Annual report 2010 - Dexia.com

A n n u a lr e p o r t2 0 1 0

A n n u a l r e p o r t 2 0 1 02 Management report116 Consolidated financial statements238 Annual financial statements261 Additional information

4 Group profile8 Message from the chairmen10 2010 and early 2011 highlights13 Update on the transformation plan17 Strategy20 Declaration of corporate governance68 Shareholder information71 Human Resources75 Sustainable development77 Risk management95 Capital management99 Financial results103 Activity and results of the business lines

M a n a g e m e n t r e p o r t

Group profileManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsDexia is a European banking group, with about35,200 members of staff and core shareholders’ equity ofEUR 19.2 billion as at 31 December 2010. The Group carriesout its activities principally in Belgium, Luxembourg, Franceand Turkey.The Dexia share is listed on Euronext Brussels and Paris andthe Luxembourg Stock Exchange, and is included in theBEL20, reference index of the Brussels Stock Exchange, andthe Dow Jones Euro Stoxx Banks.Dexia 2014: a retail bank serving10 million customersThe Dexia Group has posted clear strategic ambitions for2014 and fixed as objectives:• to complete its financial restructuring, giving precedence toincome from its commercial franchises;• to consolidate and to develop its strong commercialfranchises, rebalancing its business line portfolio around retailbanking, and tapping growth opportunities offered by themarket in Turkey;• to adopt an optimised operational model, supported by thesearch for synergies and efficiency gains.This return to the essence resulting from the Group’s strategicrepositioning is reflected in Dexia’s values, whereby membersof staff share three aims: respect, excellence and agility.Business linesRetail and Commercial BankingDexia offers a wide range of retail, commercial and privatebanking services to over 8 million customers.Dexia ranks among the three largest banks in Belgium andLuxembourg. In Belgium, Dexia serves its 4 million customersthrough a network of approximately 850 branches. TheLuxembourg operation is the international wealth managementcentre within the Group; it also covers the country with anationwide network of branches. Dexia also holds a strongposition in Turkey, through DenizBank, which currently standsin sixth position among privately-held banks and servesits customers through a nationwide network of some 500branches. Besides the retail and commercial banking activities,DenizBank is a fully-fledged bank, with a significant corporateactivity and offering its clients asset management services andinsurance products.The Group aims to continue developing its commercialfranchises in Belgium and Luxembourg and to capturethe significant growth potential of Turkey. The objectiveis to increase the proportion of income from its retail andcommercial banking activities (approximately 60% of theGroup’s total income, including approximately 27% fromTurkey) and to achieve a client base of 10 million (4 million inBelgium and Luxembourg, 6 million in Turkey) by 2014.Public and Wholesale BankingDexia plays a major role in the financing of local facilities andinfrastructures, the health and social housing sectors and thesocial economy, principally in Belgium and France.Dexia is also active:• in the field of project finance, adopting a selective approachand in sectors such as infrastructures and renewable energies,both in Europe and North America;• in the field of corporate banking in Belgium, where Dexiafocuses on medium-sized corporates, whilst maintaining anopportunist presence with large corporates.In addition, the Group is established in Germany, with anaccess to the Pfandbriefe market.Close to its clients and fully in tune with their requirements,Dexia is constantly developing and widening its range ofproducts and services. The aim is to go well beyond the role ofspecialist lender, offering clients of the business line integratedsolutions (treasury management, budget optimisation, ITsolutions and so on) most suited to their needs.Asset Management and ServicesThis business line consists of three activities (assetmanagement, investor services and insurance), characterisedby attractive growth outlook based on a diversified clienteleand strong collaboration with the Group’s other commercialfranchises.With EUR 86.4 billion of assets under management as at31 December 2010, Dexia Asset Management is the Group’sasset management centre. Its four management centres (inBelgium, France, Luxembourg and Australia) serve a broadclient base.The investor services business is conducted by RBC DexiaInvestor Services, a joint venture with Royal Bank of Canada,which offers its expertise in global custody, fund and pensionadministration and shareholder services to institutions allaround the world. Total assets under administration amountedto EUR 2,101 billion as at 31 December 2010.Dexia’s insurance activities are mainly concentrated onthe Belgian and Luxembourg markets. The Group offers acomplete range of life and non-life insurance products toretail, commercial and private banking clients as well as toDexia’s public and semi-public clients, through a bankinginsuranceapproach and through a network of tied agents.4 Dexia Annual report 2010

Group profileRatings (1)The Group’s main operating entities operating on the longtermcapital markets, Dexia Bank Belgium, Dexia Crédit Localand Dexia Banque Internationale à Luxembourg, are rated A+by Fitch, A1 by Moody’s and A by Standard & Poor’s. Three ofDexia’s European subsidiaries (Dexia Municipal Agency, DexiaKommunalbank Deutschland and Dexia LDG Banque) issueTriple-A rated secured bonds.SIMPLIFIED GROUP STRUCTUREDexiaCrédit Local100%Dexia SADexiaBankBelgium100%DexiaBanqueInternationaleà Luxembourg99.9%DenizBank99.8%Management reportDexiaCrediop70%DexiaSabadell60%DexiaKommunalbankDeutschland100%DexiaMunicipalAgency100%DexiaSofaxis100%DexiaInsuranceBelgium99.8%Dexia AssetManagement100%RBC DexiaInvestorServices50%Consolidatedfinancial statementsDEXIA SHAREHOLDING STRUCTUREAS AT 31 DECEMBER 2010 (in %)Other institutionaland individualshareholdersEmployeeshareholdingCNP AssurancesEthias GroupThree Belgian RegionsBelgian federal State1.13.05.028.25.75.7 5.717.613.814.1Caisse des dépôtset consignationsHoldingCommunalArco GroupFrench StateMEMBERS OF STAFFAS AT 31 DECEMBER 2010 (1)OthercountriesFranceLuxembourgTurkey2,3143,7635,935Total35,1859,34813,825Belgium(1) Including self-employed networks and RBC Dexia Investor Services. .Additional information Annual financial statements(1) As at 24 March 2011.Annual report 2010 Dexia5

Group profileRESULTS Dexia GAAP IFRS as adopted by EU(in millions of EUR) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Income 5,631 5,157 5,160 5,392 5,976 7,005 6,896 3,556 6,184 (1) 5,310Costs (3,323) (3,037) (3,056) (3,012) (3,229) (3,474) (3,834) (4,119) (3,607) (3,703)Gross operating income 2,308 2,120 2,104 2,380 2,747 3,531 3,062 (563) 2,577 1,607Net income Group share 1,426 1,299 1,431 1,772 2,038 2,750 2,533 (3,326) 1,010 723(1) The provisions for legal litigation were previously included in income (other net income).Management reportConsolidatedfinancial statementsBALANCE SHEET Dexia GAAP IFRS as adopted by EU(in billions of EUR) 31/12/01 31/12/02 31/12/03 31/12/04 31/12/05 31/12/06 31/12/07 31/12/08 31/12/09 31/12/10Balance-sheet total 351.4 350.9 349.9 389.2 508.8 566.7 604.6 651.0 577.6 566.7Loans and advances tocustomers 156.4 157.8 161.9 166.2 192.4 226.5 242.6 368.8 354.0 355.8Financial assets at fairvalue through profitand loss and financialinvestments 125.9 134.7 127.9 144.5 198.9 223.2 257.9 141.1 115.3 101.9Customers borrowingsand deposits 84.0 85.3 92.3 97.6 97.7 116.2 126.7 114.7 121.0 125.8Debt securities 140.9 146.5 134.9 143.9 175.7 184.7 204.0 188.1 213.1 222.2Core shareholders’equity (1) 10.3 10.9 11.6 12.3 11.5 14.4 16.1 17.5 18.5 19.2(1) For the years 2001-2004: shareholders’ equity + general banking risks reserve.Ratios Dexia GAAP IFRS as adopted by EU2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Cost-income ratio (1) 59.0% 58.9% 59.2% 55.9% 54.0% 49.6% 55.6% 115.8% 58.3% (2) 69.7%Return on equity (3) 18.7% 16.2% 16.5% 19.8% 20.0% 23.1% 17.8% -22.6% 5.6% 3.8%Tier 1 ratio 9.3% 9.3% 9.9% 10.7% 10.3% 9.8% 9.1% 10.6% 12.3% 13.1%Capital adequacy ratio 11.5% 10.7% 11.2% 11.7% 10.9% 10.3% 9.6% 11.8% 14.1% 14.7%(1) The ratio between the costs and the income.(2) The provisions for legal litigation were previously included in income (other net income).(3) The ratio between the net income Group share and the weighted average core shareholders’ equity (estimated dividend for the period deducted).Additional information Annual financial statementsQUALITY OF RISKS Dexia GAAP IFRS as adopted by EU2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Impaired loans tocustomers (in millionsof EUR) 1,897 1,942 1,708 1,722 1,473 1,359 1,218 3,535 4,808 5,554Assets quality ratio (1) 1.20% 1.23% 1.05% 1.04% 0.78% 0.61% 0.50% 0.99% 1.39% 1.64%Coverage ratio (2) 66.7% 68.0% 72.8% 73.2% 69.1% 69.3% 67.2% 58.9% 55.3% 57.9%(1) The ratio between the impaired loans and advances to customers and the gross outstanding loans and advances to customers.(2) The ratio between the specific impairments on loans and advances to customers and the impaired loans and advances to customers.6 Dexia Annual report 2010

Group profileDATA PER SHARE Dexia GAAP IFRS as adopted by EU(in EUR) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Earnings per share (1) 1.25 1.13 1.24 1.58 1.87 2.38 2.08 (2.42) 0.55 0.39Gross dividend 0.48 0.48 0.53 0.62 0.71 0.81 0.91 - (2) - (3) - (4)Net assets (5) 8.39 8.79 9.25 9.95 9.86 11.08 12.28 9.47 10.02 10.41Pay-out ratio (in %) (6) 39.3% 43.0% 42.1% 38.7% 37.9% 34.3% 42.0% - (2) - (3) - (4)(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). Forthe years 2006-2009 earnings per share have been restated to take into account the issue of bonus shares distributed to the shareholders and to enablecomparison.(2) The Board of Directors decided to propose to the Shareholders’ Meeting on 13 May 2009 that exceptionally no dividend be paid for 2008.(3) On the proposal of the Board of Directors, the Extraordinary Shareholders’ Meeting of 12 May 2010 approved a capital increase of EUR 352,915,394.01by incorporation of reserves and the issue of 83,927,561 bonus shares granted to shareholders on 11 June 2010 prorata to their shareholding. For moreinformation, see chapter “Shareholder information” on page 69 of this annual report.(4) As in 2010 and subject to prior approval by the Extraordinary Shareholders’ Meeting of 11 May 2011 of the capital reduction referred to as the first item onthe agenda of that Shareholders’ Meeting, the Board of Directors will propose to the Shareholders’ Meeting that it approves a capital increase by incorporationof reserves in an amount of approximately EUR 280 million and the issue of bonus shares which will be granted to shareholders pro rata to their shareholding,to reward them for their continuous support.(5) The ratio between the core shareholders’ equity and the number of shares (after deduction of treasury shares) at the end of the period. Under DexiaGAAP: including GBRR Group share. For the years 2006-2009 net assets have been restated to take into account the issue of bonus shares distributed to theshareholders and to enable comparison.(6) The ratio between the total dividend and the net income Group share.Management reportRatings Long term Outlook Short termDexia Bank BelgiumFitch A+ Stable outlook F1+Moody’s A1 Stable outlook P-1Standard & Poor’s A Negative outlook A-1Dexia Crédit LocalFitch A+ Stable outlook F1+Moody’s A1 Stable outlook P-1Standard & Poor’s A Negative outlook A-1Dexia Banque Internationale à LuxembourgFitch A+ Stable outlook F1+Moody’s A1 Stable outlook P-1Standard & Poor’s A Negative outlook A-1DenizBankMoody’s (foreign currency) Ba3 Stable outlookMoody’s (local currency) Baa2 Stable outlook P-2Fitch (foreign currency) BBB- Stable outlook F3Fitch (local currency) BBB Stable outlook F3Dexia Municipal Agency (obligations foncières)Fitch AAA -Moody’s Aaa -Standard & Poor’s AAA Stable outlookDexia Kommunalbank Deutschland (Pfandbriefe)Standard & Poor’s AAA Stable outlookDexia LDG Banque (lettres de gage)Standard & Poor’s AAA Stable outlookThe Group’s principal banking entities – Dexia Bank Belgium, Dexia Crédit Local and Dexia Banque Internationale à Luxembourg – are rated A+ with stableoutlook by Fitch (29 September 2010), A1 with stable outlook by Moody’s (12 February 2010), A with negative outlook by Standard & Poor’s (2 March 2011).DenizBank is rated Ba3 (foreign currency) with positive outlook and Baa2 (local currency) with stable outlook by Moody’s (7 October 2010) and BBB- (foreigncurrency) with positive outlook and BBB (local currency) with positive outlook by Fitch (2 December 2010).The triple-A rating of the covered bonds (obligations foncières) issued by Dexia Municipal Agency was affirmed by Fitch (22 March 2010), Moody’s(23 January 2009) and Standard & Poor’s (4 February 2010 – stable outlook). The triple-A rating of the covered bonds (Pfandbriefe) issued by DexiaKommunalbank Deutschland was affirmed by Standard & Poor’s (16 April 2010 – stable outlook). The triple-A rating of the covered bonds (lettres de gage)issued by Dexia LDG Banque was affirmed by Standard & Poor’s (2 June 2010 – stable outlook).Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia7

Message from the ChairmenManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsOver the last two years, Dexia has undergone an in-depth transformation,aimed at restoring the robustness of its financial base and ensuring asustainable future for the Group.In this transformation process, 2010 was a year of significant change,marked by two priority objectives: acceleration of our financialrestructuring and development of our commercial franchises, in linewith our objectives.Throughout the year, despite the unstable economic environment, wewent to great lengths to accelerate the financial restructuring, and thiswas reflected by rapid asset disposals and a substantial improvement ofour liquidity profile.We continued with our disposal plan in accordance with the programmeagreed with the European Commission, disposing of various holdingsand entities as well as a total of 27.2 billion euros in bonds and loans inrun-off. Those disposals have been reflected by a reduction of the sizeof our balance sheet by 18% since the end of 2008.In terms of liquidity, continuing the endeavours begun at the endof 2008, there has been a rapid and material improvement of the Group’s situation. Our short-term fundingrequirement has been reduced by 141 billion euros compared with the maximum reached in October 2008 and isnow at 119 billion euros at the end of December 2010. On the other hand, we have improved the quality of oursources of funding by rebalancing our liquidity profile, aligning it towards longer-term funding, based on stableresources, increasingly gathered from our clients.These efforts enabled us definitively to exit the Belgian, French and Luxembourg State guarantee on our fundingby 30 June 2010. In a particularly tense economic and financial environment resulting from the sovereign debtcrisis in certain European countries, we have returned to full funding autonomy, testifying to the solid progressmade in terms of our financial structure.In October 2010, we presented our strategic plan for 2014. The road map for each business line was chartedat an “Investor Day”, detailing the principles of the transformation of those business lines. For our Retail andCommercial Banking activities, our ambition is to increase our market share as well as the equipment rate for ourclient base. An investment plan was launched to support that ambition. Indeed, in Belgium, the establishment ofour new distribution model was a priority in 2010. In all, 304 branches were renovated and additional accountmanagers were appointed to improve the service provided to our clients. The intensification of our collectionefforts resulted in a 5% increase of deposits in Belgium and Luxembourg. In Turkey, we continued with our policyof dynamic expansion, supported by the opening of 50 new branches over the year. In the field of public banking,our Public and Wholesale Banking business line is confirming its status as a profitable and recognised specialist onits historical markets, Belgium and Luxembourg, on the basis of a model offering an increasingly comprehensiveand integrated range of products. Our asset management, investor services and insurance activities, characterisedby attractive growth prospects founded on a diversified client base, will further intensify their collaboration withthe Group’s other commercial franchises.At 723 million euros, net profit for 2010 is a sign of this accelerated transformation of our Group. Theimprovement of our funding mix and the disposal of assets in run-off are reflected in line with our objectivesby a fall in earnings. Nevertheless, the result reflects the solid progress made by the commercial business lines,which post pre-tax income up 18% over the year (excluding gains from disposals). The good performance byRetail and Commercial Banking, with strong growth of both loans and deposits, illustrates our robust commercial8 Dexia Annual report 2010

position on our main markets. Our Public and Wholesale Banking activities, refocused on our historical markets,particularly in Belgium and France, demonstrated their resistance and their profitability throughout the year andour expertise in project finance was confirmed by the granting of numerous mandates and the presentation ofmany awards. The contribution by Asset Management and Services to results doubled over the year, with theexcellent performance of our insurance activity, whilst the recovery of the financial markets was beneficial to ourasset management and investor services activities.In addition, the gradual improvement of the credit environment, particularly in Turkey, enabled the cost of riskto be improved for our commercial business lines. At the same time, we were led however to make additionalimpairments on our Financial Products portfolio, to take account of more conservative assumptions as to theevolution of the US RMBS market. Those impairments are nonetheless without impact on our solvency ratios,which are protected from any loss or additional impairment on the Financial Products portfolio following the Stateguarantee mechanism.With a Tier 1 ratio at 13.1%, our solvency remains excellent and enables us to view future regulatory developmentswith confidence.We can be proud of our achievements in 2010 and our successes, which are the fruit of the commitment ofeveryone, members of staff, shareholders and clients alike. In two years we have implemented two thirds of ourtransformation plan. We would therefore like to thank our shareholders for their support and have them benefitfrom the year’s result with the issue to them of new shares in an amount of approximately 280 million euros.Transformation will remain on the agenda for 2011 and we are concentrating even more on the strategicdevelopment of our commercial franchises. We are entirely confident in the Group’s ability to achieve theobjectives set for 2014.Management reportConsolidatedfinancial statementsJean-Luc DehaeneChairman of the Board of DirectorsPierre MarianiChief Executive OfficerAdditional information Annual financial statementsAnnual report 2010 Dexia9

2010 and early 2011 highlightsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements2010FebruaryAgreement of the European Commission to theDexia restructuring planOn 5 February 2010, the Belgian, French and Luxembourggovernments and the European Commission concluded anagreement in principle on the Dexia Group restructuring planwhich was definitively ratified by the new Commission on26 February 2010. This agreement, which falls fully withinthe dynamic of the Group transformation plan, enables Dexiato continue to develop its core business lines on its historicalmarkets, France, Belgium and Luxembourg, as well as inTurkey.More detailed information is provided in the chapter “Updateon the transformation plan” in this Annual Report (page 13).MarchDisposal of the Assured Guaranty sharesOn 11 March 2010, Dexia finalised a secondary public offeringof 21,848,934 common shares in Assured Guaranty, in itspossession since the sale of the insurance activities of FSA toAssured Guaranty. The shares sold represent all the commonAssured shares held by Dexia. The transaction generated apre-tax gain of EUR 153 million.AprilClosing of the sale of Dexia Épargne PensionDexia closed the sale to BNP Paribas Assurances of DexiaÉpargne Pension, its subsidiary specialising in life insurancein France, following the sale agreement signed in December2009.MayJudgement by the Court of First Instance inBratislava on Dexia banka SlovenskoAt the end of the hearing held on 17 May 2010, the Court ofFirst Instance in Bratislava passed a judgement ordering Dexiabanka Slovensko, the Slovakian subsidiary of the Dexia Group,to pay the sum of EUR 138 million in principal, following anaction brought by a professional client in 2008. The appealfiled by Dexia lead to the cancellation of this first instancejudgement in January 2011 (see hereafter).JuneDexia fully exits State guarantee support for itsfuture fundingOn 30 June 2010, Dexia fully exited the State guaranteeliquidity framework put in place in October 2008. Consideringthe improvement of its liquidity situation and in line with theundertakings it made to the European Commission, the Groupceased to issue guaranteed debt four months earlier thanthe agreed expiry date of 30 October 2010. The exit processwas conducted gradually, Dexia waiving the benefit of theguarantee for contracts with a maturity of up to one monthand contracts with no fixed maturity as early as October 2009.Then the Group ceased to use the guarantee for its depositcontracts, particularly interbank deposits, from 1 March 2010,finally to cease all recourse to that funding at less than oneyear on 31 May 2010 and for its medium and long-termfunding on 30 June 2010. All outstanding instruments issuedunder the government guarantee framework before 30 June2010 will continue to benefit from the government guaranteein accordance with their terms and conditions. Guaranteedoutstanding will be fully written down in 2014.More detailed information on the State guarantee is providedin the note 9.4.C. to the consolidated financial statements inthis Annual Report (page 184).Dexia disposes of its stake in SPEDexia concluded an agreement with EDF on the sale of its6.13% stake in SPE, a company operating in the energy sectorin Belgium. The capital gain on this transaction amountedto EUR 69 million after taxes. This transaction was part ofthe agreement with the European Commission providing fordisposal of this holding by 31 December 2010.Dexia sells its holding in AdInfoDexia concluded an agreement with Network ResearchBelgium, a Belgian IT service provider, on the sale of its 51%stake in AdInfo, a company active in IT services for Belgianlocal authorities. The capital gain on this transaction amountedto EUR 14 million after taxes. The transaction was part ofthe agreement with the European Commission providing fordisposal of this holding before 31 December 2010.10 Dexia Annual report 2010

2010 and early 2011 highlightsJulyCEBS stress tests confirm that Dexia does notrequire additional capital to withstand adversescenariosLike 91 other European institutions, Dexia was subject tothe 2010 EU-wide stress testing exercise coordinated by theCommittee of European Banking Supervisors (CEBS). Theconclusion of this stress test, based on different scenarios ofcredit quality deterioration (1) , is that Dexia does not requireadditional capital to withstand the CEBS two-year adversescenario, including the additional sovereign shock.More detailed information is provided in the part dedicatedto the stress tests in the chapter “Risk management” in thisAnnual Report (page 93).SeptemberDexia continues its commercial deployment andcost-cutting planDexia announced new restructuring and cost-reductionmeasures, which will contribute to strengthening Groupintegration and will enable EUR 160 million in savings to beachieved, particularly through mutualisation or optimisationmeasures relating specifically to IT functions, purchasingpolicy and market activities. These measures are reflected bythe loss of 665 full-time equivalent jobs, of which 385 inBelgium, 70 in France, 140 in Luxembourg and 70 internationally.Industrial partnership with Crédit MutuelDexia signed a letter of commitment to establish an industrialpartnership with the Crédit Mutuel group. This partnershiprelates to the commercial banking activity of Dexia Crédit Localwith its local public sector clients in France and concerns theprovision by the Crédit Mutuel group from January 2013 ofa commercial banking platform and associated functionalities.Through the industrial platform of the Crédit Mutuel-CICgroup, the Dexia Group will receive first-class banking servicesenabling it to provide its clients with an extended and highlyefficient range of services.Dexia Bank acquitted in the Lernout & HauspiecaseOn 20 September 2010, the Court of Appeal in Ghentacquitted Dexia Bank and Mr Geert Dauwe, a former memberof the management of Artesia Bank, on all the charges againstthem in the Lernout & Hauspie case.No party has filed an appeal to the Supreme Court of Appealagainst this acquittal of Dexia Bank and Mr Geert Dauwe, sothat their acquittal is definitive.More detailed information is provided in the part dedicatedto legal risk in the chapter “Risk management” in this AnnualReport (page 90).The Dexia share leaves the CAC 40The Scientific Panel of Indices, the board that decides on whichshares are included in the CAC 40, the main share index onthe Paris Stock Exchange, announced on 3 September 2010that the Dexia share would be leaving the index as from theStock Exchange trading session on Monday 20 September2010. Dexia joined the CAC Next 20, the index calculatedand published by NYSE Euronext Paris, and will remain listedon the BEL20, the main share index on the Brussels StockExchange of which it is one of the leading shares. Leaving theCAC 40 does not mean that the Dexia share is excluded fromEuro Stoxx or Stoxx Banks.More detailed information on the Dexia share is provided inthe chapter “Shareholder information” in this Annual Report(page 68).OctoberDexia announces its “Dexia 2014” strategy: a retailbank serving 10 million customersAt its “Investor Day”, held on 12 October 2010, the DexiaGroup presented its “Dexia 2014” strategy. Dexia set itselfthe objective:• to complete its financial restructuring, giving precedence toincome from its commercial franchises;• to consolidate and to develop its strong commercialfranchises, rebalancing its business line portfolio around retailbanking, tapping the growth opportunities offered by themarket in Turkey;• to reshape its operating model, seeking synergies andefficiency gains.More detailed information is provided in the chapter“Strategy” in this Annual Report (page 17).NovemberDexia sells its subsidiary Dexia banka SlovenskoDexia concluded an agreement with the Central Europeaninvestment group Penta Investments Ltd, on the sale of its88.71% stake in Dexia banka Slovensko. The transaction ispart of the agreement with the European Commission thatprovides for the disposal of Dexia banka Slovensko by Dexiabefore 31 October 2012. The transaction should be finalisedduring the first half of 2011.Turkish Post and DenizBank merge their forces forPTT cardsOn 30 November 2010, DenizBank and the Turkish Post (PTT)announced a major cooperation agreement. Thanks to thecooperation established between the two institutions, PTTcards will be equipped with Visa/MasterCard features. Throughthis project, PTT customers will have access to internationalcard payment systems and DenizBank will add a potential of3 million new customers to its client base.Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) The exercise was performed according to the scenarios, methodology andhypotheses provided by the CEBS, detailed in the global report published onthe CEBS website: http://www.c-ebs.org/EU-wide-stress-testing.aspxAnnual report 2010 Dexia11

2010 and early 2011 highlightsDecemberManagement reportA reinforced management team to implement the“Dexia 2014” strategic planDexia announced that it was going to strengthen itsManagement Board as from 1 January 2011. The new teamis enlarged to include ten members, in order to providethe essential skills enabling the Dexia Group to achieve theobjectives of its strategic plan.More detailed information is provided in the part dedicatedto the Management Board in the chapter “Declaration ofcorporate governance” in this Annual Report (page 42).DenizBank opens 50 new branches in 2010Benefiting from a solid economic environment, DenizBankcontinued to expand its customer franchise in 2010 andopened 50 new branches, bringing the total to 500 at theend of December 2010. The bank also made 346 extra ATMsavailable to its clientele and gained 425,000 new retail andbusiness customers over the year.2011Consolidatedfinancial statementsAdditional information Annual financial statementsJanuaryDecision of the Bratislava Appeal Court in favourof DexiaOn 25 January 2011, the Court of Appeal of Bratislavarendered a judgement in favour of Dexia, cancelling thefirst-instance judgement of May 2010 by which Dexia bankaSlovensko was ordered to pay an amount in principal ofEUR 138 million. As a result the case will revert back to theFirst-Instance Court of Bratislava which will have to render anew judgement taking into account the legal evaluation ofthe Court of Appeal.More detailed information is provided in the part dedicatedto legal risk in the chapter “Risk management” in this AnnualReport (page 92).12 Dexia Annual report 2010

Update on the transformation planThe year 2010 was dominated by the Dexia transformationplan. It began with the European Commission acknowledgingthe progress made since the launch of the plan in November2008. On 5 February 2010, the Belgian, French andLuxembourg governments and the European Commissionconcluded an agreement in principle on the Dexia Grouprestructuring plan which was definitively confirmed by thenew commission on 26 February 2010.The commitments made to the European Commission, as wellas the progress made in 2010 are detailed below.The Dexia restructuring plan is being monitored by anindependent expert commissioned by Dexia and the EuropeanCommission. The extent to which the objectives are being metwill be concluded from the report to be issued by the expertby 30 April 2011. With regard to the commitments related tothe balance sheet, accounting data as at 31 December 2010will be restated, in compliance with the measures outlined inthe Commission’s decision.Throughout the year, the Group continued successfully toimplement its transformation plan, reducing its short-termfunding requirement and thus its risk profile, despite aturbulent economic environment.DisposalsThe Group continued to refocus on its main franchisesand its historical markets, and this was reflected by severaldisposals.On 11 March 2010, Dexia finalised a secondary public offeringof 21,848,934 common shares in Assured Guaranty, in itspossession since the sale of the insurance activities of FSA toAssured Guaranty. The shares sold represent all the commonAssured Guaranty shares held by Dexia. The transactiongenerated a gross capital gain of EUR 153 million.In the first half of 2010, the Group also finalised the sale ofits subsidiary Dexia Épargne Pension.In June 2010, Dexia concluded an agreement with EDF inrelation to the sale of its 6.13% holding in SPE, a companyoperating in the energy sector in Belgium, as well as anagreement with Network Research Belgium, a Belgian ITservice provider, in relation to the sale of its 51% holding inAdInfo, a company active in the field of IT services to Belgianlocal authorities. The gains from these disposals amountedrespectively to EUR 69 million after taxes for SPE and EUR 14 millionafter taxes for AdInfo. These two transactions are in linewith the agreement with the European Commission providingfor disposal of these holdings before 31 December 2010.In November 2010, Dexia concluded an agreement withPenta Investments Ltd, a Central European investment group,on the sale of its 88.71% stake in Dexia banka Slovensko.The transaction is part of the agreement with the EuropeanCommission that provides for the disposal of Dexia bankaSlovensko by Dexia before 31 October 2012. The transactionshould be finalised during the first half of 2011.Dexia also launched the process for disposal or floatingof DenizEmeklilik, the insurance subsidiary of DenizBankin Turkey, in line with the agreement with the EuropeanCommission to make the sale before 31 October 2012. Nonbindingoffers have already been received.Finally, Dexia also undertook to sell its 70% holding in DexiaCrediop (Italy) before 31 October 2012 and its 60% holdingin Dexia Sabadell (Spain) before 31 December 2013.Creation of the Legacy DivisionSince the beginning of 2010, Dexia has regrouped itsportfolios in run-off as well as some Public and WholesaleBanking non-core loans and off-balance-sheet commitmentsin a specific division, named Legacy Portfolio ManagementDivision (Legacy Division) alongside the core business lines,now brought together in the Core Division.The Legacy Division contains:• the bond portfolio in run-off;• the Financial Products portfolio;• non-core public sector loans.The assets of the Legacy Division remain on the Group balancesheet and benefit from clearly identified and allocated funding,as illustrated in the table hereafter (page 14). Governmentguaranteedfunding is entirely allocated to this division.The division also includes off-balance-sheet commitments ofthe Public and Wholesale Banking business line in the UnitedStates, corresponding principally to undrawn liquidity lines inrun-off.This new analytical segmentation, in line with undertakingsmade to the European Commission, enables Dexia to improveconsiderably the visibility of its core business lines.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia13

Update on the transformation planManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsBalance SHEET Core & Legacy DivisionS(in billions of EUR) 31/12/09 31/12/10AssetsCore Division 415.8 432.5Retail and Commercial Banking 50.9 56.1Public and Wholesale Banking 216.4 214.3Asset Management and Services 31.5 29.5Asset Management 0.3 0.3Investor Services 9.5 9.7Insurance 21.7 19.4Group Center 52.0 50.5Derivatives 40.7 47.1Other assets 24.2 35.1Legacy Portfolio Management Division 161.8 134.3Bond portfolio in run-off 134.2 111.7Public and Wholesale Banking run-off loans 16.9 12.3Financial Products portfolio 10.7 10.3liabilitiesCore Division 415.8 432.5Covered bonds 75.9 74.4Commercial funding 140.6 145.1Long-term unsecured funding 40.4 45.7Short-term secured and unsecured funding 66.3 61.1Equity 12.0 10.7Derivatives 58.4 72.3Other 22.2 23.0Legacy Portfolio Management Division 161.8 134.3Financial Products (GICs) 7.1 5.0Covered bonds 24.8 24.2Long-term State guaranteed funding 22.3 44.1Long-term unsecured funding 7.7 3.6Short-term State guaranteed funding 27.7 0Short-term secured and unsecured funding 72.2 57.3Deleveraging programmeIn 2010, the Group continued with the active balance sheetdeleveraging policy it began at the end of 2008.Within the Legacy Division, the bond portfolio in run-offwas reduced by EUR 22.5 billion in 2010 and amountedto EUR 111.7 billion as at 31 December 2010, comparedto EUR 134.2 billion as at 31 December 2009 andEUR 158 billion as at 31 December 2008. Bonds were soldfor a total of EUR 18.8 billion in 2010, with a negative impactof EUR 184 million on the statement of income.The Financial Products portfolio was reduced by USD 1.6 billionin 2010, principally through natural amortisation, andamounted to USD 13.8 billion as at 31 December 2010 againstUSD 15.4 billion at the end of 2009 and USD 16.1 billion atthe end of 2008.The Group also sold non-core loans of the Public and WholesaleBanking business line, for a total amount of EUR 4.8 billionin 2010, with a negative impact of EUR 48 million on thestatement of income.Furthermore, the amount of undrawn liquidity lines in theUnited States (1) fell by USD 9.2 billion in 2010, to USD 24 billionas at 31 December 2010, thus reducing the potentialextent of stress on those liquidity facilities.Within the Core Division, the Group also sold bonds fromits ALM portfolios, for an amount of EUR 3.6 billion, witha positive impact of EUR 20 million on the statement ofincome.In total, EUR 27.2 billion of bonds and loans were disposedof in 2010, with a negative impact of EUR 213 million onthe statement of income, or a 0.78% average loss on thenominal amount.Since the beginning of the transformation plan in the end ofOctober 2008, bonds and loans for an amount of EUR 52.4 billionwere sold, with a negative impact of EUR 464 million onthe statement of income, or a 0.89% average loss on thenominal amount.Combined with the natural amortisation and the absence ofnew production, these sales enabled the balance sheet of theLegacy Division to be reduced by EUR 28 billion in 2010, toEUR 134 billion as at 31 December 2010.The Group balance sheet total was EUR 567 billion as at31 December 2010, against EUR 578 billion as at 31 December2009 and EUR 651 billion as at 31 December 2008.14 Dexia Annual report 2010(1) Stand-By Purchase Agreements (SBPA).

Update on the transformation planIn 2010, the evolution of the balance sheet was very severelyaffected by the volatility of interest rates and exchange rates.A consequence of the fall in interest rates was an appreciationof the fair value of derivatives and an increase of theamount of cash collateral. Without the impact associatedwith the variation of the fair value of derivatives and theincrease of cash collateral posted, the balance sheet total fellby 9% in 2010, to EUR 448 billion (1) .Improvement to the liquidity profileIn 2010, the Group raised EUR 44.4 billion of wholesalemedium and long-term funding. The funds raised consist ofEUR 23.2 billion in government-guaranteed debt, EUR 13.6billion in covered bonds, EUR 4.4 billion in long-term securedfunding other than covered bonds and EUR 3.2 billion insenior non-secured funding.The Group made considerable progress in reducing its shorttermliquidity gap. Short-term funding requirements fell byEUR 48 billion in 2010, to EUR 119 billion as at 31 December2010. This represents a decrease of EUR 141 billion since thepeak reached in October 2008.This significant reduction of the short-term fundingrequirement was under unfavourable interest-rate conditionsresulting in an increase of the amount of cash collateral ofEUR 8 billion in 2010 despite a very turbulent macroeconomicenvironment, marked by the sovereign crisis which weighedheavily on the funding of many European banks.This good performance was achieved by virtue of:• the sustained pace of the balance sheet deleveragingprogramme. EUR 27.2 billion of bonds and Public andWholesale Banking run-off loans were sold in 2010 (cf. sectionon “Deleveraging programme” above);• the swift execution of the long-term funding programme;• the reduction of the Public and Wholesale Banking lendingactivity, this being aligned to the Group’s long-term fundingcapacity;• the increase in retail deposits, particularly in Belgium and inTurkey. They were EUR 87.7 billion as at 31 December 2010,against EUR 81.5 billion at the end of 2009.All this contributed to rebalance the Group’s funding profile,by reducing short-term funding, and by increasing the sharefunded by stable resources (particularly commercial deposits),in accordance with the undertakings to the EuropeanCommission.In addition, Dexia also considerably improved its short-termfunding mix. Indeed, Dexia accelerated the cutback of centralbank borrowings (EUR -32 billion compared to the end ofDecember 2009) and since October 2010 was no longerfunded by short-term guaranteed debt, in view of therepayment of the short-term loans. The shift towards longertermbilateral and tri-party repos was confirmed in 2010.As at 31 December 2010, the total amount of central bankeligible securities was EUR 108 billion (of which EUR 42 billionwere unencumbered), allowing for a major liquidity bufferdespite the Group’s active balance sheet deleverage policy.In June 2010, Dexia fully exited the government guaranteedmechanism for its funding, put in place in October 2008.Considering the improvement of its liquidity situation andin line with its undertakings to the European Commission,the Group stopped to issue guaranteed debt four monthsbefore the formal end date of 30 October 2010. The exit(1) Unaudited pro forma figures.process was conducted gradually, Dexia waiving the benefitof the guarantee for contracts with a maturity of up toone month and contracts with no fixed maturity as early asOctober 2009. Then the Group ceased to use the guaranteefor its deposit contracts, particularly interbank deposits, from1 March 2010, and finally stopped the issuance of shorttermguaranteed instruments on 31 May 2010 and of allmedium and long-term guaranteed debt on 30 June 2010.All outstanding instruments issued under the governmentguarantee framework before 30 June 2010 will continue tobenefit from the government guarantee in accordance withtheir terms and conditions. Total outstanding guaranteeddebt amounted to EUR 44.4 billion as at 31 December 2010(against EUR 50.4 billion as at 31 December 2009). Thisguaranteed outstanding will be fully written down in 2014,of which approximately 40% in 2011.More detailed information on the government guaranteeis provided in the note 9.4.C. to the consolidated financialstatements in this Annual Report (page 184).Cost reductionIn order to maintain profitability of the Group refocused on itsmain franchises, in 2008 Dexia announced a target reductionto its cost base of 15% in three years, or EUR 600 million bythe end of 2011.As at 31 December 2010, costs were EUR 3,703 million,down 10% on the end of December 2008. 2010 costs wereseverely impacted by restructuring charges in an amount ofEUR 145 million.Other undertakingsUndertakings with regard to the businesslinesDexia undertook to align the loan activity of the Publicand Wholesale Banking business line with its covered bondissue capacity and to observe a level of risk-adjusted returnon capital (RAROC) at a minimum 10%. In 2010, newundertakings amounted to EUR 10.3 billion and, for the entirebusiness line, the level of 10% was respected.Restrictions on dividends and hybridinstrumentsThe agreement with the European Commission providescertain restrictions on dividends and hybrid instruments.Until the end of 2011, Dexia can only pay dividends onordinary shares in the form of new shares. During that period,the amount of dividend in shares may not be more than 40%of Dexia net income Group share over the financial year towhich the dividend relates.Dexia may only pay coupons on its subordinated debtinstruments and hybrid capital if there is a contractualobligation and will make no call until the end of 2011.On the other hand, and until 31 December 2014, Dexia willlimit any form of dividend on its ordinary shares and any callor discretionary payment of a coupon on subordinated debtinstruments and hybrid capital so that, after the payment, theGroup’s core Tier 1 ratio remains above or equal to:• 10.6% as at 31 December 2010 and then decreasing eachyear to 10.2% as at 31 December 2014;• the sum 12.5% of the weighted risks of the Legacy Divisionand 9.5% of the weighted risks of the other business lines.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia15

Update on the transformation planManagement reportThese restrictions apply in particular to Tier 1 hybridcapital instruments issued by Dexia Banque Internationaleà Luxembourg, Dexia Crédit Local and Dexia FundingLuxembourg. The characteristics of these loans are detailed inthe “Solvency” section in the chapter “Capital management”in this Annual Report (page 95).Considering the undertakings described above:• the coupon linked to the Dexia Banque Internationale àLuxembourg 6.821% Tier 1 issue was paid on 6 July 2010;• the coupon linked to the Dexia Crédit Local 4.30% Tier 1issue was not paid;• the coupon linked to the Dexia Funding Luxembourg4.892% Tier 1 issue was paid on 6 November 2010 asa consequence of the resolution of the ExtraordinaryShareholders' Meeting of Dexia SA to increase the capitalby incorporation of available reserves and with the issue ofbonus shares which were attributed to shareholders.Additional information Annual financial statementsConsolidatedfinancial statements16 Dexia Annual report 2010

StrategyIn October 2010, within the context of an Investor Dayorganised in Brussels, Dexia presented its financial andcommercial targets by 2014.The strategy described in the present chapter was establishedtaking account of the financial and economic environmentand information available at the time it was established. Itmay be altered in particular when material changes occur tomarket conditions as well as to legislation, regulation (interalia accounting principles) and prudential control.Dexia 2014: an ambitious planDexia has posted clear strategic ambitions for 2014 and fixedas objectives:• to complete its financial restructuring, giving precedence toincome from its commercial franchises;• to consolidate and to develop its strong commercialfranchises, rebalancing its business line portfolio (Retail andCommercial Banking, Public and Wholesale Banking and AssetManagement and Services) around retail banking, tapping thegrowth opportunities offered by the market in Turkey;• to reshape its operating model, seeking for more synergiesand efficiency gains.A bank with a robust financial structureBy 2014, the Group targets to reduce the size of its balancesheet by 35% to less than EUR 430 billion and to completean in-depth modification of its funding structure in orderto achieve a maximum of 11% of short-term funding. Asa result the Group will be for the most part funded longterm,via deposits collected by the business lines, by coveredbond issues and via opportunist access to the unsecuredsenior segment. Its annual long-term funding programme willbe in a range of EUR 10 to 15 billion, in line with Grouprequirements and market appetite.Assets managed in run-off will represent less thanEUR 80 billion thanks to the ongoing asset deleverage planimplemented by dedicated teams since the end of 2008.More details on the deleverage plan and on the liquidity profileare given in the chapter “Update on the transformation plan”on pages 14-15 of this annual report.Dexia will have improved the quality of its income by reducingthe share stemming from financial activities (revenues fromtransformation activities and from investment portfolios) andby developing commercial income which will represent 95%of total estimated income.The Group will continue its efforts to reduce costs in order toachieve a cost-income ratio lower than 65% in 2014.The cost of risk should improve for Public and WholesaleBanking and Retail and Commercial Banking, including Turkeywhere it could nonetheless be subject to volatility.This should lead the Group to achieve pre-tax income ofabout EUR 1.8 billion in 2014.The fall of weighted risks, via a reduction of assets managedin run-off as well as the disposal of entities together withits capacity for organic capital generation will enable theGroup to maintain robust solvency with a Core Tier 1 Ratio ofaround 15% (Basel II standards), and a ratio above the newBasel III standards.A business line portfolio rebalancedaround retail banking and founded on solidfranchisesRetail and Commercial Banking (RCB)Dexia intends to increase the proportion of income from itsRetail and Commercial Banking activities. By 2014, these willrepresent about 60% of the Group’s total income (of which27% from Turkey), against 36% in 2007. Dexia will have abase of some 10 million customers (4 million in Belgium andLuxembourg, 6 million in Turkey).Retail and Commercial Banking in Belgium andLuxembourgResting upon solid foundations, the aim of Retail andCommercial banking activity is to increase its market share aswell as the equipment rate for its customer base in Belgiumand Luxembourg.In Belgium, Dexia is positioned among the Top 3 retailand commercial banks: its network of 846 branches at theend of December 2010 covers the whole territory and thebank occupies a prime position in private banking activity.Notwithstanding the good resistance of the franchise duringthe crisis, the activity posts a relatively low equipment rateand income per customer compared to its peers.In a renewed competitive environment, Dexia’s ambition forRCB Belgium by 2014 is:• to increase cross-selling and revenue from its client base byapproaching the client proactively at key moments;• to gain market shares, particularly on private banking andSME segments;• to become a reference bank in terms of customersatisfaction.In order to sustain that ambition, a plan to invest EUR 350 millionwas launched in 2009. It is composed of several parts:Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia17

StrategyManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements• the deployment of a new distribution model based onthe “open branch” concept which enables the specialistservice of a branch to be improved thanks to state-of-the-arttechnology;• a new commercial approach adapted to the specific needs ofcustomers and relying on specialised account management;• development of a “direct sales” approach (web and callservice offer);• the repositioning of the Dexia brand with a particular focuson transparency, both with regards to product and commercialrelationship, together with a refined customer segmentation.This investment plan is expected to generate EUR 250 millionin additional income by 2014.In Luxembourg, Dexia is the third largest market operatorboth for individual customers and for professionals, with astrong positioning with affluent customers. Thanks to itscommercial stamina the Group has recovered the trust of itscustomers and posts since the first half of 2010 net positivedeposit collection figures for both local and internationalbusiness.Dexia’s ambition for RCB Luxembourg by 2014 is:• to increase market share as the main banker for Luxembourgindividual customers to 15%;• to consolidate the bank’s positioning among the Top 3 inLuxembourg in the professionals segment;• to foster up-selling and increase the average size of themost affluent customers’ assets thanks to a service offertailored to their needs;• to reinforce the expertise in private banking and by doingso establish the position of the Group as a benchmark forinternational private banking.Efforts will be ongoing to reduce the cost base in Belgiumand in Luxembourg.The implementation of this strategy for RCB Belgium andLuxembourg should be reflected by the following financialtargets:• a pre-tax income of approximately EUR 600 million in 2014(against EUR 400 million in 2009);• a reduction of the cost-income ratio from 74% to around66% between 2009 and 2014.Retail and Commercial Banking in TurkeyOver the last ten years, DenizBank has constantly outperformedthe market both in terms of asset growth and interms of profitability, pulling itself from the 81 st to 9 th rank bytotal of balance sheet whilst posting a ROE of 20% in 2009.Benefiting from a solid economic environment which offersa significant growth potential, particularly in Retail andCommercial banking, DenizBank’s ambition is to become theprincipal alternative to the major banks whilst retaining itsprofitable growth model.Relying on a very flexible operating model, a state-of-the-artIT infrastructure, a culture of efficiency and cost control aswell as cautious risk management, DenizBank will acceleratethe pace at which it opens branches, to reach 800 branchesby 2014. The contribution from retail banking to the activitymix will increase, and DenizBank will keep a specific focus onattractive niches, such as agriculture, as well as the collectionof deposits. DenizBank will also strengthen its position as acommercial bank which, in line with its model, will feed theother business lines.In 2014, although still not having reached its full potential,this strategy should enable DenizBank:• to have a base of some 6 million customers, of which2 million new customers;• to see its market share in the number of branches rise from5% to 7% between 2010 and 2014 with a specific focus onlarge towns and rural areas;• to raise the proportion of deposits on its balance sheettotal to reach approximately 70% in 2014.Its development ambitions should be reflected by the followingfinancial targets going forward to 2014:• a pre-tax income of approximately TRY 1.2 billion (EUR 600million);• a cost-income ratio of approximately 51%;• a ROE of approximately 14%.Public and Wholesale Banking (PWB)Within the context of the transformation plan implementedfrom the end of 2008, the Public and Wholesale Bankingbusiness line has refocused on its historical markets in Franceand in Belgium. The aim of this refocusing was to align thevolume of loans granted to customers to the business line’sfunding capacity, and to make profitability a priority.This redefinition is reflected in a drastic reduction of thevolumes of new commitments, which have been divided byfive between 2007 and 2010-2011, as well as in a significantreduction of the cost base over the same period.Within the limits of its geographical refocusing and subjectto the observance of strict profitability standards, the PWBbusiness line certainly has its place within the Dexia Group,where it should represent about 18% of total income by2014. Its refinancing will principally be through the issue ofcovered bonds as well as deposits collected by the businessline.For 2014, Dexia has four main ambitions for PWB.• In public banking France: to be a selective, profitableand acknowledged specialist, with a base of some 2,500strategic customers, and a widened range of products(thanks, in particular, to developments in insurance, assetmanagement, deposits…). This target is substantiated by thesituation already prevailing in 2010, with annual productiondivided by 2.5 between 2008 and 2010, when, at the sametime, commercial margins rose by more than 50%. Regardingstructured loans, Dexia has proactively adopted a process ofclarification and transparency of commercial rules towards itscustomers.• In public banking Belgium: Dexia, which benefits fromthe best scores in terms of customer recognition, intends toconfirm its position as the leader on the basis of a modeloffering a complete range of products and a high-performancenetwork.• In corporate banking Belgium: the aim is to focus onmedium-sized corporates (turnover or balance sheet ≥ EUR 10million and < EUR 1 billion), whilst maintaining an opportunistpresence with large corporates (turnover or balance sheet≥ EUR 1 billion).• In project finance: to consolidate the franchise Dexia hasin the sectors of public-private partnerships, transport, energyand the environment.In 2014, PWB financial targets are as follows:• an income of approximately EUR 1.2 billion;• a cost-income ratio of approximately 42%;• a pre-tax income of approximately EUR 600 million.18 Dexia Annual report 2010

StrategyAsset Management and Services (AMS)Asset Management and Services consists of a portfolio ofthree profitable activities which main characteristics aremodest capital consumption, attractive growth outlook basedon a diversified customer base and strong collaboration withthe other commercial franchises of the Group. In 2014, theseactivities should contribute about 21% of Group income.Asset ManagementAs a recognised and well diversified asset manager, the ambitionof Dexia Asset Management is to increase its customerfranchise by capitalising on its client centric competitive edgeand on its long standing investment expertise. Dexia AssetManagement furthermore benefits from a relatively greaterefficiency than its peers (35% operating margin and 15 basispoints of costs on average assets under management).The targets of Dexia Asset Management for 2014 are:• assets under management of approximately EUR 130 billion;• EUR 30 billion of net positive collection over 2011-2014of which 70% from non-captive customers (one thirdinternationally);• an operating margin of 48%.This should be reflected by a pre-tax income of EUR 140 millionin 2014.Investor ServicesInvestor Services activities are performed via the jointventure RBC Dexia Investor Services. It ranks amongst theTop 10 global custodians. The ambitions for this business linegoing forward to 2014 revolve around two axes:• the increase of its franchise, in particular by a constantstrengthening of the customer relationship (retention, crossselling, incease of both the number and size of mandates)and a reinforcement of its presence in countries with stronggrowth potential (UK, Australia, Italy, Switzerland);• the widening of its range of products and services.On the other hand, RBC Dexia will continue to seek efficiencygains to reduce costs and better serve its clients.By 2014, this should be reflected by:• an average annual growth of assets under administrationfrom 8% to 10% (approximately EUR 2.7 billion);• an average annual growth of income from 9% to 12%;• an average annual growth of costs from 4% to 6%.InsuranceDexia Insurance Services creates value for Dexia throughits strategy of multi-channel distribution. This strategy aims atdeveloping its own distribution channels but also at fosteringthe collaboration with the other Dexia networks and seekingsynergies accordingly. Ambitions for each of its distributionchannels are as follows.In Belgium:• regaining life insurance market share in the banking andinsurance segment: +6% to reach approximately 15% at theend of 2014;• an annual increase in premiums collected of approximately15% by 2012, then 10% between 2012 and 2014 via DVVInsurance.In Luxembourg:• EUR 1 billion in premiums by 2014 for Dexia Life &Pensions.Dexia Insurance Services will moreover continue its efforts toreduce costs.These ambitions should be reflected by a pre-tax income ofapproximately EUR 220 million in 2014 supported by a costincomeratio lower than 55% and a control of the combinedratio in non-life.A deeply transformed operational modelRefocused on its core markets, the Dexia Group is committedto an ongoing reinforcement of its operational efficiency alongthree lines: the search for efficiency gains, the development ofinternal synergies and the industrialisation of its processes.By 2014, the improvement of the operational efficiency of thedifferent business lines will remain a priority and the Groupwill continue the strict management of its costs in order toachieve a cost-income ratio lower than 65% in 2014.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia19

Declaration of corporategovernanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsIntroductionReference CodeThe Belgian Code of corporate governance, which replaces therecommendations made on this issue by the Banking, Financeand Insurance Commission, the Federation of Enterprises inBelgium and Euronext Brussels became effective on 1 January2005, and was revised for the first time on 12 March 2009 inorder to take account, in particular, of recent developments inthe regulatory environment in Belgium and Europe, as well asthe new aspirations of civil society and stakeholders as to theconduct of companies and their executives.This code is the reference for Dexia within the meaning ofArticle 96, § 2 (1) of the Company Code. It is available onthe Belgian Gazette internet site as well as on the internetsite www.corporategovernancecommittee.be.The Belgian Code of corporate governance contains ninemandatory principles for publicly traded companies. Dexiarespects those nine principles.Considering its governance structure, Dexia wished to departfrom the following specific provisions of the Code:• provision 5.2.4, which recommends that the AuditCommittee be composed of a majority of independentdirectors: the Dexia Audit Committee, consisting of theAccounts Committee and the Internal Control, Risks andCompliance Committee, consists of seven non-executivedirectors, of which three are independent. Dexia considersthat the most pertinent criterion in the choice of membersof that committee is one of competence. Furthermore, Dexiapractice goes beyond the legal prescriptions applicable tolisted companies, those provisions stating that the committeemust contain at least one independent director, and theAccounts Committee consists of a majority of independentdirectors (three directors out of a total of five members).Finally, the two committees constituting the Audit Committeeare chaired by an independent director;• provision 8.8, which proposes the fixing of a threshold fromwhich a shareholder may submit proposals to the generalmeeting at 5% of the company’s equity: Dexia has chosento comply with applicable legal provisions, which is currentlya 20%-threshold, considering its shareholder structure andawaiting the forthcoming transposition into Belgian Lawof the European Directive in relation to the protection ofshareholders’ rights.Dexia practice goes beyond the Code in relation to the numberof independent directors within the Board of Directors: theBoard of Directors of Dexia SA includes seven independentdirectors, whilst the Belgian Code of Corporate Governance(provision 2.3) recommends a minimum of three independentdirectors.Corporate Governance CharterAt its meeting on 3 February 2005, the Board of Directors ofDexia SA created a “corporate governance” committee withinthe Board (composed of directors of Dexia SA), in charge ofconducting a study and formulating recommendations onthe various governance issues treated by the Belgian Code ofcorporate governance and on any adaptations for the existingsituation at Dexia.The work of this committee resulted notably in thedevelopment of a corporate governance charter, internal rulesfor the Audit Committee and a revision of the internal rulesof the Board of Directors and the Management Board.At its meeting on 13 November 2008, the Board ofDirectors of Dexia SA amended its internal rules in order tostrengthen its governance and risk management even more.On the one hand, the Audit Committee was split into twospecialist committees: the Accounts Committee and theInternal Control, Risks and Compliance Committee. Thesetwo committees together form the Audit Committee, inaccordance with the law of 17 December 2008 in particularinstituting an audit committee in publicly traded companiesand financial establishments. On the other hand, theAppointment Committee and the Compensation Committeewere combined in one single committee. In 2009, the internalrules of the Board of Directors were further amended in orderin particular to align the criteria of directors’ independenceretained by Dexia SA with the new legal criteria defined bythe Company Code, and to strengthen the rules applicable tothe executives of Dexia SA involved in proprietary trading inDexia shares.In 2010, the regulation was adapted in order to implementthe provisions of the Law of 6 April 2010 aimed in particularat strengthening corporate governance in listed companiesand autonomous public enterprises: on this occasion, theregulation provides that the Appointment and CompensationCommittee consists of a majority of independent nonexecutivedirectors.The Corporate Governance Charter of Dexia SA (hereafterthe “Charter”) gives a detailed overview of the principalgovernance aspects of the company. This document, whichthe Board of Directors wanted to be complete and transparent,contains five sections. The first section deals with the structureand organisational chart for the Dexia Group. It also contains20 Dexia Annual report 2010

Declaration of corporate governancea short history of the Group since its creation in 1996. Thesecond section describes the structure of Dexia’s governance.It contains all the necessary information on the composition,attributions and modes of operation of the decision-makingbodies which are the Shareholders’ Meeting, the Board ofDirectors and the Management Board. The internal rules ofthe Board of Directors and of the Management Board arealso provided in their entirety. This part of the Charter alsodescribes the competences of general management at Grouplevel, and the central functions of Dexia SA. The third sectiondiscusses the shareholders and the Dexia share. It describesDexia’s relations with its shareholders and summarises thefeatures of Dexia capital and shares. The fourth sectionsummarises the control exercised over and within the DexiaGroup. The “internal control” part of this section containsinformation relating to internal audit, professional ethicsand compliance. The “external control” section deals withthe Statutory Auditor’s tasks and the protocol concerningprudential management of the Dexia Group signed with theBanking, Finance and Insurance Commission. The final sectionof the Charter describes Dexia’s compensation policy fordirectors of the company and members of the ManagementBoard.Several elements of the Corporate Governance Charterare restated, as recommended by the Belgian Code ofcorporate governance, in this chapter of the annual reportof Dexia SA.Pursuant to the Belgian Code of corporate governance, theCharter has been available since 31 December 2005 on thecompany’s website (www.dexia.com) and is updated on aregular basis.As at 31 December 2010, Dexia SA directly or indirectly held0.02% of its own shares. Dexia Group members of staff held1.07% of the capital of the company.At that same date, and to the knowledge of the company,no individual shareholder, with the exception of Arco Group,Holding Communal, Caisse des dépôts et consignations,Ethias Group, Société de prise de participation de l’État,Société fédérale de participations et d’investissement,CNP Assurances, the Flemish Region (through VlaamsToekomstfonds) and the Walloon Region, held 1% or moreof the capital of Dexia SA.Also as at 31 December 2010, the directors of Dexia SA held13,350 shares in the company.Relations among shareholdersOn 30 August 2007, Dexia SA was informed of the conclusionby some of its shareholders (Arcofin, Holding Communal,Caisse des dépôts et consignations, Ethias and CNPAssurances) of an agreement to consult each other on certainoccasions whilst each retained the right to decide freely onthe resolutions to be passed with regard to the company.This agreement was the subject of a communication toDexia SA, in accordance with Article 74, § 7 of the Lawof 1 April 2007 relating to tender offers (cf. “GeneralInformation” section in this chapter on page 66).This agreement does not undermine the principles ofgovernance in force within Dexia SA, including the role andfunctioning of the Shareholders’ Meeting and of the Board ofDirectors, the latter retaining its autonomy in establishing thestrategy and general policy of the Dexia Group.Management reportConsolidatedfinancial statementsRelations with shareholdersRelations with shareholdersShareholder baseThe following table shows the principal shareholders of DexiaSA (as at 31 December 2010):Name of shareholderPercentage ofDexia SA’s existingshares held as at31 December 2010Caisse des dépôts et consignations 17.61%Holding Communal 14.14%Arco Group 13.81%Belgian federal governmentthrough Société fédérale departicipations et d’investissement 5.73%French government throughSociété de prise de participationde l’État 5.73%Ethias Group 5.04%CNP Assurances 2.96%Flemish Region throughVlaams Toekomstfonds 2.87%Walloon Region 2.01%Brussels-Capital Region 0.86%Dexia is attentive to the quality of the relations it has with itsshareholders, both individual and institutional, and remainseager to strengthen dialogue and transparency in theirregard.Relations with individual shareholdersDexia maintains regular relations with its individualshareholders, with a Shareholders’ Meeting held on the secondWednesday of May each year in Brussels. In addition to themeeting, over the years Dexia has developed a strict, regularand interactive mechanism for the provision of informationto its shareholders, revolving around the European Club forIndividual Shareholders and the European Advisory Board ofIndividual Shareholders. Individual shareholders also have thebenefit of a call centre and dedicated sections on the internetsite.Dexia SA Shareholders’ MeetingA key moment in the life of the company, the annualShareholders’ Meeting benefits from a special informationsystem: in official notices published in the Belgian Gazetteand in the legal announcement bulletin, the BALO, in France;in notices published in the national financial press media inBelgium, France and Luxembourg; with information providedby the toll-free number; in an invitation to attend the meetingavailable in English, French and Dutch that can also bedownloaded from the internet.Shareholders’ Meetings are broadcast live on the internet,allowing shareholders who cannot attend to follow thedebates and resolutions at the meetings.Additional information Annual financial statementsAnnual report 2010 Dexia21

Declaration of corporate governanceAs requested by the Belgian Company Code, the levelof shareholding for the subtask of proposals during aShareholders’ Meeting by a shareholder is 20%.The Ordinary Shareholders’ Meeting was held on 12 May2010 in Brussels, directly followed by an ExtraordinaryShareholders’ Meeting.Contact with institutional shareholdersAfter each presentation of results or in other circumstancesjustifying them, road shows are organised with the maininstitutional investors. This enables the latter to ask membersof the Dexia Management Board direct questions concerningGroup results or strategy.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsThe European Club for Individual ShareholdersThe European Club for Individual Shareholders today hasnearly 13,000 members, primarily Belgian and Frenchshareholders. The club is a centre for the distribution of thefinancial information to shareholders who want to follow theevolutions in the Group through publications and documentsdesigned specifically for them. Registration for the EuropeanClub of Dexia Shareholders can be made by telephone, e-mailor through the website www.dexia.com.The European Advisory Board of IndividualShareholdersEstablished in June 2001, the European Advisory Boardof Dexia took over from the Dexia France Advisory Board,created in 1997. Its composition reflects the Group’s Europeanidentity: the Board is currently composed of four Belgianshareholders, five French shareholders and two Luxembourgshareholders. As from November 2010, the Advisory Boardhas been enhanced by the presence of an additional member,representing the Dexia Group Employee ShareholdersAssociation.The Board’s role is to advise the Group on its policy forcommunication to individual shareholders.In 2010, the Advisory Board met twice, once in March, toconsider the Group’s 2009 annual results, and on a secondoccasion in November. That second meeting received twopresentations: one on the Group’s half-yearly results andone on the major lines of its “Dexia 2014” strategy, whichwas the central theme of the “Investor Day” held on12 October 2010.In 2011, the Board will be partially renewed, as the mandatesof certain members (3 years, non-renewable) will expire.Telephone information service for individualshareholdersThis service is accessible from France, free of charge, on 0800355 000, from Monday to Friday and from 09.00 to 19.00.It is also accessible from Belgium and Luxembourg via abilingual (French/Dutch) toll-free number 00 800 33 942 942,during the same times (only from a fixed-line telephone).This service is regularly called by shareholders with anyquestions relating to Dexia and to its organisation in general,but also for more specific questions regarding the share price,taxation of shares, dividend amounts, its mode of taxation,VVPR strips and Dexia SA’s Shareholders’ Meetings. Thisyear, that service was particularly well used concerning theattribution of bonus shares.Relations with institutional shareholdersRelations with institutional shareholders, who hold almost15% of the capital, are extremely important to Dexia. Forthis purpose, a team based partly in Brussels and partly inParis is specifically responsible for relations with investors andanalysts.Information channelsRegular information channelsDuring the year, Dexia regularly publishes information throughtheme presentations and press releases on the business,financial results and Group news. When the results arepublished, Dexia also provides quarterly, half-yearly and annualreports. All this information is available as from publicationon the website www.dexia.com on the section “Shareholders/Investors”. It can also be obtained by e-mail.The internet site (www.dexia.com)With an average of 94,500 visitors a month, the sitewww.dexia.com confirms its important role as a vectorof information for the Dexia Group among individualshareholders, journalists and institutional investors. TrilingualEnglish, Dutch and French, the site provides rapid accessto all the information concerning the life of the Group, itspublications, activities, news and Dexia share prices. It isconsulted for the most part by European surfers, principallyBelgian and French.In 2010, www.dexia.com received almost 110,000 visitors toits section “Shareholders/Investors”.Other supportsSeveral times a year, Dexia publishes a Letter to the Shareholdersin English, French and Dutch. Individual shareholders are thuskept regularly informed of Group developments, news, resultsand minutes of the Dexia SA Shareholders’ Meetings.The Letter to the Shareholders issues are sent to membersof the Club and to shareholders who request it, and are alsoavailable on the internet site.In 2010, 4 letters were published, including a “EuropeanCommission Special Letter”.Dexia publishes complete annual information for shareholdersand investors. The Dexia annual report is available in threelanguages: English, Dutch and French. The risk report isonly available in English on the internet site. Finally, Dexiapublishes a sustainable development report in French, Dutchand English on its site.Circular FMI/2007-02 from theBanking, Finance and InsuranceCommissionA Royal Decree of 14 November 2007 concerning theobligations of issuers of financial instruments listed for tradingon a Belgian regulated market stipulates the obligations ofissuers with regard to the information to be provided to thepublic and their obligations to holders of financial instruments.In December 2007, the Banking, Finance and InsuranceCommission published a circular explaining this Royal Decree.In accordance with this regulation, Dexia SA has decided since2003 to use its internet site to meet its obligations to publishthe information stipulated by the decree and the circular.22 Dexia Annual report 2010

Declaration of corporate governanceIn making this choice, Dexia SA made a commitment tomeet several conditions, particularly the creation of a distinctsection on the website reserved for the financial informationstipulated in the circular.Maximum use of the website for the communication ofthe mandatory financial information is one component ofDexia’s policy to ensure transparency for its shareholders andinstitutional investors. The information required by CircularFMI/2007-02 from the Banking, Finance and InsuranceCommission is to be found on the Dexia internet site. Thissame policy of transparency for shareholders and institutionalinvestors is also found in the Corporate Governance Charterof Dexia SA.Compliance with current legislationsAs a company under Belgian law, whose shares are listed fortrading in Belgium, France and Luxembourg, Dexia ensurescompliance with the principle of equality among shareholdersand respect for its legal and regulatory obligations to providespecific and periodic information.Management of the DexiaGroupThe Board of Directors of Dexia SAMembers of the Board of Directors(as at 31 December 2010) (1)The articles of association of Dexia SA stipulate that the Boardis composed of between sixteen and twenty directors.As at 31 December 2010, the Board of Directors had eighteenmembers.Its composition also respects the French and Belgian statutorynature of Dexia SA. Indeed, the Board has as many Belgianmembers as it has French members and each nationalityrepresents at least one third of the Board.(1) Article 2 of the law of 6 August 1931 (Belgian Gazette of 14 August 1931)forbids ministers, former ministers and State Ministers, as well as members orformer members of Legislative Assemblies to mention their status as such inacts and publications of profit-making companies.NAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEJEAN-LUC Chairman of the 2009-2013 Chairman of the Member of the European ParliamentDEHAENE Appointment and Board of DirectorsIndependent Compensation Dexia SA Vice-Chairman of the Board of Directors:director Committee • Fondation Roi Baudouin70 years oldBelgian Chairman of the Director:Director since Strategy Committee • Inbev2008 • Lotus BakeriesHolds 700 Dexiashares• Umicore• Trombogenics• NovovilOther functions in the Dexia Group:• Chairman of the Board of Directors ofDexia Crédit Local• Vice-Chairman of the Board of Directors ofDexia Bank BelgiumBIOGRAPHYDoctor of Law from the University of Namur and the K.U. Leuven. He started his professional activities as Association Secretary to theFlanders’ Scouting Federation (Vlaams Verbond van Katholieke Scouts) and became in 1965 member of the Research Department of theChristian Workers’ Union (ACW). He started his political career in 1967, occupying several parliamentary and governmental functionsat federal and European level.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia23

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsPIERRE Member of the 2009-2013 Chief Executive Member of the Executive Committee:MARIANI Strategy Committee Officer and • FBF54 years old Chairman ofFrench the Management Vice-Chairman:Director since Board of Dexia SA • AFB2008Holds no DexiaDirector:share• EDFOther functions in the Dexia Group:Director:• Dexia Bank Belgium• Dexia Crédit Local• Dexia Banque Internationale à LuxembourgBIOGRAPHYGraduate of the Hautes études commerciales and the École nationale d’administration (ENA), graduate in law. Between 1982 and 1992he occupied various functions in the Ministry of Economy and Finance. In 1993 he was appointed Director of the Cabinet of the BudgetMinister, government spokesman in charge of communication. In 1995 he was appointed Managing Director of the Société françaised’investissements immobiliers et de gestion, a real estate company in the Fimalac Group. In 1996, he was appointed Managing Directorand member of the Management Board of the Banque pour l’expansion industrielle (Banexi), the business bank of BNP of which hebecame Chairman of the Management Board in 1997. He joined the Groupe BNP Paribas in 1999, appointed Director of InternationalRetail Banking before being appointed Director of Financial Services and International Retail Banking in 2003. In 2008, he was appointedDeputy Managing Director, co-responsible for retail banking activities, in charge of International Retail Services at BNP Paribas.Gilles Chairman of the 2010-2014 Managing Director, Member of the Management Board:Benoist Accounts Committee CNP Assurances • Caisse des DépôtsIndependentdirector Chairman of the Chairman:64 years old Internal Control, • Fédération française des sociétés anonymesFrench Risks and Compliance dássuranceDirector since Committee1999 Director and member ofHolds 300the strategy committee:Dexia shares• Suez Environnement Company SABIOGRAPHYLaw degree. Graduate of the Institut d’études politiques de Paris (IEP) and of the École nationale d’administration (ENA). After havingbeen a member of the Management Board and General-Secretary of Crédit local de France since 1987, General-Secretary and memberof the Executive Board of Caisse des dépôts et consignations from 1993 onwards. He became Chairman of the Management Board ofCNP Assurances on 9 July 1998 and was appointed Managing Director when the company’s corporate governance was changed on10 July 2007.ISABELLE 2010-2014 Chairman of Director:BOUILLOT China Equity Links • UmicoreIndependent• Saint-Gobaindirector61 years oldFrenchDirector since2009Holds noDexia shareBIOGRAPHYGraduate of the French École nationale dádministration (ENA) and the Institut des études politiques de Paris (IEP), and holder of a postgraduatedegree in Public Law. She has occupied different positions in French public administrations, among them economic advisor forthe President of the Republic between 1989 and 1991 and Budget Director at the Ministry of Economy and Finance between 1991 and1995. She joined the Caisse des dépôts et consignations as Deputy Chief Executive Officer in 1995 and was in charge of financial andbanking activities. Between 2000 and 2003, she was Chief Executive Officer of the Investment Bank in the Group CDC IXIS. She is nowChairwoman of China Equity Links. She is also director at Umicore and Saint-Gobain.24 Dexia Annual report 2010

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEOLIVIER Member of the 2010-2014 Deputy Managing Director, member of the Accounts Committee,BOURGES Internal Control, Director of the member of the Investment Commmittee,44 years old Risks and Compliance Agence des member of the Audit Committee andFrench Committee participations de member of the Compensation Committee:Director lÉtat (APE) • GDF Suezsince 2009 Member of theHolds no Strategic Committee Director, member of the Accounts Committee,Dexia sharemember of the Compensation Committee andmember of the Strategy Committee:• ThalèsDirector, member of the Supervisory Board:• Grand Port Maritime de MarseilleDirector:• La PosteBIOGRAPHYGraduate of the French École nationale d’administration (ENA), the Institut d’études politiques de Paris (IEP) and has a ScientificBaccalaureat. From 1992 to 2000 he held various functions in the Treasury Department (Direction du Trésor, Paris), i.e. as deputy headto the Banks Agency from 1992 to 1996 and from 1998 to 2000 as head of the ‘Housing Financing’ Agency (Bureau Financementdu Logement). From 1996 to 1998 he was employed as Alternate Executive Director of the IBRD. In 2000 he joined Renault, initiallyas Financial Relations Director, and was subsequently appointed Director of Vehicle Profitability. In 2006 he was made Vice-President,Corporate Planning and Program Management Office at Nissan North America. In 2008 he returned to Renault, as Senior Vice-Presidentand Director of the Management Control Department at group level.BRIGITTE Member of the 2010-2014 Professor ofCHANOINE Accounts finance and RectorIndependent Committee of the ICHEC BrusselsdirectorManagement45 years old SchoolBelgianDirector since2010Holds noDexia shareBIOGRAPHYHolds a Diploma in Commercial Engineering (ICHEC), and is a Master of Finance and Doctor of Management Sciences (IAG – Universitécatholique de Louvain). She began her professional career in 1988 as Health and Safety Manager at General Devices (Indianapolis). Since1990, she has occupied different positions in the Finance Department of the ICHEC, of which she has been the Rector since September2008. As a professor at ICHEC and at the Université catholique de Louvain, she also provides lessons, training and consulting servicesfor companies.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia25

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsSTEFAAN 2010-2014 Member of the Member of the Advisory Board:DECRAENEManagement Board • Ethias Droit Commun46 years old of Dexia SABelgianChairman of the Board of Directors:Director since Chairman of the • Febelfin2009 Management BoardHolds 3,034 of Dexia Bank Member of the Management Board:Dexia shares Belgium • het Verbond van Belgische OndernemingenDirector:• VOKAMember of the Management Committee:• Deposit and Financial Instrument Protection FundOther functions in the Dexia Group:Director:• Dexia Bank Belgium• Dexia Banque Internationale à Luxembourg• Dexia Insurance Belgium• Dexia banka Slovensko• DenizBank• RBC Dexia Investor ServicesChairman of the Board of Directors:• Dexia AM Luxembourg• Dexia Participation LuxembourgMember of the Council of Auditors:• Dexia Nederland BVBIOGRAPHYGraduate in applied economics specialising in international relations from the K.U. Leuven. The first part of his career was spent incorporate banking and investment banking in Belgium. In 2001, he was appointed Chairman of the Management Board of BanqueArtesia Nederland. In 2002, he joined Dexia Bank Nederland as a member of the Management Board. In 2003 he became memberof the Management Board of Dexia Bank Belgium, in charge of Insurance and Development of International Retail activities, and from2004 in charge of Public and Wholesale Banking. Since January 2006, he has been Chairman of the Management Board of Dexia BankBelgium. In 2008 he was appointed member of the Management Board of Dexia SA.AUGUSTIN Member of the 2007-2011 Managing Director Director:DE ROMANET Appointment and of the Caisse des • CDC EntreprisesDE BEAUNE Compensation dépôts et • CNP Assurances49 years old Committee consignations • IcadeFrench• Veolia EnvironnementDirector since Member of the2007 Strategy Committee Chairman of the Supervisory Board:Holds no• Société nationale immobilièreDexia shareChairman of the Board of Directors:• Fonds stratégique dínvestissementBIOGRAPHYGraduate of the Institut d´études politiques de Paris (IEP) and of the École nationale dádministration (ENA). He was in particularFinancial Attaché to the Permanent Representation of France to the European Community in Brussels, Director of the Office of theBudget Ministry, Director of the Office of the Ministry of Employment and Associate Manager of Oddo Pinatton Corporate. He was thenappointed Deputy General-Secretary to the Presidency of the Republic of France before being appointed Deputy Director of Finance andStrategy and a member of the Executive Committee of Crédit Agricole SA.26 Dexia Annual report 2010

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEROBERT Member of the 2010-2014 Executive director Member of the Conseil de surveillance de:DE METZ Accounts de La Fayette • Canal+ FranceIndependent Committee Management LtddirectorDirector:58 years old • Média-Participations (Paris-Bruxelles)French• L.A. Finances (Paris)Director since2009 Chief Executive Officer:Holds no• Bee2Bees SA (Brussels)Dexia shareMember of the Executive Committee:• Fondation Demeure Historique pour lávenirdu patrimoineBIOGRAPHYGraduate of the Institut d’études politiques de Paris (IEP) and of the École nationale d’administration (ENA), he began his career in theGeneral Finance Inspectorate. He joined Banque Indosuez in 1983 occupying posts in Hong Kong and France before joining DemachyWorms & Cie. Active with Paribas from 1991, he performed numerous tasks, particularly mergers-acquisitions, before his appointment asa member of the Management Board, responsible from London for fixed income, exchange and derivatives markets. He was a directorat Cobepa from 1993 to 1999. Between 2002 and 2007, he was Deputy Director General of the Vivendi Group in charge of mergersacquisitionsand strategy.CHRISTIAN Member of the 2010-2014 Chairman of theGIACOMOTTO Appointment and Management BoardIndependent Compensation of Gimar FinanceDirectorCommittee70 years oldFrenchDirector since2009Holds noDexia shareBIOGRAPHYGraduate in law, of the Institut d’études politiques de Paris (IEP) and of the New York University (American Finance), he is Chairmanof the Management Board of Gimar Finance. He began his career at the Bank of the European Union before becoming DeputyDirector General of the CIC in 1982. In 1987 he created the Arjil Bank, of which he became Chairman of the Management Boardbefore holding various managerial posts and directorships with the Lagardère Group, then Kleinwort Benson in London, the bank withwhich he founded Kleinwort Benson, Gimar & Cie in Paris in 1994. He is Vice-Chairman of the National Museums Association. He is aCommander of the Legion of Honour and Commander of the Order of Arts and Letters.ANTOINE Member of the 2010- Deputy Managing Director:GOSSET- Accounts Director of the • CNP Assurances SAGRAINVILLE Committee Caisse des dépôts • Compagnie des Alpes SA44 years old et consignationsFrenchPermanent representative ofDirector sinceCaisse des dépôts et consignations and2010 Director:Holds no• Fonds stratégique d’investissement SADexia shareBIOGRAPHYGraduate of the École nationale d’administration (ENA), the University of Paris Dauphine and the Institut d’études politiques de Paris(IEP). He began his career with the Inspection Générale des Finances. Then he became Deputy Secretary General of the Economic andFinance Committee of the European Union, and then advisor in economic and industrial affairs to the office of the Trade Commissionerof the European Commission. From 2002 to 2007 he was a partner with Cabinet Gide Loyrette Nouel in Brussels. Until 2010, he wasDeputy Director of the Office of the French Prime Minister. At present he is Deputy Managing Director of the Caisse des dépôts etconsignations.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia27

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEManagement reportAdditional information Annual financial statementsConsolidatedfinancial statementsCATHERINE Member of the 2008-2012 Director:KOPP Appointment and • Schneider ElectricIndependent CompensationdirectorCommittee61 years oldFrenchDirector since2008Holds 250Dexia sharesBIOGRAPHYAfter studying mathematics, she worked for the IBM Group, where she held several management positions (human resources, marketingand sales) before becoming Managing Director and later Chairman and Managing Director of IBM France. From 2001 to 2002, she washead of Human Resources and member of the Executive Committee of the LVMH Group. From 2002 to 2010, she has been ManagingDirector Human Resources of the Accor Group and member of the Executive Committee. Catherine Kopp is also member of the Boardof Directors of Schneider Electric. In 2006, the French Prime Minister appointed her member of the High Authority for the Fight AgainstDiscriminations and Equality. Within the Mouvement des Entreprises de France (MEDEF) she led the cross-sector negotiations on Diversity(2006) and on Modernisation of the Labour Market (2008), which both resulted in an agreement. In 2009 she was appointed by theFrench Prime Minister as a member of the High Council for Integration. Catherine Kopp is Knight of the National Order of the Legionof Honour and Officer of the National Order of Merit.Serge KUBLA 2010-2014 Mayor of Other function in the Dexia Group:63 years old Waterloo Director:Belgian• Dexia Bank BelgiumDirector since2005Holds noDexia shareBIOGRAPHYSolvay Business School. From 1976 a councillor for Waterloo, where he was alderman with responsibility for sports and then, from 1982,mayor. Since 1977, he has been active in regional and national politics. In 2002, for half the year he chaired the European Council ofIndustry. Since 2004, he has been active in regional politics.28 Dexia Annual report 2010

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEFrancine Member of the 2008-2012 Chairman of the Director and Chairman of theSwiggers Appointment and Management Board, Management Board:58 years old Compensation Arco Group • ArcoplusBelgian Committee (Arcofin, Arcopar, • ArcoparDirector since Arcoplus) • Arcofin2007 Member of the • ArcosynHolds noStrategyDexia share Committee Chairman of the Board of Directors• Procura vzw• Auxipar• Arcoplus• Interfinance• ArcosynDirector:• Arcopar• Arcofin• Aquafin (and member of the Audit Committee)• De Warande vzw• Hogeschool Universiteit Brussel• L´Économie Populaire• Sociaal en Familiaal Toerisme vzwDirector and member of the Audit Committee:• VDK SpaarbankMember of the College of Principals:• Belgian National BankOther functions in the Dexia Group:Director:• Dexia Crédit Local• Dexia Bank BelgiumBIOGRAPHYGraduate in Applied Economics and Master of Business Administration (K.U. Leuven). She has been a member of the ManagementBoard of the Arco Group since 1997 and Chairman of this Board since 2007. Previously she had a career of 20 years at BACOB Bankwhere she was Head of Strategic Planning from 1995.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia29

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsBERNARD Member of the 2010-2014 Chairman of the Lecturer at HEC, the Management College ofTHIRY Strategy Management Board the University of Liège55 years old Committee of Ethias SA andBelgian Ethias Droit Member of the Executive Board:Director since Commun AAM • Groupement des entreprises mutuelles2009 dássurances (GEMA)Holds 2,095Chief ExecutiveDexia shares Officer of Ethias Director:Finance• Ethias Banque• AMICE• AME Holding• AME Ré• AME LIFE LUX• AME LUX• AZUR-GMF Mutuelles dÁssurances Associées• SOLIDARISChairman:• AUDI• Bel Ré• Nateus• Nateus Life• MNEMA ASBL• UAAM• NRBVice-Chairman:• FEBECOOPChairman of the Management Board:• LEGIBELManager:• GIEI• GIDirector General:• CIRIEC ASBLOther function in the Dexia Group:Director:• Dexia Bank BelgiumBIOGRAPHYDoctor of Economics from the University of Liège and graduate from Stanford University, he is Chairman of the Management Board ofEthias. He began his career in the Faculty of Economics, Management and Social Sciences of the University of Liège where he was aprofessor until 2006. Between 2000 and 2001, he was Administrative Director and member of the Management Board of the BelgianCommission for Electricity and Gas Regulation. In 2006, he joined Ethias as Director of International Relations. He became a memberof the Management Board in February 2008 and Chairman in October 2008. He is also a professor at HEC, the Management Collegeof the University of Liège.30 Dexia Annual report 2010

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEMarc Member of the 2010-2014 Vice-Chairman Vice-Chairman of the Management BoardTinant Accounts Committee of the Management and Director:56 years old Board, Arco Group • ArcofinBelgian Member of the (Arcofin, Arcopar, • ArcoplusDirector since Internal Control, Arcoplus) • Arcopar2001 Risks and Compliance • ArcosynHolds 100Dexia sharesCommitteeVice-Chairman of the Board of Directors:• AuxiparChief Executive Officer and Vice-Chairmanof the Board of Directors:• EPCDirector and member of the CompensationCommittee:• Retail Estates (Sicafi listed in Brussels)Management reportDirector and co-chairman of the AuditCommittee:• Société régionale d’investissement deWallonie (SRIW)Chairman:• SYNECO ASBLDirector:• Interfinance• Mediabel SA• SOFATO vzw• Barthel Pauls Söhne AGChief Executive Officer and Director:• FINEXPA• CETS ASBLMember of the financial committee:• Université catholique de Louvain (UCL)Other function in the Dexia Group:Director:• Dexia Insurance BelgiumBIOGRAPHYGraduate and Master’s Degree in economics. Before joining the Arco Group in 1991, he was General Advisor to the Management Boardof the Société régionale dínvestment de Wallonie (SRIW).KOEN Member of the 2009-2013 Chief Executive Chairman of the Board of Directors:VAN LOO Internal Control, Officer and • Fedimmo38 years old Risks and Compliance Member ofBelgian Committee the Strategy Director:Director since Committee of the • SN Airholding2008 Member of the Société fédérale • Zephyr FINHolds 1,124 Strategy Committee de participations • Certi-FedDexia shares et dínvestissement • Bel to mundial ASBL• Zilver Avenue Participatiemaatschappij NV• Société Belge dÍnvestissement International• Fonds de réduction du coût global del´énergie• Capricorn Health Tech Fund• Ginkgo Fund SICARBIOGRAPHYGraduate in applied economics. After gaining a degree in taxation, he began his career as Deputy Advisor to the Conseil centralde l’économie. In September 1999, he joined the Office of the Belgian Minister of Finance as an expert. In November 2000 he wasappointed Advisor to the Cabinet and was then head of the Cabinet from May 2003 until November 2006. He was then appointedChief Executive Officer and Member of the Strategy Committee of the Société fédérale de participations et d’investissement.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia31

Declaration of corporate governanceNAME SPECIALIST BEGINNING PRIMARY OTHER MANDATES AND FUNCTIONSCOMMITTEES AND END OF FUNCTIONCURRENTMANDATEManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsFrancis Member of the 2009-2013 Mayor of Chairman of the Board of Directors:Vermeiren Appointment Zaventem • Holding Communal74 years old and Compensation since 1983Belgian Committee Director:Director since• Elia2004 Member of the • Asco IndustriesHolds 5,747 Strategy Committee • Publi-TDexia shares• Vivaqua IntercommunaleBIOGRAPHYFormer insurance inspector. Former manager of a tax office. He has occupied several parliamentary functions at federal and regionallevel.Eligibility criteriaThe internal rules of the Board of Directors stipulate thatdirectors are elected by the Shareholders’ Meeting becauseof their expertise and the contribution they can make to theadministration of the company.Directors respond to the skills profile established by theBoard of Directors on proposals from the Appointment andCompensation Committee which are an integral part of theinternal rules of the Board of Directors. Any member of theBoard of Directors must have the time required to performhis obligations as a director. Non-executive directors maynot consider accepting more than five director’s mandates inother listed companies.These eligibility criteria are regularly reviewed in order totake account of the evolution of the Dexia Group and itsactivities.Procedure for appointing and assessing membersof the Board of DirectorsAppointmentThe Appointment and Compensation Committee isresponsible for making proposals on the appointment ofany new director to the Board of Directors, which alonedecides whether or not to submit a candidature to theShareholders’ Meeting. Within that context, it examines theskills, knowledge and experience of the candidate havingregard for those eligibility criteria. The committee ensures thatbefore considering approval of the candidature, the Board hasreceived sufficient information on the candidate to enable itto assess whether they correspond to the general profile ofdirectors. Each candidate is proposed on the basis of his/herpotential contribution in terms of knowledge, experience andspecialisation in one or more of the following fields: visionand strategy, leadership and management skills, financial andaccounting expertise, international experience and knowledgeof the Group’s business lines. The candidate must have thenecessary availability, moreover, to fulfil his obligations asa director. It submits a detailed report to the Board on thefactors that justify this recommendation.ResignationWhen a director wishes to end a mandate early, a resignationletter is sent to the Chairman of the Board of Directors whoinforms the Board at its next meeting. If necessary, the Boardof Directors will provide a provisional replacement for theresigning director and the following Shareholders’ Meetingwill make a definitive appointment.If there is a major change in the functions of a director likelyto affect their ability to meet the eligibility criteria as definedin the Board’s internal rules, they are invited to resubmit theirmandate to the company and to provide the Chairman of theAppointment and Compensation Committee with any usefulinformation.AssessmentThe Board of Directors is organised to achieve the best exerciseof its expertise and responsibilities. Each year its makes a selfassessmentof its operation, and of its specialist committees,led by the Chairman of the Board of Directors, in order tomake useful changes and improvements to its internal rules.The latest such self-assessment took place in October 2010,and the summary report was presented to the directors at theBoard meeting on 17 December 2010.The criteria adopted in making the assessment are in particularthe efficiency and frequency of the Board and the specialistcommittees, the quality of the information provided to theBoard and its specialist committees, the Compensation ofMembers of the Board and its committees or even the roleof the Chairman.When a director’s mandate is renewed, the Appointmentand Compensation Committee makes an assessment of theirparticipation in the operation of the Board of Directors andreports on that with a recommendation.32 Dexia Annual report 2010

Declaration of corporate governanceChanges in the composition of the Board ofDirectors of Dexia SA in 2010During the 2010 financial year, significant changes concerningthe composition of the Board of Directors of Dexia SA wereas follows.1. The following decisions were made by the OrdinaryShareholders’ Meeting of 12 May 2010:• the definitive appointment as a director, for a new mandateof four years which will end at the close of the OrdinaryShareholders’ Meeting of Dexia SA in 2014, of StefaanDecraene, provisionally appointed by the Board of Directorsto replace Jan Renders, resigning;• the definitive appointment as a director, for a new mandateof four years which will end at the close of the OrdinaryShareholders’ Meeting of Dexia SA in 2014, of Robert deMetz, provisionally appointed by the Board of Directors toreplace André Levy-Lang, resigning;• the definitive appointment as a director, for a new mandateof four years which will end at the close of the OrdinaryShareholders’ Meeting of Dexia SA in 2014, of ChristianGiacomotto, provisionally appointed by the Board of Directorsto replace Denis Kessler, resigning;• the definitive appointment as a director, for a new mandateof four years which will end at the close of the OrdinaryShareholders’ Meeting of Dexia SA in 2014, of Bernard Thiry,provisionally appointed by the Board of Directors to replaceBernard Lux;• the appointment as a director, for a mandate of four yearswhich will end at the close of the Ordinary Shareholders’Meeting of Dexia SA in 2014, of Brigitte Chanoine, previouslyappointed as a permanent observer by the Board ofDirectors;• the appointment as a director, for a mandate of four yearswhich will end at the close of the Ordinary Shareholders’Meeting of Dexia SA in 2014, of Isabelle Bouillot, previouslyappointed as a permanent observer by the Board ofDirectors;• the definitive appointment as a director, for a new mandateof four years which will end at the close of the OrdinaryShareholders’ Meeting of Dexia SA in 2014, of OlivierBourges, provisionally appointed by the Board of Directors toreplace Bruno Bézard, resigning;• the definitive appointment as a director, for a new mandateof four years which will end at the close of the OrdinaryShareholders’ Meeting of Dexia SA in 2014, of Hubert Reynier,provisionally appointed by the Board of Directors to replaceAlain Quinet, resigning;• the renewal of the mandate of Gilles Benoist, for a term offour years, ending at the close of the Ordinary Shareholders’Meeting of Dexia SA in 2014;• the renewal of the mandate of Serge Kubla, for a term offour years, ending at the close of the Ordinary Shareholders’Meeting of Dexia SA in 2014;• the renewal of the mandate of Marc Tinant, for a term offour years, ending at the close of the Ordinary Shareholders’Meeting of Dexia SA in 2014.2. At its meeting on 8 July 2010, the Board of Directorsunanimously co-opted Antoine Gosset-Grainville as director,with immediate effect, as a replacement for Hubert Reynier,resigning.His definitive appointment will be submitted to theShareholders’ Meeting of Dexia SA in 2011.New directorsAs indicated above, during the 2010 financial year one newdirector was appointed, namely Antoine Gosset-Grainville.Antoine Gosset-Grainville studied at the École nationaled’administration (ENA), the University of Paris Dauphineand the Institut d‘études politiques de Paris (IEP). He beganhis career with the Inspection générale des Finances. Thenhe became Deputy Secretary General of the Economic andFinance Committee of the European Union and then Advisorin Economic and Industrial Affairs to the Office of the TradeCommissioner of the European Commission. From 2002 to2007, he was a partner with Cabinet Gide Loyrette Nouel inBrussels. Until 2010, he was Deputy Director of the Office ofthe French Prime Minister. At present he is Deputy ManagingDirector of the Caisse des dépôts et des consignations.Independent members of the Board of DirectorsThe independence criteria applied to the directors of Dexia SAare aligned to the legal criteria set out in Article 526ter of theCompany Code. These criteria, which form an integral part ofthe internal rules of the Board of Directors, are as follows:1. For a period of five years preceding his appointment, theindependent director may not have exercised a mandate oroccupied a post as executive member of the Board of Directors,or as a member of the Management Board or delegate toeveryday management, of Dexia SA or of a company or aperson associated with it in the meaning of Article 11 of theCompany Code.2. The independent director may not have sat on the Board ofDirectors of Dexia SA as non-executive director for more thanthree successive mandates without that period exceedingtwelve years.3. During a period of three years preceding his appointment,the independent director may not have been a member ofthe management personnel.4. The independent director may not receive, or have received,compensation or other significant benefit of an asset naturefrom Dexia SA or from a company or a person associatedwith it in the meaning of Article 11 of the Company Code,outside any percentages and fees received as a non-executivemember of the Board of Directors or member of thesupervisory body.5. The independent director:a) may not hold any social right representing one tenth ormore of the capital, social funds or category of shares of thecompany.b) if he holds rights representing a proportion of less than10%:• by the addition of the social rights with those held in thesame company by companies of which the independentdirector has control, those social rights may not reach onetenth of the capital, social funds or category of shares of thecompany; or• acts of arrangement in relation to those shares or theexercise of the rights attached hereto may not be subject tocontractual stipulations or unilateral undertakings to whichthe independent member of the Board of Directors hassubscribed.c) may not in any way represent a shareholder meeting theconditions of the present point.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia33

