense (189) (151) -20.2% 

Net income 448 509 +13.7% 

Minority interests 1 4 x4.5 

Net income – Group share 447 505 +13.1% 





ROEE (2) 24.6% 28.8% 



(2) Return on economic equity (net income – Group share/allocated equity – Group share). 


ASSET MANAGEMENT 





Dexia Asset Management (Dexia AM) specializes in the management 

of collective funds and institutional and private 

mandates. Top-class asset manager at the European level, 

Dexia AM manages more than EUR 100 billion over a complete 

range of investment vehicles: trend following management, 

alternative funds and sustainable investments. Dexia 

AM operates management centers in Brussels, Luxembourg, 

Paris and Sydney, and spreads its marketing teams throughout 

continental Europe. 

ACTIVITY 

2006 was a very successful year for Asset Management activities, 

with the expansion of the international coverage, numerous 

awards won, volumes exceeding the EUR 100 billion threshold 

and the excellent performances and operating ratios. 

Dexia Asset Management has carried out its international 

expansion in continental Europe with the opening of a 

branch in Germany, a springboard for further growth into 

Central and Eastern Europe. A representative office opened 

also in the Kingdom of Bahrain, as part of the strategy of 

growth in the Middle East region. The strong investment 

performances were once again rewarded by the attribution 

of many five and four stars to funds and some awards (i.e. 

“Dexia Sustainable European Balanced Low” was given two 

awards by Lipper in France, “Dexia Equities B EMU Value” 

won the Standard & Poor’s award in Switzerland, “Dexia 

Bonds Euro Short Term” received an award by Lipper Europe 

and so on). Dexia Asset Management had 60% of its funds 

placed in the first two quartiles in Standard & Poor’s ranking 


Concerning volumes, asse s under management reached 

EUR 105.2 billion at year end, up 16.1% (EUR 14.6 billion) 

in one year. Over the twelve months of 2006, the company 

collected EUR 10.0 billion net new cash (+11.0%) while 

EUR 4.6 billion (+5.1%) came from a positive market effect. 

Total assets under management stemming from institutional 

mandates reached EUR 28.6 billion, a 31.4% increase in 

one year, the new cash coming for a large part from pension 

schemes and insurance companies (EUR 5.5 billion out 

of the EUR 6.8 billion total increase). Similarly, the progression 

of institutional mutual funds has been very satisfactory, getting 

to EUR 24.6 billion, up 29.1% since December 31, 2005. 

The net new cash stemming from those was largely pulled by 

money market and event-driven funds (Merger & Acquisitions 

activities or equivalent). The volumes of the private mandates 

increased by 16.6%, while the growth of the retail funds was 

+3.2%. As of December 31, 2006 total assets under management 

distributed by Dexia Asset Management (Dexia AM) 

sales teams amounted to EUR 45.4 billion, a very strong EUR 

11.1 billion increase during the year. France was the first contributor 

in terms of net new cash realized, followed by the 

ASSETS UNDER MANAGEMENT (1) 

(in billions of EUR) Dec. 31, 2005 Dec. 31, 2006 Variation 

TOTAL 90.6 105.2 +16.1% 

By type of management 

Mutual funds 64.2 71.2 +10.8% 

Institutional funds 19.1 24.6 +29.1% 

Retail funds 45.2 46.6 +3.2% 

Private mandates 4.6 5.3 +16.6% 

Institutional mandates 21.8 28.6 +31.4% 

By type of mutual fund 

Equity funds 11.2 13.5 +20.8% 

Bond funds 18.8 19.2 +2.1% 

Money market funds 10.2 11.5 +13.2% 

Alternative funds 5.8 8.0 +37.5% 

Global balanced funds 9.7 10.8 +11.1% 

Structured products 3.2 3.4 +5.7% 

Other 5.3 4.8 -8.7% 

(1) Assets under the management of Dexia Asset Management. Assets counted twice included. 

88 | 



Australian and the Italian teams. The money market and equities 

products represented more than 50% of Dexia AM net 

new cash in 2006. 

Dexia AM continues to show a very good productivity ratio, 

with costs representing 13 basis points of assets under management, 

one of the lowest levels in the industry. 

Today, Dexia AM covers a large number of asset classes via 

a significant number of very efficient investment processes. 

Fixed income and money market investments represented 

41.1% of assets under management, equity investments 

21.2% and alternative investments the balance. With 13.4% 

(or EUR 14.3 billion) of its total assets under management in 

Socially Responsible Investment (SRI), Dexia Asset Management 

was awarded the “Sustainable Asset Manager of the 

Decade” by BANCO, a Swiss asset management magazine, 

recognizing its leadership in sustainable investment in continental 

Europe over the last decade. As a pioneer in SRI, 

Dexia AM created in 2006 its SRI Advisory Board which will 

assist the continuous development of the SRI approach and 

analysis. 


The Asset management business has experienced a very good 

year 2006, with net income – Group share amounting to 

EUR 104 million, up 31.7% compared to 2005. 

The total income was up 28.2% (or EUR +55 million) to 

EUR 253 million, a very robust progression mainly stemming 

from: 

• a continuous and steady increase of management fees (+22% 

year on year or EUR +36 million) reaching EUR 197 million in 

2006; and 

• relative performance fees going up to EUR 43 million in 2006 

from EUR 17 million in 2005. 

The revenue increase was even stronger quarter to quarter, as 

a consequence of the relative performance fees, the amount of 

which in Q4 06 was twice higher than that of Q4 05. 

Costs were up (+24.9% in one year, or EUR 27 million), in 

conjunction with the strong development of the activity. In 

particular, new sales offices were opened (in Sweden, Germany 

and Bahrain) to develop business with institutional 

clients. Staff headcounts increased by 57 in 2006, adding to 

the recruitments made in 2005. Lastly, the variable compensation 

followed the trend of the relative performance fees. 

Despite the increase, the cost per unit of asset managed was 

kept at the low level of 13 basis points. 






Income 198 253 +28.2% 


Costs (111) (138) +24.9% 


Cost of risk 0 0 n.s. 


Tax expense (7) (9) +21.3% 






ROEE (2) 90.8% 92.2% 

Total allocated equity (average) 87 112 




INSURANCE SERVICES 




This analytical segment only covers the results of the “factory” 

operations, therefore without the results from distribution 

activities, which are accounted for in the business lines 

where the insurance products are sold: mainly Personal Financial 

Services and Public/Project Finance. 

For a more significant and complete reading of the contribution 

of the insurance activities throughout the Group, please 

refer to the Focus on insurance activities across the Group 

on pages 91-92. 

Net income – Group share of the segment reached 

EUR 94 million in 2006 (+12.1% on one year). This 

EUR 11 million increase stemmed from a higher level of 

income (EUR +13 million in one year), due to different factors 

in opposite directions: 

• higher financial revenues coming from increased outstanding 

amounts in Branch 21 products; 

• higher technical provisions; 

• increasing interests on attributed economic equity, 

• less commissions received on Branch 23. 

Given the infra-year volatility in this business segment, the 

‘year-to-date’ reading is more appropriate than the quarterly 

reading. 

Costs are increasing (+12.1%) and reached EUR 140 million 

at the end of 2006, due to an increase of members of staff in 

the French operations (linked to the strong business development 

of Dexia Epargne Pension) and more specifically to a 

new IT platform for the nonlife activity. 







of which net commissions (169) (190) +12.4% 

Costs (125) (140) +12.1% 

Gross operating income 90 88 -2.3% 

Cost of risk 0 (1) n.s. 


Tax expense (4) 8 n.s. 


Minority interests 2 1 -37.9% 



ROEE (2) 12.4% 11.2% 






FOCUS ON THE INSURANCE ACTIVITIES 

ACROSS THE GROUP 

(EXCLUDING FSA AND DEXIA SOFAXIS) 

Dexia Insurance Services (DIS) consolidates the various insurance 

subsidiaries (with the exception of FSA and Dexia Sofaxis) 

and represents thereby 86% of the total insurance revenues 

generated at Group level. 

DIS is active mainly in Belgium, Luxembourg and France, the 

core market being Belgium. Further development is awaited in 

Turkey as the insurance company Global Hayat was bought by 

DenizBank shortly after the acquisition by Dexia. 

DIS supplies all the life and nonlife insurance products sold in 

the retail networks of the Group in those countries whether 

through own captive networks like in Belgium and Luxembourg 

or through partnerships like in France. 

On the Belgian market, Dexia focuses on the distribution of 

insurance products in three networks: 

• Dexia Bank Belgium branches which distributes life and nonlife 

products under Dexia brand; 

• the exclusive DVV consultants under the well-known brand 

name of DVV; 

• the direct insurer Corona Direct that provides life and nonlife 

products to families and private consumers without using intermediaries 

or through affinities with the car industry. 

Dexia’s market share in Belgium was 8.4% in 2005 on life insurance 

premiums and 4.2% on nonlife insurance premiums. 

In Luxembourg, the distribution of the insurance products is 

mainly realized through Dexia-BIL’s network, while in France, 

Dexia Epargne Pension (DEP) and Dexia Prévoyance (DP) handle 

their distribution respectively through partnerships with 

third party sales networks and own sales forces supported by 

a call center. 

If insurance activities are carried out in both Public/Project 

Finance (PPF) and Personal Financial Services (PFS), they are for 

the time being included in these business lines for their “distribution 

function”, whilst the “Insurance Services” segment handles 

the “manufacturing” functions, and generates essentially 

technical and financial revenues. As from January 1, 2007, the 

Insurance Services segment will be reallocated to the business 

lines concerned by the operations realized, introducing this way 

100% of the insurance revenues to PPF and PFS. 

Total gross premiums collected in 2006 through DIS reached 

EUR 3,774 million of which life insurance activity generated 

89% and nonlife insurance activity originated 11%. 


TOTAL GROSS WRITTEN PREMIUMS 


TOTAL PREMIUMS (BY TYPE) 3,635 3,774 +3.8% 

Nonlife 415 426 +2.8% 

Life 3,221 3,347 +3.9% 

Branch 21 (classical life included) 2,485 2,915 +17.3% 

Branch 23 (unit-linked contracts) 646 332 -48.6% 

Branch 26 (guaranteed/public sector) 90 101 +12.3% 

TOTAL PREMIUMS (BY BUSINESS LINE) 3,635 3,774 +3.8% 

Public/Project Finance (PPF) 625 621 -0.5% 

Personal Financial Services (PFS) 2,595 2,403 -7.4% 

Insurance Services 415 750 +80.4% 




Personal Financial Services, the leading collector of premiums 

in the Group, generated 64% of the total. Public/Project 

Finance and Credit Enhancement collected 16% of total premiums 

among the institutional clients, local authorities and 

other local public sector organizations. The remaining 20% 

came directly from the Insurance Services segment as it stands 

currently. 

The commercial activity was essentially focused on life 

insurance premiums (up 3.9%), while nonlife premiums 

growth was more limited (+2.8%). Globally, Dexia produced 

more Branch 21 products premiums and less Branch 23 products 

(unit-linked contracts) premiums in 2006 compared to 

2005. This trend has to be correlated to the active commercial 

campaigns realized throughout the year, the successful training 

programs conducted with the Dexia Bank Belgium agents 

and DEP very good performances. 

Geographically, 61% of life insurance premiums have been 

collected in Belgium and 39% came essentially from France 

and Luxembourg. The percentage of premiums collected outside 

Belgium rose from 30% in 2005 to 39% in 2006, with 

volumes growing by more than 30% in one year. The progression 

was particularly strong in France, with the expansion of 

Dexia Epargne Pension (+64%). 

The weight of Belgium in DIS life production generates a 

discrepancy when looking at both the premium and the revenue 

progression on 2005, because the Belgian business had 

to cope with the introduction of a new tax since January 1, 

2006. For the same reason, the production in Personal Financial 

Services decreased by EUR 192 million compared to 2005, 

as clients anticipated the new 1.1% tax on insurance products, 

which has boosted the production in the fourth quarter 

of 2005. The commercial campaigns conducted at the end 

of 2006 were efficient but not sufficient to match the exceptional 

level of production of Q4 2005. The expansion of the 

nonlife production was mitigated by the sale of Flexia in the 

third quarter of 2006. 

The premiums collected in Public/Project Finance remained 

stable compared to 2005. Consequently, it is in the Insurance 

Services segment itself that the increase in premiums was the 

highest (+80.4% or EUR 335 million). This is attributable to 

the peaking production of DEP thanks to its very successful 

partnership strategy. 

In 2006, DIS generated EUR 394 million of total revenues, up 

3.8% on 2005 despite the negative impact of the introduction 

of the new 1.1% on life insurances in Belgium which 

caused revenues to come down 4 percentage points (as the 

entry fees were lowered in addition to the incentives offered 

during commercial campaigns). Those revenues were further 

impacted by several factors in opposite directions of which: 

• the strong outstanding increase of Branch 21 products and 

the favorable effects of customers’ appetite for some products 

(e.g. Safe Invest Bonus); 

• the positive influence of low nonlife claims; 

• lower commission income on Branch 23 products as the 

outstanding amounts decreased in 2006; 

• higher technical provisions in order to cover and guarantee 

the reserves dedicated to the discretionary participation 

features of the contracts, so as to be in line with competition 

– this last item explains the steep reduction of the income in 

the fourth quarter of 2006. 

The increase of the costs reflects both higher staff numbers in 

the French operations, linked to the strong business developments 

made within Dexia Epargne Pension, and the various 

investment projects conducted through Dexia Insurance Belgium, 

notably a new IT platform in the nonlife activity. Taxes 

decreased in 2006 (EUR -11 million) partially due to the lower 

effective tax rate. 

The net income – Group share reached EUR 142 million, a 

satisfying 10.3% progression in one year. 

UNDERLYING RESULTS OF DEXIA INSURANCE SERVICES 


Revenues 379 394 +3.8% 

Costs (220) (233) +5.5% 

Taxes and other (31) (20) -35.3% 

NET INCOME – GROUP SHARE 128 142 +10.3% 


INVESTOR SERVICES 


RBC Dexia’s strategy for the first 12 months of its joint venture 

was characterized by two dominant themes: ‘Integration’ 

and ‘Growth’. The integration of the two companies has 

gone exceedingly well. The expanded range of products and 

services resulting from the joint venture continues to provide 

clients with new and innovative benefits. RBC Dexia is proud 

of the overwhelming client commitment demonstrated in 

year one. 

ACTIVITY 

RBC Dexia Investor Services offers its expertise in global custody, 

fund and pension administration and shareholder services 

to institutions around the world. Established in January 2006, 

RBC Dexia Investor Services is a joint venture equally owned by 

Royal Bank of Canada and Dexia. The company ranks among 

the world’s top 10 global custodians, with USD 2.3 trillion in client 

assets under administration. As a top-ten global custodian, 

RBC Dexia Investor Services has the capacity to service larger 

and multi-jurisdictional mandates. This scale offers a strong 

potential for efficiencies in subcustody networks, vendor management, 

IT, product development and operations. 

RBC Dexia Investor Services has a deep rooted experience 

in institutional financial services. The company offers products 

and technology that meet clients’ present and future 

needs in 14 global markets supported by a worldwide network 

of offices in 15 countries on four continents. Rated Aa3 

(Moody’s) and AA- (S&P), it has unparalleled European transfer 

agency capabilities and top ratings for clients services in 

industry client satisfaction surveys. 

RBC Dexia Investor Services provides clients an extensive 

range of solutions including: global custody, fund and pension 

administration, shareholder services, distribution support, 

reconciliation services, transition management, investment 

analytics, compliance monitoring and reporting, securities 

lending and borrowing, treasury services and commission 

recapture. 

RBC Dexia Investor Services’s commitment to quality and 

consistency of service has generated numerous awards. In 

2006, the company was named #1 global custodian in the 

World by Global Investor magazine for the third consecutive 

year, and #1 global custodian in the World for the second 

consecutive year by R&M Consultants. RBC Dexia was also 

awarded “Transfer Agent of the Year” and “Client Relationship 

Manager of the Year” at the ICFA European Awards. 

In terms of growth, new clients around the world such as 

Manulife Financial in Canada, and Great West Life in the 

UK, Ireland, Canada and Isle of Man have demonstrated 

their confidence in the unique brand of value created by the 

company. 

Total assets under administration amounted to USD 2,290 

billion as of December 31, 2006, a 27.5% increase over the 

previous year. This robust growth comes from both the appreciation 

of stock indices and strong growth from existing and 

new clients. 

For the transfer agency, the number of shareholder 

accounts rose by 10.4% over the year due to both the 

wider range of products offered since the joint venture 

and also to the strong commercial activity. RBC Dexia 

has been selected by many large institutions to provide 

fund administration services, including Manulife Financial 

Corporation in Canada for its CAD 26 billion portfolio of 

funds. 

The number of funds under administration has grown by 

20.0% since the inception of the joint venture, due to strong 

commercial activity and new funds contributed by existing 

clients. For example, RBC Dexia’s commitment to service 

excellence, led Goldman Sachs JBWere to choose the new 

company as fund administrator and transfer agent for its 

AUD 8 billion portfolio of funds in Australia. 




INVESTOR SERVICES (1) 2005 2006 Variation 

Assets under administration (2) (in billions of USD) 1,796 2,290 +27.5% 

Number of funds under administration 3,898 4,679 +20.0% 

Number of shareholder accounts in transfer agent (in thousands) 5,783 6,385 +10.4% 

(1) Activity statistics of the joint venture RBC Dexia Investor Services which is effective since January 1, 2006. The 2005 figures are pro forma. 

(2) i.e. assets under custody, administration and transfer agent. 







For its full first year of existence, RBC Dexia recorded a very 

promising start. The net income – Group share reached 

EUR 81 million, up 51.4% or EUR 28 million over the 2005 

pro forma results (the currency impact is not significant). 

Total income was up 18.9%, to EUR 371 million despite 

a rather competitive environment. Those good results stem 

from the strong organic growth of the second and the third 

quarters and from the very dynamic commercial activity. 

Costs were up 8.4% for the full year, a level much lower than 

the income growth rate and thus quite satisfactory, bearing in 

mind that investor services are staff and IT intensive activities. 


In particular, the winning of a large mandate in Australia has 

led to the setting up of the desirable infrastructure – hence 

expenditures without corresponding revenues for the time 

being. Moreover, the exceptionally good commercial performance 

coming so early has led to awarding well-deserved 

bonuses to the teams. The cost-income ratio thus improved, 

from 73.7% in 2005 to 67.2% in 2006, with income growing 

more than twice faster than costs, an achievement which 

exceeds the stated mid-term objective. 

The return on economic equity (ROEE) also experienced a 

good progression, to a high 108.0% from 97.1% one year 

before, bearing in mind that this business is much less capital 

intensive than other financial services generally. 





Costs (230) (249) +8.4% 




Tax expense (28) (38) +38.8% 





ROEE (2) 97.1% 108.0% 





TREASURY AND FINANCIAL MARKETS 

TREASURY AND FINANCIAL 

MARKETS (TFM) 

2006 was the first year of TFM’s new organization, set on 

three business pillars: 

• Fixed Income which is involved in all credit spread activities; 

• Market Engineering and Trading which regroup all competences 

in the sectors of interest rates, forex and equities; 

• Group Treasury which is in charge of the financial management 

of Dexia balance sheet. 

This new organization aims at increasing the number of 

financial market products offered to the different customers 

of Dexia (public finance, retail and private banking), develop 

TFM’s own clientele and manage Dexia Group and the entities 

balance sheets. Of note, Dexia Capital Markets has been 

D E 

A 

rewarded for its efficiency in 2006 and has been designated 

as “best lead manager of regional/ municipal bonds“ by 

its peers, in the EuroWeek magazine of January 2007. This 

award is good recognition of the increasing position of Dexia 

on intermediation’s field, the quality of its products and the 

involved teams in TFM and PPF. 

A new long-term strategy for TFM (TFM+) was launched with 

a view to increasing the contribution of this activity in Dexia 

revenue stream. TFM+ aims at using all of Dexia’s strengths: its 

very good knowledge of certain asset classes, its origination 

capacity, and its know-how in balance sheet management. 

For this purpose, the IT system in all dealing rooms is in the 

process of being harmonized, allowing a better front-to-back 

approach and more integrated transactions. 

ACTIVITY 

Following the high level reached in 2006, Group Treasury 

activities were again very buoyant in 2006, supporting the 

growth of the Group’s balance sheet. The long-term bonds 

issued represented a total of EUR 29.9 billion for the full year 

2006 (against EUR 29.7 billion in 2005). EUR 18.6 billion bear 

the AAA signature of Dexia Municipal Agency (DMA) or Dexia 

Kommunalbank Deutschland. The private placements represented 

50% of the total issuance volumes in 2006, of which 

70% through the AAA issuers, despite a rather difficult market 

environment in the fourth quarter for the AA issuers. The 

public placement activity remained important in 2006, with 

almost 28% of the total issuances of the Group. In this area, 

DMA made a warmly welcomed comeback on USD transactions 

by top quality investors, leading to a second issue which 

was largely oversubscribed. The retail-oriented bond activity 

accounts for nearly 20% of the total issuances of the Group, 

LONG-TERM ISSUES 

(IN BILLIONS OF EUR) 




C 

B 

29.7 

AAA-rated AA-rated 

Total 

4.5 29.9 

Other 

3.0 DBB (1) 

3.9 

DCL (1) 

6.7 

CREDIT SPREAD PORTFOLIO 

QUALITY (AS OF DECEMBER 31, 2006) 

OUTSTANDING AMOUNT: 


11.8 

DMA (1) 

DKD (1) 

A A 20.6% 

B AA 26.0% 

C AAA 52.1% 

D BBB 1.2% 

E NON-INVESTMENT GRADE 0.1% 

Issues 

in 2005 

Issues 


(1) DMA: Dexia Municipal Agency; DKD: Dexia Kommunalbank Deutschland; 

DCL: Dexia Crédit Local; DBB: Dexia Bank Belgium. 






of which Dexia Crediop represented more than 50% in a 

context marked with a new law relating to savings, imposing 

to provide a detailed prospectus for bank issues. The average 

cost of the long-term issuances in 2006 has decreased, 

around two basis points lower than in 2005, thanks to the 

good performance of the AAA Dexia issuers. 

Regarding the cash & liquidity management activity – whose 

first objective it is to meet the Group short-term financing 

need through different instruments such as commercial paper, 

certificates of deposit, the inter-bank market... – 2006 was a 

good year, with volumes exceeding the 2005 heights. Shortterm 

issuances decreased due to a lesser appetite from investors, 

while on the contrary, central bank deposits increased 

by more than 50% and the interbank activity was 28% up 

between June 2006 and December 2006. 

The Fixed Income business encompasses mainly the Credit 

Spread Portfolio (CSP) activity, which benefited from very 

good market opportunities in 2006. The new investments 

represented EUR 21.7 billion, close to the 2005 record 

level. In 2006, investments were concentrated on sectors 

which are future Basel II winners such as covered bonds, 

AMS/MBS or Negative Basis Trades. The investment portfolio 

increased from EUR 62.9 billion at the end of 2005 

to EUR 74.0 billion at the end of December 2006. About 

99% of the portfolio is rated investment grade and 75% 

is rated AA- or better. In the CSP, the investment lines are 

essentially classified in the available-for-sale (93%) and 

hold-to-maturity (1%) categories, the remaining portion 

is classified in trading. Regarding the securitization activity 

in Europe, where Dexia acts as an advisor, arranger 

and/or underwriter, the business performed very well with 

24 underwritings in 2006 compared to 16 in 2005. Dexia 

closed the first ever public securitization transaction of 

wrapped infrastructure bonds in 2006 (the “WISE” transaction) 

for an amount of EUR 2.2 billion; a transaction using 

the expertise of Dexia in the Public Finance sphere and in 

the financial markets. This transaction will allow reducing 

the amount of regulatory capital and allow Dexia to further 

enhance its leading position in financing the PFI/PPP and 

infrastructure sectors. In the United States, the securitization 

activities consist essentially in originating commercial 

mortgage loans before securitizing them. The production 

reached EUR 2 billion with 8 transactions, with attractive 

returns. 

The Market Engineering and Trading regroups notably 

teams focusing on the supply of structured products to 

Personal Financial Services clients, institutional clients and 

public sector clients. Those activities were particularly successful 

in 2006. In Belgium, the appetite for structured 

Eurobonds was high, resulting in significant volumes. The 

structuring desk registered a record in terms of production 

volume focused on debt restructuring in France, in Germany 

and in the United Kingdom. Market Engineering and 

Trading also includes the Equities desks in Paris and Brussels 

and the Foreign Exchange activity line which support and 

work with the other business lines and the different entities 

of the Group. 

Finally, it should be reminded that TFM is not only a strong 

revenue generator on its own, but also an important support 

unit for the other business lines and for the Group as a whole 

regarding balance-sheet management. As such, the amount 

of indirect revenues stemming from this close cooperation 

which are booked in the other business lines is estimated at 

EUR 469 million for 2006 (against EUR 359 mil lion in 2005). 

96 | 




Treasury and Financial Markets (TFM) had once again a very 

good year in 2006. The net income – Group share reached 

EUR 308 million, up 11.2% on 2005, which was a record year. 

Fixed Income activities (of which mainly the Credit Spread Portfolio) 

was the main contributor to TFM’s net income (73%), 

the balance being equally split between Market Engineering 

and Trading (MET) (13%) and Treasury (14%). 

Total income for the full year 2006 amounted to EUR 561 

million, up 11.5%. This very good progression stems mainly 

from the MET segment, with a EUR +54 million growth as 

compared to 2005. The Public Finance Market Engineering, 

the Personal Financial Services Engineering (PFSE), Foreign 

Exchange and Equities activities performed particularly well. 

Of note, a part of this income growth has to be analyzed 

in parallel with the increase of the tax expense, as explained 

below. The Fixed Income segment contributed for EUR +22 million 

with notably Credit Spread Portfolio achieving a very 

successful year. Finally, the Treasury segment experienced a 

negative contribution due to the interest rates movement 

during the year 2006. 

Costs remained unchanged compared to 2005 to EUR 176 million. 

This very good achievement is related to the equity-brokerage 

activities in France, which were restructured in 2005, 

bringing down the cost base in 2006. It is worth mentioning 

that this activity came back to profitability in 2006. Without 

this effect, the costs would have increased slightly due 

to some IT expenses and recruitments. Thus, the underlying 

cost-income ratio decreased from 34.8% in 2005 to 31.5% 



As a consequence, the gross operating income amounted 

to EUR 384 million, a very robust increase by 17.3%. Of note, 

the quarter-on-quarter trend is also very good with a 19.5% 

increase. 

Cost of risk remained at a historic low level close to zero. 

Tax expense amounted to EUR 71 million for the full year 

2006, up 53.6% in one year. The rise is more than half 

explained by the increase of gross operating income, and for 

the largest remaining part by MET’s arbitrage strategies. To 

recall, those strategies embed cash and derivative instruments 

whose value changes can cause simultaneously revenue and 

tax increases if they go in one direction, or revenue and tax 

reductions if they go in the opposite direction. The impacts 

in 2006 were a EUR 11 million tax progression linked to a 

EUR 17 million revenue increase within the Equities and PFSE 

activities. 

The return on economic equity (ROEE) declined slightly to 

stand at the satisfactory level of 22.0%. 







Costs (175) (176) +0.7% 




Tax expense (47) (71) +53.6% 


Minority interests 5 5 -7.6% 




ROEE (2) 25.8% 22.0% 



(2) Return on economic equity (net income – Group sahre/allocated equity – Group share). 


GENERAL INFORMATION 




GENERAL 

INFORMATION 

1. AUTHORIZED CAPITAL 

(ARTICLE 608 OF THE COMPANY CODE) 

The authorized capital was renewed by resolution of the 

Extraordinary Shareholders’ Meeting held on May 10, 2006 

for a further period of five years and up to a maximum 

EUR 4,887,500,000 (excluding issue premium), a resolution 

which entered into force on June 2, 2006. Until that date, it 

was the authorization relating to authorized capital adopted 

by resolution of the Extraordinary Shareholders’ Meeting held 

on June 6, 2001 which was in force. During the 2006 financial 

year, the Board of Directors made use of the authorized 

capital on three occasions, the first two under the authorization 

of June 6, 2001 and the third under the authorization of 

May 10, 2006: 

• at its meeting on May 23, 2006, the Board of Directors 

decided to issue a maximum 10,500,000 warrants within the 

context of the 2006 Dexia stock option plan (“ESOP 2006”), 

with a withdrawal of the shareholders’ preferential subscription 

right in favor of Group members of staff who are beneficiaries 

of that plan. Of the maximum 10,500,000 warrants, 

9,995,225 warrants were effectively issued; 

• at its meeting on May 23, 2006, the Board of Directors 

decided to issue a maximum 16,000,000 new shares, with 

a withdrawal of the shareholders’ preferential subscription 

right in favor of Group members of staff. Of the maximum 

16,000,000 shares, 8,265,504 shares were finally issued; 

• at its meeting on July 6, 2006, the Board of Directors 

decided to increase the capital of the Company by issuing a 

maximum of 80,000,000 new shares, on the condition and 

to the extent of the effective subscription of the new shares 

issued and withdrawal of the shareholders’ preferential subscription 

right, within the context of an accelerated book build 

transaction. The capital increase was observed on September 

11, 2006. Out of the maximum 80,000,000 shares, a total of 

62,176,166 new shares were created. Taking account of an 

accounting par of EUR 4.50 per share, the available balance 

of authorized capital was taken to EUR 4,607,707,253.00 at 

the close of this transaction. This was the only transaction 

carried out in 2006 under the new authorization relating to 

authorized capital adopted by the aforementioned Extraordinary 

Shareholders’ Meeting held on May 10, 2006. 

Details of the conditions and consequences of these issues 

is included in the special reports of the Board of Directors of 

Dexia, copies of which are available on the Dexia Internet site 

under the heading “Legal Information”. 

2. ACQUISITION OF TREASURY SHARES 

(ARTICLE 624 OF THE COMPANY CODE) 

REASON FOR ACQUISITIONS 

Acquisitions of treasury shares by the company during the 

2006 financial year arise essentially from an asset and financial 

management policy, including the optimization of equity 

funding. 

SUMMARY OF TRANSACTIONS OF TREASURY SHARES 

Number of 

Treasury shares (Dexia SA and direct subsidiaries) 

shares in Number Accounting Average % in capital 

Period from circulation of shares par (EUR) exchange as of as of 

December 31, 2005 (subscribed as of value per Dec. 31, Dec. 31, 

to December 31, 2006 capital) Dec. 31, 2006 share (EUR) 2005 2006 

Situation at start 

of period 1,107,469,030 20,546,944 4.50 18.198 1.86% 

Acquisitions 

of the period +2,369,120 4.50 21.106 +0.21% 

Cancellations 

for the period -22,096,720 -22,096,720 4.50 18.756 -2.00% 

Transfers 

over the period -340,004 4.50 12.680 -0.03% 

Issues over the period +77,812,015 

Situation 

at end of period 1,163,184,325 479,340 4.50 10.759 0.04% 0.04% 

98 | 



In accordance with the procedure set out by the Company, 

the Extraordinary Shareholders’ Meeting of Dexia SA held on 

May 10, 2006 decided to cancel 22,096,720 treasury shares 

held by the Company. The cancellation of these shares takes 

place without any reduction of the Company’s share capital, 

which involves an increase in the accounting par of the 

remaining shares. After this cancellation, the Company made 

no more repurchases of treasury shares in 2006. The balance 

of the portfolio of treasury shares indicated in the table on 

the previous page corresponds to the number of Dexia shares 

still held by Dexia Crédit Local (direct subsidiary of Dexia SA 

within the meaning of Article 627 § 1 of the Company Code) 

as of December 31, 2006, within the context of a stock option 

plan put in place by that subsidiary. The movements indicated 

under the heading “Transfers over the period” in the table on 

the previous page result from the exercise of those options. 

3. OVERVIEW OF THE DIRECT 

HOLDINGS OF DEXIA SA 


The 13 direct holdings of Dexia SA as of December 31, 2006 

are as follows: 

• 100% in Dexia Bank SA (Belgium); 

• 100% in Dexia Crédit Local SA (France); 

• 57.66% in Dexia Banque Internationale à Luxembourg SA 

(Luxembourg); 

• 100% in Dexia Management Services Ltd (United Kingdom); 

• 99.99% in Dexia Employee Benefits SA (Belgium); 

• 99.99% in Dexia Participations Luxembourg SA (Luxembourg), 

which holds 42.26 % of Dexia Banque Internationale 

à Luxembourg SA; 

• 100% in Dexia Habitat SA (France); 

• 10% in Dexia Holding Inc., a parent company of Financial 

Security Assurance Holdings Ltd (United States); 

• 8.42% in Dexia Financière SA (Belgium); 

• 100% in Dexia Nederland Holding NV (Pays-Bas); 

• 100% in Dexia Funding Luxembourg SA (Luxembourg); 

• 95% in Dexia Participation Belgique SA; 

• 99.5% in Associated Dexia Technology Services SA 

(Luxembourg). 

Dexia SA has two permanent offices, one in France and one 

in Luxembourg. 

4. LITIGATIONS 

4.1. DEXIA BANK NEDERLAND 

Background 

The difficulties linked to the share-leasing activities of the 

former Bank Labouchere (now Dexia Bank Nederland NV; 

herein-after to be referred to as “DBnl”) appeared at the time 

of the fast and severe fall of the Amsterdam stock market in 

late 2001. The value of the securities used as collateral against 

the loans granted by DBnl proved insufficient in a large 

number of contracts, thus potentially ending with a residual 

debt instead of the gain initially hoped for. 

Reference is made to the detailed disclosures, as contained 

in the Dexia Accounts and Reports 2005 (especially pages 86 

to 88) and in the Activity Reports published during the year 

2006. 

“Binding force” to the Duisenberg Arrangement 

On April 29, 2005, the announcement was made that the 

mediation undertaken by Mr Wim Duisenberg had been 

successful. DBnl entered into a general settlement with the 

Foundations Leaseverlies and Eegalease, the Consumentenbond 

(Dutch Consumer’s Association) and the Vereniging 

van Effectenbezitters (Dutch association of security holders), 

herein after to be referred to as “the Interest Groups”. 

After a positive response by an overwhelming majority of the 

share-leasing contract holders who joined the foundations 

Leaseverlies (82% of those replying) and Eegalease (78% of 

those replying), the settlement agreement between DBnl and 

the Interest Groups was signed on June 23, 2005. As a result 

of this Duisenberg Arrangement, the collective proceedings 

that had been filed by the Interest Groups against DBnl have 

been set aside. 

DBnl has made it clear to all parties concerned that its willingness 

to enter into the Duisenberg Arrangement entails no 

admission of responsibility. 

DBnl’s costs and provisions arising from the Duisenberg 

Arrangement have been recalculated each quarter on the 

basis of prevailing market data and client conduct. 

The Duisenberg Arrangement has been effective since October 

2005. Its conditions as well as other information regarding 

this Arrangement may be found at www.dexialease.nl. 

On December 31, 2006, more than 62,000 clients holding 

more than 105,000 contracts have accepted settlements 

based on the Duisenberg Arrangement. This figure does not 

include the approximately 200,000 contracts of clients which 

had already ended in another settlement, including a waiver, 

and of which some also potentially benefit from the Duisenberg 

Arrangement. 

On November 18, 2005, DBnl and the Interest Groups have 

filed their joint petition to the Amsterdam Court of Appeal to 

grant binding force to the Duisenberg Arrangement, based 

on the newly introduced “Law on Collective Settlement of 

Mass-Damage”. 

In May 2006, the Amsterdam Court of Appeal held four days 

of public hearing in respect of this joint petition of DBnl and 

the Interest Groups to grant binding force to the Duisenberg 

Arrangement. Over 60 other interest groups and individual 

clients had put up a defence. On June 20, 2006 this court has 

rendered an intermediate decision, including an assignment 

to the Autoriteit Financiële Markten (AFM) – the Dutch regulator 

of the financial markets – to report on the issue whether 

DBnl has actually bought and held the shares necessary in 

respect of the share-leasing contracts. On November 9, 2006, 

AFM has issued the final report that was favorable for the 

position of DBnl. The Amsterdam Court of Appeal has rendered 

the definitive decision on January 25, 2007, granting 

binding force to the Duisenberg Arrangement, which means 









that all relevant clients in respect of the Arrangement who will 

not “opt-out” within six months, will be bound automatically 

to the Arrangement. After mandatory advertisements were 

placed in national newspapers on January 31, 2007, the optout 

period has started on February 1, 2007, until and including 

July 31, 2007. 

The court cases that have been suspended during this trial, 

will be resumed now, but only in case the plaintiffs will file 

an “opt-out”. 

Litigations in general 

A number of disputes have arisen between Bank Labouchere 

and its clients with respect to share-leasing products. Dexia 

has reported on this matter in its earlier annual reports and 

quarterly activity reports. 

As a successor to Bank Labouchere, DBnl is still faced with 

claims which are mainly based on alleged misleading information/error 

with respect to the share-leasing products; failure to 

ascertain whether the share-leasing product is suitable for a 

client in view of his investment experience and objectives and 

his financial situation (“duty of care”); failure to obtain the 

consent of the spouse of the client; false and misleading (oral) 

statements by intermediaries; cold calling; door-to-door sales; 

waivers related to the Dexia Offer not being binding; and violations 

of the Netherlands Consumer Credit Act. 

The disputes are either with individual parties or collective 

foundations (Stichting Leaseleed). They are presented to different 

types of courts or arbitrators, mainly the sub-district and 

district courts, courts of appeal, the Dutch Securities Institute 

(DSI) and the Disputes Committee for the Banking Industry. 

Over 100 clients have issued a complaint to the so-called Disputes 

Committee Duisenberg (Geschillencommissie Duisenberg). 

However, until now only a insignificant number of 

those complaints have resulted in an adjudication. 

In past reports and press releases, Dexia has informed the 

public about significant evolutions. This information is applicable 

on the Dexia website at www.dexia.com. 

On December 31, 2006, DBnl has been summoned in civil 

courts by clients having 13,976 contracts representing 4% of 

the contracts with realized or potential losses, a large majority 

of those in collective proceedings. In 39 of those cases some 

1,700 clients are represented by Leaseproces BV, a profitdriven 

organization recruiting clients with a rather aggressive 

“no cure, no pay” offer. Approximately 22,000 clients summonned 

DBnl by means of Leaseproces BV without starting 

proceedings yet. 

Dutch Securities Institute (DSI) 

In total, approximately 2,500 clients filed complaints at the 

Grievance Committee DSI. According to the latest estimations 

of DBnl, the complaints of at least 2,100 clients will not be 

admitted because of the statute of limitation. The remaining 

number of, at maximum, 400 cases has been postponed. It 

is expected that these will not be heard before a number of 

months after the decision of the Amsterdam Court of Appeal 

of January 25, 2007 to grant binding force to the Duisenberg 

Arrangement. 

At the end of 2006, no DBnl cases were under consideration 

of the Appeals Committee of DSI. 

Depot Lease 

The Duisenberg Arrangement is not applicable to a specific 

group of originally approximately 5,500 clients who have 

entered into share-leasing agreements in connection with 

securities deposit (“Depot Lease”). In April 2005, DBnl introduced 

for the Depot Lease clients a separate solution for the 

Depot Lease clients which has been accepted by more than 

50% of the clients. However, nearly 700 clients with Depot 

Lease challenge the legality of this combination of products in 

court, among which some 390 clients united by the Stichting 

Leaseleed in a collective complaint. 

Assessment 

The purpose of the table on the next page is to give an update 

of the status of the portfolio, and to enable the readers to 

assess the risks linked to possible credit defaults, and outstanding 

and potential future litigations. 

100 | 



PORTFOLIO Number Loan Collateral Excess (+) 

AS OF DECEMBER 31, 2006 of contracts amount or Lack (-) 

(in millions of EUR, unless otherwise stated) 

of collateral 

TOTAL OUTSTANDING PORTFOLIO 133,976 843.3 882.5 +39.1 

- Contracts with sufficient collateral 60,407 295.6 441.5 +145.9 

of which: 

- Contracts with redemption or guaranteed capital 52,713 239.3 381.4 +142.1 

- Contracts without redemption or guaranteed capital 7,694 56.2 60.1 +3.9 

of which: 

- Accepted an agreement (1) 

(and signed a waiver) 4,822 34.1 36.3 +2.2 

- Not accepted an agreement 2,872 22.1 23.8 +1.7 

- Contracts with insufficient collateral 73,569 547.8 441.0 -106.8 

of which: 

- Contracts with redemption or guaranteed capital 5,532 39.6 36.4 -3.2 

- Contracts without redemption or guaranteed capital 68,037 508.1 404.6 -103.6 

of which: 


(and signed a waiver) 41,697 305.8 243.6 -62.2 

- Not accepted an agreement 26,340 202.3 160.9 -41.4 

(1) Either the Dexia Offer, the Duisenberg arrangement or another kind of settlement. 

4.2. LERNOUT & HAUSPIE 

Dexia is concerned in various ways with the bankruptcy of 

Lernout & Hauspie Speech Products (LHSP) and the consequences 

thereof. Initially, plaintiffs acted in all US proceedings 

both against Dexia SA and Dexia Bank Belgium. Meanwhile, 

in all US proceedings a notice of dismissal without prejudice 

has been filed as far as Dexia SA is concerned. Consequently, 

the pending proceedings now only involve Dexia Bank Belgium. 

In the course of 2006 no new proceedings have been 

initiated, either against Dexia Bank Belgium (Dexia Bank) or 


4.2.1. Claim on Lernout & Hauspie Speech 

Products 

Dexia Bank has a claim chargeable to the bankruptcy of LHSP 

for a principal sum of some EUR 30 million for which an 

impairment has been recorded for some EUR 25 million. 

The liquidation of LHSP’s assets is subject to separate proceedings 

in Belgium and in the United States. 

Dexia Bank was claiming a pledge on the business assets of LHSP. 

In a ruling dated April 10, 2006, the Court of Appeal in Ghent 

refused to acknowledge this pledge. Dexia Bank renounced 

to lodge an appeal with the Supreme Court. This means that 

Dexia Bank is now, as an unsecured creditor, unlikely to receive 

any dividend from the Belgian liquidation of LHSP. 

4.2.3. Indictment of Dexia Bank in Belgium in the 

criminal investigation against the LHSP directors 

On June 24, 2003, Dexia Bank announced that it had been 

indicted in the criminal investigation relating to LHSP. The 

indictment of Dexia Bank concerns offences allegedly committed 

between July 2, 1999 and September 1, 2000 by 

Artesia Banking Corporation. 

The investigation is now officially closed and the prosecutor 

has sent a “draft writ of summons” to the parties that are 

likely to be prosecuted, including Dexia Bank. According to 

the draft, Dexia Bank will be prosecuted for various offences, 

among which forgery in the annual financial statements 

of LHSP (valsheid in de jaarrekening/faux dans les comptes 

annuels) and market manipulation (koersmanipulatie/manipulation 

de cours). The draft, which is subject to changes, alleges 

in substance that Artesia Banking Corporation has aided and 

abetted LHSP in the creation of fictitious revenue, by granting 

a USD 20 million loan to Messrs. Lernout, Hauspie and 

Willaert, whilst Artesia BC allegedly knew that the management 

of LHSP would utilize these funds for improper revenue 

recognition. 




4.2.2. Claim on Lernout & Hauspie Investment 

Company 

As of December 31, 2006, Dexia Bank has a claim on Lernout 

& Hauspie Investment Company (LHIC) for an amount 

of some EUR 62 million for which an impairment has been 

recorded for some EUR 57 million. 

As part of the security for its claim, Dexia Bank has a pledge 

on a portfolio of securities owned by LHIC. 






Dexia Bank considers having serious grounds for contesting 

these charges. 

Several parties have introduced a claim for damages in the 

criminal proceedings. The largest civil party is Deminor, representing 

– according to its website – 11,000 shareholders 

of LHSP, with an aggregate amount of alleged damages of 

approximately USD 200 million in principal. There are about 

400 other individuals that have reported themselves as civil 

parties. It is likely that not all of the potential applicants have 

already introduced their claim; those who have done so, have 

in most cases not yet stated and or provided evidence of the 

alleged losses. 

It should be added that in January 2003, Dexia Bank has itself 

lodged a complaint with the examining magistrate against 

persons unknown, claiming compensation. 

As yet it is very difficult to give an opinion on the likely outcome 

of the proceedings or on the level of the financial risk 

which Dexia Bank would face, if the charges brought against 

it were upheld. Dexia Bank underlines its innocence in this 

matter and contests the charges brought against it. 

4.2.4. Civil proceedings against Dexia Bank in 

Belgium 

4.2.4.1. LHSP receivers’ claim 

In July 2005, the receivers of LHSP filed an action against 

twenty-one parties, including Dexia Bank, for an indemnity 

against the net liabilities of LHSP in bankruptcy. According to 

the receivers’ provisional assessment of the claim, the claim 

would amount to approximately EUR 439 million. This claim 

is not likely to have any development until after the end of 

the criminal proceedings because of the principle “le criminel 

tient le civil en état”. 

4.2.4.2. Claim by individuals 

Certain civil claims have been filed by groups of investors in 

LHSP shares against various parties, including Dexia Bank. The 

main claim was filed by Deminor on behalf of 4,941 investors. 

The claimants seek damages for their losses, which have not 

been assessed yet. These claims, to a large extent duplicative 

of the claims introduced in the criminal proceedings, are not 

likely to have any development until after the end of the criminal 

proceedings because of the principle “le criminel tient le 

civil en état”. 

4.2.5. Civil proceedings against Dexia Bank in the 

United States 

4.2.5.1. LHSP Litigation Trustee’s claim 

In 2005 the Litigation Trustee for the LHSP Litigation Trust 

filed an action against Dexia Bank. The Litigation Trustee seeks 

to recover damages from Dexia Bank for entering into loan 

transactions, which he claims amount to aiding and abetting 

breaches of fiduciary duty by the LHSP Management. He also 

seeks to disallow or subordinate Dexia’s claims in the US bankruptcy 

proceedings. This action is, essentially, a duplication of 

the above-mentioned LHSP receivers’ claim. 

4.2.5.2. Claims by investors 

Following the announcement of Dexia Bank’s indictment in 

Belgium, several civil claims were introduced in the United 

States against Dexia SA and Dexia Bank arguing that Dexia 

Bank is liable for the losses suffered by LHSP shareholders. 

Dexia Bank disputes the merits of all of these claims. 

a. Class actions 

Two class actions have been brought on behalf of investors 

in LHSP shares against Dexia Bank and a host of other parties 

named in prior litigation, including the principals of LHSP. 

• NASDAQ class action 

The first class action was served on Dexia Bank in February 

and March 2004 in the name of three individuals acting for 

themselves as well as on behalf of a class of purchasers of 

LHSP shares on the NASDAQ stock market between August 

19, 1998 and November 8, 2000. 

Although Dexia Bank is of the opinion that none of the claims 

of the plaintiffs is well-founded, Dexia Bank has, in view of 

the large costs of defence and the uncertainty about the outcome 

of the proceedings, decided to conclude a settlement 

agreement with the NASDAQ class plaintiffs. To this end, a 

memorandum of settlement has been concluded on February 

9, 2007, which in its principal terms provides for the payment 

by Dexia Bank of an amount of USD 60 million in exchange 

for an unconditional release of all claims against Dexia SA and 

Dexia Bank and any of their past or present affiliates, officers 

and employees, relating to purchases or sales of LHSP common 

shares on the NASDAQ Stock Market during the period 

from August 19, 1998 through and including November 8, 

2000 (the “class period”) or to purchases of call options to 

acquire LHSP common shares or sales of put options related 

to LHSP common shares on any United States-based options 

exchange during the class period by all investors who will 

participate in and/or be bound by the settlement agreement, 

without any recognition on behalf of Dexia SA or Dexia Bank 

of any wrongdoing or liability. This settlement is still subject 

to court approval. 

• EASDAQ class action 

In October 2005, a second class action was filed against Dexia 

Bank on behalf of a class of purchasers of LHSP shares on the 

EASDAQ stock market between April 28, 1998 and November 

8, 2000. 

On February 12, 2007, the District court of Massachusetts 

found that the US courts were not the appropriate forum to 

litigate this action and consequently dismissed the claim. The 

EASDAQ plaintiffs have thirty days from the date of the decision 

to lodge an appeal. 

b. Transactional proceedings 

Three separate claims for damages have been filed against 

Dexia Bank by US shareholders that had acquired LHSP shares 

through major corporate transactions. One claim was filed by 

Stonington, the former owner of Dictaphone, a US company 

acquired by LHSP in May 2000 in exchange for LHSP shares 

valued at the time at USD 490 million. The two other claims 

were filed by James and Janet Baker, who had received in the 

spring of 2000 LHSP shares valued at that time at approxi- 

102 | 



mately USD 220 million in exchange for their shares in Dragon 

Systems, and by TRA/Filler Trust, which represents the interests 

of another former shareholder of Dragon Systems, who has 

received LHSP shares valued at the time at approximately USD 

170 million. The writs of summons for these claims do not 

mention the amounts claimed by the plaintiffs, as all of them 

have reserved the right to produce evidence of the extent of 

the alleged losses at a later date. TRA/Filler Trust has however 

specified that the extent of its losses total at least some 

USD 150 million. 

In February 2007, the dispute with Stonington was brought to 

a final end through the conclusion of a settlement agreement. 

On December 31, 2006, the cases against James and Janet 

Baker and TRA/Filler Trust were still in the discovery phase 

(request for production of documents and deposition by parties 

of witnesses). 

4.2.6. L&H Holding 

On April 27, 2004, the bankruptcy receiver of L&H Holding 

summoned Messrs. Lernout, Hauspie and Willaert, along with 

Banque Artesia Nederland (BAN) and Dexia Bank, to pay the 

principal amount of USD 25 million. 

This is connected with a USD 25 million loan granted to 

Mr. Bastiaens by BAN in July 2000 for the purposes of the 

acquisition by Mr. Bastiaens of LHSP shares owned by L&H 

holding. The former Artesia Bank issued a bank guarantee 

in favor of BAN for an amount of USD 10 million. The selling 

price of USD 25 million was credited to three personal 

accounts opened with BAN by Messrs. Lernout, Hauspie and 

Willaert. Taking the view that this money was due to L&H 

Holding, the L&H Holding bankruptcy receiver is claiming its 

repayment. 

Dexia Bank vigorously contests the grounds for these 

applications. 

4.2.7. Banque Artesia Nederland 

In October 2006, Dexia Bank sold its affiliated company Banque 

Artesia Nederland (BAN). In the context of this operation, it 

has been agreed, in essence, that Dexia Bank will bear the 

financial consequences of the LHSP matter for BAN, capped at 

an amount equal to the price paid by the purchaser. 

Most of the pending procedures relate to the loan granted 

by BAN to Mr. Bastiaens (see paragraph 4.2.6., above). They 

include the claim introduced by the receiver of L&H Holding 

both in the criminal investigation relating to LHSP (in the form 

of a burgerlijke partijstelling/constitution de partie civile) and 

before the civil court (see paragraph 4.2.6., above). 