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements6. The independent director may not have entered into ormaintained a significant business relationship with Dexia SA orwith a company or person associated with it in the meaningof Article 11 of the Company Code over the last financialyear, either directly or as a partner, shareholder, member ofthe Board of Directors or member of management staff of acompany or person entering into such a relationship.7. The independent director may not over the last threeyears have been a partner or employee of a current orprevious auditor of Dexia SA or an associated company orperson associated with it in the meaning of Article 11 of theCompany Code.8. The independent director may not be an executive memberof the Board of Directors of another company in which anexecutive director of Dexia SA is a non-executive member ofthe Board of Directors or a member of the supervisory body,and may not have other significant ties with the executivedirectors of Dexia SA through posts held in other companiesor bodies.9. The independent director may not, either within DexiaSA or within a company or person associated with it in themeaning of Article 11 of the Company Code, have either hisor her spouse, or the person with whom he or she lives undera common law marriage, or an immediate family member ora relative up to two removes exercising a mandate as memberor the Board of Directors, delegate to everyday managementor member of the management staff, or in one of the othercases defined in points 1 to 8.These criteria are applicable to any director appointed for thefirst time within the Board of Directors of Dexia SA as anindependent director from 29 January 2009.They are not applicable to directors who were qualified asindependent before 29 January 2009, on the basis of thecriteria previously fixed by the Board of Directors of DexiaSA. These independent directors may continue to sit on theBoard of Directors as independent directors until 1 July 2011,when they must meet the present criteria of independenceto be able to continue to sit in that capacity. These criteriawill nonetheless be applicable to them in the case of renewalof their mandate as director before 1 July 2011. Any loss ofstatus as independent director at the end of this transitionalperiod will not be an obstacle to renewal of the mandate asnon-independent director.The independent director of Dexia who no longer meets oneof the said criteria, particularly following a major changeof his functions, will immediately inform the Chairman ofthe Board of Directors who will inform the Appointmentand Compensation Committee; the Appointment andCompensation Committee will inform the Board of Directorsand if necessary formulate an opinion.Considering these criteria, the Board of Directors of Dexia SAhas seven independent directors as at 31 December 2010.They are:• Jean-Luc Dehaene;• Gilles Benoist;• Christian Giacomotto;• Catherine Kopp;• Robert de Metz;• Brigitte Chanoine;• Isabelle Bouillot.Non-executive membersA non-executive member of the Board of Directors is amember who does not exercise management functions in acompany of the Dexia Group. The internal rules of the Boardof Directors of Dexia SA provide that at least one half of theBoard of Directors must be non-executive directors and at leastthree of the non-executive directors must be independent.It is to be noted that with the exception of Pierre Marianiand Stefaan Decraene, respectively Chairman and memberof the Management Board, all the members of the Board ofDirectors of Dexia SA are non-executive directors.The non-executive members of the Board of Directors areentitled to obtain any information necessary for them toperform their mandate properly and may ask managementfor that information.Separation of the functions of Chairman of theBoard of Directors and Chief Executive OfficerThere is a clear separation of responsibilities at the head ofthe Group between on the one hand the responsibility to leadthe Board of Directors and on the other hand the executiveresponsibility to lead activities. The articles of association ofDexia SA as well as the internal rules of the Board of Directorsof Dexia SA expressly indicate that the Chief Executive Officercannot perform the tasks of the Chairman of the Board.Moreover, the Chairman of the Board, or the person replacinghim in his absence, must be of a different nationality to theChief Executive Officer.Term of officeThe mandates of members of the Board of Directors arefor a maximum term of four years. Board members can bere-elected.The number of renewals of mandate of a non-executivedirector of the company is limited to two. The age limit fordirectors is 72. The directors concerned resign with effect fromthe date of the Ordinary Shareholders’ Meeting followingtheir birthday. The Board of Directors is entitled to deviatefrom the above rules when it deems it to be in the interestsof the company.The competences and responsibilities of theBoard of DirectorsThe internal rules of the Board of Directors describe theexpertise and responsibilities of the Board of Directors in threeareas:• strategy and general policy;• management control and risk management;• relations with shareholders.Strategy and general policyRegarding principles, the Board of Directors of Dexiadefines the Group’s strategy and standards and sees tothe implementation of that strategy at level of the Group,Dexia Bank Belgium, Dexia Crédit Local and Dexia BanqueInternationale à Luxembourg.The Board´s actions are guided solely by the interest of thecompany with respect to the shareholders, customers andmembers of staff. The Board ensures that the principles ofgood governance are observed, including recognition of thecorporate interest of Dexia Bank Belgium, Dexia Crédit Localand Dexia Banque Internationale à Luxembourg.34 Dexia Annual report 2010

Declaration of corporate governanceDexia’s internal rules therefore require that the Board ofDirectors:• meets at least once a year in order to assess the challengesand the strategic issues facing Dexia and its various businesslines;• examine strategic proposals made by the ManagementBoard and presented to it by the Chief Executive Officer;• decides on the strategy of Dexia and its various businesslines to be implemented by the Management Board, setspriorities, approves the annual budget and, more generally,sees that the chosen strategy and the human and financialmeans committed are appropriate;• defines the values of the Dexia Group after receiving theopinion of the Management Board.The internal rules give the Board specific responsibilities foracquisitions and disposals of major assets. Any acquisitionor disposal of a holding in a commercial company departingfrom the normal management of a portfolio by the DexiaGroup (Dexia SA or a company directly or indirectly controlledby Dexia SA) for an amount equal to or more than EUR 100million and guarantees given to a third party associated withthe Dexia Group must be subject to prior authorisation fromthe Board of Directors.Management control and risk managementThe Board of Directors controls and directs the managementof the company and of the Group and monitors risks.For this purpose, the internal rules of the Dexia Board ofDirectors provide that the Board:• assesses the implementation, by the Group and Dexia BankBelgium, Dexia Crédit Local and Dexia Banque Internationaleà Luxembourg, of strong and independent control functions,which include risk management, internal audit and complianceprocedures on a centralised basis;• takes measures necessary to ensure the integrity of thefinancial statements;• assesses the performances of members of the ManagementBoard;• supervises the performances of the Statutory Auditor andinternal auditors;• defines the organisation of the Management Board interms of its composition, operation and obligations on therecommendation of the Chief Executive Officer;• sets the Compensation for the members of the ManagementBoard on the recommendation of the Appointment andcompensation Committee and the recommendation of theChief Executive Officer for members of the ManagementBoard other than the Chief Executive Officer.The role of the Board of Directors towards thecompany shareholdersThe Board’s actions are guided solely by the interest of thecompany with respect to the shareholders, customers andmembers of staff.The Board ensures that its obligations towards all itsshareholders are understood and met and reports to theshareholders on the performance of its duties.Operation of the Board of DirectorsArticles of associationThe company’s articles of association set forth the followingrules that govern the operation of the Board of Directors:• All deliberations require the presence or representation ofat least half of the members of the Board;• Decisions are adopted by a majority vote of all memberspresent or represented. If there is a tie vote, the Chairman orthe member replacing him shall cast the deciding vote;• Decisions concerning the operations described belowrequire the presence or representation of at least two thirdsof the members of the Board, and a two thirds majority of allthe members present or represented:- any decision to employ authorised capital or to submitto the Shareholders’ Meeting a resolution to approve theissue of shares, bonds convertible or redeemable in shares,warrants or other financial instruments eventually conferringthe right to shares, when the amount of the capital increaseswhich would result from the issue of these shares or theconversion or redemption of these bonds or the exercise ofthese warrants or other financial instruments exceeds 10% ofthe amount of equity existing prior to these decisions;- any decision relating to the acquisition or sale of assetsrepresenting more than 10% of the company’s equity;- any decision to submit to the Shareholders’ Meeting aresolution to amend the company’s articles of association;- any decision relating to the appointment or dismissal of theChairman of the Board of Directors and the Chief ExecutiveOfficer.The Board of Directors may, on an ad hoc basis or generally,invite observers to attend its meetings. These observers donot have a deliberative vote and are bound by the sameobligations, particularly of confidentiality, as the directors.In accordance with Article 11 of the company’s articlesof association, any proposal to amend the articles ofassociation to be submitted to the Shareholders’ Meetingrequires a decision by the Board of Directors taken by a twothirdsmajority of the votes of all the members present orrepresented, and provided at least two thirds of the membersare present or represented.Internal rules of the Board of Directors ofDexia SAThe internal rules of the Board of Directors of Dexia SA, whichhave existed since 1999, codify all the rules aimed at enablingthe Board fully to exercise its competences and at increasingthe effectiveness of each director’s contribution.General organisational principlesThe Board of Directors is organised to achieve the bestexercise of its expertise and responsibilities.The meetings of the Board are frequent enough to allow theBoard to perform its tasks. Board members agree to participateactively in the work of the Board and the committees onwhich they sit. Attendance at meetings of the Board andcommittees is the first condition of this participation andeffective attendance at three quarters of the meetings at leastis desired.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia35

Declaration of corporate governanceThe agenda lists the items to be discussed and specifies ifthey are listed for information purposes, for discussion, or fora vote.The minutes report discussions and record the decisionsmade, specifying reservations issued by some directors, ifapplicable.Transactions between a company of the DexiaGroup and Board membersThe internal rules of the Board of Directors provide thattransactions between a company of the Dexia Group andthe directors must be concluded under normal marketconditions.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsObligation of confidentialityThe information provided to the directors in the performanceof their duties, during Board meetings, meetings of thespecialist committees, or during private interviews, is providedintuitu personæ; they shall ensure that the confidentiality ofsuch information is strictly maintained.The knowledge of privileged information leads to theprohibition against executing, on his own behalf or on behalfof third parties, transactions on the securities of the companiesin question and a ban on disclosing this information to thirdparties.Training of Board membersIn order to acquire a solid understanding of the Dexia Group,the new members of the Board of Directors are invited, whenthey take office, to one or two days of contacts and visitswithin the Group.The Board members who sit on the specialist committees arechosen on the basis of their specific skills. They are assistedby outside experts as needed. The tasks of these specialistcommittees are clearly defined in the internal rules of theBoard of Directors, and in the specific internal rules of theAccounts Committee and the Internal Control, Risks andCompliance Committee.Conflicts of interestDirectors make sure that their participation in the Boardof Directors is not a source of direct or indirect conflict ofinterest, either personally or because of the professionalinterests they represent.They must ensure that their participation in the Board reflectscomplete independence from interests outside the companyitself. In particular, cross-exchanges of directors are to beavoided.Directors submit their mandate to the Board if there is asignificant change in their duties and the Board decideswhether to accept their resignation in such cases, after anopinion from the Appointment and Compensation Committee.They must resign if a change in their situation creates anincompatibility with their office as a Dexia director.If a director directly or indirectly has a conflicting financialinterest in a decision or operation to be decided by the Boardof Directors, he must inform the other members of the Boardbefore they deliberate. His declaration, including the reasonsfor his conflicting financial interest, must be recorded in theminutes of the Board meeting that must make the decision.In addition, he must inform the company’s auditors. He maynot participate in the deliberations of the Board of Directorsin relation to the transactions or decisions concerned, or voteon them.For publication in the annual management report, the Boardof Directors describes in the minutes the type of decisionor operation in question and the reasons for the decisionmade and the financial consequences for the company. Themanagement report contains copy of the minutes describedabove.Transactions on Dexia financial instrumentsIn order to promote the transparency of transactions in theDexia financial instruments, the internal rules, amended bythe Board of Directors at its meeting on 26 August 2009,stipulate that all the directors of Dexia SA have the status of“permanent insider” in view of their regular access to insideinformation on Dexia. Executive directors, as well as somenon-executive directors who, have access to the estimatedconsolidated results of Dexia, are thus entered in the list of“estimated consolidated results insiders”. Moreover, within thecontext of certain specific projects, directors may have accessto inside information on Dexia in relation to its projects, andthey are entered in the list of “occasional insiders”.In view of their “permanent insider” status, directors:• will refrain from carrying out any transaction on Dexiafinancial instruments during the period of one month priorto the announcement of the quarterly, half-yearly or annualresults;• must obtain prior authorisation from the Group ChiefCompliance Officer before any transaction on Dexia financialinstruments.Directors with the status of “estimated consolidated resultsinsiders” are subject for a statutory restriction period associatedwith estimated results and will refrain from carrying out anytransaction on Dexia financial instruments during a negativeintervention period beginning on D-15 of the account closingdate and ending on the date of publication of the results.They must moreover obtain authorisation from the GroupChief Compliance Officer before any transaction in view oftheir status of “permanent insider”.Directors entered in the list of “occasional insiders” may not,during the time they are in the list, carry out any transactionon Dexia financial instruments.As for stock options, and having regard to their terms, itis possible to uncouple the initiation of the order from itsexecution. Applying this principle, a director may give aninstruction in relation to the exercise of stock options duringa positive intervention period with a view to their executionif necessary during a negative period. This uncoupling is onlypossible if the order given is irrevocable and has a floor pricelimit.36 Dexia Annual report 2010

Declaration of corporate governanceDirectors and persons who are closely associated with themare obliged to notify the CBFA of transactions on Dexiafinancial instruments carried out on their own account.Transactions notified are automatically published by the CBFAon its internet site.Directors must declare to the Group Chief ComplianceOfficer:• at the time of their entry into office, all the Dexia financialinstruments they hold;• at the end of each year, an update of the list of Dexiafinancial instruments they hold.The rules and restrictions relating to transactions on Dexiafinancial instruments described above are applicable todirectors and to persons closely associated with them. Theyalso apply to observers as defined in the articles of associationof Dexia SA.Operation and activities of the Board of Directorsof Dexia SA during the 2010 financial yearAttendance by Board membersThe Board of Directors met on eleven occasions in 2010. Thedirectors’ attendance rate at Board meetings was 92%.ATTENDANCE RATE OF EACH DIRECTOR ATMEETINGS OF THE BOARD OF DIRECTORSJean-Luc Dehaene 10 of 11Pierre Mariani 11 of 11Gilles Benoist 9 of 11Isabelle Bouillot 8 of 11Olivier Bourges 11 of 11Brigitte Chanoine 11 of 11Stefaan Decraene 11 of 11Robert de Metz 11 of 11Augustin de Romanet de Beaune 7 of 11Christian Giacomotto 11 of 11Antoine Gosset-Grainville 6 of 7Catherine Kopp 11 of 11Serge Kubla 9 of 11Francine Swiggers 11 of 11Bernard Thiry 10 of 11Marc Tinant 10 of 11Koen Van Loo 11 of 11Francis Vermeiren 11 of 11Activities of the Board of DirectorsIn addition to matters falling within the normal competenceof the Board of Directors (result monitoring, budgetapproval, appointment and compensation of membersof the Management Board, convocation to Ordinary andExtraordinary Shareholders’ Meetings, minutes of meetings ofspecialist committees), the Board also dealt with the followingfiles:• decision by the European Commission within the context ofexamining assistance granted to Dexia by the French, Belgianand Luxembourg governments;• approval of the 2009 financial statements;• allocation of the 2009 result and proposal to issue bonusshares in favour of shareholders;• monitoring implementation of the Group transformationplan;• progress made in social negotiations;• Dexia Group Compensation policy, and the compensationof Group executives and market professionals;• sale of Assured Guaranty shares acquired by Dexia on thedisposal of FSA;• Dexia Group budget for 2009, 2010 and 2011;• Dexia strategy in Turkey;• Dexia’s risk appetite policy;• creation of a new analytical division called Legacy PortfolioManagement Division alongside the Core Division;• stress tests on the solvency of European banking institutionsand publication of exposures to Member States of the eurozone;• strategic review of the Group and its different businesslines;• monitoring the litigation between Dexia banka Slovenskoand Ritro;• monitoring the Lernout & Hauspie litigation;• the Group’s liquidity situation and deleveraging;• exposure to sovereign debt;• disposal of Dexia banka Slovensko;• impact of Basel III on Dexia;• new IFRS9 rules;• Investor Day;• Dexia Group Memorandum of Governance, intended forthe Banking, Finance and Insurance Commission;• credit risk on Financial Products portfolio.Conflicts of interest in 2010As indicated above, if a director directly or indirectly has aconflicting financial interest in a decision or operation to bedecided by the Board of Directors, he must inform the othermembers of the Board before they deliberate. In addition, hisdeclaration, including the reasons for his conflicting financialinterest, must be recorded in the minutes of the Boardmeeting that must make the decision.At the meeting on 31 March 2010, the Board dealt withsetting the compensation of members of the ManagementBoard. As Pierre Mariani and Stefaan Decraene are respectivelyChairman and Member of the Management Board, theyabstained (in accordance with Article 523 of the CompanyCode) from participating in the deliberations and vote by theBoard of Directors on their compensation. The extract fromthe minutes relating to the points concerning Pierre Marianion the one hand and Stefaan Decraene on the other arereproduced below.Extract from the minutes of the meeting of the Boardof Directors of Dexia SA held on 31 March 2010J-L DEHAENE presents the report of the Appointments andCompensation Committee dated 18 March 2010, the minutesof which are included in the file for the Board and the meetingof the Appointments and Compensation Committee held on31 March prior to the meeting of the Board.These meetings were dedicated essentially to the compensationof members of the Dexia Executive Committee and topmanagement (cf. Point 2.1. and 2.2. infra).(…)Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia37

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements2.1 Compensation of members of the Management Board(other than P. MARIANI)(…)J-L DEHAENE recalls the principles applied to the granting ofvariable compensation to members of the Management Boardand top management which are detailed in the documentsappended to the file for the Board, that is to say, withregard to the variable compensation for services renderedin 2009, the principle of spread payment subject to certainconditions being met (including the maintenance of a level ofperformance) over a period of three years.This principle was applied by Dexia to the variablecompensation of members of the Management Board andtop management prior to Belgian legislation in this regardentering into force.S. DECRAENE leaves the room for discussion on proposalsregarding his fixed and variable compensation.Considering these factors, the Appointments andCompensation Committee proposes that the Board ofDirectors fix the variable compensation of members of theManagement Board (other than P. Mariani) as follows:- S. DECRAENE: EUR 300,000(…)Furthermore, it is also proposed to increase the fixedcompensation of S. DECRAENE as from 1 January 2010 fromEUR 450,000 to EUR 500,000.2.2 Compensation of P. MARIANIP. MARIANI leaves the room for discussion on proposalsregarding his fixed and variable compensation.J-L DEHAENE indicates that the Compensation Committeeproposes to grant P. MARIANI variable compensation ofEUR 800,000, payment of which shall be spread over time inaccordance with the principles stated in Point 2.1 above.Decisions:1) On proposals by the Appointments and CompensationCommittee, the Board of Directors takes the followingdecisions unanimously, subject to P. MARIANI andS. DECRAENE abstaining from participating in the deliberationsand vote in relation to their own compensation:a) the Board of Directors decides to grant the followingvariable compensation to members of the ManagementBoard for the year 2009:- P. MARIANI: EUR 800,000- S. DECRAENE: EUR 300,000(…)b) the Board of Directors decides unanimously to increase thefixed compensation of S. DECRAENE from EUR 450,000 toEUR 500,000 as from 1 January 2010.(…)Specialist committees created by the Boardof DirectorsIn order to make an in-depth examination of the filessubmitted to it, the Board of Directors created four specialistcommittees, namely:• the Strategy Committee;• the Audit Committee which since 13 November 2008 hasbeen divided into an Internal Control, Risks and ComplianceCommittee and an Accounts Committee;• the Appointment and Compensation Committee, the resultof the merger of the Compensation Committee and theAppointment Committee on 13 November 2008.These committees are charged with preparing Board decisions,the latter remaining solely its responsibility. Unless theyhave been specially delegated by the Board, the specialistcommittees have indeed no decision-making powers.These committees are composed of three to eight Boardmembers appointed by the Board of Directors for a periodof two years, which may be renewed. After each meeting,a report on the committee’s work is submitted to the Boardof DirectorsStrategy CommitteeCompositionThe Strategy Committee is composed of eight directors,including the Chairman of the Board of Directors, who chairsthe committee, and the Chief Executive Officer.Members of the Strategy Committee are (as at 31 December2010):• Jean-Luc Dehaene, Chairman of the Board of Directors,independent director, Chairman of the Committee;• Pierre Mariani, Chief Executive Officer;• Bernard Thiry, director;• Francine Swiggers, director;• Francis Vermeiren, director;• Koen Van Loo, director;• Olivier Bourges, director;• Antoine Gosset-Grainville, director (1) .Responsibilities (as at 31 December 2010):The Strategy Committee meets as required, on the initiativeof the Chief Executive Officer, to examine the strategicpositioning of the Dexia Group, considering the evolutionof the Group’s environment and its markets as well as itsdevelopment lines in the medium term, and to study importantfiles, prior to their examination by the Board of Directors, ifthey require particular confidentiality by virtue in particular oftheir repercussions on the financial markets.Any of its members may also request a meeting of theStrategy Committee.Payment of this variable compensation will be subject to theterms and conditions described above.(1) Antoine Gosset-Grainville was appointed a member of the StrategyCommittee on 31 January 2011 replacing Augustin de Romanet de Beaune.38 Dexia Annual report 2010

Declaration of corporate governanceThe Group’s strategy is developed on the basis of the followingprinciples:• it is the responsibility of the Management Board to take theinitiative to study and propose projects of a strategic natureto the Strategy Committee and to the Board of Directors;• the Board of Directors and the Strategy Committee formedwithin it may ask the Management Board to study a strategicoption;• considered in particular to be of a strategic nature areprojects responding to at least one of the following criteria:- a project of acquisition or disposal of assets for an amountequal to or greater than EUR 300 million;- a project of joint venture, consortium or partnership with athird party that could have a significant impact on the scopeof consolidation of the Group and/or on its results or theresults of one of its business lines;- a project of alliance or partnership that implies a significantchange in the shareholding structure of Dexia SA.Operation and activities during the 2010 financialyearThe Strategy Committee met twice in 2010 and dealt inparticular with the following subjects:• The strategy of the Group and its different business lines;• Publication of the stress tests;• Monitoring deleveraging and managing Group liquidity;• Disposal of subsidiaries and certain assets;• Cost reductions and improvements to the cost/incomeratio.Attendance of each individual director atmeetings of the Strategy CommitteeThe individual attendance rates of directors at meetings ofthis committee was 100% in 2010, except for Olivier Bourgeswho was excused from attending the meeting on 22 June2010 and for Augustin de Romanet de Beaune who wasexcused from attending the meeting on 12 December 2010.Audit CommitteeAt its meeting on 13 November 2008 the Board of Directorsdecided to change the operation of the Audit Committeein order in particular to strengthen governance and riskmonitoring. The committee was therefore split into twospecialist committees: the Accounts Committee and theInternal Control, Risks and Compliance Committee. Thesetwo committees, which together form the Audit Committee,in accordance with the law of 17 December 2008 inparticular establishing an audit committee in listed companiesand financial institutions, meet in plenary session once ayear before the financial statements are approved. The AuditCommittee consists exclusively of non-executive directorsamong which at least one independent director answering tothe criteria set out in Article 526ter of the Company Codeand a director competent in accounting and audit matters.• The Accounts CommitteeCompositionThe Accounts Committee consists of three to five directors, allnon-executive, including at least one independent director.The Chairman of the Board of Directors may attend meetingsof the Accounts Committee. The Chief Executive Officermay attend, but may not be a member of the AccountsCommittee.The members of the Accounts Committee are (as at31 December 2010):• Gilles Benoist, independent director and Chairman of theCommittee;• Marc Tinant, director;• Robert de Metz, independent director;• Brigitte Chanoine, independent director (1) ;• Olivier Mareuse, director (2) .Responsibilities (as at 31 December 2010)Regarding accounts and financial informationThe Accounts Committee examines draft annual, half-yearlyand quarterly social and consolidated financial statementsof the Group, which must then be presented, approved andpublished by the Board of Directors.It examines all questions in relation to the accounts and thefinancial statements and in particular, from the documentssubmitted to it, checks the conditions of their establishment,the choice of accounting guidelines, the provisions, the respectof prudential standards, the pertinence and permanenceof the accounting principles and methods applied and theappropriateness of the consolidation scope adopted.It advises the Board of Directors regarding the financialcommunication of the quarterly results and regarding delicateand sensitive matters which might have a significant impacton the financial statements.Regarding external auditThe Accounts Committee ensures the adequacy of theexternal audit for the needs of the Group, and in that regardit ensures observance of the policy of independence of theauditors.Operation of the Accounts CommitteeThe Accounts Committee meets at least four times a year,each of these meetings taking place prior to the Board ofDirectors’ meetings examining and approving the financialstatements. It may meet at any time at the request of one ofits members, or the Chairman of the Board of Directors.The competences and the mode of operation of the AccountsCommittee are described in the internal rules of thatCommittee.The member of the Management Board responsible forFinance attends meetings of the Accounts Committee. Othermembers of the Management Board may be invited toattend meetings, and likewise the General Auditor and theexternal auditors. The Accounts Committee may be assisted,if necessary, by an expert.Activities of the Accounts Committee during the2010 financial yearThe Accounts Committee met seven times in 2010 and dealtin particular with the following subjects:• examination of the results for the fourth quarter 2009 andthe first, second and third quarters 2010;• approval and certification of the 2009 financial statements;• 2010 and 2011 budgets;(1) Brigitte Chanoine was appointed a member of the Accounts Committeeon 8 July 2010.(2) Olivier Mareuse was appointed a member of the Accounts Committee on31 january 2011 replacing Antoine Gosset-Grainville.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia39

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements• evolution of the balance sheet and the funding ratio on thebasis of the 2014 business plan;• amendments to the IAS39 standards and the new IFRS9rules;• balance sheet deleveraging;• exit from the government guarantee mechanism andregular reporting to the European Commission;• Legacy Portfolio Management Division,• exposure to sovereigns and impact of the Greek crisis;• impairments on the Financial Products portfolio;• monitoring the litigation between Dexia banka Slovenskoand Ritro;• monitoring the Lernout & Hauspie litigation;• distribution of bonus shares to shareholders;• liquidity situation;• analysis of the impact of IFRS and Basel III on the DexiaGroup;• sale of Dexia Banka Slovenko.Presence of each individual director at meetingsof the Accounts CommitteeThe individual attendance rate of directors at meetings of thiscommittee was 100% in 2010.For Hubert Reynier, who left the committee on 8 July 2010,the attendance rate was 25%. For Antoine Gosset-Grainville,who joined the committee on 8 July 2010, the attendancerate was 67%.• The Internal Control, Risks and ComplianceCommitteeCompositionThe committee consists of three to five directors, all nonexecutive,including at least one independent director. TheChairman of the Board of Directors may attend the InternalControl, Risks and Compliance Committee. The ChiefExecutive Officer may attend but may not be a member ofthe Internal Control, Risks and Compliance Committee.The members of the Internal Control, Risks and ComplianceCommittee are (as at 31 December 2010):• Gilles Benoist, independent director and Chairman of theCommittee;• Marc Tinant, director;• Koen Van Loo, director;• Olivier Bourges, director.Responsibilities (as at 31 December 2010)Regarding internal audit and risk managementThe Committee has the task of supervising the performance ofthe internal control system put in place by the ManagementBoard and the risk management system regarding the risks towhich the entire Group is exposed by virtue of its activities.The committee also examines the reports presented by thehead of the Compliance, Legal & Tax support line on theGroup’s legal and tax risks.Regarding internal auditThe Committee ensures the performance and the independenceof the operations of the Internal Audit department, both forDexia SA and the Group as a whole.Regarding complianceThe committee ensures the performance and the operationalindependence of the Compliance department.Operation of the Internal Control, Risks andCompliance CommitteeThe Committee meets at least four times a year, each ofthese meetings taking place prior to the Board of Directors’meetings examining and approving the quarterly, half-yearlyor annual financial statements as the case may be. It maymeet at any time at the request of one of its members, or theChairman of the Board of Directors.The competences and operating mode of the Internal Control,Risks and Compliance Committee are described in the internalrules of that Committee.The member of the Management Board responsible for riskmanagement, the General Auditor and the head of the Legal,Compliance and Tax support line attend the meetings of theInternal Control, Risks and Compliance Committee. The ChiefCompliance Officer is present to deal with all items in relationto compliance.Operation of the Internal Control, Risks andCompliance Committee during the 2010 financialyearThe committee met seven times in 2010 and dealt in particularwith the following subjects:• reporting on MiFID monitoring as at 31 December 2009;• audit plan 2009 and 2010 and examination of themonitoring of audit recommendations;• report on the assessment of internal audit by the effectivemanagement intended for the CBFA;• progress made on the IT security study;• assessment of the risks on FSA – Assured;• risk appetite policy;• activity report 2009 from the Legal and Tax support lineand action plan 2010;• activity report 2009 from the Compliance support line andaction plan 2010;• progress made on introducing a permanent audit process;• monitoring implementation of the transformation plan andexchanges of correspondence with the regulators;• structured credits to the French public sector;• the internal audit and investigation charter.Presence of each individual director at meetingsof the Internal Control, Risks and ComplianceCommitteeThe individual attendance rate of directors at meetings of thecommittee was 100% in 2010, except for Olivier Bourgeswhose attendance rate was 71%.40 Dexia Annual report 2010

Declaration of corporate governanceThe Appointment and Compensation CommitteeCompositionThe Appointment and Compensation Committee is composedof three to seven non-executive directors, including theChairman of the Board of Directors, and has a majority ofindependent directors. The committee has the necessaryexpertise in Compensation policy. The Chief Executive Officermay attend but he may not be a member of the Appointmentand Compensation Committee (as he is not a non-executivedirector).The members of the Appointment and CompensationCommittee are (as at 31 December 2010):• Jean-Luc Dehaene, Chairman of the Board of Directors,independent director and chairman of the committee;• Christian Giacomotto, independent director;• Francine Swiggers, director;• Antoine Gosset-Grainville, director (1) ;• Francis Vermeiren, director;• Catherine Kopp, independent director (2) ;• Robert de Metz, independent director (3) .Responsibilities (as at 31 December 2010):Regarding CompensationThe Committee proposes:• the Compensation for the Chairman of the Board and theChief Executive Officer and, based on the Chief ExecutiveOfficer’s recommendation, the Compensation for the membersof the Management Board;• the granting of stock options in application of the generalprinciples defined by the Board of Directors.It is consulted moreover on the policy of compensation andincentives for top executives of the Group, as well as thepolicy regarding employee share plans.It also makes recommendations on the fees paid to directorsand the allocation of those fees to directors.Within the context of these tasks, the committee complieswith recommendations, circulars and all other international,French and Belgian regulations on compensation andcorporate governance.(1) Antoine Gosset-Grainville was appointed a member of the Appointmentand Compensation Committee on 31 January 2011 replacing Augustin deRomanet de Beaune.(2) Catherine Kopp was appointed a member of the Appointment andCompensation Committee on 24 February 2010.(3) Robert de Metz was appointed a member of the Appointment andCompensation Committee on 31 January 2011.Regarding appointmentThe Appointment Committee prepares decisions for the Boardof Directors relating to:• proposals for the appointment and renewal of the mandateof directors made by the Board to the Shareholders’ Meeting,as well as proposals for co-opting directors;• determination of independence criteria enabling a directorto be qualified as "independent";• qualification of an existing member or a new member ofthe Board of Directors as an independent director;• appointment of members of the specialist committees ofthe Board of Directors and their chairmen;• appointment and renewal of the mandate of the ChiefExecutive Officer;• appointment and renewal of the mandate of the Chairmanof the Board;• proposals from the Chief Executive Officer concerningthe composition, organisation and operating mode of theManagement Board of Dexia SA;• amendments to the internal rules of the Board ofDirectors.For these purposes, the Committee is responsible formonitoring procedures adopted by major listed companies interms of composition and operation of Boards of Directors.Operation and activities during the 2010 financialyearThe Appointment and Compensation Committee met fivetimes in 2010 and dealt in particular with the followingsubjects:• composition of the Board of Directors;• composition of the specialist committees;• leaving packages for certain former executives;• policy regarding compensation of directors of Dexia SA andits main subsidiaries;• policy regarding compensation of trading roomprofessionals;• policy regarding compensation of management;• variable Compensation of members of the ManagementBoard and the Executive Committee;• report on “Integration of Compensation policy ingovernance” intended for the CBFA;• appointment of a new director of Human Resources;• composition of the Appointment and CompensationCommittee;• adaptation of the internal rules of the Board of Directors.Presence of each individual director at meetings ofthe Appointment and Compensation CommitteeThe individual attendance rate of directors at meetings ofthese committees was 100% in 2010, except for Augustin deRomanet de Beaune whose attendance rate was 60%.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia41

Declaration of corporate governanceThe Management Board of Dexia SACompositionManagement reportMajor changes occurred in the composition of the ManagementBoard and in the mandates exercised by its members withinthe Group following decisions taken by the Board of Directorson 13 November 2008, in particular to simplify the decisionmakingprocess and to reduce the management team fromten to five members.On 17 December 2010, the Board of Directors of theDexia Group approved the new composition of the Group’sManagement Board proposed by the Appointment andCompensation Committee.After publication on 12 October 2010 of the Dexia 2014strategic plan, a new management team, extended to tenmembers, was put in place, in order to provide the essentialskills to enable the Dexia Group to achieve the objectives ofits new strategic plan.The new composition of the Management Board came intoeffect as from 1 January 2011.As at 31 December 2010, the Management Board hasfive members and is chaired by the Chief Executive Officerto whom the Board of Directors has entrusted the dailymanagement of Dexia.The members of the Management Board, other than theChief Executive Officer, are appointed and dismissed by theBoard of Directors on the recommendation of the ChiefExecutive Officer. With the exception of the Chairman, theyare appointed for a term of four years which may be renewedunless there is a contrary decision by the Board of Directors.COMPOSITION AS AT 31 DECEMBER 2010Consolidatedfinancial statementsAdditional information Annual financial statementsPierre MARIANIChief Executive OfficerChairman of the Management BoardStefaan DECRAENEHead of Retail and Commercial Banking and AssetManagement and ServicesChairman of the Management Board of Dexia BankBelgiumNEW COMPOSITION AS FROM 1 JANUARY 2011Pierre MARIANIChief Executive OfficerChairman of the Management BoardHakan ATESChief Executive Officer of DenizBankAlain CLOTHead of Public and Wholesale BankingChief Executive Officer of Dexia Crédit localMarc CROONENHead of Human ResourcesStefaan DECRAENEHead of Retail and Commercial Banking and AssetManagement and ServicesChairman of the Management Board of Dexia BankBelgiumPascal POUPELLEHead of Public and Wholesale BankingChief Executive Officer and Chairman of the ManagementBoard of Dexia Crédit LocalPhilippe RUCHETONChief Financial OfficerClaude PIRETChief Risk OfficerAlexandre JOLYHead of Strategy, Portfolios and Market ActivitiesClaude PIRETChief Risk OfficerPhilippe RUCHETONChief Financial OfficerAndré VANDEN CAMPHead of Operations and IT SystemsOlivier VAN HERSTRAETENHead of Legal, Compliance and Tax42 Dexia Annual report 2010

Declaration of corporate governanceManagement report1. Pierre Mariani – 2. Hakan Ates – 3. Stefaan Decraene – 4. Alexandre Joly – 5. Alain Clot – 6. Olivier Van Herstraeten –7. André Vanden Camp – 8. Claude Piret – 9. Marc Croonen – 10. Philippe RuchetonConsolidatedfinancial statements56273184910Additional information Annual financial statementsAnnual report 2010 Dexia43

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsResponsibilitiesThe Management Board is entrusted with the management ofthe company and of the Dexia Group, for which it managesand coordinates the different business lines, in the context ofthe strategic objectives and the general policy defined by theBoard of Directors. In addition, it ensures the execution of thedecisions taken by the Board of Directors.OperationSince the creation of Dexia SA in 1999, the ManagementBoard has had its own internal regulations (the “Regulations”),amended on several occasions, determining its responsibilitiesand its modes of operation. The collegial decision-makingprocess, the Board’s powers and certain rules governing thestatus of members are also subject to specific provisions inthe protocol on the prudential structure of the Dexia Groupsigned with the Belgian Banking, Finance and InsuranceCommission.In addition to rules governing the composition of theManagement Board (see above), the Regulations include thefollowing rules.• Rules relating to the responsibilities of theManagement Board in its dealings with the Boardof DirectorsThe Regulations first define the responsibilities of theManagement Board in its dealings with the Board of Directors.The Management Board must formulate a preliminary opinionregarding any proposals debated by the Board of Directors orthe Strategy Committee in terms of strategy or general policyof the Group. It may make recommendations to the Board ofDirectors through the Chief Executive Officer.If the Chief Executive Officer takes part in discussions by theBoard of Directors or its specialist committees, for which theManagement Board has an acknowledged right of opinion orinitiative, the Chief Executive Officer presents to and defendswith the Board of Directors the points of view previouslydebated by the Management Board.• Rules relating to decision-makingThe Management Board operates in a collegial mannerand its decisions result from a consensus of its members. Itassumes joint responsibility for such decisions. If applicable,the Chairman of the Management Board may, on his owninitiative or on request from two other members, submitthe issue under debate to a vote. Resolutions are adoptedby a majority vote of all members present or represented. Inthe event of a tie vote, the Chairman shall cast the decidingvote. In exceptional cases, decisions may be taken by theManagement Board in writing with the unanimous consentof its members.• Rules relating to meetingsManagement Board meetings are convened by its Chairman, inprinciple once a week. If necessary, meetings can be convenedat any time by the Chairman or if two or more members sodesire. Any member of the Management Board who is unableto attend may be represented by another member of theBoard, but a member may not represent more than one othermember. Each member of the Board may propose an item forthe agenda which is set by the Chairman. On the decision ofits Chairman, the Management Board may also meet in theform of a Group Executive Committee to deal with transversalsubjects of a certain importance.• Conflicts of interestIf a member of the Management Board directly or indirectlyhas a conflicting financial interest in a decision or operation tobe decided by the Board, he must inform the other membersof the Board before they deliberate. His declaration, includingthe reasons for his conflicting financial interest, must berecorded in the minutes of the Management Board meetingthat must make the decision. In addition, the member of theManagement Board must inform the company’s auditors. Hemay not participate in the deliberations of the ManagementBoard in relation to the transactions or decisions concerned,or vote on them.• Transactions between members of theManagement Board and Group companiesTransactions between companies of the Dexia Group andmembers of the Management Board must be concludedunder normal market conditions.• Transactions on Dexia financial instrumentsIn 2009, the internal rules of the Management Boardwere amended in order to update the rules relating to theprevention of insider trading in relation to Dexia financialinstruments.Compensation reportCompensation of the directors ofDexia SA for 2010Review of the principles appliedDexia SA’s 2006 Ordinary Shareholders’ Meeting decided topay an annual maximum global compensation amount ofEUR 1,300,000 to the directors for their services, effective1 January 2005.This meeting also authorised the Board to determine thepractical procedures of this compensation and its allocationwhich comprises a fixed amount and fees.At its meeting on 23 May 2002, the Board of Directorsdecided to grant each director a fixed annual compensation ofEUR 20,000 (or fixed amount of EUR 5,000 per quarter), anddirectors’ fees of EUR 2,000 per Board meeting or specialistcommittee meeting. Directors who have been in office forless than one full year shall earn a proportion of the fixedfee based on the number of quarters during which they haveeffectively been in office.For the Dexia transformation plan, the directors decided totemporary reduce the fixed amount of their compensationfor 2009. At its meeting on 29 January 2009, the Boardof Directors decided to grant each director a fixed annualamount of EUR 10,000 (or an amount of EUR 2,500 insteadof EUR 5,000 per quarter). This measure was maintained in2010.44 Dexia Annual report 2010

Declaration of corporate governancecompensation FOR SERVING AS A DIRECTOR OF DEXIA SAAND THE OTHER ENTITIES OF THE GROUPBoD BoD Strategy Accounts Internal Appointment Total 2010 Total 2009 Other Other(fix. comp.) (var. comp.) Committee Committee Control,Risks andComplianceand CompensationCommitteeGroupentities2010Groupentities2009(gross amounts in EUR)CommitteeJ.-L. Dehaene 20,000 40,000 8,000 0 0 20,000 88,000 88,000 0 0P. Mariani 0 0 0 0 0 0 0 0 0 0G. Benoist 10,000 18 000 0 12,000 12,000 0 52,000 52,000 0 0I. Bouillot 10,000 16,000 0 0 0 0 26,000 6,500 0 0O. Bourges 10,000 22,000 2,000 0 10,000 0 44,000 (1) 10,500 0 0B. Chanoine 10,000 22,000 0 6,000 0 0 38,000 8,500 0 0S. Decraene 0 0 0 0 0 0 0 0 0 0R. de Metz 10,000 22,000 0 14,000 0 0 46,000 21,000 10,000 (2) 0A. de Romanet deBeaune 10,000 14,000 2,000 0 0 6,000 32,000 (3) 34,000 (3) 0 0C. Giacomotto 10,000 22,000 0 0 0 10,000 42,000 25,000 0 0A. Gosset-Grainville 5,000 12,000 0 4,000 0 0 21,000 (3) n.a. 0 0C. Kopp 10,000 22,000 0 0 0 8,000 40,000 28,000 0 0S. Kubla 10,000 18,000 0 0 0 0 28,000 24,000 20,000 (2) 16,875 (2)H. Reynier 5,000 4,000 0 2,000 0 0 11,000 (3) 10,500 (3) 0 0F. Swiggers 10,000 22,000 4,000 0 0 10,000 46,000 46,000 41,000 (4) 35,375 (4)B. Thiry 10,000 20,000 4,000 0 0 0 34,000 19,000 20,000 (2) 16,875 (2)M. Tinant 10,000 20,000 0 12,000 12,000 0 54,000 48,000 0 0B. Unwin 5,000 8,000 0 0 0 0 13,000 26,000 0 0K. Van Loo 10,000 22,000 4,000 0 14,000 0 50,000 42,000 0 0F. Vermeiren 10,000 22,000 4,000 0 0 10,000 46,000 46,000 0 0(1) In accordance with Article 139 of the French Law on the new economic regulations, directors’ fees for mandates performed by representatives of the Frenchgovernment are to be paid to the French government account.(2) Compensations obtained by virtue of a director’s mandate in Dexia Bank Belgium.(3) Renounced to receive percentages or directors’ fees as a director of Dexia SA.(4) Compensations and other fees obtained by virtue of a director’s mandate in Dexia Bank Belgium (EUR 20,000 in 2010 and EUR 16,875 in 2009) and Dexia CréditLocal (EUR 21,000 in 2010 and EUR 18,500 in 2009).Management reportConsolidatedfinancial statementsCompensation paid to the Chairman of theBoard of DirectorsOn 13 November 2008, the Board of Directors fixed the grosscompensation of the Chairman of the Board on a proposalfrom the Compensation Committee on 10 November 2008.The compensation of the Chairman of the Board of Directorswill represent double the compensation of another director,both for fixed compensation and directors' fees. The Chairmanof the Board of Directors does not receive a compensation forhis mandates in other entities of the Dexia Group.Payment of social security contributions ofsome directorsEvery Board member of Dexia SA is considered in Belgiumas a self-employed worker and consequently must join anindependent workers’ fund and, in principle pay the socialinsurance. Some Board members already benefit from socialinsurance under another system and may therefore berequired to pay contributions in Belgium simply because ofthe mandate carried out at Dexia SA without benefiting fromincreased social insurance protection.This is the case for, for instance, Board members not residentin Belgium who already benefit, in their country of residence,from social insurance and who are required to contribute inBelgium to an unrecovered annuity. Likewise, a Board memberresident in Belgium who is subject to the salaried employeessystem or to the system applicable to public servants as aprincipal activity and who is required to contribute as anindependent worker additionally because of the mandatecarried out in Belgium without benefiting from increasedsocial insurance compared to what he already qualifies forbecause of his principal activity.In order to offset the unrecovered social security cost paidby directors who are in this position (subject to an annualreview in order to reflect changes in status), the OrdinaryShareholders’ Meeting of 10 May 2006 decided that Dexia SAwill pay the unrecovered social security contributions, the latepenalties and other amounts owed for serving as a director ofDexia and, therefore, raised the maximum ceiling for directors’compensation from EUR 700,000 to EUR 1,300,000.Additional information Annual financial statementsAnnual report 2010 Dexia45

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements46 Dexia Annual report 2010The persons qualifying for this payment are those who weredirectors of the company as at 1 January 2005 for all socialinsurance contributions as well as any new director who meetsthe required conditions. The amount of the contributionsowed for the year 2010 and paid by Dexia totalled EUR20,471.39.Compensation paid to the Chief ExecutiveOfficerThe Chief Executive Officer does not receive any fee forhis position as director. However, he is remunerated for hisresponsibilities as Chief Executive Officer and Chairman of theManagement Board (see hereafter).Compensation of members of theManagement BoardIntroductionProcedureThe compensation of members of the Management Board isfixed by the Board of Directors of Dexia SA on proposals fromthe Appointment and Compensation Committee.The Appointment and Compensation Committee analyses thelevels of compensation of members of the Management Boardhaving regard to compensation granted in other companies inthe sector.In this respect, compensation consultants are used to obtaininformation on salary developments on the labour market forthe financial sector.In order to offer compensation in line with the market, everytwo years the Appointment and Compensation Committeeasks for a benchmarking study. This study was carried out in2010 with the support of Towers Watson, a specialist externalconsultant.The Appointment and Compensation Committee determinesthe reference group of companies to be included in thebenchmark and the positioning of Dexia vis-à-vis thatreference group.On analysing this benchmark, as regards members of theManagement Board of Dexia SA, the Appointment andCompensation Committee makes a proposal to the Boardof Directors on any increases in fixed compensation and, ifnecessary, adjustment of the extent of variable compensationand any changes justified by market developments.The year when the Appointment and CompensationCommittee does not require a benchmark, it will be informedby its external advisor (compensation specialist) of theevolution of the executive compensation market.Regulatory contextThe compensation of executives of companies in the financialsector has been subject to numerous regulations over the lasttwo years.The Board of Directors immediately undertook to observethis regulatory framework as it evolved on the basis ofnational and international provisions aimed at strengtheningCorporate Governance particularly in terms of compensation,as well as Circulars from the Banking, Finance and InsuranceCommission.Against that background, last year Dexia even anticipatedthe obligations weighing on the financial sector in particularregarding the deferment of variable compensation.During the year 2010, Dexia reviewed its compensation policyin the light of recent initiatives in the matter and sent theBanking, Finance and Insurance Commission details of aglobal compensation policy for the Dexia Group complyingwith Belgian and European regulations as well as recentprinciples of sound compensation practice.In accordance with the regulations, Dexia retroactively alteredthe conditions for variable compensation for 2010 paid in2011 and as a consequence amended its compensation policywith retroactive effect.Dexia’s compensation policy has been prepared by the HumanResources department in collaboration with the Audit, Riskand Legal Compliance & Tax departments and submitted tothe Appointment and Compensation Committee of Dexia SA.The proposals of the Appointment and CompensationCommittee were submitted to the Board of Directors ofDexia SA which validated the Group compensation policy.The compensation policy applicable to compensation paidfrom 2011 on the one hand states the general principlesapplicable to all members of staff of the Dexia Group. Onthe other hand, observing the principle of proportionality,it contains specific provisions, exclusively applicable to anidentified group as being likely to impact the risk profileof the Dexia Group by virtue of the nature or level of theirfunctions and/or compensation.Orientations adopted by the Board of Directors inaccordance with the regulationsConsidering the guidelines in particular included in theRoyal Decree of 22 February 2011 (1) , the Board of Directorsreviewed the balance of the compensation packages ofexecutives and senior management of the Group.That revision aimed to reduce the incentive to take excessiverisks which might assume recourse to variable compensationwhich is disproportionate in comparison to the fixedcompensation.It will also enable the extent of variable compensation to bereduced considerably, without any increase of costs, whilstmaintaining a competitive package for Group executives.CompensationFixed and variable compensationThe compensation of members of the Management Boardconsists of a fixed part and a variable part.The fixed and variable compensation of members of theManagement Board constitutes a whole from which, unlessthe Board of Directors decides otherwise on the proposalof the Appointment and Compensation Committee, will bededucted any Director’s fees or percentage paid to a memberof the Management Board by a company in the Dexia Groupor by a third party company in which a mandate is performedin the name and on behalf of Dexia.Compensation for the year 2010Fixed compensationBasic compensationBasic compensation is determined considering the natureand importance of the responsibilities assumed by each (andtaking account of market benchmarks for comparable posts).(1) Royal Decree approving the Regulations of the Banking, Finance andInsurance Commission dated 8 February 2011 concerning the compensationpolicy of financial institutions.

Declaration of corporate governanceSummary table of the fixed compensation and benefits of the Chairman of theManagement BoardFixed compensation Representation costs Car (1)(in EUR)paid in 2010Pierre Mariani 1,000,000 6,324 3,087(1) This amount corresponds to the fiscal advantage arising from the provision of a company car which can be used for private purposes.Summary table of the fixed compensation and benefits of other members of theManagement Board (1)(in EUR) Fixed compensations paid in 2010 Other benefits (2)1,980,000 30,231(1) Stefaan Decraene, Pascal Poupelle, Philippe Rucheton, Claude Piret.(2) This amount corresponds to the fiscal advantage arising from the provision of a company car which can be used for private purposes.Bonus packageIn accordance with the above, the Board of Directors decidedto reduce the variable compensation dependent on theperformance of members of the Management Board in orderto reduce the potential incentive to take excessive risks.As a consequence, the Board decided to grant a bonuspackage, not affected by performance, paid quarterly tomembers of the Management Board. This bonus will bepaid for the first time (1) on 1 April 2011 (year n+1) for theyear 2010. The variable compensation and its extent will bereduced accordingly.As a result, and in accordance with Article 7.l. of the RoyalDecree of 22 February 2011, the Board is increasing thecompensation not linked to performance which must be asignificant proportion of the entire compensation.On the basis of the decisions of the Board of Directors, thebonus package represents:Pierre Mariani EUR 200,000Other members of the Management Board (1) EUR 296,000(1) Stefaan Decraene, Philippe Rucheton, Claude Piret.Variable compensation for the year 2010It should be noted that the extent of the variable compensationof the CEO is also revised.Before grant of thebonus packageAfter grant of thebonus packageMinimum Target Maximum0 112.50% 225%0 75% 150%The same reductions are applied to other members of theManagement Board.PrinciplesVariable compensation will be granted up to at least 50% inthe form of equity instruments.These instruments will be reflected, at the beneficiary’s choice,by:• a payment in cash indexed to the share price;• a payment in hybrid Tier 1.Deferment of variable compensationThe deferred part of the variable compensation correspondsat a minimum to 40% of the total amount of the variablecompensation.The principle of deferment of the variable compensation isapplicable to the total variable compensation.The period of deferment is three years following the financialyear during which the variable compensation is due. Thedeferred part of the variable compensation will be grantedin the years 2012, 2013 and 2014, at one third each year,provided that the following conditions are met:• on a proposal of the Appointment and CompensationCommittee, the Board of Directors will verify on each dateof payment of a deferred part that the performance of themember of the Management Board has not deteriorated;• the member of the Management Board is still in the serviceof the Group at the time of payment of the different amounts.The deferred parts will be lost if the beneficiary leaves theGroup voluntarily or if there is a termination on seriousgrounds, unless the Board of Directors decides otherwise on aproposal of the Appointment and Compensation Committee.RetentionThe instruments representing the capital in the form ofwhich the variable compensation is partially granted have amaximum retention period of one year.A posteriori adjustment of the variable compensationThe variable compensation may be adjusted in the case ofpoor individual or collective performance in particular.Application of these principles for 2010The Board of Directors has noted that the objectives of thetransformation plan were achieved and even exceeded in2010.As in 2009, the Board of Directors reaffirms that variablecompensation, for the year 2010, must be lower than practiceprior to the crisis for the equivalent post.The Board recalls that there was no stock option or freeallocation of shares during 2010.Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) This bonus will be paid, recurrently, quarterly for 2011.Annual report 2010 Dexia47

Declaration of corporate governanceSummary table showing the variable compensation of the Chairman of theManagement Board and other members of the Management Board 2009compared to 2010(in EUR) 2009 2010Pierre Mariani 800,000 600,000Other members of the Management Board (1) 775,000 554,000Total 1,575,000 1,154,000(1) Stefaan Decraene, Philippe Rucheton, Claude Piret.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsIn line with Dexia compensation policy, payment of theamounts shown in the table below is deferred over two/threeyears. In line with the compensation policy rules adopted bySummary table showing the deferment of the variable compensation of theChairman of the Management Board and other members of the ManagementBoard (1)Amount paid Amount to be Amount to be Amount to be Amount to be(in EUR)in 2011 paid in 2012 paid in 2013 paid in 2014 paid in 2015TotalPierre MarianiCash 180,000.0 40,000.0 40,000.0 40,000.0 - 300,000.0Instrument (2) - 180,000.0 40,000.0 40,000.0 40,000.0 300,000.0Other members of the Management BoardCash 166,200.0 36,933.3 36,933.3 36,933.3 - 277,000.0Instrument (2) - 166,200.0 36,933.3 36,933.3 36,933.3 277,000.0(1) Stefaan Decraene, Philippe Rucheton, Claude Piret.(2) The counter-value of the instruments representing the capital is paid after a retention period of one year following definitive acquisition of the rights, asappears in the table.Deferred part of the variable compensation for2009 due in 2011PrinciplesThe Board of Directors decided in 2009 to apply principlesenabling variable compensation to be linked to long-termperformances. To do so, the payment of variable compensationwill be deferred and subject to certain conditions to be metover several years. The deferred part is thus linked to theshare price and is liable to adjustment in the case of poorperformance.Conditions for allocation and payment of thevariable compensationFor 2009, the allocation and payment of variable compensationto members of the Management Board was subject not onlyto maintenance of a level of performance and fulfilment ofundertakings made to the European Commission, but also tothe non-renewal of the State guarantees on interbank loansand bond issues beyond 30 June 2010.Deferment of variable compensationIn line with the principles stated above, the variablecompensation of members of the Management Board for2009 was deferred over three years, the deferred partdetermined under the following conditions.• In n+1 (i.e. 2010), the member of the Management Boardreceives:- 100% for the part not exceeding EUR 50,000;- 50% for the part exceeding EUR 50,000 but notEUR 100,000;- 33% for the part exceeding EUR 100,000.the Board of Directors, the part paid immediately in cash represents30% of the variable compensation. The balance isdeferred.• The member of the Management Board is likely to receivethe balance, under the conditions described above, in n+2(i.e. 2011) and in n+3 (i.e. 2012), provided they are still in theservice of the Group on payment of the deferred amounts.The deferred parts are lost if the beneficiary leaves the Groupvoluntarily or there is a dismissal on serious grounds, unlessthe Board of Directors decides otherwise, on a proposal fromthe Appointment and Compensation Committee.In order to index the deferred part to the share price overthe deferment period and thus closely linking the interestsof members of the Management Board to those of theshareholders (from a long-term perspective), the deferred partwas converted into a number of Dexia shares, on the basisof a benchmark price of EUR 4.253, corresponding to theaverage closing price of the Dexia share on Euronext Brusselsover the thirty days preceding 1 March 2010.At the time of payment of the deferred part, it is valued onthe basis of a benchmark price corresponding to the averageclosing price of the Dexia share on Euronext Brussels over thethirty days preceding 1 March of the year of payments.Changes with regard to recent corporategovernance initiativesAs the Board of Directors reserved the right, the terms ofpayment of the deferred part of the variable compensationfor 2009 were revised with regard to recent principles andprovisions adopted in respect of good governance and soundcompensation practice.48 Dexia Annual report 2010

Declaration of corporate governanceEvolution of the deferred part of the compensation for 2009 due in 2011 and2012 to the Chairman of the Management Board and other members of theManagement Board (1)Amount paid Amount paid Amount to be(in EUR)in 2010 in 2011 paid in 2012TotalPierre MarianiCash 308,333.0 128,768.1 128,768.1 565,869.2Value of the instruments when granted (2) (3) - 128,768.1 128,768.1 257,536.2Value of the instruments at payment date (2) (3) - 95,523.9Other members of the Management BoardCash 525,001.0 144,036.5 144,036.5 813,074.0Value of the instruments when granted (2) (3) - 144,036.5 144,036.5 288,073.0Value of the instruments at payment date (2) (3) - 106,850.5(1) Stefaan Decraene, Philippe Rucheton, Claude Piret.(2) The amounts shown for 2012 must be adjusted in relation to the market price in March 2012.(3) The amounts are different to those presented in the annual report 2009 given their adjustment following the issue of bonus shares decided by theExtraordinary Shareholders’ Meeting on 12 May 2010.Management reportUnder the provisions of European Directive CRD III (1) as statedby the recommendations of the Committee of EuropeanBanking Supervisors, the principle of indexation of variablecompensation to the share price may be limited to one halfof total variable compensation.It was therefore decided that one half of the sharesrepresenting the capital to which the deferred part of thevariable compensation for 2009 relates will be valued at thebenchmark price on the basis of which the conversion intocapital shares was initially made.Considering the adjustment following the issue of bonusshares decided by the Extraordinary Shareholders’ Meetingon 12 May 2010 and the evolution of the share price, theamounts paid to members of the Management Board inMarch 2011 are reduced by 13% on their initial value.Extralegal pensionsCertain members of the Management Board have anadditional extralegal pension put in place by Dexia. Variousschemes are applicable to each of these members:• Claude Piret and Stefaan Decraene are entitled, providedcertain conditions are met, in particular a minimum careerof 35 years, to a benefit equivalent to an annual retirementannuity, if alive at the time of retirement, equivalent to 80%of the fixed limited compensation. In 2007, Dexia decided toclose this additional extralegal pension scheme, maintainingthe rights acquired and to come for those persons affiliatedbefore 31 December 2006.• Pierre Mariani and Philippe Rucheton benefit from the newextralegal pension scheme for members of the ManagementBoard on Belgian contracts. At the time of retirement, theywill be entitled to the capital from the capitalisation of annualcontributions. These represent a fixed percentage of theannual fixed limited compensation.Annual premiums of EUR 537,450 were paid in 2010 tomembers of the Management Board on Belgian contractsincluding EUR 147,180 for the Chief Executive Officer.Collective annual premiums of EUR 211,110 were paid in2010 to members of the Management Board on Belgiancontracts for additional cover for death, permanent invalidityand medical costs, including EUR 70,760 for the ChiefExecutive Officer, broken down as follows:Extralegal plans(in EUR)Death, orphan capital 42,370Disability 28,020Hospitalisation 370Collective annual premiums of EUR 6,010 were paid in 2010 tothe member of the Management Board on a French contractfor obligatory and additional cover for death, permanentinvalidity and medical costs.Conditions in relation to departureIf Dexia terminates the contract binding him to Dexia, PierreMariani will be entitled to a single lump-sum amount ofcompensation to be determined in relation to the AFEP-MEDEF rules in force.If Dexia terminates the contract binding them to Dexia, StefaanDecraene and Claude Piret will be entitled to an amount ofcompensation equal to the fixed and variable compensationand other benefits corresponding to a period of 24 months.If Dexia terminates the contract binding him to Dexia, withintwelve months of a change of control, Philippe Rucheton willbe entitled to an amount of compensation equal to the fixedand variable compensation corresponding to a period of 18months, notwithstanding the rules of Common Law whichmight be applicable.On termination of his contract with Dexia, on his departurePascal Poupelle received the equivalent of his variablecompensation due for 2010 and an indemnity equal to 12months of fixed compensation.Consolidatedfinancial statementsAdditional information Annual financial statements(1) Directive amending Directives of the European Parliament and Councildated 14 June 2006 No. 2006/48/EC relating to the taking up and pursuit ofthe business of credit institutions and No. 2006/49/EC on the capital adequacyof investment firms and credit institutions.Annual report 2010 Dexia49

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsInternal control and riskmanagement systemPrincipal characteristics of theinternal control and risk managementsystemFramework and tasks of internal controlIn March 2001, Dexia SA, a financial company under Belgianlaw, concluded a protocol on the prudential structure withthe Banking, Finance and Insurance Commission.Within that context, Dexia SA voluntarily complies withoperating standards equivalent to those applicable to Belgiancredit institutions which are parent companies. That conditionincludes on the one hand the introduction within Dexia SAof an appropriate collegial management structure and on theother hand, in addition to the legal provisions arising fromthe status of financial company, Dexia SA is subject to certainprudential framework provisions inspired by those legallyapplicable to credit institutions under Belgian law, includingin particular the Law of 22 March 1993 relating to the statusand control of credit institutions and the Banking, Financeand Insurance Commission Circular of 30 June 1997 oninternal control and internal audit.Internal control is a process providing a reasonable assurancethat the objectives of the organisation, the effectiveness andefficiency of operations, the reliability of financial informationand compliance with the laws and regulations will be achievedat the desired level. Like any control system, it is designed toreduce residual risk to a level accepted by the requirementsof Dexia.More specifically, the tasks assigned to internal control inforce within the Dexia Group can be grouped in five principallines:1. Checking the effectiveness of the risk managementmechanismRisk management is at the core of banking activity. TheDexia Group has introduced an internal control mechanismwith the objective, in relation to the main activities of theGroup, to guarantee that the risks taken are appropriate forthe accepted level.2. Ensuring the reliability and pertinence of accounting andfinancial informationThe principal objective of financial information is to give atrue picture of the situation of the Dexia Group on a regular,complete and transparent basis. The internal control system isfocussed on achieving that objective.3. Ensuring observance of the regulations as well as the rulesof professional ethics and compliance, both internally andexternallyThe good operation of the Dexia Group involves strictfulfilment of legislative and regulatory obligations in eachof the countries where it has establishments, as well as thestandards it has fixed for itself, beyond those obligations, inparticular regarding corporate governance, compliance andsustainable development. The internal control system aims toensure observance of those principles.4. Improving the Group’s operation whilst ensuring theefficient management of available meansIt must be possible to put the decisions taken to that endby the Management Board into practice rapidly throughoutthe Group. The internal control procedures aim to ensure theintegrity of information flows, the compliance of the actionsintroduced and the monitoring of results.5. Ensuring the operational effectiveness and efficiency of allthe business linesThe proper functioning of operational circuits is a constantconcern at all decision-making levels. Many initiatives aretaken in this regard in constant collaboration between theBusiness and Support functions which also measure them viaindicators and regular reporting. The internal control systemassesses the effectiveness of the operational processes andmonitoring mechanisms.General architecture of the mechanismThe general architecture of the mechanism relies on thebasic principles declined in all activity lines and all supportprocesses.The Dexia Group internal control system relies on activitiesintegrated in all operational, support and accountingprocesses, the surveillance of which is a constant responsibilityof management with successive levels of control.Within the context of a project common to the so-calledcontrol support lines (risk, compliance, audit), Dexia hasprogressively completed risk and control guidelines.The latter revolves around five points: control environment,risk analysis, control activities, information and communicationand finally monitoring.In terms of control environment, a clear separation offunctions has been conceived to maintain and to ensure aclear distinction between operators undertaking an actionor a transaction and those responsible for their validation,their monitoring and their completion. In addition, a seriesof consistent and clear instructions, consisting of charters,codes, lines of conduct and procedures has been put in placein order, inter alia, to ensure that all the internal controloperators can be coordinated.In that logic, the general architecture of the Dexia Groupinternal control system is based on an organisation split intothree levels:1. The first control level is performed by each member of staffand their superior, in relation to the responsibilities expresslydelegated to them, procedures applicable to their activity andinstructions given.2. The second control level is for specialist functions,irrespective of their activities and reporting directly to theManagement Board. This second level may also be theresponsibility of specialist committees, composed of members50 Dexia Annual report 2010

Declaration of corporate governanceof staff in operational, support and audit posts, chaired bya member of the Management Board. The fields concernedare for instance compliance, permanent control (the functionmonitoring audits) and risk management.3. The third control level is for the Dexia Group audit supportline which has the task, through periodic audits to supervisethe performance and the effective application of the twoaudit levels defined above, in the parent company and all itssubsidiaries and branches.For risk analysis and audit activities, each level/department/function performs its own risk diagnosis and puts checks inplace as it deems fit. Audit mechanisms are implementedat the level of the activities of each business line processand at the level of the support functions including IT. As acomponent of Dexia management, activity monitoring isorganised at each level and additionally revolves around theoperational entities of Dexia SA.Internal and external information and communication arepriorities. In addition to the internal communication mechanismof e-mail, intranet and within specialist departments, there areprocedures in this regard. The organisation of the Dexia Groupalso generates transversal communication to all operationalentities. There is differing reporting such as the ActivityReport established by Strategic Planning and Controlling andthe Quarterly Risk Report drawn up by Risk Management.External communication and Financial Communication aim forthe transparency and pertinence of information transmittedoutside Dexia.The main internal control actorsIn order to ensure the proper functioning and the developmentof the Dexia Group, its Management Board is responsible inthe last resort for the introduction and maintenance of anappropriate internal audit system. It defines and coordinatesthe management policy of the Dexia Group within the contextof the strategy defined by the Board of Directors. It allocatesthe means and sets the deadlines for the implementation ofactions decided within the framework of that policy. It checksthat the given objectives are achieved and that the internalaudit system is appropriate for all requirements. Finally, itadjusts those requirements in relation to internal and externaldevelopments observed.The teams more specifically concerned by the internal auditare as follows:• The Risk Management team, under the responsibilityof the Chief Risk Officer, a member of the ManagementBoard, under his direction supervises risk management policy.It establishes lines of conduct for limits and delegations,controls and measures risks aggregated at Group level andputs harmonised methods in place in the different entities(cf. chapter “Risk management” pages 77-94).• The Chief Compliance Officer reporting to the memberof the Executive Committee in charge of Legal, Complianceand Tax from November 2008, guides the support line ofcompliance officers in the different entities and ensuresobservance of the integrity policy and the development of aculture of professional ethics.• The Permanent Control, in place within the Dexia Groupsince the last quarter 2009 under the responsibility of theChief Compliance Officer, guides and monitors the gatheringof information on the permanent control plans for the DexiaGroup. That guidance relies on decentralised means withinthe divisions, as well as within the subsidiaries and branches.On 1 March 2011, the Permanent Control team wastransferred under the responsibility of the Head of OperationalManagement, another important internal control actor.• The Internal Audit, reporting directly to the ChiefExecutive Officer, Chairman of the Management Board,defines the methodology used in the Group, defines theGroup audit plan, coordinates, runs and performs audit tasks,and monitors action plans associated with recommendations.In its internal control surveillance task, the Board of Directorsof Dexia SA has relied since November 2008 on an AuditCommittee itself divided into an Internal Control, Risks andCompliance Committee composed of four directors, all nonexecutiveof whom two are independent directors, and anAccounts Committee composed of five directors, all nonexecutiveof whom three are independent directors. Twoof the five members of the Accounts Committee are alsomembers of the Internal Control, Risks and ComplianceCommittee. The Chairman of the Board of Directors mayattend this Committee, and also the Chief Executive Officer.The Accounts Committee and the Internal Control, Risks andCompliance Committee each meet at least four times perannum. Two of those meetings are held before the meetingsof the Boards of Directors examining the annual or halfyearlyaccounts. They can also meet on the request of theirmembers, or the Chairman of the Board of Directors.The two sub-committees meet at least once per annum,in the extended form of the Audit Committee, before theannual financial statements are approved, in order to dealwith joint matters relating to Group risk and provisioningpolicies and their impacts on the accounts or any other topicalsubject. That meeting is chaired jointly by the Chairman ofthe Accounts Committee and the Chairman of the InternalControl, Risks and Compliance Committee.In order to achieve optimum performance of their tasks, themembers of that committee may benefit, on their request andat the company’s cost, from specific training taking accountof Group features and in particular its internal control.The competences and the mode of operation of the AuditCommittee (and its two sub-committees) are described intheir internal rules.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia51

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsInternal AuditOrganisation and governanceInternal audit taskInternal Audit is an independent and objective activity whichhas the task of giving the Dexia Group an assurance on thedegree of risk control.To that end, internal audit grasps all the objectives of theorganisation, analyses the risks associated with thoseobjectives and periodically assesses the robustness of thecontrols put in place to manage those risks. Internal audit thensubmits an assessment of the residual risks to managementso that the latter can validate their adequacy to the globalrisk profile desired by the Dexia Group and for Dexia SA, andif necessary puts forward actions to management to increasethe effectiveness of controls.Moreover, via audit committees, internal audit supports theGroup Boards of Directors in their surveillance role.In accordance with international standards, a joint auditcharter sets out the fundamental principles governing theinternal audit function in the Dexia Group, describing itsobjectives, its role, its responsibilities and its modes ofoperation. Following the transformation of the Dexia Group,the audit charter was adapted so as to reflect the changesarising within the internal audit support line. The new charterwas presented to and approved by the Management Boardon 27 July 2010 and by the Audit Committee of Dexia SAon 4 August 2010. So that each member of staff of theDexia Group can grasp the importance of the function in theinternal control mechanisms and aids to the management ofthe Dexia Group, the audit charter will be published on theDexia internet site (wwww.dexia.com) as well as on the DexiaSA intranet site during the first half-year 2011.Guiding principlesThe strategy, the level of requirement and the rules ofoperation of internal audit in the Dexia Group are fixed bythe Management Board of Dexia SA, within the frameworkapproved by the Board of Directors of Dexia SA, via itsAudit Committee. That framework takes account of therequirements, legislation and local regulations and instructionsfrom the prudential control authorities.In line with professional and ethical standards, the followinggeneral principles underlie the performance of the tasks ofthe internal audit support line and are compulsory for allauditors:• Objectivity: the objectivity of audits is guaranteed by severalelements: the allocation of auditors, the objectification ofaudit conclusions via a documented methodical approach,the supervision of tasks and taking account of the point ofview of the party audited through a process in which bothsides take part.• Independence: independence is ensured by aligning eachaudit department to the highest hierarchical level of the entityfor which it is responsible.• Impartiality: internal audit is not involved in the operationalorganisation of Group entities. Group Management Boardsmay however call on them for an opinion, advice orassistance. This type of intervention by internal audit mustremain exceptional, particularly with regard to the elaborationand introduction of internal control procedures.• Access to information: in performing its task, internal audithas access to all information, documents, premises, systemsor persons of the entity for which it is responsible, includinginformation regarding management, minutes and files fromconsultative and decision-making bodies. Within that context,audit management has access to all information in all Groupentities.• Confidentiality: each auditor is bound by a strict dutyof reservation and discretion. In particular it must ensurefulfilment of the obligations of professional secrecy arisingfrom the regulations.• Competence: each auditor must demonstrate the greatestprofessionalism and have constant training to ensure masteryof the rapid developments of audit techniques, banking,financial and IT techniques and fraud techniques. Trainingrequirements are assessed at annual appraisals.• Common methodology: auditors use the same methodologyand document their work in an identical manner in order toensure consistent quality of interventions and the traceabilityof investigations by internal audit in the Group and to fostera consolidated perception of risks and their control.Internal audit receives the means necessary to perform itstasks from the Management Boards of the Dexia Group sothat it can respond constantly to the evolution of structuresand the environment of the Group.Scope of interventionAll activities, processes, systems and entities of the DexiaGroup are within the scope of action of internal audit, withoutreservation or exception. The scope of intervention includesall processes, whether operational, support, management,corporate governance and risk management and controlprocesses.In principle it does not cover the activities of companies inwhich the Dexia Group only has a minority holding, apartfrom exceptions associated in particular with requests fromthe supervisory authorities.Organisation of the functionThe first half-year 2010 was marked by the continuation ofthe transformation plan and by the effective introductionof the changes provided by the audit transformation plan,particularly in terms of organisation of the support line andthe evolution of methodology.1. PrinciplesThe Dexia Group internal audit support line operates inaccordance with a directive model by which all the GeneralAuditors of the entities run directly by Dexia SA report directlyto the General Auditor of Dexia SA, and this has an impactprincipally on the fixing of objectives and the assessment ofthe General Auditors of the entities reporting to the Dexia SAGeneral Auditor. Within this context, the heads of internalaudit in the branches report hierarchically to the GeneralAuditor of their parent company and the heads of internalaudit in the support lines of the parent companies report tothem operationally.52 Dexia Annual report 2010

Declaration of corporate governance2. Organisation of an audit functionWhen Dexia SA controls a subsidiary or, if there is no suchaudit, when the prudential control authorities expressly askfor one, an audit function is established in that subsidiary. Ifthe creation of an audit function is not considered pertinent,Dexia SA assumes the function of local audit and if necessarya service level agreement is concluded between Dexia SA andthe subsidiary concerned.3. Role of Dexia SA audit departmentDexia SA audit department is charged with ensuring theadequacy of the organisation of internal audit put in placethroughout the Dexia Group and the quality of its operation.Dexia SA audit department is responsible for:• audit strategy and its appropriate implementation in allaudit departments within the Dexia Group;• definition and application of a common risk analysismethodology;• definition and application of a common auditmethodology;• definition and application of a common recommendationfollow-up methodology;• optimum allocation of competences within the function;• determination of the level of training required of auditorsthroughout the Group;• coordination and assessment of training programmes;• circulation of necessary information within the function;• implementation of quality control;• management of central projects and the provision of audittools;• attribution and monitoring of the operating budget of eachlocal audit department.4. GovernanceThe organisational structure of internal audit is aligned tothe organisation of the Dexia Group by business lines andsupport functions. Each “segment” thus defined is run by aGroup Head of Audit who is responsible, in liaison with theoperational directors concerned, for the identification andsurveillance of risks relating to the segment with which heis entrusted, as well as supervision of all the audit tasks inrelation to that segment.The segments are as follows:• Public and Wholesale Banking• Retail and Commercial Banking, Asset Management andInvestor Services• Private Banking• Market activities, Balance Sheet Management, Risk etFinance• Operations, IT and other support functionsThis organisation, by transversal segment, is superimposed onthe organisation by entity, so as to maintain a global viewof risks.The General Auditor of Dexia SA sees to the adequate coverof risks over the entire scope of the Dexia Group: head office,subsidiaries and branches. It also plays an interface role withthe management of Dexia SA and the Regulator.Compared to 2009, final implementation of the transformationplan within the audit support line resulted in the followingchanges:• The post of head of audit for the Public and WholesaleBanking segment was combined with that of General Auditorof Dexia Crédit Local, the post of head of audit for the Retailand Commercial Banking segment with that of GeneralAuditor of Dexia Bank Belgium and the post of head of auditfor the Private Banking segment with that of General Auditorof Dexia Banque Internationale à Luxembourg.• The human means of the audit support line were regroupedin shared service centres (IT, Belgium, France, Luxembourg,Turkey), the scope of action of which is not limited to theborders of their respective countries.• A single audit plan was introduced for the Group and themonitoring of audits is ensured by segment in a transversalmanner for the entire Group.As the internal audit support line is integrated, themanagement and guidance of that support line relies on twostructures, the Audit Management Committee (AMC) and theInternal Audit Executive Committee (IAEC), as well as on a“support” team.Composed of the General Auditor of Dexia SA, who chairsit, and the General Auditors of the main entities (Dexia BankBelgium, Dexia Crédit Local and Dexia Banque Internationaleà Luxembourg), the General Auditor of DenizBank and thehead of audit in charge of IT systems and other supportfunctions, the AMC manages audit strategy and its financialand human means.For its part, the IAEC is composed of the members of theAMC, plus segment heads of audit as well as the head ofAudit Process Management and Organisation (APMO) whochairs it. This committee defines the audit universe andupdates it regularly, validates the risk map prepared by eachof the segment heads, defines the Group’s global auditplan, ensures the optimum planning of audit tasks, proposesnecessary developments in terms of means of the support line,methodology and tools, defines audit team training policy,analyses results from monitoring the performance of thesupport line and validates internal and external reporting.The Audit Process Management and Organisation (APMO)unit has the role of supporting the audit support line. It thushas the objectives of defining and updating methodologyand the audit process, elaborating and/or coordinatingthe different activity reports produced by the support line(internally and externally), implementing and maintainingthe tools necessary for the proper functioning of the auditsupport line, coordinating the work with operational risk andcompliance teams, producing performance indicators for therealisation of tasks and organising the auditor training plan aswell as quality reviews in order to ensure correct applicationof the audit method and processes. The APMO unit organisesand also participates in the Audit Committee and, in an effortto strengthen control of subsidiaries and branches, monitorsthe surveillance bodies of the entities and their subsidiaries/branches as well as the tasks performed by the local regulators.Finally, the APMO unit is responsible for management of theaudit plan, which means that it plans all the tasks under theaudit plan as well as any tasks outside the plan.Audit workThe work of internal audit rests on tried and tested methodstranslated directly from international good audit practices.Both the audit tasks and risk analysis through all the entitiesof Dexia rely on common methodologies. These are regularlyadapted to reflect both the evolution of standards andreturns of experience on the ground and the evolutions ofstructures.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia53

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsIndeed, in 2010, the risk methodology and establishment ofthe audit plan, which were reviewed in 2009, were subjectto improvements and simplifications (particularly for thesubsidiaries), as well as the computerisation of the principalstages.The methodology first of all identifies the objectives of thebusiness lines and the support processes in order then toquantify the impact of major risks which might adversely affectthe achievement of those objectives. Then the audit tasks aretargeted on the more critical subjects in terms of impact andprobability of occurrence. The methods used structure theaudit activity as a support to corporate governance in termsof risk control.The global risk universe approach, the common auditmethodology, the performance of “transversal” tasks ifnecessary, if not local and jointly depending on needs, andthe terms of accounting and monitoring at the level of theGroup parent structure contribute to assessing whether theDexia internal audit system is integrated and efficient and, ifnecessary, to asking for improvements.1. Process of risk analysis and planning audit tasks andresourcesInternal audit at Dexia SA exercises its function on the basisof a single audit plan for the Group defined by the IAEC,approved by the Management Board and then by the AuditCommittee and/or the Board of Directors.This plan is constructed from an annual risk analysisperformed independently by audit in compliance with bestpractices presented by the Institute of Internal Audit. Theprincipal stages leading audit to elaborate its audit plan areas follows:• identification of potential critical risks which might becontrary to the outcome of business line objectives by businessline and support process;• evaluation of the degree of vulnerability of Dexia SA inrelation to those critical risks, via a measure of the impactand probability of occurrence. The results of that evaluationenable more significant risks to be identified;• identification of audit units and audit universes which areeither at the origin of risks or responsible for anticipatingthem, leading to a risk score per audit unit, a score fromwhich a frequency of audit review is deducted;• listing of tasks performed in the past (the last three years)on audit units (back testing);• selection of tasks on risky audit units taking account of tasksperformed in the past and possible regulatory requirements interms of frequency.With a desire for efficiency, the audit plan is targeted onthe more risky audit units, namely those which, through allbusiness lines and all support processes, carry the greatestnumber of risks and/or key controls for the achievement ofobjectives. The audit units which do not carry major risks aresubjected to a simplified approach, responding to regulatoryrequirements to cover the audit universe.This perennial plan enables any resources requirement to bedetermined both from a quantitative and a qualitative pointof view as well as training needs.The audit plan draws a distinction between several types ofaudit tasks:• transversal tasks which are performed on the same sphereof activity in several entities at the same time and relateprincipally to one of the processes with a relatively highdegree of integration;• joint tasks which are performed jointly within an entity bylocal audit teams (if available), with the participation of oneor more auditors from a shared service centre;• local tasks which only relate to a single entity.2. Method of performing audit tasksThe method of performing audit tasks is common to allentities of the Dexia Group. The different phases of theprocess are presented in a procedure which describes thedifferent phases to be followed in performing an internal audittask (preparation, realisation, audit report, recommendationmonitoring...) as well as the formats of documents expectedat each phase. The procedure also determines the roles andresponsibilities and modes of review and approval and thearchiving of documents.The Dexia audit methodology revolves around four principalphases.• The preparation phase: after studying the activity sectorto be audited, when the aim is to gather and to analyseavailable information which might prove useful in properlyunderstanding the activity, the audit team prepares a workprogramme which in particular includes the processes, risks,controls expected to cover the identified risks and tests to beperformed in order to give an opinion on the concept andeffectiveness of the controls in place to cover identified risks.A task letter informs those concerned as well as the membersof the management boards of the entities involved of thescope, objectives and programme for the task• The realisation phase: each task must be performed on thebasis of working documents established on a determined basisand organised in audit files. They clearly reflect the work carriedout and the techniques and methods of work used to reacha substantiated conclusion. The audit opinion is expressed onthe capacity of the controls to provide appropriate cover ofidentified risks. A causal analysis is performed of weaknessesrevealed and residual risk is assessed.• The conclusion phase: each task is subject to a writtenreport, established in the presence of all concerned, intendedfor the parties audited as well as management. The reportcontains an assessment of the ability of the internal controlsystem to cover risks (positive and negative points), but alsorecommendations on measures enabling the risk level to beimproved. Then action plans are established by the partiesaudited and discussed with audit. Each action plan is definedby an operational member of staff who assumes responsibilityfor it and the date completion. The audit attributes a criticallevel to each of the recommendations made. Finally, eachaudited process is given a rating expressing the degreeof risk control. Throughout the task, a constant andconstructive dialogue is established with the audited partiesand management. Each report is then presented to theManagement Board which rules on the recommendations,action plans and their completion.• Recommendation monitoring: each task results inrecommendations being made from the action plans definedby the audited parties with an undertaking on their part asto the date of completion. The aim of these is to remedy anyweaknesses revealed by the audit tasks, in order to consolidatethe internal control system. The implementation of each action54 Dexia Annual report 2010

Declaration of corporate governanceplan is regularly monitored by audit on the basis of a declaredprogress statement and supporting documents provided bythe parties audited. Internal audit keeps a database of allrecommendations arising from audit reports and has defineda consistent procedure for monitoring the implementation ofthose recommendations.3. MonitoringTwice a year, the General Auditor of Dexia SA presentsthe Audit Committee and/or the Board of Directors with areport on the activities of internal audit. This report containsa summary of the principal observations made during audittasks, an annotated statement of the completion of auditplans, particularly in the case of a significant departure fromplanning, and an assessment of the sufficiency of means(from a qualitative and quantitative point of view).To support the recommendation monitoring process, twiceyearly monitoring of the action plans associated with the auditrecommendations is presented to the management boards ofthe various Group entities, and any delay in completing theaction plans responding to the recommendations is dealt withthere.A new recommendation monitoring tool was commissionedsuccessfully at the end of January 2010. This tool enablesthe auditors and the audited parties constantly to exchangeviews on the evolution of action plans responding to theaudit recommendations. It is planned in 2011 to deploy thetool in the subsidiaries of the Dexia Group and to integraterecommendations from the Regulators.TrainingIn addition to the training organised by human resources, anaudit-specific training plan has been introduced. It has varioussections to be followed depending on the role and seniorityof the auditor. Furthermore, at a human risk control level, theorganisation of internal audit into shared service centres willprovide better cover for Group activities by mitigating the riskof a lack of means (both qualitative and quantitative) whilstensuring the required reactivity in the case of urgency.Projects for 2011In 2011, correspondents must allocate some of an evengreater part of their time compared to 2010 to monitoringrisks in the scope under their responsibility (includingmonitoring action plans responding to recommendations frominternal audit, the regulators and the corporate auditors). Inthis way, the internal audit support line wishes clearly, beyondthe completion of tasks enabling new risks to be identified, toplace the emphasis on strengthened monitoring of the actionsagreed with the audited parties at the end of the previoustasks and having to remedy risks identified in the past. Thismechanism should, when it appears necessary, allow thetriggering of a warning procedure from management onthe areas of weakness which might appear significant andlasting.Several methodological projects are provided for 2011,including:• Revision of the audit universe. This new revision will integratethe transformation plan as well as all the organisationalchanges and associated movements of members of staff.This revision of the universe will have an impact on therecommendation monitoring tool.• Introduction of a more robust tool for reporting on thestate of progress made on action plans associated withrecommendations, a tool which will be provided both toauditors and to the parties audited. This tool will permit thesharing of reporting between the internal audit support lineand the operational support lines. It should be in operation atthe end of 2011.• Recasting of the intranet site for the internal audit supportline with more detailed access management rules. First ofall, the site will enable the audit support line to obtain allnecessary information on the audit methodology and alsoto gather in one single place all the audit reports and keydocuments for each of the phases of an audit task. Secondly,it will enable the flows of each audit task to be automatedand therefore performance indicators to be automaticallycalculated on the good operation of the support line.• A self-assessment of internal audit in line with the QualityAssurance Review standards of the Institute of InternalAuditors, with the aim of preparing for external validationby an independent body. This process is recommended byinternational standards.Activities in 2010A major part of the Dexia Group audit plan was implementedin the form of “transversal tasks”, namely tasks performedsimultaneously in Dexia SA and in the Group’s mainoperational entities: Dexia Crédit Local, Dexia Bank Belgium,Dexia Banque Internationale à Luxembourg and DenizBankas well as certain of their subsidiaries/branches, in relationto the subjects dealt with. In 2010, those tasks related inparticular to risk management, the Finance, Balance SheetManagement, Operations and IT support lines as well asmarket activities. The other support functions were also theobject of regular tasks.The audit tasks performed in 2010 gave rise to theestablishment of plans to remedy weaknesses detected inthe internal control system. Each action plan was approvedby the Management Board of the entity concerned and,depending on its importance, reported to the ManagementBoard of Dexia SA, and subject to regular monitoring, toensure that the recommendations formulated are effectivelyimplemented.In terms of implementation of the audit plan (number oftasks) over the year 2010, the performance rate of local andjoint tasks is considered good, and slightly up on the rate fortransversal tasks.The year 2010 was marked by a strengthening of themonitoring of contacts with the Regulators.In fact, contacts with the different Regulators of the DexiaGroup, whether through inspection tasks or meetings, tendedto be intensified, and this mobilised an increasing amount ofthe time of internal audit staff in 2010.When the Regulator performs a task within the Dexia Group,the role of audit consists of monitoring its progress ensuringthat the elements requested are properly transmitted to theInspectors, at the end of the task, coordinating the formulationof action plans responding to the recommendations by theRegulators (applying the principle of strengthening the roleof audit in these matters), then to likewise monitoring theresponse to its own recommendations.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia55

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAt Dexia SA level, the tasks performed by the Regulators in2010 related in particular to the following matters: ICAAP,Financial Products and Margin Calls.Moreover, regarding relations with the supervisory authoritiesand the corporate auditors, the audit departments ofsubsidiaries and branches of Dexia SA inform the auditdepartment of Dexia SA of planned meetings on the auditoperation, tasks performed by the prudential controlauthorities in their entities (throughout the task) and thematters deemed important arising from their regular meetingswith the corporate auditors and the supervisory authoritiesand submit the minutes. The audit management of Dexia SAmay attend these meetings when they so desire.Creation of an investigation and branchaudit unitOne of the guiding principles of the transformation of theaudit support line was the creation in 2010 of an Investigationand Branch Audit unit within Dexia SA, responsible forthe definition of transversal methodologies as well asinvestigations to be performed transversally (involving severalentities of the Dexia Group) and the periodical inspection ofthe branch network.The task of Investigations is, independently and objectively,to contribute to controlling the risks of fraud. Indeed the unitparticipated in the establishment of a governance structurefor the management of fraud risk. It intervenes in awarenessand fraud prevention activities. It takes measures for thedetection of fraud and deals with cases of fraud, and then itsuggests and monitors the remedy.The task of Branch Audit is, independently and objectively, togive Dexia an assurance as to the degree of control of risksassociated with activities in physical distribution channels.It systematically and methodically assesses the processes ofrisk management, control and governance in distributionchannels.Organisation and governanceIn terms of governance, the Investigation and Branch Auditunit is managed by the Group Head of Investigation andBranch Audit, reporting to the General Auditor of Dexia SA.It consists of:• an Investigation and Branch Audit unit reporting hierarchicallyand operationally to the Dexia SA audit department;• local Investigation and Branch Audit units reportinghierarchically to the audit departments of the entities butwhich nonetheless depend operationally on the Investigationand Branch Audit unit of Dexia SA.In order to manage and to steer the unit, it is coordinatedby a so-called Investigation and Branch Audit ExecutiveCommittee (IBAEC). On the basis of a fraud risk analysis, thiscommittee proposes the planning of joint activities, ensuresoptimum planning of transversal tasks, proposes necessarydevelopments in terms of the unit’s means, methodologyand tools, defines team training policy, analyses the results oftransversal tasks and validates activity reports. It also decideson the temporary placement of inspectors among entities.An Investigation and Branch Audit Charter sets out thefundamental principles governing the function, describing itsobjectives, roles, powers, duties and responsibilities, modesof operation and basic rules. This document assists in fixingobjectives for the unit and describes relations and conditionsof intervention by the Investigation and Branch Audit teamof Dexia SA vis-à-vis other entities of the Dexia Group takingaccount of the presence or not of local investigations teams.The Charter was presented to and approved by theManagement Board of Dexia SA in June 2010 and a meetingof the Internal Control, Risks and Compliance Committee inAugust 2010.Operational implementation of the Charter involves theconclusion of various service level agreements between DexiaSA and its subsidiaries. These agreements should be finalisedduring the first quarter 2011.Publication of the Investigation and Branch Audit Charterand its communication to employees of the Group will beorganised during the first half-year 2011. This will enableevery member of staff to understand the importance of thefunction in the internal control mechanisms and to assistmanagement of the Dexia Group.Activities in 2010Beyond the activities of elaborating and implementing theInvestigation Charter, the activity of the Dexia SA Investigationand Branch Audit Unit was aligned in 2010 to the followinglines:1. Actions involving awareness of fraud risk(s)On the request of the Operations and IT Systems support line,the Dexia SA team cooperated in the organisation of a FraudAwareness Workshop (presented by Deloitte) for the teams ofthat support line.2. The performance of tasksIn 2010 the Investigation and Branch Audit Unit was involvedin several tasks:• a transversal task, “Fleet Management”;• a joint task, performed in partnership between Dexia SAand Dexia Banque Internationale à Luxembourg, consistingof checking inter alia on advantages in kind, conflicts ofinterest, the operation of compliance functions and corporategovernance;• a task concerning assistance in the analysis of accountssuppliers and more precisely the exposure to financial riskassociated with double payments of supplier invoices;3. Inquiries and information to the judicial authoritiesIn 2010, 20 inquiries were made by the Investigation andBranch Audit department in Dexia SA. According to theclassification of fraud risks set out by the Basel II committee,the tasks performed or ongoing may be classified among thefollowing risk categories: internal fraud (12 tasks), externalfraud (4 tasks), clients, products and business practices (3tasks) and employment practices and workplace safety (1task).In addition to these inquiries, the team responded to severalrequests for information from entities and the judicialauthorities.56 Dexia Annual report 2010