In addition, BAN is involved in a number of procedures pertaining 

to Parvest shares acquired by Messrs. Lernout, Hauspie 

and Willaert with the proceeds of the sale of the LHSP shares 

to Mr. Bastiaens. The investigating magistrate in the Belgium 

criminal case, L&H Holding and KBC Bank have all made claims 

in relation to these shares and proceeded to their provisional 

attachment in the hands of BAN. In addition, the Luxembourg 

Court of Appeals has issued a decision on July 12, 2006 at 

the request of Crédit Agricole Indosuez Luxembourg (CAIL) by 

which BNP Paribas Luxembourg has been ordered to deliver 

the Parvest shares to CAIL by June 30, 2007 or to pay to CAIL 

the countervalue of these Parvest shares on June 30, 2007 

if the latter have not been delivered to CAIL prior to July 1, 

2007. The Luxembourg Court of Appeals has condemned 

BAN to indemnify and hold BNP Paribas Luxembourg harmless 

against any damage deriving from its condemnation. As 

a consequence, BAN is at risk to have to pay BNP Paribas Luxembourg 

the countervalue of the Parvest shares, if the provisional 

attachments on these Parvest shares are not lifted prior 

to June 30, 2007. 

BAN has lodged an appeal against the decision of the court 

of appeals of Luxembourg before the supreme court (cour de 

cassation). 

4.2.8. Provisions and impairments 

On December 31, 2006, the exposure of Dexia Bank on the 

outstanding claims relating to credit facilities granted in the 

Lernout & Hauspie file amounts to some EUR 101 million 

(see paragraphs 4.2.1., 4.2.2. and 4.2.7.). On the same date 

impairments for the Lernout & Hauspie file have recorded for 

a total amount of some EUR 90 million. Dexia Bank expects 

to be able to recover the difference in view of the securities 

provided. 

The relevant provisions have been charged to the 2006 financial 

statements in order to cover the residual risks linked to 

the US cases for which no settlement has been concluded, 

as well as for costs and legal fees related to the whole of 

the L&H procedures mentioned in paragraphs 4.2.1. to 4.2.6. 

above. Dexia strongly challenges the validity and the merits of 

all these claims. 

Dexia does not disclose 

• the amount of the provisions relating to the LHSP US 

legal proceedings for which as yet no settlement has been 

concluded; and 

• the settlement amount reached with Stonington, mentioned 

below in paragraph 4.2.5.2.b. Dexia believes that to 

do so could seriously prejudice the outcome of the still pending 

LHSP legal proceedings. 

4.3. INHERITANCE DUTIES 

The enquiry opened by the judicial authorities on September 

28, 1999 into Dexia Bank and a possible fraud involving 

inheritance duties seems to have ended. Four former executives 

were accused at the end of March 2004. However that 

accusation did not imply the guilt of the persons concerned, 

in whom Dexia maintains its confidence. Dexia Bank confirms 

that the necessary internal audit and IT procedures have enabled 

it to abide by the directives issued in this regard by the 

Banking, Finance and Insurance Commission. There was no 

fundamental development in this file during 2006. 









4.4. FINANCIAL SECURITY ASSURANCE – 

SUBPOENA 

In November 2006, 

• Financial Security Assurance Holdings Ltd. (FSA) received a 

subpoena from the Antitrust Division of the US Department 

of Justice (DOJ) in connection with an ongoing criminal investigation 

of bid rigging of awards of municipal guaranteed 

investment contracts (GICs); and 

• Financial Security Assurance Inc. received a subpoena from 

the US Securities and Exchange Commission (SEC) in connection 

with an ongoing civil investigation of brokers of municipal 

GICs. 

FSA issues municipal GICs through its financial products segment, 

but does not serve as a GIC broker. FSA understands 

that approximately two dozen firms have received subpoenas 

in connection with these investigations. The subpoenas 

request that FSA furnish to the DOJ and SEC records and other 

information with respect to FSA’s municipal GIC business. FSA 

intends to cooperate fully with both investigations. 

5. AGENDAS OF THE SHAREHOLDERS’ 

MEETINGS 

The agendas for the Ordinary Shareholders’ Meeting and the 

Extraordinary Shareholders’ Meeting to be held on Wednesday 

May 9, 2007 in Brussels are available on the Dexia SA 

Internet site: www.dexia.com. 

6. SHARE CAPITAL 

6.1. EVOLUTION OF CAPITAL OVER THE 2006 

FINANCIAL YEAR 

The evolution of capital is presented below in chronological 

order. 

6.1.1. May 10, 2006: modification to the 

representation of capital as a consequence of the 

cancellation and destruction of treasury shares 

The Extraordinary Shareholders’ Meeting of the company 

was held on May 10, 2006 to decide on the cancellation and 

destruction of 22,096,720 treasury shares without any reduction 

of capital, thus modifying the representation of capital of 

EUR 4,887,585,073.42 by reducing the total number of shares 

from 1,107,469,030 to 1,085,372,310 after cancellation. 

a) 13,000 subscription rights of the category of “F1996” warrants 

at a price of EUR 5.95 and 825 subscription rights of the 

category of “F1997” warrants at a price of EUR 8.10. These 

options were issued by the Board of Directors of Dexia SA 

on July 6, 2000, from authorized capital, in favor of certain 

Group members of staff (issue of 76,350 “F1996” warrants 

exercisable at a price of EUR 59.45 and 99,425 “F1997” warrants 

exercisable at a price of EUR 81 and 100,190 “F1998” 

warrants exercisable at a price of EUR 112.67); (1) 

b) 26,060 subscription rights of the category “A1999” warrants 

were exercised at a price of EUR 13.81 and 26,430 

subscription rights of the category “A2000” warrants were 

exercised at a price of EUR 15.17. 

These options had been issued by the Board of Directors of 

Dexia SA on March 14, 2002, within the context of a public 

offer of exchange, with a view to allowing the holders of 

options on shares issued in 1999 and 2000 by Artesia Banking 

Corporation SA (which had merged in the meantime with 

Dexia Bank Belgium), to exchange the options allocated to 

them in 1999 and/or 2000 by Artesia Banking Corporation 

SA for subscription rights issued by Dexia SA and divided into 

categories (“A1999” warrants in exchange for options issued 

by Artesia Banking Corporation during the financial year 1999 

and “A2000” warrants in exchange for options issued by 

Artesia Banking Corporation during the financial year 2000). 

c) 45,000 subscription rights of the category “ESOP 2000” 

warrants were exercised at a price of EUR 14.58. These 

options had been issued by the Board of Directors of Dexia SA 

on May 30, 2000 within the context of the Dexia stock option 

plan for the year 2000 in favor of certain members of staff 

(executives and management) of the Group. 

d) 57,000 subscription rights of the category “ESOP 2001” 

warrants were exercised by their beneficiaries at a price of 

EUR 17.86. These options were issued by the Board of Directors 

of Dexia SA on May 22, 2001 particularly in favor of 

certain member of staff and executives of the Company, its 

subsidiaries, sub-subsidiaries and branches. 

e) 58,966 subscription rights of the category “ESOP 2002” 




certain members of staff and executives of the Company, its 


As a consequence of that exercise, the amount of capital 

of the company went from EUR 4,887,585,073.42 to 

EUR 4,888,607,837.92 represented by 1,085,599,591 shares. 

(1) Number and strike before division by 10. 

6.1.2. June 30, 2006: capital increase – exercise of 

subscription rights (“F1996”, “F1997”, “A1999”, 

“A2000”, “ESOP 2000”, “ESOP 2001” and “ESOP 

2002”) 

A first capital increase by the issue of 227,281 new shares 

with VVPR strips was observed by notarized deed dated June 

30, 2006 and results from the exercise of the following categories 

of subscription rights. 

104 | 



6.1.3. September 11, 2006: capital increase – 

accelerated book building 

A capital increase carried out as part of an accelerated book 

building transaction and giving rise to the issue of 66,176,166 

new shares subscribed at a price of EUR 19.30 was observed 

by notarized deed dated September 11, 2006. 


of the Company went from EUR 4,888,607,837.92 to 


6.1.4. September 29, 2006: capital increase – 

exercise of subscription rights (“F1996”, “F1997”, 

“A1999”, “A2000”, “ESOP 2000”, “ESOP 2001” 

and “ESOP 2002” warrants) 

A capital increase by the issue of 638,709 new shares with 

VVPR strips was observed by notarized deed dated September 

29, 2006 and results from the exercise of the following categories 

of subscription rights: 

a) 26,000 subscription rights of the category “F1996” warrants 

were exercised within the context of the stock option 

plan described in point 6.1.2.a above by their beneficiaries 

at a price of EUR 5.95 and 5,000 subscription rights of 

the category “F1997” warrants were exercised at a price of 

EUR 8.10; 

b) 88,840 subscription rights of the category “A1999” warrants 


plan described in point 6.1.2.b above by their beneficiaries 


the category “A2000” warrants were exercised at a price of 

EUR 15.17; 


warrants were exercised within the context of the stock option 

plan described in point 6.1.2.c above by their beneficiaries at 

a price of EUR 14.58; 



plan described in point 6.1.2.d above by their beneficiaries at 


e) 364,419 subscription rights of the category “ESOP 2002” 

warrants were exercised within the context of the stock 

option plan described in point 6.1.2.e above by their beneficiaries 

including 118,219 at a price of EUR 11.88 (all beneficiaries 

except French beneficiaries) and 246,200 at a price of 

EUR 13.66 (French beneficiaries). 




6.1.5. October 26, 2006: capital increase – exercise 

of subscription rights (“share plan net 2001 + 

Germany”) 

456,738 subscription rights of the category “share plan net 

2001 + Germany” warrants were exercised by their beneficiaries 

at a price of EUR 17.23. These options were issued in 

accordance with the resolution dated June 6, 2001 passed 

by the Extraordinary Shareholders’ Meeting of Dexia SA 

particularly in favor of members of staff of the branch network 

of Dexia Bank Belgium and members of staff of certain 

international subsidiaries and sub-subsidiaries of Dexia SA 

(Germany). 




6.1.6. December 20, 2006: capital increase 

reserved for Dexia Group members of staff (stock 

option plan 2006) – exercise of subscription rights 

(“F1997”, “F1998”, “A1999”, “A2000”, “ESOP 

2000”, “ESOP 2001”, “ESOP 2002” and “ESOP 

2003” warrants) 

The first part of the capital increase on December 20, 2006 

falls within the context of the 2006 shareholding plan aimed 

at all members of staff and all employees of the Dexia Group, 

in accordance with terms similar to those for 2000, 2001, 

2002, 2003, 2004 and 2005 Dexia shareholding plans. In all, 

8,265,504 new Dexia shares with VVPR strips were subscribed 

and issued on December 20, 2006 within the context of the 

2006 shareholding plan. 

It is also to be noted that a total of 197,748 subscription rights 

(of a maximum 1,200,000 issued under suspensive condition 

by the Extraordinary Shareholders’ Meeting of the company 

on May 10, 2006) were also issued on December 20, 2006 in 

favor of employees who had subscribed to the offer providing 

for the free grant of 6 subscription rights for 10 sub scribed 

shares without discount (term of offer only made to employees 

of the self-employed network of branches of the Dexia 

Group in Belgium). 

The second part of the capital increase observed by notarized 

deed dated December 20, 2006 related to the issue of 

3,914,221 new shares accompanied by VVPR strips resulting 

from the exercise of the following categories of subscription 

rights: 





the category “F1998” warrants were exercised at a price of 

EUR 11.27; 

b) 86,275 subscriptions rights of the category “A1999” warrants 




the category “A2000” warrants were exercised at a price of 

EUR 15.17; 









e) 1,598,719 subscription rights of the category “ESOP 2002” 


option plan described in point 6.1.2.e above by their benefici- 









aries including 1,053,095 at a price of EUR 11.88 (all beneficiaries 


EUR 13.66 (French beneficiaries); 

f) 677,000 subscription rights of category “ESOP 2003” 




certain members of staff and executives of the Company, its 


As a consequence of the subscription to the increase of 

capital within the context of the 2006 stock option plan, a 

total of 8,265,504 new shares with VVPR strips were issued, 

and as a consequence of the exercise of subscription rights 

3,914,221 new shares with VVPR strips were issued, on 

December 20, 2006, taking the capital of the company from 

EUR 5,173,330,096.42 to EUR 5,228,138,858.92 (the balance 

being allocated to an issue premium account) represented by 

1,161,050,929 shares. 

6.1.7. December 28, 2006: capital increase – 

exercise of subscription rights (“F1998”, “A1999”, 

“A2000”, “ESOP 2000”, “ESOP 2001”, “ESOP 2002” 

warrants) 

The last capital increase of the year 2006 observed by notarized 

deed dated December 28, 2006, results from the exercise, 

by their beneficiaries, of 2,133,396 subscription rights 

mentioned hereafter, through the creation of 2,133,396 new 

shares with VVPR strips: 


were exercised within the context of the stock option plan 

described in point 6.1.2.a above by their beneficiaries at a 

price of EUR 11.27; 

b) 12,377 subscription rights were exercised by their beneficiaries 

within the context of the stock option plan 

described in point 6.1.2.b above, of which 4,760 at a price of 

EUR 13.81 (“A1999” warrants) and 7,577 at a price of 

EUR 15.71 (“A2000” warrants); 








a price of EUR 17.86 (“ESOP 2001” warrants); 

e) 1,994,200 subscription rights of the category “ESOP 2002” 


option plan described in point 6.1.2.e above by their beneficiaries 

including 1,976,750 at a price of EUR 11.88 (all beneficiaries 


EUR 13.66 (French beneficiaries). 

As a consequence of this capital increase, the company’s 

share capital was increased to 5,237,739,140.92 (the balance 

being allocated to an issue premium account), represented by 

1,163,184,325 shares. 

It is finally to be noted that, by a resolution of the Board of 

Directors of the company passed on May 23, 2006, it was 

decided to issue under the suspensive condition of their effective 

attribution a maximum of 10,500,000 subscription rights 

(“ESOP 2006” warrants) within the context of the 2006 Dexia 

stock option plan reserved for members of staff (including 

members of the management bodies of the Group) of the 

company and its subsidiaries in Belgium and other countries. 

The subscription price of these options was fixed at EUR 18.62 

per subscription right and EUR 20.71 per subscription right for 

options attributed to members of staff and executives who 

carry on their professional activity in the Group’s subsidiaries 

in Turkey. 

106 | 



6.2. SUMMARY TABLE OF DEXIA SUBSCRIPTION RIGHTS (“WARRANTS”) (AS OF DECEMBER 31, 2006) 

Exercise Exercise Number of Number of Number of Number of 

price period subscription subscription canceled residual 

(in EUR) rights rights subscription subscription 

allocated exercised rights rights 

from to because void 

Subscription rights allocated 

in 2000 

“F1996” warrants 5.95 Sept. 3, 2001 Sept. 3, 2006 763,500 748,500 15,000 0 

“F1997” warrants 8.10 May 27, 2002 May 27, 2007 994,250 848,071 146,179 

“F1998” warrants 11.27 May 29, 2003 May 29, 2008 1,001,900 708,090 293,810 

“ESOP 2000” warrants 14.58 Nov. 30, 2000 (1) Dec. 31, 2010 (1) 5,915,000 2,567,953 3,347,047 

“Share Plan Net 2000” warrants 15.88 June 30, 2005 June 30, 2005 1,377,180 1,345,810 31,370 0 


in 2001 

“ESOP 2001” warrants 17.86 June 30, 2004 (1) Dec. 31, 2011 (1) 8,100,000 1,606,969 6,493,031 

“Share Plan Net 2001 + Germany” 

warrants 17.23 Oct. 26, 2006 Oct. 26, 2006 469,524 456,738 12,786 0 


in 2002 

“ESOP 2002” warrants 

(2) 

13.66/11.88 Sept. 30, 2005 (1) July 23, 2012 (1) 10,000,000 4,267,075 5,732,925 

13.66 1,640,726 

11.88 4,092,199 

“Share plan Net 2002” warrants 10.97 Oct. 31, 2007 Oct. 31, 2007 495,096 0 495,096 

“A1999 warrants 13.81 May 1, 2003 (1) July 31, 2007 (1) 1,994,406 1,109,020 885,386 

“A2000 warrants 15.17 May 1, 2004 (1) July 31, 2008 (1) 1,597,184 477,431 1,119,753 


in 2003 

“ESOP 2003” warrants 11.37 Sept. 30, 2006 (1) July 24, 2013 (1) 10,000,000 677,000 9,323,000 

“Share Plan Net 2003” warrants 13.37 Oct. 31, 2008 Oct. 31, 2008 299,676 0 299,676 


in 2004 

“ESOP 2004” warrants 13.56 Sept. 30, 2007 (1) July 24, 2014 (1) 10,000,000 0 10,000,000 






in 2005 

“ESOP 2005” warrants 18.03 June 30, 2008 (1) June 29, 2015 (1) 9,994,950 0 9,994,950 




“ESOP 2006” warrants 18.62 June 30, 2009 (1) June 29, 2016 (1) 9,760,225 0 9,760,225 

“ESOP 2006” warrants DenizBank 20.71 Dec. 15, 2009 Dec. 14, 2016 235,000 0 235,000 

“Share Plan Net 2006” warrants 21.25 Oct. 29, 2011 Oct. 29, 2011 197,748 0 197,748 

(1) Excluding specific conditions. 

(2) EUR 13.66: France/EUR 11.88: other countries. 





6.3. SHARE CAPITAL AS OF DECEMBER 31, 2006 

As of December 31, 2006, the share capital amounted to 

EUR 5,237,739,140.92 represented by 1,163,184,325 shares 

with no nominal value, of which 359,271,947 registered 

shares and 803,912,378 bearer shares. The shares are listed 

on Euronext Brussels, Euronext Paris and the Luxembourg 

Stock Exchange. 

6.4. NOTIFICATIONS UNDER THE LEGISLATION 

ON TRANSPARENCY 

Under the terms of the law of March 2, 1989 on the publication 

of large holdings in companies listed on the Stock 

Exchange and on the basis of article 5 of the Articles of Association 

of Dexia SA, shareholders are obliged to notify their 

holding to the Banking, Finance and Insurance Commission 

and to Dexia, if their equity interest reaches a threshold of 

3%, then 5% or a multiple of 5%. 

For the calculation of holding percentages, the numerator 

consists of the number of effective voting rights and the 

number of future voting rights, potential or not (resulting 

from conversion rights and undertakings in, or subscription 

rights to securities to be issued), held by the person making 

the declaration. The denominator consists of the number of 

effective voting rights and the number of future voting rights, 

potential or not (resulting from conversion rights and undertakings 

in, or subscription rights to securities to be issued) of 


This notification is also obligatory in the following cases: 

• in the event of takeover or sale of a company which must 

itself submit a declaration; 

• in the event of a decrease in voting rights to below one of 

the aforementioned thresholds. 

Moreover, in application of the “Protocol on the prudential 

supervision of the Dexia Group” (see chapter Corporate Governance 

on page 51), Dexia SA has asked its large shareholders 

to inform the company and the Banking, Finance and 

Insurance Commission as soon as possible prior to any of the 

aforementioned transactions. 

A declaration was introduced on the basis of aforementioned 

provisions. The equity interest of Caisse des dépôts et consignations 

exceeded on June 7, 2006 the threshold of 10% 

(10.027%). 


108 | 



CONSOLIDATED BALANCE SHEET 112 

CONSOLIDATED STATEMENT OF INCOME 114 

CONSOLIDATED STATEMENT OF CHANGE IN EQUITY 115 

CONSOLIDATED CASH FLOW STATEMENT 118 

NOTES TO THE FINANCIAL STATEMENTS 119 

NOTE 1. ACCOUNTING PRINCIPLES AND RULES OF CONSOLIDATED FINANCIAL STATEMENTS 119 

NOTE 2. SIGNIFICANT CHANGES IN SCOPE OF CONSOLIDATION AND 

LIST OF MAIN SUBSIDIARIES AND AFFILIATED ENTERPRISES OF THE GROUP DEXIA 137 

NOTE 3. BUSINESS AND GEOGRAPHIC REPORTING 139 

NOTE 4. SIGNIFICANT ITEMS INCLUDED IN THE NET INCOME 140 

NOTE 5. POST-BALANCE-SHEET EVENTS 140 

NOTE 6. LITIGATIONS 140 

NOTE 7. NOTES ON THE ASSETS OF THE CONSOLIDATED BALANCE SHEET 146 

NOTE 8. NOTES ON THE LIABILITIES OF THE CONSOLIDATED BALANCE SHEET 162 

NOTE 9. OTHER NOTES ON THE CONSOLIDATED BALANCE SHEET 172 

NOTE 10. NOTES ON THE CONSOLIDATED OFF-BALANCE-SHEET ITEMS 192 

NOTE 11. NOTES ON THE CONSOLIDATED STATEMENT OF INCOME 193 

NOTE 12. NOTES ON RISK EXPOSURE 202 

BOARD OF STATUTORY AUDITORS’ REPORT TO THE GENERAL SHAREHOLDERS’ 

MEETING ON THE CONSOLIDATED ACCOUNT OF THE COMPANY DEXIA SA 

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2006 213 

110 | 


CONSOLIDATED 

FINANCIAL 

CONSOLIDATED FINANCIAL STATEMENTS 


STATEMENTS 


CONSOLIDATED BALANCE SHEET 

ASSETS 

(in millions of EUR) Notes Dec. 31, 2005 Dec. 31, 2006 

RAPPORT DE GESTION 

CONSOLIDATED 

FINANCIAL STATEMENTS 

I. Cash and balances with central banks 7.2. 3,444 3,365 

II. Due from banks 7.3. 75,053 78,215 

III. Loans and advances to customers 7.4. 192,402 226,502 

IV. Loans and securities held for trading 7.5. 15,655 15,385 

V. Loans and securities designated at fair value 7.6. 13,865 17,184 

VI. Loans and securities available for sale 7.7. 166,204 188,378 

VII. Securities held to maturity 7.8. 3,217 2,260 

VIII. Positive value of derivatives 9.1. 28,632 24,032 

IX. Fair value revaluation of portfolio hedge 1,659 759 

X. Investments in associates 7.9. 778 826 

XI. Tangible fixed assets 7.10. 2,185 2,188 

XII. Intangible assets and goodwill 7.11. 735 2,393 

XIII. Tax assets 7.12. - 9.2. 602 749 

XIV. Other assets 7.13. - 9.3. 4,294 (1) 3,552 

XV. Non current assets held for sale 7.14. 36 955 

TOTAL ASSETS 508,761 566,743 

(1) Cash collaterals have been reclassified in 2005, see note Accounting principles. 

The notes on pages 119 to 212 are an integral part of these consolidated financial statements. 


112 | 


LIABILITIES 


I. Due to banks 8.1. 134,793 174,754 

II. Customer borrowings and deposits 8.2. 97,738 109,484 

III. Liabilities held for trading 8.3. 3,813 578 

IV. Liabilities designated at fair value 8.4. 18,022 21,311 

V. Negative value of derivatives 9.1. 37,652 30,489 

VI. Fair value revaluation of portfolio hedge 966 239 

VII. Debt securities 8.5. 175,685 184,726 

VIII. Subordinated and convertible debt 8.6. 4,985 4,365 

IX. Technical provisions of insurance companies 9,846 12,288 

X. Provisions and other obligations 8.7. 1,320 1,468 

XI. Tax liabilities 8.8. - 9.2. 1,377 1,276 

XII. Other liabilities 8.9. - 9.3. 6,864 (1) 6,545 

XIII. Liabilities included in disposal groups held for sale 8.10. 0 785 

TOTAL LIABILITIES 493,061 548,308 

(1) Cash collaterals have been reclassified in 2005, see note Accounting principles. 

EQUITY 


XIV. Subscribed capital 9.7. 4,888 5,238 

XV. Additional paid-in capital 9,137 10,229 

XVI. Treasury shares (356) (1) 

XVII. Reserves and retained earnings (4,219) (3,783) 

XVIII. Net income for the period 2,038 2,750 

CORE SHAREHOLDERS’ EQUITY 11,488 14,433 

XIX. Gains and losses not recognised in the statement of income 2,596 1,866 


CONSOLIDATED 



TOTAL SHAREHOLDERS’ EQUITY 14,084 16,299 

XX. Minority interests 1,183 1,710 

XXI. Discretionary participation features of insurance contracts 433 426 

TOTAL EQUITY 15,700 18,435 

TOTAL LIABILITIES AND EQUITY 508,761 566,743 



CONSOLIDATED STATEMENT OF INCOME 



CONSOLIDATED 



I. Interest income 11.1. 56,049 73,057 

II. Interest expense 11.1. (52,399) (69,128) 

III. Dividend income 11.2. 129 152 

IV. Net income from associates 11.3. 89 102 

V. Net trading income 

and net result of hedge accounting 11.4. 154 319 

VI. Net income on investments 11.5. 502 1,164 

VII. Commission income 11.6. 1,397 1,560 

VIII. Commission expense 11.6. (225) (253) 

IX. Technical margin of insurance activities 11.7. - 9.3. 208 100 

X. Other net income 11.8. 72 (61) 

INCOME 5,976 7,012 

XI. Staff expense 11.9. (1,586) (1,722) 

XII. General and administrative expense 11.10. (975) (1,105) 

XIII. Network costs (366) (352) 

XIV. Depreciation & amortization 11.11. (247) (252) 

XV. Deferred acquisition costs (55) (50) 

COSTS (3,229) (3,481) 

GROSS OPERATING INCOME 2,747 3,531 

XVI. Impairment on loans and provisions 

for credit commitments 11.12. (52) (124) 

XVII. Impairment on 

tangible and intangible assets 11.13. 0 0 

XVIII. Impairment on goodwill 11.14. 0 0 

(1-2) 

NET INCOME BEFORE TAX 2,695 3,407 

XIX. Tax expense 11.15. (602) (569) 

NET INCOME 2,093 2,838 

Attributable to minority interest 55 88 

Attributable to equity holders of the parent 2,038 2,750 

in EUR 

Earnings per share 11.16. 

- basic 1.87 2.49 

- diluted 1.85 2.45 

(1) of which EUR 280 million result on the sale of Banque Artesia Nederland. 

(2) of which EUR 236 million result on Dexia’s net asset contribution to the joint venture RBC Dexia Investor Services. 


114 | 


CONSOLIDATED STATEMENT OF 

CHANGE IN EQUITY 

CORE SHAREHOLDERS’ EQUITY Subscribed Additional Treasury Reserves Net Core 

capital paid-in shares and retained income for shareholders’ 

(in millions of EUR) capital earnings the period equity 

AS OF DEC. 31, 2004 IFRS 4,825 8,993 0 (3,421) 1,822 12,219 

Impacts of first-time application of IAS 32&39 and IFRS 4 0 0 (584) 681 (1,822) (1,725) 

AS OF JAN. 1, 2005 4,825 8,993 (584) (2,740) 0 10,494 

Movements of the period 

- Issuance of subscribed capital 63 144 0 (2) 0 205 

- Acquisition of treasury shares 0 0 (600) 0 0 (600) 

- Sale and cancellation of treasury shares 0 0 828 (814) 0 14 

- Dividends 0 0 0 (677) 0 (677) 

- Share based payments: value of employee services 0 0 0 26 0 26 

- Variation of scope of consolidation 0 0 0 (10) 0 (10) 

- Net income for the period 0 0 0 0 2,038 2,038 

- Other 0 0 0 (2) 0 (2) 

AS OF DEC. 31, 2005 4,888 9,137 (356) (4,219) 2,038 11,488 


CONSOLIDATED 


GAINS AND LOSSES Gains and losses not recognized in the statement of income Cumulative Total gains 

NOT RECOGNIZED IN Subsidiary securities derivatives associates Translation and losses – 

THE STATEMENT held (AFS) (CFH) (AFS, CFH Adjustments Group share 

OF INCOME for sale and CTA) (CTA) 


AS OF DEC. 31, 2004 IFRS 0 0 0 0 (103) (103) 

Impacts of first-time 

application of 

IAS 32&39 and IFRS 4 0 1,770 (88) 4 11 1,697 


AS OF JAN. 1, 2005 0 1,770 (88) 4 (92) 1,594 


- Net change in fair value 

through equity – 

Available for sale investments 0 991 0 3 0 994 

- Net change 

in fair value through equity – 

Cash flow hedges 0 0 (8) 0 0 (8) 

- Translation adjustments 0 29 0 0 169 198 

- Variation of scope of consolidation 0 (36) 0 0 0 (36) 

- Cancellation of FV 

following AFS disposals 0 (146) 0 0 0 (146) 

AS OF DEC. 31, 2005 0 2,608 (96) 7 77 2,596 



MINORITY INTERESTS Core Gains and losses Minority DISCRETIONARY 

equity not recognized in the interests PARTICIPATION 

statement of income 

FEATURES OF 

INSURANCE 


CONTRACTS 

AS OF DEC. 31, 2004 IFRS 491 (7) 484 0 

Impacts of first-time application of 

IAS 32&39 and IFRS 4 (57) 12 (45) 224 


CONSOLIDATED 


AS OF JAN. 1, 2005 434 5 439 224 


- Increase of capital 717 0 717 0 

- Dividends (25) 0 (25) 0 

- Net income for the period 55 0 55 0 

- Net change in fair value through equity – 

Available for sale investments 0 36 36 209 

- Translation adjustments 0 6 6 0 

- Variation of scope of consolidation (45) 0 (45) 0 

AS OF DEC. 31, 2005 1,136 47 1,183 433 

Core shareholders’ equity 11,488 

Gains and losses not recognized in the statement of income attributable to equity holders of the parent 2,596 

Minority interests 1,183 

Discretionary participation features of insurance contracts 433 

TOTAL EQUITY AS OF DEC. 31, 2005 15,700 


CORE SHAREHOLDERS’ EQUITY Subscribed Additional Treasury Reserves Net Core 

capital paid-in shares and retained income of shareholders’ 

(in millions of EUR) capital earnings the period equity 

AS OF DEC. 31, 2005 4,888 9 137 (356) (4,219) 2 038 11,488 


- Issuance of subscribed capital 350 1,092 0 (6) 0 1,436 

- Acquisition of treasury shares 0 0 (50) 0 0 (50) 

- Trading activities on treasury shares 0 0 (14) (1) 0 (15) 

- Sale and cancellation of treasury shares 0 0 419 (414) 0 5 

- Transfers to reserves 0 0 0 2,038 (2,038) 0 

- Dividends 0 0 0 (770) 0 (770) 

- Share based payments: value of employee services 0 0 0 30 0 30 

- Variation of scope of consolidation (1) 0 0 0 (441) 0 (441) 

- Net income for the period 0 0 0 0 2,750 2,750 

AS OF DEC. 31, 2006 5,238 10,229 (1) (3,783) 2,750 14,433 

(1) Mainly purchase of minority interests in Denizßank group for EUR 408 million - see note 9.6., Acquisitions and disposals of consolidated companies. 


116 | 


GAINS AND LOSSES Gains and losses not recognized in the statement of income Cumulative Total gains 

NOT RECOGNIZED IN Subsidiary securities derivatives associates Translation and losses – 

THE STATEMENT held (AFS) (CFH) (AFS, CFH Adjustments Group share 

OF INCOME for sale and CTA) (CTA) 


AS OF DEC. 31, 2005 0 2,608 (96) 7 77 2,596 


- Net change in fair value 

through equity – 

Available for sale investments 0 (161) 0 8 0 (153) 

- Net change 

in fair value through equity – 

Cash flow hedges 0 0 120 0 120 

- Net change in fair value due to 

transfers to income – 

Cash Flow hedges 0 0 (14) 0 (14) 

- Translation adjustments 0 (14) 0 (196) (210) 

- Variation of scope of consolidation 0 (16) 0 1 (15) 

- Cancellation of FV following 

AFS disposals 0 (459) 0 0 (459) 

- Transfert 1 0 0 0 1 

AS OF DEC. 31, 2006 1 1,958 10 15 (118) 1,866 

MINORITY INTERESTS Core Gains and losses Minority DISCRETIONARY 

equity not recognized in the interests PARTICIPATION 

statement of income 

FEATURES OF 

INSURANCE 


CONTRACTS 

AS OF DEC. 31, 2005 1,136 47 1,183 433 


- Increase of capital (1) 513 0 513 0 

- Dividends (44) 0 (44) 0 

- Net income for the period 88 0 88 0 

- Net change in fair value through equity 0 (1) (1) (7) 

- Translation adjustments (1) 3 2 0 

- Variation of scope of consolidation (28) (3) (31) 0 


CONSOLIDATED 



AS OF DEC. 31, 2006 1 664 46 1 710 426 

Core shareholders’ equity 14,433 

Gains and losses not recognized in the statement of income attributable to equity holders of the parent 1,866 

Minority interests 1,710 

Discretionary participation features of insurance contracts 426 

TOTAL EQUITY AS OF DEC. 31, 2006 18,435 

(1) Issuance of Perpetual Non-cumulative Guaranteed Securities for EUR 500 million. 



CONSOLIDATED CASH FLOW STATEMENT 

(in millions of EUR) Dec. 31, 2005 Dec. 31, 2006 


CONSOLIDATED 



CASH FLOW FROM OPERATING ACTIVITIES 

Net income after income taxes 2,093 2,838 

Adjustment for: 

- Depreciation, amortization and other impairment 258 266 

- Impairment on bonds, equities, loans and other assets (44) (90) 

- Net gains on investments (295) (914) (1) 

- Charges for provisions (mainly insurance provision) 2,945 2,708 

- Unrealized gains or losses (30) (41) 

- Income from associates (89) (102) 

- Dividends from associates 42 39 

- Deferred taxes 64 42 

- Other adjustments 242 (2) 30 

Changes in operating assets and liabilities 11,883 11,532 

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 17,069 16,308 

CASH FLOW FROM INVESTING ACTIVITIES 

Purchase of fixed assets (625) (374) 

Sales of fixed assets 115 169 

Acquisitions of unconsolidated equity shares (1,415) (1,030) 

Sales of unconsolidated equity shares 1,341 1,286 

Acquisitions of subsidiaries and of business units (70) (1,132) (3) 

Sales of subsidiaries and of business units 21 343 

NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (633) (738) 

CASH FLOW FROM FINANCING ACTIVITIES 

Issuance of new share 933 1,953 

Issuance of subordinated debt 7 288 

Reimbursement of subordinated debt (328) (581) 

Purchase of treasury shares (600) (50) 

Sale of treasury shares 4 4 

Dividends paid (703) (813) 

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (687) 801 

NET CASH PROVIDED 15,749 16,371 

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD 27,956 43,797 

Cash flow from operating activities 17,069 16,308 

Cash flow from investing activities (633) (738) 

Cash flow from financing activities (687) 801 

Effect of exchange rate changes and change in scope of consolidation 

on cash and cash equivalents 92 (2,227) (4) 

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 43,797 57,941 

ADDITIONAL INFORMATION 

Income tax paid (513) (520) 

Dividends received 171 191 

Interest received 54,174 73,601 

Interest paid (51,284) (70,805) 

(1) Includes EUR 236 million result on Dexia’s net asset contribution to the joint venture RBC Dexia Investor Services. It is a non cash item. Includes also EUR 280 million due 

to the sale of Banque Artesia Nederland. 

(2) Includes EUR 218 million paid by Aegon. 

(3) Acquisition of DenizBank group for EUR 1,066 million. 

(4) Includes impact on cash and cash equivalents of joint venture RBC Dexia Investor services: EUR -1 740 million. 


118 | 


NOTES 

TO THE FINANCIAL STATEMENTS 

1. ACCOUNTING PRINCIPLES AND RULES OF CONSOLIDATED 


These financial statements include the disclosures required by the European Accounting Regulation published up to December 31, 2006. 

Additional accounting policies and disclosures may be required in order to comply with local laws, accounting standards and stock exchange 

regulations. 

General information 120 

Notes to the financial 

statements 120 

1. Accounting policies 120 

1.1. Basis of accounting 120 

1.2. Changes in accounting policies 

since the previous publication that may 

impact Dexia Group 120 

1.2.1 New IFRS standards, IFRIC interpretations 

and amendments 120 

1.2.2. IASB and IFRIC texts endorsed by 

the European Commission 120 

1.2.3. Change in presentation 121 

1.3 Consolidation 121 

1.3.1. Subsidiaries 121 

1.3.2. Jointly controlled entities 121 

1.3.3. Associates 121 

1.4. Offsetting financial assets and 

financial liabilities 121 

1.5. Foreign currency translation and transactions 121 

1.5.1. Foreign currency translation 121 

1.5.2. Foreign currency transactions 121 

1.6. Trade date and settlement date accounting 122 

1.7. Realized gains and losses on 

sales of financial assets 122 

1.8. Impairments on financial assets 122 

1.9. Interest income and expense 122 

1.10. Commission income and expense 123 

1.11. Insurance and reinsurance activities 123 

1.11.1. Insurance 123 

1.11.2. Reinsurance 125 

1.12. Network costs 125 

1.13. Deferred acquisition costs 126 

1.14. Loans and advances due from 

banks and customers 126 

1.15. Financial assets or financial liabilities 

held for trading and financial assets or 

liabilities designated at fair value through 

profit and loss 126 

1.15.1. Loans and securities held for trading 126 

1.15.2. Liabilities held for trading 126 

1.15.3. Loans and securities designated 

at fair value through profit and loss 126 

1.15.4. Liabilities designated at 

fair value through profit and loss 126 

1.16. Loans and securities available 

for sale and securities held to maturity 126 

1.17. Positive/negative value of derivatives 127 

1.18. Hedging derivatives 127 

1.19. Hedge of the interest rate risk 

exposure of a portfolio 127 

1.20. Tangible fixed assets 128 

1.21. Intangible assets 128 

1.22. Goodwill 128 

1.22.1. Positive goodwill 128 

1.22.2. Impairment of goodwill 129 

1.23. Other assets 129 

1.24. Leases 129 

1.24.1. A Dexia company is the lessee 129 

1.24.2. A Dexia company is the lessor 129 

1.25. Sale and repurchase agreements 

and lending of securities 129 

1.26. Borrowings 129 

1.27. Deferred income tax 129 

1.28. Employee benefits 129 

1.28.1. Pension obligations 129 

1.28.2. Other post-retirement obligations 129 

1.28.3. Other long-term benefits 129 

1.28.4. Termination benefits 129 

1.28.5. Equity compensation benefits 129 

1.28.6. Employee entitlements 129 

1.29. Provisions 129 

1.30. Share capital and treasury shares 131 

1.30.1. Share issue costs 131 

1.30.2. Dividends on ordinary shares 131 

1.30.3. Preferred shares 131 

1.30.4. Treasury shares 131 

1.30.5. Insurance discretionary 

participation features 131 

1.31. Fiduciary activities 131 

1.32. Fair value of financial instruments 131 

1.33. Cash and cash equivalents 132 

1.34. Earnings per share 132 

2. Related party transactions 132 

3. Segment reporting 132 

3.1. Business segments (primary segment reporting) 132 

3.2. Geographic segments 

(secondary segment reporting) 132 

4. Risk management policies and hedging activities 133 

4.1. Market risk 133 

4.1.1. Overview 133 

4.1.2. Interest rate risk 133 

4.1.3. Currency risk 134 

4.1.4. Equity risk 134 

4.1.5. Issuer risk 134 

4.1.6. Price risk 134 

4.2. Credit risk 134 

4.3. Liquidity risk 135 

4.4. Capital adequacy 135 


CONSOLIDATED 





CONSOLIDATED 




Dexia provides financial services to the local public sector, and 

is one of the world’s largest players in Public/Project Finance 

and Credit Enhancement. In Europe, Dexia offers retail and 

private banking services and also asset management and 

insurance services. Since the beginning of 2006, the custodian 

activity (Investor Services) is served on a worldwide basis. 

The parent company of the Group is Dexia, which is a limited 

liability company and is incorporated and domiciled in Belgium. 

The address of its registered office is: Place Rogier 11 

— B-1210 Brussels (Belgium). 

Dexia is listed on the Euronext Stock Exchange in Paris and in 

Brussels and on the Luxembourg Stock Exchange. 

These financial statements have been approved for issue by 

the Board of Directors on March 1, 2007. 

NOTES TO THE FINANCIAL STATEMENTS 

The principal accounting policies adopted in the preparation 

of these consolidated financial statements are set out below. 

The common used abbreviations below are: 

ARC: Accounting Regulatory Committee 

EFRAG: European Financial Reporting Advisory Group 

EU GAAP: International Financial Reporting Standards as 

adopted by the European Union (EU) 

IASB: International Accounting Standards Board 

IFRIC: International Financial Reporting Interpretations 

Committee 

IFRS: International Financial Reporting Standard 

1. ACCOUNTING POLICIES 

1.1. BASIS OF ACCOUNTING 

The consolidated financial statements of Dexia are prepared in 

accordance with all IFRSs as adopted by the EU. 

The European Commission published Regulation EC 1606/2002 

on July 19, 2002, requiring listed groups to apply IFRS as from 

January 1, 2005. This regulation has been updated several 

times since 2002, validating the various texts published by the 

IASB with the exception of certain rules included in IAS 39. 

The European Commission carved out some paragraphs of 

IAS 39 with the objective of enabling European companies to 

reflect appropriately in their consolidated financial statements 

the economic hedges they make in the management of their 

interest rate risk exposure. 

Dexia’s financial statements have therefore been prepared “in 

accordance with all IFRSs as adopted by the EU” and endorsed 

by the EC up to December 31, 2006, including the conditions 

of application of interest rate portfolio hedging and the possibility 

to hedge core deposits. 

In preparing the consolidated financial statements, management 

is required to make estimates and assumptions that 

affect amounts reported. While management believes they 

have considered all available information in developing these 

estimates, actual results could differ from such estimates and 

the differences could be material to the financial statements. 

The consolidated financial statements are stated in millions of 

euro (EUR) unless otherwise stated. 

1.2. CHANGES IN ACCOUNTING POLICIES SINCE 

THE PREVIOUS ANNUAL PUBLICATION THAT 

MAY IMPACT DEXIA GROUP 

1.2.1. New IFRS standards, IFRIC interpretations 

and amendments 

The IASB published a new standard: 

• IFRS 8 Operating segments, which will supersede IAS 14 

Segment reporting and will be applicable as from January 1, 

2009. The impact of this standard is under analysis. 

The IFRIC published 5 new interpretations in 2006: 

• IFRIC 8 Scope of IFRS 2, which has no impact on Dexia 

Group; 

• IFRIC 9 Reassessment of embedded derivatives; Dexia 

already applies the principle given by this interpretation; 

• IFRIC 10 Interpretation on Interim Financial reporting and 

impairment; Dexia already applies this rule; 

• IFRIC 11 IFRS 2 Group and Treasury Share Transactions, 

which has no impact on Dexia; 

• IFRIC 12 Service concession arrangements, which has no 

impact on Dexia. 

1.2.2. IASB and IFRIC texts endorsed 

by the European Commission 

The European Commission endorsed IFRS 7 Financial Instruments 

disclosure and several amendments to existing standards 

and interpretations in 2006: 

• An amendment to IFRS 1 First-time Adoption of International 

Financial Reporting Standards; 

• An amendment to IAS 1 Presentation of Financial Statements 

— Capital disclosures; 

• An amendment to IAS 39 Financial Instruments: Recognition 

and Measurement and IFRS 4 Insurance Contracts — Financial 

Guarantee Contracts; 

• Amendments to IAS 21 The effects of changes in foreign 

exchanges rates; 

• IFRIC 7 applying the restatement approach under IAS 29 

Financial Reporting in hyperinflationary economy; 

• IFRIC 8 scope of IFRS 2; 

• IFRIC 9 Reassessment of embedded derivatives. 

Dexia applies all of these texts in 2006, except the amendment 

to IAS1 and IFRS 7, which will be applicable as from January 1, 

2007. Dexia however already gives information on capital disclosures 

and will include most of the requirements of IFRS 7 in 

its annual financial statements, but not all of them. 

Dexia does not expect that these new amendments may have 

a significant impact on the financial situation of the Group. 

120 | 


1.2.3. Change in presentation 

Cash collaterals 

In order to harmonize the accounting presentation within 

Dexia, cash collaterals of some companies of the Group have 

been reclassified from “Other assets” to “Due from Banks” 

in December 31, 2005 balance sheet for an amount of EUR 

4,52 billion while an amount of EUR 359 million was restated 

from “Other liabilities” to “Customer borrowings and deposits”. 

The impact only affected the balance sheet and no reclassification 

in profit and loss was required. 

Unrealized gains on transactions between Dexia and its 

“equity method investments” are eliminated to the extent of 

Dexia’s interest. Unrealized losses are also eliminated unless 

the transaction shows evidence of an impairment of the asset 

transferred. The recognition of losses from associates is discontinued 

when the carrying amount of the investment reaches 

zero, unless Dexia has incurred or guaranteed obligations in 

respect of the associates’ undertakings. Where necessary, the 

accounting policies of the associates have been amended to 

ensure consistency with the policies adopted by Dexia. 

1.3. CONSOLIDATION 

1.3.1. Subsidiaries 

The consolidated financial statements include those of the 

parent company, its subsidiaries and special purpose entities 

(SPE). Subsidiaries and SPE are those entities in which Dexia, 

directly or indirectly, has the power to exercise control over 

financial and operating policies. 

Subsidiaries are consolidated from the date on which effective 

control is transferred to Dexia and are no longer consolidated 

as from the date on which Dexia’s control ceases. 

Intercompany transactions, balances and unrealized gains and 

losses on transactions between Dexia’s companies have been 

eliminated. Intragroup losses may indicate an impairment that 

requires recognition in the consolidated financial statements. 

When necessary, the accounting policies of the subsidiaries 

have been amended to ensure consistency with the policies 

adopted by Dexia. 

Equity and net income attributable to minority interests are 

shown separately in the balance sheet and statement of 

income respectively. 

1.3.2. Jointly controlled entities 

A joint venture (JV) is a contractual arrangement whereby two 

or more parties undertake an economic activity that is subject 

to joint control. Joint ventures are accounted for via the proportionate 

consolidation method. In the financial statements, 

joint ventures are integrated by combination of their share of 

the assets, liabilities, income and expenses on a line-by-line 

basis. 

The same consolidation treatment, as for subsidiaries, is applied 

for intercompany transactions. When necessary, the accounting 

policies of jointly controlled entities have been amended to 

ensure consistency with the policies adopted by Dexia. 

1.3.3. Associates 

Investments in associates are accounted for using the equity 

method of accounting. Associates are investments where 

Dexia has significant influence, but does not exercise control. 

This is usually the case, when Dexia owns between 20% and 

50% of the voting rights. The ownership share of net income 

for the year is recognized as income from associates and the 

investment is recorded in the balance sheet at an amount that 

reflects its share of the net assets including net goodwill. 

1.4. OFFSETTING FINANCIAL ASSETS 

AND FINANCIAL LIABILITIES 

Financial assets and financial liabilities are offset (and consequently, 

the net amount is only reported) Dexia has a 

legally enforceable right to offset and intends either to settle 

on a net basis, or to realize the asset and settle the liability 

simultaneously. 

1.5. FOREIGN CURRENCY TRANSLATION 

AND TRANSACTIONS 

The consolidated financial statements are stated in EUR (functional 

and presentation currency), the currency in which Dexia 

is incorporated. 

1.5.1. Foreign currency translation 

On consolidation, the statements of income and cash flow 

statements of foreign entities that have a functional currency 

different from Dexia’s presentation currency are translated 

into Dexia’s presentation currency (EUR) at average exchange 

rates for the year or the period and their assets and liabilities 

are translated at respective year-end or quarter-end exchange 

rates. 

Exchange differences arising from the translation of the net 

investment in foreign subsidiaries and associates and of borrowings 

and other currency instruments designated as hedges 

of such investments, are recorded as a cumulative translation 

adjustment within shareholders’ equity. On disposal of a foreign 

entity, such exchange differences are recognized in the 

statement of income as part of the gain or loss on sale. 

Goodwill and fair value adjustments arising from the acquisition 

of a foreign entity are treated as assets and liabilities of 

the foreign entity and are translated at the closing rate. 

1.5.2. Foreign currency transactions 

For individual Dexia entities, foreign currency transactions are 

accounted for using the approximate exchange rate at the 

date of the transaction. Outstanding balances denominated 

in foreign currencies at period or year-end are translated at 

period or year-end exchange rates for monetary items and 

non-monetary items carried at fair value. Historical rates are 

used for non-monetary items carried at cost. The resulting 

exchange differences from monetary items are recorded in the 

consolidated statement of income; for non-monetary items 


CONSOLIDATED 





CONSOLIDATED 



carried at fair value, the exchange differences follow the same 

accounting treatment as for fair value adjustments. 

1.6. TRADE DATE AND SETTLEMENT DATE 

ACCOUNTING 

All “regular way” purchases and sales of financial instruments 

are recognized and derecognized on the settlement date, 

which is the date of delivery to or by Dexia. However, financial 

instruments held for trading are recognized and derecognized 

at trade date. 

For financial assets and liabilities measured at initial recognition 

at fair value through P&L, Dexia recognizes from the trade 

date any unrealized gains or losses arising from revaluing the 

contract to fair value at the reporting date. These unrealized 

gains and losses are recognized in the statement of income 

unless the transactions have been assigned to cash-flow hedge 

relationships or are related to an available-for-sale asset. 

1.7. REALIZED GAINS AND LOSSES ON SALES 

OF FINANCIAL ASSETS 

For financial assets not revalued through the statement of 

income, realized gains or losses on disposals is the difference 

between the proceeds received (net of transaction costs) and 

the cost or amortized cost of the investment. 

1.8. IMPAIRMENTS ON FINANCIAL ASSETS 

Dexia records allowances for impairment losses when there is 

objective evidence that a financial asset or group of financial 

assets is impaired, in accordance with IAS 39 § 58-70. The 

impairments represent the management’s best estimates of 

losses at each balance-sheet date. 

An interest bearing financial asset is impaired if its carrying 

amount is greater than its estimated recoverable amount. 

The amount of the impairment loss for assets carried at amortized 

cost is calculated as the difference between the asset’s 

carrying amount and the present value of expected future 

cash flows discounted at the financial instrument’s original 

effective interest rate or current effective interest rate determined 

under the contract for variable-rate instruments. The 

recoverable amount of an instrument measured at fair value 

is the present value of expected future cash flows discounted 

at the current market rate of interest for a similar financial 

asset. 

Allowances for impairment losses are recorded on assets 

within “Due from banks”, and “Loans and advances to customers”, 

in the following way: 

• Specific impairments – The amount of the impairment on 

specifically identified assets is the difference between the carrying 

amount and the recoverable amount, being the present 

value of expected cash flows, including amounts recoverable 

from guarantees and collateral, discounted using the effective 

interest rate at the time of impairment. Assets with small balances 

(including retail loans) that share similar risk characteristics 

are generally aggregated in this measurement. 

• Collective impairments – Loss impairments cover incurred 

losses where there is no specific impairment but objective 

evidence that losses are present in segments of the portfolio 

or other lending related commitments at the balance-sheet 

date. These have been estimated based upon historical patterns 

of losses in each segment, the credit ratings allocated to 

the borrowers and reflecting the current economic environment 

in which the borrowers operate. Dexia develops for that 

purpose credit risk models using an approach that combines 

appropriate default probabilities and loss given defaults that 

are subject to regular back testing and are based on Basel II 

data and risk models. 