Declaration of corporate governanceComplianceThe Compliance function is an independent and objectiveactivity. It carries on its activities without influence, interferenceor restriction likely to affect its independence, its integrity, itsimpartiality and its objectivity.The role and fields falling within the Compliance function aswell as the principles of governance underlying the approachadopted by Dexia regarding compliance are set out in thecompliance policy which was approved and entered into forcein 2009.The compliance fields are as follows:• the fight against money laundering and the financing ofterrorism;• market abuse and personal transactions;• the integrity of the markets in financial instruments;• integrity towards clients in all Dexia activities;• data protection and professional secrecy;• prevention of conflicts of interest;• external mandates;• the independence of the auditors;• whistleblowing;• prevention with regard to specific mechanisms (policyaimed at preventing specific mechanisms put in place for thepurposes of tax evasion as provided, if such should be thecase, by the applicable law);• any other field indicated by the Management Board or theBoard of Directors.In the fields of competence listed above, the Compliancefunction performs the following tasks:• It analyses legal and regulatory developments in order toanticipate and to assess possible consequences on Dexiaactivities. It ensures the correct interpretation of national andinternational legislation and regulations. It is also a first pointof contact with the regulators.• It identifies, analyses and measures non-compliance risksand reputation risks which might arise from activities andfinancial products, in particular:- existing activities and products;- new activities/services;- new products/segmentations;- new entities;- any new geographic perimeter.• It provides assistance to business lines in the developmentand implementation of compliance procedures and otherdocuments, for example compliance manuals, internal codesof conduct and practical guides. It assists and advises in orderto ensure the correct interpretation and implementationas well as the observance of these procedures and otherdocuments.• It develops and provides compliance training programs,adapted to the needs of business lines, promoting anappropriate compliance culture and an awareness andunderstanding of standards, procedures and lines ofconduct.• It checks the fulfilment of compliance obligations, inparticular taking account of risks incurred.• To the extent that it is required by local regulations,it communicates with the financial regulators or anyother competent authority about any suspect incident ortransaction.• It reports regularly to the Management Boards andCoordination Committees of Internal Control with regard toits activities and the status of any major shortcoming.Organisation and positioningThe Group’s Chief Compliance Officer reports to the memberof the Management Board of Dexia SA responsible forthe Legal, Compliance and Tax support line. A cascadingprocedure is in place to guarantee the right of the GroupChief Compliance Officer to report directly to the Chairmanof the Management Board of Dexia SA or to the Chairmanof the Internal Control, Risks and Compliance Committee ofDexia SA on any significant incident.This organisational mode was duplicated within the mainentities.Dexia SA Compliance was reorganised at the beginning of2010, and is now composed of two divisions reporting to theChief Compliance Officer of Dexia:• Permanent Control, the deployment of which began duringthe first quarter 2010 following the decision taken by theManagement Board to extend this function to the entireGroup. Since 1 March 2011, the team has been placed underthe responsibility of the Head of Operational Risk;• Dexia SA Compliance, the head of which took up the poston 1 September 2010. Compliance is subdivided into twopoles:- the “Policies and Guidelines” pole in charge of fieldsrelating to regulatory surveillance of compliance, marketabuse, conflicts of interest, client and private data protection,relations with entities directly reporting to Dexia SA (DexiaTechnology Services and DenizBank), and determination ofthe compliance framework applicable to the different businesslines;- the “Monitoring, Reporting and Tools” pole in charge ofadministration, global monitoring of the Compliance functionand specific monitoring in particular regarding MiFID. Thispole is also in charge of establishing the compliance risk mapand coordination of the AML and CTF mechanisms in Groupentities.GuidingThe Dexia Group has a Compliance Committee the tasks ofwhich are:• to distribute competences within the Group in compliancewithin business lines and competence centres;• to ensure an integrated approach is adopted.Its composition reflects all the activities and/or business lineswithin Dexia.Furthermore, there is periodic reporting by each Groupsubsidiary. A consolidated report is then drawn up andsubmitted to the Internal Control, Risks and ComplianceCommittee.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia57

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsThe new rules on the prevention of insider dealing in Dexiafinancial instruments approved at the end of 2009 weretransposed at the beginning of 2010. These rules define thestatus attributed to members of staff in relation to the accessto inside/sensitive information which they have or are likelyto have in performing their tasks, and fix the restrictions/obligations associated with each status.The Code of Professional Ethics was revised and trainingcourses were organised for members of staff of DexiaSA in order to remind them of key principles in terms ofcompliance. The new Code of Professional Ethics is graduallybeing transposed within the entities of the Group.The definition of a consistent control plan over all Groupentities began in 2010. The aim of the exercise is to ensurethe application of policies, guidelines and procedures, ifnecessary to trace malfunctions and to implement correctiveactions in order to allow better guiding of the support line.The review and finalisation of compliance monitoring controlsat Dexia SA level were performed in consultation with thePermanent Control team.The third edition of the compliance risk map was launchedin 2010. The results of the map will be presented jointly withthe action plans attributed to each major risk. The actionplans will be monitored to check their implementation andsynergy work has begun with Compliance monitoring in orderto identify and deal best with the controls of the monitoringplan corresponding to the major risks of the map.The Legal, Compliance and Tax support line wishes to havea single IT tool allowing centralised guiding as well astransversal management of its processes and activities. Thework of analysis in this direction began at the end of 2009and continued in 2010.The needs of the Compliance support line currently coveredby the e-Room collaborative tool will be included in the newsoftware.The quarterly consolidated MiFID report put in place in 2009continues to be produced. The year 2010 saw the scopeof MiFID monitoring extended gradually into the entitiesconcerned with MiFID.This report contains the indicators and results of testsintended to measure the performance of procedures inrelation to the European MiFID Directive. It is produced byDexia SA on the basis of reports from the different entitiessubject to that Directive as well as on the basis of exchangesand discussions between the Dexia Group and the mainentities. Once validated, the final report is presented by theChief Compliance Officer to the Internal Audit CoordinationCommittee.Concrete actions are put in place gradually in order to improvethe supervision of subsidiaries and branches.Each main entity has the responsibility of organising contactswith its own network of subsidiaries.So Dexia SA Compliance maintains close relations with theentities reporting directly to it and with the main entities.Deployment to the entire Group of the Permanent Controlsupport line, decided by the Internal Control CoordinationCommittee in November 2009 continued in 2010. Thissupport line ensures monitoring of the Group PermanentControl.The global governance structure of that support line revolvesaround three pillars:• the monitoring function within Dexia SA which isresponsible for definition of the methodology, guidelines andreporting, definition of the Group Permanent Control planand its consolidation;• heads of Permanent Control in the Risk, Back Office TFMand IT Security support lines (as well as Compliance) whichsee to the application of Group guidelines in each entity forthe support line;• heads of Permanent Control in the entities which arethe guarantors of application, within their entity, of themethodology, references and procedures of the Group.Permanent Control Managers of the entities report to theGroup Head of Permanent Control and, with a few exceptions,operationally to the Head of Operational Risk of their entity.A statement of progress in deploying the support line ispresented regularly to the Internal Control CoordinationCommittee. The gradual establishment of the team at DexiaSA and entity level gave an assurance of the dissemination ofstandards, implementation of governance of the support lineand entities over which Permanent Control is being deployed.The inventory of controls is currently being established and themonitoring of those controls will be developed over 2011.Characteristics of internal controlwithin the context of producingfinancial informationThe Finance support line has the following five departments,reporting to the Chief Financial Officer, member of theManagement Board:• Financial Management, including transversal services to theFinance Capital & Structuring, Finance Project Management,Finance Control & Finance Prudential Watch support line;• Accounting and Consolidation;• Strategic Planning and Controlling;• Balance Sheet Management (BSM);• Financial Communication.Dexia’s scope of consolidation includes the following directsubsidiaries, also known as the operational entities:• Dexia Bank Belgium SA;• Dexia Crédit local SA;• Dexia Banque Internationale à Luxembourg SA;and the following subsidiaries:• Dexia Holdings Inc. (holding company of Dexia FinancialProducts);• Dexia Participation Belgique SA (holding company holdingDenizBank);• Dexia Nederland BV (result of the merger of Dexia NederlandHolding SA and Dexia Bank Nederland);• Associated Dexia Technology Services SA;• Dexia Management Services Ltd;• Dexia Participation Luxembourg SA;• Dexia Funding Luxembourg SA.58 Dexia Annual report 2010

Declaration of corporate governanceProduction of the financial statementsThe Accounting and Consolidation department produces thefollowing financial statements:• the consolidated financial statements of the Dexia Group;• the periodic prudential reports;• the corporate financial statements of Dexia SA.Consolidation processUnits gather databases using standardised frameworks,bundles.The Group accounting plan, integrated into the consolidationsoftware, is common to all Dexia entities and subsidiaries.The amount of detail required from subsidiaries is defined atGroup level.It also monitors and audits the accounting data of thepermanent establishments of Dexia SA in France andLuxembourg and, within the context of the consolidationprocess, its direct subsidiaries.In particular it checks that the information provided isconsistent and complies with Group rules.It has four divisions:• Accounting Standards;• Consolidation;• Consolidation Information Systems;• General Accounting.Dexia SA consolidated financial statementsDexia SA principally has holdings in Dexia Crédit Local, DexiaBanque Internationale à Luxembourg, Dexia Bank Belgiumand DenizBank. Each of these entities prepares consolidatedfinancial statements and these are consolidated with thefinancial statements of the holding company, Dexia SA, anddirectly associated subsidiaries.The main adjustments booked by the Dexia GroupConsolidation division relate to the elimination of reciprocalaccounts and intra-Group transactions (acquisitions/assetdisposals, dividends...). They also relate to the reprocessing ofcompanies held by different Group entities.If there is difficulty in interpreting the accounting principles,all entities may call on the Dexia SA Consolidation division. Incollaboration with the Accounting Standards division, it givesan appropriate answer.When the consolidated financial statements have beenfinalised, they are submitted for review to the Chief FinancialOfficer who has them approved by the Management Board.They are then presented to the Audit Committee (part of theAccounts Committee), and approved by the Board of Directorsof Dexia SA. The consolidated financial statements preparedby the Dexia SA consolidators are presented for review to theAccounts Director of the entity, who validates them and hasthem approved by the Chief Financial Officer of the entity.Consolidation toolConsolidation reporting uses the Magnitude software, acommon tool deployed in all Dexia subsidiaries and branches.It operates via a common database, Dexia SA thus havingaccess to all bundles.The shared use of this common database enables consolidateddata to be established at Dexia level and at an operationalentity level.The selection of data, for each entity or subsidiary, is managedon the basis of scopes of consolidation established by eachconsolidation level.The standardised bundles are adjustable to permit thegathering of specific data for a sub-group (or consolidationlevel).The establishment of data intended for the annual report isdivided into phases, and in particular this allows differentiatedmanagement in time depending upon the type of data. Tothat end, the following phases are distinguished:• AC: database (essentially headings and flows);• AI: interco-type data;• AX: data for notes to the accounts;• AT: fiscal data (movements and analysis of the origin ofdeferred taxes, proof of tax).Bundled data is then subject to the appropriate consolidationprocessing, either via automatic processes managed by theconsolidation software or by manual entries so as to resultin consolidated data. Manual entries are managed by theConsolidation divisions of the entities and subsidiaries. Manualentries are also subject to defined checks in the software.Reciprocal entries are reconciled automatically in Magnitudeonce the entities and subsidiaries have submitted their“AI” bundles of declarations of inter-company transactions.Magnitude enables statements to be restored presenting thedeclaration differences between the different Group entities(per account and per class of accounts). The restorationaccounts may be edited per entity but also globally for theconsolidation level. Reciprocal declarations are gathered inthree stages: declarations, correction of differences, definitivearbitrages.Monitoring reciprocal transactionsIn migrating to IFRS, hedging reciprocal transactions has beenforbidden by Dexia, excepting specific exemptions.The process of reconciling reciprocal transactions involvesdifferent divisions:• the Consolidation division, in charge of coordinating work(instructions, progress meetings...);• the Accounting division which deals with the declaration ofreciprocal accounts in Magnitude for Dexia SA;• the Consolidation division of entities and subsidiariesintervening to advance the resolution of differences betweentwo entities or subsidiaries, making the link with theirrespective Accounting divisions;• the trading rooms of Dexia Bank Belgium and Dexia CréditLocal New York with regard to off-setting. In fact, the DexiaBank Belgium trading room, as a competence centre, ensuresthat internal derivatives are effectively turned over on themarket.Within the Consolidation division, reciprocal transactions arereconciled under management supervision. An operatingmode details the rules relating to specific problems (securitiesissued by a Group entity, acquired by another Group subsidiary,Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia59

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsreciprocal rate-hedged lending and borrowing, maintenanceof hedge relations including intra-Group derivatives anddifferences in the valuation of derivatives).Reciprocal transactions are entered in Magnitude semiautomatically.Later amendments are entered directly inMagnitude. Subsidiaries are made aware of their responsibilityin resolving differences observed, following a pre-definedschedule. A process of transaction-reconciliation via theIntellimatch tool is being deployed within the Group.Notes and appendices to the annual financialstatementsSome of the notes and appendices to the annual accounts arenot drawn up directly by the Accounting and Consolidationdepartment, but come from the following departments:• Strategic Planning and Controlling (analysis per businessline);• Risk Management (appendices on risks);• Legal (note relating to litigation);• Human Resources (transactions with management-relatedparties, stock options).The planning for gathering this information and finalresponsibility for the content of the annual financial statementsare assumed by the Finance division.Dexia SA accountsDexia SA accounts are kept in Brussels and also in thepermanent establishments in Paris and Luxembourg. Thesethree establishments keep a separate accounting. On amonthly basis, all transactions recorded in the financialstatements of the permanent establishments are integrated atthe registered office in Brussels using the SAP tool.Additional checks are made by teams in the Accountingdivision when drawing up the quarterly or annual financialstatements. Balances and the principal evolutions must bejustified.Accounting StandardsThe Accounting Standards division has become thecompetence centre for the entire Group. Its task is:• to monitor, analyse and interpret IFRS/IAS/IFRIC/SICaccounting standards published and endorsed by theEuropean Union;• to ensure compliance of the consolidated financialstatements with those standards;• to analyse transactions proposed by the business, todetermine their IFRS treatment and to assist entities and otherdepartments on questions relating to standards, financialstructures and new products;• to represent Dexia before external organisations such asEFRAG (European Financial Reporting Advisory Group), EBF(European Banking Federation), Febelfin (1) and so on;• to centralise updated documents relating to standards andto make them available to entities and subsidiaries.(1) Febelfin is the “umbrella federation” of the Belgian financial sector.Manual of accounting principlesIn providing documents relating to standards, the AccountingStandards division produces or is involved in producing thefollowing documents:• chart of accounts at Group level: accounting plan integratingthe latest modifications of Magnitude;• Disclosure Manual: published and used for the productionof appendices;• valuation rules included in the financial statements.Validation committeeThe Dexia Accounting Standard Committee (DASC), on whichsit the heads of Accounting Standards of each entity, isresponsible for:• interpreting accounting standards;• defining and validating accounting options made by entitiesand subsidiaries.Interpretations made and common positions taken by theDASC are validated by the auditors.Monitoring points for attention raised by theauditors with regard to IFRSA formal debriefing on audit points is made by the auditorswith the Accounts Committees. Any obstacles are resolved inan ongoing process of exchange with the auditors.Training policyThe Group head of Accounting Standards is responsible fororganising and chairing training sessions and seminars onAccounting Standards. Seminars organised internally aregenerally intended for exchanges on adopted accountingprocesses and their operational definition. Seminars organisedwith the support of an external service provider enableupdates to be made on customary market practices and theprogress of discussions of topical subjects (FVO, Day One,New IAS39...).Periodic prudential reportingStandardised reporting (COREP) is sent to the Banking,Finance and Insurance Commission four times a year;regulatory ratios (CAD) are calculated quarterly for publicationpurposes; solvency margin calculations are sent half-yearly tothe Banking, Finance and Insurance Commission.Components of COREP reportingCOREP reporting is realised with contributions from:• Finance (calculation of regulatory capital, floor calculation,calculation of consumption in market risk – standardmethod);• Credit Risk Management (calculation of capital requirementfor credit risk – AIRBA method);• Market Risk Management (calculation of capital requirementfor market risk – internal model);• Operational Risk Management (calculation of capitalrequirement for operational risk – standard method).Capital requirements are calculated by different divisionsof the Risk Management support line and are subject tochecks defined within that same support line. Finance checksprobability by comparison with requirements declared in theprevious period.60 Dexia Annual report 2010

Declaration of corporate governanceCOREP reporting is communicated electronically (XBRL andby mail); it consists of various documents falling within theresponsibility of different services.Ratio assembly is the responsibility of Finance.Calculation of regulatory capitalRegulatory capital is calculated on the basis of:• consolidation of the financial statements on a prudentialscope for capital elements, for the value of holdings to bededucted (by the equity method or not), for items to bededucted;• calculation of the fair value of subordinated loans by thedifferent consolidation levels; compliance of the calculationbase with the accounting balances is checked centrally; theresult of the calculation is entered under a technical headingon the Magnitude consolidation software;• calculation provided by Risk Management regardingexpected loss; the amount is entered under a technicalheading on the Magnitude consolidation software.The calculation of regulatory capital is stored in the Magnitudeconsolidation software.such as Financial Communication, External Communication,Finance Capital & Structuring, Mergers & Acquisitions, RiskManagement. This involves the following reports:• Activity monitoring;• Result per entity;• Analytical result;• Performance fees;• Use of capital;• Financial remarks;• Monitoring specific expenditure;• Transversal cost matrix.In this context, it performs the following tasks:• Determining the conceptual framework of the analysisof the results and profitability of Group business lines andanalytical entities;• Guiding the annual budget procedure;• Establishing periodic commercial and financial reports;• Making projections of periodic quarterly and annualresults;• Making themed studies intended to analyse the profitabilityof certain sectors of activity or certain entities.Management reportMemorandum of UnderstandingThe process of elaboration and control of reportingestablished by virtue of the Memorandum of Understandingand any additional documents (1) is similar to those applicableto the Dexia consolidated financial statements. Dexia SA willbe subject to new FINREP reporting which will replace theMemorandum of Understanding from 2011.Producing management informationThe main aim of management information is to givemanagement reliable information as soon as possible on theactivity and the profitability of business lines and analyticalentities.The financial statements sent by the Dexia Group to itsshareholders and to the public are completed by otherelements from detailed analyses such as activity reportsand results per business line, which are integrated into theFinancial Report or communicated at presentations to financialanalysts. Most of this information requires a cross-referencingand aggregation of data from different sources, a breakdownof figures available globally or a reprocessing of accountingdata in relation to management parameters. It is checkedand provided to the editors of the Financial Report by theStrategic Planning and Controlling department.Apart from this information intended for the public, theStrategic Planning and Controlling department establishesa series of management reports intended for Dexia’smanagement bodies. Management reports are established forthe Dexia Management Board and heads of business lines.They are then sent wholly or in part to other departments,(1) The reporting list is included in the appendix to the Memorandum ofUnderstanding concluded on 11 September 2000 between the Banking,Finance and Insurance Commission (Belgium), the Banking Commission andthe Credit Establishment and Investment Company Committee (France) andthe Financial Sector Supervisory Commission (Luxembourg) on the controlon a consolidated basis of the Dexia banking group, as revised on Dexia’smigration to IFRS.Consolidation toolsManagement information is produced via a multidimensionaldatabase enabling data to be stored and processed. It alsoenables targeted on-line analyses to be performed rapidly andis used for the management of all data relating to activitiesand profitability.Planning reportingAs part of its planning task, the Strategic Planning andControlling department establishes the following reports:• a guidance note, produced annually by the Chief FinancialOfficer;• a financial and budget plan: a note presenting globalforecasts and forecasts per business line, produced annuallyat the end of the year;• basic standards and hypotheses for budget elaboration.Financial and budget plans are produced entirely in theentities/subsidiaries, per business line.When the entity’s budget is established, apart from its beingin line with the guidance note, the Chief Executive Officerof the entity/subsidiary ensures the budget’s consistencyas a whole, its feasibility from the points of view both offinancial, capital and human resources and observance of anylocal constraint, and presents it to the member of the DexiaManagement Board responsible for its scope.First-level challenging is by the latter, with the assistanceof the Strategic Planning and Controlling, Organisation,Risk Management, Human Resources and Finance Capital &Structuring divisions. Its aim is to check it is in line with theguidance note. Budgets thus established are then presentedto the Chief Executive Officer. They are then presented to theManagement Board of Dexia SA before being submitted forapproval to the Board of Directors.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia61

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnalytical information for realisationAn operating chart, established quarterly, contains a series ofkey indicators (production and outstanding long and shorttermfunding, commissions, volumes of deposits and assetsunder management, gross present value originations andguaranteed premiums from credit enhancement activity...).It is drawn up with the support of information provided bythe commercial services, on the basis of structures specificto each commercial business line and uniform across theGroup, established by Strategic Planning and Controlling.The information provided is accompanied by comments madedirectly by the commercial services. It allows for any possiblerepositioning of results expected for the current year.The Strategic Planning and Controlling support line checksthe consistency of the information provided and complianceof the presentation with the standards established for all theentities of the Dexia Group.This operating chart is presented by the head of business lineto the Management Board prior to being sent to FinancialCommunication which sees to its transcription for the annualreport and the quarterly Financial Report.Determining results per business line in theprofitability reportsThe elaboration of income per business line relies essentiallyon two types of analytical information, commercial marginon the one hand and other elements of the statement ofincome (commissions, general costs, value corrections...) onthe other hand.Aggregation of the interim balances over all business linesis subject to reconciliation of the accounting statement ofincome.To summarise, all of these processes contribute to theelaboration of the statement of income for each business line,thus allowing an assessment of the profitability-risk ratio andthe contribution to Dexia’s overall result.The aggregation processThe aggregation process is described in the Manual ofProcedures and Standards for Management Control, commonto the entire Dexia Group.The complete process is supervised by the Strategic Planningand Controlling department, which provides all the entitieswith standardised and secure collection tools, in order to makemore accurate and to optimise the mechanism for gatheringinformation. Finally, it also ensures global aggregation.The process of information aggregation per business line isfollowed in parallel to the consolidation process guided bythe Accounting and Consolidation division. In order to ensurethe consistency of analytical and accounting information,consistency checks have been introduced.Finance ControlThe role and tasks of the Finance Control function cover theFinance support line for the entire Group. This team has thetasks of completing the internal control mechanism of theDexia Group by aligning its work to the main entities (whichare responsible for maintaining the quality of the internalaudit in their respective group) and of representing theFinance support line in the general control mechanism withinthe Dexia Group.Relying on risk maps and controls within the Financefunctions to identify major risks, the Finance Control functionconcentrates its interventions on the consistent applicationof financial standards and principles (accounting, analytical,prudential and so on) of Dexia through the Group. The tasksmay therefore relate also to audit of contributions other thanAccounting/Management Control relating to the productionfinancial information (ICAAP/Pillar 2 reporting and so on).This team also has the task of contributing to a betteralignment of control processes between the different entitiesof the Dexia Group. The performance of transversal tasks alsocomes within this rationale.To summarise, its tasks break down as follows:• assessing the risks and the adequacy of control systemswithin the Finance support line (process/risk/control map);• performing transversal control tasks or those specific to anentity (in relation to a pre-established control plan);• coordinating the monitoring of recommendations on theFinance sphere (Control, Regulators, Internal and ExternalAudit);• acting as Finance correspondent for any internal controlquestion.Relations with the Statutory AuditorsThe Statutory Auditors make regular checks on the financialreporting of the various entities and subsidiaries of the DexiaGroup. They are involved with the entire process of checkingthe financial and accounting information with a concernfor efficiency and transparency. As part of their duties theyanalyse the accounting procedures and assess the internalaudit systems necessary for reliably establishing the financialstatements. They issue instructions to the auditors of theentities and ensure their work is centralised. They organisesummary meetings on the results of their audits and assess theinterpretation of standards. Finally, they check the consistencyof accounting information between the management reportand the financial statements. The performance of theseduties enables them to obtain a reasonable assurance that,considering the legal and regulatory provisions governingthem, the annual financial statements give a true picture ofthe assets, financial situation and results of the company andthat the information given in the Notes is appropriate.62 Dexia Annual report 2010

Declaration of corporate governanceDeloitte(in EUR)Services renderedto Dexia SAServices renderedto the Dexia Group(consolidated amounts)a) Audits of the financial statements 200,400 7,448,981 (1)b) Certification work 184,531 (2) 637,134c) Tax advice - 20,727d) Due diligence - -e) Other work (not certification) 21,328 257,764Total 406,259 8,364,606(1) This amount includes EUR 113,747 in fees relating to additional non-budgeted tasks.(2) This amount essentially includes certification in the grant of the State guarantee.External controlStatutory AuditorIn accordance with Article 14 of the articles of associationof Dexia SA, the control of the company’s financial situationand annual financial statements is entrusted to one or moreauditors who are appointed by the Shareholders’ Meeting fora maximum of three years on the recommendation of theBoard of Directors.Since 1 January 2008, the function of legal control of thefinancial statements of Dexia SA has been in the hands ofDeloitte – Reviseurs d’entreprises SC s.f.d. SCRL, a companyrepresented by Messrs. B. De Meulemeester and F. Verhaegen,Statutory Auditors, replacing the previous auditors, fora term of three years, ending at the close of the Ordinaryshareholders' meeting in May 2011. That meeting will beinvited to decide on a renewal of the auditor’s mandate.Compensation of the Statutory AuditorThis table gives a summary of the Compensation paid to theStatutory Auditor for its services in 2010 at Dexia SA and atthe level of the whole Group.Protocol on the prudential structure of theDexia GroupIn accordance with the provisions of European Directives onbanking coordination, the prudential supervision of the DexiaGroup is exercised on the consolidated basis of the Dexia SAfinancial company which is the parent company. Thatsupervision is exercised by Belgian, French and Luxembourgsupervisory authorities.The Banking, Finance and Insurance Commission signed aprotocol with Dexia SA in 2001 relating to the prudentialstructure of the Dexia Group. This protocol, which containsimportant agreements between the Banking, Finance andInsurance Commission and Dexia SA in terms of corporategovernance, deals in particular with the status of companyexecutives (honesty and professional experience, treatmentof conflicts of interest, loans to executives), the quality ofDexia SA shareholders, the joint nature and authority of theDexia SA Management Board, and consolidated control of theDexia Group. A copy of the protocol may be obtained fromthe company’s corporate offices. The text of the protocol,which was slightly modified in 2003, is also available on theDexia website (www.dexia.com).Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia63

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsGeneral informationAuthorised capital(Article 608 of the Company Code)The Extraordinary Shareholders’ Meeting on 13 May 2009decided to cancel the non-utilised balance of its authorisedcapital in existence at the date of the meeting and to establisha new authorised capital at EUR 8,080,000,000 on that samedate for a period of five years, the decision coming into forceon 27 May 2009. Over the 2010 financial year, the Board ofDirectors did not make use of the authorised capital.Acquisition of own shares(Article 624 of the Company Code)The Extraordinary Shareholders’ Meeting on 13 May 2009renewed the authorisation given to the Board of Directors fora new period of five years:• to acquire the company’s own shares on the market or inany other manner up to the legal maximum number for acounter-value established in accordance with the provisions ofany law or regulation applicable at the time of the purchase,and which may not be less than one euro per share or higherby more than 10% of the last closing price on EuronextBrussels;• insofar as needed, to dispose of the company’s own shares,possibly beyond the maximum period of five years providedfor their acquisition. Direct subsidiaries within the meaningof Article 627 § 1 of the Company Code are authorised toacquire or to dispose of the company’s shares under the sameconditions.The Shareholders’ Meeting delegated all powers to the Boardof Directors which, in its turn, entrusted those powers:• if necessary to determine the terms and conditions of resaleor disposal of own shares and• to decide and if necessary to implement the disposal of thesaid own shares.The Board of Directors did not however launch a programmeto purchase own shares in 2010.The balance of the portfolio of own shares as at 31 December2010 corresponds to the number of Dexia shares still held byDexia Crédit Local (direct subsidiary of Dexia SA within themeaning of Article 627 § 1 of the Company Code), within thecontext of a share option plan put in place by that subsidiaryin 1999.SUMMARY OF TRANSACTIONS ON OWN SHARESNumber ofOwn shares (Dexia SA and direct subsidiaries)shares in Number of Accounting Counter-% of capitalcirculation own shares par (EUR) value perPeriod from 31 Dec. 2009 (subscribedshare (EUR)31/12/09 31/12/10to 31 Dec. 2010capital)Situation at the start of theperiod 1,762,478,783 293,570 4.590 9.544 0.02% 0.02%Acquisitions over the period 0 0 4.590 0.00% 0.00%Cancellations over the period 0 0 4.590 0.00% 0.00%Transfers over the period 0 0 4.590 0.00% 0.00%Issues over the period 83,927,561 (1) 13,978 4.205 4.205Situation at the end of theperiod 1,846,406,344 307,548 4.572 9.301 0.02% 0.02%(1) The issue of 83,927,561 shares (“bonus shares”) was decided by the Extraordinary Shareholders’ Meeting held on 12 May 2010. Their effective issue wasobserved by notarised deed dated 11 June 2010. They were distributed to shareholders in the proportion of one bonus share per 21 existing shares.Overview of the direct holdings ofDexia SA as at 31 December 2010The 10 direct holdings of Dexia SA as at 31 December 2010are as follows:• 100% in Dexia Bank SA (Belgium);• 100% in Dexia Crédit Local SA (France);• 57.68% in Dexia Banque Internationale à Luxembourg SA(Luxembourg);• 99.99% in Dexia Participation Luxembourg SA (Luxembourg),which holds 42.23% of Dexia Banque Internationale àLuxembourg SA;• 10% in Dexia Holdings Inc., the parent company of DexiaFP Holdings Inc. (United States);• 100% in Dexia Nederland BV (Netherlands);• 100% in Dexia Funding Luxembourg SA (Luxembourg);• 95.39% in Dexia Participation Belgique SA, which holds99.84% of DenizBank AS;• 99.40% in Associated Dexia Technology Services SA(Luxembourg);• 0.01% in Deniz Faktoring AS (Turkey), 99.99% being heldby DenizBank AS.Dexia SA has two permanent offices, one in France and onein Luxembourg.64 Dexia Annual report 2010

Declaration of corporate governanceAgenda of the Shareholders’MeetingsThe agendas for the Ordinary Shareholders’ Meeting and theExtraordinary Shareholders’ Meeting to be held on Wednesday11 May 2011 in Brussels are available on the Dexia SA Internetsite: www.dexia.com.Warrants granted in 2001Exerciseprice(in EUR)fromExercise periodtoNumber ofsubscriptionrightsgrantedNumber ofsubscriptionrightsexercisedNumber ofsubscriptionrights cancelledas voidNumber of residualsubscription rightsbefore transfer (5)“ESOP 2001” Warrants 17.05 30 june 2004 (1) 31 Dec. 2011 (1) 8,100,000 2,715,038 115,750 5,499,997Warrants granted in 2002“ESOP 2002” Warrants 13.04/11.34 (2) 30 Sept. 2005 (1) 23 July 2012 (1) 10,000,000 5,541,057 234,774 4,374,096Warrants granted in 200313.04 1,121,01311.34 3,253,083“ESOP 2003” Warrants 10.85 30 Sept. 2006 (1) 24 July 2013 (1) 10,000,000 2,247,878 8,069,375Warrants granted in 2004“ESOP 2004” Warrants 12.94 30 Sept. 2007 (1) 24 July 2014 (1) 10,000,000 81,250 10,391,021Warrants granted in 2005“ESOP 2005” Warrants 17.77 30 june 2008 (1) 29 june 2015 (1) 9,994,950 15,000 110,100 10,339,793Warrants granted in 2006Share capitalShare capital as at 31 December 2010Summary table of Dexia Subscription rights (as at 31 December 2010)As at 31 December 2010, the share capital amounted toEUR 8,441,935,648.09, represented by 1,846,406,344 shareswithout indication of nominal value, of which 327,854,624registered shares, 1,508,960,651 dematerialised shares and9,591,069 bearer (physical) shares. The shares are listed onEuronext Brussels, Euronext Paris and the Luxembourg StockExchange.“ESOP 2006” Warrants 17.77 30 june 2009 (1) 29 june 2016 (1) 9,760,225 15,000 125,650 10,077,602“2006 network shareownership plan” Warrants 20.28 29 Oct. 2011 29 Oct. 2011 197,748 0 207,163“ESOP 2006” Warrants(DenizBank) 19.77 15 Dec. 2009 14 Dec. 2016 235,000 0 246,189Warrants granted in 2007“ESOP 2007” Warrants 22.19 30 june 2010 (1) 29 june 2017 (1) 10,322,550 0 10,778,325Warrants granted in 2008“ESOP 2008” Warrants 9.63 30 june 2011 29 june 2018 7,093,355 0 7,378,529“ESOP 2008” Warrants 12.08 30 june 2012 29 june 2018 3,466,450 0 3,598,397“FP State guarantee”Warrants (3) 12 May 2010 12 May 2011 (4) 2 0 0 2(1) Except under specific conditions.(2) 13.04: France/11.34: other countries.(3) Relates to the issue, decided by the Extraordinary Shareholders’ Meeting on 24 June 2010, of a subscription right (warrant) in favour of the State of Belgium and a subscriptionright (warrant) in favour of the State of France, in relation to the mechanism for repayment of the guarantee granted by the Belgian and French States with regard to the obligationsof Dexia related to the Financial Products activities of the FSA Group, within the context of the sale of FSA to Assured Guaranty. For a description of the specific characteristics ofthese subscription rights, please consult the special report of the Board of Directors of 12 May 2009: http://www.dexia.com/docs/2009/2009_legal/20090509_rapportSpecialFSA_FR.pdf.(4) Warrants are issued for a term of five years and their reissue, by cancellation of the existing warrants, will be submitted to the approval of the Shareholders’ Meeting every yearon the date of the Shareholders’ Meeting.(5) In order to protect warrant holders against adverse economic consequences arising from the issue of bonus shares following the resolution passed by the ExtraordinaryShareholders’ Meeting held on 12 May 2010, the exercise price for warrants was reduced and the number of warrants increased in accordance with an adjustment ratio determinedin line with the Corporate Action Policy of Euronext NYSE Liffe. Those adjustments were observed by notarised deed dated 25 November 2010. By virtue of that adjustment, warrantholders are in the same financial situation as before the issue of the bonus shares.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia65

Declaration of corporate governanceManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsNotifications under the legislation ontransparencyUnder the terms of the Law of 2 May 2007 (the “Law”) relatingto the publication of major holdings in issuers the shares ofwhich are admitted for trading on a regulated market andthe Royal Decree dealing with its execution dated 14 February2008, which entered into force on 1 September 2008, andon the basis of Article 5 of the articles of association of DexiaSA, shareholders are obliged to notify their holding to theBanking, Finance and Insurance Commission and to Dexia,insofar as it reaches a threshold of 1%, 3%, then 5% or amultiple of 5%.To calculate percentages of holdings, the numerator consistsof the number of voting rights attached to shares conferringvoting rights or not associated with shares, reduced orincreased by the number of voting rights which may beacquired on the exercise of similar financial instruments heldby the person making the declaration. The denominatorconsists of the total of existing voting rights in Dexia SA aspublished on the website.Moreover, in application of the “Protocol on the prudentialstructure of the Dexia Group” (cf. “Corporate governance”on page 63), Dexia SA has asked its main shareholdersto inform the company and the Banking, Finance andInsurance Commission as soon as possible prior to any of theaforementioned transactions.During the year 2010, Dexia SA received various notificationsfrom its shareholders, namely:• on 26 February 2010, a transparency notification was sentto BlackRock Inc. the holding of which exceeded the statutorythreshold of 1% on 24 February 2010;• on 25 March 2010, BlackRock Inc. sent a new transparencynotification according to which their holding passed backbelow the statutory threshold of 1% on 22 March 2010;• on 1 September 2010, the shareholders which hadconcluded an agreement under which they are deemed toconstitute “persons acting in concert” (cf. point Legislationon tender offers hereafter) under the meaning of Belgianlegislation relating to tender offers notified their holding inthe capital of Dexia SA following the crossing by Ethias Groupof the legal threshold of 5% on 26 August 2010;• on 17 September 2010 BlackRock Inc. notified its holdingin the capital of Dexia SA above the statutory threshold of1% on 13 September 2010;• on 3 November 2010, BlackRock Inc. sent a newtransparency notification according to which their holdingpassed back below the statutory threshold of 1% on 28October 2010.All of these notifications are published in full on the DexiaSA internet site.It emerges from these notifications that no shareholder,other than the reference shareholders listed in the table onpage 21, holds more than 1% of the share capital of DexiaSA as at 31 December 2010.Legislation on tender offers“Grandfathering” regimeUnder the terms of Article 74 of the Law of 1 April 2007relating to public takeover bids, persons which as at1 September 2007, either alone or in concert, hold morethan 30% of the voting securities of a Belgian companyadmitted to trading on a regulated market are not subjectto the obligation to launch a public takeover bid on theshares of the said company provided in particular that for21 February 2008 at the latest they have sent a notificationto the Banking, Finance and Insurance Commission and acommunication to the said company.On 30 August 2007, Dexia SA was informed of theconclusion by certain of its shareholders (Arcofin, HoldingCommunal, Caisse des dépôts et consignations, Ethias andCNP Assurances) of an agreement under the terms of whichthey are deemed to constitute “persons acting in concert”within the meaning of the Law of 1 April 2007 relating topublic takeover bids. The holding of the shareholders actingin concert in the capital of Dexia SA exceeds a threshold of50%.This agreement was the object of a notification to theCBFA and a communication to Dexia SA in accordance withArticle 74 § 6 and 7 of the Law of 1 April 2007 relating topublic takeover bids.The principal elements of that communication are publishedon the Dexia SA internet site.Moreover, in accordance with Article 74 § 8 of the said Law,the parties acting in concert must annually notify any changeto their holding which has taken place since 1 September2007.Within this context, each year Dexia SA receives an updatelisting the transactions carried out on Dexia shares by thedifferent shareholders acting in concert (and associatedparties) as well as, if such should be the case, any changes ofcontrol holding within the meaning of Article 74 § 8 of thesaid Law. The essential of the notifications received in 2010,which are available in full on the Dexia SA internet site underthe heading “Legal Information/Belgian tender offer rules”, islisted in the following table.66 Dexia Annual report 2010

Declaration of corporate governanceNumber of sharesheld with votingrights2009 2010Percentage ofshares held withvoting rightsNumber of sharesheld with votingrightsPercentage ofshares held withvoting rightsArcofin SCRL 246,450,499 (1) 13.98% 248,813,296 (4) 13.48%Arcopar SCRL 1,867,684 (1) 0.11% 2,571,219 (4) 0.14%Arcoplus SCRL 388,739 (1) 0.02% 530,092 (4) 0.03%Arcosyn SA 464,139 (1) 0.03% 605,492 (4) 0.03%Auxipar SA 790,502 (1) 0.04% 931,855 (4) 0.05%Holding Communal 256,981,170 (2) 14.58% 267,444,856 (5) 14.48%CNP Assurances SA 52,292,439 (3) 2.97% 54,677,878 (6) 2.96%Caisse des dépôts et consignations 310,436,225 (3) 17.61% 325,218,902 (6) 17.61%Ethias Droit Commun 0 (2) 0.00% 0 (4) 0.00%Belré SA 11,695,763 (2) 0.66% 0 (4) 0.00%Nateus Life SA 144,000 (2) 0.01% 0 (4) 0.00%Nateus SA 48,710 (2) 0.03% 0 (4) 0.00%Ethias SA (formerly Nateus SA) 72,758,790 (2) 4.13% 93,065,092 (4) 5.04%Ethias Investment RDT-DBI SA 3,350,500 (2) 0.19% 0 (4) 0.00%Ethias Finance SA 0 (2) 0.00% 0 (4) 0.00%(1) As at 30 August 2009.(2) As at 31 August 2009.(3) As at 1 September 2009.(4) As at 31 August 2010.(5) As at 27 August 2010.(6) As at 26 August 2010.Powers of the administrative body, in particularconcerning the power to issue or repurchasesharesIn accordance with Articles 607 and 620 of the CompanyCode, the Shareholders’ Meeting may grant to the Boardof Directors certain powers to increase the capital and topurchase own shares. Within this context, the ExtraordinaryShareholders’ Meeting on 12 May 2010 decided to renew thefollowing authorisations granted to the Board of Directors.Authorisation to increase the capital within thelimits of the authorised capital during a tenderofferThe Extraordinary Shareholders’ Meeting held on 12 May 2010expressly authorised the Board of Directors, in accordancewith legal provisions, for a period of three years, in the caseof a tender offer on the companies shares, to increase thecapital by way of contributions in kind or in case with thepossibility of limiting or removing the preferential subscriptionright of existing shareholders, without the total amount ofthose increases of capital (excluding issue premium) exceedingthe balance of the authorised capital.Authorisation to acquire or to dispose of ownshares in order to avoid the company sufferingserious, imminent prejudiceThe Extraordinary Shareholders’ Meeting on 12 May 2010renewed for a period of three years the authorisationsgranted to the Board of Directors referred to in Article 7 §§2 and 3 of the company’s articles of association, to acquireand to dispose of own shares in order to avoid serious,imminent prejudice (these authorisations are also valid fordirect subsidiaries within the meaning of Article 627 § 1 ofthe Company Code).Agreements between the company Dexia SAand members of the management body and itsstaff, which provide indemnities if members ofthe management body resign or must leave theirposts without valid reason or if the employmentof members of staff ends by virtue of a tenderofferThe contract of employment concluded between Dexia SAand Mr André Vanden Camp as a member of the Company’sExecutive Committee provides that, if the contract isterminated following a change of control, he will be paid asingle and fixed indemnity equal to 18 months of fixed andvariable salary. That indemnity is subject to a condition ofperformance in the sense that the indemnity will be reducedif an assessment of Mr André Vanden Camp’s performancefinds that it has deteriorated.The management agreement concluded between Dexia SAand Mr Philippe Rucheton as a member of the Company’sManagement Board provides an indemnity equal to 18 monthsof fixed and variable salary if the agreement is terminated byDexia SA before Mr Philippe Rucheton has reached the age of65 years, within a deadline of 12 months following a changeof control. The fixed indemnity corresponding to a period of18 months may not however exceed the number of monthsbetween the date of termination and the date on which MrPhilippe Rucheton reaches the age of 65 years.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia67

Shareholder informationManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsStock market evolution in 2010The year 2010 did not see any continuation of the equitymarket rebound which began in 2009. This investmentcategory was broadly relinquished in 2010 in favour of othermore remunerative assets (real estate, gold, corporate bondsand so on) despite an “under-valuation” of some shares. Asat 31 December 2010, the Euro Stoxx 50 had lost 5.4%, andthe CAC 40 3.3%, whilst for its part the BEL20 had risen2.7% by virtue of the very good performance of its firstcapitalisation.On the other side of the Atlantic, macroeconomic data, andparticularly employment data, did nothing to reassure themarkets as to the robustness and the recovery of the USeconomy, which might have triggered a recovery in Europe.Within the euro zone, against a background of weak growthin the economy, the third shock of the financial crisis (thesovereign debt crisis), first of all hit Greece and then, bycontagion certain more fragile countries in the euro zone.The introduction of austerity plans, the fall of tax receipts,and additional expenditure associated with population ageingaggravated the debt situation of some European States,arousing fears among investors in the absence of strongeconomic growth. The mechanisms for support to States indifficulty put in place in May by the European Union, theIMF, the Eurogroup and the ECB, allowed a gradual returnto calm. However, after the summer, renewed uncertainty hitthe markets in view of the problems of the Irish banks, anddominated the fourth quarter.Against that background, the financial sector was particularlyaffected, and this was reflected by a fall of more than 26.5%on the Euro Stoxx Banks which includes banks in the eurozone. On top of the tensions on sovereign debts, whichimpacted bank portfolios, came a number of uncertainties ofa regulatory or fiscal nature, such as the new Basel III solvencyand liquidity standards.For Dexia, the year 2010 saw its market price fall 38.9% (1) overthe period. The market year had however begun relatively wellwith an out-performance by the share in comparison to thesector until the first concerns arose on the sovereign debts ofcertain European States and regulatory uncertainties weighingon the financial sector. In that environment, the evolution ofthe Dexia share price was below market performance, in bothfalling and rising periods, with the exception of the periodwhich followed the announcement of the results of Europeanbank stress tests by the CEBS (Committee of EuropeanBanking Supervisors). Globally, the lack of visibility prior tothe decision by the European Commission, the weight of thebond portfolio and fears as to sovereign exposure weighedon the share’s performance throughout the year.The number of share exchanges fell by more than 38%over the year, against the general background of investordisaffection with financial stocks. The exit of the Dexiashare from the CAC 40, from 20 September 2010 on, againaccentuated the trend. To recall, the Crédit local de France(currently Dexia Crédit Local) share joined the CAC 40 on17 November 1993 before being replaced in the index bythe Dexia share in November 1999, after the developmentof the relationship between Crédit local de France and CréditCommunal de Belgique (currently Dexia Bank Belgium) in1996 and the Group's reorganisation in 1999.(1) On the basis of the adjusted share price as at 31 December 2009(EUR 4.257) to take the impact on the share price of the issue of bonus sharesdistributed to shareholders in 2010 into account.Stock exchange data 31/12/09 31/12/10Share price (in EUR) 4.460 (1) 2.600Stock market capitalisation (in millions of EUR) 7,861 4,8012009 2010Highest price/lowest price (in EUR) 7.060/1.100 4.868/2.540Average daily transaction volume (in millions of EUR) 21,365 13,379Daily number of shares exchanged (in thousands of shares) 4,640 3,802(1) Historical share price. The adjusted share price was EUR 4.257 as at 31 December 2009 and takes the impact of the issue of bonus shares distributed toshareholders in 2010 into account.68 Dexia Annual report 2010