• Country risk component – Included within specific and 

collective impairment. 

When an asset is determined by management as being uncollectable, 

it is written off against its related impairment; subsequent 

recoveries are against to the “Impairment on loans 

and provisions for credit commitments” in the statement 

of income, in the heading “Impairment on loans and provisions 

for credit commitments”. If the amount of the impairment 

subsequently decreases due to an event occurring after 

the write-down of the initial impairment, the release of the 

impairment is credited to the “Impairment on loans and provisions 

for credit commitments”. 

“Available for sale” (AFS) assets are only subject to specific 

impairment. 

“Available for sale” quoted equities are measured at fair 

value through “Gain and losses on securities not recognized 

in the statement of income” or within the statement of 

income in the case of impairment. Dexia analyses all equities 

that have declined by more than 25% of their quoted price 

over a quarter or when a risk is identified by management 

and takes the decision to impair and assess whether there is 

an objective evidence of impairment according to IAS 39. A 

prolonged decline in the fair value below its cost is also objective 

evidence of impairment. Impairments on equity securities 

cannot be reversed in the statement of income due to later 

recovery of quoted prices. 

Reversal impairment on debt securities is addressed on a caseby-case 

basis in accordance with the standard. 

When AFS securities are impaired, the related accumulated fair 

value adjustments are included in the statement of income as 

“Net income on investments”. Impairments on loans included 

in AFS are reported in the heading “Impairments on loans and 

provisions for credit commitment”. 

1.9. INTEREST INCOME AND EXPENSE 

Interest income and expense are recognized in the statement 

of income for all interest bearing instruments on an accrual 

basis using the effective interest rate method based on the 

purchase price (including transaction costs). 

Transaction costs are incremental costs that are directly attributable 

to the acquisition of a financial asset or liability and 

are included the calculation of the effective interest rate. An 

incremental cost is one that would not have been incurred if 

the entity had not acquired the financial instrument. 

Accrued interest is reported in the same line as the related 

financial asset or liability in the balance sheet. 

122 | 


Once an interest bearing financial asset has been written 

down to its estimated recoverable amount, interest income 

is thereafter recognized based on the rate of interest that 

was used to discount the future cash flows for measuring the 

recoverable amount. 

1.10. COMMISSION INCOME AND EXPENSE 

Commissions and fees are recognized in accordance with 

IAS 18. According to this standard, most of the commissions 

arising from Dexia’s activities are recognized on an accrual 

basis over the life of the underlying transaction. 

For significant acts such as commissions and fees arising from 

negotiating, or participating in the negotiation of a transaction 

for a third party, such as the arrangement of the acquisition 

of loans, equity securities or other securities or the 

purchase or sale of businesses, are recognized based on the 

stage of completion of the underlying transaction, when the 

underlying transaction has been completed. 

For asset management operations, revenue consists principally 

of unit trust and mutual fund management and administration 

fees. Revenue from asset management is recognized 

as earned when the service is provided. Performance fees are 

recognized when they are definitively acquired, i.e. when all 

underlying conditions are met. 

Loan commitment fees are recognized as part of the effective 

interest rate if the loan is granted, and recorded as revenue 

on expiry if no loan is granted. 

1.11. INSURANCE AND REINSURANCE 

ACTIVITIES 

1.11.1. Insurance 

Dexia is mainly active in banking products. Some insurance 

products sold by insurance companies have been requalified 

as financial instruments as they do not meet the requirements 

of insurance products under IFRS 4. 

IFRS 4 allows the possibility to continue to account for its 

insurance products under local GAAP if they qualify as such 

under IFRS 4. Hence, Dexia has decided to use the local 

accounting policies to measure the technical provisions for 

contracts that fall under IFRS 4 and investment contracts 

with discretionary participation features (DPF). A contract 

that complies with the conditions of an insurance contract 

remains an insurance contract until all rights and obligations 

cease to exist or expire. An insurance contract is a contract 

under which one party (the insurer) accepts significant insurance 

risk from another party (the policyholder) by agreeing to 

compensate the policyholder if a specified uncertain future 

event (the insured event) adversely affects the policyholder. 

A contract can start as an investment contract and become 

an insurance contract when containing significant insurance 

components as time passes. 

Life and nonlife claims and changes in technical reserves are 

also recorded in the “Technical margin of insurance activities”, 

whereas losses and changes in provisions for credit 

enhancement activities, which are similar to banking activities, 

are reported under “Impairment on loans and provision 

for credit commitments”. 

All items arising from insurance activities are classified according 

to their nature in the balance sheet, except for technical 

provisions, which are identified on a separate heading. 

Insurance activities of Dexia are mainly performed by Dexia 

Insurance Services (DIS) for life and nonlife products and 

by Financial Security Assurance (FSA) in the USA for credit 

enhancement of municipal and corporate bonds. 

DIS activities: life and nonlife 

Insurance products of DIS are recorded under local GAAP. This 

group is mainly constituted by Belgian entities, for which Belgian 

GAAP (Royal Decree of November 17, 1994) are applicable, 

if they are qualified as such under IFRS 4. However, 

provisions for catastrophe and equalizations are reversed. 

The Life insurance portfolio features: 

• Insurance contracts including reinsurance contracts and the 

accepted reinsurance treaties with exception of the in-house 

defined employee benefit plans 

• Financial instruments issued with a discretionary profit sharing 

(discretionary participation feature (DPF)) 

• Unit-linked (UL) contracts stipulating that the policyholder 

can switch at all times, without costs, to an investment 

product with guaranteed interest rate and a probable profit 

sharing. 

Classification 

Classification is done policy by policy, whereas for group 

insurances, classification is done on the employer’s level. 

Life insurance products are classified following Belgian GAAP 

into the hereunder categories: 

• Type 1: branch 21: guaranteed insurance products with or 

without DPF 

• Type 2: branch 21: investment products with profit sharing 

• Type 3: branch 21: investment products without profit 

sharing 

• Type 4: branch 23: investment products with risk-UL 

products 

• Type 5: branch 23: investment products without risk 

• Type 6: branch 23: investment products convertible to a 

branch 21 investment product with risk (class 23) 

• Type 7: branch 23: investment products convertible to a 

branch 21 investment product with profit sharing 

The nonlife insurance portfolio features includes only insurance 

contracts that contain a significant insurance risk. 

Shadow accounting 

An insurer is permitted, but not required, to change its 

accounting policies so that a recognized but unrealized gain 

or loss on an asset affects those measurements in the same 

way that a realized gain or loss does. The related adjustment 

to the insurance liability (or deferred acquisition costs or intangible 

assets) shall be recognized in equity if, and only if, the 

unrealized gains or losses are recognized directly in equity. 

Dexia Group decided to apply shadow accounting, “if under 

legal and/or contract conditions the realization of gains on 

an insurer’s assets have a direct effect on the measurement 

of some or all of its insurance contracts and investment contracts 

with discretionary participation features (DPF).” 


CONSOLIDATED 





CONSOLIDATED 



Shadow loss adjustment 

To determine the need for a shadow loss adjustment Dexia 

determines if additional liabilities would be required, assuming 

current market investment yields rather than the estimated 

return of the assets. If the level of liabilities required is higher 

than total liabilities, then the deficiency should decrease the 

unrealized gains recorded in equity and increase liabilities 

through a shadow premium deficiency adjustment. 

This requires the liability adequacy test (see Liability Adequacy 

Test) to be performed after all shadow adjustments - if any. 

Should there be insufficient unrealized capital gains left in 

equity to accommodate the shadow loss adjustment, the 

additional liability increase should be charged to income 

(P/L). 

Discretionary participation feature (DPF) 

Discretionary participation feature is a contractual right to 

receive, as a supplement to guaranteed benefits, additional 

benefits: 

• that are likely to be a significant portion of the total contractual 

benefits; 

• whose amount or timing is contractually at the discretion 

of the issuer; and 

• that are contractually based on: 

• the performance of a specified pool of contracts or a specified 

type of contract; 

• realized and/or unrealized investment returns on a specified 

pool of assets held by the issuer; or 

• the profit or loss of the company, fund or other entity that 

issues the contract. 

All unrealized gains and losses coming from investments 

backing insurance contracts and investment contracts with 

DPF are categorized proportionally for the part related to the 

insurance contracts and investment contracts with discretionary 

participation features in a separate line of the equity. 

Proportional calculation happens on the basis of the carried 

reserves and by separated management of the assets. 

Insurance contracts with deposit component 

(unbundling) 

All unit-linked products that contain both an insurance contract 

and a deposit component will be unbundled. Accounting 

policies for insurance contracts are applied for the insurance 

component; accounting policies for financial instruments are 

applied for the deposit component. 

The unit-linked products that can be converted into a guaranteed 

investment product (branch 21) with profit sharing 

fall under IFRS 4 (investment with DPF) and will not be 

unbundled. 

Embedded derivatives 

IAS 39 applies to derivatives embedded in an insurance contract 

unless the embedded derivative is itself an insurance 

contract. The requirements for insurance contracts with DPF 

also prevail for financial instruments with DPF elements. 

As an exception to the requirement in IAS 39, an insurer need 

not separate, and measure at fair value, a policyholder’s option 

to surrender an insurance contract for a fixed amount (or for 

an amount based on a fixed amount and an interest rate), 

even if the exercise price differs from the carrying amount 

of the host insurance liability. However, the requirement in 

IAS 39 does apply to a put option or cash surrender option 

embedded in an insurance contract if the surrender value varies 

in response to the change in a financial variable (such as 

an equity or commodity price or index), or a non-financial 

variable that is not specific to a party to the contract. 

DPF in financial instruments 

If the issuer classifies part or that entire feature as a separate 

component of equity, the liability recognized for the whole 

contract shall not be less than the amount that would result 

from applying IAS 39 to the guaranteed element. 

Dexia reviews at each reporting date whether this minimum 

requirement is met and in case of an insufficiency, the corresponding 

liabilities are adjusted accordingly. 

Liability Adequacy Tests 

An insurer applies a liability adequacy test (LAT) for its insurance 

products and investment contracts with DPF. Dexia 

assesses at each reporting date whether its recognized insurance 

liabilities are adequate, using current estimates of future 

cash flows under its insurance contracts. 

If that assessment (based on the entire life and nonlife insurance 

portfolios separately) shows that the carrying amount of 

its insurance liabilities (less related deferred acquisition costs 

and related intangible assets) is inadequate in the light of the 

estimated future cash flows, the entire deficiency shall be recognized 

in profit or loss. 

For life insurance, LAT uses the following parameters, which 

are based on the Royal Decree of November 14, 2003 with 

respect to the life business : 

• premiums: collected inventory premiums plus contractual 

provided inventory premiums; 

• interest rate for actualization cash flows: yields of the assets 

backing insurance liabilities; 

• mortality table: experience table of the country (Assuralia 

for Belgium); 

• costs : calculation based on the last updated tariff costs and 

the booked costs; 

• tariff costs take into account the inventory surcharges, commercial 

surcharges and fixed sums; 

• real assigned costs take into account management 

expenses, claims handling expenses and commissions. These 

costs are stipulated by product group and are indexed. Considering 

lapses, death and expiration period the annual delta 

is stipulated between the costs in the tariff and real assigned 

costs. Deltas are then actualised to the LAT-rate. 

For nonlife insurance, the LAT that examines if the premium 

and claim provisions are sufficient to settle definitely the 

opened claim files and the claims that will occur within the 

contractual duration of the contracts to open and to settle 

definitively. 

A LAT is carried out for all products. The test is subdivided into 

two parts. During the first part Dexia examines if the build up 

reserves for claim files already opened are sufficient, and in a 

second part Dexia makes an estimation of the expected loss 

burden for insurance portfolios and examine if the unearned 

premium reserves are sufficient. 

124 | 


Regarding reserves for the files already opened Dexia performs 

runoff calculations, using estimates for the claims handling 

expenses. 

For the assessment of loss burden for the insurance portfolio, 

Dexia conducts a reasoning that is based on percentages 

(average loss burden of the last 5 years and administrative 

expenses of the last year). 

FSA activities 

Financial guaranty insurance generally provides an unconditional 

and irrevocable guaranty that protects the holder of 

a financial obligation against non-payment of principal and 

interest when due. Upon a payment default on an insured 

obligation, Dexia is generally required to pay the principal, 

interest or other amounts due in accordance with the obligation’s 

original payment schedule or, at its option, to pay 

such amounts on an accelerated basis. The contract may be 

considered a derivative or an insurance contract depending 

on certain legal characteristics. 

Gross and ceded premiums received in upfront payouts are 

earned in proportion to the amount of risk outstanding over 

the expected period of coverage. Deferred premium revenue 

and prepaid reinsurance premiums represent the portion of 

premium that is applicable to coverage of risk to be provided 

in the future on policies in force. 

Dexia establishes provisions for losses liabilities based on its 

estimate of specific and non-specific losses. Dexia also establishes 

provisions for loss adjustment expenses (LAE), consisting 

of the estimated cost of settling claims, including legal 

and other fees and expenses associated with administering 

the claims process. Dexia calculates a loss and loss adjustment 

expenses liability based upon identified risks inherent 

in its entire insured portfolio. If an individual policy risk has a 

probable loss as of the balance sheet date, a specific reserve 

is established. For the remaining policy risks in the portfolio, a 

non-specific reserve is established to account for the inherent 

credit losses that can be statistically estimated. 

Dexia establishes a specific reserve for the present value of 

the estimated loss, net of subrogation recoveries, when, in 

management’s opinion, likelihood of a future loss on a particular 

insured obligation is probable and reasonably estimable 

at the balance sheet date. When an insured obligation has 

met the criteria for establishing a specific reserve and that the 

transaction pays a premium in installments, those premiums, 

if expected to be received prospectively, are considered a form 

of recovery and are no longer earned as premium revenue. 

A specific reserve is determined using cash flow or similar 

models that represent Dexia’s estimate of the net present 

value of the anticipated shortfall between: 

• scheduled payments on the insured obligation plus anticipated 

loss adjustment expenses; and 

• anticipated cash flow from and proceeds to be received on 

sales of any collateral supporting the obligation and other 

anticipated recoveries. 

The estimated loss, net of recovery, on a transaction is discounted 

using the risk-free rate appropriate for the term of 

the insured obligation at the time the reserve is established. 

Dexia records a non-specific reserve to reflect the credit 

risks inherent in its portfolio. Non-specific reserves in addition 

to specific reserves represent Dexia’s estimate of the 

total reserves. Generally, when an insured credit deteriorates 

to a point where claims are expected, a specific reserve is 

established. 

The non-specific reserve amount established considers all levels 

of protection (e.g., reinsurance and over-collateralization). 

Net par outstanding for policies originated in the current 

period is multiplied by loss frequency and severity factors. 

The loss factors used for calculation are the product of default 

frequency rates obtained from Moody’s and severity factors 

obtained from S&P. Moody’s is chosen due to its credibility, 

large population, statistical format and reliability of future 

update. Dexia applies an experience factor to the results of 

the statistical calculation. 

Liability Adequacy Test 

An insurer applies a Liability Adequacy Test for its insurance 

products, in accordance with IFRS 4. Dexia assesses at each 

reporting date whether its recognized insurance liabilities are 

adequate, using current estimates of future cash flows under 

its insurance contracts. This test is applied to all insurance 

contracts. 

For nonlife insurance, the Liability Adequacy Test is a sufficiency 

test within IFRS 4 that examines if the premium and 

provisions are sufficient to cover any open claim files and 

claims that are expected to occur within the contractual duration 

of the contracts. 

1.11.2. Reinsurance 

Dexia’s reinsurance contracts with third parties that contain 

enough characteristics to be classified as an insurance contract 

continue to be accounted for in accordance with local GAAP. 

A reinsurance asset is impaired if, and only if: 

• there is objective evidence, as a result of an event that 

occurred after initial recognition of the reinsurance asset, that 

the cedant may not receive all amounts due to it under the 

terms of the contract; and 

• that event has a reliably measurable impact on the amounts 

that the cedant will receive from the reinsurer. 

To measure the solvency of a reinsurer, Dexia refers to its 

attributed credit rating and the impairment rules. 

1.12. NETWORK COSTS 

This heading records commission paid to intermediaries associated 

by exclusive sales mandate for bringing in transactions 

with customers. 


CONSOLIDATED 





CONSOLIDATED 



1.13. DEFERRED ACQUISITION COSTS 

Deferred acquisition costs are only applicable to FSA activities 

and are comprised of expenses related to the production 

of insurance contracts, including commissions paid on 

reinsurance assumed, compensation and related costs of 

underwriting and marketing personnel, certain rating agency 

fees, premium taxes and certain other underwriting expenses, 

reduced by ceding commission income on premiums ceded 

to reinsurers. 

Deferred acquisition costs are amortized over the period in 

which the related premiums are earned. Amortization of 

deferred acquisition costs is presented on a separate heading 

within operating costs. 

When an insured issue is retired or defeased prior to the end 

of the expected period of coverage, the remaining deferred 

acquisition cost is recognized. Recoverability of deferred 

acquisition costs is determined by: 

• considering deferred premium revenue and premiums 

related to early repayments; 

• and the present value of anticipated losses and loss adjustment 

expenses. 

1.14. LOANS AND ADVANCES DUE FROM 

BANKS AND CUSTOMERS 

Loans categorized as “loans and advances”, being those not 

included within trading, designated at fair value through P/L 

and AFS, are carried at amortized cost, being the outstanding 

principal amount, net of any deferred fees and material 

direct costs on loans and net of any unamortized premiums 

or discounts. 

1.15. FINANCIAL ASSETS OR FINANCIAL 

LIABILITIES HELD FOR TRADING OR FINANCIAL 

ASSETS OR LIABILITIES DESIGNATED AT FAIR 

VALUE THROUGH PROFIT AND LOSS 

1.15.1. Loans and securities held for trading 

Loans held for trading purposes are included in “Financial 

assets held for trading” and are carried at fair value, with 

unrealized gains and losses recorded in earnings as “Net trading 

income”. Interest income is accrued using the effective 

interest rate method and is recorded under “Net interest 

income”. 

Trading securities are securities acquired for generating a profit 

from short-term fluctuations in price or dealer’s margin, or are 

securities included in a portfolio in which a pattern of shortterm 

profit taking exists. Trading securities are initially recognized 

at fair value and subsequently re-measured at fair value. 

All related realized and unrealized gains and losses are included 

in “Net trading income”. Interest earned during the period of 

holding the trading assets is reported as “Interest income”. 

Dividends received are included in “Dividend income”. 

All purchases and sales of trading securities that require 

delivery within the time frame established by regulation or 

market convention (“regular way” purchases and sales) are 

recognized at settlement date. Other trading transactions are 

treated as derivatives until settlement occurs (see also Paragraph 

1.6. “Trade date and settlement date accounting”). 

1.15.2. Liabilities held for trading 

Liabilities held for trading follow the same accounting rules as 

those for loans and securities held for trading. 

1.15.3. Loans and securities designated at fair 

value through profit and loss 

Loans and securities designated at fair value through statement 

of income follow the same accounting rules as those for 

loans and securities held for trading. 

Under the fair value option, a financial asset, a financial liability 

or a group of financial instruments can be designated by 

the entity as “at fair value through profit or loss”, provided 

that doing so results in more relevant information or increases 

measurement reliability. The fair value option simplifies the 

application of IAS 39. It is used: 

• when such designation eliminates or significantly reduces a 

measurement or recognition inconsistency that would otherwise 

arise, 

• when a group of financial assets, financial liabilities or both 

is managed and its performance is evaluated on a fair value 

basis, in accordance with a documented risk management or 

investment strategy, 

• when an instrument contains a non-closely related embedded 

derivative. 

The use of the fair value option is an accounting policy choice 

which should be made for the entire financial instrument, at 

initial recognition and when certain conditions of documentation 

are fulfilled. 

In order to avoid volatility in its equity and results, Dexia has 

designated the assets and liabilities of unit-linked contracts 

(branch 23) at fair value through the statement of income. 

1.15.4. Liabilities designated at fair value through 

profit and loss 

The above comments on the fair value option are also valid 

for the liabilities. 

1.16. LOANS AND SECURITIES AVAILABLE FOR 

SALE AND SECURITIES HELD TO MATURITY 

Management determines the appropriate classification of its 

investments at initial recognition. 

Quoted securities with fixed maturity are classified as held-tomaturity 

(HTM) when management has both the intent and 

the ability to hold the assets to maturity. 

Securities and loans and receivables intended to be held for 

an indefinite period of time, which may be sold in response to 

needs for liquidity or changes in interest rates, exchange rates 

or equity prices, are classified as available-for-sale (AFS). 

Securities and loans and receivables are initially recognized 

at fair value (which includes transaction costs). Interest is rec- 

126 | 


ognized based on the effective interest rate method and is 

recognized within net interest income. 

Available-for-sale financial assets are subsequently remeasured 

at fair value based on quoted bid prices or amounts 

derived from cash-flow models. Unrealized gains and losses 

arising from changes in the fair value of financial assets classified 

as available-for-sale are recognized within equity. When 

securities are disposed of, the related accumulated fair value 

adjustments are included in the statement of income as “Net 

income on investments”. 

Held-to-maturity investments are carried at amortized cost 

using the effective interest method, less any allowance for 

impairment. 

1.17. POSITIVE/NEGATIVE VALUE 

OF DERIVATIVES 

Derivative financial instruments generally include foreign 

exchange contracts, currency and interest rate futures, forward 

rate agreements, currency and interest rate swaps and 

currency and interest rate options (both written and purchased). 

All derivatives are initially recognized in the balance 

sheet at fair value and are subsequently remeasured 

at fair value. Fair values are obtained from quoted market 

prices, discounted cash flow models or pricing models as 

appropriate. 

Derivatives are reported as assets when fair value is positive 

and as liabilities when fair value is negative. 

The amount reported on these lines of the balance sheet 

includes the premium paid/received net of amortization, the 

revaluation to fair value and the accrued interest, the sum of 

all elements representing the fair value of the derivative. 

Certain derivatives embedded in other financial instruments, 

are treated as separate derivatives when: 

• their risks and characteristics are not closely related to those 

of the host contract; and 

• the hybrid contract is not carried at fair value with unrealized 

gains and losses reported in the statement of income. 

1.18. HEDGING DERIVATIVES 

On the date a derivative contract is entered into, Dexia may 

designate certain derivatives as either: 

(1) a hedge of the fair value of a recognized asset or liability 

or a firm commitment (fair value hedge); or 

(2) a hedge of a future cash flow attributable to a recognized 

asset or liability or a forecasted transaction (cash flow hedge); 

or 

(3) a hedge of a net investment in a foreign entity (net investment 

hedge). 

If a derivative is not designated in a hedging relationship, it is 

to be deemed held for trading or part of a fair value option 

strategy. 

Hedge accounting may be used for derivatives designated in 

this way, provided certain criteria are met. 

The criteria for a derivative instrument to be accounted for as 

a hedge include inter alia: 

• formal documentation of the hedging instrument, hedged 

item, hedging objective, strategy and relationship prepared 

before hedge accounting is applied; 

• the hedge is documented showing that it is expected to be 

highly effective (within a range of 80% to 125%) in offsetting 

changes in fair value or cash flows attributable to the hedged 

risk in the hedged item throughout the reporting period; and 

• the hedge is effective at inception and on an ongoing 

basis. 

Entities of Dexia use internal derivative contracts (internal 

hedging) mainly to cover their interest rate risk. Those internal 

contracts are offset with external parties. If the contracts cannot 

be offset with third parties, the hedging criteria are not 

met. Internal derivative contracts between separate divisions 

within the same legal entity and between separate entities 

within the consolidated Group can qualify for hedge accounting 

in the consolidated financial statements only if the internal 

contracts are offset by derivative contracts with a party 

external to the consolidated group. In this case, the external 

contract is regarded as the hedging instrument. 

Changes in the fair value of derivatives that are designated 

and qualify as fair value hedges and that prove to be highly 

effective in relation to hedged risk, are recorded in the statement 

of income, along with the corresponding change in fair 

value of the hedged assets or liabilities that is attributable to 

that specific hedged risk. 

If the hedge no longer meets the criteria for hedge accounting 

(fair value hedge model), the adjustment to the carrying 

amount of a hedged interest-bearing financial instrument is 

amortized to net profit or loss over the period to maturity 

through an adjustment of the yield of the hedged item. 

Changes in the fair value of derivatives that are designated 

and qualify as cash flow hedges and are highly effective in 

relation to the hedged risk, are recognized in the hedging 

reserve in equity as “Gains and losses not recognized in 

the statement of income” (see “Consolidated statement of 

changes in shareholders’ equity”). The non-effective portion 

of the changes in the fair value of the derivatives is recognized 

in the statement of income. Where the forecast transaction 

results in the recognition of a non-financial asset or a 

liability, the gains and losses previously deferred in equity are 

transferred from equity and included in the initial measurement 

of the cost of the asset or liability. Otherwise, amounts 

deferred in equity are transferred to the statement of income 

and classified as revenue or expense in the periods during 

which the hedged firm commitment or forecast transaction 

affects the statement of income. 

Certain derivative transactions, while providing effective economic 

hedges under Dexia’s risk management positions, do 

not qualify for hedge accounting under the specific rules in 

IFRS and are therefore treated as derivatives held for trading 

with fair value gains and losses reported in income. 

1.19. HEDGE OF THE INTEREST RATE RISK 

EXPOSURE OF A PORTFOLIO 

Dexia has decided to apply IAS 39 as adopted by the EU because 

it better reflects the way Dexia manages its activities. 


CONSOLIDATED 





CONSOLIDATED 



The objective of the hedge relationships is to reduce the interest 

rate risk exposure stemming from the selected category 

of assets or liabilities designated as the qualifying hedged 

items. 

The entity performs a global analysis of interest rate risk 

exposure. It consists of assessing fixed rate exposure taking 

into account all the exposure coming from balance sheet and 

off-balance sheet items. This global analysis may exclude certain 

components of the exposure, such as financial market 

activities, provided that the risk exposure stemming from the 

excluded activities are monitored on an activity-by-activity 

basis. The entity selects assets and/or liabilities to be entered 

into the hedge of interest rate risk exposure of the portfolio. 

The entity defines at inception the risk exposure to be hedged, 

the length of the time-bucket, the way and the frequency it 

performs tests. The entity constantly applies the same methodology 

for selecting assets and liabilities entering in the portfolio. 

Assets and liabilities are included on a cumulative basis 

in all the time buckets of the portfolio. Hence, when they are 

removed from the portfolio, they must be removed from all 

the time buckets in which they had an impact. 

The entity may choose which assets and/or liabilities it wishes 

to classify into the portfolio provided they are included in the 

global analysis. Demand deposits and savings accounts may 

be included in the portfolio based on behavioral study for estimating 

expected maturity date. The entity may designate as 

qualifying hedged items different categories of assets or liabilities 

such as “available for sale” assets or loan portfolios. 

The hedging instruments are a portfolio of derivatives. Such 

a portfolio of derivatives may contain offsetting positions. 

The hedging items are recognized at its fair value (including 

accrued interest expense or income) with adjustments 

accounted for in the statement of income. 

Effectiveness tests consist of verifying that the hedging objective, 

i.e. reducing the interest rate risk exposure, is fulfilled. 

Inefficiency can come only from overhedging due to noncontractual 

events occurring within the categories of assets 

or liabilities. 

Hedged interest rate risk revaluation of elements carried out 

at amortized cost is included in the line “Fair value revaluation 

of portfolio hedges”. In case of hedging of AFS, the revaluation 

is part of the heading “Loans and securities AFS”. 

1.20. TANGIBLE FIXED ASSETS 

Tangible fixed assets include property, plant and equipment 

and investment properties. 

All property, plant and equipment are stated at its cost less 

accumulated depreciation and impairments. 

Depreciation is calculated using the straight-line method to 

write down the cost of such assets to their residual values 

over their estimated useful lives. 

The main service lives are as follows: 

• buildings (including acquisition costs and non deductible 

taxes): 20 to 50 years; 

• computer equipment: 3 to 6 years; 

• leasehold improvements, equipment and furniture: 2 to 

12 years; 

• vehicles: 2 to 5 years. 

The exchange losses on liabilities for the acquisition of an 

asset as well as the interest on specific or general borrowings 

to finance the construction of qualifying assets are expensed 

immediately. 

Where the carrying amount of an asset is greater than its estimated 

recoverable amount, it is written down to its recoverable 

amount. Gains and losses on disposals of property and 

equipment are determined by reference to their carrying 

amount and are included in Other net income. Expenditure 

that enhances or extends the benefits of real estate or fixed 

assets is capitalized and subsequently depreciated. 

Investment properties are those properties held to earn rentals 

or for capital appreciation. Dexia may also partly use certain 

investment properties. If the “own use” portions can be 

sold separately or leased out separately under finance lease, 

then these portions are accounted for separately. If the “own 

use” portions cannot be sold separately, the property is an 

investment property only if Dexia holds an insignificant portion 

for its own use. 

Investment properties are recorded at its cost less accumulated 

depreciation and impairments. The investment properties 

are depreciated over their useful lives on a straight-line basis. 

Depreciation of buildings given in operating leases is recorded 

in “Depreciation”, whereas depreciation on other assets given 

in operating lease is booked in “Other net income”. 

1.21. INTANGIBLE ASSETS 

Intangible assets mainly consist of internally generated and 

acquired software. Costs associated with maintaining computer 

software programs are recognized as expense as incurred. 

However, expenditure that enhances or extends the benefits 

of computer software programs beyond one year is used to 

increase the original cost of the software. Computer software 

development costs recognized as assets are amortized using 

the straight-line method over their useful lives from the time 

the software is available for use. This amortization period is 

usually between 3 and 5 years. 

Where the carrying amount of an asset is greater than its estimated 

recoverable amount, it is written down to its recoverable 

amount. Gains and losses on disposals of intangible 

assets are determined by reference to their carrying amount 

and are included in “Other net income”. Expenditure that 

enhances or extends the benefits is capitalized and subsequently 

depreciated. 

1.22. GOODWILL 

1.22.1. Positive goodwill 

Goodwill represents the excess of the cost of an acquisition 

over the fair value of Dexia’s share of the net assets of the 

acquired subsidiary or associated undertaking at the date of 

acquisition. Goodwill on acquisition occurring on or after January 

1, 2004 is reported in the balance sheet as an intangible 

asset. Goodwill is allocated to cash-generating units for the 

purpose of impairment testing. Cash-generating units may be 

128 | 


a legal entity, or may be designed based on criteria of, geographic 

area and business segment. 

Variations in percentage of ownership in fully-consolidated 

companies are considered as transactions with shareholders. 

Therefore, neither fair value adjustments nor goodwill adjustments 

are made, when percentage increases or decreases 

take place without change in the consolidation method. The 

difference between purchase or sale of net asset and the purchase 

or sale price is directly recorded in equity. 

difference between the gross receivable and the present value 

of the receivable is recognized as unearned finance income. 

Lease income is recognized over the term of the lease using 

the net investment method (before tax), which reflects a constant 

periodic rate of return. 

1.25. SALE AND REPURCHASE AGREEMENTS 

AND LENDING OF SECURITIES 

1.22.2. Impairment of goodwill 

The carrying amount of goodwill is reviewed at year-end 

when circumstances or events indicate that there may be 

uncertainty over the carrying amount. It is written down for 

impairment when the recoverable amount of the business is 

insufficient to support the carrying value. 

1.23. OTHER ASSETS 

Other assets mainly comprise accrued income (non-interest 

related), prepayments and other accounts receivable. They 

also include insurance products (reinsurance, insurance premiums 

receivables, etc.), construction contracts, inventories, 

plan assets relating to employee benefit obligations. These 

other assets are recorded at amortized cost less any allowance 

for impairment if applicable or following the applicable 

standard. Plan assets are recognized in accordance with IAS 

19 requirements. 

1.24. LEASES 

1.24.1. A Dexia company is the lessee 

A finance lease is a lease that transfers substantially all the 

risks and rewards incidental to ownership of an asset. An 

operating lease is a lease other than a finance lease. 

Dexia principally enters into operating leases for the rental of 

equipment or real estate. Lease rentals are recognized in the 

statement of income on a straight-line basis over the period 

of the lease. 

When an operating lease is terminated before the lease period 

has expired, any payment to be made to the lessor by way of 

penalty is recognized as an expense in the period in which 

termination takes place. 

If the lease agreement substantially transfers the risk and 

rewards of ownership of the asset, the lease is recorded as 

a finance lease and the related asset is capitalized. At inception 

the asset is recorded at the lower of the present value of 

the minimum lease payments or fair value and is depreciated 

over its estimated useful life. The corresponding rental obligations 

are recorded as borrowings and interest payments are 

recorded using the effective interest rate method. 

1.24.2. A Dexia company is the lessor 

When assets held are subject to a finance lease, the present 

value of the lease payments is recognized as a receivable. The 

Securities sold subject to a linked repurchase agreement 

(“repos”) remain in the financial statements recognized as 

financial assets held for trading, financial assets available for 

sale or financial assets held to maturity. The corresponding 

liability is included in “Due to banks” or “Customer borrowings 

and deposits” as appropriate. The asset is reported as 

pledged in the notes. 

Securities purchased under agreements to resell (“reverse 

repos”) are recorded as: 

• an obligation to return securities within off-balance sheet 

items; and 

• “Interbank loans and advances” or “Loans to customers” 

as appropriate. 

The difference between the sale and repurchase price is 

treated as interest income or expense and is accrued over 

the life of the agreements using the effective interest rate 

method. Securities lent to counterparts are retained in the 

financial statements. 

Securities borrowed are not recognized in the financial 

statements. 

If they are sold to third parties, the gain or loss is included 

in “Net trading income” and the obligation to return them 

is recorded at fair value in “Financial liabilities — trading 

securities”. 

1.26. BORROWINGS 

Borrowings are recognized initially at fair value, being their 

issue proceeds net of transaction costs incurred. Subsequently, 

borrowings are stated at amortized cost and any difference 

between net proceeds and the redemption value is 

recognized in the statement of income over the period of the 

borrowings using the effective interest rate method. 

Debts are included in the financial statements, based on the 

substance of their underlying contracts more than their legal 

form. 

1.27. DEFERRED INCOME TAX 

Deferred income tax is provided in full, using the liability 

method, on temporary differences arising between the tax 

bases of assets and liabilities and their carrying amounts in 

the financial statements. 

The principal temporary differences arise from depreciation of 

property, plant and equipment, revaluation of certain financial 

assets and liabilities including derivative contracts, provisions 

for pensions and other post retirement benefits, provisions for 

loan and other impairments and tax losses carried forward; 


CONSOLIDATED 





CONSOLIDATED 



and, in relation to acquisitions, from the difference between 

the fair values of the net assets acquired and their tax base. 

The rates enacted or substantively enacted at the balancesheet 

date are used to determine deferred income tax. 

Deferred tax assets are recognized to the extent that it is 

probable that future taxable profit will be available against 

which the temporary differences can be utilized. 

Deferred income tax is provided on temporary differences 

arising from investments in subsidiaries, associates and joint 

ventures, except where the timing of the reversal of the temporary 

difference can be controlled and it is probable that the 

difference will not reverse in the foreseeable future. 

Deferred tax related to fair value remeasurement of availablefor-sale 

investments and cash flow hedges, which are charged 

or credited directly to equity, is also credited or charged directly 

to equity and is subsequently recognized in the statement of 

income together with the deferred gain or loss. 

1.28. EMPLOYEE BENEFITS 

Employee benefit obligations are measured at the present 

value of the estimated future cash outflows using interest 

rates of corporate bonds rated AA, which have terms to 

maturity approximating to the terms of the related liability 

and taking into consideration also actuarial and demographic 

assumptions. 

Qualified internal and external actuaries carry out valuations 

of these obligations. All valuations, assumptions and results 

are reviewed and validated by an external actuary for Dexia 

that ensures that all calculations are harmonized and calculated 

in conformity with IAS 19. 

1.28.1. Pension obligations 

Dexia operates a number of defined benefit and defined contribution 

plans throughout the world, the assets of which are 

generally held in separate insurance companies. The pension 

plans are generally funded by payments from employees and 

by the relevant Dexia companies. 

they relate. The obligation of Dexia is limited to the contributions 

that Dexia agrees to pay into the fund on behalf of the 

employee. 

1.28.2. Other post-retirement obligations 

Some Dexia companies provide post-retirement health care 

benefits to their retirees. The entitlement to these benefits 

is usually based on the employee remaining in service up to 

retirement age and the completion of a minimum service 

period. The expected costs of these benefits are accrued over 

the period of employment, using a methodology similar to 

that for defined benefit pension plans. 

1.28.3. Other long-term benefits 

This mainly includes provisions for jubilee premiums that will 

be received by employees when they become entitled to this 

right. 

1.28.4. Termination benefits 

A termination benefit provision is only recorded when Dexia 

is committed to terminate the employment before the normal 

date of retirement or provide benefits as a result of an offer 

made in order to encourage voluntary redundancy. Dexia 

must have a detailed formal plan and no realistic possibility 

of withdrawal. 

1.28.5. Equity compensation benefits 

Share options are granted to directors and to some employees. 

The cost of the option is recognized within expense based 

on services received. The fair value of the option is calculated 

based on valuation techniques (Black and Scholes adjusted 

for departure of employees) and on market data. 

Dexia also offers a discount for the capital increases reserved 

for its personnel. This discount is taken into expense taking 

into account the fact that those equity securities are blocked 

for a certain period of time. 

1.28.1.1. Defined benefit plans 

For defined benefit plans, pension costs are assessed using 

the projected units credit method. 

Under this method, the cost of providing pensions is charged 

to the statement of income so as to spread the regular cost 

over the service lives of employees. Net cumulative unrecognized 

actuarial gains and losses exceeding the corridor 

(greater than 10% of the present value of the gross defined 

benefit obligation or 10% of the fair value of any plan assets) 

are recognized in income over the average remaining life of 

the plan. 

The defined obligation is presented net of plan assets as a 

liability unless the assets are held by a Group entity in which 

case the assets are recorded gross in the related lines of the 

assets. 

1.28.1.2. Defined contribution pension plans 

Dexia’s contributions to defined contribution pension plans 

are charged to the statement of income in the year to which 

1.28.6. Employee entitlements 

Employee entitlements to annual leave and long service leave 

are recognized when they accrue to employees. A provision 

is made for the estimated liability for annual leave and longservice 

leave as a result of services rendered by employees up 

to the balance-sheet date. 

1.29. PROVISIONS 

According to IAS 37, a provision is a liability of uncertain timing 

or amount. 

Provisions are recognized based on their discounted value 

when: 

• Dexia has a present legal or constructive obligation as a 

result of past events; 

• it is probable that an outflow of resources embodying economic 

benefits will be required to settle the obligation; and 

130 | 


• a reliable estimate of the amount of the obligation can be 

made. 

For provisions on loans commitments, the above presumptions 

are applied through the same methodology as applied 

for impairment of financial assets measured at amortized cost 

as in IAS 39. 

1.30. SHARE CAPITAL AND TREASURY SHARES 

1.30.1. Share issue costs 

External incremental costs directly attributable to the issue of 

new equity securities, other than as part of a business combination, 

are deducted from equity net of any related income 

tax. 

1.30.2. Dividends on ordinary shares 

Dividends on ordinary shares are recognized in equity in the 

period in which they are declared (authorized and no longer 

at the discretion of the entity). Dividends for the year that 

are declared after the balance-sheet date are disclosed in the 

subsequent events note. 

1.30.3. Preferred shares 

Preferred shares that are non-redeemable and upon which 

dividends are declared at the discretion of the directors, are 

classified as equity. 

1.30.4. Treasury shares 

Where Dexia or its subsidiaries purchase Dexia’s share capital 

or obtains rights to purchase its share capital, the consideration 

paid including any attributable transaction costs net of 

income taxes is shown as a deduction from total shareholders’ 

equity. Gains and losses on sales of own equity securities 

are charged or credited to the treasury share account in 

equity. 

1.30.5. Insurance discretionary participation 

features 

The unrealized gains and losses relating to assets classified as 

available for sale and backing insurance contracts with discretionary 

participation feature are classified by the Group as 

follows: 

• as a liability to the extent of the return guaranteed to the 

contract holders; 

• as a separate component of equity to the extent of that 

feature. 

1.32. FAIR VALUE OF FINANCIAL INSTRUMENTS 

Fair value is the amount for which an asset could be 

exchanged, or a liability settled, between knowledgeable, 

willing parties in an arm’s-length transaction. Market prices 

are used to determine fair value, where an active market 

(such as a recognized stock exchange) exists, as it is the best 

evidence of the fair value of a financial instrument. Market 

prices are not, however, available for a significant number 

of the financial assets and liabilities held or issued by Dexia. 

Therefore, for financial instruments where no market price is 

available, the fair values have been estimated using present 

value or other estimation and valuation techniques based on 

market conditions existing at balance-sheet dates. 

The values derived from applying these techniques are significantly 

affected by the underlying assumptions made concerning 

both the amounts and timing of future cash flows and 

the discount rates. 

Financial instruments classified as trading assets or liabilities, 

assets or liabilities designated at fair value through P/L, available 

for sale, derivatives and other transactions undertaken 

for trading purposes are measured at fair value by reference 

to quoted market prices when available. If quoted market 

prices are not available, then fair values are estimated on the 

basis of pricing models, or discounted cash flows. Fair value is 

equal to the carrying amount for these items. 

For trading and AFS, when quoted prices are not available, 

the pricing models try to reflect as precisely as possible the 

market conditions at the calculation date as well as the 

changes in the credit quality of the financial instruments. For 

unquoted and immaterial positions, some simplifying hypotheses 

are applied: 

(a) the carrying amount of financial instruments maturing 

within 12 months can be assumed to approximate to their 

fair value; 

(b) the fair value of variable-rate financial instruments is 

assumed to be approximated by their carrying amounts. 

In addition to the above assumptions, the following remarks 

could be made regarding the fair value of loans and 

receivables: 

(a) the fair value of fixed-rate loans and mortgages are estimated 

by comparing market interest rates when the loans 

were granted with current market rates offered on similar 

loans; 

(b) cap, floor and prepayment options are included in determining 

the fair value of loans and receivables; 

(c) for most of the loans and receivables the credit spread 

remains stable over the lifetime. However, based on experience, 

it is noted that in a number of portfolios the credit 

spread changes over the time. For those, we included the 

most recent credit spreads available for calculating the fair 

value. 


CONSOLIDATED 



1.31. FIDUCIARY ACTIVITIES 

Assets and income arising thereon together with related 

undertakings to return such assets to customers are excluded 

from these financial statements where Dexia acts in a fiduciary 

capacity such as nominee, trustee or agent. 



CONSOLIDATED 



1.33. CASH AND CASH EQUIVALENTS 

For the purposes of the cash flow statement, cash and cash 

equivalents comprise balances with less than 3 months 

remaining maturity included within cash and balances with 

central banks, interbank loans and advances, loans and 

advances to customers, financial assets held for trading, 

financial assets available for sale and financial assets of the 

fair value portfolio. 

1.34. EARNINGS PER SHARE 

Basic earnings per share is calculated by dividing net income 

available to ordinary shareholders by the weighted average 

number of ordinary shares in issue during the year, excluding 

the average number of ordinary shares purchased by Dexia 

and held as treasury shares. 

For the diluted earnings per share the weighted average 

number of ordinary shares in issue is adjusted to assume 

conversion of all dilutive potential ordinary shares, such as 

convertible debt and share options granted to employees. 

Potential or contingent share issuances are treated as dilutive 

when the derivatives are “in the money” and their conversion 

to shares would decrease net earnings per share. 

2. RELATED PARTY 

TRANSACTIONS 

Parties are considered to be related if one party has the ability 

to control the other party or exercise significant influence 

over the other party in making financial or operational decisions. 

The ultimate parent of the Group is Dexia, incorporated 

in Belgium. Relations with equity-accounted companies are 

reported, as well as relations with the directors. 

3. SEGMENT 

REPORTING 

A segment is a distinguishable component of Dexia that is 

engaged either in providing products or services (business 

segment) or in providing products or services within a particular 

economic environment (geographic segment), which 

is subject to risks and returns that are different from those of 

other segments. Segments with a majority of revenue earned 

from sales to external customers and whose revenue, result 

or assets are 10 per cent or more of all the segments that are 

reported separately. 

• Asset Management, Insurance and Insurance Services; 

• Treasury and Financial Markets; 

• Non allocated. 

The “non allocated” part is mainly composed of: 

• equities portfolio not attributable to other segments; 

• exceeding share capital; 

• building property, other tangible and intangible fixed assets 

not attributable to other business lines; 

• share leasing activities in the Netherlands; 

• items non attributable to other segments. 

Dexia caters for two types of clients: institutions and individual 

customers. All distribution activities related to these two markets 

are covered by a specific business line (first and second 

business lines). Moreover, some activities are transversal by 

nature and common to all commercial business lines. These 

activities (Asset Management, Fund Services and Insurance) 

are grouped as a “production and service centers” function 

(third business line). Finally, Dexia has a treasury and financial 

markets sector (fourth business line), covering all trading 

room and associated activities, both for Group business lines 

and external counterparties. 

Relations between business lines and especially between 

commercial business lines, financial markets and production 

and service centers are subject to retrocessions and/or analytical 

transfers, governed by service level agreements based on 

normal commercial terms and market conditions. 

The results of each business line also include: 

• the earnings from commercial transformation, including 

the management costs of this transformation and the Group 

equity allocated to this activity on the basis of medium and 

long-term outstanding; 

• interest on economic capital: economic capital is allocated 

to the business lines for internal purposes and the return on 

economic capital is used to measure the performance of each 

business line; 

• funding cost. 

Segment assets and liabilities comprise operating assets and 

liabilities, being the majority of the balance sheet but excluding 

items such as tax assets and liabilities. 

The Chief Operations Officer (COO) manages main tangible 

and intangible assets. Therefore, these are allocated to “Non 

Allocated” except when they are directly managed by a commercial 

or financial business line. 

The accounting policies of the segments are the same as those 

described in the summary of significant accounting policies. 

3.2. GEOGRAPHIC SEGMENTS (SECONDARY 

SEGMENT REPORTING) 

3.1. BUSINESS SEGMENTS (PRIMARY SEGMENT 

REPORTING) 

Dexia’ s reportable segments are defined by using the “management 

approach”. These segments reflect Dexia’s internal 

organisational structure and are used by the management to 

make business decisions. 

Dexia is organized as follows: 

• Public/Project Finance and Credit Enhancement; 

• Personal Financial Services; 

Although Dexia’s business segments are managed on a 

worldwide basis, they operate in four main geographic areas 

as follows: 

• euro zone (countries using the euro currency); 

• rest of Europe (European countries which do not belong to 

the euro zone); 

• USA; 

• rest of the world. 

132 | 


4. RISK MANAGEMENT POLICIES 

AND HEDGING ACTIVITIES 

This section presents information about Dexia’s exposure to, 

and its management and control of risks, in particular the primary 

risks associated with its use of financial instruments: 

• market risk is exposure to observable market variables such 

as interest rates, exchange rates and equity markets; 

• credit risk is the risk of loss resulting from client or counterpart 

default and arises on credit exposure in all forms, including 

settlement risk; 

• funding and liquidity risk is the risk of being unable to meet 

its payment when due, or to be unable, to borrow funds in 

the market on an unsecured, or even secured basis at an 

acceptable price to fund actual or proposed commitments. 

The notional amounts of certain types of financial instruments 

provide a basis for comparison with instruments recognized 

on the balance sheet but do not necessarily indicate 

the amounts of future cash flows involved or the current fair 

value of the instruments and, therefore, do not indicate Dexia’s 

exposure to credit or price risks. The derivative instruments 

become favorable (assets) or unfavorable (liabilities) as a result 

of fluctuations of the underlying interest, foreign exchange, 

equity or credit risks relative to their terms. The aggregate 

contractual or notional amount of derivative financial instruments 

on hand, the extent to which instruments are favorable 

or unfavorable and, thus the aggregate fair values of derivative 

financial assets and liabilities can fluctuate significantly. 

Assumptions and techniques have been developed to provide 

a consistent measurement of fair value for Dexia’s assets and 

liabilities. However, because other institutions may use different 

methods and assumptions, fair value disclosures cannot 

necessarily be compared from one financial institution to 

another. 

This section also presents Group’s regulatory capital position. 

4.1. MARKET RISK 

4.1.1. Overview 

Market risk is the risk of loss arising from movements in 

observable market variables such as interest rates, exchange 

rates and equity markets. 

The risk of price movements on securities resulting from general 

credit and country risk factors and events specific to individual 

issuers is also considered to be market risk. 

Market risk is incurred in Dexia primarily through trading 

activities, which are centered in the Treasury and Financial 

Markets business line (TFM). It arises from market making, 

client facilitation and own positions in equities, fixed income 

and interest rate products and foreign exchange. 

TFM assumes non-trading risk positions that arise from shortterm 

balance sheet and capital management activities. Market 

risks arise, but to a much lesser extent, in other business 

lines primarily from the facilitation of customer business. 

Group Risk Management (GRM) defines risk rules, framework 

and controls and acts as an independent risk control 

unit for market risks, credit risks and operational risks. Each 

main Dexia entity has its own risk unit applying operationally 

Group risk rules. 

Market risk measures are applied to all trading activities, to 

foreign exchange exposures wherever they arise, and to interest 

rate risk in the banking books of all business lines including 

TFM. 

The principal risk measures and controls on market risk are 

value at risk (VaR) and stress test. VaR expresses the potential 

loss on the current portfolio from adverse market movements 

assuming a specified time horizon before positions can 

be adjusted (holding period of 10 days), and measured to a 

specified level of confidence (99%), based on historical market 

changes. Stress test is assessed against a set of forwardlooking 

scenarios using stress moves in market variables, 

which are regularly reviewed. Complementary controls are 

also applied, where appropriate, to prevent undue concentrations, 

taking into account variations in price volatility and 

market depth and liquidity. They include controls on exposure 

to individual market risk variables, such as individual interest 

or exchange rates, and positions in the securities of individual 

issuers (“issuer risk”). 

4.1.2. Interest rate risk 

Interest rate risk is the risk of loss resulting from changes 

in interest rates. It is controlled primarily through the limit 

structure described in 4.1.1. above. Exposure to interest rate 

movements is expressed for all interest rate sensitive positions, 

whether marked to market or subject to accrual accounting, 

as the impact on their fair values of a one basis point (0.01%) 

change in interest rates. Interest rate sensitivity is one of the 

inputs to the VaR model. 

Non-trading 

Interest rate risk is inherent in many of Dexia’s businesses and 

arises from factors such as differences in timing between contractual 

maturity or re-pricing of assets, liabilities and derivative 

instruments. 

Most short term non-trading interest rate risk is captured at 

the point of business origination and transferred to a management 

unit — primarily the treasury trading unit of the 

Treasury and Financial Markets business line — where it is 

managed within the market risk limits described in 4.1.1. The 

long-term non-trading interest rate risk is managed in the 

assets and liabilities department (ALM). 