Shareholder informationDEXIA’S STOCK MARKET PERFORMANCE (FROM NOVEMBER 1996 TO 31 DECEMBER 2010)27 EUR24 EUR21 EUR18 EUR15 EUR12 EUR9 EUR6 EUR3 EUR0 EURBase Dexia20/11/9620/05/9720/11/9720/05/9820/11/9820/05/99Dexia EuroStoxx Banks EuroStoxx50DEXIA’S POSITION IN THE MAIN EUROPEANINDICES (AS AT 31 DECEMBER 2010)20/11/9920/05/0020/11/0020/05/0120/11/0120/05/0220/11/0220/05/0320/11/0320/05/04Weightingin indexPositionBEL20 (1) 2.44% 14Euronext 100 0.29% 82Dow Jones EURO STOXX Banks (1) 0.44% 2620/11/0420/05/0520/11/0520/05/0620/11/0620/05/0720/11/0720/05/0820/11/0820/05/0920/11/0920/05/1031/12/10Management report(1) Calculated on the free float.EVOLUTION OF THE NUMBER OF 31/12/06 31/12/07 31/12/08 31/12/09 31/12/10SHARESNumber of shares 1,163,184,325 1,178,576,763 1,762,478,783 1,762,478,783 1,846,406,344of which own shares 490,607 8,932,736 293,570 293,570 307,548Subscription rights (warrants) 58,697,872 62,817,843 71,787,214 71,242,716 (1) 70,960,487 (1)Total number of shares and subscriptionrights (2) 1,221,882,197 1,241,394,606 1,834,559,567 1,833,721,497 1,917,366,829(1) This amount does not take into account the two warrants issued by decision of the Extraordinary Shareholders’ Meeting of 24 June 2009 in the frameworkof the State Guarantee in relation to the sale of FSA.(2) For more details, consult the legal information at www.dexia.com.Consolidatedfinancial statementsDATA PER SHARE 31/12/06 31/12/07 31/12/08 31/12/09 31/12/10Earnings per share (in EUR) (1)- basic (2) 2.38 2.08 (2.42) 0.55 0.39- diluted (3) 2.34 2.05 (2.42) 0.55 0.39Average weighted number of shares (1)- basic (4) 1,157,567,239 1,218,031,322 1,372,373,776 1,846,098,796 1,846,098,796- diluted (4) 1,174,269,891 1,235,488,294 1,372,373,776 1,846,098,796 1,846,098,796(1) (5)Net assets per share (in EUR)- related to core shareholders’ equity (6) 11.08 12.28 9.47 10.02 10.41- related to total shareholders’ equity (7) 12.61 10.99 2.12 5.52 4.85Dividend (in EUR)Gross dividend 0.81 0.91 - (8) - (9) - (10)Net dividend (11) 0.61 0.68 - (8) - (9) - (10)Net dividend for shares with a VVPR strip (12) 0.69 0.77 - (8) - (9) - (10)(1) The average weighted number of shares, the earnings per share and the net assets per share have been restated to take into account the issue of bonusshares distributed to the shareholders and to enable comparison.(2) The ratio between the net income Group share and the weighted average number of shares.(3) The ratio between the net income Group share and the average weighted diluted number of shares.(4) Excluding own shares.(5) The ratio between the net assets and the number of shares at the end of the period (after deduction of own shares).(6) Excluding reserves on shares available for sale, fair value of hedge derivatives and conversion differences.(7) Including reserves on shares available for sale, fair value of hedge derivatives and conversion differences.(8) No dividend was paid for the 2008 financial year.(9) On the proposal of the Board of Directors, the Extraordinary Shareholders’ Meeting of 12 May 2010 approved a capital increase of EUR 352,915,394.01 byincorporation of reserves and the issue of 83,927,561 bonus shares granted to shareholders on 11 June 2010 prorata to their shareholding.(10) As in 2010 and subject to prior approval by the Extraordinary Shareholders’ Meeting of 11 May 2011 of the capital reduction referred to as the first item onthe agenda of that shareholders’ meeting, the Board of Directors will propose to the shareholders’ meeting that it approve a capital increase by incorporationof reserves in an amount of approximately EUR 280 million and the issue of bonus shares which will be granted to shareholders prorata to their shareholding,to reward them for their continuous support.(11) After deduction of a 25% Belgian withholding tax.(12) After deduction of a 15% Belgian withholding tax (as the deduction is reduced to 15% for securities with a VVPR strip).Additional information Annual financial statementsAnnual report 2010 Dexia69

Shareholder informationManagement reportConsolidatedfinancial statementsPRINCIPAL DEXIA SHAREHOLDERSPercentage of existing shares heldas at 31 December 2010Caisse des dépôts et consignations 17.61%Holding Communal 14.14%Arco Group 13.81%Belgian federal government through Société fédérale departicipation et d’investissement 5.73%French government through Société de prise de participation del’État 5.73%Ethias group 5.04%CNP Assurances 2.96%Flemish Region through Vlaams Toekomstfonds 2.87%Walloon Region 2.01%Employee shareholding 1.07%Brussels-Capital Region 0.86%Other institutional and individual shareholders 28.17%STOCK MARKET RATIOS 2006 2007 2008 2009 2010Pay-out ratio (in %) (1) 34.3 42.0 - (2) - (3) - (4)Price-earnings ratio (5) 8.3x 7.9x n.a. 7.8x 6.7xPrice to book ratio (6) 1.8x 1.3x 0.3x 0.4x 0.2xAnnual yield (in %) (7) 3.9 5.3 - (2) - (3) - (4)(1) The ratio between the total dividend and the net income Group share.(2) No dividend was paid for the 2008 financial year.(3) On the proposal of the Board of Directors, the Extraordinary Shareholders’ Meeting of 12 May 2010 approved a capital increase of EUR 352,915,394.01 byincorporation of reserves and the issue of 83,927,561 bonus shares granted to shareholders on 11 June 2010 prorata to their shareholding.(4) As in 2010 and subject to prior approval by the Extraordinary Shareholders’ Meeting of 11 May 2011 of the capital reduction referred to as the first item onthe agenda of that Shareholders’ Meeting, the Board of Directors will propose to the Shareholders’ Meeting that it approves a capital increase by incorporationof reserves in an amount of approximately EUR 280 million and the issue of bonus shares which will be granted to shareholders pro rata to their shareholding,to reward them for their continuous support.(5) The ratio between the average share price as at 31 December and the earnings per share for the year. For the period 2005-2008, the average price onEuronext Brussels and Euronext Paris. On 14 January 2009 following the introduction of the single order book, the benchmark for the Dexia share becameEuronext Brussels.(6) The ratio between the average share price as at 31 December and the net assets per share as at 31 December (related to core shareholders’ equity).(7) The ratio between the gross dividend per share and the share price as at 31 December.Additional information Annual financial statementsDividend policyTo recall, in accordance with the agreement with the EuropeanCommission, Dexia is not authorised to pay dividends in cashuntil the end of 2011.However, as in 2010, the Board of Directors wishes to rewardthe shareholders for their continuous support notwithstandingthe difficult circumstances due to the financial crisis and plansto propose to the Extraordinary Shareholders’ Meeting of11 May 2011 to approve a capital increase by incorporationof reserves in an amount of approximately EUR 280 million (1) ,by the issue of new shares to shareholders, in the form ofbonus shares.Bonus shares are new ordinary shares representing the capitalof Dexia, issued in consideration of the capital increase byincorporation of reserves and issued to shareholders pro ratato their shareholding. They will have the same dividend rightand the same rights as existing Dexia shares on their date ofissue.The rate of exchange of the number of coupons giving a rightto a new share will be fixed on 10 May 2011 after the closingof Euronext Brussels.The issue price of the new shares will be equal to the averageclosing price of the Dexia share on Euronext Brussels over thethirty calendar days preceding 11 May 2011, the date of theExtraordinary Shareholders’ Meeting.For more detailed information, please consult the specialreport from the Board of Directors dated 23 February 2011,available at www.dexia.com.Relations with shareholdersDexia is attentive to the quality of its relations with itsshareholders. Those relations are described in detail in thechapter entitled “Corporate Governance”, pages 21 to 23in this Annual Report. In 2011 Dexia meets its shareholderson Wednesday 11 May in Brussels at the Ordinary andExtraordinary Shareholders’ Meetings.(1) Subject to prior approval of the capital reduction referred to as the firstitem on the agenda of the Extraordinary Shareholders’ Meeting which will beheld after the Ordinary Shareholders’ Meeting of 11 May 2011.70 Dexia Annual report 2010

Human ResourcesHuman Resources in transformationIn 2009, the refocusing of the Group was accompanied bya complete activity review and by a plan aiming at a tighterorganization of all Group support lines (including HumanResources). The Human Resources transformation consisted inimproving and optimising its operation from the point of viewof alignment, increased responsibility and efficiency-seekingand therefore set a new target organisation for HumanResources to be implemented and rolled-out and that willchange its modus operandi.The four principles of the Human Resources reorganisationare:• the introduction of a common governance for HumanResources by the definition of a common approach in theoperational management of activities, with global policies,rules, processes and tools and by a redefinition of the rolesand responsibilities of committees;• the homogenisation of the support line in operationalterms, by:- the definition and documentation of standard processesand tools for all the entities,- the establishment of consistency in the principal HRprocesses and tools for the whole Group whilst taking intoaccount the specific local features imposed by the businessmode, the legal or social framework,- the development of self-service in all the entities for basicHR operations, supported by a call centre and an integratedback office;• the optimisation of the distribution of HR services via thecreation of “job pools”, ensuring a common managementof the activities of recruitment and mobility, trainingadministration and HR administration, for all the entities inthe same country;• the mutualisation of key HR competences by:- the redefinition of the distribution of roles between theGroup and the entities, and the elaboration of strategy for allthe HR activities together for the Group,- the creation of mutualised competence centres for keyprocesses.The Transformation Plan 2011-2013, presented on15 September 2010, will shift HR from a strong functionalmodel to a directive model (to be implemented in 2011).The aim is to improve the level of coordination and visibility,to simplify the organisational structures, to improve thedecision-making processes and to achieve synergies. Inaddition, implementing the project to reorganise HR has alsomade it possible to identify a number of remaining operatinginefficiencies, as well as the synergies not yet realised betweenthe various entities.Furthermore, this change in the governance of HR willfacilitate better consistency, visibility and control overspending and better-coordinated management of initiatives,especially transversal projects. The new organisation will alsofocus on industrialising the processes even more, simplifyingthe structures and sharing competences.The elaboration and implementation of this HR TransformationPlan will continue in 2011. In addition to its propertransformation, all competences will be mobilized in 2011 tosucceed in the overall transformation of Dexia and to limitthe impacts on teams as much as possible. Solutions will besought via social dialogue and in line with Dexia’s Principlesof Social Management.Key figuresAt the end of 2010, Dexia had 35,185 members of staff, of68 different nationalities, in 34 countries (including RBC DexiaInvestor Services and the independent networks in Belgium).• Seniority – More than 60% of members of staff joinedthe Group less than ten years ago and the average length ofservice of Group members of staff is 11 years.• Age – Group members of staff are young; in total, 41.2%of staff are less than 35 and 58.8% less than 40 years of age.The average age is 39.2 for men and 36.9 for women, andthe overall average age is 38.• Men/women – The overall division of workforce betweenmen and women is well balanced, at 50.5% and 49.5%respectively.• Turnover – 95.1% of workforce on indefinite-termcontracts.• Part-time – 15% of Group members of staff work parttime.• Training days – The average number of training days permember of staff (Full Time Equivalent) rises to 1.9 days forthe whole Group (more than 10% increase year-on-year).As regards staff figures, the downward trend resulting fromthe transformation plan continued throughout 2010, incompliance with the objectives. It should, however, be notedthat, at Group level, the fall was offset by the substantialgrowth in new hires at DenizBank, Dexia's Turkish subsidiary(not subject to the terms of the transformation plan).Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia71

Human ResourcesMEMBERS OF STAFFGENDER BREAKDOWNAS AT 31 DECEMBER 2010 (1) 50.5%4.1Caisse des dépôtset consignationsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsHoldingCommunalArco GroupFrench StateOthercountriesFranceLuxembourgTurkeyAGE PYRAMID> 5955-5950-5445-4940-4435-3930-3425-2920-24< 202,3143,7635,935FemaleMale20% 15% 10% 5% 0% 5% 10% 15% 20%SENIORITY PYRAMIDFemaleTotal35,1859,348Male13,825Belgium(1) Including self-employed networks and RBC Dexia Investor Services. .> 4036-4031-3526-3021-2516-2011-156-100-550% 40% 30% 20% 10% 0% 10% 20% 30% 40% 50%Male49.5%FemaleRecruitment, talent management andmobilityWith regard to recruitment, 2010 was marked by the strictmonitoring of vacant posts and an extremely selectiveexternal recruitment policy. The main objective was to provideassistance and to implement the Transformation Plan forthe various departments through the internal mobility ofmembers of staff. In 2010, 437 members of staff moved toother Group entities. Particular attention was paid, moreover,to the repatriation of a large proportion of expatriates asDexia’s international activities were reduced.In Turkey, DenizBank remains strongly present and attractiveon the labour market. More than 1,500 members of staff wererecruited in 2010, in order to support its growth strategy.In the other countries, Dexia prepared the repositioning ofthe Dexia Employer Brand, in line with the Group’s brandimage campaigns.In career management the emphasis was placed on theinternal mobility of members of staff and the identification of“Key People”. Retention actions were continued through thevarious Group entities. In association with the Dexia MobilityCentre (team dedicated to the management of mobility andto professional reclassification), Career Committees monitoredvacant posts in particular in order to promote internal careeropportunities to a maximum across the Group.The systematisation of annual reviews aimed at monitoringperformance and potential, gathering the aspirations ofmembers of staff and formalising succession plans enabledcompany managers to be associated very closely with therunning of Human Resources.The reactivation of assessment and development centres aswell as the deployment of a common assessment mechanismfor all Group members of staff also witnessed Dexia’s desireto foster their professional development.72 Dexia Annual report 2010

Human ResourcesWorking conditionsImplementation of the Transformation Plan had majorconsequences on the evolution of the working conditionsof members of staff. For a long time, the Group has beeneager to give its employees the greatest possible visibility overtheir company and their evolution within it, to prevent and todetect stress situations, particularly with the introduction of apolicy to prevent “mental risks”.There are many mechanisms to detect, prevent and managestress, within the entities.Several information channels currently enable such risks tobe detected in the entities (personnel representatives, workdoctor, social assistants, internal and external advisory teams,recovery tools as part of the quality certification process,satisfaction surveys and so on).As for prevention, in addition to existing measures (preventivemedical consultations, ergonomic advices, training of membersof staff and managers and so on), there have been new largescaletraining and coaching actions.Stress detection surveys were carried out in several entitieswith a view to averting psycho-social risks and reducing thestress with which members of staff might have to cope. Insome entities, the survey also covered employee satisfactionwith the performance of their tasks. The aim of thesesurveys is to implement action plans aimed at increasing staffmotivation.Finally, declared stress situations are managed and assistanceprovided by various means: via the Human Resourcesdivision, internal and/or external experts, coaching measures,psychological hotlines, interviews, working time adjustments.The Dexia Corporate University also created new trainingcourses aligned to the accompaniment of change and stressmanagement for all: members of staff, managers, HumanResources teams and so on.TrainingSupporting the Dexia transformation plan was one ofthe major objective of the training department in 2010.Initiatives to support line management in their role as changeagent were combined with coaching and training peopleconfronted with a professional reorientation. Seminars werealso organized to explain and discuss the evolution of theregulatory framework in different areas (risk, finance andfinancial markets). A major investment was also made intraining for the commercial networks in order to furtherimprove the customer orientation and satisfaction. In thatframework, the Deniz Academy has been supporting thegrowth of DenziBank’s commercial network providing trainingfor new hired sales staff, management trainings for new salesmanagers and sales programmes on "relationship bankingstrategy".In order to support people in their career opportunities, theDexia Corporate University re-launched some of its strategiclearning initiatives:• Marco Polo Programme: a programme for high potentialthat aims at promoting mobility within the Group and atcontributing to the development of a Group culture. Thisprogram includes a 6-month assignment in a different countryand a different entity.• Lead an Organisation: mini-MBA programme targetingsenior managers• Discovering Dexia: the integration seminar for all newexecutives was re-launched in December 2010.• Dexia Mentoring Programme: a transversal programmeto transfer knowledge and expertise throughout theorganizationGlobally, the Dexia Corporate University has once againcontributed to cascading the Group’s strategy. In thatcontext, the University continued to support Dexia in changemanagement through the following actions:• the ongoing offer of the University dedicated to changeand uncertainty: Learning with Change, Dealing with Stress,Change and Team, among others;• a very specific offer to help team managers to deal withchange: dynamic online manuals, workshops, and so on;• short or long-term individual coaching, designed for topexecutives and team managers;• team coaching, for managers and their teams;• training paths in project management.During 2010, the Dexia Corporate University has also workedon a number of initiatives which will be implemented in2011: a harmonized “on-boarding” programme targetingnew employees; a learning support to help employees toswitch to new versions of software such as MS Office, Clarityor Business Object.In total 1,290 participants attended one of the trainingcourses organized by the DCU in 2010.CompensationRecurrent projects continued in 2010. Indeed management ofthe exit from the 2005 share ownership plan enabled teamsto continue the work of informing members of staff on theterms linked to its maturity.Furthermore, the Dexia Group compensation policy wasimpacted by new Belgian, French and even Europeanregulations. The People Reward team took part in discussionswith the regulators and sector federations and prepared theappropriate amendments to Dexia policy so as to comply withthese issues.Regulatory aspects evolved strongly in 2010 and that trendis likely to continue throughout 2011 in order to continuealigning the sustainable development of the companyand its risk profile with common practices in terms ofcompensation.Indeed, in accordance with the European “Capital RequirementsDirective III” and associated guidelines from theCommittee of European Banking Supervisors, in 2011 theDexia Group will adapt its general compensation policy, theprinciples of which fall within the guidelines established byEurope. Similarly, Dexia has also adapted its policy to complywith the obligations arising from the Belgian Law of 6 April2010 on corporate governance.Implementing the Transformation Plan and refocusing Dexiaon its core franchises required the management of a largenumber of international and national moves and necessitatedassistance in those internal moves from Human Resourcesdepartments.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia73

Human ResourcesFinally, questions regarding compensation and themanagement of compensation aspects associated withperformance were given particular attention, notably in orderto ensure that variable compensation takes account, on theone hand, of the results achieved by the entities concernedand by the Group as a whole and, on the other hand, of theperformance of members of staff.Social dialogueManagement reportAdditional information Annual financial statementsConsolidatedfinancial statementsThe European Works Council (EWC) at Dexia is composedof 30 permanent members from 13 different Dexia entitiesand 4 countries. This social body is competent to discuss anymajor transnational question with management.Considering the current situation and the informationconsultationprocess in relation to the transformation plan, thesocial calendar was particularly full and numerous meetingswere organised (5 meetings of the European Works Council,11 meetings of the EWC Board) to provide information tostaff representatives and to answer their questions.At a local level, social dialogue was intense in all Groupentities. In fact, within their entities, social partners dealt withthe information-consultation process arising from the thirdphase of the transformation plan.In order to implement earlier phases of the transformationplan within the Belgian job pool, social partners in theentities concerned held plenary sessions together to negotiatecollective staff transfer agreements.74 Dexia Annual report 2010

Sustainable developmentThe 2010 Dexia SustainableDevelopment ReportOrientation of the 2010 reportSince 2009, Dexia has been undertaking an in-depthtransformation of its activities, refocusing on its core businesslines and its historical franchises and adapting its cost structure.In 2010 we wanted to increase the consistency of oursustainable development strategy with that transformation,realigning it to the vital question: in running our bankingbusiness line, how do we assist our clients in their sustainabledevelopment endeavours?Our aim is to simplify our approach, making it moretransparent, by articulating it around a definition of sustainabledevelopment and four fundamental principles common tothe Group as a whole. We wanted to decline that renewedundertaking operationally by selecting a priority line of actionfor 2011-2012: energy performance in buildings.This new alignment of our sustainable development approachnaturally led us to establish our 2010 sustainable developmentreport in line with the Group’s four fundamental principles –Relevance, Essence, Communication and Evaluation – givingpriority to the issue of energy performance in buildings.In order to limit its direct environmental impact, since 2008Dexia has done without any paper printing of its sustainabledevelopment report, and for its 2010 report an exclusivelydematerialised support has been adopted, available on itsinternet site at www.dexia.com.Principal themes of the reportIdentity and strategy• Message from the Chairmen• Our strategy for sustainable development• Our key indicatorsPriority 2011-2012: The energy performance inbuildings• Background and issues• Providing a range of products and services suited toall our customers• Controlling energy consumption in our ownbuildingsRelevance• Fighting deprivation and social exclusion• Adapting our services to the diverse needs of ourcustomers• Supporting the development of green growthEssence• Incorporating environmental and social risks into ourfinancing activities• Socially Responsible Investing• Conducting our business responsibly• Acting as a responsible businessCommunication• Strengthening the dialogue with our stakeholders• Developing a relationship of trust with ourcustomersEvaluation• Reporting process• Auditor’s Report• Table of indicators• Table for correspondence of reference systems• GlossaryManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia75

Sustainable developmentEnergy performance in buildingsManagement reportIn order to assist all of our clients to achieve their objectives regarding energy performance in buildings, over several yearsDexia has developed an innovative range of dedicated products and services. In Belgium and Luxembourg, Dexia offers itsindividual clients loans intended to finance work to improve the energy performance of their homes (habitation eco-loans,housing loans and a range of ImmoPlus Green products). In France, since 2009 Dexia has offered a process to assist localpublic sector operators in their real estate energy renovation projects. This relies on the provision of software to audit andto simulate energy works, enabling public decision-makers to link a technical view with the financial perspective, as wellas putting dedicated finance in place.Eager to set an example in managing its own buildings, since 2008 Dexia has been performing energy audits in its principalbuildings. The Pachéco/Ommegang and Galilée buildings in Belgium were audited in 2008 and 2009. In 2010, an auditwas also performed on the Dexia Towers in Brussels and Paris.Additional information Annual financial statementsConsolidatedfinancial statements76 Dexia Annual report 2010

Risk managementIntroductionIn 2010, the Risk Management activities were severelyimpacted by a disrupted economic environment, marked bysignificant interest and exchange rates volatility as well asconsiderable investor distrust for some sovereign issuers inthe euro zone. Despite this difficult context, Dexia continuedto implement its transformation plan successfully, furtherreducing its short-term funding requirement and thus its riskprofile.This reduction of the Group’s risk profile continued in particularthanks to a voluntarist policy of reducing the portfolio in runoffsince the end of 2008. In line with the agreement withthe European Commission, the Group also disposed of variousholdings in 2010 (cf. chapter “Update on the transformationplan” on page 13) which, combined with the reduction of theportfolio in run-off, is reflected by a fall of EUR 38.5 billionin the Group’s credit risk exposure compared to the end of2009. Risk weighted assets naturally followed the same trendand decreased by EUR 2.3 billion over the year, despite theunfavourable impact of the price of the euro against the USdollar, whilst the Tier 1 ratio improved from 12.3% at yearend2009 to 13.1% at year-end 2010. We can also notice asignificant reduction of the cost of risk excluding the FinancialProducts portfolio which amounted to EUR 641 million in2010 against EUR 1,096 million in 2009. The decrease wouldbe higher by excluding the Financial Products portfolio.Over the year, the Group considerably reduced its short-termliquidity gap and continued to improve the mix of its short-termfunding sources. This improvement of its liquidity situationenabled Dexia to exit the State guarantee on its financingfour months before the formal end date of 30 October 2010.In fact, on 30 June 2010, the Group stopped issuing guaranteeddebt, in line with its undertakings to the EuropeanCommission. More detailed information on the State guaranteeis provided in the note to the consolidated financial statements9.4.C. (page 184).Dexia was subject to the 2010 European Union-wide stresstesting exercise, coordinated by the Committee of EuropeanBanking Supervisors (CEBS). The conclusion of that stress test,based on various scenarios of credit quality deterioration (1) ,is that Dexia does not require additional capital to withstandthe CEBS two-year adverse scenario, including the additionalsovereign shock. More detailed information on the stress testsis provided in the section dedicated to stress tests (page 93)in this chapter.Market activity monitoring was improved with the launch in2010 of the “Market Risk Engine” project aimed at having anintegrated system for the calculation of historical VaR over allrisk factors. Considerable progress was also made in valuingstructured instruments and back-to-back derivatives.Dexia continued the development and implementation ofvarious transversal projects:• new models were developed and will be gradually used forthe calculation of regulatory capital;• Dexia put in place in 2010 an action plan related tostress-testing in 2010: the development of new governanceenhancing and optimising the organisation in place was madea priority in 2010. Furthermore, Dexia participated actively inthe regulatory exercises run by the CEBS, the first results ofwhich were provided by Dexia in May 2010;• a formal framework of risk appetite indicators was put inplace at Dexia SA level and will be gradually introduced in themain entities during 2011;• an action plan was put in place to answer the recommendationsmade by the Dexia regulators within the contextof the Pillar 2 of Basel II mission;• potential impacts of the regulatory developments proposedby the BIS (Bank for International Settlements) were quantified,particularly regarding the definition of capital, leverage ratioand liquidity ratios;• Dexia took part in international consideration of theevolution of IFRS regulations on classification and provisioning,with presentation of the exposure draft in June 2010, as wellas on the hedging of financial instruments.Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) The test was conducted using the scenarios, methodology and keyassumptions provided by the CEBS, detailed in the aggregate report publishedon the CEBS website: http://www.c-ebs.org/EU-wide-stress-testing.aspxAnnual report 2010 Dexia77

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsGovernance2010 was marked by the effective reorganisation of theRisk Management support line with the approach aligned tothe general organisation of the Dexia Group and based ona directive model in which the local chief risk officer (CRO)reports directly to the Group CRO. In this context, the missionof the Risk Management support line was redefined: the mainchallenges are to define the Dexia risk appetite, to put inplace independent and integrated risk measures for all typesof risks, to manage all risks and proactively to identify andaddress any emerging risk.The support line is now organised transversally by businessline: “Retail and Commercial Banking” credit risk, “Public andWholesale Banking” credit risks and risks linked to financialmarket activities. This organisation is based on competencecentres on which local risk management can rely, in accordancewith the Service Level Agreements (SLA) concluded in 2010.Credit riskDefinitionCredit risk represents the potential loss (decrease of assetvalue or payment default) which Dexia may incur as a resultof deterioration in the solvency of any counterparty.OrganisationThe Dexia risk management oversees Dexia credit risk, underthe supervision of the Management Board and specialistcommittees. It is in charge of defining Group policy on creditrisk, particularly the decision-making process for grantingloans, and supervising the processes for rating counterparties,analysing credit files and monitoring exposure.In 2010, in order to increase its efficiency and to make themost of Group competences, the Risk support line evolvedtowards an organisation by specialist expertise centres,in relation to the various Dexia business lines (Retail andCommercial Banking, Public and Wholesale Banking andfinancial market activities). Specialist risk committees werealso set up per expertise centre, while coordination is providedby transversal teams and committees.Transversal committeesThe Risk Policy Committee defines risk policies includingthe credit assigment rules for different sectors and types ofcounterparty.The Executive Risk Committee meets weekly to decide onthe risk management strategy and the organisation of thesupport line.The Management Credit Committee, organised on a weeklybasis, is in charge of undertaking decisions.Committees specialising per expertise centreIn order to fluidify the decision-making process, theManagement Credit Committee delegates its decision-makingpower to Credit Committees organised per entity and/orexpertise centre. This delegation is based on specific rules, inrelation to the type of counterparty, the level of counterpartyrating and credit risk exposure. The Management CreditCommittee remains the decision-making body of lastresort for larger credit files or those presenting a risk leveldeemed to be sensitive. For each file presented to the creditcommittee, an independent analysis is performed, presentingthe main risk indicators, as well as a qualitative analysis ofthe transaction. Dexia updated credit granting procedures inaccordance with the request by the European Commission toensure a minimum RAROC of 10% for transactions of thePWB business line.At the same time as monitoring the credit process, differentcommittees are responsible for the supervision of specificrisks. These committees are organised par expertise centreand per entity and meet quarterly.“Watchlist” committees supervise assets deemed to be“sensitive” and placed on watchlist.Default committees qualify and monitor counterparties indefault in accordance with Basel II regulations, applying rulesprevailing at Dexia.Provision committees settle the amount of provisions allocatedand monitor the cost of risk.Rating committees ensure the correct application of internalrating systems and the appropriateness of rating processes inrelation to established principles and the consistency of thoseprocesses within the different entities.Credit Risk Management in each Group entity focuses onlocal credit risk management and is in charge of analysingand monitoring local counterparties. This also includes thedevelopment and the update of internal rating systemsrelative to these counterparties and the production of localreportings.Market riskDefinitionMarket risk comprises the Group’s exposure to adversemovements in market prices as a result of interest-rate risk,equity-price risk and foreign-exchange risk.The interest-rate risk consists of a general interest-rate riskresulting from market evolution and a specific interest-raterisk (credit spread) linked to the issuer. The latter arises fromvariations in the spread of a specific signature within a ratingclass. The risk associated with the equity price representsthe risk arising from the reduction in value of equity. As forforeign-exchange risk, this represents the potential decreaseof the value due to currency exchange rate movements.OrganisationRisk management and more particularly Financial MarketsRisk Management (FMRM) oversees market risk under thesupervision of the Management Board and specialist riskcommittees. FMRM is a support line integrated into the Risksupport line. On the basis of its global risk managementapproach, it is responsible for identifying, analysing,monitoring and reporting on risks and results (including thevaluation aspect) associated with financial market activities.The policies, guidelines and procedures documenting andgoverning each of the activities are defined within Dexia SAand applied to all the entities of the Dexia Group. Centralteams within expertise centres or transversal teams also havethe responsibility to define methods of income statement78 Dexia Annual report 2010

Risk managementcalculation and risk measurement, as well as to guaranteeconsolidated measurement, reporting and monitoring of therisks and results of each of the activities for which they areresponsible.Established in the operational entities, local FMRM teams areresponsible for day-to-day activity, namely and inter alia theimplementation of policies and directives defined at Dexia SAlevel, but also local risk assessment and monitoring of risks at alocal level (computation of risk indicators, control of the limitsand triggers and so on), as well as reporting, reconciliationwith local strategic planning, accounting and IT systems.Each operational entity is also responsible for monitoring andreporting to local supervisory and regulatory bodies.CommitteesThe Market Risk and Guidelines Committee (MRGC) meetson a monthly basis and is responsible for a wide range oftopics such as: risk and statement of income trigger reportinganalysis (1) and related decisions, definition and revision oflimits, proposals for the approval of new products, discussionof guidelines, risk governance and standards, risk conceptsand measurement methodology and the quality of valuationprocesses.Ad hoc MRGC are organised to decide on specific issueswhen required from a business and/or a risk managementperspective.In addition to the monthly MRGC, a specific MRGC meetseach quarter to discuss risk and business reports associatedwith market activities.Dexia Market Risk Committee (DMRC) meets bimonthly andacts as supervisory committee of the MRGC.The Risk Policy Committee and Risk Management ExecutiveCommittee validate all major changes in risk profile or riskgovernance.Balance Sheet ManagementDefinitionBalance Sheet Management (BSM) covers all the structuralrisks of the banking book, namely, interest-rate risk, foreignexchangerisk, equity risk and liquidity risk.We refer to the part on Market Risks for detailed definitionsof structural and specific interest-rate risk, foreign-exchangerisk and equity risk.Liquidity risk measures the ability of the Group to meet itscurrent and future liquidity requirements, both expected andunexpected.OrganisationBalance Sheet Management (BSM) is the responsibility ofthe Finance support line and involves management of thestructural risks of the entire Group. Within Risk Management,(1) Statement of income triggers warn of a deterioration of results and areexpressed as a percentage of VaR limits: typically at 50%, 75% and 100% fortriggers 1, 2 and 3 and stop the activity at 300% of VaR.the role of BSM Risk is to define the risk framework in whichmanagement may be undertaken by BSM Finance (risk factors,limits, investment universe, guidelines), to validate modelsused in the effective management of that risk, to monitorexposure and to check compliance in relation to Groupstandards, to define the stress to be applied to different riskfactors, to challenge the management of the risk performedby the Finance support line and to ensure compliance of theframework with external regulations in force throughout theDexia Group.CommitteesAll BSM risks are managed via the Dexia SA Assets & LiabilitiesCommittee (ALCo) which meets monthly. ALCo decides onthe global risk framework, fixes limits, ensures consistency ofstrategy and delegates its implementation to local ALCo. ALCodecides globally on the level of exposure in line with the riskappetite defined by the Management Board, and validatesinternal transfer price mechanisms within the Dexia Group.Local ALCo manage risks specific to their balance sheet withinthe framework defined by and under the responsibility of theDexia SA ALCo.The Funding and Liquidity Committee (FLC), by delegationfrom the Group ALCo, centralises and coordinates the decisionmakingprocess in relation to liquidity associated issues. TheFLC is responsible for monitoring the Group’s liquidity position,its evolution and its cover by short, medium and long-termresources. It monitors the achievement of liquidity targetsfixed by the Management Board and elaborates funding,disinvestment and structuring strategies which will enable theGroup to overcome regulatory and internal stresses. Meetingbimonthly, the FLC takes all possible steps to improve theGroup’s liquidity profile.Operational riskDefinitionDexia defines operational risk as follows: operational risk isthe risk of financial or non-financial impact resulting frominadequate or failed internal processes, people and systems,or from external events. This definition includes IT, legal andcompliance risks, but excludes strategic risk.Dexia’s definition of operational risk is based on, but notrestricted to, the one used by the Basel Committee, whichfocuses on losses (negative financial impacts). Dexia policyalso requires the gathering of data on events generatingfinancial gains.OrganisationThe Operational Risk Management framework relies on stronggovernance with clearly defined roles and responsibilities.The Management Board, organised on a weekly basis, regularlyreviews the evolution of the risk profile of the different Groupactivities and takes the required decisions.The Risk Policy Committee, a strategic committee withrepresentatives of the Management Board, approves Groupwidepolicies. This committee is organised on a quarterlybasis.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia79

Risk managementThe Operational Risk Guidelines Committee, chaired on aquarterly basis by the Group Chief Risk Officer, reflects indetail the policy approved on recommendations suited tocommercial activities. It transversally reviews operational riskevents as well as analyses performed.As to risk management of derivatives, Dexia closely monitorsthe conclusion of appropriate legal documentation relating tonetting agreements and the exchange of collateral.Fundamentals of Dexia credit risk in 2010Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsThe Operational Risk Management Committee, chaired ona monthly basis by the Group head of operational risks,develops a consistent mechanism for the entire Group,including business continuity, crisis management, informationsecurity and insurance policy.Dexia Group Middle Management is principally responsiblefor operational risk management. In its field of activity, itappoints a correspondent for operational risks whose role isto coordinate the gathering of data and the self-assessmentof risks, with the support of the local operational riskmanagement function.Risk monitoringCredit riskDexia policyDexia Credit Risk Management (CRM) sets a global frameworkof policies and guidelines in coherence with the risk appetiteof the bank, framework that guides CRM in its differentfunctions of risk analysis, risk decision, and risk surveillance.CRM manages the credit granting process by givingdelegations within the framework set by the top managementof the bank, and by chairing credit committees. As a partof its credit surveillance function, CRM monitors the creditevolution of its portfolios by performing, on a regular basis,credit reviews and by updating ratings. CRM also definesand implements the impairment policy. As such it decides onspecific impairments and qualifies defaults.Risk measuresCredit risk measures rely principally on internal rating systemsput in place by Dexia under Basel II. Each counterparty israted by analysts in charge of credit risk or by dedicatedscoring systems. This rating corresponds to a valuation of thecounterparty’s level of default risk, expressed on an internalrating scale, and is a key element in the loan granting processby the credit committee or by automated granting systems.Ratings are reviewed at least annually, and this allows aproactive identification of counterparties requiring regularmonitoring by the “watchlist” committee.In order to control the Group’s general credit risk profile andto limit risk concentrations, credit risk limits are defined foreach counterparty, fixing the maximum exposure to credit riskdeemed acceptable for a given counterparty. Limits may alsobe imposed per economic sector and per product. The riskdepartment proactively monitors these limits, in relation tothe evolution of the perception of risks run by the Group. Inorder to take more recent events into consideration, specificlimits may be frozen at any time by the Risk Managementdepartment.At a macroeconomic level, the year 2010 saw a gradualimprovement of the economic environment in the majorityof countries in Europe. However, the year was also markedby a crisis of confidence as to the ability of some EuropeanStates to fulfil their financial obligations, resulting in tensionson the financial markets and difficulties for those countriesto obtain financing. The crisis led all European countries toadopt financial austerity measures aimed at reducing theirpublic debt.Within Dexia, a clear slowdown was observed in thedeterioration of the average rating of portfolios, reflecting theimprovement of the economic situation. That more generaltrend is particularly visible on a certain number of sectorsweakened by the financial crisis and on which collectiveprovisions were booked in 2008 and 2009, in particular theharbour, textiles, motorway and shipping sectors, giving riseto write-backs of collective provisions.With regard to Retail and Commercial Banking activities, animprovement is also to be noted. In Belgium, the persistenceof mitigated macroeconomic indicators is reflected by newdefaults which, although down compared to 2009, are stillbeyond pre-crisis levels. The mortgage loan portfolio hasproved particularly resilient whilst professional loans did notescape certain granularity effects but presented a cost ofrisk down compared to 2009. In Turkey, the sharp economicrebound is reflected by sustained production volumes, a returnof defaults to a pre-crisis level and significant recoveries. As aconsequence, the cost of risk is well down on 2009, both forindividual and for SME loan portfolios.In order to cope with the crisis affecting the sovereign debtof some European States, principally Greece, Ireland, Portugaland Spain, Dexia not only blocked the granting of credit tothe sovereigns concerned but also reduced those exposuresvia its asset cession programme (1) . Dexia continues to monitorthis issue, particularly the impact of interventions by theEuropean Support Fund and the IMF to sustain those Statesexperiencing difficulties.Against that background, it is important not to extrapolatethe sovereign default risk to that of local authorities.A certain number of elements enable relativisation of the riskof systemic contagion.• The prudential framework to the management of localauthorities is constraining. In the majority of countries inwhich Dexia is active, local authorities are obliged to presentbalanced budgets. The contracting of debt is reserved forinvestment and not for operating expenditure, which is 80%guaranteed by grants and subsidies. The debt level is generallylimited. As a consequence, although local authorities haveseen their debt grow over the recent period, it remains atreasonable levels (8% deficit and 9% public debt in theEuropean Union).(1) More details on the Dexia exposures on these countries are given in thepart dedicated to Credit risk exposure on page 82 of this chapter.80 Dexia Annual report 2010

Risk management• Numerous mechanisms protect local authority debt holders(in France and Belgium, they are obliged to reserve theamounts necessary to service the debt; in Italy, creditors ofpublic debt benefit from a priority right to tax revenues, andso on).Local authorities have nonetheless been globally hit by thedeterioration of the world economy, rather heterogeneouslydepending upon the country concerned. Indeed, Japanwas somewhat sheltered from the crisis, local authoritiesnot appearing to be significantly impacted. Turkey was notaffected by the recession and most major metropolitan citiesretain good savings capacity. The reactions and measurestaken by governments play a significant role. Some authoritiesreceive a major proportion of their receipts from centralgovernment. The increase of transfers, either ad hoc as inPoland or through the introduction of recovery plans as in theUnited States, offset the fall of tax receipts.In Spain, a clear increase of the level of debt and a pronounceddeterioration of gross savings levels are to be noted for someregions, whilst in view of land registry revisions the communeshave posted an increase of receipts. In Italy, debt is likely tostabilise but pressures on health expenditure remain severe.In Eastern Europe, the impact of the crisis is rather markedin Bulgaria, the Czech Republic and Hungary through a fallin tax receipts but this is offset by increased governmentsubsidies. No pronounced effect is observed at this stagein Romania. In Poland, the crisis is hardly visible on currentauthority receipts but savings are falling and investmentremains sustained. In France, the sharp increase in transferduty products has helped in coping with the slowdown ofother operational resources. 2010 was a year of transition fordirect local taxation, marked by the abolition of local businesstax. Government grants hardly evolved at all and are likelyto remain frozen for three years. Investment fell slightly butremains at a high level. There is a risk that the impact ofthese different measures will particularly affect Départementswhich on the one hand are deprived of the momentum oftheir fiscal resources and on the other hand must deal with asustained increase in social action expenditure, particularly byvirtue of Active Solidarity Income (Revenu de solidarité active,RSA), which will have a potential impact on their internalrating, although it will nonetheless remain sound. In Belgium,affected by the economic and financial crisis, budgets revealeda weakening in 2009 of the financial situation of numerousBelgian municipalities. Results demonstrate a relativestabilisation in 2010 compared to the situation in 2009. Therate of growth of receipts for the financial year (2.2%) is wellabove the forecast expenditure rate (1.6%). In general, localadministrations have a funding structure which is relatively lessdirectly sensitive to the evolution of the economic situation. Inthe USA, the federal States have budgets which are difficultto conclude but are more frequently obliged by the law tobe balanced. Authorities have therefore made significantreductions to their expenditure.Dexia pursued its bond cession programme in 2010, in linewith the undertakings made to the European Commission,resulting mechanically in a reduction of the Group’s credit risk.On that portfolio, the impact of the crisis continued to weighon the average rating level, although no clear deteriorationwas observed in terms of performance or expected loss. Thedeterioration is more pronounced in Residential Mortgage-Backed Securities (RMBS) segments in the United States andin Europe, principally in Ireland and Spain. The bond portfolioremains nonetheless characterized by very good credit quality,with 95% at Investment Grade level.In general, the good resistance shown by the Dexia assetbase to the economic crisis confirms the low risk profile ofthe Group’s business lines.Financial Products portfolio (1)In 2010, the Financial Products portfolio was reduced byUSD 1.6 billion, to USD 13.8 billion (nominal value), due toUSD 0.4 billion asset sales and to the amortization of theportfolio. As at 31 December 2010, the expected average lifeof the portfolio is 9.2 years.In a context characterized by a volatile economic environmentand large stocks of homes which will continue to weigh heavilyon the real estate market, at least in 2011, Dexia adapted itsUS RMBS scenario to take the following considerations intoaccount.• During 2010, a high percentage of delinquent loans, inparticular subprime loans, have been restructured by theservicers, and this has contributed to an improvement of thedefault rate on such assets. However, Dexia estimates that aproportion of these defaults could just be postponed in time.• Visibility on housing price recovery remains low due to theexisting large stock of homes for sale and to other negativefactors such as the impact of a potential foreclosure freeze.Dexia therefore proceeded to make some adjustments to itsassumptions for US RMBS. In particular, to reflect the assessedimpact of loan modifications, Dexia assumes that the currentdefault rates will not improve within the next 3 years andmight need 4 additional years to return to the levels observedbefore the crisis arose. Moreover, Dexia assumes that currentseverity rates (2) will not show any improvement until the endof the transactions.Based on these elements, projected economic losses wouldincrease to USD 1,796 million under Dexia’s “base case”.Such an estimate is made to the best of Dexia’s knowledgeon the basis of market conditions as at the end of December2010.As at 31 December 2010, total impairments amounted toUSD 2.252 billion.The modelling of the US RMBS portfolios is very sensitive toparameters such as the timing of defaults, loan modifications,the evolution of house prices and the length of the crisis.Therefore any changes of the parameters could lead tosignificant modifications to the projected economic resultscompared to the “base case”.• As an example, under a scenario based on deteriorateddefault rates against the “base case” (higher level of defaultduring the whole period) coupled with a higher (5%) severity,expected losses would increase to USD 2.3 billion.• As another example, under a scenario based on a flatdefault rate curve “for ever”, expected economic losseswould increase to USD 2.8 billion.(1) More detailed information on the Financial Products portfolio is given inthe note 12.2.A.3. to the consolidated financial statements in this annualreport (page 211).(2) “Severity” refers to the loss expected on a property that would have beensold following a foreclosure process.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia81

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsFinancialinstitutions• In contrast, a faster recovery in the US economy by 18 monthscompared to the “base case” would decrease the expectedeconomic losses to USD 1.3 billion.Assuming the materialization of one of those scenarios,Dexia’s regulatory solvency ratio is immune from provisionsand losses on the Financial Products portfolio in line with theState guarantee mechanism (1) .Lastly, Dexia launched an active Central work-out process to optimizerecoveries on the US RMBS portfolio governments in 2011, with a dedicatedand experienced team 11.7%13.6% in New York, and filed lawsuits againstIndividuals,different stakeholders involved in the US RMBS market.SMEs andself-employed However,8.8%at this stage no potential positive impact of suchlitigation has been taken into account in the Group’s financialFinancialCentralProject financeinstitutions statements. 3.5%governments4.8% 11.7%ABS/MBS13.6%Individuals, Credit risk exposure (2) 46.2%2.1%SMEs Monolines andself-employed9.3%Corporate 8.8%The credit-risk exposure includes: PublicProject financesector• 3.5% the net carrying amount for balance-sheetentitiesassets other thanderivative 4.8% contracts (i.e. the accounting value after deductionABS/MBS46.2%Monolinesof specific 2.1% provisions);• the market 9.3% value for derivative contracts;Corporate • the fully committed amount for Public off-balance-sheet commitments:the full commitment is either sector the undrawn portion ofentitiesliquidity facilities or the maximum amount Dexia is committedto pay for the guarantees granted to third parties.When credit-risk exposure is guaranteed by a third party witha lower risk weight, the principle of substitution is applied.The credit-risk exposure includes fully consolidated subsidiariesof the Dexia Group and 50% of the joint venture RBC DexiaInvestor Services.Total Group credit risk exposure is EUR 547,617 million as at31 December 2010.Exposure by category of counterpartyas at 31 December 2010The mix of counterparties in Dexia’s portfolio is very stable.Half of the exposure is on the local public sector.FinancialinstitutionsIndividuals,SMEs andself-employedProject financeABS/MBSMonolinesCorporate8.8%3.5%4.8%2.1%13.6%9.3%11.7%Centralgovernments46.2%PublicsectorentitiesNote: the counterparties are the final counterparties, i.e.after taking into account the Basel II eligible guarantee(substitution principle). Monolines exposure is essentially anindirect exposure.Exposure by geographical region as at31 December 2010As at 31 December 2010, the Group’s exposure was mainlyconcentrated in the European Union (75.1%, EUR 411.3 billionat year-end 2010), particularly in France (18.2%) and Belgium(20.3%).Turkey 2.7% United States and Canada 13.7%Spain 6.3% Belgium 20.3%South andCentralAmerica 0.7%South-eastTurkey Asia 2.7% 0.5% United States and Canada 13.7% France 18.2%Spain Rest 6.3% ofEurope 2.0%Belgium 20.3%South andCentral Portugal 1.1%America Other 0.7% 3.6%South-eastAsiaOther EuropeanUnion0.5%countriesGermany France 18.2% 6.7%Rest9.4%ofEurope 2.0%Greece 1.0%Ireland 0.4%Portugal Luxembourg 1.1% 2.4% Japan 1.7%Italy 9.3%Other 3.6%Other EuropeanUnion countriesGermany 6.7%9.4% Exposure by rating Not class rated as at 31 December Greece 1.0% 2010As at 31 DLuxembourg AAAAT IONDecember 2010, about half of Ireland Dexia’s 0.4% exposure2.4% Japan 1.7%was rated AAA or AA. Only 10% Italy was 9.3% rated Non-InvestmentNIG13.7%Grade (NIG).AT IONNIGBBBABBBAD19.8%19.8%9.6%9.6%0.4%0.4%Not rated6.0%6.0%19.4%13.7%AAA31.1%31.1%AAAATurkey 19.4% 2.7% United States and Canada 13.7%Spain 6.3% Belgium 20.South andCentralAmerica 0.7%South-eastAsia 0.5%FranceRest ofEurope 2.0%Portugal 1.1%Other 3.6%Other EuropeanUnion countries9.4%Luxembourg 2.4%AT IONNIGGermany 6Greece 1.0%Ireland 0.4%Japan 1.7%Italy 9.3%DNot rated9.6%0.4%6.0%13.7%AAA(1) More information on the State guarantee is given in the note 9.4.C. to theconsolidated financial statements in this annual report (page 184).(2) More information is given in the note 12.2. “Credit risk exposure” to theconsolidated financial statements in this annual report (page 210).BBB19.8%31.1%AA82 Dexia Annual report 2010A19.4%

Risk managementBreakdown of government bond portfolio on a selection of european countriesThe government bond portfolio on Greece, Ireland, Italy, Portugal and Spain amounted to EUR 21,958 million as at 31 December2010, down EUR 3,802 million compared to 31 December 2009.31 December 2009(in millions of EUR)Totalo/w bankingbooko/w insurancebooko/w tradingbookGreece 5,135 3,772 1,340 23Ireland 143 141 2 1Italy 15,237 13,352 1,873 11Portugal 3,172 2,751 384 37Spain 2,072 1,697 360 15TOTAL 25,760 21,714 3,959 8731 December 2010(in millions of EUR)Totalo/w bankingbooko/w insurancebooko/w tradingbookGreece 4,266 3,437 828 1Ireland 326 0 326 0Italy 13,502 12,354 1,143 5Portugal 2,162 1,927 235 0Spain 1,702 1,373 314 15TOTAL 21,958 19,091 2,846 21Management reportAsset qualityIn 2010, impaired loans and advances to customers increasedby 16% to EUR 5.6 billion mainly due to the FinancialProducts portfolio but also to some commitments in thePublic and Wholesale Banking business. This rise was coupledwith a 21% increase of the specific impairments on loansand advances to customers which reached EUR 3.2 billion.As a result, the coverage ratio stood at 57.9% compared to55.3% in 2009.improving credit environment in Turkey, reversals of collectiveimpairments in Public and Wholesale Banking also reflectingan improvement of the environment (more particularly insectors like shipping, ports and highways) and reversals ofcollective impairments for ABS and subordinated debt relatedto the bond portfolio in run-off. On the other hand, 2010was marked by higher impairments on the Financial Productsportfolio taking into account more conservative assumptionson the US RMBS Market.Consolidatedfinancial statementsOverall, Dexia’s cost of risk (impairments on loans andprovisions for credit commitments) fell sharply in 2010.The Group benefited from a decrease of the cost of riskin Retail and Commercial Banking mainly due to a rapidlyasset quality(in millions of EUR, except where indicated) 31/12/09 31/12/10Impaired loans and advances to customers 4,808 5,554Specific impairments on loans and advances to customers 2,657 3,214Assets quality ratio (1) 1.4% 1.6%Coverage ratio (2) 55.3% 57.9%(1) The ratio between the impaired loans and advances to customers and the gross outstanding loans and advances to customers.(2) The ratio between the specific impairments on loans and advances to customers and the impaired loans and advances to customers.Additional information Annual financial statementsAnnual report 2010 Dexia83

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsMarket riskDexia policyIn order to have an integrated and sound market riskmanagement, Dexia developed a framework based on thefollowing components:• a comprehensive risk measurement approach, whichconstitutes an important part of the process of monitoringand controlling the Group’s risk profile;• a sound structure of limits and procedures that governrisk taking. The limit system must be consistent with theeffectiveness of the organisation’s overall risk measurementand management process and with the adequacy of thecapital position. These limits are integrated to the fullestextent possible;• a strong risk management organisation responsible foridentifying, measuring, monitoring, controlling and reportingrisk. The development of an enterprise-wide risk managementframework must be responsive to the nature of the challengesthe bank has to face. This approach provides the managementwith the assurance that risks are being managed in accordancewith Dexia’s strategy and objectives and with the overall riskappetite framework.Risk measuresThe Dexia Group adopted the VaR (Value at Risk) measurementmethodology as one of the leading risk indicators. The VaR isa measure of the potential loss that can be experienced witha 99% confidence level and for a holding period of 10 days.Dexia applies multiple VaR approaches based on their abilityto measure market risk accurately in different market activitiesand portfolios.• General interest-rate and forex risks are measured througha parametric VaR approach.• Specific interest-rate risk, equity risk and other risks intrading books are moreover measured by means of a historicalVaR approach.• Non-linear and particular risks are measured throughspecific and historical VaR methodologies with a view to amore appropriate measurement of the sensitivity to marketvolatilities.Dexia exposure to market risk as measured in Value at Risk(VaR) terms stems mainly from general interest-rate risk andspecific interest-rate (spread) risk reflecting today’s volatility incredit markets, while its market exposure arising from tradingpositions in equity, exchange and other risk factors remainsmuch lower.Dexia applies the internal VaR model for the regulatory capitalrequirement calculus on foreign exchange risk and generalinterest-rate risk within the trading scope.The VaR methodologies are improved on an on-going basis.The “Market Risk Engine” project was launched in 2010.It aims for an historical VaR over all risk factors (with acomplete revaluation on non-linear risk factors); a completehistorical VaR which is confirmed as the standard in manybanks will provide a consistent and more precise measure.In addition to VaR, the new tool will facilitate stress testing,the analysis of extreme values and so on. The first phase ofthe project has already been successfully implemented andenabled existing historical VaR to be consolidated, historicalVaR to be added on the basis of sensitivities and progress tobe made on implementing the Stressed VaR as requested bythe regulator.In 2010 back-testing generated three exceptions for interestraterisk and foreign-exchange risk (internal model), threewithin the equity risk scope and none on spread scope, whichproves the quality of the tools used.As a complement to VaR measures and statement of incometriggers, Dexia applies a wide range of other risk measures inorder to assess risks related to the different business lines andportfolios (nominal limits, maturity limits, market limits andlimits on authorised products, sensitivity limits and Greeksand scenario analysis).Stress-testing is becoming increasingly important for soundrisk management as it explores a range of low-probabilityevents outside the predictive capacity of VaR measurementtechniques. As such, VaR measures assess market risk in adaily market environment, whereas stress-testing measuresmarket risk in an abnormal market environment. In thiscontext, the range of scenario assumptions was regularlyrevised and updated. The results of consolidated stress testsand the corresponding analyses are presented quarterly to theMRGC and the DMRC.The bond portfolio on the banking books is not subject toVaR limits, given its different investment horizon. Followingthe Dexia transformation plan, this portfolio is largely inrun-off.Exposure to market risk (1)Value at RiskThe detailed VaR use of market activities (bond portfolio inbanking book not included) is disclosed in the table below.Average global Value at Risk amounted to EUR 44.6 million in2010 (as compared to EUR 78.4 million in 2009).Substantial limit reductions have been implemented, in linewith the risk appetite reduction as included in the overallDexia transformation plan. The global limit has been reducedfrom EUR 178 million in the third quarter of 2008 to EUR 130million at the end of 2008 and to EUR 100 million since thebeginning of 2009.Bond portfolioDexia (excluded BSM portfolio and Financial Products, seebelow) manages bond portfolios, largely in run-off, amountingto EUR 138.5 billion as at 31 December 2010 (againstEUR 165.5 billion as at 31 December 2009). The sensitivityin economic value of these bonds portfolios is very limited, asinterest-rate risk is hedged.An important part of the bond portfolios is classified inLoans & Receivables. The AFS reserve of these securities isinsensitive to the market spread evolutions. Regarding theother bonds portfolios classified in AFS, the sensitivity in fair(1) More information is given in the note 12.5. “Market risk & BSM” to theconsolidated financial statements (page 225).84 Dexia Annual report 2010

Risk managementVALUE AT RISK OF MARKET ACTIVITIES(in millions of EUR) 2009 2010IR (1) & FX (2)(4)EQT Spread OtherEQT Spread OtherVaR(Trading et Trading Trading risks (5) (Trading et Trading (4) Trading risks (5)(10 days, 99%)Banking) (3)Banking) (3)By activity Average 30.1 4.6 39.3 4.6 16.6 2.1 22.4 3.5Maximum 86.5 9.7 59.2 7.8 28 4.7 30 5.8Global Core (6) Legacy (6) Core (6) Legacy (6)Average 45.7 41.9 30.4 23.5Maximum 103.6 58.5 44.1 32.7End period 37 29.4 27.8 15Total 2009 Total 2010Average 78.4 44.6Maximum 137.8 55.5End period 45.7 39.1Limit 100.0 100.0(1) IR: interest rate.(2) FX: forex.(3) IR & Forex: without BSM.(4) EQT: equities.(5) Other risks: inflation, commodities, CO 2.(6) “Core” refers to assets considered by Dexia as being part of its core businesses while the Legacy portfolio contains the run-off assets, in line with theAgreement with the European Commission. More detailed information on the Legacy Divsion is provided in the chapter “Update on the transformation plan”of this annual report (page 13).value after a basis point credit-spread increase amounted toEUR -35.46 million (against EUR -36.18 million/basis point as at31 December 2009).Given the illiquidity of markets and the reduced possibility ofhaving “observable” prices/spreads in the valuation process,a mark-to-model valuation development was performedon the illiquid part of the available-for-sale bond perimeter(AFS).The valuation principles used by Dexia for its financialinstruments are detailed in the section Fair value of financialinstruments in the Accounting principles and rules ofconsolidated financial statements (page 133) in this annualreport.Balance Sheet ManagementDexia policyDexia is conservative in term of Asset and LiabilityManagement. The main objective is to minimize P&L volatilityand to preserve value. There is no objective of creatingadditional revenue through voluntary interest-rate risk taking– focus is on stabilising global bank earnings.Interest-rate sensitivity measure is considered as the main riskmeasurement tool (full revaluation expressed in sensitivityterms). Although a parametric VaR (indicative) is calculatedat Group level based on interest-rate sensitivities, global andpartial risk sensitivity per time bucket remain the principalrisk indicators based on which the ALCOs manage their riskexposures.Risk measuresInterest rateThe role of BSM in the management of interest-rate riskconsists on the one hand of reducing the volatility of theP&L, thus immunising the commercial margin generated bythe business lines, and on the other hand of preserving theoverall value creation of the Group.Measurement of balance-sheet risks is harmonised among theGroup’s various entities. Sensitivity of the net present value ofBSM positions to an interest-rate trend is currently the mainindicator for fixing limits and monitoring risks.The structural rate risk of the Dexia Group is concentratedprincipally on European long-term interest rates and resultsfrom the structural imbalance between Dexia’s assets andliabilities.Risk sensitivity measures reflect the balance-sheet exposure tofirst and second order sensitivity and to behavioural risk. VaRcalculations are additional indicative measures.Credit spreadThe credit spread is defined as being the specific interest-raterisk capturing individual issuer-related causes. This is due tovariations in the spread of one specific signature within arating class and is measured with sensibility measures (/basispoint).Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia85

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsEquityThe Value at Risk measurement approach is applied to assessthe portfolio’s vulnerability to adverse changes in equity prices,volatility or correlation. Inter alia, the market risk managementframework includes Earnings-at-Risk and Stress-Test measuresrepresenting the maximum accounting loss under differentscenario assumptions. The equity portfolios of the bankingentities are in run-off mode. Within the insurance perimeter,a warning system has been introduced from the perspectiveof reallocating assets for the potential occurrence of a stressand in order to preserve solvency ratios.(Structural) foreign exchangeAlthough Dexia’s reporting currency is the euro, assets,liabilities, income and expenses are also denominated inother currencies. The Group ALCo decides on hedging therisk associated with the evolution of these results in foreigncurrencies. In 2010, a systematic and ongoing hedge wasmade of these exposures.The structural risks associated with financing of participations(equity) in foreign currencies as well as the volatility of theGroup’s solvency ratio are also monitored regularly.Insurance companies and pension fundsSpecific reports on insurance companies and pensionfunds are presented to the Group ALCo. They cover riskfactors associated with interest rates, inflation and equities.Risk indicators are calculated on the basis of a Groupharmonised risk methodology complemented with specificrisk management factors.Balance-sheet exposureBalance-sheet exposure to interest-rate risk(sensitivity)Interest-rate sensitivity measures the change in the balancesheetnet economic value if interest rates move by 1% acrossthe entire curve. ALM long-term sensitivity amounted toEUR -148 million as at 31 December 2010 (againstEUR -104 million as at 31 December 2009), excludinginsurance companies and pension funds. Interest ratesensitivity limits was EUR -400 million/% as at 31 December2010 (the limit is unchanged compared to limit at year-end2009). This evolution is fully in line with the renewed BSMstrategy focusing on minimising P&L volatility while preservingoverall value creation.The Dexia Financial Products portfolio amounted toUSD 13.9 billion (EUR 10.4 billion) as at 31 December 2010against USD 15.5 billion (EUR 10.7 billion) as at 31 December2009. The interest-rate risk of this portfolio amounted toEUR -8.5 million/% (against a limit of EUR -42 million/%)as at 31 December 2010 against an exposure ofEUR -6.2 million/% (against a limit of EUR -42 million/%) asat 31 December 2009.Balance-sheet exposure to credit-spread riskBSM manages bond portfolios amounting to EUR 14.6 billion(banking entities) and EUR 14.9 billion (insurance) as at31 December 2010 against an exposure of EUR 17.5 billion(banking entities) and EUR 15.8 billion (insurance) as at31 December 2009.Part of the bond portfolios is classified in Loans & Receivables.The AFS reserve of these securities is insensitive to the marketspread evolutions. Regarding the other bonds portfoliosmanaged by BSM and classified in AFS, the sensitivity infair value (and in AFS reserve) after a basis point creditspreadincrease amounted to EUR -12.85 million (bankingentities) against EUR -15.62 million/basis point as at 31December 2009 and to EUR -10.18 million (insurance) againstEUR -11.09 million/basis point as of 31 December 2009.The spread sensitivity of the Financial Products portfolioclassified in AFS stood at EUR -1.31 million/basis point as at31 December 2010 against EUR -1.12 million/basis point as at31 December 2009.Balance-sheet exposure to equities (quotedshares)Equity Value at Risk (VaR with a 99% confidence level anda 10-day holding period) expresses the potential change inmarket value. Please note the banking equity portfolio iscurrently in run-off. As for insurance companies and pensionfunds, the equity portfolio amounted to EUR 1,359 million asat 31 December 2010.(in millions of EUR) 2009 2010Banking Insurance/PensionBanking Insurance/PensionVaR (10 days, 99 %)fundsfundsAverage 37.8 98.5 11 102Maximum 53 142 14 116End period 16 119 14 116Limit 70 160 15 15086 Dexia Annual report 2010

Risk managementLiquidityDexia PolicyIn 2010, Dexia completely revised its internal process formanaging liquidity risk, including its contingency fundingplan.The new framework aims at providing more effective andcoordinated liquidity management. The cornerstone of thisnew framework is the Funding and Liquidity Committee(FLC) (1) , a central committee of all those parties concerned byliquidity and funding, coordinating their actions.Dexia ensures that it maintains liquidity reserves proportionalto its future funding requirement under several scenarios, ina normal situation and in a stress situation. These liquidityreserves consist of assets eligible to refinancing with centralbanks to which Dexia has access (BCE, Fed and Central Bankof Turkey). Dexia’s expected funding requirements are assessedprudently, dynamically and fully, taking existing and plannedon and off balance sheet transactions into consideration. Themonitoring of short-term liquidity risk is organised on a dailybasis whilst the supervision of long-term liquidity risk is on aquarterly basis. Furthermore, liquidity is at the centre of thedefinition of Dexia’s annual business plan.Globally, Dexia’s internal framework for managing liquidityrisk allows a monitoring of short term liquidity on a dailybaisis and a prospective view of long term liquidity.The updated contingency funding plan modifies thegovernance structure to make it more reactive in the case ofliquidity stress requiring rapid measures to be taken.Risk measuresDexia’s new internal framework for managing liquidity riskalso defines a certain number of liquidity indicators which,alongside regulatory liquidity indicators, guarantee Dexia’sresistance to liquidity risk. These indicators include but are notlimited to normal “liquidity ratios” comparing liquidity reservesto liquidity deficits. They also include limits on the absolutesize of liquidity deficits. All of these indicators are assessedaccording to different scenarios, in the principal currenciesand at all relevant consolidation levels. They are part of theDexia Risk Appetite framework and are communicated to theManagement Board and to the Audit Committee on a regularbasis.Dexia liquidity risk is also monitored by regulatory liquidityratios. These ratios are communicated to the CBFA ona monthly basis and to the CREFS (Comité des Risques etEtablissements Financiers Systémiques) on an annual basis.Exposure to liquidity riskIn 2010, the Group raised EUR 44.4 billion of medium andlong-term wholesale funding. The funds raised consisted ofEUR 23.2 billion in State guaranteed debt, EUR 13.6 billion incovered bonds, EUR 4.4 billion in long-term secured fundingother than covered bonds and EUR 3.2 billion in seniorunsecured funding.The Group made considerable progress in reducing its shorttermliquidity gap. Short-term funding requirements fell byEUR 48 billion in 2010, to EUR 119 billion as at the end ofDecember 2010.This good performance was achieved by virtue of:• the sustained pace of deleveraging programme.EUR 22.4 billion of bonds and EUR 4.8 billion of Publicand Wholesale Banking run-off loans were sold in 2010.More detailed information on balance-sheet deleveraging isprovided in the chapter “Update on the Transformation Plan”(page 14) in this annual report;• the swift execution of the long-term funding programme;• the reduction of the Public and Wholesale Banking lendingactivity, this being aligned to the Group’s long-term fundingcapacity;• the increase of retail deposits, particularly in Belgium andTurkey. These were EUR 87.7 billion at the end of 2010,against EUR 81.5 billion at the end of 2009.Dexia also considerably improved its short-term fundingmix. Indeed, Dexia accelerated the decrease of central bankborrowings (EUR -32 billion compared with the end ofDecember 2009) and since June 2010 was no longer fundedby short-term guaranteed debt, in view of the repayment ofshort-term guaranteed loans. The shift towards longer-termfunding bilateral and tri-party repos was confirmed in 2010.As at 31 December 2010, the total amount of central bankeligible securities amounted to EUR 108 billion, of whichEUR 42 billion were unencumbered allowing for a majorliquidity buffer despite the Group’s active deleverage policy.With the reserves available within one month, EUR 66 billionare available to cover the one month liquidity gap.This significant reduction of the short-term fundingrequirement was under unfavourable interest-rate conditionsresulting in an increase of the amount of cash collateral ofEUR 8 billion in 2010 despite a very disrupted macroeconomicenvironment, marked by the sovereign crisis which weighedheavily on the funding of many European banks.In 2010, Dexia also ended transactions guaranteed by theBelgian, French and Luxembourg governments. In fact, on30 June 2010, considering the improvement of its liquiditysituation and in line with its undertakings to the EuropeanCommission, the Group ceased to issue guaranteed debt fourmonths before its formal end date of 30 October 2010. Totaloutstanding guaranteed debt amounted to EUR 44 billion asat 31 December 2010 (against EUR 50 billion at the end ofDecember 2009). This guaranteed outstanding will be totallywritten down in 2014 of which about 40% in 2011.More detailed information on Dexia’s liquidity profile isprovided in the chapter “Update on the Transformation Plan”(page 15).Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) This committee is described in the part “Governance – Balance sheetmanagement” of this chapter (page 79).Annual report 2010 Dexia87

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsOperational riskDexia policyDexia operational risk policy consists in identifying andassessing on a regular basis the existing risks and currentcontrols in order to check that the acceptance level definedper activity line is respected. If not, adequate governance shallbe put in place and lead to efficient and/or corrective actionsto return to acceptable situation.A connection has been recently decided between theoperational risk management and the permanent controlshould lead to a reinforced monitoring of risk indicators.Risk measures and managementThe operational risk framework relies on the followingelements:Operational risk event data collectionThe systematic capture and monitoring of risk events isone of the most important requirements stated by theBasel Committee, whatever the approach chosen for thecapital calculation (Standardised or Advanced MeasurementApproach): “Data on a bank’s historical loss experience couldprovide meaningful information for assessing the bank’sexposure to operational risk and developing a policy tomitigate/control the risk”.As a consequence, the continuous collection of risk eventdata enables Dexia both to be compliant with regulatoryrequirements, and to obtain very valuable information in orderto improve the quality of the internal control system. Strictguidelines have been defined and deployed at Group level interms of reporting, in order to ensure that the most importantinformation is escalated in due time to Senior Management(in particular, the compulsory declaration threshold has beenset at EUR 2,500). The Management Board receives a reporton the main events, including an action plan enabling risks tobe reduced, defined by the bank’s Middle Management.Over the last 3 years, the split of the total amount of lossesamong standard event types is the following:Business Disruptionand System FailuresExecution,Delivery &ProcessManagement49.5%EmploymentPractices andWorkplaceSafety1.2 %3.0%19.2%9.5%17.2%0.4%Damage toPhysical AssetsInternalfraudExternalfraudClients,Products &Business PracticesThe largest proportion of the losses is due to Execution, Deliveryand Process Management events, which also represent themajority of all events, present in all businesses and supportfunctions. These events and the related action plans arereviewed on a quarterly basis with the key stakeholders (inparticular Operations & IT activity lines). As a matter of fact,most important events of this type observed in 2009 did notoccur again in 2010.The proportion of frauds increased in 2009 in the retailbanking activities. Global mitigating plans have been approvedby the Management Board, so that existing processes can beadapted to all threats.Other categories remain limited in number and amount.The main events are of course subject to corrective actionsapproved by the management bodies.Self-assessment of risks and associated controlsIn addition to building a history of losses, it is also necessaryto determine the exposure of Dexia to main risks through riskmapping of all significant activities. To do this, all the entitiesof the Dexia Group perform bottom-up self-assessmentexercises regarding risks and associated controls. They can leadto the definition of mitigation actions. They provide a goodview of the most important risk areas in the different entitiesand activities, with the objective of reporting the results toManagement across the organisation. These exercises arerepeated each year.Information security and business continuitymanagementInformation security policy and the related informationsecurity guidelines, standards and practices aim to secureDexia’s information assets (1) .Security programmes and well-defined responsibilitiesensure that all business activities are organised in a secureenvironment.As required by the Group business continuity policy, businesslines are required to make impact analyses for critical business,to define and document recovery plans and ensure thatbusiness continuity plans are tested and updated at least oncea year. On the basis of regular reporting, the ManagementBoard validates recovery strategies, residual risks, and actionplans for continuous improvement.From the same point of view, an assessment of the businesscontinuity mechanisms took place in 2010 for all Dexiasubsidiaries.Management of insurance policiesThe mitigation of the operational risks to which Dexiais exposed is also guaranteed by subscription to Groupinsurance policies, covering professional liability, fraud, theftand business interruption. Through an insurance policyelaborated for the whole Group, the aim is moreover toestablish insurance guidelines regarding the different riskswithin the Group and to be implemented at Group and entitylevels. It is also a matter of providing a centralised frameworkfor negotiations with brokers and insurance companies.(1) Information or data representing value to the company which musttherefore be properly protected.88 Dexia Annual report 2010

Risk managementAgainst that background, a mapping of existing policies ineach entity and subsidiary was realized in 2010, in order toimprove effective cover.Definition and follow-up of action plansThe bank’s Middle Management defines the corrective actionsrequired by major incidents or notable risks identified. Aregular follow-up and a quarterly reporting for all activitieshave been set up by Operational Risk Management. By virtueof this process, the internal control system is continuouslyimproved and the main risks appropriately mitigated overtime.Increased coordination with other functionsinvolved in the internal audit systemA new software tool was developed in 2009 aimed atcovering most of the building blocks of the OperationalRisk Management framework, and also offering some keyfunctions for other central functions such as Internal Audit,Compliance, Permanent Control or Quality Control. Theinstallation of this software in 2010 allows the use of onelanguage and reference systems common to those functions,as well as the generation of consolidated information for thebank’s Middle Management, in particular regarding any typeof action plan or recommendation to be followed up overtime.Calculation of regulatory capital requirementsDexia has decided to apply the Basel II Standardised Approachfor the calculation of the capital requirement for operationalrisk management.This approach mainly consists of applying a percentage (called“Beta” factor, in a range between 12% and 18%) to arelevant indicator calculated for each of the eight businesslines defined by the Basel Committee (Corporate Finance,Commercial Banking, Retail Banking, Trading and Sales, AssetManagement, Agency Services, Retail Brokerage, Paymentand Settlement).The relevant indicator essentially consists of the operatingincome from the underlying activities which includes net interestand net commission income. Income from insurance activitiesis not taken into consideration, as they are not subjectto Basel II regulation.The total of regulatory capital for each business line is used tocalculate total capital requirements for operational risk. This isan average over the last three years. The calculation is updatedat each year-end.The capital requirement for the last calculation periods is thefollowing:Capital requirements(in millions of EUR)2009 2010833.5 772A decrease of the capital requirements of 7.4% can beobserved between 2009 and 2010. This is linked to the factthat the 2007 gross income is replaced in the calculation bythe 2010 gross income, which are lower due to the activityevolutions from the 2008 financial crisis.Legal riskLike many financial institutions, Dexia is subject to a number ofregulatory investigations and litigations, including class actionlawsuits in the US and Israel. The status of the most significantlitigations and investigations as per 31 December 2010, andbased on the information available to Dexia at such date issummarised below. On the basis of the information availableto Dexia as per that date, other litigations and investigationsare not expected to have a material impact on the Group’sfinancial situation or it is too early properly to assess whetherthey may have such an impact.As assessed by Dexia based on the information available toit as per the above referenced date, the consequences ofthe most significant litigations and investigations liable tohave a material impact on the Group’s financial situation, itsresults or its business generally are provided for in the Group’sfinancial statements. Subject to the terms and conditions ofthe professional liability insurance and Directors’ liabilityinsurance policies entered into by Dexia, the adverse financialconsequences of all or certain litigations and investigationsmay be covered, in whole or in part, under such insurancepolicies entered into by Dexia, and, upon acceptance of suchrisks by the relevant insurers, be offset against any pay-outDexia would receive pursuant thereto.Dexia Nederland BVBackgroundThe difficulties linked to the share-leasing activities of the BankLabouchere (now Dexia Nederland BV, hereinafter referred toas the Company) appeared at the time of the fast and severefall of the Amsterdam stock market in late 2001. The valueof the securities used as collateral against the loans grantedby the Company proved insufficient in a large number ofcontracts, thus potentially ending with a residual debt insteadof the gain initially hoped for.Specific litigationsDuty of care casesAs stated in the previous annual report, on 5 June 2009 theNetherlands Supreme Court passed an important judgementwith respect to the share-leasing contracts of the Company.Many allegations were rejected, including error, misleadingadvertising, abuse of circumstances, and the applicability ofthe Netherlands Consumer Credit Act. On the other hand theSupreme Court decided that a special duty of care shouldhave been applied at the time of entering into a share-leasingcontract. The Supreme Court made a distinction betweentwo categories of clients: clients for whom the contract was abearable financial burden and clients for whom the contractwas an irresponsibly heavy financial burden.As also stated in the previous annual report, on 1 December2009 the Amsterdam Court of Appeal subsequently passedfour detailed judgements, in respect of the exact way thedistinction of the Netherlands Supreme Court between thetwo categories of clients should be made. Clients stating tohave been faced with an irresponsibly heavy financial burdenhave the obligation to furnish the facts. Furthermore, theAmsterdam Court of Appeal decided that profits from earlierManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia89

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsshare-lease products should be taken into account whencalculating damages and legal interest to be reimbursed is tobe calculated from the termination date of a contract.Shortly after the judgements of the Amsterdam Court ofAppeal were passed, cassation appeal against two of thosejudgements was filed by clients of the company and is stillpending. The judgements of the Netherlands Supreme Courtin these cases are expected by the end of the second quarterof 2011.The outcome of the judgement of the Amsterdam Court ofAppeal forms the basis of the out-of-court settlement attemptsby the Company (hereafter called the “Court model”).Spousal consent casesUnlike the situation with regard to disputes with clients aboutduty of care issues, the situation with regard to “spousalconsent” cases is less clear. On 28 March 2008 the NetherlandsSupreme Court ruled by judgement that article 1:88 of theDutch Civil Code is applicable to share-lease contracts. Theapplicability of this article means that the written consent ofthe spouse (or registered partner) of the lessee was necessaryto enter into the lease contract, in the absence of which thespouse is permitted to annul the contract, meaning that allpayments made under the contract should be reimbursedand any existing debt towards the Company resulting fromthe contract is extinguished. It has been well established injurisprudence that the spouse or partner should annul thecontract within three years after becoming aware of theexistence of the contract. However, controversial questionsremain concerning the nature of the evidence required todemonstrate the knowledge of the spouse.Number of court casesOn 31 December 2010, the Company is still involved in about2,000 civil court cases (compared to over 3,400 at the end of2009). However, the vast majority of these court cases havebeen suspended. The vast majority of clients in proceedings(and especially those clients with complaints about breach ofthe duty of care) were offered out-of-court settlements onthe basis of the so-called “Court model” during 2010. Thenumber of clients in proceedings will decrease sharply in 2011because of settlements expected after the judgements of theSupreme Court and the Amsterdam Court of Appeal.Proceedings related to “spousal cases” are still ongoing dueto the interpretation issues.Litigations in generalA number of disputes have arisen between the Company andits clients with respect to share-leasing products. Particularlywith regard to the nature of these disputes, Dexia refers toits earlier reports and quarterly activity reports. Generallyspeaking, only the approximately 19,000 clients that have fileda so-called opt-out statement before 1 August 2007, and didnot enter into any settlement since then, are entitled to startor continue proceedings against the Company. However, morethan 1,800 cases have already been closed due to settlementswith the Company or the closure of proceedings.Klachteninstituut Financiële Dienstverlening(KiFiD)At the end of 2010, three share-lease related cases werestill under consideration by the Klachteninstituut FinanciëleDienstverlening (KiFiD), the Complaints Institute for FinancialServices.Provisions as at 31 December 2010Provisions are updated every quarter and may be influencedby fluctuations in the value of the underlying equity portfoliosof the share-leasing contracts, by client behaviour and byfuture judgements. At the end of 2010 the provisioningmodel was adapted to the most recent information aboutclient behaviour as well as the most recent information aboutthe effect of the “Court model”. The net financial impactthereof on Dexia’s 2010 financial statements was negligible.At the end of December 2010, total provisions amounted toEUR 177.5 million.Lernout & HauspieDexia Bank Belgium (Dexia Bank) was involved in various waysin the bankruptcy of Lernout & Hauspie Speech Products SA(LHSP) and the consequences thereof. This was described indetail in the 2007, 2008 and 2009 annual reports.The following important developments have taken place sincethe 2009 annual report.Claim on Lernout & Hauspie Speech ProductsAt 31 December 2010, Dexia Bank has a claim in USDchargeable to the bankruptcy of LHSP for a principal sum ofEUR 29.3 million (exchange rate USD/EUR 1.3399), for whichan impairment of EUR 25.1 million has been booked. Thisclaim originates in the share taken by the former ArtesiaBanking Corporation (ABC) in the syndicated loan of USD 430million to LHSP on 5 May 2000. ABC’s share amounted toUSD 50 million.Dexia Bank believes it will be able to recover the netaccounting value of this claim.The liquidation of LHSP’s assets is subject to separateproceedings in Belgium and in the United States.According to the LHSP Belgian bankruptcy receivers, DexiaBank and the other unsecured creditors are unlikely to receiveany reimbursement from the Belgian liquidation of LHSP.In 2008, Dexia Bank waived its claim on the insolvency ofLHSP in the United States, in exchange for a waiver by theAmerican Litigation Trustee of LHSP of all its claims enteredagainst Dexia Bank.Prosecution of Dexia Bank in BelgiumOn 4 May 2007, Dexia Bank was summoned, together with20 other parties, to appear before the Court of Appeal inGhent. According to the writ of summons, Dexia Bank wasprosecuted by virtue of the former ABC being accused asan alleged accessory to the falsification of the financialstatements of LHSP and other related offences among whichforgery, securities fraud and market manipulation.90 Dexia Annual report 2010

Risk managementOn 20 September 2010, the Court of Appeal of Ghentpassed its judgement on the criminal case. It acquitted DexiaBank and Mr G. Dauwe, former member of the ManagementBoard of ABC, of all criminal charges on the basis of a verydetailed analysis of the facts by the Court of Appeal.No party has filed an appeal to the Supreme Court of Appealagainst this acquittal of Dexia Bank and Mr G. Dauwe, so thattheir acquittal is definitive.As a result of those acquittals, the Court of Appeal of Ghentis no longer competent to pronounce on the claims madein civil actions by the shareholders, creditors and receivers ofLHSP against Dexia Bank and Mr G. Dauwe. Deminor andDolor, together representing the majority of the individualsbringing civil actions, consider that they can only appealwhen the Court of Appeal in Ghent has pronounced on thecivil case. Dexia Bank and its counsel are of the opinion thatthis position is extremely contestable.Whatever the case, an appeal by a civil party will notthrow back into question the acquittal of Dexia Bank andMr G. Dauwe.Considering the comprehensively substantiated judgement,the risk of Dexia Bank being ordered to pay damages andinterest to the receivers, creditors or shareholders of LHSP isparticularly low.Civil proceedings against Dexia Bank inBelgiumLHSP receivers’ claimIn July 2005, the Belgian receivers of LHSP filed a civil actionbefore the Commercial Court of Ypres against twenty-oneparties including Dexia Bank. They claim compensation forthe net liabilities of LHSP in bankruptcy. According to thereceivers’ provisional assessment of the claim, it would amountto approximately EUR 439 million. This claim, to a largeextent duplicative of the claims introduced by the receiversin the criminal proceedings, has not developed since then.There is not likely to be any development until after the endof the criminal proceedings (still on hold before the SupremeCourt of Appeal with regard to parties other than Dexia Bank)and settlement of the civil aspect before the Court of Appeal.Considering the acquittal of Dexia Bank and the reasoning forthe order, the risk of that action being declared substantiatedis considered extremely low.Individual actionsDuring the criminal proceedings, certain civil claims werefiled before the Commercial Courts of Ypres and Brusselsagainst various parties, including Dexia Bank. The main claimwas filed by Deminor on behalf of 4,941 investors. Similarly,151 investors affiliated to Spaarverlies (now named Dolor)and the liquidators of the company Velstra also commencedcivil actions. These claims, to a large extent duplicative of theclaims introduced in the criminal proceedings, have notdeveloped since then. There is not likely to be any developmentuntil after the end of the criminal proceedings (still onhold before the Supreme Court of Appeal with regard toparties other than Dexia Bank) and settlement of the civilaspect before the Court of Appeal.Considering the acquittal of Dexia Bank and the reasoning forthe order, the risk of that action being declared substantiatedis considered extremely low.L&H HoldingOn 27 April 2004, the bankruptcy receiver of L&H Holdingsummoned Messrs Lernout, Hauspie and Willaert, alongwith Banque Artesia Nederland (BAN) and Dexia Bank, toreturn the Parvest shares (the value of which was estimatedat USD 31.5 million as at 31 December 2010) or, in default,to pay the principal amount of USD 25 million. The case,pending before the Commercial Court of Ypres, has notdeveloped since thenThis action is connected with a USD 25 million loan grantedto Mr Bastiaens by BAN in July 2000 for the purposes of theacquisition by Mr Bastiaens of LHSP shares owned by L&HHolding. The selling price of USD 25 million was credited notto the account of L&H Holding but to three separate accountsopened by Messrs Lernout, Hauspie and Willaert. Taking theview that this money was due to L&H Holding, the L&HHolding bankruptcy receiver is claiming its repayment.The order by the Court of Appeal in Ghent on 20 September2010 attributed the said Parvest shares to the bankruptcyreceiver of L&H Holding.If the Parvest shares, on deposit in the Netherlands and seizedby various parties, are restored to the bankruptcy receiver ofL&H Holding, his action will have no object and in principleit will lapse.ProvisionsIn view of its acquittal in the criminal case on the basis ofthe facts of the case, the risk that Dexia Bank will be orderedto pay damages and interest in the current civil proceedingsis particularly low and no provision has been constituted inthat regard.Financial Security AssuranceFinancial Security Assurance Holdings Ltd (FSA Holdings) andits subsidiary, Financial Security Assurance Inc. (now namedAssured Guaranty Municipal Corp. and hereafter referredto as “AGM”), former subsidiaries of the Dexia Group, andmany other banks, insurance companies and brokerage firmsare being investigated in the United States by the AntitrustDivision of the US Department of Justice, the US tax authoritiesand the US Securities and Exchange Commission (SEC) onthe grounds that they violated certain laws and regulationsin connection with bidding on and entering into municipalderivatives transactions, including guaranteed investmentcontracts (GICs) (1) , with the issuers of municipal bonds.Several US states have initiated parallel, similar investigations.In addition to the governmental investigations describedabove, a large number of banks, insurance companies andbrokerages, including in some cases FSA Holdings, Dexia and/or AGM, have been named as defendants in various civilactions relating to municipal GICs and municipal derivativestransactions. These civil lawsuits allege violations of antitrustand other laws and regulations. Substantially all these civil(1) The guaranteed investment contracts (GICs) that are the subject of theseinvestigations and lawsuits were issued by subsidiaries of FSA Holdingsin exchange for an investment of funds by US municipal entities. Thosesubsidiaries also issued GICs to issuers of securitized debt securities. The GICs,which had varying terms and repayment conditions, entitle their holdersto receive interest payments at a guaranteed rate (fixed or variable) alongwith a return of invested principal. Payments of principal and interest on theGICs were guaranteed by AGM, and remain so after the acquisition of thatcompany by Assured Guaranty Ltd.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia91

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsproceedings have been consolidated for pre-trial purposes ina single matter before the US District Court for the SouthernDistrict of New York.Under the terms of the sale of FSA Holdings and AGM toAssured Guaranty Ltd, Dexia retained the Financial Productsbusiness and agreed to indemnify AGM and Assured GuarantyLtd for all losses related to this activity that they may incur asa result of the investigations and lawsuits mentioned above.On 27 July 2010, the Department of Justice (DOJ) indictedformer FSA employee Steven Goldberg, together with twoformer colleagues of Goldberg at his previous employer inthe bid rigging matter. The DOJ did not indict FSA or anyentity within the Dexia FP Group as part of the Goldbergindictment.Dexia is not able at present reasonably to predict the durationand the outcome of the investigations and legal proceedingsin progress, or their potential financial repercussions. Inaddition, due to the nature of the DOJ/SEC investigations andcivil actions relating to the same subject matter, any indicationwhether a provision has been constituted in relation to theseinvestigations or litigations or their subject matter and, if so,the amount thereof, could seriously prejudice Dexia’s legalposition or its defence in the context of these legal actions orany related proceedings.Investigations of allegedshortcomings in financialcommunicationIn 2009 a shareholder, Mr Robert Casanovas, lodged acomplaint with the Public Prosecutors in Brussels and Parisalleging shortcomings in Dexia’s financial communication.These complaints had given rise to the opening of twopreliminary investigations. Mr Casanovas and his wife,Mrs Marie Christine Guil, had also served direct summonseson the company Dexia SA and several former and currentexecutives of the Group to appear before the Criminal Courtin Paris.At the hearing in October 2009, Mr Casanovas and his wifewithdrew their action against the company Dexia SA whichacknowledged it. This withdrawal occurred after the PublicProsecutor in Paris dismissed the complaint filed by Mr RobertCasanovas and his wife. As to the complaint lodged inBrussels, the Public Prosecutor also dismissed the chargesagainst Dexia.Nonetheless, in October 2010, Mr Casanovas and his wifere-filed an action against Dexia before the Civil Court ofPerpignan on essentially the same grounds as the criminalcomplaints filed in 2009.Dexia denies any shortcomings in its financial communicationand considers that the allegations made by Mr Casanovasand his wife are unfounded.No provision has been set up.Dexia banka SlovenskoIn June 2009, a client of Dexia banka Slovensko, whichdefaulted on its collateral posting obligations in respect ofcertain currency transactions, commenced a court actionagainst the bank claiming EUR 162.4 million for noncompliancewith legislation and contractual obligations.Dexia banka Slovensko, in turn, submitted a counterclaim forEUR 92.2 million.On 17 May 2010 the District Court of Bratislava announcedits judgement on the former client’s claim, ordering Dexiabanka Slovensko to pay an amount in principal of EUR 138million. By separate judgement, the District Court furtherordered Dexia banka Slovensko to pay legal fees and costsin an amount of EUR 15.3 million. The bank appealed bothdecisions to the Court of Appeal of Bratislava and, in reactionto these decisions, withdrew its counterclaim still pendingbefore the District Court and resubmitted it for a higheramount to the Permanent Arbitration Court of the SlovakBanking Association.On 25 January 2011, the Court of Appeal in Bratislava passeda judgement cancelling both judgements of the District Courtof Bratislava. The case will now return to the court of firstinstance. In its decision, the Court of Appeal in Bratislavaalmost entirely dismissed the arguments adopted by theDistrict Court and stated that it did not establish the factsof the case correctly and erred in its legal arguments. Thereasoning of the Court of Appeal will be binding on the courtof first instance in the renewed proceedings.This decision lead to the reversal of the provision ofEUR 138 million set up in the second quarter of 2010.However a provision of EUR 39 million is still being maintainedto cover potential charges related to this case.Dexia CrediopDexia Crediop, like other banks in Italy, is involved in certainjudicial proceedings with respect to hedging transactionsconcluded in the framework of debt refinancing for localauthorities.Under Italian law, debt may be restructured only if it leads toa reduction in the cost borne by the community. The legalquestion raised is whether or not the cost to be taken intoconsideration includes the cost of hedging transactions.In November 2010, the Administrative Tribunal of theRegion of Tuscany rendered a decision in a dispute betweenDexia Crediop and the Province of Pisa according to whichthe hedging transaction must be taken into account whencalculating the costs of the restructuring transaction. DexiaCrediop lodged an appeal against this decision before theState Council in January 2011.In addition, Dexia Crediop has filed several claims before civiland administrative courts to preserve its rights under certainhedging agreements.At this stage of the proceedings, Dexia is not in a positionto forecast in a reasonable way the duration or the outcomeof the disputes, nor their possible financial consequences.Therefore, only a provision of an amount of EUR 7 millionappears in the accounts as at 31 December 2010 in order tocover the legal fees.Dexia Banque Internationale àLuxembourg and Dexia Private Bank(Switzerland)Further to the Bernard Madoff Investment Securities (“BMIS”)bankruptcy, the trustee of the BMIS estate and certain trusteesof Madoff-related investment funds launched proceedingsagainst a large number of financial institutions and institutionalinvestors that purchased Madoff securities and Madoff-linkedinvestment products, claiming reimbursement of profitsearned by and redemptions received on these investments92 Dexia Annual report 2010