The margin risks embedded in retail products remain with, 

and are subject to additional analysis and control by, the originating 

business units. Many client products have no contractual 

maturity date or directly market-linked rate. Their interest 

rate risk is transferred on a pooled basis through “replication” 

portfolios — portfolios of revolving transactions between the 

originating business unit and Treasury and Financial Markets 

business line or ALM department at market rates designed to 

estimate their average cash flow and repricing behavior. The 

structure and parameters of the replication portfolios are set 

in accordance with long-term observations of market and client 

behavior, and are reviewed periodically. 


CONSOLIDATED 




4.1.3. Currency risk 

4.2. CREDIT RISK 


CONSOLIDATED 



Currency risk is the risk of loss resulting from changes in 

exchange rates. 

Trading 

Dexia is an active participant in currency markets and carries 

currency risk from these trading activities, conducted primarily 

in the Treasury and Financial Markets business line. These 

trading exposures are subject to VaR, stress and concentration 

limits as described in 4.1.1. 

Non-trading 

Dexia’s reporting currency is the euro but its assets, liabilities, 

income and expense are denominated in many currencies 

with significant amounts in USD. Reported profits or 

losses are translated at each closing date into euros, reducing 

volatility in Dexia’s earnings from changes in exchange rates. 

Dexia also, from time to time, proactively hedges significant 

expected foreign currency earnings/costs (mainly in USD) in 

accordance with the instructions of the Dexia Management 

Board. 

4.1.4. Equity risk 

Equity risk is the risk of loss resulting from changes in the 

levels of equity indices and values of individual shares. The 

Treasury and Financial Markets business line is a player in 

major equity markets and carries equity risk from these activities. 

These exposures are subject to VaR, stress and concentration 

limits as described in 4.1.1 and, in the case of individual 

shares, to issuer risk controls as described in 4.1.5. 

4.1.5. Issuer risk 

The values of tradable assets — equities, bonds and other 

debt instruments held for trading — are affected by factors 

specific to individual issuers as well as general market moves. 

These may include short-term factors influencing price but 

also more fundamental causes including severe financial 

deterioration. 

As an active trader in equities and bonds, the Treasury and 

Financial Markets business line holds positions in tradable 

assets, which are not only included in VaR, but which are also 

subject to concentration limits on individual issuers, including 

positions arising from derivatives as well as physical holdings. 

4.1.6. Price risk 

The price risk is the risk that the fair value or future cash-flows 

of a financial instrument will fluctuate because of changes in 

market prices, whether those changes are caused by factors 

specific to the individual financial instruments of its issuer, or 

factors affecting all similar financial instruments traded in the 

market. 

Credit risk represents the loss, which Dexia would suffer if 

a client or counterpart failed to meet its contractual obligations. 

It is inherent in traditional banking products — loans, 

lending commitments and other contingent liabilities, such 

as letters of credit — and in traded products — derivative 

contracts such as forwards, swaps and options, and repo and 

securities borrowing and lending transactions. 

Reductions in the market values of tradable assets (securities 

and other obligations in tradable form held for trading) resulting 

from changes in the credit quality of individual obligations 

are considered as market risk. This is explained in 4.1.1. above. 

To ensure a consistent and unified approach, with appropriate 

checks and balances, all entities with material credit risk have 

independent credit risk control functions. They are responsible 

for counterpart ratings and credit risk assessment. Credit 

risk authority, including authority to establish allowances and 

provisions for credit loss, is ultimately exercised by credit committees 

at Group level. 

Dexia manages and controls concentrations of credit risk 

wherever they are identified, in particular to individual counterparties 

and groups and to industries and countries. Dexia 

sets limits on its credit exposure to both individual counterparties 

and counterparty groups. Exposure is measured for 

banking products as the face value amount. 

For all traded products, credit exposure is measured for 

internal risk control purposes based not only on the current 

replacement value of contracts but also on potential future 

changes in replacement value (based on an add-on by product 

type and maturity), and credit limits are applied on this basis. 

Securities borrowing and lending transactions are represented 

on the balance sheet by the values of cash collateral placed 

with or received from counterparties while repo/reverse repo 

transactions are represented by the amounts of the forward 

commitments. Dexia is an active user of credit derivatives to 

hedge credit risk in banking and traded products. 

Dexia also makes use of master netting agreements where 

possible in its OTC derivatives trading and, in line with general 

market trends, has also entered into bilateral collateral agreements 

with market participants. Concentrations of credit risk 

exist if clients are engaged in similar activities, or are located 

in the same geographic region or have comparable economic 

characteristics such that their ability to meet contractual obligations 

would be similarly affected by changes in economic, 

political or other conditions. Stress measures are therefore 

applied to assess the impact of variations in bankruptcy rates 

and asset values, taking into account risk concentrations in 

each portfolio. 

Dexia classifies a receivable as impaired if the book value of 

the receivable exceeds the present value of the cash flows 

actually expected in future periods — loan interest payments 

and scheduled principal repayments, or other payments due, 

for example on guarantees, and including liquidation of collateral 

where available. Loans are further classified as nonperforming 

where payment of interest, principal or fees is 

overdue by more than 90 days or when insolvency proceedings 

have commenced or obligations have been restructured 

on concessionary terms. The occurrence of actual credit losses 

is erratic in both timing and amount and those that arise usu- 

134 | 


ally relate to transactions entered into in previous accounting 

periods. In order to account for average credit loss over time 

and to encourage risk-adjusted pricing, Dexia uses the concept 

of “expected loss” for management purposes. Expected 

loss is a statistically based measurement intended to reflect 

the annual costs that will arise, on average, over time, from 

positions that become impaired, and is a function of the probability 

of default (given by the counterparty rating), current 

and likely future exposure to the counterparty and the likely 

severity of the loss should default occur. 

4.3. LIQUIDITY RISK 

Liquidity risk is the risk of the bank not being able to meet its 

current and future payment commitments or not being able 

to do so on time (solvency or refinancing risk). 

Dexia’s approach to liquidity management is to ensure, as far 

as possible, that it will always have sufficient liquidity to meet 

its liabilities when due, without compromising its ability to 

respond quickly to strategic market opportunities. 

Given the size of Dexia’s balance sheet, the balance between 

its resources and their use is carefully managed. In practice, 

attention is paid to two main concerns: 

• the adequacy of expected new lending production (in terms 

of maturity and amount) with the available resources; 

• the Group’s liquidity needs, even in troubled times. 

The first question is addressed in the annual planning process. 

Each year, the forecasts for the new lending production are 

compared with the funding capacity. The purpose is to preserve 

an acceptable liquidity gap profile for the Group. Besides, the 

Group has decided to improve its analytical accounting process, 

in order to reflect more accurately the finding cost of the 

transactions originated by the business lines, whether they 

require funding or bring funding. The purpose of this kind of 

“internal market” for liquidities is to provide the right incentive 

to the business line to achieve a natural match between 

the lending and the funding capacities. 

The second question is addressed by way of various scenarios 

representing highly-stressed situations. These scenarios 

are then translated into a set of limits and ratios. They are 

designed so that Dexia can withstand for one year, thanks to 

its liquidity reserve (notably for Credit Spread Portfolio) a total 

squeeze of funding and a stress on deposits while maintaining 

its lending activity. The liquidity position is monitored and 

controlled from one day up to twelve months. Hence, great 

care is given to the forecast of the expected liquidity needs in 

the main currencies as well as to the estimate of the liquidity 

reserve. Special attention is also paid to off-balance-sheet 

liquidity commitments of the Group. 

Given the importance, all the main issues regarding the liquidity 

of the Group are directly managed by the Group’s ALM 

committee, which includes all the members of the Management 

Board. 

4.4. CAPITAL ADEQUACY 

The adequacy of Dexia’s capital is monitored using, among 

other measures, the rules and ratios established by the Basel 

Committee on Banking Supervision (“BIS rules/ratios”). The 

ratios of the Bank of International Settlements (BIS) compare 

the amount of eligible capital (in Total and Tier 1) with the 

total of Risk-Weighted Assets (RWAs). While Dexia monitors 

and reports its capital ratios under BIS rules, it also has to 

report to the CBFA (Banking, Financial and Insurance Commission) 

the capital requirements underpinning Dexia’s business 

following the banking prudential rules and the prudential 

rules of conglomerates. 

Dexia has complied with all regulatory capital rules for all periods 

reported. 

BIS eligible capital 

BIS eligible capital consists of two parts: 

• Tier 1 capital which comprises share capital, share premium, 

retained earnings including current year profit, hybrid capital, 

foreign currency translation and minority interests, less intangible 

assets, accrued dividends, net long positions in own 

shares and goodwill; 

• Tier 2 capital which includes eligible part of subordinated 

long-term debt, less subordinated debt from and equities in 

financial institutions. 

Tier 1 capital is required to be at least 4% and Total eligible 

capital at least 8% of RWAs. 

BIS risk-weighted assets (RWAs) 

Three elements make up total RWAs — credit risk, other 

assets and market risk, each of which is described below. 

The credit risk component consists of on- and off-balancesheet 

claims, measured according to the regulatory formulae 

outlined below and, weighted according to the type of 

counterparty and collateral at 0%, 20%, 50% or 100%. The 

least risky claims, such as claims on OECD governments and 

claims collateralized by cash, are weighted at 0%, meaning 

that no capital support is required, while the claims deemed 

most risky, including unsecured claims on corporate and private 

customers, are weighted at 100%, meaning that 8% 

capital support is required. Securities not held for trading are 

included as claims, based on the net long position in the securities 

of each issuer, including both physical holdings and positions 

derived from other transactions such as options. 

Claims arising from derivative transactions include not only 

the current positive replacement value (shown in the table 

below under balance-sheet assets), but also an “add-on” to 

reflect their potential future exposure. 

Capital is required to support market risk arising in all positions 

held for trading in interest rate instruments, foreign exchange 

and equities, including risks on individual equities, and traded 

debt obligations such as bonds. Dexia computes this risk 

using a Value at Risk (VaR) model endorsed by the CBFA, from 

which the market risk capital requirement is derived. Unlike 

the calculations for credit risk and other assets, this produces 

the capital requirement itself rather than the RWA amount. In 

order to compute a total capital ratio, the market risk capital 

requirement is converted to a “RWA equivalent” so that the 


CONSOLIDATED 





CONSOLIDATED 



capital requirement is 8% of this RWA equivalent, i.e. the 

market risk capital requirement is multiplied by 12.5. 

As from January 1, 2005, Dexia is publishing its financial 

statements under IFRSs as adopted by the EU. The CBFA has 

required calculating the ratio based on IFRS amounts, with 

the main following adjustments applicable for Dexia: 

• AFS reserves on bonds and cash flow hedge reserves are 

not part of equity; 

• AFS reserves on shares are added to Tier 2 equity if positive, 

with a haircut, or deducted from Tier 1 equity if negative; 

• some IFRS adjustments on subordinated debts, minority 

interests and debts must be reversed to reflect the characteristics 

of absorption of loss of those instruments; 

• other elements (SPV, deferred taxes, etc) are also adjusted 

based on CBFA requirements. 

Moreover, as from January 1, 2007, according to the CRD 

regulation (Capital Requirement Directive), the CBFA will 

adapt its definition of the regulatory capital. The most important 

point which could impact Dexia is the elements which 

are currently deducted from the total regulatory capital 

(banks accounted for by the equity method, participations in 

financial companies or subordinated loans issued by such a 

financial company) that will be deducted for 50 % from Tier 

1 capital and for 50 % from total regulatory capital. For these 

elements dealing with insurance companies, the new deduction 

rule will be implemented as from 2012. 

However, about the solvency ratio publication, Dexia will use 

the flexibility allowed by the Directive and the CBFA in the 

way that the publication obligations (pillar III) are not applied 

when the bank has just begun to use the new methods of calculation 

(Basel II). Hence, to ensure continuity in the applied 

method, Dexia will use this option in 2007 and will continue 

to publish its ratios based on the former rule, which allows 

deducting participations from total regulatory capital. 

As from January 1, 2008, Dexia will calculate its capital adequacy 

according to Basel II regulation and its regulatory capital 

will be calculated consequently. 

136 | 


2. SIGNIFICANT CHANGES IN SCOPE OF CONSOLIDATION AND 

LIST OF MAIN SUBSIDIARIES AND AFFILIATED ENTERPRISES 

OF THE GROUP DEXIA 

2.1. SIGNIFICANT CHANGES IN SCOPE OF 

CONSOLIDATION COMPARED WITH 2005 

Dexia and Royal Bank of Canada combine their institutional 

investor services businesses in a joint venture equally owned 

by both of them, named RBC Dexia Investor Services. 

Dexia consolidate 50% of the joint venture by proportional 

method as from January 1, 2006. 

As of October 17, 2006 Dexia closed a share purchase 

agreement with Zorlu Holding concerning the acquisition 

of approximately 75% stake in DenizBank Financial Services 

Group. 

The shares were transferred from Zorlu Holding A.S. to Dexia 

Participation Belgique SA — a 100% subsidiary of Dexia — 

for an amount of USD 2,43 billion. 

DenizBank is therefore fully consolidated in Dexia financial 

statements since October 17, 2006. More details about the 

transaction are presented in note 9.6. “Acquisitions and disposals 

of consolidated companies”. 

As prescribed by Turkish law, Dexia Participation Belgique SA 

launched a mandatory tender offer for the remaining ordinary 

shares held by the minority shareholders (24.15%) listed on 

the Istanbul Stock Exchange. 

This offer launched on December 4 was closed on December 

22, 2006 at a price per share in TRY equivalent to that offered 

to Zorlu Holding. 

As at December 31, 2006, the shareholding of Dexia in 

DenizBank stood at 99.74%. 

The companies Banksys and Bank Card Company which were 

accounted for by the equity method were sold and Banque 

Artesia Nederland NV left the scope of the Group following 

the closing of the sale. 

Dexia Banque Privée France has been transferred in noncurrent 

assets held for sale. 

2.2. MAIN SUBSIDIARIES AND AFFILIATED ENTERPRISES OF THE GROUP DEXIA (1) 

Name Head Office % of Consolidation Activity 

capital held method 

DIRECT PARTICIPATIONS OF DEXIA SA 

Associated Dexia 69, route d’Esch 100 fully IT 

Technology Services SA (ADTS) L-2953 Luxembourg 

Dexia Employee Avenue Livingstone 6 100 fully financial engineering 

Benefits SA 

B-1000 Bruxelles 

Dexia Funding 69, route d’Esch 100 fully funding 

Luxembourg SA 

L-2953 Luxembourg 

Dexia Habitat SA 7 à 11, quai André Citroën 100 fully investment company 

F-75015 Paris 

Dexia Management Shackleton House, 100 fully other 

Services Ltd 

4 Battle Bridge Lane 

UK-London SE1 2RB 

Dexia Nederland Holding NV Beethovenstraat 300 100 fully investment company 

NL-Amsterdam 

Dexia Participations Boulevard Pacheco 44 100 fully investment company 

Belgique SA 


Dexia Participations 69, route d’Esch 100 fully investment company 

Luxembourg SA 


Group Denizbank A.S. Büyükdere Cad. No: 106, 99.74 fully credit institution 

T-34394 Esentepe/Istanbul 

Group Dexia Bank Piet Heinkade 55, PB 808 100 fully credit institution 

Nederland NV 

NL-1019 GM Amsterdam 


CONSOLIDATED 



MAIN SUBSIDIARIES AND AFFILIATED ENTERPRISES OF THE SUBGROUP “DEXIA BANK BELGIUM SA” 

Crédit du Nord SA 59, Boulevard Haussmann 10 equity credit institution 

F-75008 Paris method 

Dexia Bank Belgium SA Boulevard Pacheco 44 100 fully credit institution 


Dexia Crédits Logement SA Boulevard Pacheco 44 100 fully home loans 


(1) Complete list available on request. 


Name Head Office % of Consolidation Activity 

capital held method 


CONSOLIDATED 



Dexia Financial Services 6 George’s Dock 100 fully mutual funds 

Ireland Unltd IRL-IFSC Dublin 1 

Dexia Insurance Belgium Rue Joseph II 96, 100 fully other services 

Invest NV B-1000 Bruxelles financial sector 

Dexia Insurance Belgium SA Avenue Livingstone 6 99.63 fully general insurance 


Dexia Investment Boulevard Pacheco 44 100 fully investment company 

Company NV 


Dexia Investments Ireland SA 6 George’s Dock 100 fully financing 

IRL-IFSC Dublin 1 

DVV Finance SA 2, rue Nicolas Bové 100 fully development capital 


Eurco RE Ltd 6 George’s Dock 99.94 fully general insurance 


Parfipar SA Boulevard du Régent 40, 100 fully credit institution 


MAIN SUBSIDIARIES AND AFFILIATED ENTERPRISES OF THE SUBGROUP “DEXIA BANQUE INTERNATIONALE À LUXEMBOURG SA” 

Darton Investments S.à.r.l. 180, rue des Aubépines 99.92 fully investment company 


Dexia Asset Management Rue Royale 180 100 fully asset management 

Belgium SA 


Dexia Asset Management Washington Plaza 100 fully asset management 

France SA 

40, rue de Washington 

F-75008 Paris Cedex 08 

Dexia Asset Management 283, route d’ Arlon 100 fully asset management 

Luxembourg SA (1) 


Dexia Banque Internationale 69, route d’Esch 99.93 fully credit institution 

à Luxembourg 


Group Dexia Banque Beethovenstrasse 48 100 fully credit institution 

Privée Suisse AG 

CH-8039 Zürich 

RBC Dexia Investor Services 5, rue Thomas Edison 50 proportionally fund services 

Bank SA 

L-1445 Strassen 

RBC Dexia Investor 77 King Street West – 35th floor 50 proportionally fund services 

Services Trust Ltd 

Royal Trust Tower 

Toronto, ON, Canada M5W-1P9 

MAIN SUSIDIARIES AND AFFILIATED ENTERPRISES OF THE SUBGROUP “DEXIA CRÉDIT LOCAL SA” 

Crédit du Nord SA 59, Boulevard Haussmann 10 equity credit institution 

F-75008 Paris method 

Dexia Crediop Spa Via Venti Settembre 30 70 fully credit institution 

I-00187 Roma 

Dexia Crédit Local SA 7-11, quai André Citroën 100 fully credit institution 

F-75015 Paris 

Dexia Kommunalbank Charlottenstrasse 82 100 fully credit institution 

Deutschland AG 

D-10969 Berlin 

Dexia Kommunalkredit Türkenstrasse 9 50.84 fully credit institution 

Bank AG 

A-1092 Wien 

Dexia Municipal Agency SA 7 à 11, quai André Citroën 100 fully credit institution 

F-75015 Paris 

Dexia Sabadell Banco Local Paseo de las 12 Estrellas 4 60 fully credit institution 

Campo de las Naciones, 

E-28042 Madrid 

Dexia Sofaxis F-18020 Bourges Cedex 100 fully other service activities 

Financial Security Assurance 350, Park Avenue 98.1 fully investment company 

Holding Ltd 

New York, NY 10022 – USA 

Group Kommunalkredit Türkenstrasse 9 49 equity credit institution 

Austria AG A-1092 Wien method 

SISL SA 

69, route d’ Esch 

L-2953 Luxembourg 100 fully investment company 

(1) 49% by Dexia Bank Belgium, 51% by Dexia Banque Internationale à Luxembourg. 

138 | 


3. BUSINESS AND GEOGRAPHIC REPORTING 

BUSINESS Public/Project Personal Asset Treasury and Non allocated - Dexia 

REPORTING Finance and Financial Management, Financial Central 

Credit Services Insurance Markets Assets 

Enhancement 

and Investor 


Services 

AS OF DECEMBER 31, 2005 

Income 2,288 2,289 701 487 211 5,976 

of which Net income from associates 23 46 2 0 18 89 

Net income before tax 1,502 657 275 312 (51) 2,695 

Assets 

Subtotal assets (1) 236,557 47,942 17,346 141,245 8,360 451,450 

of which investments in associates 261 491 19 0 7 778 

Liabilities 

Subtotal liabilities (2) 161,685 67,376 21,852 159,343 7,805 418,061 

Other segment information 

Capital expenditures (111) 0 0 0 (427) (538) 

Depreciation and amortization 0 0 0 (246) (246) 

Impairments (3) (49) (25) 26 26 17 (5) 

Other non cash expenses (4) (14) (35) (4) (9) (4) (66) 


Income 2,566 2,460 1,110 563 313 7,012 

of which net income from associates 20 60 3 0 19 102 

Net income before tax 1,701 799 580 387 (60) 3,407 

Assets 

Subtotal assets (1) 247,332 35,383 20,809 199,918 7,142 510,584 

of which investments in associates 270 528 21 0 7 826 

Liabilities 

Subtotal liabilities (2) 149,799 58,779 22,250 248,484 1,935 481,247 

Other segment information 

Capital expenditures 0 0 0 0 (272) (272) 

Depreciation and amortization 0 0 (252) (252) 

Impairments (3) (52) (31) 32 20 (8) (39) 

Other non cash expenses (4) (15) (35) (5) (4) (8) (67) 

(1) Includes Due from banks, Loans and advances to customers, Loans and securities held for trading, Loans and securities available for sale, Investments in 

associates, Other assets specific to insurance companies. 

(2) Includes Due to banks, Customer borrowing and deposits, Debt securities, Technical provisions of insurance companies. 

(3) Includes Impairments on tangible and other intangible assets, Impairments on securities, Impairments on loans and provisions for credit commitments, 

Impairments on goodwill. 

(4) Includes IFRS2 costs, net allowances to provisions for restructuring costs, net allowances to provisions related to IAS 19, capital losses on exchange of 

assets. 


CONSOLIDATED 



Relations between business lines, and especially between 

commercial business lines, financial markets and production 

and service centers are subject to retrocessions and/or analytical 

transfers, governed by service level agreements based on 

normal commercial terms and market conditions. The results 

of each business line also include: 

• The earnings from commercial transformation, including 

the management costs of this transformation and the Group 

equity allocated to this activity on the basis of medium and 

long-term outstanding; 

• Interest on economic capital: economic capital is allocated 

to the business lines for internal purposes and the return on 

economic capital is used to measure the performance of each 

business line; 

• Funding cost. 

Tangible and intangible assets are allocated to “Non allocated 

– Central assets“ except when they are directly managed by a 

commercial or financial business line. 


GEOGRAPHIC Eurozone (1) Rest of USA Rest of Intra geographical Dexia 

REPORTING Europe the world zone transactions 


AS OF DECEMBER 31, 2005 

Net income before tax 2,074 63 520 38 0 2,695 

Total assets 478,016 24,338 58,350 9,469 (61,412) 508,761 

Capital expenditures (510) 0 (28) 0 0 (538) 


CONSOLIDATED 




Net income before tax 2,565 102 595 145 0 3,407 

Total assets 531,165 12,701 58,186 19,288 (54,597) 566,743 

Capital expenditures (248) (2) (3) (19) 0 (272) 

(1) Countries using the euro currency. 

(2) Including Turkey as from 2006. 

Geographic reporting is done based on booking centers, being the country of the company having recorded the transaction, 

and not the country of the customers. 

4. SIGNIFICANT ITEMS INCLUDED 

IN THE NET INCOME 

Reported amounts are significant unusual transactions and 

not only large transactions. They therefore do not include 

results on sales of securities nor provisions thereon or on 

customers. 

The main items regarding the year 2006 are: 

• In Q1 2006 Dexia recorded a profit as a result of the constitution 

of the joint venture RBC Dexia Investor Services, equally 

owned by Dexia and by Royal Bank of Canada. 

In accordance with IFRS, the contribution to the joint venture 

has been done at fair value, leading to a profit of 

EUR 236 million, the recording of a goodwill on the net 

contribution done by Royal Bank of Canada of EUR 121 million 

and a decrease of 50 % of the net goodwill on Dexia 

Fund Services activities, amounting to EUR 21 million. 

• A capital gain of EUR 280 million is recorded in Q4 2006 

pursuant to the sale of Banque Artesia Nederland NV. 

• As explained in note 6. “Litigations”, a provision related to 

the Lernout & Hauspie case is recognized in the 2006 Financial 

Statements in order to cover the residual risks linked to 

the settlements as well as the costs and legal fees related to 

the whole US procedures. 

All non-operating items are reported on page 73. 

As of December 31, 2006 Dexia Banque Privée France is recorded 

in “Noncurrent assets held for sale” for EUR 0.9 billion 

and in “Liabilities included in disposal groups held for sale” 

for EUR 0.8 billion. 

6. LITIGATIONS 

6.1. DEXIA BANK NEDERLAND 

6.1.1. Background 

The difficulties linked to the share-leasing activities of the former 

Bank Labouchere (now Dexia Bank Nederland NV; hereinafter 

to be referred to as “DBnl”) appeared at the time of the fast 

and severe fall of the Amsterdam stock market in late 2001. The 

value of the securities used as collateral against the loans granted 

by DBnl proved insufficient in a large number of contracts, 

thus potentially ending with a residual debt instead of the gain 

initially hoped for. 

Reference is made to the detailed disclosures, as contained in 

the Dexia Accounts and Reports 2005 (especially pages 86 to 88) 

and in the Activity Reports published during the year 2006. 

6.1.2. “Binding force” to the Duisenberg arrangement 

5. POST-BALANCE-SHEET EVENTS 

A gross dividend of EUR 0.81 per share will be proposed at 

the Annual Shareholders’ Meeting on May 9, 2007. The payment 

date of the dividend is May 24, 2007. 

BNP Paribas and Dexia signed an agreement regarding the 

sale of Dexia Banque Privée France (DBPF), a wholly-owned 

subsidiary of Dexia BIL, which offers private banking services 

to private clients and not-for-profit organizations. 

The transaction is subject to approval from the relevant supervisory 

authorities. A net profit in a range of EUR 42 million will 

be recorded in 2007. 

On April 29, 2005, the announcement was made that the 

mediation undertaken by Mr Wim Duisenberg had been 

successful. DBnl entered into a general settlement with the 

Foundations Leaseverlies and Eegalease, the Consumentenbond 

(Dutch Consumer’s Association) and the Vereniging 

van Effectenbezitters (Dutch association of security holders), 

hereinafter to be referred to as “the Interest Groups”. 

After a positive response by an overwhelming majority of the 

share-leasing contract holders who joined the foundations 

Leaseverlies (82% of those replying) and Eegalease (78% of 

those replying), the settlement agreement between DBnl and 

the Interest Groups was signed on June 23, 2005. As a result 

of this Duisenberg Arrangement, the collective proceedings 

140 | 


that had been filed by the Interest Groups against DBnl have 

been set aside. 

DBnl has made it clear to all parties concerned that its willingness 

to enter into the Duisenberg Arrangement entails no 

admission of responsibility. 

DBnl’s costs and provisions arising from the Duisenberg Arrangement 

have been recalculated each quarter on the basis of 

prevailing market data and client conduct. 

The Duisenberg Arrangement has been effective since October 

2005. Its conditions as well as other information regarding 

this Arrangement may be found at www.dexialease.nl. 

On December 31, 2006, more than 62,000 clients holding 

more than 105,000 contracts have accepted settlements 

based on the Duisenberg Arrangement. This figure does not 

include the approximately 200,000 contracts of clients which 

had already ended in another settlement, including a waiver, 

and of which some also potentially benefit from the Duisenberg 

Arrangement. 

On November 18, 2005, DBnl and the Interest Groups have 

filed their joint petition to the Amsterdam Court of Appeal to 

grant binding force to the Duisenberg Arrangement, based 

on the newly introduced “Law on Collective Settlement of 

Mass-Damage.” 

In May 2006, the Amsterdam Court of Appeal held four days 

of public hearing in respect of this joint petition of DBnl and 

the Interest Groups to grant binding force to the Duisenberg 

Arrangement. Over 60 other interest groups and individual 

clients had put up a defence. On June 20, 2006 this court has 

rendered an intermediate decision, including an assignment to 

the Autoriteit Financiële Markten (AFM) – the Dutch regulator 

of the financial markets – to report on the issue whether DBnl 

has actually bought and held the shares necessary in respect 

of the share-leasing contracts. On November 9, 2006, AFM 

has issued the final report that was favorable for the position 

of DBnl. The Amsterdam Court of Appeal has rendered 

the definitive decision on January 25, 2007, granting binding 

force to the Duisenberg Arrangement, which means that all 

relevant clients in respect of the Arrangement who will not 

“opt-out” within six months, will be bound automatically to 

the Arrangement. After mandatory advertisements were placed 

in national newspapers on January 31, 2007, the opt-out 

period has started on February 1, 2007, until and including 

July 31, 2007. 

The court cases that have been suspended during this trial, 

will be resumed now, but only in case the plaintiffs will file 

an “opt-out”. 

6.1.3. Litigations in general 

A number of disputes have arisen between Bank Labouchere 

and its clients with respect to share-leasing products. Dexia 

has reported on this matter in its earlier annual reports and 

quarterly activity reports. 

As a successor to Bank Labouchere, DBnl is still faced with 

claims which are mainly based on alleged misleading information/error 

with respect to the share-leasing products; failure to 

ascertain whether the share-leasing product is suitable for a 

client in view of his investment experience and objectives and 

his financial situation (“duty of care”); failure to obtain the 

consent of the spouse of the client; false and misleading (oral) 

statements by intermediaries; cold calling; door-to-door sales; 

waivers related to the Dexia Offer not being binding; and violations 

of the Netherlands Consumer Credit Act. 

The disputes are either with individual parties or collective 

foundations (Stichting Leaseleed). They are presented to different 

types of courts or arbitrators, mainly the sub-district and 

district courts, courts of appeal, the Dutch Securities Institute 

(DSI) and the Disputes Committee for the Banking Industry. 

Over 100 clients have issued a complaint to the so-called 

Disputes Committee Duisenberg (Geschillencommissie Duisenberg). 

However, until now only a insignificant number of 

those complaints have resulted in an adjudication. 

In past reports and press releases, Dexia has informed the 

public about significant evolutions. This information is applicable 

on the Dexia website at www.dexia.com. 

On December 31, 2006, DBnl has been summoned in civil 

courts by clients having 13,976 contracts representing 4% of 

the contracts with realized or potential losses, a large majority 

of those in collective proceedings. In 39 of those cases 

some 1,700 clients are represented by Leaseproces BV, a profit 

driven organization recruiting clients with a rather aggressive 

“no cure, no pay” offer. Approximately 22,000 clients summoned 

DBnl by means of Leaseproces BV without starting 

proceedings yet. 

6.1.4. Dutch Securities Institute (DSI) 

In total, approximately 2,500 clients filed complaints at the 

Grievance Committee DSI. According to the latest estimations 

of DBnl, the complaints of at least 2,100 clients will be not 

admitted because of the statue of limitation. The remaining 

number of, at maximum, 400 cases has been postponed. It 

is expected that these will not be heard before a number of 

months after the decision of the Amsterdam Court of Appeal 

of January 25, 2007 to grant binding force to the Duisenberg 

Arrangement. 

At the end of 2006, no DBnl cases were under consideration 

of the Appeals Committee of DSI. 

6.1.5. Depot Lease 

The Duisenberg Arrangement is not applicable to a specific 

group of originally approximately 5,500 clients who have 

entered into share-leasing agreements in connection with 

securities deposit (“Depot Lease”). In April 2005, DBnl introduced 

for the Depot Lease clients a separate solution for the 

Depot Lease clients which has been accepted by more than 

50% of the clients. However, nearly 700 clients with Depot 

Lease challenge the legality of this combination of products in 

court, among which some 390 clients united by the Stichting 

Leaseleed in a collective complaint. 

6.1.6. Assessment 

The purpose of the table on the next page is to give an update 

of the status of the portfolio, and to enable the readers to 

assess the risks linked to possible credit defaults, and outstanding 

and potential future litigations. 


CONSOLIDATED 




PORTFOLIO Number Loan Collateral Excess (+) 

AS OF DECEMBER 31, 2006 of contracts amount or Lack (-) 

(in millions of EUR, unless otherwise stated) 

of collateral 


CONSOLIDATED 



TOTAL OUTSTANDING PORTFOLIO 133,976 843.3 882.5 +39.1 

- Contracts with sufficient collateral 60,407 295.6 441.5 +145.9 

of which: 

- Contracts with redemption or guaranteed capital 52,713 239.3 381.4 +142.1 

- Contracts without redemption or guaranteed capital 7,694 56.2 60.1 +3.9 

of which: 


(and signed a waiver) 4,822 34.1 36.3 +2.2 

- Not accepted an agreement 2,872 22.1 23.8 +1.7 

- Contracts with insufficient collateral 73,569 547.8 441.0 -106.8 

of which: 

- Contracts with redemption or guaranteed capital 5,532 39.6 36.4 -3.2 

- Contracts without redemption or guaranteed capital 68,037 508.1 404.6 -103.6 

of which: 


(and signed a waiver) 41,697 305.8 243.6 -62.2 

- Not accepted an agreement 26,340 202.3 160.9 -41.4 

(1) Either the Dexia Offer, the Duisenberg arrangement or another kind of settlement. 

6.2. LERNOUT & HAUSPIE 

Dexia is concerned in various ways with the bankruptcy of Lernout 

& Hauspie Speech Products (LHSP) and the consequences 

thereof. Initially, plaintiffs acted in all US proceedings both 

against Dexia SA and Dexia Bank Belgium. Meanwhile, in all 

US proceedings a notice of dismissal without prejudice has 

been filed as far as Dexia SA is concerned. Consequently, the 

pending proceedings now only involve Dexia Bank Belgium. In 

the course of 2006 no new proceedings have been initiated, 

either against Dexia Bank Belgium (Dexia Bank) or Dexia SA. 

6.2.1. Claim on Lernout & Hauspie Speech Products 






Dexia Bank was claiming a pledge on the business assets of 

LHSP. In a ruling dated April 10, 2006, the Court of Appeal 

in Ghent refused to acknowledge this pledge. Dexia Bank 

renounced to lodge an appeal with the Supreme Court. This 

means that Dexia Bank is now, as an unsecured creditor, unlikely 

to receive any dividend from the Belgian liquidation of 

LHSP. 

6.2.2. Claim on Lernout & Hauspie Investment 

Company 







6.2.3. Indictment of Dexia Bank in Belgium in the 

criminal investigation against the LHSP directors 




between July 2, 1999 and September 1, 2000 by Artesia 

Banking Corporation. 


has sent a «draft writ of summons» to the parties that are 






de cours). The draft, which is subject to changes, 

alleges in substance that Artesia Banking Corporation has 

aided and abetted LHSP in the creation of fictitious revenue, 

by granting a USD 20 million loan to Messrs. Lernout, Hauspie 

and Willaert, whilst Artesia BC allegedly knew that the 

management of LHSP would utilize these funds for improper 

revenue recognition. 
















142 | 







6.2.4. Civil proceedings against Dexia Bank in 

Belgium 

6.2.4.1. LHSP receivers’ claim 





would amount to approximately EUR 439 million. This claim is 

not likely to have any development until after the end of the 

criminal proceedings because of the principle le criminel tient 

le civil en état. 

6.2.4.2. Claim by individuals 








proceedings because of the principle le criminel tient le 

civil en état. 

6.2.5. Civil proceedings against Dexia Bank in the 

United States 

6.2.5.1. LHSP Litigation Trustee’s claim 


filed an action against Dexia Bank. The Litigation Trustee seeks 

to recover damages from Dexia Bank for entering into loan 

transactions, which he claims amount to aiding and abetting 

breaches of fiduciary duty by the LHSP Management. He also 

seeks to disallow or subordinate Dexia’s claims in the US bankruptcy 

proceedings. This action is, essentially, a duplication 

of the above-mentioned LHSP receivers’ claim. 

6.2.5.2. Claims by investors 






a) Class actions 





of the plaintiffs is well-founded, Dexia Bank has, in view of the 

large costs of defence and the uncertainty about the outcome 

of the proceedings, decided to conclude a settlement agreement 

with the NASDAQ class plaintiffs. To this end, a memorandum 

of settlement has been concluded on February 9, 

2007, which in its principal terms provides for the payment 

by Dexia Bank of an amount of USD 60 million in exchange 

for an unconditional release of all claims against Dexia SA and 

Dexia Bank and any of their past or present affiliates, officers 

and employees, relating to purchases or sales of LHSP common 

shares on the NASDAQ Stock Market during the period 

from August 19, 1998 through and including November 8, 

2000 (the “class period”) or to purchases of call options to 

acquire LHSP common shares or sales of put options related 

to LHSP common shares on any United States-based options 

exchange during the class period by all investors who will 

participate in and/or be bound by the settlement agreement, 

without any recognition on behalf of Dexia SA or Dexia Bank 

of any wrongdoing or liability. This settlement is still subject 

to court approval. 

• EASDAQ class action 




8, 2000. 






b) Transactional proceedings 








spring of 2000 LHSP shares valued at that time at approximately 

USD 220 million in exchange for their shares in Dragon 


of another former shareholder of Dragon Systems, who 

has received LHSP shares valued at the time at approximately 

USD 170 million. The writs of summons for these claims 

do not mention the amounts claimed by the plaintiffs, as all 

of them have reserved the right to produce evidence of the 

extent of the alleged losses at a later date. TRA/Filler Trust has 

however specified that the extent of its losses total at least 

some USD 150 million. 


CONSOLIDATED 



• NASDAQ class action 

The first class action was served on Dexia Bank in February and 

March 2004 in the name of three individuals acting for themselves 

as well as on behalf of a class of purchasers of LHSP 

shares on the NASDAQ stock market between August 19, 

1998 and November 8, 2000. 



CONSOLIDATED 









6.2.6. L&H Holding 





This is connected with a USD 25 million loan granted to Mr. 

Bastiaens by BAN in July 2000 for the purposes of the acquisition 

by Mr. Bastiaens of LHSP shares owned by L&H holding. 

The former Artesia Bank issued a bank guarantee in favor 

of BAN for an amount of USD 10 million. The selling price 

of USD 25 million was credited to three personal accounts 

opened with BAN by Messrs. Lernout, Hauspie and Willaert. 

Taking the view that this money was due to L&H Holding, the 

L&H Holding bankruptcy receiver is claiming its repayment. 


applications. 

6.2.7. Banque Artesia Nederland 


Artesia Nederland (BAN). In the context of this operation, 

it has been agreed, in essence, that Dexia Bank will bear the 



Most of the pending procedures relate to the loan granted 

by BAN to Mr. Bastiaens (see paragraph 6.2.6., above). They 

include the claim introduced by the receiver of L&H Holding 

both in the criminal investigation relating to LHSP (in the form 

of a burgerlijke partijstelling/constitution de partie civile) and 

before the civil court (see paragraph 6.2.6., above). 



en Willaert with the proceeds of the sale of the LHSP shares to 

Mr. Bastiaens. The investigating magistrate in the Belgium criminal 

case, L&H Holding and KBC Bank have all made claims 

in relation to these shares and proceeded to their provisional 


Court of Appeals has issued a decision on July 12, 2006 at 

the request of Crédit Agricole Indosuez Luxembourg (CAIL) 

by which BNP Paribas Luxembourg has been ordered to deliver 

the Parvest Shares to CAIL by June 30, 2007 or to pay to 

CAIL the countervalue of these Parvest shares on June 30, 

2007 if the latter have not been delivered to CAIL prior to 

July 1, 2007. The Luxembourg Court of Appeals has condemned 

BAN to indemnify and hold BNP Paribas Luxembourg harmless 

against any damage deriving from its condemnation. 

As a consequence, BAN is at risk to have to pay BNP Paribas 

Luxembourg the countervalue of the Parvest shares, if the 

provisional attachments on these Parvest shares are not lifted 

prior to June 30, 2007. 



cassation). 

6.2.8. Provisions and impairments 



Lernout & Hauspie file amounts to some EUR 101 million 

(see paragraphs 6.2.1., 6.2.2. and 6.2.7.). On the same date 

impairments for the Lernout & Hauspie file have recorded for 

a total amount of some EUR 90 million. Dexia Bank expects 

to be able to recover the difference in view of the securities 

provided. 


statements in order to cover the residual risks linked to 

the US cases for which no settlement has been concluded, 

as well as for costs and legal fees related to the whole of 

the L&H procedures mentioned in paragraphs 6.2.1. to 6.2.6. 

above. Dexia strongly challenges the validity and the merits of 

all these claims. 


• the amount of the provisions relating to the LHSP US legal 

proceedings for which as yet no settlement has been concluded 

and 


below in paragraph 6.2.5.2.b). 

Dexia believes that to do so could seriously prejudice the outcome 

of the still pending LHSP legal proceedings. 

6.3. INHERITANCE DUTIES 

The enquiry opened by the judicial authorities on September 

28, 1999 into Dexia Bank and a possible fraud involving 

inheritance duties seems to have ended. Four former executives 

were accused at the end of March 2004. However that 

accusation did not imply the guilt of the persons concerned, 

in whom Dexia maintains its confidence. Dexia Bank confirms 

that the necessary internal audit and IT procedures have enabled 

it to abide by the directives issued in this regard by the 

CBFA. There was no fundamental development in this file 

during 2006. 

144 | 


6.4. FINANCIAL SECURITY ASSURANCE – 

SUBPOENA 

In November 2006, 

• Financial Security Assurance Holdings Ltd. (FSA) received a 

subpoena from the Antitrust Division of the US Department 

of Justice (DOJ) in connection with an ongoing criminal investigation 

of bid rigging of awards of municipal guaranteed 

investment contracts (GICs) and 

• Financial Security Assurance Inc. received a subpoena from 

the US Securities and Exchange Commission (SEC) in connection 

with an ongoing civil investigation of brokers of municipal 

GICs. 

FSA issues municipal GICs through its financial products segment, 

but does not serve as a GIC broker. FSA understands 

that approximately two dozen firms have received subpoenas 

in connection with these investigations. The subpoenas 

request that FSA furnish to the DOJ and SEC records and other 

information with respect to FSA’s municipal GIC business. FSA 

intends to cooperate fully with both investigations. 



CONSOLIDATED 



7. NOTES ON THE ASSETS OF THE CONSOLIDATED BALANCE SHEET 

(IN MILLIONS OF EUR) 

7.1. CASH AND CASH EQUIVALENTS 

For the purpose of the cash flow statement, cash and cash equivalents comprises the following balances with less than 90 days 

remaining duration: 

A. Analysis by nature 



Cash and balances with central banks 3,435 3,357 

Interbank loans and advances 36,298 49,029 

Loans and securities available for sale 3,081 5,127 

Loans and securities held for trading 965 396 

Loans and securities designated at fair value 18 0 

Non current assets held for sale 0 32 

TOTAL 43,797 57,941 

CONSOLIDATED 


B. Of which restricted cash 


Mandatory reserves (1) 1,259 2,154 

Other 6 3 

TOTAL 1,265 2,157 

(1) Mandatory reserves: minimum reserve deposits credit institutions must have with ECB or with other central banks. 


7.2. CASH AND BALANCES WITH CENTRAL BANKS 


Accrued interest 4 8 

Acquisition cost 3,440 3,357 

TOTAL 3,444 3,365 

Analysis by nature (acquisition cost) 


Cash in hand 485 586 

Balances with central banks other than mandatory reserve deposits 1,696 617 

Mandatory reserve deposits 1,259 2,154 

TOTAL 3,440 3,357 

of which included in cash and cash equivalents 3,435 3,357 

7.3. DUE FROM BANKS 


Accrued interest on not impaired interbank loans and advances 599 1,167 

Accrued interest on impaired interbank loans and advances 0 0 

Fair value hedge adjustment 620 321 

Reimbursement amount, premium discount and impairments (1) 73,834 76,727 

TOTAL 75,053 78,215 

146 | 

(1) In order to harmonize the accounting presentation within Dexia, cash collaterals of some companies of the Group have been reclassified from “Other 

assets“ to “Due from banks“ in December 31, 2005 balance sheet for an amount of EUR 4,522 million. 


A. Analysis by nature (reimbursement amount, premium discount and impairments) 


Nostro accounts 6,851 13,603 

Reverse repurchase agreements 42,746 40,110 

Loans and other advances 24,236 23,014 

Impaired loans 1 0 

TOTAL 73,834 76,727 


B. Analysis of quality 

See note 7.16. Quality of financial assets. 

C. Analysis by maturity and interest rate 

See notes 12.3., 12.4. and 12.6. 


D. Analysis of the fair value 

See note 12.1. 

7.4. LOANS AND ADVANCES TO CUSTOMERS 


Accrued interest on not impaired loans to customers 1,595 1,975 

Accrued interest on impaired loans to customers 3 5 

Fair value hedge adjustment 2,683 1,322 

Reimbursement amount, premium discount and impairments 188,121 223,200 

TOTAL 192,402 226,502 

A. Analysis by counterpart (reimbursement amount, premium discount and impairments) 


CONSOLIDATED 



Public sector 112,275 121,407 

Others 75,799 101,733 

Impaired loans 1,473 1,359 

Less: 

Specific impairment on impaired loans (1) (1,018) (942) 

Collective impairment (2) (408) (357) 

TOTAL 188,121 223,200 

of which included in finance lease 3,132 3,692 

(1) Includes respectively EUR 178 million and EUR 188 million relating to share leasing of DBnl as of Dec. 31, 2005 and Dec. 31, 2006. 

(2) Includes respectively EUR 174 million and EUR 56 million relating to share leasing of DBnl as of Dec. 31, 2005 and Dec. 31, 2006. 





See notes 12.3., 12.4. and 12.6. 

D. Analysis of the fair value 



7.5. LOANS AND SECURITIES HELD FOR TRADING 


Accrued interest on loans and securities held for trading 66 113 

Fair value adjustment (35) 119 

Reimbursement amount and premium discount 15,624 15,153 

TOTAL 15,655 15,385 

CONSOLIDATED 



A. Analysis by counterpart (reimbursement amount and premium discount) 



Banks 9,275 5,367 

Other 3,449 8,492 

TOTAL 15,624 15,153 

of which included in cash and cash equivalents 965 396 

B. Analysis by nature (reimbursement amount and premium discount) 


Listed Unlisted Listed Unlisted 

Loans 0 1,022 0 540 

Bonds issued by public bodies 2,737 9 1,114 104 

Other bonds and fixed-income instruments 9,881 922 10,388 2,560 

Equity and variable-income instruments 1,053 0 447 0 

TOTAL 13,671 1,953 11,949 3,204 

C. Treasury bills and other eligible bills for refinancing to the central banks 


Treasury bills and other eligible bills for refinancing to the central banks 1,042 124 

148 | 


D. Securities pledged under repurchase agreements with other banks 


Market 

Market 

value 

value 

Included in bonds issued by public bodies 0 40 

Included in other bonds and fixed-income instruments 901 1,323 

E. Analysis by maturity and interest rate 

See notes 12.3., 12.4. and 12.6. 

F. Analysis of the fair value 


7.6. LOANS AND SECURITIES DESIGNATED AT FAIR VALUE 



Accrued interest on loans and securities designated at fair value 50 89 

Fair value adjustment (164) 80 


TOTAL 13,865 17,184 

A. Analysis by counterpart (reimbursement amount and premium discount) 

CONSOLIDATED 



Public sector 582 285 

Banks 329 396 

Other 13,068 16,334 

TOTAL 13,979 17,015 

of which included in cash and cash equivalents 18 0 


B. Analysis by nature (reimbursement amount and premium discount) 



Loans 0 243 0 181 

Bonds issued by public bodies 398 184 107 129 

Other bonds and fixed-income instruments 5,111 2,284 7,762 2,740 

Equity and variable-income instruments 0 0 20 0 

Unit linked products Insurance 5,758 1 6,054 22 

TOTAL 11,267 2,712 13,943 3,072 


C. Treasury bills and other eligible bills for refinancing to the central banks 


Treasury bills and other eligible bills for refinancing to the central banks 75 131 

Figures as at Dec.31, 2005 have been restated. 

D. Securities pledged under repurchase agreements with other banks 



Market 

Market 

value 

value 

Included in bonds issued by public bodies 0 0 

Included in other bonds and fixed-income instruments 1,449 2,312 


See notes 12.3., 12.4. and 12.6. 

CONSOLIDATED 





The FVO for financial assets is mainly used in the following 

situations: 

1) where liabilities contain a discretionary participation feature 

that pay benefits based on realized/unrealized investment 

returns of a specified pool of insurer’s assets; 

2) the FVO is used as an alternative method in order to reduce 

volatility in profit or loss when, at inception, there is a risk that 

the hedge accounting requirements will not be met. 

7.7. LOANS AND SECURITIES AVAILABLE FOR SALE 

To determine the fair value for non-listed financial instruments 

classified under the fair value option, the pricing tools 

used and procedures followed are determined by Group Risk 

Management. The pricing tool is a discounted cash flow 

model whereby the net present value is determined by an 

interest rate based on available market rates applicable for 

similar securities and for issuers with a similar credit rating. 


Accrued interest on not impaired loans and securities available for sale 1,900 2,276 

Accrued interest on impaired loans and securities available for sale 0 0 

Fair value adjustment 8,240 4,679 


TOTAL 166,204 188,378 

150 | 





Banks 46,485 57,219 

Others 48,070 58,270 

Impaired loans 0 0 

Impaired bonds issued by public bodies 0 0 

Impaired other bonds and fixed-income instruments 124 29 

Impaired other equity and variable-income instruments 592 440 

REIMBURSEMENT AMOUNT AND PREMIUM DISCOUNT 156,393 181,655 

Less: 

Specific impairment on impaired loans and securities available for sale (329) (232) 

TOTAL 156,064 181,423 





See notes 12.3., 12.4. and 12.6. 

D. Analysis by nature (reimbursement amount and premium discount ) 



Loans 0 391 0 373 

Bonds issued by public bodies 48,553 2,216 52,797 2,556 

Other bonds and fixed-income instruments 84,242 17,429 99,534 22,656 

Equity and variable-income instruments 2,980 582 3,252 487 

TOTAL 135,775 20,618 155,583 26,072 


CONSOLIDATED 



E. Transfers between portfolios 

Nil. 

F. Convertible bonds included in the available-for-sale portfolio 

No position greater than EUR 50 million. 

G. Analysis of the fair value 



7.8. SECURITIES HELD TO MATURITY 


Accrued interest on not impaired securities held to maturity 91 54 

Accrued interest on impaired securities held to maturity 0 0 

Fair value adjustment 0 0 


TOTAL 3,217 2,260 


CONSOLIDATED 






Banks 451 382 

Other 775 445 

Impaired bonds issued by public bodies 0 0 

Impaired other bonds and fixed-income instruments 0 0 

REIMBURSEMENT AMOUNT AND PREMIUM DISCOUNT 3,126 2,206 

Less: 

Specific impairment on securities held to maturity 0 0 

Collective impairment 0 0 

TOTAL 3,126 2,206 




See notes 12.3., 12.4. and 12.6. 

D. Analysis by nature (reimbursement amount and premium discount ) 



Bonds issued by public bodies 999 7 976 112 

Other bonds and fixed-income instruments 1,415 705 566 552 

TOTAL 2,414 712 1,542 664 

E. Analysis of the fair value 


152 | 


7.9. INVESTMENTS IN ASSOCIATES 

A. Carrying value 


CARRYING VALUE AS OF JAN. 1 769 778 

Acquisitions 2 35 

Disposals (40) (10) 

Change in scope of consolidation (out ) 0 (45) 

Share of result before tax 126 143 

Share of tax (36) (41) 

Dividend paid (42) (39) 

Changes in goodwill (see below) 0 0 

Share of gains and losses not recognized in the income statement 2 8 

Translation adjustments 10 (2) 

Other (13) (1) 

CARRYING VALUE AS OF DEC. 31 778 826 


B. Positive goodwill included in carrying value 


ACQUISITION COST AS OF JAN. 1 231 229 

Transfers (2) 0 

ACQUISITION COST AS OF DEC. 31 (A) 229 229 

ACCUMULATED DEPRECIATION AND ACCUMULATED IMPAIRMENT AS OF JAN. 1 (48) (46) 

Transfers 2 0 

ACCUMULATED DEPRECIATION AND ACCUMULATED IMPAIRMENT AS OF DEC. 31 (B) (46) (46) 

NET BOOK VALUE AS OF DEC. 31 (A)+(B) 183 183 

C. List of major associates 

CONSOLIDATED 



Associates Book Fair value Book Fair value Website 

value of investment value of investment 

2005 2005 2006 2006 

Crédit du Nord 

441 746 484 733 www.groupe-credit-du-nord.com 

Kommunalkredit Austria 118 402 175 251 www.kommunalkredit.at 

SLF Finance SA (non listed) 63 63 64 64 

XL Finance Assurance (non listed) 47 47 na na 

Groupe Popular Banca Privada 38 77 41 115 www.popularbancaprivada.es 

TOTAL 707 1,335 764 1,163 


7.10. TANGIBLE FIXED ASSETS 

A. Net book value 

Land and buildings Office furniture Investment Total 

and other equipment 

Property 

Own use Own use Own use Own use Ope- 

Owner Finance Owner Finance rating 

Lease Lease lease 


CONSOLIDATED 



ACQUISITION COST 

AS OF JAN. 1, 2005 1,234 2 1,259 2 35 1,133 3,665 

Acquisitions 413 0 89 0 16 20 538 

Disposals (78) 0 (42) 0 (5) (1) (126) 

Change in scope 

of consolidation (in) 302 0 3 0 0 0 305 


of consolidation (out) 0 0 (5) 0 0 0 (5) 

Transfers 67 (2) (69) (1) 0 (197) (202) 

Translation adjustments 0 0 6 0 0 0 6 


AS OF DEC. 31, 2005 (A) 1,938 0 1,241 1 46 955 4,181 

ACCUMULATED DEPRECIATION 

AND IMPAIRMENT 

AS OF JAN. 1, 2005 (341) (1) (1,021) (1) (16) (652) (2,032) 

Booked (23) 0 (65) 0 (6) (64) (158) 

Write-back 0 0 0 0 0 2 2 

Write-off 13 0 36 0 3 1 53 


of consolidation (in) 0 0 (1) 0 0 0 (1) 


of consolidation (out) 0 0 3 0 0 0 3 

Transfers (49) 1 42 0 0 151 145 

Translation adjustments 0 0 (4) 0 0 0 (4) 

Other (3) 0 (1) 0 0 0 (4) 



AS OF DEC. 31, 2005 (B) (403) 0 (1,011) (1) (19) (562) (1,996) 

NET BOOK VALUE 

AS OF DEC. 31, 2005 (A)+(B) 1,535 0 230 0 27 393 2,185 

154 | 


Land and buildings Office furniture Investment Total 

and other equipment 

Property 

Own use Own use Own use Own use Ope- 

Owner Finance Owner Finance rating 

Lease Lease lease 


AS OF JAN. 1, 2006 1,938 0 1,241 1 46 955 4,181 

Acquisitions 150 6 62 9 22 23 272 

Disposals (123) 0 (39) 0 (5) (15) (182) 


of consolidation (in) 28 2 66 43 0 0 139 


of consolidation (out) (48) 0 (20) 0 0 0 (68) 

Transfers (5) (1) (26) 0 0 (69) (101) 

Translation adjustments 2 0 (5) 0 0 0 (3) 


AS OF DEC. 31, 2006 (A) 1,942 7 1,279 53 63 894 4,238 



AS OF JAN. 1, 2006 (403) 0 (1,011) (1) (19) (562) (1,996) 

Booked (48) (1) (63) (3) (8) (37) (160) 

Write-back 1 0 1 0 0 0 2 

Write-off 16 0 34 0 3 10 63 


of consolidation (in) (7) 0 (36) (25) 0 0 (68) 


of consolidation (out) 16 0 13 0 0 0 29 

Transfers 1 0 23 0 0 54 78 

Translation adjustments 0 0 2 0 0 0 2 



AS OF DEC. 31, 2006 (B) (424) (1) (1,037) (29) (24) (535) (2,050) 

NET BOOK VALUE 

AS OF DEC. 31, 2006 (A)+(B) 1,518 6 242 24 39 359 2,188 


CONSOLIDATED 



B. Fair value 


Fair values of investment properties 397 391 

Fair value subject to an independent valuation 7 2 

Fair value not subject to an independent valuation 390 389 

C. Expenditures 


Expenditures capitalized for the construction of property, plant & equipment 236 13 

D. Contractual obligations relating to investment property at the end of the period 

Nil. 


7.11. INTANGIBLE ASSETS AND GOODWILL 

Positive Internally Other Total 

Goodwill developed intangible 

sofware assets (1) 


CONSOLIDATED 


ACQUISITION COST AS OF JAN. 1, 2005 802 392 276 1,470 

Acquisitions 0 48 37 85 

Disposals 0 (1) (4) (5) 

Change in scope of consolidation (in) 7 0 0 7 

Change in scope of consolidation (out) 0 0 (5) (5) 

Transfers (18) 30 43 55 

Translation adjustments 0 0 2 2 

ACQUISITION COST AS OF DEC. 31, 2005 (A) 791 469 349 1,609 



AS OF JAN. 1, 2005 (292) (274) (187) (753) 

Booked 0 (53) (47) (100) 

Change in scope of consolidation (out) 0 0 2 2 

Write-off 0 1 3 4 

Transfers 18 (22) (22) (26) 

Translation adjustments 0 0 (1) (1) 



AS OF DEC. 31, 2005 (B) (274) (348) (252) (874) 

NET BOOK VALUE AS OF DEC. 31, 2005 (A)+(B) 517 121 97 735 

(1) Other intangible assets include purchased softwares. 


156 | 


Positive Internally Other Total 

Goodwill developed intangible 

sofware assets (1) 

ACQUISITION COST AS OF JAN. 1, 2006 791 469 349 1,609 

Acquisitions 1,310 71 45 1,426 

Disposals (46) (6) (8) (60) 

Change in scope of consolidation (in) 168 3 278 449 

Change in scope of consolidation (out) (23) (3) (28) (54) 

Transfers (30) 3 (17) (44) 

Translation adjustments (12) (1) (4) (17) 

Other 0 0 (3) (3) 

ACQUISITION COST AS OF DEC. 31, 2006 (A) 2,158 536 612 3,306 



AS OF JAN. 1, 2006 (274) (348) (252) (874) 

Booked 0 (58) (47) (105) 

Change in scope of consolidation (in) (15) (2) (24) (41) 

Change in scope of consolidation (out) 3 3 17 23 

Write-off 34 1 2 37 

Transfers 30 (1) 17 46 

Translation adjustments 1 0 0 1 



AS OF DEC. 31, 2006 (B) (221) (405) (287) (913) 

NET BOOK VALUE AS OF DEC. 31, 2006 (A)+(B) 1,937 131 325 2,393 

(1) Other intangible assets include purchased softwares and intangible assets identified in the purchase of DenizBank group - see note 9.6.. 

7.12. TAX ASSETS 


Current/prepaid 243 215 

Operational taxes 39 52 


CONSOLIDATED 



CURRENT TAXES 282 267 

Deferred tax assets (see note 9.2.) 320 482 

TOTAL 602 749 

7.13. OTHER ASSETS 


Other assets (1) 2,934 2,275 

Other assets specific to insurance companies 1,360 1,277 

TOTAL 4,294 3,552 

(1) In order to harmonize the accounting presentation within Dexia, cash collaterals of some companies of the Group have been reclassified from “Other 

assets“ to “Due from banks“ in December 31, 2005 balance sheet for an amount of EUR 4,522 million. 


A. Other assets 

Analysis by nature Dec. 31, 2005 Dec. 31, 2006 

Accrued income 237 151 

Deferred expenses 58 61 

Other accounts receivable 1,944 1,490 

Plan assets (1) 7 17 

Long term construction contracts 1 3 

Inventories 3 5 

Other assets 684 548 


CONSOLIDATED 



TOTAL 2,934 2,275 

(1) See note 8.7.I. 

B. Other assets specific to insurance activities 

B.1. Dec. 31, 2005 Dec. 31, 2006 


Acquisition costs and share of reinsurers 1,360 1,277 

TOTAL 1,360 1,277 

B.2. Analysis by nature (acquisition costs and share of reinsurers) Dec. 31, 2005 Dec. 31, 2006 

Share of the reinsurers in the technical reserves 121 88 

Receivables resulting from direct insurance transactions 105 85 

Premiums still to be issued 0 1 

Deferred acquisition costs (1) 284 259 

Other insurance assets 850 844 

Impaired insurance assets 1 1 

Less: 

Specific impairment (1) (1) 

(1) Mainly FSA. 

TOTAL 1,360 1,277 

7.14. NON CURRENT ASSETS HELD FOR SALE 


Assets of subsidiaries held for sale (1) 0 901 

Tangible and intangible assets held for sale 35 53 


TOTAL 36 955 

(1) Dexia Banque Privée France. 

158 | 


7.15. LEASING 

1. Dexia as lessor 

A. Finance lease (1) 

Gross investment in finance leases Dec. 31, 2005 Dec. 31, 2006 

Not later than 1 year 508 778 

Later than 1 year and not later than 5 years 1,310 1,578 

Later than 5 years 1,935 2,021 

SUBTOTAL (A) 3,753 4,377 

UNEARNED FUTURE FINANCE INCOME ON FINANCE LEASES (B) 620 688 

NET INVESTMENT IN FINANCE LEASES (A)-(B) 3,133 3,689 

The net investment in finance leases may be analyzed as follows Dec. 31, 2005 Dec. 31, 2006 


Later than 1 year and not later than 5 years 1,135 1,358 

Later than 5 years 1,584 1,689 

TOTAL 3,133 3,689 


Amount of contingents rents recognised in statement of income during the period 0 0 

Amount of uncollectible finance lease receivables included in 

the provision for loan losses at the end of the period 11 11 

Estimated fair value of finance lease 3,144 3,509 

Accumulated allowance for uncollectible minimum lease payments receivable 4 4 

(1) The figures as at December 31, 2005 have been restated. 

B. Operating lease (1) 

Future net minimum lease receivables under non-cancellable operating leases are as follows Dec. 31, 2005 Dec. 31, 2006 


CONSOLIDATED 




Later than 1 year and not later than 5 years 36 61 

Later than 5 years 20 34 

TOTAL 71 119 

Amount of contingent rents recognized in statement of income during the period 1 4 


2. Dexia as lessee 

A. Finance lease 

Minimum lease payments Dec. 31, 2005 Dec. 31, 2006 




TOTAL 0 1 


Present value of finance lease liabilities Dec. 31, 2005 Dec. 31, 2006 




TOTAL 0 0 



Contractual future minimum lease payments (A) 0 17 

Correction due to discount rate (B) 0 1 

PRESENT VALUE OF THE FUTURE MINIMUM LEASE PAYMENTS (A)-(B) 0 16 

Amount of contingent rents recognized in statement of income during the period 0 0 

Amount of future minimum sublease payments expected to be received under 

non-cancellable subleases at the balance sheet date 0 0 

B. Operating lease (1) 

Future net minimum lease payments under non-cancellable operating leases Dec. 31, 2005 Dec. 31, 2006 

CONSOLIDATED 






TOTAL 384 357 


Amount of future minimum sublease payments expected to be received under 

non-cancellable subleases at the balance sheet date 5 6 

Lease and sublease payments recognized as an expense during the period: 

- minimum lease payments 80 114 

- contingent rents 2 0 

- sublease payments 0 5 

TOTAL 82 119 


7.16. QUALITY OF FINANCIAL ASSETS 

Accrued interest Normal loans Impaired loans Total 

Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2006 Dec. 31, 2005 Dec. 31, 2006 

Due from banks 599 1,167 0 0 599 1,167 

Loans to customers 1,595 1,975 3 5 1,598 1,980 

Securities – held to maturity 91 54 0 0 91 54 

Loans and securities – available for sale 1,900 2,276 0 0 1,900 2,276 

Fair value adjustment Normal loans Impaired loans Total 


Due from banks 620 321 0 0 620 321 

Loans to customers 2,683 1,322 0 0 2,683 1,322 

Loans and securities – available for sale 7,983 4,405 257 274 8,240 4,679 

160 | 


Analysis of normal loans and securities 

Gross amount (acquisition cost and premium discount) (A) 


Normal assets in due from banks 73,834 76,727 

Normal loans to customers 188,074 223,140 

Normal securities held to maturity 3,126 2,206 

Normal loans and securities available for sale 155,677 181,186 

Normal assets from insurance activities 1,360 1,277 

Normal other accounts and receivables 1,941 1,490 

Normal other assets 672 548 

Collective impairment on not impaired loans (-) (408) (357) 

TOTAL 424,276 486,217 

Analysis of impaired Gross amount (acquisition Specific loan loss allowance Net amount 

loans and securities cost and premium discount) (B) individual basis (C) (B)+(C) 


Impaired assets 

in due from banks 0 0 0 0 0 0 

Impaired loans to customers 1,473 1,359 (1,018) (942) 455 417 

Impaired securities - 

held to maturity 0 0 0 0 0 0 

Impaired loans and securities – 

available for sale 716 469 (329) (232) 387 237 

Impaired assets from insurance activities 1 1 (1) (1) 0 0 

Impaired other accounts and receivable 5 2 (1) (2) 4 0 

Impaired other assets 12 0 0 0 12 0 

TOTAL 2,207 1,831 (1,349) (1,177) 858 654 


CONSOLIDATED 


Normal + impaired Gross amount (A)+(B) Specific loan loss Net amount (A)+(B)+(C) 

allowance (C) 


Due from banks 73,834 76,727 0 0 73,834 76,727 

Loans to customers 189,547 224,499 (1,018) (942) 188,529 223,557 

Securities held to maturity 3,126 2,206 0 0 3,126 2,206 

Loans and securities 

available for sale 156,393 181,655 (329) (232) 156,064 181,423 

Assets from insurance activities 1,361 1,278 (1) (1) 1,360 1,277 

Other accounts and receivable 1,945 1,492 (1) (2) 1,944 1,490 

Other assets 684 548 0 0 684 548 

Collective impairment 

on not impaired loans (-) (408) (357) 0 0 (408) (357) 


TOTAL 426,482 488,048 (1,349) (1,177) 425,133 486,871 


8. NOTES ON THE LIABILITIES OF THE CONSOLIDATED BALANCE SHEET 


8.1. DUE TO BANKS 



Fair value hedge adjustment 273 114 



CONSOLIDATED 


TOTAL 134,793 174,754 

A. Analysis by nature (reimbursement amount and premium discount) 


On demand 9,584 24,732 

Term 45,139 65,498 

Repurchase activity 46,333 45,580 

Central banks 7,745 9,027 

Other borrowings 25,221 29,121 

TOTAL 134,022 173,958 

B. Analysis by maturity and interest rate 

See notes 12.3., 12.4. and 12.6. 


C. Analysis of the fair value 


8.2. CUSTOMER BORROWINGS AND DEPOSITS 



Fair value hedge adjustment (97) (248) 

Reimbursement amount and premium discount (1) 97,096 108,903 

TOTAL 97,738 109,484 

(1) In order to harmonize the accountring presentation within Dexia, cash collaterals of some companies of the Group have been reclassified 

from “Other liabilities” to “Customer borrowings and deposits” in December 31, 2005 balance sheet for an amount of EUR 359 million. 

A. Analysis by nature (reimbursement amount and premium discount) (1) Dec. 31, 2005 Dec. 31, 2006 

Demand deposits 19,902 26,391 

Saving deposits 26,184 27,372 

Term deposits 43,782 49,769 

Other customer deposits 362 46 

TOTAL CUSTOMER DEPOSITS 90,230 103,578 

Repurchase activity 4,558 4,172 

Other borrowings 2,308 1,153 

TOTAL CUSTOMER BORROWINGS 6,866 5,325 

TOTAL 97,096 108,903 

(1) Analysis in 2005 has been restated. 

162 | 



See notes 12.3., 12.4. and 12.6. 



8.3. LIABILITIES HELD FOR TRADING 




Reimbursement amount and premium discount 3,753 558 

TOTAL 3,813 578 



Bonds issued by public bodies 3,449 508 

Other bonds 54 19 

Repurchase agreements 234 0 

Equity 16 31 

TOTAL 3,753 558 


See notes 12.3., 12.4. and 12.6. 



8.4. LIABILITIES DESIGNATED AT FAIR VALUE 


CONSOLIDATED 







TOTAL 18,022 21,311 



Liabilities at fair value 12,768 16,252 

Unit-linked products 5,012 4,781 

TOTAL 17,780 21,033 



See notes 12.3., 12.4. and 12.6. 

The following types of liabilities incurred by FSA are subject to 

the FVO classification: 


CONSOLIDATED 





The FVO for financial liabilities is mainly used in the following 

situations: 

1) at the insurance business for its liabilities containing a discretionary 

participation feature that pay benefits based on 

realized/unrealized investment returns of a specified pool of 

insurer’s assets. 

2) by FSA for liabilities where the hedge accounting requirements 

are not met or there is a risk that they will not be met, 

the FVO is used as an alternative in order reduce volatility in 

profit or loss. 

8.5. DEBT SECURITIES 

a) Fixed rate liabilities that are highly customized funding 

contracts that are tailored to the specific needs of the 

investor. 

b) Global funding fixed rate liabilities. 

For both types of liabilities, the change of credit spread is 

immaterial as liabilities are AAA-rated and highly customized. 

This conclusion is confirmed by a quantitative analysis 

showing that contractual spreads were not correlated with 

FSA’s credit spread and by correlation with similar debts. 

3) by companies issuing debt with embedded derivatives. 

The pricing tools used and the procedures followed to determine 

the fair value for non-listed financial instruments classified 

under the fair value option, are set up by Group Risk Management.The 

pricing tool is a discounted cash flow model whereby 

the net present value is determined by an interest rate based 

on available market rates applicable for similar securities and 

taking into account our own credit rating. 


Accrued interest 2,507 2,613 

Fair value adjustment 686 (238) 


TOTAL 175,685 184,726 

A. Analysis by nature (reimbursement amount and premium discount 


Certificates of deposit 33,685 31,993 

Customer savings certificates 7,367 5,992 

Non-convertible bonds 131,440 144,366 

TOTAL 172,492 182,351 


See notes 12.3., 12.4. and 12.6. 



164 | 


8.6. SUBORDINATED AND CONVERTIBLE DEBT 





TOTAL 4,985 4,365 

A. Accrued interest 


Convertible subordinated debt 0 0 

Non-convertible subordinated debt 83 72 

Convertible non-subordinated debt 2 0 

Other dilutive instruments 0 0 

Hybrid capital and redeemable preference shares 17 7 

TOTAL 102 79 

B. Fair value adjustment 


Convertible subordinated debt 0 0 

Non-convertible subordinated debt 81 63 


Other dilutive instruments 0 0 

Hybrid capital and redeemable preference shares 0 0 

TOTAL 81 63 

C. Analysis by category (reimbursement amount and premium discount) 

Convertible subordinated debt 

Nil. 


CONSOLIDATED 



Non-convertible subordinated debt 


Loan capital perpetual subordinated notes 1,027 923 

Other 3,194 3,055 

TOTAL 4,221 3,978 

List available on request. 


Convertible non-subordinated debt 



List available on request. 

Other dilutive instruments 

Nil. 


CONSOLIDATED 



Hybrid capital and redeemable preference shares 


499 225 

As of Dec. 31, 2005, hybrid capital instruments issued by Dexia BIL: two perpetuals, one of EUR 225 million and another one of EUR 275 million. 

As of Dec. 31, 2006, hybrid capital instrument issued by Dexia BIL: perpetual of EUR 225 million at the rate of 6,821%, refunding only possible annually as 

from July 6, 2011. 

A call on perpetual of EUR 275 million at the rate of 6,875% has been exercised on July 6, 2006. 

D. Analysis of convertible subordinated debt in Dexia shares 

Nil. 


See notes 12.3., 12.4. and 12.6. 



166 | 


8.7. PROVISIONS AND OTHER OBLIGATIONS 



Litigation claims (1) 227 352 

Restructuring 176 150 

Long-term defined benefit plans 549 597 

Other post retirement obligations 45 51 

Other long-term employee benefits 46 45 

Provision for off-balance-sheet credit commitments (2) 158 135 

Other provisions (non insurance) (3) 119 138 

TOTAL (4) 1,320 1,468 

(1) Provisions for litigations, include provisions relating to staff, to taxes, for administrative and other claims. 

(2) Of which EUR 145 and 106 millions relating to Dexia Bank Nederland (Legio Lease Provision) for 2005 and 2006 respectively. 

(3) The Other Provisions mainly contain: provisions to restore property, plant and equipment to their original state, a provision for onerous rental contracts 

and a number of provisions for non-material events. 

(4) Claims with major risks are analyzed in detail in note 6. Litigations. 


B. Analysis of movements 

Litigation Restructuring Pensions Provision for Other 

claims and other off-balance-sheet provisions 

employee 

credit 

benefits commitments 

AS OF JAN. 1, 2005 235 195 592 99 125 

Exchange difference 10 0 0 (1) 0 

Additional provisions 37 17 110 8 64 

Unused amounts reversed (26) (2) (13) (8) (29) 

Utilization during the year (12) (42) (60) (152) (34) 

Changes in scope of consolidation (in) 0 0 0 0 1 

Changes in scope of consolidation (out) (8) (4) 0 0 0 

Transfers (13) 8 14 (1) (4) 

Other movements 4 4 (3) 213 (4) 

AS OF DEC. 31, 2005 227 176 640 158 119 

CONSOLIDATED 



Litigation Restructuring Pensions Provision for Other 

claims and other off-balance-sheet provisions 

employee 

credit 

benefits commitments 

AS OF JAN. 1, 2006 227 176 640 158 119 

Exchange difference (8) 0 (1) (2) (1) 

Additional provisions 223 41 133 23 67 

Unused amounts reversed (22) (20) (21) (3) (12) 

Utilization during the year (51) (33) (69) (57) (29) 

Changes in scope of consolidation (in) 0 3 5 7 4 

Changes in scope of consolidation (out) (8) 0 (16) 8 (1) 

Transfers (9) (17) 22 1 (15) 

Other movements 0 0 0 0 6 

AS OF DEC. 31, 2006 352 150 693 135 138 

C. Analysis by maturity 



D. Provisions for pensions and other long term benefits 

A. Change in benefit obligation Dec. 31, 2005 Dec. 31, 2006 


1. Benefit obligation at beginning of year 2,307 2,494 

2. Current service cost 106 115 

3. Interest cost 101 96 

4. Plan participants’ contributions 6 8 

5. Amendments 2 (8) 

6. Actuarial (gains)/losses 93 (164) 

7. Benefits paid (118) (127) 

8. Expenses paid 0 0 

9. Taxes paid 0 0 

10. Premiums paid (2) (3) 

11. Acquisitions/divestitures 0 (92) 

12. Plan curtailments (1) (2) 

13. Plan settlements 0 (31) 

14. Exchange rate changes 0 (4) 

15. BENEFIT OBLIGATION AS OF END OF YEAR 2,494 2,282 

CONSOLIDATED 



B. Change in plan assets Dec. 31, 2005 Dec. 31, 2006 

1. Fair value of plan assets at beginning of year 1,492 1,588 

2. Expected return on plan assets 72 68 

3. Actuarial gains/(losses) on plan assets 54 (28) 

4. Employer contributions 85 87 

5. Member contributions 6 8 

6. Benefits paid (118) (127) 

7. Expenses paid 0 0 

8. Taxes paid (1) 0 

9. Premiums paid (2) (3) 

10. Plan settlements 0 (16) 

11. Acquisitions/divestitures 0 (91) 

12. Exchange rate changes 0 (3) 

13. FAIR VALUE OF PLAN ASSETS AS OF END OF YEAR 1,588 1,483 

C. Amounts recognized in the balance sheet Dec. 31, 2005 Dec. 31, 2006 

1. Present value of funded obligations 1,930 1,691 

2. Fair value of plan assets 1,588 1,484 

3. Deficit/(surplus) for funded plans 342 207 

4. Present value of unfunded obligations 564 591 

5. Unrecognized net actuarial gains/(losses) (273) (122) 

6. Unrecognized past service (cost)/benefit 0 0 

7. Effect of paragraph 58(b) limit 0 0 

8. NET LIABILITY/(ASSET) 633 676 

Amounts in the balance sheet 

1. Liabilities 640 693 

2. Assets (7) (17) 

3. NET LIABILITY/(ASSET) 633 676 

168 | 


D. Components of costs Dec. 31, 2005 Dec. 31, 2006 

Amounts recognized in statement of income 

1. Current service cost 106 117 

2. Interest cost 101 97 

3. Expected return on plan assets (72) (70) 

4. Expected return on reimbursement assets 0 0 

5. Amortization of past service cost incl. §58(a) 2 (8) 

6. Amortization of net (gain)/loss incl. §58(a) 7 10 

7. Effect of paragraph 58(b) limit 0 0 

8. Curtailment (gain)/loss recognized (1) (2) 

9. Settlement (gain)/loss recognized 0 (12) 

10. TOTAL COSTS RECOGNIZED IN THE STATEMENT OF INCOME 143 132 

Actual return on assets 

Actual return on plan assets 126 40 

Actual return on reimbursement assets 0 0 


E. Balance sheet reconciliation Dec. 31, 2005 Dec. 31, 2006 

1. Balance sheet liability/(asset) 574 633 

2. Expenses recognized in statement of income in the financial year 143 132 

3. Amounts recognized in SORIE in the financial year 0 0 

4. Employer contributions made in the financial year 63 67 

5. Benefits paid directly by company in the financial year 22 20 

6. Credit to reimbursements 0 0 

7. Net transfer in/(out) (including the effect of any business combinations/divestitures) 1 (1) 

8. Exchange rate adjustment - (gain)/loss 0 (1) 

9. BALANCE SHEET LIABILITY/(ASSET) AS OF END OF YEAR (1)+(2)+(3)-(4)-(5)+(6)+(7)+(8) 633 676 

F. Plan assets 

Asset category 

Percentage of Plan assets 


CONSOLIDATED 



1. Equity securities 19.97% 18.43% 

2. Debt securities 76.39% 77.66% 

3. Real estate 0.00% 0.00% 

4. Other (1) 3,64% 3.91% 

(1) Includes qualifying insurance policies. 

G. History of experience gains and losses Dec. 31, 2005 Dec. 31, 2006 

1. Difference between the actual and expected return on plan assets 

a. Amount 54 (28) 

b. Percentage of plan assets 3% -2% 

2. Total gains (-) and losses on plan liabilities (1) 

a. Amount 93 (164) 

b. Percentage of present value of plan liabilities 4% -7% 

(1) Due essentially to change on assumptions. 


H. Range of assumptions to determine expenses 

Dec. 31, 2005 

Discount Inflation Expected Expected Expected Salary 

Rate return return return Increase 

on assets on bonds on shares Rate 

Europe 4.00% – 5.50% 2.50% 3.00% – 6.00% 4.00% – 5.50% 6.00% – 7.00% 2.50% – 5.50% 

Switzerland 2.50% 1.00% 3.11% 2.25% 6.75% 1.50% 

United Kingdom 4.75% 2.50% 6.58% 4.75% 7.75% 4.00% 


CONSOLIDATED 



Dec. 31, 2006 

Discount Inflation Expected Expected Expected Salary 

Rate return return return Increase 

on assets on bonds on shares Rate 

Europe 3.61% – 4.50% 2.50% 2.90% – 7.50% 2.90% – 4.50% 5.90% – 7.90% 2.50% – 5.50% 

Switzerland 2.75% 1.00% 3.25% 2.75% 5.75% 2.00% 

United Kingdom 5.00% 2.75% 6.02% 5.00% 8.00% 4.25% 

Comment on assumptions: 

As a general principle, discount rate is equal to return on bonds in a plan assets. 

Return on shares takes into account a risk premium. 

The expected return on assets is based on the mix of return of bonds and shares of the portfolio. 

I. Reconciliation with financial statements 

Long Term Obligations 2005 2006 

Outstanding liability relating to defined benefit plans 549 597 

Outstanding liability relating to other post retirement obligations 45 51 

Outstanding liability relating to other long term employee benefits 46 45 

TOTAL OUTSTANDING LIABILITY REPORTED IN THE FINANCIAL STATEMENTS 640 693 See note 8.7.A. 

TOTAL LIABILITY CALCULATED BY ACTUARIALS 640 693 

TOTAL LIABILTIY RELATING TO INSIGNIFICANT PLANS 0 0 

Outstanding asset reported in the financial statements 7 17 See note 7.13.A. 

TOTAL ASSETS ANALYSED BY ACTUARIALS 7 17 

TOTAL ASSETS RELATING TO INSIGNIFICANT PLANS 0 0 

J. Concentration risk 

Some of the Dexia’s plan assets are insurance policies issued by Ethias.The fair value of the plan assets amounts to respectively 

EUR 1,043 million as of December 31, 2005 and EUR 1,022 million as of December 31, 2006. 

E. Defined contribution plan 

Contributions to legal pensions are not included in the amounts. For 2005 and 2006, the amount recognized as an expense for 

defined contribution plans is respectively EUR 30 million and EUR 33 million. 

170 | 


8.8. TAX LIABILITIES 

Analysis by nature Dec. 31, 2005 Dec. 31, 2006 

Current income tax 241 235 


CURRENT TAX LIABILITIES 327 376 

Deferred tax liabilities (See note 9.2.) 1,050 900 

TOTAL 1,377 1,276 

8.9. OTHER LIABILITIES 


Other liabilities (1) 4,524 4,332 

Other liabilities specific to insurance activities 2,340 2,213 

TOTAL 6,864 6,545 

(1) In order to harmonize the accountring presentation within Dexia, cash collaterals of some companies of the Group have been reclassified from “Other 

liabilities” to “Customer borrowings and deposits” in December 31, 2005 balance sheet for an amount of EUR 359 million. 

A. Other liabilities 


Accrued costs 141 132 

Deferred income 78 122 

Subsidies 58 78 

Other accounts payable 3,003 2,791 

Other granted amounts received 177 198 

Salaries and social charges (payable) 531 546 

Shareholder dividends payable 55 71 

Long-term construction contracts 1 0 

Other liabilities 480 394 

TOTAL 4,524 4,332 

B. Liabilities specific to insurance activities 


CONSOLIDATED 




Debts for deposits from assignees 68 67 

Debts resulting from direct insurance transactions 2,194 2,085 

Debts resulting from reinsurance transactions 71 60 

Other insurance liabilities 7 1 

TOTAL 2,340 2,213 

8.10. LIABILITIES INCLUDED IN DISPOSAL GROUPS HELD FOR SALE 


Liabilities of subsidiaries held for sale (1) 0 785 

Discontinued operations 0 0 

TOTAL 0 785 

(1) Dexia Banque Privée France. 


9. OTHER NOTES ON THE CONSOLIDATED BALANCE SHEET (IN MILLIONS OF EUR) 

9.1. DERIVATIVES 



Assets Liabilities Assets Liabilities 


Derivatives held for trading 21,350 21,308 15,351 15,112 

Derivatives designated as fair value hedges 1,758 10,300 3,173 9,424 

Derivatives designated as cash flow hedges 407 667 754 551 

Derivatives of portfolio hedge 5,117 5,377 4,754 5,401 

Derivatives designated as hedge 

of a net investment in foreign entities 0 0 0 1 

TOTAL 28,632 37,652 24,032 30,489 

CONSOLIDATED 



B. Detail of derivatives held for trading 


Notional Amount Assets Liabilities Notional Amount Assets Liabilities 

To receive To deliver To receive To deliver 

Foreign exchange 

derivatives 81,817 79,483 1,488 1,998 78,291 78,440 1,155 1,030 

Interest rate derivatives 873,693 886,592 19,051 18,443 848,712 855,098 12,870 12,637 

Equity derivatives 17,345 11,570 715 817 13,263 13,754 1,212 1,414 

Credit derivatives 75,362 55,982 96 50 20,919 78,783 114 31 

TOTAL 1,048,217 1,033,627 21,350 21,308 961,185 1,026,075 15,351 15,112 

c. Detail of derivatives designated as fair value hedges 





derivatives 41,181 41,982 735 1,802 53,928 55,400 994 2,613 


Equity derivatives 0 0 0 0 299 1,589 17 296 

Credit derivatives 0 0 0 0 1,478 70 5 0 

TOTAL 194,009 195,481 1,758 10,300 245,572 238,282 3,173 9,424 

172 | 


D. Detail of derivatives designated as cash flow hedges 





derivatives 9,898 9,795 140 109 2,106 1,743 343 22 

Interest rate derivatives 94,643 97,140 267 558 169,337 169,292 411 529 

TOTAL 104,541 106,935 407 667 171,443 171,035 754 551 

E. Detail of derivatives of portfolio hedge 




Foreign exchange derivatives 2,533 2,667 87 60 1,391 1,451 9 185 


TOTAL 419,332 417,084 5,117 5,377 473,550 474,215 4,754 5,401 

F. Detail of derivatives designated as hedge of a net investment in foreign entities 




Foreign exchange derivatives 0 0 0 0 341 342 0 1 


CONSOLIDATED 


9.2. DEFERRED TAXES 

A. Analysis 


NET DEFERRED TAX ASSETS (LIABILITIES) (730) (418) 

of which: 

Deferred tax liabilities (1,050) (900) 

Deferred tax assets 372 549 

Impairment on deferred tax assets (52) (67) 


B. Movements 


AS OF JAN.1 (487) (730) 

Movements of the year: 

- Statement of income charge/credit (71) (27) 

- Items directly computed by equity (174) 378 

- Effect of change in tax rates – statement of income (2) (14) 

- Effect of change in tax rates – equity 7 (21) 

- Changes in scope of consolidation 16 (7) 

- Exchange differences (19) 13 

- Other movements 0 (10) 

AS OF DEC. 31 (730) (418) 


Deferred tax coming from assets of the balance sheet Dec. 31, 2005 Dec. 31, 2006 

Cash, loans and loan loss provisions (1,091) (404) 

Securities (1,854) (884) 

Derivatives (1,108) (460) 

Investments in associates (16) 0 

Tangible and intangible fixed assets (186) (199) 

Other assets and liabilities specific to insurance companies (89) (82) 

Other (25) (16) 

TOTAL (4,369) (2,045) 


CONSOLIDATED 



Deferred tax coming from liabilities of the balance sheet Dec. 31, 2005 Dec. 31, 2006 

Securities 0 0 

Derivatives 2,514 1,819 

Borrowings, deposits and issuance of debt securities 1,132 (124) 

Provisions 11 57 

Pensions 105 112 

Other assets and liabilities specific to insurance companies 46 9 

Tax losses carried forward 311 306 

Tax credit carried forward 14 0 

Legal tax free provisions (384) (419) 

Entities with special tax status (197) (223) 

Minority interest, reserves of associates and own shares 0 0 

Other 139 157 

TOTAL 3,691 1,694 

C. Expiry date of unrecognized deferred tax assets 

Nature Less than 1 year Between Over 5 Undetermined Total 

1 to 5 years years maturity 

Temporary difference 0 0 

Tax losses carried forward (67) (67) 

TOTAL 0 0 0 (67) (67) 

9.3. INSURANCE CONTRACTS 

A. Life contracts 

A.1. Income and expenses 

PREMIUM INCOME 


Insurance Investment Insurance Investment 

contracts contracts with DPF (1) contracts contracts with DPF (1) 

Individual Group Individual Group Individual Group Individual Group 

Gross premiums written 285 259 1,841 209 392 239 2,312 50 

Premiums ceded to reinsurers (2) (40) 0 0 (3) (38) 0 (1) 

Change in gross 

unearned premium 

reserves (UPR) 0 0 0 0 0 56 0 0 

Share of reinsurer 

in change of unearned 

premium reserves 

(UPR) 0 0 0 0 0 (15) 0 0 

NET PREMIUM 

AFTER REINSURANCE 283 219 1,841 209 389 242 2,312 49 

(1) Discretionary Participation Features. 

174 | 


CLAIMS EXPENSES 



contracts contracts with DPF contracts contracts with DPF 


Gross claims paid (175) (112) (187) (3) (228) (116) (372) (5) 

Claims reserve 

as of Jan. 1 24 7 0 0 32 10 1 0 

Claims reserve 

as of Dec. 31 (32) (10) (1) 0 (12) (14) (8) 0 

Transferred claims 

reserves 1 0 0 0 (6) 0 0 0 

Share of reinsurers 2 13 0 1 4 14 0 0 

NET CLAIMS INCURRED (180) (102) (188) (2) (210) (106) (379) (5) 


CHANGES IN TECHNICAL RESERVES 

1. Change in life insurance reserve 





Life insurance reserve 

as of Jan. 1 2,181 635 3,593 175 2,296 710 5,466 386 


as of Dec. 31 (2,296) (710) (5,466) (386) (2,367) (741) (8,006) (228) 

Transferred life 

insurance reserve (1) (34) 0 0 (262) (18) 477 (247) 

Share of reinsurers 

in life insurance reserve 

as of Jan. 1 (47) (46) (1) 0 (11) (19) (1) 0 


in life insurance reserve 

as of Dec. 31 11 19 1 0 10 5 1 0 


in transferred life 

insurance reserve 36 22 0 0 0 14 0 0 

CONSOLIDATED 



NET CHANGE 

IN LIFE INSURANCE 

RESERVE (116) (114) (1,873) (211) (334) (49) (2,063) (89) 


2. Change in profit sharing reserve 






CONSOLIDATED 


Profit sharing reserve 

as of Jan. 1 2 4 12 1 3 6 21 2 

Profit sharing reserve 

as of Dec. 31 (3) (6) (21) (2) (5) (8) (48) 0 

Transferred profit 

sharing reserve 0 0 0 0 1 0 0 (2) 

Share of reinsurerss 

in profit sharing reserve 

as of Jan. 1 0 0 0 0 0 0 0 0 

Share of reinsurerss 

in profit sharing reserve 

as of Dec. 31 0 0 0 0 0 0 0 0 


in paid profit share 0 0 0 0 0 0 0 0 


in transferred 

profit sharing 

reserve 0 0 0 0 0 0 0 0 

NET CHANGE 

IN PROFIT SHARING 

RESERVE (1) (2) (9) (1) (1) (2) (27) 0 

LOSSES RESULTING FROM LIABILITY ADEQUACY TEST (LAT) 

Nil. 


A.2. Assets and liabilities 

GROSS RESERVES 






local GAAP 2,296 710 5,466 386 2,367 741 8,006 228 

Reserves due 

to results of LAT 

(Liability Adequacy Test) 0 0 0 0 0 0 0 0 

Reserves due 

to shadow accounting 

adjustments 5 15 44 4 3 6 22 2 

Reserves 

due to results of IAS 39 0 0 0 0 0 0 0 0 

TOTAL LIFE 

INSURANCE RESERVE 2,301 725 5,510 390 2,370 747 8,028 230 

Claims reserves 32 10 1 0 12 14 8 1 

Other technical reserves 3 6 21 2 5 8 48 0 

TOTAL GROSS 

RESERVES 2,336 741 5,532 392 2,387 769 8,084 231 

176 | 


SHARE OF REINSURERS 






in life insurance 

reserve 11 19 1 0 10 5 1 0 


in claims 

reserves 2 2 0 0 2 2 0 0 


in other technical 

reserves 1 0 0 0 0 0 0 0 

TOTAL SHARE 

OF REINSURERS 14 21 1 0 12 7 1 0 

DISCRETIONARY PARTICIPATION FEATURE INCLUDED IN EQUITY 

As of Dec. 31, 2005 As of Dec. 31, 2006 

Contracts 

Contracts 

with DPF 

with DPF 

Individual Group Individual Group 

Net discretionary participation feature included in equity 374 59 370 56 

Insurance or investment contracts with DPF that have embedded derivates that need to be separated and fair valued through profit and loss are limited to 

two products. These amounts are not significant. 

RECONCILIATION OF CHANGES IN LIFE INSURANCE RESERVE 

Gross amount Reinsurance Net amount 

amount 

LIFE INSURANCE RESERVE AS OF DEC. 31, 2004 6,584 94 6,490 

FTA impacts (IFRS 4 shadow adjustments) 30 0 30 

Additional reserves originated during the period 2,370 (54) 2,424 

Additional reserves due to shadow adjustments 38 0 38 

Additional reserves due to results of LAT (Liability Adequacy Test) 0 0 0 

Claims paid (522) (16) (506) 

Results on death and on life 11 9 2 

Attribution of technical interest 244 1 243 

Other changes 171 (3) 174 


CONSOLIDATED 




Gross amount Reinsurance Net amount 

amount 


Additional reserves originated during the period 2,839 19 2,820 

Additional reserves due to shadow adjustments (35) 0 (35) 

Additional reserves due to results of LAT (Liability Adequacy Test) 0 0 0 

Claims paid (562) (98) (464) 

Results on death and on life (67) 1 (68) 

Attribution of technical interest 335 2 333 

Other changes (61) 62 (123) 

LIFE INSURANCE RESERVE AS OF DEC. 31, 2006 11,375 17 11,358 


B. Nonlife contracts 

B.1. Income and expenses 

PREMIUM INCOME 


Gross premiums written 367 365 

Premiums ceded to reinsurer (26) (25) 


NET PREMIUMS AFTER REINSURANCE (A) 341 340 

Change in gross Unearned Premium Reserves (UPR) (2) (4) 

Share of reinsurers in change of Unearned Premium Reserve (UPR) 0 0 

CHANGE IN NET UNEARNED PREMIUM RESERVE (UPR) (B) (2) (4) 

TOTAL NET EARNED PREMIUMS (A)+(B) 339 336 

CLAIMS EXPENSES 

CONSOLIDATED 



Gross claims paid (189) (193) 

Claims reserve as of Jan. 1 575 600 

Claims reserve as of Dec. 31 (600) (571) 

Transferred claims reserves 0 (49) 

Share of reinsurers 10 12 

NET CLAIMS INCURRED (204) (201) 


CHANGE IN OTHER NONLIFE INSURANCE RESERVES 


Other nonlife insurance reserves as of Jan. 1 16 17 

Other nonlife insurance reserves as of Dec. 31 (17) (18) 

Transferred other nonlife insurance reserves 0 0 

Share of reinsurers in other nonlife insurance reserves as of Jan. 1 (1) (1) 

Share of reinsurers in other nonlife insurance reserves as of Dec. 31 1 1 

Share of reinsurers in transferred other nonlife insurance reserves as of Jan. 1 0 0 

NET CHANGES IN INSURANCE LIABILITIES (1) (1) 

LOSSES RESULTING FROM LIABILITY ADEQUACY TEST (LAT) 

Nil. 

178 | 


B.2. Assets and liabilities 

GROSS RESERVES 


Claims reserves 543 514 

Reserves Unallocated Loss Adjustment Expenses (ULAE) 28 27 

Premium deficiency reserves (nonlife LAT) 0 0 

Reserves for claims Incurred But Not Reported (IBNR) 29 29 

TOTAL CLAIMS RESERVES 600 570 

Other technical reserves 17 18 

Unearned Premium Reserve (UPR) 85 83 

TOTAL GROSS RESERVES 702 671 

SHARE OF REINSURERS 


Share of reinsurers in claims reserves 83 66 

Share of reinsurers in reserves ULAE 0 0 

Share of reinsurers in IBNR 0 0 

SHARE OF REINSURERS IN TOTAL CLAIMS RESERVE 83 66 

Share of reinsurers in other technical reserves 1 0 

Share of reinsurers in UPR 2 2 

TOTAL SHARE OF REINSURERS 86 68 

RECONCILIATION OF CHANGES IN CLAIMS RESERVES 


Gross amount Reinsurance Net amount Gross amount Reinsurance Net amount 

amount 

amount 

CLAIMS RESERVES 

AS OF JAN. 1 575 87 488 600 83 517 

Claims paid 

on previous years (46) 2 (48) (108) (19) (89) 

Change in claim 

charges on previous 

years (82) (16) (66) (81) 0 (81) 

Liabilities on claims 

current year 153 10 143 159 2 157 


CONSOLIDATED 



CLAIMS RESERVES 

AS OF DEC. 31 600 83 517 570 66 504 

CLAIMS DEVELOPMENT 

Runoff triangle total costs (gross figures) 

Occurrence year 

Liquidation year Previous years 2002 2003 2004 2005 2006 

2001 469 

2002 300 184 

2003 246 112 194 

2004 204 70 105 225 

2005 180 59 63 115 241 

2006 154 52 49 66 129 239 


9.4. RELATED PARTIES TRANSACTIONS 

A. Related parties transactions 


CONSOLIDATED 


Key Entities with Subsidaries Associates Joint ventures 

management joint control in which 

or significant 

the entity is 

influence over the 

a venturer 

entity (1) 

Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 

2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 

Loans (2) 1 1 316 651 2 382 193 1,040 16 60 

Interest income 0 0 6 20 0 0 5 8 1 1 

Deposits 16 2 344 377 23 264 95 190 38 2,389 

Interest expense 0 0 (5) (10) 0 0 (2) (5) (1) (95) 

Other revenue – 

fee result 0 0 0 0 0 0 12 (3) 0 (16) 

Guarantees issued and commitments 

provided (3) 0 0 0 56 1 1 194 26 7 512 

Guarantees and commitments 

received 0 0 700 1,320 0 0 10 905 23 0 

(1) We refer here to the main shareholders of Dexia (2005-2006) : Arcofin , Holding Communal , Caisse des dépôts et consignations. 

(2) Loans to key management personnel were granted at general market conditions. 

(3) Unused lines granted. 

No provisions were recorded on loans given to related parties. 

Dexia group entered no investment transactions exceeding EUR 25 million with related parties. 

B. Key management compensations 



Short-term benefits 8 7 

Post-employment benefits 4 2 

Other long-term benefits 0 0 

Termination benefits 0 0 

Share-based payments 1 1 

Details per person are reported in the Management Report on page 46. 

Short-term benefits include the salaries, bonuses and other advantages. 

Post-employment benefits: service cost calculated in accordance with IAS 19. 

Share-based payments include the cost of stock options and the discount given on capital increase allowed to 

the key management. 

180 | 


9.5. SECURITIZATION 

Dexia Bank Belgium and DenizBank have securization vehicles. 

Dexia Bank Belgium has three securitization vehicles : Atrium- 

1, Atrium-2 and MBS. This latter has six compartments. 

Total assets of those vehicles amounts respectively EUR 332 

million and EUR 295 million as of Dec.31, 2005 and Dec. 

31,2006. 

Atrium-1 is a securitization transaction of social housing 

loans pursuant to a long-term credit facility between BACOB 

(merged into Dexia Bank Belgium) and Domus Flandria NV 

(the borrower) and guaranteed by the Flemish Region. The 

guarantee of the Flemish Region was transferred to the special 

purpose vehicle (SPV). The original size of the transaction was 

EUR 188 million. Two classes of fixed-rate notes were issued 

on April 30, 1996, both carrying a Moody’s rating equal to 

that of the Flemish government (initially Aa2, currently Aa1). 

As of December 31, 2006 EUR 118.6 million is still outstanding 

under class A2 while class A1 has been repaid. 

Atrium-2 is a securitization transaction of social housing 

loans pursuant to a long term credit facility between BACOB 

(merged into Dexia Bank Belgium) and Domus Flandria NV 

(the borrower) and guaranteed by the Flemish Region. The 

guarantee of the Flemish Region was transferred to the SPV. 

The original size of the transaction was EUR 129.3 million. 

Two classes of fixed-rate notes were issued on June 19, 1997, 

both carrying a Moody’s rating equal to that of the Flemish 

government (initially Aa2, currently Aa1). As of December 31, 

2006 EUR 86 million is still outstanding under class A2. 

MBS-3 is a securitization transaction of Belgian residential 

mortgage loans. The transaction, which had an original 

outstanding amount of EUR 371.8 million, was launched on 

November 24, 1997. Four floating-rate tranches of obligations 

were issued, three senior classes (called class A1 through A3 

and rated Aaa/AAA by Moody’s and Fitch) and one junior class 

(called class B and rated A3/A by Moody’s and Fitch). As at 

December 31, 2006 there is still EUR 28.5 million outstanding. 

There is 24.5 million outstanding under class A3 and EUR 3.9 

million under class B (currently rated Aa1/AA by Moody’s and 

Fitch). 

MBS-4 is a securitization transaction of Belgian residential 

mortgage loans. The transaction, which had an original 

outstanding amount of EUR 272.7 million, was launched on 

November 25, 1998. Four floating-rate tranches of obligations 

were issued, three senior classes (called class A1 through A3 

and rated Aaa/AAA by Moody’s and Fitch) and one junior class 

(called class B and rated A3/A by Moody’s and Fitch). As of 

December 31, 2006 there is still EUR 51.2 million outstanding. 

There is EUR 46.2 million outstanding under class A3 and EUR 

5.0 million under class B (currently rated Aa1/AA by Moody’s 

and Fitch). 

In June 2005, DenizBank completed a securitization transaction: 

the “DPR (Diversified Payment Rights) Securitization”. 

The bank securitizes its SWIFT MT 100 category payment 

orders received primarily through foreign depository banks in 

EUR, USD and GBP currencies. 

The SPC “DFS Funding Corporation Cayman” issued three 

tranches of series: USD 150 million Series 2005-A Floating 

Rate Notes Due 2010; USD 80 million Series 2005-C Fixed 

Rate Notes Due 2012; USD 70 million Series 2005-C Fixed 

Rate Notes Due 2010, and bought the Diversified Payment 

Rights. 

As at December 31, 2006 there is still USD 300 million 

outstanding. 


CONSOLIDATED 





CONSOLIDATED 



9.6. ACQUISITIONS AND DISPOSALS OF 

CONSOLIDATED COMPANIES 

A. Main acquisitions 

Year 2005 

There were no significant acquisitions in 2005. 

Year 2006 

ACQUISITION OF CONTROL OF DENIZBANK 

On May 30, 2006 Dexia signed a share purchase agreement 

for the acquisition of a majority stake in DenizBank. The closing 

of the transaction took place on October 17, 2006 when 

all authorizations were received. On October 17, 2006 Dexia 

acquired 75% of the share capital of DenizBank A.S. 

A small percentage (0.85%) had been acquired by Dexia 

Bank Belgium before March 2006, so that on October 17, the 

acquired percentage stood at 75.85%. 

Dexia has hedged the purchase price, which was concluded in 

USD with Zorlu group until the payment. 

With approximately 1.9 million retail customers, strong niches 

in SME or corporate segments (in the health sector, agricultural, 

tourism, energy,...) DenizBank is the 6th largest private 

bank in Turkey and counts more than 260 branches all over 

the country. The bank has also subsidiaries in Austria, Cyprus 

and Russia. 

Market value of assets and liabilities purchased 

Cash and cash equivalents 1,497 

Due from banks 272 

Loans and advances to customers 4,401 

Loans and securities available for sale 559 

Positive value of derivatives 38 

Intangible assets (of which 7 millions existing and 239 acquired) 246 

Goodwill 1,310 

Other assets 412 

Due to banks (2,214) 

Customer borrowings and deposits (4,069) 

Negative value of derivatives (19) 

Debt securities 0 

Other liabilities (286) 

Minority interests (202) 

TOTAL PURCHASE CONSIDERATION PAID, INCLUDING COSTS AND HEDGING 1,945 

Less: cash and cash equivalent in subsidiary acquired (1,497) 

CASH FLOW OUT OF ACQUISITION 448 

Comment: it should be noted that the net cash outflow includes 100% of cash acquired with only 75,85% of cash paid by Dexia. 

Identification of intangible assets purchased 

Dexia has analyzed the potential intangible assets. 

Some items, like software, banking licence, long-term contracts 

and leasing rights have been identified but were immaterial. 

Three items have been identified and recorded, for a gross value 

of EUR 239 million. 

Trade name: EUR 57 million 

This intangible asset has been valued with the Relief from Royalty 

Method, which is based on a hypothetical royalty income 

attributable to an asset. 

In particular, it estimates the expected annual royalty savings 

attributable to ownership of the identifiable intangible asset. 

This approach is based on the concept that if a company owns 

a trademark, it does not have to “rent” one and therefore is 

“relieved” from paying a royalty. 

The useful life has been fixed to 10 years. 

Core Deposits: EUR 120 million 

This intangible asset has been valued with the Favorable 

Source of Funds Method. 

Core deposits’ value (CD) is measured by the present value of 

the difference, or spread, between the CD’s ongoing cost and 

the cost of a market alternative replacement. 

Acquired core deposit accounts typically provide a low-cost 

source of funds to the buyer, mainly in Turkey, where current 

accounts are not remunerated. 

To replace these established, low-cost deposit accounts in a 

timely manner, a potential purchaser would have to utilize 

higher-cost funds at current market rates. 

As alternative funding, Dexia used overnight bank borrowing 

interest rate. The useful life of this intangible asset has been 

estimated to 7 years. 

182 | 


Customer Relationships: EUR 62 million 

This intangible asset has been valued with the Multi-Period 

Excess Earnings Method. 

Excess earnings can be defined as the difference between the 

net operating cash flow after tax attributable to the existing 

customers at the acquisition date and the required cost of 

invested capital on all the other assets (contributory assets such 

as fixed assets, core deposits, trade name, assembled workforce) 

used in order to maintain the customer relationship. 

Value is estimated through the sum of the discounted future 

excess earnings attributable to these customers over the 

remaining lifespan of the customer relationship. 

The useful life of this intangible asset has been estimated to 

8 years. 

Impact of unallocated goodwill as of October 17, 2006 

The tax rate in Turkey being 20%, the net of tax amount of 

identified intangible assets amounts to EUR 191 million, or 

TRY 352 million. 

The remaining unallocated goodwill then stands at EUR 1,310 

million, or TRY 2,411 million. 

As from this date, the value of all assets and liabilities, including 

identified intangible assets and unallocated goodwill, will 

vary with the TRY exchange rate. 

As this calculation has been done based on financial statements 

with accounting rules and methods which are not yet 

fully harmonized with Dexia accounting principles their value 

may still change within the twelve months after the business 

combination. 

Financing of the purchase of DenizBank 

To finance the acquisition of DenizBank, Dexia proceeded 

with a share capital increase (EUR 1,2 billion), issued EUR 

500 million of Perpetual Non-cumulative Guaranted Securities 

qualifying as Regulatory Tier 1 capital and sold some stakes in 

participations. Details of those transactions are reported in the 

related notes to the financial statements. 

DenizBank group contributed to net income attributable to 

Dexia shareholders for EUR 32 million for the period from October 

17 to December 31, 2006. 

Acquisition of minority interests of DenizBank due to a 

mandatory tender offer. 

Dexia had no call options nor written puts towards the minority 

shareholders at the moment of the business combination. 

By taking the control of DenizBank, Dexia was required by Turkish 

law to launch a mandatory tender offer on the remaining 

shares of DenizBank listed on the Istanbul Stock Exchange. Compliant 

to this law the timing, conditions and the fixing of the price 

were taken out of the control of Dexia management. There was 

no certainty about the result of this tender, as the remaining 

shareholders had the choice to bring, or not, their shares to 

the tender. 

The tender started on December 4, 2006 and closed on December 

22, 2006. The price was paid in TRY and Dexia hedged the risk of 

fluctuation of the purchase price in TRY until the payment. 

At the end of the tender, the shareholding of Dexia stood then 

at 99.74%. This percentage remained unchanged since December 

31, 2006. 

The price paid for the shares acquired in the mandatory tender 

offer has been compared with the percentage of equity 

acquired as of December 31, 2006. 

The purchase of minority interests was considered as a transaction 

between shareholders and the difference between the 

price paid and the equity acquired has been recorded as a 

movement between Group equity and minority interests since 

Dexia is applying the economic entity model. 

This accounting treatment is disclosed in the Dexia accounting 

rules (see point 1.22.1. – Positive Goodwill) and has been consistently 

applied since the conversion of Dexia to IFRS. 

In order to allow the comparison with companies having used 

an alternative accounting treatment, the following additional 

information is provided: 

In millions of EUR 


CONSOLIDATED 



Part of equity purchased (23.89%), including Q4 2006 result: 210 

Price paid, including costs and hedging: 618 

Difference between purchase consideration paid and equity acquired: 408 

This amount of EUR 408 million has been deducted from the Group core shareholders’ equity, and is reported in the line 

“Variation in scope of consolidation“ in the Statement of change in equity document. 

B. Main disposals 

Year 2005 

On December 1, 2005 the Group disposed of 100% of the 

share capital of Eural Banque d’épargne SA. 

It was the only significant disposal in 2005. 

Year 2006 

On December 28 , 2006 the Group disposed of 100% of the 

share capital of Banque Artesia Nederland. 

It was the only significant disposal in 2006. 


The assets and liabilities disposed are as follows: 


Eural 

Banque Artesia 

Nederland 


CONSOLIDATED 



Cash and cash equivalents 107 176 

Due from banks 355 277 

Loans and advances to customers 758 3,422 

Loans and securities available for sale 1,394 684 

Positive value of derivatives 55 51 


Due to banks (22) (3,033) 

Customer borrowings and deposits (1,363) (1,216) 

Negative value of derivatives (77) (55) 

Debt securities (1,091) 

Other liabilities (47) (119) 

NET ASSETS (1) 88 222 

Proceeds from sale (in cash) 121 485 

Less: cash and cash equivalents in the subsidiary sold (107) (176) 

NET CASH INFLOW ON SALE 14 309 

(1) Eural: including EUR 39 million gains and losses not recognized in the statement of income (AFS reserve). 

Banque Artesia Nederland: including EUR 17 million gains and losses not recognized in the income statement (AFS reserve). 

C. Joint venture RBC Dexia investor services 

On January 2, 2006, Dexia and Royal Bank of Canada completed the joint venture to combine their institutional investor services 

businesses. 

RBC Dexia Investor Services is a joint venture equally owned by Royal Bank of Canada and Dexia. 

Dexia consolidate 50% of the joint venture by the proportional method. 

Contribution Contribution Net impact 

done by Dexia received by Dexia on assets 

disposal of 50% from RBC entry of 50% and liabilities 

Cash and cash equivalents 4,431 2,691 (1,740) 

Due from banks 1 0 (1) 

Loans and advances to customer 703 32 (671) 

Loans and securities available for sale 22 0 (22) 

Positive value of derivatives 6 0 (6) 

Goodwill, including goodwill of RBC contribution 21 153 132 

Other assets 502 80 (422) 

Due to banks (442) 0 442 

Customer borrowings and deposits (4,858) (2,389) 2,469 

Negative value of derivatives (5) 0 5 

Debt securities 0 0 0 

Other liabilities (175) (125) 50 

NET CONTRIBUTION 206 442 236 

The contribution to the joint venture has been done at fair 

value by both parties, Dexia and RBC. 

Dexia recorded a profit of EUR 236 million on the part brought 

to RBC taking into account the costs linked to the transaction 

and booked a net goodwill of EUR 121 million on the net 

assets contributed by RBC at fair value. 

This net goodwill was not allocated to intangible assets as 

the purpose of the transaction was not to purchase existing 

customers’ relations but to retain actual clients and attract 

new clients in a company having a worldwide coverage. 

Taking into account the very short notice of rupture of 

contracts in such an activity, the value of existing customers’ 

relationship was not material. 

The purpose of this joint-venture was also lead to future 

synergies and to allow saving cost in IT infrastructure. 

As those elements did not meet the recognition criteria of 

intangible assets, the whole net goodwill was let in unallocated 

goodwill and correspond to real increase in profit and synergies, 

which is clearly the case since the creation of this joint venture, 

as reported in Dexia 2006 financial statements. 

184 | 


9.7. EQUITY 

By category of share 


Number of shares authorized and not issued 660,445,892 1,023,934,945 

Number of shares issued and fully paid 1,107,469,030 1,163,184,325 

Number of shares issued and not fully paid 0 0 

Value per share no nominal no nominal 

value 

value 

Outstanding as of Jan. 1 1,145,261,366 1,107,469,030 

Number of shares issued 14,094,529 77,812,015 

Number of shares cancelled (51,886,865) (22,096,720) 

Outstanding as of Dec. 31 1,107,469,030 1,163,184,325 

Rights, preferences and restrictions, including restrictions 

on the distribution of dividends and the repayment of capital 0 0 

Number of treasury shares (1) 20,550,020 490,607 

Number of shares reserved for issue under stock options and 

contracts for the sale of share 819,344 479,340 

(1) In 2005: mainly purchased by Dexia SA and also, to a lesser extent, shares bought by Dexia Crédit Local to cover 1999’s SOP. 

In 2006: Dexia Crédit Local’s purchases to cover 1999’s SOP. 


CONSOLIDATED 




9.8. SHARE-BASED PAYMENTS 

STOCK OPTION PLANS SETTLED IN DEXIA SHARES Dec. 31, 2005 Dec. 31, 2006 

Number of Number of 

Options (1) Options (1) 


CONSOLIDATED 



Outstanding at the beginning of the period 51,939,550 56,452,344 

Granted during the period 10,184,922 10,192,973 

Forfeited during the period (285,500) (51,600) 

Exercised during the period (2) (5,386,628) (7,702,639) 

Expired during the period 0 (12,786) 

Outstanding at the end of the period 56,452,344 58,878,292 

Exercisable at the end of the period 25,238,988 27,341,131 

(1) Outstanding options also include the call options granted to DCL’s employees in 1999. 

(2) The weighted average exercise price for 2005 and 2006 was respectively EUR 13,60 and 13,30 per share. 


RANGE OF EXERCISE Number of Weighted- Weighted- Number of Weighted- Weighted- 

PRICES outstanding average average outstanding average average 

options exercise remaining options exercise remaining 

price contractual price contractual 

(EUR) (EUR) life (year) (EUR) life (year) 

5.95 - 8.10 249,474 7.13 1.25 146,179 7.15 0.40 

10.97 - 11.37 10,853,596 11.27 7.14 10,111,906 11.36 6.14 

11.88 - 13.66 20,598,219 12.33 7.40 16,213,021 12.27 6.74 

13.81 - 14.58 4,926,021 14.30 4.11 4,232,433 14.35 3.29 

15.17 - 15.88 1,506,588 15.17 1.98 1,303,827 15.17 1.76 

17.23 - 17.86 8,133,524 17.86 5.70 6,493,031 17.86 5.00 

18.03 - 18.20 10,184,922 - 9.41 10,184,922 - 8.41 

18.62 - 21.25 - - - 10,192,973 - 9.42 

STOCK OPTION PLANS SETTLED Plan 2005 Plan 2006 Plan 2006 Plan 2006 

IN DEXIA SHARES Stock option plan Self-employed Stock option plan 

Dexia’s employees network DenizBank group 

Grant Date 30/06/05 30/06/06 17/11/06 15/12/06 

Number of instruments granted 10,184,922 9,760,225 197,748 235,000 

Exercise price 18.03 18.62 21.25 20.71 

Share price at the date of grant 18.21 18.85 21.27 20.92 

Contractual life (years) 10 years 10 years 5 years 10 years 

Vesting conditions See note 1 See note 1 See note 2 See note 1 

Settlement Dexia shares Dexia shares Dexia shares Dexia shares 

Fair value per granted instrument at grant date 2.16 2.33 2.67 2.44 

Valuation Model See note 3 See note 3 See note 3 See note 3 

(1) The vesting conditions are the following: 40% is vested immediately, 20% is yearly vested over the next 3 years. 

(2) Immediately vested at grant date. 

(3) For the stock option plan offered towards Dexia’s employees, Dexia used the fair value obtained from a non-related third party. 


Equity-settled arrangements 26 30 

Cash-settled arrangements (1) 15 18 

Arrangements with settlement alternatives 0 0 

TOTAL EXPENSES 41 48 

Liabilities for cash-settled arrangement (1) 99 85 

Liabilities for arrangements with settlement alternatives 0 0 

TOTAL LIABILITIES 99 85 

(1) Performance share plan of FSA. 

186 | 


Performance shares granted by FSA 

Through 2004, performance shares were awarded under the 

1993 Equity Participation Plan (the “1993 Equity Plan“). The 

1993 Equity Participation Plan authorizes the discretionary grant 

of performance shares by the Human Resources Committee to 

key employees. The amount earned for each performance share 

depends on the attainment of certain growth rates of adjusted 

book value per outstanding share over a three-year period. 

Performance shares issued prior to January 1, 2005 permitted the 

participant to elect, at the time of award, growth rates including or 

excluding realized and unrealized gains and losses on the General 

Investment Portfolio. Performance shares issued after January 1, 

2005 do not offer the option to include the impact of unrealized 

gains and losses on the General Investment Portfolio. No payout 

occurs if the compound annual growth rate of adjusted book 

value and book value per outstanding share over specified threeyear 

performance cycles is less than 7%, and a 200% payout 

occurs if the compound annual growth rate is 19% or greater. 

Payout percentages are interpolated for compound annual 

growth rates between 7% and 19%. 

In 2004, FSA adopted a new 2004 Equity Participation Plan (the 

“2004 Equity Plan“) that continues the incentive compensation 

program formerly provided under the company’s 1993 Equity 

Participation Plan. The 2004 Equity Plan provides for performance 

share units comprised 90% of performance shares (which provide 

for payment based upon the FSA’s performance over specified 

three-year performance cycles as described above) and 10% of 

share of Dexia SA restricted stock. The Dexia SA restricted stock 

component is a fixed plan, where FSA purchases Dexia SA shares 

and establishes a prepaid expense for the amount paid which 

is amortized over 2.5 and 3.5 year vesting period. In 2006 and 

2005, FSA purchased shares to economically defease its liability 

for USD 4.6 million and 4.4 million, respectively. These amounts 

are being amortized to expense over the employees’ vesting 

periods. 

FSA SHARES Outstanding at Granted Earned Forfaited Outstanding Share price 

beginning of during during during at end of at date of 

period the period the period the period period grant (in USD) 

2005 1,217,761 316,638 313,987 24,434 1,195,978 131.30 

2006 1,195,978 370,441 340,429 15,696 1,210,294 139.22 


CONSOLIDATED 


The figures as of December 31, 2005 have been restated. 



9.9. MINORITY INTERESTS – CORE EQUITY 

AS OF JAN.1, 2005 434 

- Increase of capital 717 Note 1 

- Dividends (25) 

- Net income for the period 55 

- Variation of scope of consolidation (45) Note 2 

AS OF DECEMBER 31, 2005 1,136 


CONSOLIDATED 



AS OF JAN.1, 2006 1,136 

- Increase of capital 513 Note 3 

- Dividends (44) 

- Net income for the period 88 

- Translation adjustments (1) 

- Variation of scope of consolidation (28) Note 4 

AS OF DECEMBER 31, 2006 1,664 

(1) Dexia Crédit Local issued on November 18, 2005 undated deeply subordinated non-cumulative Notes for EUR 700 million. The prospectus of which may 

be obtained on demand. The Notes bear interest on their current principal amount at a fixed rate of 4.300 % for the first 10 years, then, if not called, bear 

interest at a floating rate equal to 3-month Euribor plus a margin of 1.730% per annum payable on a quarterly basis. 

The payment of interest on the Notes may, or in certain circumstances shall, be suspended. In some circumstances, the principal amount may also be 

reduced according to the loss absorption mechanism. Any interest not paid on the Notes will be lost and will therefore no longer be due and payable by 

the issuer. 

In application of IAS 32, the notes are recognized in equity as the payments of interest are non cumulative and made at the discretion of the issuer. 

As those Notes were issued by Dexia Crédit Local and not directly by Dexia SA, they are accounted for as minority interests in Dexia financial statements. 

(2) The change in scope of consolidation in 2005 includes the purchase by FSA of remaining minority interests in FSA International Ltd for EUR 40 million, without 

impact in group equity and the change in value of the debt relating to FSA for EUR 5 million, deducted from minority interests. The impact on group equity 

of debt revaluation is EUR -7 million. 

(3) Dexia Funding Luxembourg issued on November 2, 2006 undated subordinated non-cumulative Notes for EUR 500 million. The prospectus of which may 

be obtained on demand. The Notes bear interest on their current principal amount at a fixed rate of 4.892 % for the first 10 years, then, if not called, bear 

interest at a floating rate equal to 3-month Euribor plus a margin of 1.78% per annum payable on a quarterly basis. The payment of interest on the Notes 

may, or in certain circumstances shall, be suspended. In some circumstances, the principal amount may also be reduced according to the loss absorption 

mechanism. 

Any interest not paid on the Notes will be lost and will therefore no longer be due and payable by the issuer. As for the issue done by DCL in 2005, those 

Notes will be considered as equity, and because they are issued by a subsidiary, will be recorded in minority interests in Dexia financial statements. 

(4) The change in scope of consolidation in 2006 mainly include the decrease of minority interests in DenizBank and in RBC–DFS Spain. 

188 | 


9.10. CONTRIBUTION BY ACTIVITY 


Banking FSA Other Total Banking FSA Other Total 

and insurance (1) and insurance (1) 

other 

other 

activities 

activities 

I. Cash and balances 

with central banks 3,444 0 0 3,444 3,365 0 0 3,365 

II. Due from banks 74,563 402 88 75,053 77,982 159 74 78,215 

III. Loans and advances to customers 192,014 76 312 192,402 226,154 46 302 226,502 

IV. Loans and securities held for trading 15,655 0 0 15,655 15,385 0 0 15,385 

V. Loans and securities designated 

at fair value 7,848 257 5,760 13,865 10,914 194 6,076 17,184 

VI. Loans and securities available for sale 140,133 15,857 10,214 166,204 159,369 17,184 11,825 188,378 

VII. Securities held to maturity 3,217 0 0 3,217 2,260 0 0 2,260 

VIII. Positive value of derivatives 28,426 201 5 28,632 23,727 298 7 24,032 

IX. Fair value revaluation 

of portfolio hedge 1,659 0 0 1,659 759 0 0 759 

X. Investments in associates 724 47 7 778 819 0 7 826 

XI. Tangible fixed assets 2,129 27 29 2,185 2,140 25 23 2,188 

XII. Intangible assets and goodwill 581 13 141 735 2,246 9 138 2,393 

XIII. Tax assets 520 74 8 602 664 76 9 749 

XIV. Other assets 2,704 1,205 385 4,294 2,069 1,190 293 3,552 

XV. Non-current assets held for sale 36 0 0 36 955 0 0 955 

TOTAL ASSETS 473,653 18,159 16,949 508,761 528,808 19,181 18,754 566,743 

I. Due to banks 134,768 0 25 134,793 174,628 0 126 174,754 

II. Customer borrowings and deposits 97,217 0 521 97,738 109,073 0 411 109,484 

III. Liabilities held for trading 3,813 0 0 3,813 578 0 0 578 

IV. Liabilities designated at fair value 0 13,010 5,012 18,022 2,378 14,152 4,781 21,311 

V. Negative value of derivatives 37,627 25 0 37,652 30,438 51 0 30,489 

VI. Fair value revaluation 

of portfolio hedge 966 0 0 966 239 0 0 239 

VII. Debt securities 175,602 83 0 175,685 184,302 424 0 184,726 

VIII. Subordinated and convertible debt 4,932 0 53 4,985 4,311 0 54 4,365 

IX. Technical provisions 

of insurance companies 0 142 9,704 9,846 0 145 12,143 12,288 

X. Provisions and other obligations 1,074 0 246 1,320 1,242 0 226 1,468 

XI. Tax liabilities 1,027 182 168 1,377 983 204 89 1,276 

XII. Other liabilities 4,074 2,371 419 6,864 3,853 2,341 351 6,545 

XIII. Non-current liabilities held for sale 0 0 0 0 785 0 0 785 


CONSOLIDATED 



TOTAL LIABILITIES 461,100 15,813 16,148 493,061 512,810 17,317 18,181 548,308 

(1) The heading “Other insurance“ includes mainly Dexia Insurance Belgium Group. 



Banking FSA Other Total Banking FSA Other Total 

and insurance (1) and insurance (1) 

other 

other 

activities 

activities 


CONSOLIDATED 



Interest margin 3,124 178 348 3,650 3,341 210 378 3,929 

Dividend income 79 1 49 129 81 4 67 152 

Net income from associates 82 6 1 89 102 0 0 102 

Net trading income and net 

result of hedge accounting 163 6 (15) 154 273 54 (8) 319 

Net income on investments 410 8 84 502 1,036 7 121 1,164 

Net commission 1,138 (5) 39 1,172 1,280 (4) 31 1,307 

Technical margin of insurance activities 0 329 (121) 208 0 310 (210) 100 

Other net income 87 0 (15) 72 (67) 0 6 (61) 

INCOME 5,083 523 370 5,976 6,046 581 385 7 012 

Staff expense (1,458) (45) (83) (1,586) (1,569) (56) (97) (1,722) 

General and administrative expense (888) (24) (63) (975) (1,015) (25) (65) (1,105) 

Network costs (311) 0 (55) (366) (299) 0 (53) (352) 

Depreciation & amortization (231) (2) (14) (247) (241) (3) (8) (252) 

Deferred acquisition costs 0 (55) 0 (55) 0 (50) 0 (50) 

COSTS (2,888) (126) (215) (3,229) (3,124) (134) (223) (3,481) 

GROSS OPERATING INCOME 2,195 397 155 2,747 2,922 447 162 3,531 

Impairment on loans 

and provisions for credit 

commitments (31) (20) (1) (52) (105) (18) (1) (124) 

Impairment on tangible 

and intangible assets 0 0 0 0 0 0 0 0 

Impairment on goodwill 0 0 0 0 0 0 0 0 

NET INCOME BEFORE TAX 2,164 377 154 2,695 2,817 429 161 3,407 

Tax expense (467) (104) (31) (602) (433) (110) (26) (569) 

NET INCOME 1,697 273 123 2,093 2,384 319 135 2,838 

Attributable to minority interest 43 11 1 55 84 3 1 88 

Attributable to equity holders of the parent 1,654 262 122 2,038 2,300 316 134 2,750 

(1) The heading “Other insurance“ includes mainly Dexia Insurance Belgium Group. 

The contribution to financial statements is presented under IFRS after elimination of intercompany balances and transactions, 

and therefore does not correspond to the published financial statements of FSA, which is published under US GAAP, nor those 

of DIB, published under Belgian GAAP. 

190 | 


9.11. EXCHANGE RATES 


Closing rate Average rate Closing rate Average rate 

Australian Dollar AUD 1.6113 1.6277 1.6699 1.6695 

Canadian Dollar CAD 1.3728 1.4991 1.5337 1.4300 

Swiss Franc CHF 1.5541 1.5475 1.6081 1.5763 

Koruna (Czech republic) CZK 28.9839 29.7804 27.5492 28.2639 

Danish Krone DKK 7.4598 7.4524 7.4546 7.4588 

Euro EUR 1.0000 1.0000 1.0000 1.0000 

Pound Sterling GBP 0.6852 0.6831 0.6726 0.6820 

Hong Kong Dollar HKD 9.1426 9.6396 10.2438 9.8277 

Forint HUF 252.8001 248.5968 251.4469 264.1324 

Shekel ILS 5.4272 5.5674 5.5520 5.6087 

Yen JPY 138.8567 136.9703 156.8456 146.8583 

Mexican Peso MXN 12.5787 13.4915 14.2633 13.7988 

Norwegian Krone NOK 7.9807 7.9999 8.2115 8.0450 

New Zealand Dollar NZD 1.7266 1.7619 1.8704 1.9448 

Swedish Krona SEK 9.3909 9.3017 9.0298 9.2459 

Singapore Dollar SGD 1.9612 2.0630 2.0195 1.9987 

New Turkish Lira (1) TRY 1.5917 1.6656 1.8515 1.8069 

US Dollar USD 1.1790 1.2395 1.3172 1.2649 

(1) Turkish Lira: average rate fourth quarter 2006: 1,8685. 


CONSOLIDATED 




10. NOTES ON THE CONSOLIDATED OFF-BALANCE-SHEET ITEMS 


10.1. REGULAR WAY TRADE 


Loans to be delivered and purchases of assets 11,652 16,047 

Borrowings to be received and sales of assets 14,795 21,346 


10.2. GUARANTEES 


Guarantees given to credit institutions 82,958 26,122 

Guarantees given to customers 22,677 41,778 

Guarantees received from credit institutions 44,957 4,927 

Guarantees received from customers 65,873 53,929 

CONSOLIDATED 


10.3. LOAN COMMITMENTS 


Unused lines granted to credit institutions 2,697 1,297 

Unused lines granted to customers 45,616 62,695 

Unused lines obtained from credit institutions 3,967 5,817 

Unused lines obtained from customers 0 462 


10.4. OTHER COMMITMENTS 


Insurance activity – Commitments given 582,144 378,545 

Insurance activity – Commitments received 159,897 92,783 

Banking activity – Commitments given 153,559 184,445 

Banking activity – Commitments received 98,314 227,744 

As from December 31, 2006 commitments given include financial instruments given as collateral and commitments received 

include financial instruments received as collateral. 

Financial statements 2005 were not restated. 

192 | 


11. NOTES ON THE CONSOLIDATED STATEMENT OF INCOME 


11.1. INTEREST INCOME – INTEREST EXPENSE 


INTEREST INCOME 56,049 73,057 

a) Interest income of assets not at fair value 14,531 18,826 

Cash and balances with central banks 60 99 

Due from banks 1,719 2,472 

Loans and advances to customers 7,197 8,432 

Loans and securities available for sale 5,103 7,298 

Securities held to maturity 170 142 

Interest on impaired assets 40 31 

Other 242 352 

b) Interest income of assets at fair value 41,518 54,231 

Loans and securities held for trading 463 596 

Loans and securities designated at fair value 189 482 

Derivatives 40,866 53,153 

INTEREST EXPENSE (52,399) (69,128) 

a) Interest expense of liabilities not at fair value (11,199) (15,652) 

Due to banks (3,126) (5,425) 

Customer borrowings and deposits (2,018) (2,557) 

Debt securities (5,786) (7,405) 

Subordinated and convertible debt (261) (251) 

Other (8) (14) 

b) Interest expense of liabilities at fair value (41,200) (53,476) 

Liabilities held for trading (51) (9) 

Liabilities designated at fair value (318) (604) 

Derivatives (40,831) (52,863) 

NET INTEREST INCOME 3,650 3,929 

11.2. DIVIDEND INCOME 



CONSOLIDATED 



Financial assets available for sale 121 144 

Financial assets held for trading 2 3 

Financial assets designated at fair value 6 5 

TOTAL 129 152 


11.3. NET INCOME FROM ASSOCIATES 


Income from associates before tax 125 143 

Share of tax (36) (41) 

Impairment on goodwill 0 0 

TOTAL 89 102 


11.4. NET TRADING INCOME AND NET RESULT OF HEDGE ACCOUNTING 


Foreign exchange net income 67 130 

Revaluation of assets at fair value in FVH hedge 2,452 (1,640) 

Revaluation of liabilities at fair value in FVH hedge 522 1,170 

Other activities from trading and hedging (2,887) 659 

TOTAL 154 319 

CONSOLIDATED 


All interests received and paid on all assets, liabilities and derivatives are recorded in the interest margin. 

Therefore, the net trading income and net result of hedge accounting include only the change in market value of derivatives, the 

revaluation of assets and liabilities in a hedge relationship and the revaluation of trading portfolio. 

This heading therefore includes the inefficiency of all hedge relationships. 

The item “Other activities from trading and hedging” includes results on trading derivatives, hedging derivatives and, in case of 

rupture of cash flow hedge relationship, the accumulated CFH reserve related to those derivatives. 

It also includes net result on portfolio hedge. 


194 | 


11.5. NET INCOME ON INVESTMENTS 


Gains on loans 61 67 

Gains on loans and securities available for sale 592 1,174 

Gains on securities held to maturity 0 0 

Gains on tangible fixed assets 37 18 

Gains on intangible fixed assets 0 2 

Gains on assets and liabilities held for sale 0 29 

Gains on liabilities 25 10 

Other gains 0 1 

TOTAL GAINS 715 1,301 

Losses on loans (48) (7) 

Losses on loans and securities available for sale (183) (202) 

Losses on securities held to maturity 0 0 

Losses on tangible fixed assets (5) (7) 

Losses on intangible fixed assets (1) 0 

Losses on assets and liabilities held for sale 0 (1) 

Losses on liabilities (23) (5) 

Other losses 0 0 

TOTAL LOSSES (260) (222) 

NET IMPAIRMENT 47 85 

TOTAL 502 1,164 


CONSOLIDATED 


IMPAIRMENT ON SECURITIES Specific Risk Total 

Allowances Write-backs 

As of December 31, 2005 

Securities held to maturity 0 0 0 

Securities available for sale (37) 84 47 

TOTAL (37) 84 47 

As of December 31, 2006 

Securities held to maturity 0 0 0 

Securities available for sale (11) 96 85 


TOTAL (11) 96 85 


11.6. COMMISSION INCOME AND EXPENSE 


Income Expense Net Income Expense Net 


CONSOLIDATED 



Management of unit trusts and mutual funds 380 (26) 354 468 (33) 435 

Administration of unit trusts and mutual funds 257 (36) 221 204 (36) 168 

Insurance activity and broking 83 (2) 81 77 (3) 74 

Credit activity 71 (17) 54 91 (19) 72 

Purchase and sale on securities 85 (19) 66 95 (20) 75 

Purchase and sale on unit trusts and mutual funds 92 (20) 72 54 (11) 43 

Payment services 133 (27) 106 152 (41) 111 

Commissions to not exclusive brokers 38 (10) 28 24 (10) 14 

Financial engineering 29 (1) 28 24 (1) 23 

Services on securities other than safekeeping 33 (10) 23 60 (12) 48 

Custody 55 (11) 44 160 (26) 134 

Issues and placements of securities 46 (23) 23 29 (6) 23 

Private banking 31 0 31 35 0 35 

Clearing and settlement 7 (12) (5) 10 (12) (2) 

Other 57 (11) 46 77 (23) 54 

TOTAL 1, 397 (225) 1,172 1,560 (253) 1,307 

Figures as of Dec.31, 2005 have been restated. 

11.7. TECHNICAL MARGIN OF INSURANCE ACTIVITIES 

INCOME IN THE TECHNICAL MARGIN Dec. 31, 2005 Dec. 31, 2006 

Premiums and contributions received 3,763 3,844 

Allowance charges - intervention of reinsurers 27 29 

Changes in technical reserves - part of reinsurers (5) (17) 

Other technical income 168 148 

INCOME 3,953 4,004 

EXPENSES IN THE TECHNICAL MARGIN Dec. 31, 2005 Dec. 31, 2006 

Premiums received transferred to reinsurers (544) (243) 

Premiums and contributions paid (122) (131) 

Allowance charges (668) (914) 

Change in technical reserves (2,375) (2,552) 

Other technical expenses (36) (64) 

EXPENSES (3,745) (3,904) 

TOTAL 208 100 

196 | 


11.8. OTHER NET INCOME 


Other income 225 235 

Other expense (153) (296) 

TOTAL 72 (61) 

11.9. STAFF EXPENSE 


Wages and salaries 1,047 1,152 

Social security and insurance costs 286 304 

Pension costs – defined benefit plans 100 84 

Pension costs – defined contribution plans (1) 30 33 

Other post retirement benefits 0 4 

Stock compensation expense (2) 41 48 

Long-term employee benefits 3 2 

Restructuring expenses (3) 2 

Other expenses 82 93 

TOTAL 1,586 1,722 

(1) See note 8.7.E. 

(2) See note 9.8. 


(AVERAGE FTE)) Fully Proportionally Total Fully Proportionally Total 

consolidated consolidated consolidated consolidated 

Senior Executives 497 1 498 537 25 562 

Employees 19,363 3 19,366 18,815 

(1) 

2,066 20,881 

Other 26 1 27 44 3 47 

TOTAL 19,886 5 19,891 19,396 2,094 21,490 

(1) The increase comes from the RBC Dexia Investor Services joint venture staff. 


CONSOLIDATED 



. 


(AVERAGE FTE) France Belgium Luxembourg Italy Spain Other USA Other non Total 

au 31/12/05 Europe Europe Dexia 

Senior Executives 85 286 65 4 2 27 21 8 498 

Employees 2,424 10,433 3,184 268 208 2,149 524 176 19,366 

Other 0 7 0 0 2 4 7 7 27 

TOTAL 2,509 10,726 3,249 272 212 2,180 552 191 19,891 


(AVERAGE FTE) France Belgium Luxembourg Italy Spain Other USA Other non Total 

au 31/12/06 Europe Europe Dexia 

Senior Executives 47 322 61 4 2 81 18 27 562 

Employees 2,351 10,215 2,808 266 123 1,866 566 2,686 20,881 

Other 11 5 7 0 1 5 11 7 47 

TOTAL 2,409 10,542 2,876 270 126 1,952 595 2,720 21,490 

CONSOLIDATED 



11.10. GENERAL AND ADMINISTRATIVE EXPENSE 


Occupancy 100 82 

Operating leases 87 107 

Professional fees 117 152 

Marketing advertising and public relations 88 101 

Technology and system costs 143 184 

Software costs and research and development costs 48 51 

Repair and maintenance expenses 12 10 

Restructuring costs other than staff 3 1 

Insurance (except related to pension) 29 17 

Transportation of mail and valuable 44 50 


Other general and administrative expense 223 273 

TOTAL 975 1,105 

11.11. DEPRECIATION AND AMORTIZATION 


Depreciation on investment property 65 39 

Depreciation on property plant and equipment 22 46 

Depreciation on other tangible assets 60 65 

Amortization of intangible assets 100 102 

TOTAL 247 252 

198 | 


11.12. IMPAIRMENT ON LOANS AND PROVISIONS FOR CREDIT COMMITMENTS 

COLLECTIVE IMPAIRMENT Dec. 31, 2005 Dec. 31, 2006 

Allowances Write backs Total Allowances Write backs Total 

Loans (175) 175 0 (86) 73 (13) 

Credit enhancement (collective reserve) (6) 0 (6) (18) 0 (18) 

TOTAL (181) 175 (6) (104) 73 (31) 

SPECIFIC IMPAIRMENT Dec. 31, 2005 

Allowances Write backs Losses Recoveries Total 

Due from banks 0 1 0 0 1 

Loans to customers (205) 193 (22) 2 (32) 

Other receivables (1) (1) 1 0 0 0 

Commitments (8) 8 0 0 0 

Credit enhancement (specific reserve) (24) 10 (1) 0 (15) 

TOTAL (238) 213 (23) 2 (46) 


SPECIFIC IMPAIRMENT Dec. 31, 2006 

Allowances Write backs Losses Recoveries Total 

Due from banks 0 0 0 0 0 

Loans to customers (176) 163 (61) 22 (52) 

Other receivables (1) (1) 0 0 0 (1) 

Commitments (51) 12 0 0 (39) 

Credit enhancement (specific reserve) (5) 6 (2) 0 (1) 

TOTAL (233) 181 (63) 22 (93) 

(1) Is published in heading XIV. of the Assets. 

11.13. IMPAIRMENTS ON TANGIBLE AND INTANGIBLE FIXED ASSETS 


Impairment on investment property 0 0 

Impairment on property plant and equipment 1 1 

Impairment on other tangible assets 0 0 

Impairment on assets held for sale (1) (1) 

Impairment on long-term construction contracts 0 0 

Impairment of intangible assets 0 0 

CONSOLIDATED 



TOTAL 0 0 

Impairments are recorded when the criterias are met. A review of the market and sale’s conditions are performed on a regular 

basis, at least once a year. If the expected loss on sale is lower than the existing impairment, a reversal of impairment is 

recorded. 


11.14. IMPAIRMENT ON GOODWILL 

Nil. 

11.15. TAX EXPENSE 


Income tax on current year (590) (504) 

Deferred taxes (64) (42) 


CONSOLIDATED 



TAX ON CURRENT YEAR RESULT (A) (654) (546) 

Income tax on previous year 43 (39) 

Provision for tax litigations 9 16 

OTHER TAX EXPENSE (B) 52 (23) 

TOTAL (A)+(B) (602) (569) 

Effective corporate income tax charge 

The standard tax rate applicable in Belgium in 2005 and 2006 was 33.99%. 

Dexia effective tax rate was respectively 25.10% and 16.52% for 2005 and 2006. 

The difference between these two rates can be analyzed as follows: 


NET INCOME BEFORE TAX 2,695 3,407 

Income and losses from companies accounted for by the equity method 89 102 

TAX BASE 2,606 3,305 

Applicable tax rate at year-end 33.99% 33.99% 

THEORETICAL CORPORATE INCOME TAX AT STANDARD RATE 886 1,123 

Effect of different tax rates in other countries (52) (93) 

Tax effect of non-deductible expenses 70 77 

Tax effect of non-taxable income (1) (223) (581) 

Items taxed at a reduced rate (26) (5) 

Effect of change in tax rates 0 2 

Other (3) 0 

Unrecognized deferred tax assets (tax loss carried forward) 3 23 

TAX ON CURRENT YEAR RESULT 654 546 

EFFECTIVE TAX RATE 25.10% 16.52% 

(1) Mainly non-taxable gains on sales of equity shares. 

200 | 


11.16. EARNINGS PER SHARE 

BASIC 

Basic earnings per share are calculated by dividing the net income attributable to equity holders of the parent by the weighted 

average number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by the 

company and held as treasury shares. 


Net income attributable to equity holders of the parent 2,038 2,750 

Weighted average number of ordinary shares (millions) 1,091 1,105 

Basic earnings per share (expressed in EUR per share) 1.87 2.49 

DILUTED 

Diluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assume 

conversion of all dilutive potential ordinary shares resulting from share options granted to employees. 

For the share options, a calculation is done to determine the number of shares that could have been acquired at fair value 

(determined as the average share price of the company’s shares for the financial year) based on the monetary value of the 

subscription rights attached to outstanding share options. 

The number of shares calculated as above is compared with the number of shares that would have been issued assuming the 

exercise of the shares options. 

No adjustment is made to net income attributable to equity holders of the parent as they are no financial instruments convertible 

in Dexia shares. 


Net income attributable to equity holders of the parent 2,038 2,750 

Weighted average number of ordinary shares (millions) 1,091 1,105 

Adjustment for share options (millions) 12 16 

Weighted average number of ordinary shares for diluted earnings per share (millions) 1,103 1,121 

Diluted earnings per share (expressed in EUR per share) 1.85 2.45 


CONSOLIDATED 




12. NOTES ON RISK EXPOSURE (IN MILLIONS OF EUR) 

12.1. FAIR VALUE 

A. Breakdown of fair value 

A.1. Breakdown of fair value of assets 


CONSOLIDATED FINANCIAL 

STATEMENTS 



Accounting Fair Difference Accounting Fair Difference 

value value value value 

Cash and balances with central banks 3,444 3,444 0 3,365 3,365 0 

Due from banks 75,053 75,800 747 78,215 79,130 915 

Loans and advances to customers (1) 192,402 197,854 5,452 226,502 227,393 891 

Loans and securities held for trading 15,655 15,655 0 15,385 15,385 0 

Loans and securities designated at fair value 13,865 13,865 0 17,184 17,184 0 

Loans and securities available for sale 166,204 166,204 0 188,378 188,378 0 

Securities held to maturity 3,217 3,374 157 2,260 2,345 85 

Positive value of derivatives 28,632 28,632 0 24,032 24,032 0 

Fair value revaluation of portfolio hedge 1,659 1,659 0 759 759 0 

Investments in associates 778 1,406 628 826 1,225 399 

Other assets 7,816 7,816 0 8,882 8,880 (2) 

Non-current assets held for sale 36 36 0 955 983 28 

TOTAL 508,761 515,745 6,984 566,743 569,059 2,316 

(1) Fair value in 2005 wrongly included nominal of some commitments to customers for an amount of EURO 8,9 billion. The 2005 figure has been restated. 

A.2. Breakdown of fair value of liabilities 


Accounting Fair Difference Accounting Fair Difference 

value value value value 

Due to banks 134,793 133,129 (1,664) 174,754 172,690 (2,064) 

Customer borrowings and deposits 97,738 97,465 (273) 109,484 109,086 (398) 

Liabilities held for trading 3,813 3,813 0 578 578 0 

Liabilities designated at fair value 18,022 18,022 0 21,311 21,311 0 

Negative value of derivatives 37,652 37,652 0 30,489 30,489 0 

Fair value revaluation of portfolio hedge 966 966 0 239 239 0 

Debt securities 175,685 172,098 (3,587) 184,726 183,025 (1,701) 

Subordinated and convertible debts 4,985 4,948 (37) 4,365 3 890 (475) 

Other liabilities 19,407 19,401 (6) 21,577 21,566 (11) 

Liabilities included in disposal groups 

held for sale 0 0 0 785 785 0 

TOTAL 493,061 487,494 (5,567) 548,308 543,659 (4,649) 

In accordance with our valuation rules, fair value is equal to accounting value for some kinds of items, see note 1.32. of 

Accounting policies. 

202 | 


B. Analysis of fair value of assets and liabilities booked at fair value 

B.1. Assets booked at fair value 

As of Dec. 31, 2005 

Quoted Model Model Total 

market price (with observable (no observable 

market prices and rates) market prices and rates) (1) 

Loans and securities held for trading 8,793 6,862 0 15,655 

Loans and securities designated at fair value 10,319 3,322 224 13,865 

Loans and securities available for sale 97,921 67,766 517 166,204 

Positive value of derivatives 7,510 20,999 123 28,632 

Fair value revaluation of portfolio hedge 0 1,649 10 1,659 

TOTAL 124,543 100,598 874 226,015 

As of Dec. 31, 2006 




Loans and securities held for trading 11,750 3,635 0 15,385 

Loans and securities designated at fair value 12,471 4,713 0 17,184 

Loans and securities available for sale 146,239 42,069 70 188,378 


Fair value revaluation of portfolio hedge 0 759 0 759 

TOTAL 172,552 72,343 843 245 738 

(1) This amount also includes the amortized cost of assets for which no quoted market price nor model (with observable market prices and rates) exists, like 

unlisted shares. 

Fair value may also be calculated based on interpolation of market prices. 


CONSOLIDATED 


B.2. Liabilities booked at fair value 

As of Dec. 31, 2005 





Liabilities held for trading 3,509 304 0 3,813 

Liabilities designated at fair value 5,012 13,010 0 18,022 

Negative value of derivatives 11,425 25,770 457 37,652 


TOTAL 19,959 40,037 457 60,453 





Liabilities held for trading 545 33 0 578 

Liabilities designated at fair value 4,781 16,530 0 21,311 

Negative value of derivatives 2,100 26,696 1,693 30,489 


TOTAL 7,426 43,498 1,693 52,617 

(1) This amount also includes the amortized cost of assets for which no quoted market price nor model (with observable market prices and rates) exists, 

like unlisted shares. 

Fair value may also be calculated based on interpolation of market prices. 


12.2. CREDIT RISKS EXPOSURE 

A. Analysis of total Dexia group exposure 

Credit exposure covers counterpart risk in balance sheet and 

off-balance sheet confirmed risks. 

Exposures are considered taking into account the guarantees 

(except Dexia Bank Belgium group) and the impairments. 

The exposure covers all the subsidiaries in which Dexia has a 

majority participation except Dexia Insurance Belgium group. 

A.1. Exposure by geographical region 


CONSOLIDATED 



Belgium 91,597 94,267 

France 89,040 98,171 

Germany 38,694 42,120 

Italy 57,171 59,381 

Luxembourg 8,268 10,537 

Other EU countries 99,165 122,450 

Rest of Europe 6,995 8,516 

Turkey 119 8 465 

United States and Canada 323,251 317,878 

South and Central America 634 1,058 

Southeast Asia 1,502 2,652 

Japan 4,829 8,909 

Other (1) 20,736 19,952 

TOTAL 742,001 794,356 

(1) Includes supranational entities, like ECB. 

A.2. Exposure by category of counterpart 



Central governments 59,340 56,460 

Local public sector 375,275 396,365 

Corporate 26,778 35,626 

Monoline 14,933 17,268 

ABS/MBS 132,226 128,717 

Project finance 15,093 20,209 

Individuals, SME, self-employed 33,151 36,295 

Financial institutions 79,155 98,225 

Other 6,050 5,191 

TOTAL 742,001 794,356 

204 | 


B. FSA insured portfolio 

A focus on the FSA insured portfolio is published as it represents a large part of the exposure. 

B.1. Breakdown by sectorial category (net par outstanding) 


Pooled corporates 56,805 49,865 

Residential mortgages 21,018 17,630 

Other asset-backed 19,206 19,234 

Consumer receivables 8,342 8,203 

ABS 105,371 94,932 

General obligations 77,474 75,900 

Utility 31,209 30,418 

Tax-supported non general obligations 34,456 32,718 

Transportation 12,465 11,796 

Other municipal 20,651 24,297 

Health care 10,000 9,987 

Housing 6,434 5,752 

MUNICIPAL 192,689 190,868 

TOTAL 298,060 285,800 

B.2. Rating 


AAA 72,891 67,079 

AA 90,088 90,978 

A 99,407 91,327 

BBB 34,065 35,497 

Non-investment grade 1,609 919 

TOTAL 298,060 285,800 


CONSOLIDATED 




12.3. INTEREST RATE REPRICING RISK: BREAKDOWN BY REMAINING MATURITY UNTIL NEXT REFIXING 

INTEREST RATE 

Sight accounts and saving deposits are presented in the column “At sight and on demand” as the information presented below takes into 

account the remaining maturity until the next date at which interest rates are reset from on an accounting standpoint, rather than on assumptions 

based on observed behavioral data. This latter approach is realized in the ALM sensitivity (see note 12.4.). 

ASSETS At sight and Up to More More Over 5 Undetermined Accrued Fair value Impairment Total 

on demand 3 than 3 than years maturity interest adjustment 

months months 1 to 5 

As of Dec. 31, 2005 to 1 year years 


CONSOLIDATED 


Cash and balances with 

central banks 3,421 19 0 0 0 0 4 0 0 3,444 

Due from banks 11,406 27,922 8,972 21,000 4,486 48 599 620 0 75,053 

Loans and advances to customers 13,108 31,866 37,504 37,191 66,886 2,992 1,598 2,683 (1,426) 192,402 

Loans and securities held for trading 27 7,856 3,753 2,554 849 585 66 (35) 0 15,655 

Loans and securities designated 

at fair value 55 6,197 1,283 29 703 5,712 50 (164) 0 13,865 

Loans and securities available for sale 577 66,199 17,055 9,337 59,328 3,897 1,900 8,240 (329) 166,204 

Securities held to maturity 0 98 876 1,060 1,092 0 91 0 0 3 217 


Fair value revaluation 

of portfolio hedge 1 659 0 1,659 

Investments in associates 778 778 

Tangible fixed assets 2,185 2,185 

Intangible assets and goodwill 735 735 

Tax assets 654 (52) 602 

Other assets 578 899 19 5 6 2,782 0 7 (2) 4,294 

Non current assets held for sale 40 0 0 (4) 36 

TOTAL 29,172 141,056 69,462 71,176 133,350 20,408 14,175 31,775 (1,813) 508,761 


LIABILITIES At sight and Up to More More Over 5 Undetermined Accrued Fair value Total 



As of Dec. 31, 2005 

to 1 year 

Due to banks 46,884 60,560 19,427 2,453 4,410 288 498 273 134,793 

Customer borrowings and deposits 36,276 29,623 3,040 1,682 1,980 24,495 739 (97) 97,738 

Liabilities held for trading 30 246 2,470 962 29 16 34 26 3,813 

Liabilities designated at fair value 47 5,384 2,450 1,922 3,012 4,965 113 129 18,022 

Negative value of derivatives 10,566 27 086 37,652 

Fair value revaluation of portfolio hedge 966 966 

Debt securities 684 52,017 25,961 52,659 40,809 362 2,507 686 175,685 

Subordinated and convertible debts 5 309 754 1,039 1,629 1,066 102 81 4,985 

Technical provision from insurance companies 9,846 9,846 

Provisions and other obligations 1,320 1,320 

Tax liabilities 1,377 1,377 

Other liabilities 1,996 669 193 43 65 3,888 10 0 6,864 

TOTAL 85,922 148,808 54,295 60,760 51,934 47,623 14,569 29,150 493,061 

NET POSITION At sight and Up to More than More than Over Undetermined 

on demand 3 3 months 1 to 5 5 years maturity 

As of Dec. 31, 2005 months to 1 year years 

On balance sheet sensitivity gap (56,750) (7,752) 15,167 10,416 81,416 (27,215) 

Balance-sheet sensitivity gap is hedged through derivatives. 

206 | 


ASSETS At sight and Up to More More Over 5 Undetermined Accrued Fair value Impairment Total 



As of Dec. 31, 2006 to 1 year years 

Cash and balances with 

central banks 2,663 694 0 0 0 0 8 0 0 3,365 

Due from banks 12,507 32,771 24,499 3,822 3,115 13 1,167 321 0 78,215 


Loans and securities held for trading 201 9,407 665 1,019 3,418 443 113 119 0 15,385 


at fair value 2 4,977 2,689 333 2,919 6,095 89 80 0 17,184 


Securities held to maturity 10 197 126 1 275 590 8 54 0 0 2,260 



of portfolio hedge 759 0 759 



Intangible assets and goodwill 2,393 2,393 

Tax assets 749 0 749 

Other assets 545 253 41 10 11 2,678 0 17 (3) 3,552 


TOTAL 42,201 137,009 86,983 73,536 169,467 22,066 13,642 23,374 (1,535) 566,743 

LIABILITIES At sight and Up to More More Over 5 Undetermined Accrued Fair value Total 



As of Dec. 31, 2006 to 1 year years 

Due to banks 62,035 85,027 17,140 4,018 2,063 3,675 682 114 174,754 

Customer borrowings and deposits 66,553 27,782 9,559 2,527 2,404 78 829 (248) 109,484 

Liabilities held for trading 30 355 50 76 21 26 19 1 578 

Liabilities designated at fair value 2,284 6,958 1,128 2,608 3,330 4,725 147 131 21,311 

Negative value of derivatives 8,504 21,985 30,489 

Fair value revaluation of portfolio hedge 239 239 

Debt securities 1,625 53,278 38,806 47,768 40,647 227 2,613 (238) 184,726 

Subordinated and convertible debts 2 1,081 208 2,003 786 143 79 63 4 365 

Technical provision from insurance companies 12,288 12,288 





held for sale 785 785 


CONSOLIDATED 



TOTAL 134,277 175,451 66,964 59,024 49,354 28,314 12,877 22,047 548,308 



As of Dec. 31, 2006 months to 1 year years 

On balance sheet sensitivity gap (92,076) (38,442) 20,019 14,512 120,113 (6,248) 

Balance-sheet sensitivity gap is hedged through derivatives. 



CONSOLIDATED 


12.4. INTEREST RATE SENSITIVITY RISK 

No average interest rate by assets and by liabilities is 

published as Dexia has developped a wide hedging policy 

through ALM department. Our interest margin is therefore 

the result of interests received and paid on business 

transactions. 

The Value at Risk (VaR) less the interests on hedging operations 

is a more relevant risk indicator for Treasury and Financial 

Markets activities and sensibility for ALM activities. 

Treasury and Financial Markets activities 

Treasury and Financial Markets activities of Dexia are mainly 

oriented as a support function for the Group. The detailed 

VaR usage of Dexia Group is in the table below. In 2006, the 

average Value at Risk the Group has faced on its financial 

markets activities has been limited to EUR 29.8 million. 

(DenizBank not included). 

Dexia Group calculated in 2006 an Interest Rate and FX 

VaR mainly based on parametrical method (99% 10 days), 

an Equity VaR based on historical method and since the 

beginning of the last quarter of the year it started to 

calculate an historical credit spread VaR but only on trading 

desks. 

In 2005, the average global VaR of TFM amounted to 

EUR 26.9 million. This number did not include the spread 

risk. Consequently, it has to be compared to the TFM IR, FX 

& EQT VaR of 2006 which amounted to EUR 27.6 million. 


IR (1) &FX (2) EQT (3) IR&FX EQT Spread Trading (4) 

(Trading and banking) Trading (Trading Trading uniquement 

and banking) 

4 e trimestre 

Individual Average 24.2 Average 2.8 Average 25.2 Average 2.3 Average 11.7 

Maximum 34.5 Maximum 7.6 Maximum 43.7 Maximum 6.6 Maximum 16.0 

Global Average 26.9 Average 29.8 

Maximum 38.5 Maximum 58.9 

Limit 75 Limit 142 

(1) IR: interest rate 

(2) FX: forex 

(3) EQT: equities 

(4) Calculation of VaR Spread started only at the last quarter of 2006. 


ALM sensitivity (1) 

The basis point value (BPV) measures the change in the balance sheet net economic value if interest rates raise by 1 % across 

the entire curve. 

BPV (in millions of EUR) Dec. 31,2005 Dec. 31,2006 

TOTAL (209) (494) 

(1) Positions of insurance companies and pension funds are excluded. 

For the sensitivity calculation, residual maturity of the portfolio until next refixing interest rate date is defined using assumptions 

on the observed behaviour of our customers and not on legal repayment date (see note 12.3.). 

208 | 


12.5. LISTED SHARES SENSITIVITY 

The Value at Risk (VaR) represents the potential change in 

market value, whereas the Earnings at Risk (EaR) represents 

the impact in the accounting result if the VaR materializes. 

The VaR equity calculated by Dexia is a measure of the potential 

loss that can be experienced with a level of confidence of 99 

% and for a holding period of 10 days. 

The EaR is lower than the VaR as most of listed shares have a 

positive AFS reserve cushion. Impairment tests are performed 

when the difference between the market value and the cost 

is higher than 25% and/or when there is a lasting decline in 

the fair value. 

The -25% column represents the impairment that could be 

recorded in accounting result if there is a decline in value 

of 25%. 

A. Banking companies (ALM portfolio) (1) 

Market value VaR % VaR EaR -25% 

March 31, 2005 1,128 61 5.4% (1) (8) 

June 30, 2005 1,231 65 5.3% 0 0 

September 30, 2005 1,332 69 5.2% (2) (6) 

December 31, 2005 1,443 79 5.4% 0 (10) 

March 31, 2006 1,671 91 5.4% (9) (17) 

June 30, 2006 1,461 103 7.0% (17) (32) 

September 30, 2006 1,453 106 7.3% (8) (12) 

December 31, 2006 1,527 106 7.0% (2) (7) 

(1) DenizBank not included. 

B. Insurance companies portfolio 

Market value VaR % VaR EaR -25% 

March 31, 2005 1,249 52 4.2% 0 (36) 

June 30, 2005 1,315 52 3.9% 0 (40) 

September 30, 2005 1,511 56 3.7% 0 (35) 

December 31, 2005 1,729 69 4.0% 0 (51) 

March 31, 2006 1,815 81 4.5% (3) (47) 

June 30, 2006 1,554 81 5.2% (2) (67) 

September 30, 2006 1,679 94 5.6% (2) (34) 

December 31, 2006 1,795 100 5.6% (1) (16) 


CONSOLIDATED 




12.6. LIQUIDITY RISK: BREAKDOWN BY RESIDUAL MATURITY UNTIL MATURITY DATE 

Sight accounts and saving deposits are included in the column “At sight and on demand” even though they have no fixed repayment date. 

ASSETS 

Breakdown of gross amount and premium/discount 

At sight and Up to More than More than Over Undetermined Accrued Fair value Impairment Total 

on demand 3 3 months 1 to 5 5 years maturity interest adjustment 



CONSOLIDATED 



Cash and balances 

with central banks 3,234 206 0 0 0 0 4 0 0 3,444 

Due from banks 10,986 26,316 9,058 22,364 5,066 44 599 620 0 75,053 



held for trading 706 822 3,903 8,311 1,775 107 66 (35) 0 15,655 


at fair value 48 87 32 660 7,440 5,712 50 (164) 0 13,865 


Securities held to maturity 0 67 760 1,043 1,256 0 91 0 0 3,217 



of portfolio hedge 1,659 0 1,659 



Intangible assets and goodwill 735 735 

Tax assets 654 (52) 602 

Other assets 1,798 1,050 55 12 9 1,365 0 7 (2) 4,294 


TOTAL 31,506 47,144 36,039 98,585 233,032 18,318 14,175 31,775 (1,813) 508,761 

LIABILITIES 


At sight and Up to More than More than Over Undetermined Accrued Fair value Total 



Due to banks 54,281 44,272 19,440 4,771 10,971 287 498 273 134,793 

Customer borrowings and deposits 37,606 27,411 2,990 2,135 2,461 24,493 739 (97) 97,738 

Liabilities held for trading 18 255 2,464 965 37 14 34 26 3,813 

Liabilities designated at fair value 47 305 2,457 5,533 4,473 4,965 113 129 18,022 


Fair value revaluation of portfolio hedge 0 966 966 

Debt securities 1,627 34,287 22,935 63,250 50,031 362 2,507 686 175,685 

Subordinated and convertible debt 5 95 639 1,326 1,671 1,066 102 81 4,985 

Technical provisions from insurance companies 9,846 9,846 




TOTAL 95,657 107,495 51,048 78,024 69,711 47,407 14,569 29,150 493,061 




Net liquidity gap (64,151) (60,351) (15,009) 20,561 163,321 (29,089) 

This table does not take into account the liquidity nor the eligibility to refinancing of the asset, so that some listed long-term assets may be sold 

in case of need of liquidity. 

210 | 


ASSETS 


At sight and Up to More than More than Over Undetermined Accrued Fair value Impairment Total 



Cash and balances 

with central banks 2,699 658 0 0 0 0 8 0 0 3,365 

Due from banks 12,694 36,275 21,522 3,532 2,656 48 1,167 321 0 78,215 



held for trading 1 396 544 5,986 7,784 442 113 119 0 15,385 


at fair value 0 2 214 617 10,087 6,095 89 80 0 17,184 


Securities held to maturity 0 102 134 1,243 726 1 54 0 0 2,260 



of portfolio hedge 759 0 759 



Intangible assets and goodwill 2,393 2,393 

Tax assets 749 0 749 

Other assets 637 357 44 5 10 2,485 0 17 (3) 3,552 


TOTAL 40,785 62,685 45,846 99,391 260,107 22,448 13,642 23,374 (1,535) 566,743 

LIABILITIES 


At sight and Moins More than More than Over Undetermined Accrued Fair value Total 



Due to banks 63,554 70,691 20,444 8,532 10,601 136 682 114 174,754 

Customer borrowings and deposits 66,694 26,295 9,329 2,693 3,817 75 829 (248) 109,484 

Liabilities held for trading 0 355 50 87 40 26 19 1 578 

Liabilities designated at fair value 56 780 2,341 6,405 6,726 4,725 147 131 21,311 


Fair value revaluation of portfolio hedge 0 239 239 

Debt securities 1,735 34,592 25,380 61,933 58,681 30 2,613 (238) 184,726 

Subordinated and convertible debt 3 421 175 1,764 1,110 750 79 63 4,365 

Technical provisions from insurance companies 12,288 12,288 



Other liabilities 1,748 1,022 65 24 88 3,594 4 0 6,545 


held for sale 785 0 0 785 


CONSOLIDATED 



TOTAL 133,790 134,156 57,784 81,438 81,063 25,153 12,877 22,047 548,308 




Net liquidity gap (93,005) (71,471) (11,938) 17,953 179,044 (2,705) 

This table does not take into account the liquidity nor the eligibility to refinancing of the asset, so that some listed long-term assets may be sold 

in case of need of liquidity. 


12.7. CURRENCY RISK 

As of Dec. 31, 2005 

EUR Other EU USD Other Total 

currencies 

Total assets 262,926 45,635 175,419 24,781 508,761 

Total liabilities 260,233 48,337 176,085 24,106 508,761 

NET ON BALANCE POSITION 2,693 (2,702) (666) 675 0 


CONSOLIDATED 




EUR Other EU USD Other Total 

currencies 

Total assets 342,279 53,806 141,343 29,315 566,743 

Total liabilities 341,345 55,479 141,444 28,475 566,743 

NET ON BALANCE POSITION 934 (1,673) (101) 840 0 

12.8. INSURANCE RISKS 

Insurance activities are performed in Dexia group by FSA and 

DIB group (see Accounting principles point 1.11.). 

FSA risks are mainly credit risks and are analysed in note 

12.2.B. FSA generally insures only the most senior tranches 

of asset-backed issues, which have low default and high 

recovery rates because of overcollaterization, cash reserves, 

deductibles or first-loss protections (see ratings in note 

12.2.B.). Before to insure a municipal bond, FSA obtains a 

pledge of tax revenues or a claim on a dedicated stream of 

revenue from essential public service. The insured portfolio 

is diversified with respect of issuers, geography, industries 

12.9. BREAKDOWN OF RISK WEIGHTED ASSETS 

and types of collaterals. To manage the risk profile, FSA also 

make use of quota share and layered loss reinsurance from 

highly rated reinsurers. Therefore, the sensibility to risk may be 

considered as low, what may be also deducted from the loss 

experience of previous years. 

DIB group is active in life (more than 85% of gross premium 

written) and nonlife activities and has no major concentration 

of risks. Some of the risks are reinsured (see note 9.3.). 

Because of its activities, the reinsurance of a part of the risks 

and the size of DIB activities in comparison with total activities 

and risks of Dexia group, change of insurance variables will 

not have a significant impact on Dexia financial position. 

Dec. 31,2005 Dec. 31,2006 

20% weighted counterparts 40,120 45,102 



Trading portfolio 5,261 8,091 

TOTAL 115,002 133,369 

212 | 


BOARD OF STATUTORY AUDITORS’ REPORT 

TO THE GENERAL SHAREHOLDERS’ MEETING 

ON THE CONSOLIDATED ACCOUNTS 

OF THE COMPANY DEXIA SA AS OF AND 

FOR THE YEAR ENDED DECEMBER 31,2006 

As required by law and the company’s articles of association, 

we report to you in the context of our appointment as statutory 

auditors. This report includes our opinion on the consolidated 

accounts and the required additional disclosure. 

UNQUALIFIED OPINION ON THE 

CONSOLIDATED ACCOUNTS, WITH 

EXPLANATORY PARAGRAPH 

We have audited the consolidated accounts of Dexia SA and 

its subsidiaries (the “Group“) as of and for the year ended 

December 31, 2006, prepared in accordance with International 

Financial Reporting Standards, as adopted by the European 

Union, and with the legal and regulatory requirements 

applicable in Belgium. These consolidated accounts comprise 

the consolidated balance sheet as of December 31, 2006 and 

the consolidated statements of income, changes in shareholders’ 

equity and cash flows for the year then ended, as well 

as the summary of significant accounting policies and other 

explanatory notes. The total of the consolidated balance sheet 

amounts to EUR 566,743 million and the consolidated statement 

of income shows a profit for the year (Group share) of 

EUR 2,750 million. 

The company’s Board of Directors is responsible for the 

preparation of the consolidated accounts. This responsibility 

includes: designing, implementing and maintaining internal 

control relevant to the preparation and fair presentation of 

consolidated accounts that are free from material misstatement, 

whether due to fraud or error; selecting and applying 

appropriate accounting policies; and making accounting estimates 

that are reasonable in the circumstances. 

Our responsibility is to express an opinion on these consolidated 

accounts based on our audit. We conducted our audit in 

accordance with the legal requirements applicable in Belgium 

and with Belgian auditing standards, as issued by the “Institut 

des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren“. 

Those auditing standards require that we plan and perform 

the audit to obtain reasonable assurance about whether the 

consolidated accounts are free of material misstatement. 

In accordance with the auditing standards referred to above, 

we have carried out procedures to obtain audit evidence about 

the amounts and disclosures in the consolidated accounts. 

The selection of these procedures is a matter for our judgment, 

as is the assessment of the risk that the consolidated 

accounts contain material misstatements, whether due to 

fraud or error. In making those risk assessments, we have considered 

the Group’s internal control relating to the preparation 

and fair presentation of the consolidated accounts, in order 

to design audit procedures that were appropriate in the circumstances, 

but not for the purpose of expressing an opinion 

on the effectiveness of the Group’s internal control. We have 

also evaluated the appropriateness of the accounting policies 

used and the reasonableness of accounting estimates made 

by management, as well as the presentation of the consolidated 

accounts taken as a whole. Finally, we have obtained 

from the Board of Directors and Group officials the explanations 

and information necessary for our audit. We believe that 

the audit evidence we have obtained provides a reasonable 

basis for our opinion. 

In our opinion, the consolidated accounts give a true and 

fair view of the Group’s net worth and financial position as 

of December 31, 2006 and of its results and cash flows for 

the year then ended in accordance with International Financial 

Reporting Standards, as adopted by the European Union, 

and with the legal and regulatory requirements applicable in 

Belgium. 

Without amending our unqualified opinion, we nevertheless 

draw the attention to the note 6 to the consolidated financial 

statements describing some legal disputes with regard to the 

share leasing in the Netherlands, the final outcome of which 

is uncertain at this moment. 

ADDITIONAL REMARK 

The company’s Board of Directors is responsible for the preparation 

and content of the management report on the consolidated 

accounts 

Our responsibility is to include in our report the following 

additional remark, which does not have any effect on our 

opinion on the consolidated accounts: 

• the management report deals with the information required 

by the law and is consistent with the consolidated accounts. 

However, we are not in a position to express an opinion on 

the description of the principal risks and uncertainties facing 

the companies included in the consolidation, the state of their 

affairs, their forecast development or the significant influence 

of certain events on their future development. Nevertheless, 

we can confirm that the information provided is not in obvious 

contradiction with the information we have acquired in 

the context of our appointment. 


CONSOLIDATED 



Brussels, March 28, 2007 

Board of Statutory Auditors, 

PricewaterhouseCoopers 

Mazars & Guérard 

Reviseurs d’Entreprises SCCRL, 


Represented by 


R. Peirce X. Doyen 

(free translation) 


BALANCE SHEET 216 

OFF-BALANCE SHEET ITEMS 217 

STATEMENT OF INCOME 218 

NOTES TO THE FINANCIAL STATEMENTS 219 

REPORT OF THE BOARD OF STATUTORY AUDITORS 

ON THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 

DECEMBER 31, 2006 239 

214 | 


ANNUAL 

FINANCIAL 



STATEMENTS 


BALANCE SHEET 

(before income appropriation) 

ASSETS 

(in thousands of EUR) 31/12/04 31/12/05 31/12/06 



ANNUAL 


FIXED ASSETS 18,799,949 20,174,401 21,946,223 

I. Formation expenses 4,835 4,353 7,921 

II. Intangible assets 1,002 1,835 2,199 

III. Tangible assets 2,165 1,878 3,046 

B. Plant, machinery and equipment 418 234 260 

C. Furniture and vehicles 1,676 1,504 2,686 

E. Other tangible assets 68 137 100 

F. Assets under construction and advance payments made 3 3 0 

IV. Financial assets 18,791,947 20,166,335 21,933,057 

A. Affiliated enterprises 18,791,937 20,166,335 21,933,047 

1. Participating interests 16,318,162 16,530,358 18,352,306 

2. Amounts receivable 2,473,775 3,635,977 3,580,741 

C. Other financial assets 10 0 10 

2. Amounts receivable and cash guarantees 10 0 10 

CURRENT ASSETS 724,962 767,969 426,441 

V. Amounts receivable after more than one year 53,181 69,599 43,052 

B. Other amounts receivable 53,181 69,599 43,052 

VII. Amounts receivable within one year 24,988 2,040 47,731 

A. Trade debtors 298 235 981 

B. Other amounts receivable 24,690 1,805 46,750 

VIII. Investments 620,228 639,134 271,779 

A. Own shares 577,823 364,195 0 

B. Other investments and deposits 42,405 274,939 271,779 

IX. Cash at bank and in hand 11,194 21,093 17,138 

X. Deferred charges and accrued income 15,371 36,103 46,741 

TOTAL ASSETS 19,524,911 20,942,370 22,372,664 

216 | 


LIABILITIES AND SHAREHOLDERS’ EQUITY 


EQUITY 16,904,723 17,125,552 18,700,438 

I. Capital 4,825,428 4,887,585 5,237,739 

A. Issued capital 4,825,428 4,887,585 5,237,739 

II. Share premium account 8,992,910 9,137,128 10,228,952 

IV. Reserves 1,390,262 1,330,559 1,172,578 

A. Legal reserve 478,616 482,543 488,759 

B. Unavailable reserves 577,823 364,195 0 

1. In respect of own shares held 577,823 364,195 0 

D. Available reserves 333,823 483,821 683,819 

V. Profit carried forward 631,898 264,304 743,450 

Vbis. Net income for the year (1) 1,064,225 1,505,976 1,317,719 

PROVISIONS AND DEFERRED TAXES 23,248 31,698 35,188 

VII. A. Provisions for liabilities and charges 23,248 31,698 35,188 

2. Taxation 0 0 1,003 

4. Other liabilities and charges 23,248 31,698 34,185 

AMOUNTS PAYABLE 2,596,940 3,785,120 3,637,038 

VIII. Amounts payable after more than one year 2,506,838 1,459,373 200,000 

A. Financial debts 2,506,838 1,459,373 200,000 

5. Other loans 2,506,838 1,459,373 200,000 

IX. Amounts payable within one year 73,602 2,290,633 3,394,506 

A. Current portion of amounts payable after more than 

one year falling due within one year 0 167,062 0 

B. Financial debts 97 2,042,670 3,277,190 

1. Credit institutions 97 2,042,670 3,277,190 

C. Trade debts 12,851 16,759 35,258 

1. Suppliers 12,851 16,759 35,258 

E. Taxes, remuneration and social security 20,249 6,356 10,479 

1. Taxes 16,865 2,733 1,279 

2. Remuneration and social security 3,384 3,623 9,200 

F. Other amounts payable 40,405 57,786 71,579 

X. Accrued charges and deferred income 16,500 35,114 42,532 

TOTAL LIABILITIES 19,524,911 20,942,370 22,372,664 

(1) See note 1 to the financial statements. 

OFF-BALANCE SHEET ITEMS 



ANNUAL 



Miscellaneous rights and commitments: 

- Personal guarantees given on behalf of third parties 20 26 30 

- Personal guarantees given on behalf of Dexia Funding Lux SA 0 0 500,000 

- Bank rental guarantee for the Square de Meeûs building 483 483 483 

- Bank guarantee relating to the bid bond on BCR 0 19,000 0 

- Real guarantees given on own assets 17 17 19 

- Foreign currency transactions – amounts receivable 141,169 149,308 141,169 

- Foreign currency transactions – amounts to be delivered 98,548 122,019 101,907 

- Stock options 696,201 807,446 893,049 

- Commitment to acquire Dexia Nederland Holding NV 93,000 0 0 

- Commitment towards Financial Security Assurance 0 0 227,756 

Holdings Ltd (“FSA”) 

- Commitment towards Dexia Bank Nederland NV PM PM PM 


STATEMENT OF INCOME 




ANNUAL 


I. Operating income 238 108 164 

D. Other operating income 238 108 164 

II. Operating charges (93,070) (91,944) (126,832) 

B. Services and other goods (42,711) (53,977) (82,901) 

C. Remuneration, social security costs and pensions (20,526) (24,793) (36,064) 

D. Depreciation of and amounts written off on formation expenses, 

intangible and tangible fixed assets (20,899) (4,306) (4,964) 

F. Increase (+); decrease (-) in provisions for liabilities and charges (8,565) (8,450) (2,487) 

G. Other operating charges (369) (418) (416) 

III. Operating loss (92,832) (91,836) (126,668) 

IV. Financial income 1,242,457 1,697,485 1,641,710 

A. Income from financial fixed assets 1,234,113 1,683,894 1,566,423 

B. Income from current assets 7,810 11,193 15,356 

C. Other financial income 534 2,398 59,931 

V. Financial charges (54,163) (115,351) (221,570) 

A. Debt charges (49,929) (110,726) (161,021) 

C. Other financial charges (4,234) (4,625) (60,549) 

VI. Current profit before taxes 1,095,462 1,490,298 1,293,472 

VII. Exceptional income 0 0 195 

A. Adjustments to depreciation of and to other amounts 

written off intangible and tangible fixed assets 0 0 195 

VIII. Exceptional charges (51,331) (204) (68) 

A. Exceptional depreciation of and other exceptional amounts 

written off on formation expense, intangible and tangible fixed assets (322) (204) (68) 

B. Amounts written off on financial fixed assets (51,009) 0 0 

IX. Profit for the period before taxes 1,044,131 1,490,094 1,293,599 

X. Income taxes 20,094 15,882 24,120 

A. Income taxes (1,553) (3,000) (1,021) 

B. Adjustment of income taxes and write-back of tax provisions 21,647 18,882 25,141 

XI. Profit for the period 1,064,225 1,505,976 1,317,719 

XIII. Profit to be appropriated 1,064,225 1,505,976 1,317,719 

Profit brought forward of the previous period 743,450 

Profit for the period to be appropriated 1,317,719 

PROFIT TO BE APPROPRIATED 2,061,169 

218 | 


NOTES TO THE 


1. PRESENTATION OF 

THE FINANCIAL STATEMENTS 

3.1.2. Foreign currency translation into euros 

Monetary assets, liabilities, rights and commitments denominated 

in foreign currencies are translated into euros at the last 

day average year-end exchange rate. 

Non-monetary items are translated into euros at the exchange 

rate ruling in effect on the transaction date. 

Foreign currency income and expense are translated into euros 

at the exchange rate ruling in effect on the date on which the 

income or expense is recognized in the statement of income. 

Dexia SA presents its financial statements before 

appropriation. 

The profit for the 2006 financial year amounts to EUR 1,317.7 

million. The profit carried forward from the previous year 

stands at EUR 743.5 million, making a total profit for appropriation 

of EUR 2,061.2 million. Proposal to appropriate the 

profit thus: 

• to the legal reserve up to EUR 35 million; 

• to the available reserve up to EUR 300 million; 

• to the payment of a gross dividend of 0.81 EUR on each 

share; 

• with the balance to be transferred to the profit carried 

forward. 

2. FINANCIAL STATEMENTS 

AND CHART OF ACCOUNTS 

Dexia SA, a financial firm, is a company governed by Belgian 

law whose financial instruments are authorized for trading in a 

regulated Belgian market, and it is therefore subject to the obligation 

to publish yearly financial statements as prescribed by the 

Belgian Company Code and its decree of application dated January 

30, 2001. 

The accounting plan is presented in accordance with the accounting 

plan prescribed in the Royal Decree of September 12, 1983, 

amended by the Royal Decree of August 4, 1996. 

The items provided for in the accounting plan that do not apply 

to Dexia have been excluded. 

The financial statements are presented in thousands of euros. 

3.2. ASSETS 

3.2.1. Formation expenses (item I.) 

Formation expenses are recorded as an asset and amortized 

on a straight-line basis at the rate of at least 20% per year. 

3.2.2. Intangible fixed assets (item II.) 

License acquisitions, software definition and the external costs 

related to the development of the website of Dexia Group 

are recorded as intangible fixed assets when the acquisition 

price is at least equal to EUR 495.79 per item, or when delivery 

is broken down into partial shipments representing less 

than EUR 495.79 each but the total delivery is at least EUR 

495.79. 

Intangible fixed assets recorded in the assets are depreciated 

over a maximum of 5 years. 

Furthermore, the internal costs related to the development of 

software and the website are entirely charged in the financial 

year in which they are exposed. 

3.2.3. Tangible fixed assets (item III.) 

If necessary, exceptional depreciations will be effected so as to 

align the accounting value of fixed assets to their utilization 

value for the company by virtue of their alteration or changes 

of economic or technological circumstances. 

Exceptional depreciations are reversed if they are no longer 

justified. 

3.2.4. Financial assets (item IV.) 



ANNUAL 


3. ACCOUNTING POLICIES 

3.1. GENERAL POLICIES 

3.1.1. Legislation 

Accounting policies are in conformity with the Royal Decree 

of January 30, 2001, in application of the Belgian Company 

Code. 

If legislation allows options or authorizes a waiver, the accounting 

policies hereafter shall mention the option chosen of 

whether such a waiver has been applied. 

Participating interests and shares are stated at acquisition cost 

or contribution cost. Related transaction costs are recorded 

directly in the statement of income. 

Impairments are recorded in the case of capital losses or lasting 

depreciation. They are determined by reference to the 

financial position, profitability and prospects of the company 

in which shares and/or equity interests are held. 

Participating interests and shares may also be revalued. For 

this it is necessary that their value, determined on the basis 

of their utility to the company, presents a certain and lasting 

surplus in relation to their book value. 

Debts appearing under financial fixed assets are valuated 

according to the same principles as debts at more than one 

year and one year at the most. 


3.2.5. Amounts receivable after more than one 

year and within one year (items V. and VII.) 

4. NOTES TO THE ANNUAL 




ANNUAL 


Receivables are stated at their nominal value. Allowances are 

booked to cover any risk of non-recovery. 

3.2.6. Short-term investments and cash assets 

(items VIII. And IX) 

Cash is stated at nominal value. 

Securities are stated at acquisition cost, while the accessorial 

costs are recorded in the statement of income in the year in 

which they are incurred. 

At balance sheet date, impairments are recorded on shortterm 

investments and liquid assets if their realization value is 

lower than their book value. 

Complementary impairments are recorded on these assets in 

order to reflect either a change in their realization or market 

value, or the risks inherent in the nature of the products concerned 

or the activities conducted. 

Nevertheless, own shares acquired with a view to cancellation 

are valuated at cost as they may only be destroyed further to 

the agreement of the Shareholders’ Meeting. 

3.3. LIABILITIES 

3.3.1. Revaluation surpluses (item III.) 

Shares and participating interests that are recorded as longterm 

investments may be revaluated in the case of a certain, 

permanent increase in their fair value for the company compared 

with their book value. 

Revaluation surpluses are maintained in this heading until the 

realization of the assets concerned or their inclusion in the 

capital. 

3.3.2. Provisions for liabilities and charges (item 

VII.) 

At balance sheet date, the Board of Directors, acting with prudence, 

sincerity and good faith, examines the provisions to be built 

up in order to cover all possible risks or losses that might have 

occurred during the financial year or previous financial years. 

Provisions relating to previous financial years are regularly reviewed 

and reversed if they no longer serve a purpose. 

3.3.3. Debts of over one year and up to one year 

(items VIII. and IX.) 

Debts are stated in the balance sheet for their nominal value. 

3.4. OFF-BALANCE SHEET ITEMS 

Off-balance sheet items are recorded for the nominal value of 

the rights and commitments mentioned in the agreement or 

for their assessed value. 

Dexia SA is a cross-border holding company which has two permanent 

establishments in Paris and Luxembourg. From an accounting 

point of view, the financial statements of Dexia SA include 

the accounts of Brussels, the Dexia SA head office, and those of 

the permanent establishments in Paris and Luxembourg. 

4.1. THE BALANCE SHEET TOTAL (BEFORE 

INCOME APPROPRIATION) 

The balance sheet total was EUR 22,373 million as of December 

31, 2006, against EUR 20,942 million as of December 31, 

2005, or an increase of 7%. 

4.2. ASSETS 

FIXED ASSETS 

4.2.1. Formation expenses 

All the expenses related to the capital increases are recorded 

in the assets as “Formation expenses” and are amortized 

over a period of five years. 

The net book value of formation expenses amounts to 

EUR 7.9 million. 

Formation expenses include the fees directly associated with 

capital increases and expenditure in implementing share 

ownership plans aimed at all members of staff of the Group, 

namely some 23,000 people in the 30 countries in which the 

Dexia Group is active. 

4.2.2. Intangible fixed assets 

Intangible fixed assets totaled EUR 2.2 million and concerned 

the acquisition and the definition of software as well as external 

costs related to the development of the website. These 

intangible fixed assets are depreciated on a straight-line basis 

over a period of three years. 

4.2.3. Tangible fixed assets 

Tangible fixed assets which have a net book value of EUR 3 million 

have a gross acquisition value of EUR 12.3 million. 

Property, plant and equipment contribute a gross acquisition 

value of EUR 4.2 million and are depreciated on a straight-line 

basis over a period of ten years. 

Office and IT equipment represented a gross investment of EUR 

5 million, depreciated on a straight-line basis at a rate of 25% 

whilst vehicles with a gross acquisition value of EUR 0.1 million 

are depreciated on a straight-line basis over five years. 

Other tangible fixed assets reach EUR 0.1 million and include the 

installation of the premises rented (gross acquisition value of EUR 

3 million) depreciated on a straight-line basis over the period of 

the lease contracts. 

220 | 


4.2.4. Financial assets 

Participating interests in affiliated companies 

The item “Participating interests” representing EUR 16,530.3 

million as of December 31, 2005 was EUR 18,352.3 million as 

of December 31, 2006. 

It includes the following equity interests: 

EUR 6,497.0 million 100% of Dexia Bank Belgium SA, Brussels, 

Belgium. 

EUR 6,614.0 million 100% interests in Dexia Crédit Local 

SA, Paris, France. 

EUR 1,819.8 million 95% of Dexia Participation Belgique 

SA, Brussels, Belgium. 

On May 30, 2006, the Dexia Group 

signed an agreement to purchase 

shares with a view to the acquisition 

from Zorlu Holding of a 75% holding 

in DenizBank Financial Services Group. 

On June 26, 2006, Dexia SA incorporated 

Dexia Participation Belgique SA in 

order to accommodate the holding in 

DenizBank Financial Services Group. 

EUR 1,751.8 million 57.68% interest in Dexia Banque Internationale 

à Luxembourg SA (Dexia BIL), 

Luxembourg. 

On December 22, 2006, Dexia SA purchased 

427 shares in Dexia BIL for EUR 

0.6 million. 

EUR 1,279.3 million 99.99% interest in Dexia Participation 

Luxembourg SA, Luxembourg, which 

owns 42.26% of Dexia BIL. 

EUR 284.1 million 10% interest in Dexia Holding Inc. in 

New York, USA, a holding company 

which owns 99.02% of Financial Security 

Assurance Holdings Ltd. 

EUR 93.0 million 100% in Dexia Nederland Holding NV, 

Amsterdam, The Netherlands. 

EUR 7.8 million 8.42% interest in Dexia Financière SA, 

Brussels, Belgium. 

EUR 3.0 million 100% interest in Dexia Habitat SA, Paris, 

Finance. 

EUR 1.0 million 99,99 % dans Dexia Employee 

Benefits SA, Bruxelles, Belgium. 

EUR 1.5 million 99.53% in Associated Dexia Technology 

Services SA Luxembourg 

The company ADTS was incorporated 

on July 17, 2006 and its object in particular 

is to provide IT services. This 

company only commenced activity on 

January 1, 2007. 

PM 

100% interest in Dexia Management 

Services Ltd, London, United Kingdom. 

PM 

100% in Dexia Funding Luxembourg SA, 

Luxembourg. 

Dexia Funding Luxembourg SA is a 

financing vehicle which, within the context 

of the acquisition of DenizBank, 

issued indefinite-term subordinated 

securities under the conditions for qualification 

as Tier 1 own funding (Tier 1 

hybrid capital) for an amount of EUR 

500.0 million. 

Receivables on affiliated companies 

This item includes subordinated loans granted to Group entities 

for a total of EUR 3,581.0 million. 

CURRENT ASSETS 

4.2.5. Receivables after more than one year 

Other receivables 

Since 2002, Dexia SA’s permanent establishment in Paris has 

headed the tax consolidation group in France, which as of 

December 31, 2006 included the following companies: 

• CLF Marne-la-Vallée Participation 

• CLF Patrimoniale 

• Compagnie pour le Foncier et l’Habitat 

• Dexia Assuréco 

• Dexia Bail 

• Dexia CBXIA1 (integration in scope) 

• Dexia CBXIA2 (integration in scope) 

• Dexia CLF Avenir 

• Dexia CLF Développement 

• Dexia CLF Energia 

• Dexia CLF Energy 

• Dexia CLF Immo 

• Dexia CLF Organisation 

• Dexia Crédit Local 

• Dexia Éditions Locales de France 

• Dexia Établissement Stable Paris 

• Dexia Finance 

• Dexia Flobail 

• Dexia Habitat 

• Dexia Municipal Agency 

• Dexia Sofaxis 

• Dexint Développement 

• Europrojet Développement 

• Floral 

• Guide pratique de la Décentralisation. 

The company CLF Badger left the scope. 

Because the commitments subscribed by Dexia Crédit Local 

and its subsidiaries allow Dexia, through its permanent establishment, 

to lock in temporary tax savings, it was agreed that 

the resources produced by the permanent establishment will 

be lent to the tax consolidation Group’s subsidiaries that made 

it possible to realize these tax savings through advances called 

“tax deferred advances”. 

Tax deferred advances granted by the permanent establishment 

with contractual maturity after December 31, 2007 amounted 

to EUR 43.1 million as of December 31, 2006. 



ANNUAL 



4.2.6. Amounts receivable within one year 

4.2.9. Deferred charges and accrued income 



ANNUAL 


Trade debtors 

The item “Trade debtors” relates to advances paid to suppliers 

(EUR 0.6 million) and other commercial receivables for the 

remaining balance (EUR 0.4 million). 

Other receivables 

The sale of Kempen & Co NV to a group of financial investors 

and management was finalized on November 15, 2004. 

Within the context of that agreement, the subordinated loan 

of EUR 33 million granted by Dexia SA to Kempen & Co NV 

remained in place. The terms and conditions of that loan were 

amended in order to take into account the fact that Kempen 

& Co NV is now independent and does not have a rating. Kempen 

& Co wanted to repay this loan on January 2, 2007, which 

justifies its transfer to receivables at one year maximum. 

In fact, Dexia’s permanent establishment is the only entity 

liable to corporate income tax, the withholding tax and the 

annual flat tax owed by the tax group in France, with the 

understanding that the subsidiaries reimburse the permanent 

establishment for their share of the tax paid by the tax consolidation 

group for its companies. On December 31, 2006, 

the tax liability of the permanent establishment in Paris to the 

French tax authorities as the head of the tax consolidation 

group in France reached EUR 11.8 million. 

For its part, the registered office has a tax claim on the Belgian 

tax authorities corresponding to overpaid advance tax of 

EUR 1.1 million relating to the year 2005. 

The work rules state that salary is to be paid in advance. 

These represent a claim of EUR 0.7 million as of December 31, 


The balance includes various receivables is EUR 0.2 million. 

4.2.7. Investments 

Own shares 

In accordance with the decision taken at the Extraordinary 

Shareholders’ Meeting held on May 10, 2006, the own shares 

held by Dexia SA on May 5, 2006, or 22,096,720 shares 

representing EUR 414.2 million, were cancelled without 

reduction of capital. 

Deferred charges totaled EUR 0.7 million and accrued income 

was EUR 46 million. 

Among accrued income are the pro ratas of interest relating to 

subordinated loans granted to Group entities (EUR 43.8 million), 

a currency swap and accrued interest with Dexia Crédit 

Local (EUR 1.1 million), the subordinated loan to Kempen & 

Co (EUR 0.4 million) and cash investments (EUR 0.4 million) 

as well as interest accrued on deferred tax advances (EUR 

0.3 million). 

4.3. LIABILITIES 

SHAREHOLDERS’ EQUITY 

As of December 31, 2006, the holding company’s shareholders’ 

equity including 2006 net income before appropriation 

totaled EUR 18,700.4 million and is composed of the following 

items. 

4.3.1. Capital 

Subscribed capital totaled EUR 5,237.7 million as of December 

31, 2006 compared with EUR 4,887.6 million as of December 

31, 2005. 

This increase of EUR 350.1 million resulted from the following 

operations: 

1. a capital increase of EUR 279.8 million subscribed by institutional 

investors with a view to financing the purchase of 

DenizBank; 

2. a capital increase reserved to employees and members of 

the Dexia Group as part of the 2006 shareholding plan for an 

amount of EUR 37.2 million; 

3. the exercise of warrants granted to employees for an 

amount of EUR 33.1 million. 

As of December 31, 2006, the company’s capital was 

represented by 1,163,184,325 shares, including 803,912,378 

bearer shares and 359,271,947 registered shares. The total 

number of Dexia VVPR strips was 668,841,416. 

Other investments and deposits 

This heading includes two term deposits of maximum one 

month for a total amount of EUR 271.7 million as well as 

VVPR Dexia strips worth EUR 0.1 million. 

4.2.8. Cash at bank and in hand. 

Available cash in accounts totaled EUR 17.1 million. 

4.3.2. Additional paid-in capital 

Each capital increase is accompanied by additional paid-in 

capital, which totaled EUR 10,229 million as of December 31, 


4.3.3. Reserves and retained earnings 

The item “Reserves” includes the legal reserve (EUR 488.8 million) 

and an available reserve amounting to EUR 683.8 million. 

Retained earnings from 2005 amounted EUR 743.5 million. 

222 | 


4.3.4. Net income for the year 

4.3.8 Amounts payable within one year 

As of December 31, 2006, net income totaled EUR 1,317.7 million. 

This result is composed of the dividends received from 

Dexia’s operating entities (EUR +1,395.3 million), financial 

results (EUR +24.9 million), exceptional income (EUR 0.1 million) 

and net income (EUR 24.1 million) after deduction of the 

holding company’s operating expenses (EUR -126.7 million) . 

PROVISIONS AND DEFERRED TAXES 

4.3.5. Provision for fiscal charges 

The permanent establishment in Paris made a provision for 

fiscal charges of EUR 1 million within the context of fiscal consolidation 

as a consequence of an adjustment impacting the 

earlier tax deficits of a subsidiary. 

4.3.6. Provisions for other liabilities and charges 

Succeeding Dexia Crédit Local at the head of the tax consolidation 

group in France, Dexia, through its permanent 

establishment, assumed vis-à-vis the former head of the tax 

consolidation group commitments initially subscribed by Dexia 

Crédit Local within the context of a tax leverage operation 

carried out in France with the approval of French tax authorities. 

For the 2006 financial year, these operations resulted in 

tax savings of EUR 4.1 million (cash savings) included in the 

total of EUR 25 million mentioned in the note “Corporate 

income tax”, and in an allowance in the same amount. 

The balance of these provisions as of December 31, 2006 is 


The provision of EUR 0.1 million associated with the transfer 

of the registered office to the Dexia Tower, Place Rogier 11, 

B–1210 Brussels has been used. 

Moreover, a provision of EUR 1.5 million provided for returning 

the premises at Square De Meeûs to pristine condition is 

also reversed. 

Furthermore, the provision for removal costs for the move of 

the permanent establishment in Paris currently situated at 

7-11, quai André Citroën to new premises in the Tour Dexia 

CBX located in the La Défense district of Paris is still held in 

the accounts (EUR 0.1 million). Initially planned for 2005, this 

move has been postponed to 2007. 

DEBTS 

4.3.7. Amounts payable after more than one year 

Financial debts 

These debts relate to short-term financing concluded with 

Group companies in the amount of EUR 3,276.7 million and 

overdrafts on sight accounts up to EUR 0.5 million. 

Trade debts 

Suppliers’ invoices not yet paid amount to EUR 7.7 million and 

invoices to be received EUR 27.6 million. 

Taxes, remuneration and social security 

This item includes: 

• VAT to be paid (EUR 0.5 million); 

• payroll withholding tax (EUR 0.8 million); 

• debts corresponding to compensation and social contributions 

(EUR 9.2 million). 

Other amounts payable 

As already specified above, the permanent establishment in 

Paris of Dexia SA is the head of the tax consolidation group 

in France. The permanent establishment is therefore the only 

establishment liable to the corporate income tax, the withholding 

tax and the annual flat tax owed by the tax group 

in France. 

For subsidiaries, belonging to a fiscal integration group has a 

neutral impact in relation to the tax situation which they would 

have been in if there had been no integration. In fact, subsidiary 

companies must therefore pay to the permanent establishment 

their contribution to the tax payment on companies in 

the fiscal integration group. For the year 2006, advances paid 

by subsidiaries exceed the tax they are estimated to owe the 

head of the group, which is why the permanent establishment 

on December 31, 2006 had a debt of EUR 1 million to the 

subsidiaries taking part in the French tax consolidation. 

Dividends relating to the 2005 financial year still to be paid 

amount to EUR 24.7 million whilst the balance of dividends 

for previous financial years is EUR 45.9 million. 

4.3.9. Accrued charges and deferred income 

This item is composed exclusively of expenses to be accrued 

as follows: 

• financial charges on a currency and interest swap 

(EUR 3.5 million); 

• financial charges linked to loans due with Group companies 

(EUR 38.2 million); 

• pro rata operating expenditures attributable to the 2006 

fiscal year (EUR 0.8 million). 



ANNUAL 


Financial debts payable after more than one year concerned 

loans contracted with Group companies in the amount of 

EUR 200 million. 




ANNUAL 


4.4. OFF-BALANCE-SHEET ITEMS – 

COMMITMENTS 

Dexia SA has significant commitments that are recorded off 

balance sheet: 

4.4.1. On November 2, 2006, Dexia SA issued a subordinated 

guarantee within the context of a subordinated “hybrid Tier 

1” issue by Dexia Funding Luxembourg SA (DFL), a 100% 

subsidiary of Dexia SA (perpetual non-cumulative securities 

at a guaranteed fixed/floating rate, for a global amount of 

EUR 500 million). This subordinated guarantee was issued in 

favor of the security holders who subscribed to the said securities 

and cover the payment by DFL of (i) any coupon which 

has not been waived in accordance with the issue conditions 

and (ii) the redemption price in the case of the liquidation or 

insolvency of DFL (or similar situations) or (iii) the redemption 

price in the case of redemption in accordance with the issue 

conditions. 

4.4.2. A bank guarantee was issued for the lease of the building 

located at Square de Meeûs Brussels where the Dexia SA 

registered office was situated until September 30, 2006 (EUR 

0.5 million). That guarantee will be discharged in 2007. 

4.4.3. The acquisition of the American group Financial Security 

Assurance was partly financed through a currency interest 

rate swap contract signed with Dexia Crédit Local in the 

amount of USD 134.2 million (EUR 101.9 million as of December 

31, 2006) against EUR 141.2 million. 

4.4.4. As of December 31, 2006, the number of stock options 

granted and not yet exercised stood at 58,462,872. On the 

basis of the strike prices, this operation results in an off-balance 

sheet commitment of EUR 893 million. 

4.4.5. On May 18, 2005, Dexia SA purchased 100% of the 

shares of Dexia Nederland Holding NV from Dexia Financière 

SA on the basis of a valuation made of these at EUR 93 million 

subject to a return to better fortune clause granted to Dexia 

BIL and Dexia Bank, also shareholders of Dexia Financière, for 

the case where the value of Dexia Nederland Holding, including 

the DBnl holding, should be revised upwards as a consequence 

of decisions in favor of DBnl. 

4.4.6. On November 22, 2006, Dexia SA concluded a contribution 

agreement with its under-subsidiary Financial Security 

Assurance Holdings Ltd (FSA) within the context of the issue 

of a “hybrid Tier 1” loan of USD 300 million by FSA. This 

contribution agreement provides that Dexia SA undertakes to 

provide FSA with the funds to pay deferred interest on the 

hybrid debt in the case where (i) FSA opts to defer the payment 

of interest on the said debt and if (ii) FSA cannot gather 

sufficient capital to finance that deferred interest during a 

period of five years. In any case, Dexia SA’s obligation under 

the contribution agreement is limited to USD 300 million, 

which corresponds approximately to 10 years of compound 

interest on the hybrid debt. 

4.4.7. On December 5, 2002, Dexia SA undertook vis-à-vis its 

subsidiary Dexia Bank Nederland NV and each of the entities 

to arise from the demerger of Dexia Bank Nederland, to the 

exclusion of any other party, to ensure that Dexia Bank Nederland 

or the entities are in a position at any time to honor their 

liabilities vis-à-vis third parties and to continue their activities, 

including the maintenance of their relations with account 

holders and other clients. The aim of this undertaking was 

in particular to prevent third parties from being prejudiced 

by the demerger of Dexia Bank Nederland. The amendment 

or withdrawal of this undertaking was made subject to the 

prior consent of DNB (De Neder landsche Bank). The sale of 

Kempen & Co NV to a group of financial investors and management 

was finalized on November 15, 2004. Within the 

context of that sale, in a letter dated the same date, Dexia SA 

reconfirmed its undertaking vis-à-vis Dexia Bank Nederland, 

which remains a 100% subsidiary of Dexia to the exclusion 

of any other party. In addition to the usual guarantees given 

to purchasers to whom Dexia SA is also committed, Dexia SA 

will indemnify Kempen & Co against risks relating to share 

leasing contracts sold by Dexia Bank Nederland NV, formerly 

Labouchere, and undertakes to compensate Kempen & Co 

for any losses resulting from a limited and identified number 

of factors. 

For more details about Dexia Bank Nederland: see notes on 

p. 99-100 and p. 140-142 of this report. 

4.4.8. Lernout & Hauspie 

Dexia is concerned in various ways with the bankruptcy of 

Lernout & Hauspie Speech Products (LHSP) and the consequences 

thereof. Initially, plaintiffs acted in all US proceedings 

both against Dexia SA and Dexia Bank Belgium. Meanwhile, 

in all US proceedings a notice of dismissal without prejudice 

has been filed as far as Dexia SA is concerned. Consequently, 

the pending proceedings now only involve Dexia Bank Belgium. 

In the course of 2006 no new proceedings have been 

initiated, either against Dexia Bank Belgium (Dexia Bank) or 


1. Claim on Lernout & Hauspie Speech Products 






Dexia Bank was claiming a pledge on the business assets of 

LHSP. In a ruling dated April 10, 2006, the Court of Appeal 

in Ghent refused to acknowledge this pledge. Dexia Bank 

renounced to lodge an appeal with the Supreme Court. This 

means that Dexia Bank is now, as an unsecured creditor, 

unlikely to receive any dividend from the Belgian liquidation 

of LHSP. 

2. Claim on Lernout & Hauspie Investment Company 







224 | 


3. Indictment of Dexia Bank in Belgium in the criminal 

investigation against the LHSP directors. 




between July 2, 1999 and September 1, 2000 by Artesia 

Banking Corporation. 


has sent a “draft writ of summons” to the parties that are 






de cours). The draft, which is subject to changes, alleges 

in substance that Artesia Banking Corporation has aided and 

abetted LHSP in the creation of fictitious revenue, by granting 

a USD 20 million loan to Messrs. Lernout, Hauspie and 

Willaert, whilst Artesia BC allegedly knew that the management 

of LHSP would utilize these funds for improper revenue 

recognition. 





















4. Civil proceedings against Dexia Bank in Belgium 

4.1. LHSP receivers’ claim 





would amount to approximately EUR 439 million. This claim 

is not likely to have any development until after the end of 

the criminal proceedings because of the principle “le criminel 

tient le civil en état”. 

4.2. Claim by individuals 








proceedings because of the principle “le criminel tient le 

civil en état”. 

5. Civil proceedings against Dexia Bank in the United 

States 

5.1. LHSP Litigation Trustee’s claim 


filed an action against Dexia Bank. The Litigation Trustee 

seeks to recover damages from Dexia Bank for entering into 

loan transactions, which he claims amount to aiding and 

abetting breaches of fiduciary duty by the LHSP Management. 

He also seeks to disallow or subordinate Dexia’s claims in 

the US bankruptcy proceedings. This action is, essentially, a 

duplication of the above-mentioned LHSP receivers’ claim. 

5.2. Claims by investors 






5.2.1. Class actions 




a) NASDAQ class action 

The first class action was served on Dexia Bank in February and 

March 2004 in the name of three individuals acting for themselves 

as well as on behalf of a class of purchasers of LHSP 

shares on the NASDAQ stock market between August 19, 

1998 and November 8, 2000. 


of the plaintiffs is well-founded, Dexia Bank has, in view of the 

large costs of defence and the uncertainty about the outcome of 

the proceedings, decided to conclude a settlement agreement 

with the NASDAQ class plaintiffs. To this end, a memorandum 

of settlement has been concluded on February 9, 2007, which 

in its principal terms provides for the payment by Dexia Bank 

of an amount of USD 60 million in exchange for an unconditional 

release of all claims against Dexia SA and Dexia Bank and 

any of their past or present affiliates, officers and employees, 

relating to purchases or sales of LHSP common shares on the 

NASDAQ Stock Market during the period from August 19, 1998 

through and including November 8, 2000 (the “class period”) 

or to purchases of call options to acquire LHSP common shares 

or sales of put options related to LHSP common shares on any 

United States-based options exchange during the class period 

by all investors who will participate in and/or be bound by the 

settlement agreement, without any recognition on behalf of 

Dexia SA or Dexia Bank of any wrongdoing or liability. This settlement 

is still subject to court approval. 



ANNUAL 





ANNUAL 


b) EASDAQ class action 




8, 2000. 






5.2.2. Transactional proceedings 








spring of 2000 LHSP shares valued at that time at approximately 

USD 220 million in exchange for their shares in Dragon 


of another former shareholder of Dragon Systems, who has 

received LHSP shares valued at the time at approximately USD 

170 million. The writs of summons for these claims do not 

mention the amounts claimed by the plaintiffs, as all of them 

have reserved the right to produce evidence of the extent of 

the alleged losses at a later date. TRA/Filler Trust has however 

specified that the extent of its losses total at least some 

USD 150 million. 







6. L&H Holding 





This is connected with a USD 25 million loan granted to Mr. 

Bastiaens by BAN in July 2000 for the purposes of the acquisition 

by Mr. Bastiaens of LHSP shares owned by L&H holding. 

The former Artesia Bank issued a bank guarantee in favor 

of BAN for an amount of USD 10 million. The selling price 

of USD 25 million was credited to three personal accounts 

opened with BAN by Messrs. Lernout, Hauspie and Willaert. 

Taking the view that this money was due to L&H Holding, the 

L&H Holding bankruptcy receiver is claiming its repayment. 


applications. 

Most of the pending procedures relate to the loan granted by 

BAN to Mr. Bastiaens (see paragraph 6, above). They include 

the claim introduced by the receiver of L&H Holding both in 

the criminal investigation relating to LHSP (in the form of a 

burgerlijke partijstelling/constitution de partie civile) and 

before the civil court (see paragraph 6, above). 



en Willaert with the proceeds of the sale of the LHSP shares 

to Mr. Bastiaens. The investigating magistrate in the Belgium 

criminal case, L&H Holding and KBC Bank have all made 

claims in relation to these shares and proceeded to their provisional 


Court of Appeals has issued a decision on July 12, 

2006 at the request of Crédit Agricole Indosuez Luxembourg 

(CAIL) by which BNP Paribas Luxembourg has been ordered 

to deliver the Parvest Shares to CAIL by June 30, 2007 or to 

pay to CAIL the countervalue of these Parvest shares on June 

30, 2007 if the latter have not been delivered to CAIL prior 

to July 1, 2007. The Luxembourg Court of Appeals has condemned 

BAN to indemnify and hold BNP Paribas Luxembourg 

harmless against any damage deriving from its condemnation. 

As a consequence, BAN is at risk to have to pay BNP Paribas 

Luxembourg the countervalue of the Parvest shares, if the 

provisional attachments on these Parvest shares are not lifted 

prior to June 30, 2007. 



cassation). 

8. Provisions and impairments 



Lernout & Hauspie file amounts to some EUR 101 million (see 

paragraphs 1, 2 and 7). On the same date impairments for the 

Lernout & Hauspie file have recorded for a total amount of 

some EUR 90 million. Dexia Bank expects to be able to recover 

the difference in view of the securities provided. 


statements in order to cover the residual risks linked to the 

US cases for which no settlement has been concluded, as well 

as for costs and legal fees related to the whole of the L&H procedures 

mentioned in paragraphs 1 to 6 above. Dexia strongly 

challenges the validity and the merits of all these claims. 


• the amount of the provisions relating to the LHSP US legal 

proceedings for which as yet no settlement has been concluded 

and 


below in paragraph 5.2.2. Dexia believes that to do so could 

seriously prejudice the outcome of the still pending LHSP legal 

proceedings. 

7. Banque Artesia Nederland 


Artesia Nederland (BAN). In the context of this operation, it 

has been agreed, in essence, that Dexia Bank will bear the 



226 | 


4.5. STATEMENT OF INCOME 

4.5.1. Operating income 

Other operating income relates to the recovery of general 

costs (EUR 0.2 million). 

Miscellaneous services and other goods increased by 

EUR 28.9 million to EUR 82.9 million. 

This item includes fees paid to consultants, experts, auditors 

and Group subsidiaries for their services, which amounted 

to EUR 52.1 million against EUR 31.4 million in 2005. The 

increase of fees is principally associated with the services provided 

by Group subsidiaries. The fees are also due for guidance 

and control tasks carried out by corporate teams from 

the Dexia Group in particular within the context of Basel II. 

The Dexia Corporate University, which is intended to develop 

top-level training programs for members of staff of the entire 

Dexia Group generated a cost of EUR 1.6 million. Logistics 

costs (leasing of premises, telecommunications, travel, supplies) 

totaled EUR 21.9 million compared with EUR 14.4 million 

in 2005, that growth being linked to the evolution of 

the Dexia SA workforce. Printing and advertising costs linked 

to corporate publications were EUR 4.4 million compared to 

EUR 4.6 million in 2005. The subscription paid to the Banking, 

Finance and Insurance Commission stood at EUR 1 million in 

2006 whilst compensation paid to members of the Board of 

Directors was stable at EUR 1.9 million. 

The average number of persons directly employed by Dexia 

rose from 118 to 177, a trend which explained the increase 

in payroll and social contributions from EUR 24.8 million to 


Members of staff benefit from a supplementary retirement 

and survival pension scheme for which both employers and 

staff premiums have been paid to a group insurance. Some 

members of the Management Board also benefit from a supplementary 

scheme as defined by article 39 of the French CGI, 

the contributions for which are paid to an external insurance 

company. 

Amortization of formation expenses represented EUR 3.2 million, 

amortization of intangible fixed assets EUR 1.2 million 

and depreciation of tangible fixed assets EUR 0.6 million. 

Interest paid and due in relation to the loans granted by 

Group entities totaled EUR 152.4 million. Financial charges 

relating to the currency interest rate swap with Dexia Crédit 

Local were EUR 7.8 million and other interest charges were 


Other financial charges were mainly composed of commissions 

linked to the payment of dividends by payment organizations, 

which are Dexia Bank, ING, Dexia BIL and Caceis 

(EUR 4.3 million), the cost of fiduciary services (EUR 0.2 million). 

The depreciation of the dollar against the euro gave rise 

to a negative conversion difference associated with the revaluation 

of loans granted in dollars (EUR 56 million). 

4.5.3. Exceptional income 

Regarding the site in Paris, exceptional depreciations were 

made in 2004 with a view to planned moves. In fact, it 

occurred that some of the assets depreciated could be used 

again in the new premises in the Dexia Tower – CBX, a depreciation 

recovery was therefore made in the amount of EUR 

0.2 million. 

The transfer of the registered office to the Dexia Tower in Brussels 

gave rise to an exceptional depreciation of EUR 0.1 million 

on audiovisual installations and equipment which could not 

be transferred to the new premises. 

4.5.4. Corporate income tax 

The corporate tax charge relates to a provision for fiscal 

charges (EUR 1 million) (see section 4.3.5. provision for fiscal 

charges). 

Proceeds from foreign income taxes are explained by the fact 

that the permanent establishment in Paris is the head of the 

tax consolidation group in France. The tax savings realized by 

the tax consolidation group are recorded in the financial statements 

of the permanent establishment and considered as an 

immediate gain (EUR 25 million). In addition, the registered 

office made a tax regularization relating to income in 2004 for 

an amount of EUR 0.1 million. 

4.5.5. Net income for the year 



ANNUAL 


4.5.2. Financial results 

Financial income from financial assets included the dividends 

paid by Group entities (EUR 1,395.3 million) as well as interest 

received and earned for subordinated loans (EUR 171.1 

million). 

Income from current assets included the interest generated 

by the currency swap contracted with Dexia Crédit Local 

(EUR 4.2 million), proceeds from tax deferred advances 

(EUR 0.8 million) and income from money-market investments 

(EUR 8.9 million). The subordinated loan granted to Kempen 

& Co produced EUR 1.5 million in interest. 

Other financial results come from a hedge transaction in an 

amount of EUR 3.9 million and positive exchange differences 

realized on the repayment of loans expressed in dollars as 

a consequence of the depreciation of the dollar against the 

euro (EUR 56 million). 

Net income for 2006 totaled EUR 1,317.7 million. 


4.6. STATEMENT OF FORMATION EXPENSES 

(in thousands of EUR) 

Amounts 

NET BOOK VALUE AS AT 31/12/05 4,353 

Movements during the period: 

- New expenses incurred & expenses of capital increase 6,728 

- Amortization (3,160) 


Detailing: expenses of formation or capital increase 7,921 



4.7. STATEMENT OF INTANGIBLE ASSETS (LICENCES) 


Amounts 

ACQUISITION COST AS AT 31/12/05 4,102 


- Acquisitions, including produced fixed assets 1,522 

ACQUISITION COST AS AT 31/12/06 5,624 

AMORTIZATION AND AMOUNTS WRITTEN DOWN AS AT 31/12/05 2,267 


- Recorded 1,158 

AMORTIZATION AND AMOUNTS WRITTEN DOWN AS AT 31/12/06 3,425 


ANNUAL 


4.8. STATEMENT OF TANGIBLE FIXED ASSETS 

Plant, Furniture Other Assets under 

machinery and tangible contruction and 

(in thousands of EUR) and equipment vehicles assets advance payments 

ACQUISITION COST AS AT 31/12/05 1,071 6,414 3,142 3 


- Acquisitions 158 1,522 12 0 

- Sales and disposals (11) (10) 0 0 

- Transfers from one heading to another 3 0 0 (3) 

ACQUISITION COST AS AT 31/12/06 1,221 7,926 3,154 0 

DEPRECIATION AS AT 31/12/05 837 4,910 3,005 0 


- Recorded 134 531 49 0 

- Written back because surplus 0 (195) 0 0 

- Canceled due to sales and disposals (10) (6) 0 0 

DEPRECIATION AS AT 31/12/06 961 5,240 3,054 0 

NET BOOK VALUE AS AT 31/12/06 260 2,686 100 0 

228 | 


4.9. STATEMENT OF FINANCIAL FIXED ASSETS 

1. Participating interests and shares 


Amounts 

ACQUISITION COST AS AT 31/12/05 16,606,614 


- Acquisitions 1,821,948 

ACQUISITION COST AS AT 31/12/06 18,428,562 

AMOUNTS WRITTEN DOWN AS AT 31/12/05 76,256 

- Recorded 0 

AMOUNTS WRITTEN DOWN AS AT 31/12/06 76,256 

NET BOOK VALUE AS AT 31/12/06 18,352,306 

2. Amounts receivable 

1. Affiliated 2. With 

(in thousands of EUR) participation link 

NET BOOK VALUE AS AT 31/12/05 3,635,977 0 


- Additions 170,000 10 

- Repayments 

- Exchange differences (225,236) 0 

NET BOOK VALUE AS AT 31/12/06 3,580,741 10 



ANNUAL 



4.10. SHARE IN THE CAPITAL AND OTHER RIGTS IN OTHER COMPANIES 

List of both enterprises in which the enterprise holds a participating interest, and other enterprises in which the enterprise holds rights in the 

amount of at lease 10% of the capital issued. 

Information from the most recent period 

Name, full address Shares for which annual accounts are available 

of the registered office and for held by the via Primary Monetary Capital and Net 

the enterprise governed enterprise subsidiaries financial unit reserves result 

by Belgian law, the (directly) statement (+) or (-) (in thousand 

company number Number % % of monetary unit) 



ANNUAL 


Dexia Banque SA 

Boulevard Pachéco 44 

B-1000 Brussels 

BE 0403.201.185 

Common shares 359,412,609 100.00 31/12/05 EUR 2,947,236 715,850 

Dexia Crédit Local SA 

7-11, quai André Citroën 

F-75015 Paris 

Common shares 87,045,744 100.00 31/12/05 EUR 2,829,132 424,908 

Dexia Banque Internationale 

à Luxembourg SA 

69, route d’Esch 


Common shares 1,163,720 57.68 42.26 31/12/05 EUR 1,245,813 122,433 

Dexia Holding Incorporated 

Park Avenue 350 

US-New York, NY 10022 

Common shares 1 10.00 90.00 31/12/05 USD 2,769,402 78,155 

Dexia Nederland Holding NV 

Beethovenstraat 300 

NL-1077 WZ Amsterdam 

Common shares 50,000 100.00 31/12/05 EUR 438,340 57,733 

Dexia Management Services Ltd 

Tuffon Street Westminster 55 

UK-London SW1P 3QF 

Common shares 10,000 100.00 31/12/05 GBP 78 7 

Dexia Employee Benefits SA 

Avenue Livingstone 6 


BE 0866.161.005 

Common shares 9,999 99.99 0.01 31/12/05 EUR 294 (706) 

Dexia Participation Luxembourg SA 



Common shares 25,759 99.99 0.01 31/12/05 EUR 1,279,031 14 

Dexia Financière SA 



BE 0479.551.271 

Common shares 6,780,866 8.42 91.58 31/12/05 EUR 93,879 830 

Dexia Habitat SA 

7 à 11, quai André Citroën 

F-75901 Paris, France 

Common shares 187,494 100.00 31/12/05 EUR 2,968 (16) 

Dexia Participation Belgique SA 

Place Rogier, 11 


BE 0882.068.708 

Common shares 95 95.00 5.00 

Dexia Funding Luxembourg SA 

69, Route d’ Esch 


Common shares 31 100.00 

Associated Dexia Technology Services 

69, Route d’ Esch 


Common shares 1,493 99.53 0.47 

230 | 


4.11. INVESTMENTS: OTHER INVESTMENTS AND DEPOSITS 


Previous 

period 

Period 

Term deposits with credit institutions 

falling due: 274,850 271,700 

- Within one month 274,850 271,700 

- Between one month and one year 

Other investments not yet shown above 89 79 

4.12. DEFERRED CHARGES AND ACCRUED INCOME 


Period 

Deferred charges 736 

Accrued income: interest 46,005 

4.13. STATEMENT OF CAPITAL 

A. Issued capital 


Amounts 

of shares 

Number 

Issued capital as at 31/12/05 4,887,585 

Changes during the period: 

- Capital increase for staff 

and employees of Dexia Group 37,195 8,265,504 

- Exercise of warrants for Group staff 33,166 7,370,345 

- Capital increase 279,793 62,176,166 

ISSUED CAPITAL AS AT 31/12/06 5,237,739 

B. Structure of the capital 

Amounts 


Number 

of shares 



ANNUAL 


Different categories of shares: 

• Shares without indication of nominal value, each representing 

1/1,163,184,325 of the issued capital 5,237,739 1,163,184,325 

• Registered shares and bearer shares: 

- Registered 359,271,947 

- Bearer 803,912,378 

C. Own shares held by: 

Amount of 

capital 


Number of 

shares 

- The company itself 0 0 

- Its direct subsidiaries 2,157 479,340 


D. Commitments to issue shares 

Amount 

of capital 


Number 

of shares 

Following the exercising of subscription rights: 

- Number of outstanding subscription rights 0 58,462,872 

- Amount of capital to be subscribed 263,083 0 

- Maximum number of shares to be issued 0 58,462,872 


E. Amount of authorized capital, not issued 


F. Shares issued, not representing capital 

Number of shares 

Amounts 

4,607,707 

Voting right 

attached thereto 


ANNUAL 


Whereof: 

- Held by the company itself 0 0 

- Held by its subsidiaries 0 0 

4.14. ANALYSIS BY CURRENT PORTIONS OF AMOUNTS INITIALLY PAYABLE AFTER MORE THAN 

ONE YEAR 


not more than between one over five years 

one year 

and 

five years 

Financial debts 0 0 200,000 

5. Other loans 0 0 200,000 

Trade debts 0 0 0 

Advance payments received on contracts in progress 0 0 0 

Other amounts payable 0 0 0 

TOTAL 0 0 200,000 

4.15. AMOUNTS PAYABLE FOR TAXES, REMUNERATION AND SOCIAL SECURITY 

(in thousands of EUR) Period 

Taxes 

a) Expired taxes payable 0 

b) Non-expired taxes payable 1,279 

c) Estimated taxes payable 0 

Remuneration and social security 

a) Amounts due to the National Office of Social Security 0 

b) Other amounts payable relating to remuneration and social security 9,200 

232 | 


4.16. ACCRUED CHARGES AND DEFERRED INCOME 

(in thousands of EUR) Period 

Accrued charges: interest 41,759 

Accrued charges: general operating expense 773 

4.17. OPERATING RESULTS 

Previous period 

Period 

Other operating income (in thousands of EUR) 

Whereof: the total amount of subsidies and compensatory amounts obtained from public authorities 0 0 

Employees recorded in the personnel register 

a) Total number at the closing date 134 207 

b) Average number of employees in full-time equivalents 110.8 161.9 

c) Number of actual working hours 194,038 252,134 

Personnel charges (in thousands of EUR) 

a) Remuneration and direct social benefits 14,905 23,768 

b) Employers’ social security contribution 4,414 6,845 

c) Employers’ premium for extra statutory insurance 5,397 5,054 

d) Other personnel charges 77 397 

e) Pensions 0 0 

Provisions for liabilities and charges (in thousands of EUR) 

Increases 8,700 4,090 

Decreases (250) (1,603) 

Other operating charges (in thousands of EUR) 

Taxes related to operations 404 395 

Other charges 14 21 

Hired temporary staff and persons placed at the disposal of the enterprise 

a) Total number at the closing date 0 1 

b) Average number of employees in full-time equivalents 0.1 0.4 

c) Number of actual working hours 91 678 

d) Charges to the enterprise (in thousands of EUR) 2 24 

4.18. INCOME TAXES 

(in thousands of EUR) Exercice 



ANNUAL 


Detail of heading X.A. 

Income taxes of the current period 0 

a) Taxes and withholding taxes due or paid 31 

b) Excess of income tax prepayments and withholding taxes capitalised (31) 

c) Estimated additional taxes recorded under assets 0 

Income taxes on previous periods 1,021 

a) Additional charges for income taxes due or paid 18 

b) Additional charges for income taxes estimated or provided for 1,003 

Taxes of the current period that are materially affected by differences between 

the profit before taxes and the estimated taxable profit 

Definitively taxed income 1,325,497 

Tax integration in France 

PM 


4.19. OTHER TAXES AND TAXES BORNE BY THIRD PARTIES 

(in thousands of EUR) Previous period Period 

Total amount of value added tax, turnover taxes and special taxes charged during the period: 

1. To the enterprise (deductible) 0 0 

2. By the enterprise 0 15 

Amounts retained on behalf of third parties for: 

1. Payroll withholding taxes 5,615 8,796 

2. Withholding taxes on investment income 105,064 112,610 



4.20. RIGHTS AND COMMITMENTS NOT ACCRUED IN THE BALANCE SHEET 


Exercice 

Personal guarantees, given or irrevocably promised by the enterprise, 

as security parties’ debts or commitments 500,030 

Whereof: 

- Maximum amount for which other debts or commitments of third parties are guaranteed 500,030 

Forward contracts: 

- Goods purchases ( to be received) 0 

- Goods sold ( to be delivered) 0 

- Currencies purchased ( to be received) 141,169 

- Currencies sold ( to be delivered) 101,907 

ANNUAL 


234 | 


5. FINANCIAL RELATIONSHIPS 

5.1. FINANCIAL RELATIONSHIPS WITH DIRECTORS 

The amount of direct and indirect remuneration and pensions, included in the income statement, as long as the disclosure does 

not concern exclusively or mainly, the situation of a single identifiable person. 

To the directors (in thousands of EUR) 5,041 

5.2. DERIVATES NOT MEASURED AT FAIR VALUE 

In this case an estimate of the fair value of financial derivates not measured at fair value with indication about the nature and 

the volume of the instruments. 


Currency interest rate swap : 1 contract 32,478 


5.3. RELATIONSHIPS WITH AFFILIATED ENTERPRISES AND ENTERPRISES LINKED BY PARTICIPATING 

INTERESTS 

Affiliated enterprises 

(in thousands of EUR) Previous period Period 

FINANCIAL FIXED ASSETS 20,166,335 21,933,047 

Investments 16,530,358 18,352,306 

Amounts receivable: 

- Subordinated 3,635,977 3,580,741 

- Others 0 0 

AMOUNTS RECEIVABLE 36,619 43,446 

After one year 36,599 43,052 

Within one year 20 394 

CURRENT INVESTMENTS 274,850 271,700 

Shares 0 0 

Amounts receivable 274,850 271,700 


ANNUAL 


AMOUNTS PAYABLE 1,467,878 3,503,873 

After one year 1,459,373 200,000 

Within one year 8,505 3,303,873 

PERSONAL GUARANTEES 0 500,000 

Provided or irrevocably promised by the enterprise, as security 

for debts or commitments of affiliated enterprises 0 500,000 

OTHER SUBSTANTIAL FINANCIAL COMMITMENTS 0 227,756 


From financial fixed assets 1,683,894 1,566,423 

From current assets 9,927 13,871 

Other financial income 0 0 

From interests and debts 110,558 160,214 

Other financial charges 3,121 4,157 


6. SOCIAL REPORT 

6.1. STATEMENT OF THE PERSONS EMPLOYED 

A. Employees recorded in the personnel register in Belgium 



ANNUAL 


Full-time Part-time Total (T) or total Total (T) or total 

(period) (period) full-time full-time 

1. During the period and equivalents (FTE) equivalents (FTE) 

during the previous period (period) (previous period) 

Average number of employees 142.8 26.9 161.9 (FTE) 110.8 (FTE) 

Number of actual working hours 219,546 32,588 252,134 (T) 194,038 (T) 

Personnel charges (in thousands of EUR) 20,046 7,674 27,720 (T) 17,132 (T) 

Amount of the benefits in 

addition to wages (in thousands of EUR) 177 (T) 113 (T) 

Full-time Part-time Total of full-time 

2. As at the closing date of the period equivalents 

a. Number of employees recorded in the personnel register 179 28 198.9 

b. By nature of the employment contract 

Contract of unlimited duration 176 28 195.9 

Contract of limited duration 3 3.0 

Contract of replacement 

c. By sex 

Male 118 16 129.2 

Female 61 12 69.7 

d. By professional category 

Management personnel 30 13 39.3 

Employees 149 15 159.6 

B. Hired temporary staff and persons placed at the disposal of the enterprise during the period 

Temporary personnel Persons placed at 

the disposal of 

3. During the period the enterprise 

Average number of personnel employed 0.4 0 

Number of actual working hours 678 0 

Charges to the enterprise (in thousands of EUR) 24 0 

236 | 


6.2. LIST OF PERSONNEL MOVEMENTS DURING THE PERIOD 

A. Entrants 

During the period 


equivalents 

a. Number of employed persons recorded 93 6 97.8 

in the personnel register during the period 



Contract of limited duration 3 3.0 

c. By sex and level of education 

Male: secondary education 6 0 6.0 

higher non-university education 10 1 10.8 

university education 44 0 44.0 

Female: secondary education 2 0 2.0 




B. Leavers 

During the period 


equivalents 

a. Number of employed persons of which the date of termination of the 

contract has been recorded in the personnel register during the period 25 1 25.5 



Contract of limited duration 8 0 8.0 

c. By sex and level of education 

Male: secondary education 0 0 0 

higher non-university education 0 0 0 


Female: secondary education 0 0 0 



d. By reason of termination of contract 

Retirement 1 0 1.0 

Dismissal 5 0 5.0 

Other reason 19 1 19.5 


ANNUAL 



6.3. STATEMENT CONCERNING THE IMPLEMENTATION OF MEASURES STIMULATING 

EMPLOYMENT DURING THE PERIOD 

EMPLOYMENT PROMOTION MEASURES 

Number of employed persons involved 

Amount of 

Number In full-time the advantage 

equivalents (in thousands of EUR) 


1. Measures comprising a financial profit 

Structural reduction of social security contributions 228 224.9 868 

2. Other measures 

Reduction of personal social security contributions 

to low paid employees 12 11.3 0 

NUMBER OF EMPLOYEES INVOLVED IN ONE OR MORE MEASURES STIMULATING EMPLOYMENT: 

TOTAL FOR THE PERIOD 228 224.9 

TOTAL FOR THE PREVIOUS PERIOD 137 130.8 


6.4. INFORMATION ON TRAINING FOR EMPLOYED PERSONS DURING THE PERIOD 

Total of initiatives of employees training at the expense of the employer Male Female 

Number of employees involved 74 46 

Number of training hours 1,885 1,224 

Costs for the enterprise (in thousands of EUR) 386 251 

ANNUAL 


238 | 


BOARD OF STATUTORY AUDITORS’ 

REPORT TO THE GENERAL SHAREHOLDERS’ 

MEETING ON THE ANNUAL ACCOUNTS 

OF THE COMPANY DEXIA SA 

AS OF AND FOR THE YEAR ENDED 

DECEMBER 31, 2006 

As required by law and the company’s articles of association, 

we report to you in the context of our appointment as 

statutory auditors. This report includes our opinion on the 

annual accounts and the required additional disclosures and 

information. 

UNQUALIFIED OPINION ON THE ANNUAL 

ACCOUNTS, WITH EXPLANATORY PARAGRAPH 

We have audited the annual accounts of Dexia SA as of and for 

the year ended December 31, 2006, prepared in accordance 

with the financial reporting framework applicable in Belgium, 

and which show a balance sheet total of EUR 22,372,664 (000) 

and a profit for the year of EUR 1,317,719 (000). 


of the annual accounts. This responsibility includes: 

designing, implementing and maintaining internal control 

relevant to the preparation and fair presentation of annual 

accounts that are free from material misstatement, whether 

due to fraud or error; selecting and applying appropriate 

accounting policies; and making accounting estimates that 

are reasonable in the circumstances. 

Our responsibility is to express an opinion on these annual 

accounts based on our audit. We conducted our audit in 

accordance with the legal requirements applicable in Belgium 

and with Belgian auditing standards, as issued by the “Institut 

des Reviseurs d’Entreprises/Instituut der Bedrijfsrevisoren”. 

Those auditing standards require that we plan and perform 

the audit to obtain reasonable assurance about whether the 

annual accounts are free of material misstatement. 

In accordance with the auditing standards referred to above, 

we have carried out procedures to obtain audit evidence 

about the amounts and disclosures in the annual accounts. 

The selection of these procedures is a matter for our judgment, 

as is the assessment of the risk that the annual 

accounts contain material misstatements, whether due to 

fraud or error. In making those risk assessments, we have 

considered the company’s internal control relating to the 

preparation and fair presentation of the annual accounts, 

in order to design audit procedures that were appropriate 

in the circumstances, but not for the purpose of expressing 

an opinion on the effectiveness of the company’s internal 

control. We have also evaluated the appropriateness of the 

accounting policies used and the reasonableness of accounting 

estimates made by management, as well as the presentation 

of the annual accounts taken as a whole. Finally, 

we have obtained from the Board of Directors and company 

officials the explanations and information necessary for our 

audit. We believe that the audit evidence we have obtained 

provides a reasonable basis for our opinion. 

In our opinion, the annual accounts give a true and fair view 

of the company’s net worth and financial position as of 

December 31, 2006 and of its results for the year then ended 

in accordance with the financial reporting framework applicable 

in Belgium. 

Without amending our unqualified opinion, we nevertheless 

draw the attention to the part of the management report 

describing some legal disputes with regard to the share leasing 

in the Netherlands, the final outcome of which is uncertain 

at this moment, and to the note to the annual accounts 

mentioning the engagement of the company towards Dexia 

Bank Nederland. 

ADDITIONAL REMARKS AND INFORMATION 


and content of the management report, and for ensuring 

that the company complies with the Companies’ Code 

and the company’s articles of association. 

Our responsibility is to include in our report the following 

additional remarks and information, which do not have any 

effect on our opinion on the annual accounts: 

• the management report deals with the information required 

by the law and is consistent with the annual accounts. However, 

we are not in a position to express an opinion on the 

description of the principal risks and uncertainties facing the 

company, the state of its affairs, its foreseeable development 

or the significant influence of certain events on its future 

development. Nevertheless, we can confirm that the information 

provided is not in obvious contradiction with the information 

we have acquired in the context of our appointment; 

• without prejudice to certain formal aspects of minor importance, 

the accounting records are maintained in accordance 

with the legal and regulatory requirements applicable in 

Belgium; 



ANNUAL 



• there have been no transactions undertaken or decisions 

taken in breach of the company’s statutes or the Companies’ 

Code such as we would be obliged to report to you. The 

appropriation of results proposed to the general meeting is in 

accordance with the relevant requirements of the law and the 

company’s articles of association; 

• in accordance with article 523 of the Companies’ Code, 

we are also required to report to you on the capital impacts 

of the decisions of the Board of Directors of March 2, 2006 

relating to the remuneration of the representative director 

and the president of the Board of Directors, in which regard 

we have been informed of a conflict of interest. The information 

pertaining to these decisions is included in the management 

report within the section relating to the remuneration of 

the Board of Directors and the Management Committee. We 

are of the opinion that this disclosure is adequate to inform 

the shareholders about the capital impacts for the company 

of these decisions. 


Brussels, March 28, 2007 

Board of Statutory Auditors, 

PricewaterhouseCoopers 

Mazars & Guérard 





R. Peirce X. Doyen 


(free translation) 

ANNUAL 


240 | 


ADDITIONAL 

INFORMATION 

CORPORATE OBJECT 

Article 3 of the Articles of Association reads as follows: 

“The company has the object, both in Belgium and in other 

countries, of: 

GENERAL DATA 

NAME 

The company is called “Dexia”. 

REGISTERED OFFICE 

The registered office of the company is in Belgium at Place Rogier 

11, 1210 Brussels (RPM Brussels VAT BE 0458.548.296). 

LEGAL FORM, INCORPORATION, DURATION 

The company is a limited company under Belgian law that 

makes a public appeal for investment. It was incorporated on 

July 15, 1996 for an indefinite period. The company has two 

permanent offices located in France and in Luxembourg. 

1. the acquisition, holding, management and sale, by whatever 

means, of all equity interests in companies or any other 

legal entities, whatever their legal form, existing or to be created, 

which operate as credit institutions, insurance or reinsurance 

companies or which carry on financial, industrial, 

commercial or civil, administrative or technical activities, as 

well as all types of shares, bonds, public funds and any other 

financial instruments of whatever nature; 

2. the provision of assistance or administrative, commercial 

and financial services and accomplishment of all research on 

behalf of third parties and in particular on behalf of companies 

and other legal entities, whatever their legal form, in 

which it holds a direct or indirect equity interest, as well as 

the provision of loans, advances, guarantees or securities, in 

whatever form; 

3. the conducting of all movable property, real property, financial, 

industrial, commercial or civil transactions including the 

acquisition, management, leasing and sale of all movable 

and real property, related directly or indirectly to the realization 

of its corporate object or likely to contribute to such 

realization.” 

PLACES WHERE THE PUBLIC MAY CONSULT 

DOCUMENTS 

The Articles of Association of the company are available at the 

office of the Clerk to the Commercial Court of Brussels and at 

the company’s registered office. 

The annual reports as well as the annual financial statements 

and the consolidated financial statements are lodged with 

the National Bank of Belgium. These documents may also be 

obtained from the company’s registered office. 

Decisions in relation to appointments and resignations of 

members of the Board of Directors are published in the Appendix 

to the Belgian Gazette. Financial notices concerning the 

company are published on its website (www.dexia.com). The 

convocations to shareholders’ meetings are published on the 

website and in the financial newspapers, the daily press and 

periodicals. 




INFORMATIONS 

COMPLÉMENTAIRES 


DEXIA IN THE WORLD 




INFORMATIONS 


Adinfo 



Phone: + 32 2 222 81 74 

Fax: + 32 2 222 24 37 

www.adinfo.be 

AMCC 

1180 NW Maple Street Suite 202 

Issaquah, WA 98027 

USA 

Phone: + 1 425 313 46 00 

Fax: + 1 425 313 10 05 

www.artesiamortgage.com 

Astris Finance, LLC 

1001 Connecticut Avenue NW 

Suite 905 

Washington, DC 20006 

USA 

Phone: + 1 202 223 97 01 

Fax: + 1 202 223 43 50 

www.astrisfinance.com 

Ausbil Dexia 

Veritas House – Level 23 

207 Kent Street 

Sydney NSW 2000 

Australia 

Phone: + 61 2 925 90 200 

Fax: + 61 2 925 90 222 

www.ausbil.com.au 

Corona 

Avenue de la Métrologie 2 


Phone: + 32 2 244 22 11 

Fax: + 32 2 216 15 15 

www.corona.be 

DenizBank 

Büyükdere Cad. No: 106 

34394 Esentepe/Istanbul 

Turkey 

Phone: + 90 212 355 08 00 

Fax: + 90 212 274 79 93 

www.denizbank.com 

DenizBank (Austria) 

Karntner Ring 12 

A-1010 Wien 

Phone: + 43 1 503 93 960 

Fax: + 43 1 503 93 96 133 

www.denizbank.at 

DenizBank Moscow 

2nd Zvenigorodskaya Str. H.13, 

Building 42 FI. 6 

123022 Moscow 

Russia 

Phone: + 7 495 725 10 20 

Fax: + 7 495 725 10 25 

www.denizbank.ru 

Dexia Asset Management 

Alternative Dublin Ltd 

George’s Quay House 

43 Townsend Street 

IRL-Dublin 2 

Phone: + 353 1 613 11 20 

Dexia Asset Management Belgium 

Rue Royale 180 


Phone: + 32 2 222 52 42 

Fax: + 32 2 222 07 07 

www.dexia-am.com 

Dexia Asset Management France 

Washington Plaza 

40, rue Washington 

F-75408 Paris Cedex 08 

Phone: + 33 1 53 93 40 00 

Fax: + 33 1 45 63 31 04 


Dexia Asset Management Luxembourg 

283, route d’Arlon 


Phone: + 352 254 34 31 

Fax: + 352 254 34 34 940 


Dexia Asset Management Switzerland 

Geneva Branch 

2, rue de Jargonnant 

CH-1207 Genève 

Phone: + 41 22 707 90 00 

Fax: + 41 22 707 90 99 


Dexia Asset Management Spain 

Madrid Branc 

Calle Ortega y Gasset, 26 


Phone: + 34 91 360 94 75 

Fax: + 34 91 360 98 99 


Dexia Asset Management Italy 

Milano Branch 

Corso Italia 1 

I-20122 Milano 

Phone: + 39 02 31 82 83 60 

Fax: + 39 02 31 82 83 84 



Sweden/Norway/Finland 

Stockholm Branch 

Engelbrektsplan 2 

PO Box 7573 

SE-103 93 Stockholm 

Phone: + 46 8 407 57 80 

Fax: + 46 8 407 57 01 



The Netherlands 

Rotterdam Branch 

Lichtenauerlaan 102-120 

NL-3062 ME Rotterdam 

Phone: + 31 10 204 56 51 

Fax: + 31 10 204 58 79 


Dexia Asset Management Australia 

Ausbil Dexia Ltd 


207 Kent Street 


Australia 

Phone: + 61 2 9259 0200 

www.ausbil.com.au 

242 | 


Dexia Asset Management Denmark / 

Dexia AM c/o 

Dexia Bank Denmark A/S 

Grønningen 17 

DK-1270 København K 

Phone: + 45 33 46 11 00 

Dexia Asset Management Bahrain 

Middle East Representative Office 

Almoayyed Tower, 21st floor 

Seef District – PO Box 18259 

Kingdom of Bahrain 

Phone: + 973 17 566 727 

Dexia Asset Management Germany 

Dexia Asset Management Lux SA 

Zweigniederlassung Deutschland 

An der Welle 4 

D-60422 Frankfurt 

Phone: + 49 69 7593 8823 

Dexia Bail 

1, passerelle des Reflets 

Tour Dexia – La Défense 2 

TSA 92202 

F-92919 La Défense Cedex 

Phone: + 33 1 58 58 68 08 


Dublin Branch 

6 George’s Dock 


Phone: + 353 16 45 50 31 

Fax: + 353 18 29 15 77 


London Branch 

Shackleton House, Hay’s Galleria 

4 Battle Bridge Lane 

UK-London SE1 2GZ 

Phone: + 44 20 7556 3060 

Fax: + 44 20 7556 2560 

Dexia Bank Denmark A/S 

Grønningen 17 

DK-1270 København K 

Phone: + 45 33 46 11 00 

Fax: + 45 33 32 42 01 

www.dexia-bank.dk 

Dexia Bank Nederland 

Piet Heinkade 55 

Postbus 808 

NL-1000 AV Amsterdam 

Phone: + 31 20 348 50 00 

Fax: + 31 20 348 55 55 

www.dexiabank.nl 

Dexia banka Slovensko 

Hodzova 11 

01011, Zilina 

Slovaquie 

Phone: + 421 41 51 11 101, 102 

Fax: + 421 41 56 21 129 

www.dexia.sk 




Phone: + 32 2 222 11 11 

Fax: + 32 2 222 40 32 

www.dexia.be 

www.axionweb.be 

Dexia Banque Internationale 

à Luxembourg 



Phone: + 352 4590 1 

Fax: + 352 4590 2010 

www.dexia-bil.lu 

Dexia Banque Privée Suisse 

Beethovenstraße, 48 

Postfach 2192 


Phone: + 41 58 810 82 92 

Fax: + 41 58 810 82 71 

www.dexia-pb.ch 

Dexia BIL 

Singapore Branch 

1 Finlayson Green # 18-01 

Singapore 049246 

Phone: + 65 6 222 76 22 

Fax: + 65 6 536 02 01 


Dexia CLF Banque 



TSA 72200 


Phone: + 33 1 44 37 45 02 

Fax: + 33 1 44 37 45 07 

Dexia CLF Régions Bail 



TSA 72200 


Phone: + 33 1 58 58 68 08 

Dexia Crediop 

Via Venti Settembre, 30 

I-00187 Roma 

Phone: + 39 06 47 71 1 

Fax: + 39 06 47 71 59 52 

www.dexia-crediop.it 




TSA 72200 


Phone: + 33 1 58 58 77 77 

Fax: + 33 1 58 58 70 00 

www.dexia-creditlocal.fr 


Dublin Branch 



Phone: + 353 1 670 27 00 

Fax: + 353 1 670 27 05 


Tokyo Branch 

Meiji Seimei Kan 5F 1-1 

Marunouchi 2-chome, 

Chiyoda-ku, Tokyo 100-0005 

Japan 

Phone: + 81 3 6268 4180 

Fax: + 81 3 6268 4185 


New York Branch 

445 Park Avenue 

New York, NY 10022 

USA 

Phone: + 1 212 515 70 00 

Fax: + 1 212 753 55 22 

www.dexia-americas.com 

Dexia Crédit Local Asia Pacific Pty Ltd 


207, Kent Street 


Australia 

Phone: + 61 2 925 13 961 

Fax: + 61 2 925 90 222 




INFORMATIONS 






INFORMATIONS 


Dexia Crédit Local Canada 

800 Square Victoria, Suite 1620 

CP 201, Montréal (Québec) 

Canada H4Z 1 E3 

Phone: + 1 514 868 1200 

Dexia Crédit Local Research 

and Development India Pvt Ltd 

Mercantile House, Level 10 

KG Marg, New Delhi 110001 

India 

Phone: + 91 11 14 35 20 805 

Dexia Crédit Local Portugal 

Estrella Office 

Rua Domingos Sequeira 27-5G 

P-1350-119 Lisboa 

Phone: + 351 21 395 15 16 

Fax: + 351 21 397 77 33 

Dexia Crédito Local México 

Torre Hemicor – Av. Insurgentes Sur # 826 

Colonia del Valle – Bénito Juarez 

3100 México DF 

Mexico 

Phone: + 55 56 87 75 45 

Dexia Crédits Logement 

Headquarters 



Operations 

• Chaussée de Dinant 1033 

B-5100 Wépion 

Phone: + 32 81 46 82 11 

Fax: + 32 81 46 05 55 

• H. Consciencestraat 6 

B-8800 Roeselare 

Phone: + 32 51 23 21 11 

Fax: + 32 51 23 21 45 

Dexia Delaware LLC 

445 Park Avenue 7th Floor 


USA 

Phone: + 1 212 515 70 00 

Fax: + 1 212 753 55 22 

Dexia Éditions 



TSA 92202 


Phone: + 33 1 58 68 80 41 

Dexia Employee Benefits 



Phone: + 32 2 222 09 13 

Fax: + 32 2 222 09 14 

www.dexia-eb.com 

Dexia Épargne Pension 

65, rue de la Victoire 

F-75009 Paris 

Phone: 0810 39 82 83 

www.dexia-ep.com 

Dexia Factors 



Phone: + 32 2 282 66 33 

Fax: + 32 2 282 66 99 

www.dexia-factors.be 

Dexia Finance 



TSA 92202 


Phone: + 33 1 58 58 87 05 

Dexia Flobail 



TSA 92202 


Phone: + 33 1 58 58 68 08 

Dexia Insurance Belgium 



Phone: + 32 2 286 61 11 

Fax: + 32 2 286 15 15 

www.dvvlap.be 

Dexia Investment Company 



Phone: + 32 2 222 71 94 

Fax: + 32 2 285 35 48 

Dexia Investments Ireland 



Phone: + 353 1 645 50 00 

Fax: + 353 1 829 15 77 

www.dexia-investments.ie 

Dexia Kommunalbank Deutschland 

Charlottenstraße 82 

D-10969 Berlin 

Phone: + 49 30 25 59 8-0 

Fax: + 49 30 25 59 8-2 00 

www.dexia.de 

Dexia Kommunalkredit Bank AG 

Türkenstraße 9 

A-1092 Wien 

Phone: + 43 1 31 6 31 

Fax: + 43 1 31 6 31 103 

www.dexia-kom.com 

Dexia Kommunalkredit Bulgaria EOOD 

Sofia 1000, 19 Karnigradska 

Bulgaria 

Phone: + 359 897 886 761 

Dexia Kommunalkredit 

Czech Republic a.s 

Karlova 27, 110 00 Praha 1 

Czech Republic 

Phone: + 420 221 146 331 

Dexia Kommunalkredit Hungary Kft. 

Horvat u. 14-24 

1027 Budapest 

Hungary 

Phone: + 36 1 224 76 50 

Dexia Kommunalkredit Polska 

UI. Sienna 39 

PL-00-121 Warszawa 

Phone: + 48 22 654 35 84 

Dexia Kommunalkredit Romania SRL 

42 Dorobantilor Street 

1st District 

010573 Bucuresti 

Romania 

Phone: + 40 21 619 34 07 

Dexia Lease Belgium 

Headquarters 



Operations 



Phone: + 32 2 222 37 08 

Fax: + 32 2 222 37 13 

www.dexialease.be 

Dexia Lease Services 



Phone: + 32 2 222 38 36 

Fax: + 32 2 222 37 13 

244 | 


Dexia Life & Pensions 

2, rue Nicolas Bové 


Phone: + 352 262 54 41 

Fax: + 352 262 54 45 480 

www.dexia-life.com 

Dexia Location Longue Durée 

22, rue des Deux Gares 

F-92564 Rueil-Malmaison Cedex 

Phone: + 33 1 57 69 55 55 

Fax: + 33 1 57 69 65 87 

www.dexia-clflease.fr 

Dexia Municipal Agency 



TSA 92202 


Phone: + 33 1 58 58 77 77 

Fax: + 33 1 58 58 70 00 

www.dexia-ma.com 

Dexia Prévoyance 

3, avenue Claude Guillemin 

Site du BRGM 

BP 6009 

F- 45060 Orléans Cedex 2 

Phone: + 33 2 38 64 39 80 

Fax: + 33 2 38 64 33 68 

assurance@dexia-prevoyance.com 

Dexia Private Bank Jersey 

PO Box 12 

2-6, Church Street 

St Helier, Jersey JE4 9NE 

Phone: + 44 1534 83 44 00 

Fax: + 44 1534 83 44 11 

www.dexia-privatebank.je 

Dexia Public Finance Bank 

Shackleton House 

4, Battle Bridge Lane 

UK-London SE1 2RB 

Phone: + 44 207 378 77 57 

Fax: + 44 207 378 71 88 

www.uk-dexia.com 

Dexia Public Finance Norden 

Box 7573 

Engelbrektsplan 2 

S-103 93 Stockholm 

Phone: + 46 8 407 57 00 

Fax: + 46 8 407 57 01 

Dexia Public Finance Switzerland 

2, rue de Jargonnant 

CH-1207 Genève 

Phone: + 41 22 718 01 20 

Dexia Sabadell Banco Local 

Paseo de las Doce Estrellas 4 

Campo de las Naciones 


Phone: + 34 91 721 33 10 

Fax: + 34 91 721 33 20 

www.dexiasabadell.es 

Dexia Securities France 

112, avenue Kléber 

F-75116 Paris 

Phone: + 33 1 56 28 52 00 

Fax: + 33 1 56 28 52 80 

Dexia Société de Crédit 

Headquarters and operations 

Rue des Clarisses 38 

B-4000 Liège 

Phone: + 32 4 232 45 45 

Fax: + 32 4 232 45 01 

Operations 

Boulevard Saint-Michel 50 


Phone: + 32 2 732 12 12 

Fax: + 32 2 737 29 27 

www.dexia-societedecredit.be 

Dexia Sofaxis 

Route de Creton 

F-18100 Vasselay 

Phone: + 33 2 48 48 10 10 

Fax: + 33 2 48 48 10 11 

www.sofaxis.com 

Dexia Technology Services 



Phone: + 352 4590 1 

Domiserve 

6, rue André Gide 

92320 Châtillon 

Phone: 0810 55 55 55 

www.domiserve.com 

Experta (Suisse) 

Steinengraben 22 

CH-4002 Basel 

Phone: + 41 61 285 17 17 

Fax: + 41 61 285 17 77 

www.experta.ch 

Experta Corporate and Trust Services 

283, route d’Arlon 


Phone: + 352 26 92 55 1 

Fax: + 352 26 92 55 3366 

www.experta.lu 

Experta Trust Company (Bahamas) 

Limited 

Trade Winds Building, 4th Floor 

Bay Street 

PO Box N-10697 Nassau 

Bahamas 

Phone: + 1 242 325 09 22 

Fax: + 1 242 325 09 11 

www.experta.bs 

Experta Trust Services Jersey 

PO Box 300 

2-6, Church Street 

St Helier, Jersey JE4 8YL 

Phone: + 44 1534 83 44 44 

Fax: + 44 1534 83 44 55 

www.experta.je 

Fidexis 

Boulevard du Souverain 191 


Phone: + 32 2 209 02 30 

Fax: + 32 2 209 02 37 

Financial Security Assurance 

31 West 52nd Street 


USA 

Phone: + 1 212 826 01 00 

Fax: + 1 212 688 31 01 

www.fsa.com 

INCA 

PO Box 1847 – Gallo Manor 

2152 Johannesburg 

South Africa 

Phone: + 27 11 202 22 00 

Kommunalkredit Austria AG 


A-1092 Wien 

Phone: + 43 1 31 6 31 0 

Fax: + 43 1 31 6 31 503 

www.kommunalkredit.at 




INFORMATIONS 




Kommunalkredit Dexia 



A-1092 Wien 

Phone: + 43 1 31 6 31 0 

Fax: + 43 1 31 6 31 505 

www.kdam.at 

Otzar Hashilton Hamekomi (OSM) 

3, Heftman Street 

61070 Tel-Aviv 

Israël 

Phone: + 972 3 695 7211 5 

Fax: + 972 3 691 9503 

Popular Banca Privada 

José Ortega y Gasset 29 


Phone: + 34 914 18 93 30 

Fax: + 34 914 18 93 28 

www.popularbancaprivada.com 

RBC Dexia Investor Services España 

Fernando el Santo 20 


Phone: + 34 91 360 99 00 

Fax: + 34 91 360 99 95 

www.rbcdexia-is.es 

RBC Dexia Investor Services Ireland Ltd 

George’s Quay House 

43 Townsend Street 

IRL-Dublin 2 

Phone: + 353 1 613 04 00 

Fax: + 353 1 613 04 01 

www.rbcdexia-is.com 

RBC Dexia Investor Services Italia S.p.A 

Via Messina 38 

I-20154 Milano 

Phone: + 39 02 33 62 31 

Fax: + 39 02 33 62 32 30 


Sepia 



Phone: + 32 2 286 63 27 

Fax: + 32 2 284 74 76 

Société Luxembourgeoise 

de Leasing BIL Lease 

48, rue d’Eich 


Phone: + 352 22 77 33 1 

Fax: + 352 22 77 44 




INFORMATIONS 


RBC Dexia Investor Services Bank 

France 

105, rue Réaumur 

F-75002 Paris 

Phone: + 33 1 70 37 83 00 

Fax: + 33 1 70 37 83 03 



14, Porte de France 

L-4360 Esch-sur-Alzette 

Phone: + 352 26 05 1 

Fax: + 352 24 60 95 00 


RBC Dexia Investor Services Belgium 

Rue Royale 180 


Phone: + 32 2 222 06 01 

Fax: + 32 2 222 34 25 


RBC Dexia Investor Services Cayman 

Royal Bank House 

4th Floor 

24 Shedden Road 

PO Box 1586 

Grand Cayman KY1-1110 

Phone: + 1345 914 4676 

Fax: + 1345 949 5777 


RBC Dexia Investor Services Netherlands 

Piet Heinkade 55 

NL-1019 GM Amsterdam 

Phone: + 31 20 348 50 05 

Fax: + 31 20 348 50 09 


RBC Dexia Trust Services Hong Kong 

51/F, Central Plaza 

18 Harbour Road 

Wanchai, Hong Kong 

Phone: + 852 2978 5656 

Fax: + 852 2845 0390 


RBC Dexia Trust Services Singapore 

20 Cecil Street 

#28-01 Equity Plaza 

Singapore 049705 

Phone: + 65 6435 33 36 

Fax: + 65 6536 0219 



Strassen, Zürich Branch 

Badenerstraße 565 

P.O. Box 101 


Phone: + 41 44 405 92 92 

Fax: + 41 44 405 14 71 


246 | 


INFORMATIONS 






Dexia’s Annual Report 2006 has been published by the Corporate Communication department of Dexia SA. 

This report is also available in Dutch and French. It just needs to be requested at the Dexia head office in Brussels 

or in Paris or via the company website at www.dexia.com. 


Place Rogier 11 


Account no. 068-2113620-17 

RPM Brussels VAT BE 0458.548.296 

In Paris 




In Luxembourg 



CONTACTS 

Press department 

E-mail: pressdexia@dexia.be 

Phone Brussels: + 32 2 213 50 81 

Phone Paris: + 33 1 58 58 86 75 

Investor Relations 

Phone Brussels: + 32 2 213 57 46 

Phone Paris: + 33 1 58 58 85 56 

Website 

www.dexia.com 

FINANCIAL CALENDAR 

Ordinary Shareholders’ Meeting for the 2006 financial year 

May 9, 2007 

Payment of dividend for the 2006 financial year 

May 24, 2007 

Half-yearly information 

August 30, 2007 

Ordinary Shareholders’ Meeting for the 2007 financial year 

May 14, 2008

Photographs: GETTY IMAGES/Anne Rippy – GETTY IMAGES/Odilon Dimier – Stéphane de Bourgies - Concept: 

Lay-out: Nord Compo - 7, rue de Fives – BP 123 - F-59653 Villeneuve-d’Ascq - Phone: +33 3 20 41 40 01 - Printed by Emico Offset – Wommelgem – Belgium 

Printed on Artic the Volume. This paper is FSC certified. FSC stands for Forest Stewardship Council and the certification means that Dexia 

supports a sustainable and responsible system for forestry when choosing this paper.

SDXI 0109-5 03-07

Annual report 2006 - Dexia.com

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