Risk managementover a period of several years leading up to the discovery ofthe fraud scheme operated by, and the subsequent bankruptcyof BMIS (so-called clawback claims).Dexia Banque Internationale à Luxembourg and its affiliateDexia Private Bank (Switzerland) have been named asdefendants in certain civil actions based on these clawbackclaims for an estimated amount in principal of approximatelyUSD 79 million. The major part of this amount relatesto investments made by Dexia Banque Internationale àLuxembourg for the account of third party investors.Dexia is not able at present reasonably to predict the durationor the outcome of the legal proceedings in progress, ortheir potential financial repercussions. If and to the extentthese clawback claims would be supported by the courts,Dexia Banque Internationale à Luxembourg intends toseek reimbursement of any amounts to which it would becondemned from the beneficiaries for whose account itacted.As at 31 December 2010, no provision has been set up withrespect to the clawback claims.In addition, Dexia Banque Internationale à Luxembourg is adefendant in a limited number of proceedings brought byclients who invested in Madoff-linked products.Dexia Asset ManagementDexia Asset Management is defendant in proceedings broughtagainst it by a professional investor before the Irish Court,filed in December 2010, seeking unquantified damages foralleged breach of contract.The claims relate to investments made by this professionalinvestor in two Irish funds managed by Dexia AssetManagement.The proceedings have been commenced and served uponDexia Asset Management, but have not yet been advancedby the claimant beyond the document initiating theproceedings.As at 31 December 2010, a provision in an amount ofEUR 2 million has been set up to cover expected legal fees andcosts in relation to the defence against these allegations.Dexia Crédit LocalEarly in 2011, claims have been filed against Dexia CréditLocal by two clients in relation to structured financings.Dexia is analysing these claims but at this stage, is not ablereasonably to predict the duration and the outcome of theseproceedings, or their potential financial repercussions.Dexia IsraelIn May 2002, a complaint was filed in relation to the purchaseby Dexia of shares held by the State of Israel claiming noncompliancewith company law. In April 2009, the CentralDistrict Court rejected the application for a class actionformulated by the complainants. In June 2009, the latterappealed to the Supreme Court. The hearing was held inNovember 2010. The Court has not yet passed judgement.No provision has been set up.Stress testsDexia put an action plan in place in 2010 regarding stresstesting: the development of new governance enhancing andoptimising the organisation in place was made a priority in2010.In terms of Pillar 1 stress tests (individual stress tests onBasel II internal rating models), Dexia maintains its target tocover more than 80% of weighted credit risks.In terms of Pillar 2 stress tests (global stress tests), the stresstest performed by Dexia on the basis of an expert scenario ofeconomic recession led to the maintenance of a Tier 1 ratioat a level above 8%.In addition to the “classic” stress tests for market and liquidityrisks, Dexia now has a full range of stress tests (sensitivityanalyses, the implementation of stress scenarios and potentialvulnerability assessments), enabling it to assess the potentialeffects of a hypothetical event or combination of events on itsfinancial health, and to obtain a global view of the possibledeformation of elements of the statement of income or itscapital ratios under stress. Such simulations were made in2010 for ABS, Assured-FSA and local authorities in particular.Finally, in 2010 Dexia was among 91 European establishmentssubjected by the Committee of European Banking Supervisors(CEBS) to a common stress test, built on different scenarios ofcredit quality deterioration (1) . the conclusion of the stress testsis that Dexia does not require additional capital to withstandthe CEBS two-year adverse scenario, including the additionalsovereign shock. Dexia’s strong capital base would enable itto resist to the conservative set of assumptions of the stresstests over the next two years, while still maintaining strongcapital ratios. More specifically, as a result of the assumedshock under the adverse scenario, the estimated consolidatedTier 1 ratio of the Group would change to 11.2% in 2011compared to 12.3% by the end of December 2009. Anadditional sovereign risk scenario would have a further impactof 0.29 percentage point on the estimated Tier 1 ratio,bringing it to 10.9% at the end of 2011, compared with theregulatory minimum of 4%.Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) The test was conducted using to the scenarios, methodology and keyassumptions provided by the CEBS, detailed in the aggregate report publishedon the CEBS website: http://www.c-ebs.org/EU-wide-stress-testing.aspxAnnual report 2010 Dexia93

Risk managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsEvolution of the regulatoryframeworkSince 1 January 2008 the Dexia Group has used the AdvancedInternal Rating Based Approach (AIRBA) for calculating itscapital requirements and its solvency ratios. New models havebeen developed and will progressively be used for calculatingregulatory capital as from 31 December 2011.Pillar 2 was consolidated in 2010 following inspections bythe college of regulators. This mechanism, applicable since31 December 2008, requires banks to demonstrate to theirregulators the adequacy of their risk profile and their capital.To do so, they must have internal systems for the calculationand management of their risks, capable of making a validassessment of their economic capital needs (Internal CapitalAdequacy Assessment Process − ICAAP). This process is thusbased on three main processes: the analysis of risks by theRisk support line and the financial plan (including a capitalallocation, an analysis of the evolution of the results ofbusiness lines and the internal capital supply) and an analysisof the economic adequacy of capital by the Finance supportline.The Board of Directors and the Management Board ofDexia SA have been kept closely informed of developmentson Pillar 2. In May 2010 these two bodies approved Dexia’sglobal risk appetite policy (cf. section on the internal capitaladequacy in the chapter “Capital Management” pages97-98).Pillar 3, which defines a range of qualitative and quantitativeinformation in relation to risks distributed to market operators,is applicable at the highest consolidated level of the DexiaGroup and has been part of the external communication ofDexia SA since 2008 (see the document Risk Report – Pillar 3of Basel II published on Dexia’s website www.dexia.com).Finally, Dexia is heavily involved and very closely monitorsnational and international consultations by participatingin particular in the study of the impact of the Bank ofInternational Settlements on Basel III reform regarding thedefinition of capital, leverage ratio, liquidity ratios and so on.In this context, Dexia worked actively on application of theso-called “CRD 2” and “CRD 3” European directives.Risk appetiteRisk appetite expresses the level of risk an institution is readyto take, given the expectations of the principal stakeholders(shareholders, creditors, regulators, rating agencies, clientsand so on), in order to achieve its strategic and financialobjectives.In 2010, the Group worked on integration of its riskappetite approach in various strategic analyses, and began toimplement it in the main subsidiaries.Based on a global approach, risk appetite is a reference pointto:• guide strategy and planning;• frame performance in terms of growth and value creation;• facilitate daily investment decisions.A formalised framework was developed in 2009, and thenvalidated in 2010, integrating a series of ratios constitutinga key element in defining limits for major financial balances.The framework is based on a mix of accounting ratios(gearing), regulatory ratios (Tier 1, weighted risks), economicratios (economic capital, earnings at risk), and naturallyintegrates liquidity and funding structure ratios as well ascredit concentration limits.Limits are defined on each of these ratios, and validated bythe Board of Directors each year. The Group’s financial plan isanalysed respecting the framework set for risk appetite. TheRisk Management and Finance support lines are responsiblefor monitoring these ratios, and if necessary propose measuresto the Management Board to ensure the limits are observed.94 Dexia Annual report 2010

Capital managementSolvencyDexia monitors its solvency using rules and ratios establishedby the Basel Committee on Banking Supervision and theEuropean Capital Requirements Directive.These ratios, the capital adequacy ratio and the Tier 1 ratio,compare the amount of regulatory capital (in total and Tier 1)with total weighted risks. From a regulatory point of view,they should amount to a minimum 4% for the Tier 1 ratioand 8% for the capital adequacy ratio.Another indicator used by Dexia to monitor its solvency is theCore Tier 1 ratio, which compares the amount of regulatorycapital excluding hybrid capital, with total weighted risks.The Banking, Finance and Insurance Commission (CBFA)requires Dexia to submit the calculation of capital necessary inperformance of its activity in accordance with the prudentialbanking regulations on the one hand and in accordance withthe prudential regulations on financial conglomerates on theother.Dexia has complied with all regulatory capital rules for allperiods reported.Regulatory capitalRegulatory capital consists of:• Tier 1 capital consisting of share capital, share premiums,retained earnings including current year profit, hybrid capital,foreign currency translation and minority interests, lessintangible assets, accrued dividends, net long positions inown shares and goodwill;• Tier 2 capital which includes the eligible part of subordinatedlong-term debt, less subordinated debt from and equities infinancial institutions.According to regulatory requirements:• AFS reserves on bonds and cash flow hedge reserves arenot 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;• certain IFRS adjustments on subordinated debts, minorityinterests and debts must be reversed to reflect thecharacteristics of absorption of loss of those instruments;• other elements (SPV, deferred taxes, etc.) are also adjustedbased on CBFA requirements.Moreover, since 1 January 2007, according to the CRDregulation (Capital Requirement Directive), the CBFA adaptedits definition of the regulatory capital. The most importantpoint impacting Dexia is that the elements which werededucted from the total regulatory capital (banks accountedfor by the equity method, participations in financial companiesor subordinated loans issued by such a financial company)will be deducted for 50% from Tier 1 capital and for 50%from total regulatory capital. For these elements dealingwith insurance companies, the new deduction rule will beimplemented as from 1 January 2013.For regulatory purposes, insurance companies are accountedfor by the equity method. Therefore, non-controlling interestsdiffer from those published in the financial statements.Discretionary participation features only relate to insurancecompanies.Comparison of total equity (financialstatements) and equity calculated forregulatory requirements 31/12/09 31/12/10ConsolidatedfinancialRegulatorypurposesConsolidatedfinancialRegulatorypurposes(in millions EUR)statementsstatementsTotal shareholders’ equity 10,182 10,182 8,945 8,945Non-controlling interests 1,806 1,796 1,783 1,773of which Core equity 1,813 1,805 1,858 1,849of which Gains and Losses not recognised in the statementof income (8) (9) (75) (76)Discretionary participation features of insurance contracts 1 0 0 0Total equity 11,988 11,978 10,728 10,718Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia95

Capital managementManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsRegulatory capital 31/12/09 31/12/10Regulatory capital (after profit appropriation) 20,251 20,636Tier 1 capital 17,573 18,425Core shareholders’ equity 18,498 19,214Cumulative translation adjustments (Group share) (531) (361)Prudential filters (111) (104)Non-controlling interests eligible in Tier 1 613 660Dividend payout (non-controlling interests) (9) (6)Items to be deducted (2,308) (2,401)Intangible assets and goodwill (2,163) (2,262)Holdings > 10% in other credit and financial institutions (50%) (57) (54)Subordinated claims and other items in other credit and financial institutions inwhich holdings > 10% (50%) (88) (85)Innovative hybrid Tier 1 instruments 1,421 1,423Tier 2 capital 2,678 2,211Perpetuals 755 839Subordinated debts 2,630 2,541Available for sale reserve on equities (+) 435 308IRB provision excess (+); IRB provision shortfall 50% (-) 157 0Items to be deducted (1,298) (1,478)Holdings > 10% in other credit and financial institutions (50%) (187) (186)Subordinated claims and other items in other credit and financial institutions inwhich holdings > 10% (50%) (88) (85)Participations in insurance undertakings (1,023) (1,206)At year-end 2010, Tier 1 capital amounted toEUR 18,425 million, up 5%. Excluding hybrid Tier 1instruments in an amount of EUR 1,423 million, core Tier 1capital amounted to EUR 17,002 million at year-end 2010.These hybrid Tier 1 instruments consist of three issuances:• a perpetual hybrid capital instrument of EUR 225 millionissued by Dexia Banque Internationale à Luxembourg;• undated subordinated non-cumulative Notes for EUR 700 million,issued by Dexia Crédit Local;IssuerBooked amount(in millions of EUR)Rate Call date Rate applicableafter the callDexia Banque Internationale àLuxembourg SA 225 6.821% 06.07.11Dexia Crédit Local SADexia Funding Luxembourg SA• undated subordinated non-cumulative Notes for EUR 498 million,issued by Dexia Funding Luxembourg.The characteristics of the three issuances are as follows:The agreement with the European Commission providescertain restrictions in relation to the payment of coupons andcalls on Dexia hybrid capital instruments. These restrictions aredetailed in the chapter “Update on the transformation plan”in this annual report (page 15-16).700 4.30% 18.11.15498 4.892% 02.11.16Euribor 3 m+ 230 bpEuribor 3 m+ 173 bpEuribor 3 m+ 178 bp96 Dexia Annual report 2010

Capital managementWeighted risksWeighted risks consist of three elements: credit risk, marketrisk and operational risk. Each of these risks is described inthe chapter “Risk Management” in this Annual Report (pages78 to 80).At year-end 2010, Dexia’s total weighted risks amounted toEUR 140.8 billion against EUR 143.2 billion at year-end 2009.This fall of EUR -2.3 billion is essentially due to deleveragingefforts (EUR -3.2 billion) and impairments on the FinancialProducts portfolio (EUR -4.2 billion), partially offset byexchange effects (EUR +3.2 billion) and the increased assetbase (EUR +2.7 billion).(in millions of EUR) 31/12/09 31/12/10Weighted credit risks 129,758 128,240Weighted market risks 2,993 2,945Weighted operational risks 10,419 9,650TOTAL 143,170 140,834Solvency ratiosIn 2010, Tier 1 ratio further improved by 81 bps to 13.1%supported by organic generation of Tier 1 capital ofEUR 852 million (equivalent to 60 bps) and by a decrease oftotal weighted risks by EUR 2.3 billion (equivalent to 21 bps).The core Tier 1 ratio reached 12.1%, up by 79 bps comparedto the end of 2009, illustrating the Group’s solid solvencysituation.The capital adequacy ratio was 14.7% at the end of 2010, up51 bps on the end of 2009.Dexia was subject to the 2010 European Union-wide stresstesting exercise, coordinated by the Committee of EuropeanBanking Supervisors (CEBS). The conclusion of that stress test,based on various scenarios of credit quality deterioration (1) ,was that Dexia does not require any additional capital towithstand the CEBS two-year adverse scenario, including theadditional sovereign shock.More detailed information on the stress tests is providedin the section dedicated to stress tests in the chapter “RiskManagement” of this Annual Report (page 93).31/12/09 31/12/10Tier 1 ratio 12.3% 13.1%Core Tier 1 ratio 11.3% 12.1%Capital adequacy ratio 14.1% 14.7%Management reportConsolidatedfinancial statementsInternal capital adequacyIn 2010, Dexia had the Management Board and the Boardof Directors validate its internal capital adequacy mechanismthus responding to the requirements of Pillar 2 of Basel II.Beyond those external requirements, this process is at theheart of management of the bank and responds to itscapital adequacy target in line with its risk profile. It relieson a comparison between available financial resources andeconomic capital.(1) The test was conducted using the scenarios, methodology and keyassumptions provided by the CEBS, detailed in the aggregate report publishedon the CEBS website: http://www.c-ebs.org/EU-wide-stress-testing.aspxAdditional information Annual financial statementsAnnual report 2010 Dexia97

Capital managementEconomic capitalEconomic capital adequacyManagement reportConsolidatedfinancial statementsEconomic capital is defined as the potential deviation of theGroup’s economic value in relation to the value expected at agiven interval of confidence and time horizon. The economiccapital quantification process is organised in three phases: riskidentification (definition and cartography updated annually upto a local level), their assessment (essentially on the basis ofstatistical methodologies) and their aggregation on the basisof an inter-risks diversification matrix. The majority of risks arecapitalised in relation to a measure of expected loss; certainrisks are not however capitalised if other management modes(limits, scenarios, governance and so on) are considered moreappropriate to cover them.Capitalised risks are assessed at a high level of severity(99.97% at one year).During 2010, economic capital reporting was totallycentralised, in line with the new Group organisation.A series of methodological evolutions was made to calculationmethods in order to learn from the crisis, and to respond tointernal recommendations as well as those from the regulatorswho audited the mechanism at the end of 2009.Dexia’s economic capital is EUR 14,022 million at year-end2010.Credit risk represents approximately one half of the utilisationof economic capital.Market risk, which includes interest-rate risks, foreignexchangerisks and the equity-price risk, is the second riskfactor.Created in 2009, the Economic Performance AnalysisCommittee (EPAC) manages the capital adequacy processand in this context has to propose solutions suited to Dexiastrategy. On a quarterly basis, the EPAC examines (regulatoryand economic) ratios, limits and triggers defined in the riskappetite policy and the budget framework, and possibledivergences in relation to forecasts. It assesses the Group’scapacity to absorb them and studies action proposals. Theinformation in the EPAC report is established jointly by theRisks and Finance support lines; the Management Boardreads it.ECONOMIC CAPITAL BY TYPE OF RISKAS AT 31 DECEMBER 2010OperationalriskMarketrisk32%17%51%CreditriskOperational risk (including commercial risk) is the third riskfactor.ECONOMIC CAPITAL BY BUSINESS LINEAS AT 31 DECEMBER 2010Additional information Annual financial statementsThe Legacy division consumes almost one quarter of economiccapital. It includes the bond portfolio in run-off (comprisingthe former credit spread portfolio, the public bond portfolioand some trading portfolios), the Financial Products portfolioand some non-core public loans as well as off-balance sheetcommitments, mainly liquidity lines in the United States.Public and Wholesale Banking and Retail and CommercialBanking both consume approximately 20% of capital. AssetManagement and Services consume almost 10% of capital,and the remainder is allocated to the Group Center (ALM,holdings…).LegacyGroupCenter23%28%9%19%21%Public andWholesaleBankingRetail andCommercialBankingAssetManagementand Services98Dexia Annual report 2010

Financial resultsPreliminary notes to the consolidatedfinancial statementsChanges in scope of consolidationIn 2009As from 1 April 2009, Dexia no longer consolidates theactivities of Financial Security Assurance Holdings Ltd, soldto Assured Guaranty Ltd. FSA Insurance’s result for the firstquarter 2009 is consolidated on a line-by-line basis and thenet result is offset in “Net income on investments”. The salewas completed on 1 July 2009.As from the fourth quarter 2009, Crédit du Nord is no longerincluded in Dexia’s consolidated financial statements pursuantto the agreement under which Société Générale buys Dexia’s20% stake in Crédit du Nord. The first nine-month result forCrédit du Nord is considered in Dexia’s annual result 2009.Simultaneously to this transaction Dexia purchased Crédit duNord’s 20% stake in Dexia Crédit Local de France Banque.As a result of this acquisition, Dexia controls 100% of DexiaCrédit Local de France Banque.On 9 December 2009, Dexia signed an agreement relating tothe sale of Dexia Épargne Pension to BNP Paribas Assurance.Following the signing of the agreement, Dexia ÉpargnePension was recorded in “Non current assets held for sale”and in “Liabilities included in disposal groups held for sale”as at 31 December 2009.In 2010Following its sale in April 2010, Dexia Épargne Pension left thescope of consolidation. Its results for the first three months of2010 have been consolidated.Dexia sold its 51% stake in AdInfo. AdInfo’s results for thefirst six months of 2010 have been consolidated.Analytical treatmentUnder the new segment reporting, introduced on 1 January2010, Dexia’s business was split into two divisions:• The Core Division, composed of the following businesslines:- Retail and Commercial Banking (segment 1);- Public and Wholesale Banking (segment 2);- Asset Management and Services, comprising the activities ofAsset Management (segment 3), Investor Services (segment 4)and Insurance (segment 5);- Group Center (segment 6).• The Legacy Portfolio Management Division (segment 7),which gathers the contributions of the bond portfolios in runoff(including the Financial Products portfolio) and the PWBrun-off commitments.Those segments can be defined as being components of Dexiathat engage in business activities from which the Group mayearn income and incur expenses. They are regularly reviewedin order to assess performance and to make resourceallocationdecisions.They are defined by using the management approach, whichmeans that they reflect Dexia’s internal organizational structureand are used by management to make business decisions.The Legacy Portfolio Management Division remains on thebalance sheet in a separate (non-core) unit with clearlyidentifiable and allocated funding. The State-guaranteedfunding is allocated to this division.Interests allocated from the Group Center to the otherbusiness lines and to the Legacy Division are now related tothe allocated equity which is:• the economic equity in the core business lines;• the normative equity (12.5% of the weighted risks) in theLegacy Division.“Return on allocated equity” measures the performance ofthe core business lines.“Tangible and intangible assets” are allocated to theGroup Center except when they are directly managed by acommercial or financial business line.Relations between business lines and especially betweencommercial business lines, the financial markets division and“production and service centre” departments are subject toanalytical transfers, governed by service level agreementsbased on normal commercial terms and market conditions.The results of each business line also include:• the commercial margin;• interest on economic capital: economic capital is allocatedto the business lines for internal purposes and the return oneconomic capital is used to measure the performance of eachbusiness line.Although Dexia’s business segments are managed on acentralized basis, geographical segments with an income(in absolute terms) above 10% have been defined forcompliance purposes. Geographic information is based onbooking centres, being the country of the company recordingthe transaction and not the country of the customers.More information on segment reporting is given in the note 3to the consolidated statements on page 144.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia99

Financial resultsConsolidated statement of incomeIncomefrom losses and provisioning on the Financial Products portfoliofollowing the Financial Products State Guaranteemechanism (1) .Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAt EUR 5,310 million, 2010 income was marked byacceleration of the Group’s transformation and in particularby the strengthening of its financial structure. Indeed, thesharp decrease of the liquidity gap and the Group’s activedeleveraging programme, in line with Dexia’s targets, werereflected by a EUR 528 million decrease in Treasury revenuesagainst 2009 record results and a EUR 283 million loss onmargins on run-off assets. Although remaining contained,the cost of deleveraging also impacted revenues with aEUR 212 million loss for a total of EUR 27.2 billion of assetsales. The stronger contribution from the commercial businesslines and the positive effects of the Legacy trading portfoliovaluation (CDS linked to synthetic securitization and CVAon CDS intermediation) did not fully offset this impact.Consequently, income fell by 14% in 2010. Excluding FSAInsurance (deconsolidated as from 2Q 2009), the decreasewas 9% compared to the FY 2009.ExpensesCosts totalled EUR 3,703 million (+3% on 2009). Within thecontext of its restructuring plan, Dexia booked EUR 145 millionof provisions for restructuring costs in 2010 against EUR 89million in the previous year. Excluding those restructuringcosts and bonus reversals, costs remained flat. In 2010, thecost base was also impacted by business-related costs inTurkey resulting from the network expansion (+50 branchesin 2010) and by EUR 52 million of currency impact onRBC Dexia Investor Services and DenizBank. The cost-incomeratio amounted to 69.7% for the full year 2010.Gross operating incomeConsequently, gross operating income amounted toEUR 1,607 million in 2010 compared to EUR 2,577 millionin 2009.Cost of riskThe cost of risk was down sharply on 2009 (-40%) atEUR 641 million. Excluding FSA Insurance, the cost of risk fellby EUR 183 million, reflecting diverging trends. On the onehand, the Group benefited from a decrease (EUR 104 million)of the cost of risk in Retail and Commercial Banking mainlydue to a rapidly improving credit environment in Turkey,EUR 195 million reversals of impairments in Public andWholesale Banking also reflecting an improvement of theenvironment and EUR 191 million reversals on collectiveimpairments for ABS and subordinated debt booked in thebond portfolio in run-off following the disposal of assets. Onthe other hand, 2010 was marked by higher impairments onthe Financial Products portfolio (EUR 559 million in 2010 versusEUR 231 million in 2009), particularly during the last quarterof the year in line with more conservative assumptions on theUS RMBS market. These provisions have not however impactedDexia’s regulatory solvency ratios which have been immuneImpairments and provisions for litigationsOther impairments and provisions for legal litigationsamounted to EUR 42 million.Pre-tax incomeConsequently, pre-tax income amounted to EUR 924 millionagainst EUR 1,403 million in 2009.Tax expensesTax expenses were EUR 127 million and the effective taxrate 14%, principally explained by EUR 143 million of oneoffpositive items: USD 51 million (EUR 39 million) of taxrefunds in the US, EUR 78 million of reversals of DeferredTax Assets (DTA) or tax provisions and tax impacts related tothe closure of foreign entities. In 2010, EUR 21 million DTAon timing differences on the Financial Products portfolio werealso recognized on provisions exceeding the economic lossassessment after deduction of the Own Credit Risk.Net income Group shareAfter taking EUR 74 million of non-controlling interests intoaccount, net income Group share amounted to EUR 723million in 2010 against EUR 1,010 million in 2009.SolvencyWith a Tier 1 ratio of 13.1% (Core Tier 1 of 12.1%) at the endof December 2010, the Group enjoys robust solvency whichwas further strengthened in 2010 thanks to organic capitalgeneration and by a decrease of total weighted risks. Moreinformation is given in the chapter “Capital management” ofthis annual report (page 95).Return on EquityReturn on equity stood at 3.8% in 2010.Earnings per shareEarnings per share amounted to EUR 0.39 for 2010 comparedto EUR 0.55 for 2009.Consolidated balance sheetThe consolidated balance-sheet total amounted toEUR 567 billion as at 31 December 2010, down byEUR 11 billion compared to 31 December 2009.The evolution of the total balance sheet reflected mainly:• the active balance-sheet deleveraging policy(EUR -27.2 billion);• the natural asset amortization (EUR -27.6 billion);• the new commercial production in line with the refocus onthe core commercial franchises (EUR +22.3 billion);100Dexia Annual report 2010(1) More detailed information on the State guarantee is provided in thenote 9.4.C. to the consolidated financial statements in this Annual Report(page 184).

Financial resultsConsolidated statement of income (1)(in millions of EUR, except where indicated) 2009 (2) 2010 VariationIncome (3) 6,184 5,310 -14.1%Expenses (3,607) (3,703) +2.7%Gross operating income 2,577 1,607 -37.6%Cost of risk (1,096) (641) -41.5%Other impairments & provisions for legal litigation (2) (78) (42) -46.5%Pre-tax income 1,403 924 -34.1%Tax expense (314) (127) -59.6%Net income 1,089 797 -26.8%Non-controlling interests 79 74 -6.3%Net income Group share 1,010 723 -28.4%Return on equity (4) 5.6% 3.8%Cost-income ratio (5) 58.3% 69.7%Earnings per share (in EUR) (6) 0.55 0.39(1) FSA Insurance deconsolidated since 2Q 2009.(2) The provisions for legal litigation were previously included in income (other net income).(3) Income (also mentioned as revenues) = interest, fees, commissions, trading and other income.(4) The ratio between the net income Group share and the weighted average core shareholders’ equity.(5) The ratio between the cost and the income.(6) The ratio between the net income Group share and the average weighted number of shares. 2009 figures have been restated to take into account the issueof bonus shares distributed to the shareholders and to enable comparison.Management report• the changes in interest rate, foreign exchange rate andcredit spreads. A EUR 17 billion positive variation came fromcash collateral postings and fair value adjustments of assets(mainly derivatives) following the evolution of the EUR andUSD interest rate curves.• the sale of Dexia Épargne Pension (EUR -4.3 billion).EquityTotal shareholders’ equity is composed of core equity(capital, additional paid-in capital, reserves, result for theyear before allocation less treasury shares) and gains andlosses not recognized in the statement of income (or OtherComprehensive Income).Total shareholders’ equity of the Dexia Group amountedto EUR 8.9 billion as at 31 December 2010 againstEUR 10.2 billion as at 31 December 2009. This EUR 1.2billion decrease was due to the evolution of the OtherComprehensive Income partially offset by the current 2010result of EUR 723 million. The Other Comprehensive Incomedecreased by EUR 2 billion in 2010, mainly under the effectof the sovereign turmoil.Core shareholders’ equity increased by EUR 0.7 billion toEUR 19.2 billion supported by the organic capital generationof the Group.Gains and losses not recognised in the statementof income include the fair value on the available-for-saleassets, the "frozen" fair value adjustment of financial assetsreclassified to Loans and Receivables, the fair value of cashflowhedge derivatives and the translation reserve. Theydecreased by EUR 2 billion in 2010 and stood at EUR -10.3billion at the end of 2010.• The available-for-sale reserve, down by EUR 2.4 billion, wasimpacted by the spread widening on sovereign debt (Greece,Portugal and Italy).• The "frozen" fair value adjustment of financial assetsreclassified to Loans and Receivables, created within theframework of the amendments to IAS 39 and IFRS 7, isamortised over time and amounted to EUR -5.3 billion as at31 December 2010. If the reclassification had not been made,an additional net amount of EUR -0.6 billion would have beenrecognised in AFS reserve in 2010.• The cash-flow hedge reserve remained nearly stable atEUR -0.7 billion• The translation reserve improved by EUR 0.2 billion atEUR -0.4 billion.Non-controlling interests remained at EUR 1.8 billion.LiabilitiesThe amount of customer deposits and debt securities (savingsbonds, certificates and bonds) reached EUR 338 billion as at31 December 2010 (+1%). Their relative share in the totalbalance sheet reached 60% at the end of 2010 against 58%at the end of 2009.Customer deposits amounted to EUR 127 billion, anincrease of 5% or EUR 6.1 billion during the year. Savingsaccounts, term and other deposits grew by EUR 9 billionwhereas demand deposits were down EUR 2 billion. Reverserepurchase agreements decreased by EUR 1 billion.Debt securities decreased by EUR 2.6 billion (or -1%) toEUR 210 billion: certificates of deposit fell (EUR -17 billion)while non-subordinated debt increased by EUR 14 billion,showing the reallocation of the funding from short-term tomedium and long-term sources. Savings bonds decreasedslightly (EUR -0.7 billion) in the context of low interest rates.Subordinated debts stood at EUR 3.9 billion.Liabilities due to banks decreased to EUR 98 billion at theend of 2010, down EUR 25 billion, of which EUR 29 billionwith central banks, confirming that Dexia accelerated thecutback of central bank borrowing.Liabilities included in disposal groups held for saledecreased by EUR 4.3 billion due to the sale of Dexia ÉpargnePension in 2010.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia101

Financial resultsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsCONSOLIDATED BALANCE SHEET(in millions of EUR) 31/12/09 31/12/10TOTAL ASSETS 577,630 566,735Cash and balances with central banks 2,673 3,266Loans and advances due from banks 47,427 53,379Loans and advances to customers 353,987 352,307Financial assets measured at fair value through profit or loss 10,077 9,288Financial investments 105,251 87,367Derivatives 40,728 47,077Fair value revaluation of portfolio hedge 3,579 4,003Investments in associates 171 171Tangible fixed assets 2,396 2,346Intangible assets and goodwill 2,177 2,276Tax assets 2,919 2,847Other assets 1,895 2,358Non current assets held for sale 4,350 50TOTAL LIABILITIES AND EQUITY 577,630 566,735Due to banks 123,724 98,490Customer borrowings and deposits 120,950 127,060Financial liabilities measured at fair value through profit or loss 19,345 20,154Derivatives 58,364 72,347Fair value revaluation of portfolio hedge 1,939 1,979Debt securities 213,065 210,473Subordinated debts 4,111 3,904Technical provisions of insurance companies 13,408 15,646Provisions and other obligations 1,581 1,498Tax liabilities 238 157Other liabilities 4,585 4,299Liabilities included in disposal groups held for sale 4,332 0Total liabilities 565,642 556,007Subscribed capital 8,089 8,442Additional paid-in capital 13,618 13,618Treasury shares (25) (21)Reserves and retained earnings (4,194) (3,548)Net income for the period 1,010 723Core shareholders’ equity 18,498 19,214Gains and losses not recognised in the statement of income (8,317) (10,269)Total shareholders’ equity 10,181 8,945Non-controlling interests 1,806 1,783Discretionary participation features of insurance contracts 1 0Total equity 11,988 10,728AssetsLoans and advances to customers were reduced byEUR 1.6 billion (-0.5%) in 2010 and stood at EUR 352 billionat the end of the year. This is the result of a EUR 8 billiondecrease due to the balance-sheet deleveraging processand the natural amortization while loans and advances tocustomers increased by EUR 6 billion (mainly in the Retail andCommercial Banking activities in Belgium and Turkey).Financial assets at fair value through profit and lossdecreased by EUR 0.8 billion (-8%) at EUR 9.3 billion.Loans and advances due from banks increased toEUR 53 billion, i.e. a EUR 6 billion positive variation ascompared to December 2009. This was mainly due to reverserepurchase agreements (EUR +3 billion), cash collateral posted(EUR +6 billion) and loans and advances (EUR -2 billion).Cash and balances with central banks stood atEUR 3.3 billion.Financial investments, which include available-for-saleassets, declined to EUR 87.4 billion (-17%) because of thebalance-sheet deleveraging process.102Dexia Annual report 2010

Activity and results of the business linesCore DivisionUnder the segment reporting introduced in the first quarterof 2010, the Core Division includes the contributions of Retailand Commercial Banking, Public and Wholesale Banking,Asset Management and Services and Group Center.The capital gains related to the sale of SPE (EUR 69 million),Dexia Épargne Pension (EUR 29 million) and AdInfo (EUR 14million) were all recorded in the Core Division.In 2010, the Core Division reported pre-tax income ofEUR 1,140 million up 11% on 2009 driven by divergingtrends.Pre-tax income of the commercial business lines increased by18% (excluding the aforementioned capital gains) supportedby the strong performance of Retail and Commercial Bankingand Insurance, resilient Public and Wholesale Banking activityand a recovery in the financial markets driving up AssetManagement and Investor Services.In contrast, the strengthening of the Group’s liquidity profile,in line with targets, impacted the pre-tax income of the GroupCenter due to a sharp fall in treasury income.Statement of income(in millions of EUR, except where indicated) 2009 (1) 2010 VariationIncome (2) 5,004 4,916 -1.8%Expenses (3,444) (3,585) +4.1%Gross operating income 1,560 1,331 -14.7%Cost of risk (455) (151) -66.9%Other impairments & provisions for legal litigation (1) (78) (40) -48.7%Pre-tax income 1,027 1,140 +11.0%Cost-income ratio 68.8% 72.9%Total allocated equity (average) 10,032 10,403Weighted risks 89,932 92,279(1) The provisions for legal litigation were previously included in income (other net income).(2) Income (also mentioned as revenues) = interest, fees, and commissions, trading and other income.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia103

Activity and results of the business lines // Retail and Commercial BankingRetail and Commercial BankingActivityTotal customer loans rose by EUR 5 billion (of which EUR 3billion of business loans and EUR 1.7 billion of mortgages) toreach EUR 56 billion at the end of 2010.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsDevelopment of its retail franchises is central to Dexia’scommercial strategic plan and the Group kept a strongfocus on expanding its customer franchise and better servingits client base in 2010. Against a background of gradualeconomic recovery, Dexia pursued the development of its newdistribution model in Belgium while further strengthening itsprivate banking franchise in Luxembourg. In Turkey, DenizBankbenefited from the fast growth of the economy, supported bya strong domestic demand, increasing foreign trade, and anoverall rise in the level of bank penetration.This positive commercial momentum translated into robustgrowth in loans and deposits.Deposit collection recorded a strong 8% increase(EUR +6.2 billion) to EUR 87.7 billion on 2009, of which 40%from Turkey. In Belgium, the product mix remained orientedtowards savings accounts as retail and private customersremained very cautious given the high volatility of financialmarkets and very low interest rates. Structured bonds issuedby the Group were also chosen as an alternative, especiallyat the end of the year. In Turkey deposit growth, in bothsight accounts and term deposits, was significant and higherthan the market sector average (34% of deposit growthfor DenizBank compared to a 20% average for the sector).This principally explained the 3% fall in off-balance-sheetassets (excluding life insurance products) which amountedto EUR 36 billion at year-end 2010. Life insurance technicalreserves were up 10% on 2009 at EUR 11.9 billion, driven byguaranteed-yield insurance products (branch 21) in Belgiumand unit-linked contracts in Luxembourg.Overall, total customer assets rose by 5% to EUR 135.6billion essentially supported by the solid increase of customerdeposits.In Belgium, 2010 saw an important milestone passed on theroad to implementation of the new distribution model whichis part of the investments supporting Dexia’s commercialambitions. By virtue of a new commercial organisation andstate-of-the-art technology, this new model, based on the“open branch” concept, permits a specialist service withinthe branches. By the end of 2010, 304 branches wererefurbished and additional specialist account managers wereappointed to improve customer service further. Although notyet reaching its full potential, the new distribution modeldelivered its first results with customer satisfaction improvingin 2010 (particularly among personal and affluent customers)and market share in assets rising to 14%. In addition, severalinitiatives were successfully launched in 2010, such as thenew investment approach defining investor portraits for eachcustomer and thus refining investment advice and the tailoredbusiness banking offer for the medical sector.The successful deployment of the commercial strategycontributed to significant growth in loans and deposits.Overall, customer assets rose by 4% to EUR 93.4 billion andloans grew by EUR 1.8 billion (or 6%) driven by business andmortgage loans. EUR 3.4 billion were collected on savingsaccounts (reaching EUR 32 billion at the end of 2010), a 12%increase compared to 2009 and a 39% increase over a twoyear--period.More particularly, EUR 0.9 billion were gatheredon fidelity accounts (fidelity premium higher than base rate) in3 months at the end of 2010. Product mix remained orientedtowards structured bonds and life insurance products, resultingin a EUR 1.8 billion growth in structured bonds issued by theGroup and a EUR 0.8 billion rise of the life insurance technicalreserves. Demand for guaranteed-yield insurance products(branch 21) was sustained.Customer assets and loans(in billions of EUR) 31/12/09 31/12/10 VariationTOTAL CUSTOMER ASSETS AND LOANS 179.9 191.4 +6.4%Customer assets 129.2 135.6 +5.0%Deposits 81.5 87.7 +7.7%Sight accounts 10.9 11.8 +9.0%Savings deposits 32.6 36.0 +10.7%Savings bonds & term deposits 25.8 25.5 -1.1%Bonds issued by the Group 12.2 14.3 +17.0%Off-balance-sheet assets 36.9 36.0 -2.5%Mutual funds 18.3 17.5 -4.5%Direct securities (1) 18.6 18.5 -0.4%Life insurance technical reserves 10.8 11.9 +10.0%Customer loans 50.8 55.9 +10.0%Mortgage loans 24.7 26.4 +6.9%Consumer loans 2.5 2.8 +11.6%Business loans 19.1 22.0 +15.6%Other loans 4.4 4.6 +3.0%(1) Customer financial assets (such as shares, bonds and cooperators’ shares) held under custody by the bank.104 Dexia Annual report 2010

Activity and results of the business lines // Retail and Commercial BankingIn Luxembourg, the bank further consolidated its localfranchise and increased its market share as “main banker”of Luxembourg individuals from 13% in 2009 to 14% in2010. Recruitment of wealth managers and diversification ofthe offer to affluent and private clients led to a successfulrepositioning of private banking, confirmed by a 5% increasein mandate penetration at 24%. Dexia also improved itsdistribution model by refurbishing its branches and reinforcingdirect sales and services. Specific initiatives focused on frontierzone inhabitants, farmers and young customers. As a result,total customer assets were up 3% on 2009 to EUR 31 billionat the end of 2010 supported by a strong growth in lifeinsurance (+34% in life reserves). Loans rose by 2% to EUR 9billion at the end of 2010.In Turkey, DenizBank continued its fast expansion, accordingto plan. With 50 new retail and SME branches to reach a totalof 500 domestic branches by the end of the year and 346 extraATMs made available to its clientele, DenizBank continued toexpand its customer franchise in 2010. DenizBank gained425,000 new retail and business customers (+11% comparedto 2009) and the cooperation with the Turkish Post agreed inNovember 2010 added a potential of 3 million new customersto its client base. With a 34% rise to TRY 19.7 billion (orEUR 9.6 billion), deposit gathering was higher than the 20%average sector growth, supported by private banking assets(+67% compared to 2009, to TRY 6 billion). Outstandingloans also posted a sharp 28% increase to TRY 23.8 billion(or EUR 11.6 billion) reflecting the dynamism of the Turkisheconomy. As a result the loan to deposit ratio of DenizBankstabilized around 120% at year-end 2010 following a sharpdecrease from 146% to 126% between 2008 and 2009. Theranking of DenizBank as sixth privately-held Turkish bank wasconfirmed with TRY 34 billion of total assets.ResultsRetail and Commercial Banking recorded a high pre-taxincome of EUR 709 million in 2010, an increase of 32%compared to 2009, driven by Turkey and Belgium andtestifying to the healthy commercial position of the Groupand the improvement of the risk environment.Income increased by EUR 86 million on 2009, at EUR 2,852million, mainly supported by good revenue generation inBelgium driven by volumes and a favourable product mix ininvestments and loans. In Turkey, revenues benefited from apositive exchange rate impact and increased volumes whichmore than offset the margin shrinkage in line with the fastdecreasing cost of risk.Whereas cost reduction efforts continued in Belgium andLuxembourg, costs rose by 4% in 2010, to EUR 1,935million, as a result of business expansion in Turkey (e.g. 50branches opened in 2010 and related development costs) anda negative TRY/EUR currency impact. The business line’s costincomeratio stabilized at 68% in 2010.Cost of risk fell sharply (-33%), EUR 208 million in 2010against EUR 313 million in 2009, mainly as a result of animproving economic environment in Turkey.Management reportConsolidatedfinancial statementsIn October 2010, Dexia presented its financial and commercialtargets for 2014, within the context of an Investor Dayorganised in Brussels. The commercial ambitions set up forRetail and Commercial Banking are detailed in the chapter“Strategy” on pages 17-18 of this annual report.Consolidated statement of income(in millions of EUR, except where indicated) 2009 (2) 2010 VariationIncome (1) 2,765 2,852 +3.1%Expenses (1,853) (1,935) +4.4%Gross operating income 913 917 +0.5%Cost of risk (313) (208) -33.4%Other impairments and provisions for legal litigations (2) (63) 0 n.s.Pre-tax income 537 709 +32.1%Cost-income ratio 67.0% 67.8%Total allocated equity (average) 2,685 2,875Weighted risks 26,778 30,431(1) Income (also mentioned as revenues) = interest, fees, and commissions, trading and other income.(2) The provisions for legal litigations were previously included in income (other net income).Additional information Annual financial statementsAnnual report 2010 Dexia105

Activity and results of the business lines // Public and Wholesale BankingManagement reportConsolidatedfinancial statementsPublic and Wholesale BankingActivityThe Public and Wholesale Banking business line was severelyimpacted by implementation of the Dexia transformation planand significantly reshaped in 2009. In particular, the businessline chose:• to refocus on its historical markets in order to gain themeans to develop healthily and sustainably, particularly inBelgium and in France,• in a broader geographic environment, to promote itsexpertise in public-private partnerships (PPP), private financeinitiatives (PFI) and project finance.At the end of 2008, the decision was taken to concentrateactivity in the Group’s main franchises, to align Groupproduction to its long-term funding capacities and to placethe emphasis on profitability.At the end of the second year of such principles being applied,the situation is satisfactory:• In line with the strategy defined at the end of 2008, thebusiness line has freed itself totally from the logic of marketshare, in order to concentrate on a much more selectiveapproach.• The priority is now given to granting shorter-term loanswith attractive margins. The amount of those commitmentsrose by one third in 2010.• At the same time, long-term commitments fell slightlybetween December 2009 and December 2010, toEUR 228 billion, reflecting stability on historical markets and afall of 4% on other zones.• The development of activities associated with loan activity,as in Belgium where Dexia offers an integrated range ofservices to public sector operators, was continued in particularwith the development of automobile or IT leasing and thefinancing of personal services. This strategy of diversificationis illustrated by commercial successes like the treasurymanagement of the Centre Pompidou in Paris and processingby Dexia of the entire Vinci Park Services payroll.Activity trends per segment are as follows.In public banking, Dexia’s more selective approach is reflectedby an 18% fall of new commitments compared to the end of2009, to EUR 7.7 billion. That new production was achievedprincipally in France and Belgium, where Dexia’s position as askilled and selective specialist was better recognised, and toa lesser extent in Spain. Margin levels were satisfactory on allmarkets and in particular on the Belgian and French markets,where the margin compared to internal funding costs rose onaverage by 76% in 2010. Total long-term commitments weredown slightly at the end of 2009, at EUR 191 billion.As for project finance, the Group chose to make more ofits know-how, preferring syndication activity and increasingasset rotation on its balance sheet. This decision falls withinthe framework of the undertaking to align the business line’sproduction to its long-term funding capacity.New commitments amounted to EUR 1.4 billion in 2010, fortotal commitments of EUR 27.9 billion, up 4% on 2009.Throughout the year, the strategy of accompanying majorglobal sponsors was confirmed with the award of LeadArranger mandates in 90% of the transactions concluded.Dexia carries on its activity in sectors where the Grouphas acknowledged expertise: social infrastructure, transport,Additional information Annual financial statementsLong-term commitmentsLong-term commitmentsNew long-term commitments(in millions of EUR, at current exchange rates) 31/12/09 31/12/10 Variation 2009 2010 VariationDexia 231,580 228,172 -1.5% 11,681 10,273 -12.1%of which public sector 194,524 191,193 -1.7% 9,378 7,685 -18.0%of which project finance 27,926 27,871 -0.2% 1,370 1,418 +3.6%of which corporate banking 9,131 9,108 -0.2% 934 1,169 +25.2%Historical markets 129,265 130,027 +0.6% 8,498 7,874 -7.3%Belgium 46,962 48,181 +2.6% 4,796 4,130 -13.9%France 82,303 81,846 -0.6% 3,702 3,744 +1.1%Other markets 102,315 98,145 -4.1% 3,183 2,399 -24.6%Italy 35,987 33,701 -6.4% 686 398 -41.9%United States and Canada 6,962 7,165 +2.9% 318 411 +29.4%Iberian Peninsula (Spain and Portugal) 16,916 16,889 -0.2% 1,593 1,150 -27.8%Germany 23,759 21,926 -7.7% 3 0 n.s.United Kingdom 12,381 12,835 +3.7% 159 246 +54.5%Israel 894 1,143 +27.9% 172 158 -8.3%Headquarters 5,415 4,487 -17.1% 253 36 -85.8%Deposit-taking services and investment products(in millions of EUR) 31/12/09 31/12/10 VariationBalance sheet 24,053 25,857 +7.5%Off-balance sheet 13,371 12,890 -3.6%Total 37,424 38,748 +3.5%106 Dexia Annual report 2010

Activity and results of the business lines // Public and Wholesale Bankingthe environment and renewable energies (sixth in the worldin terms of the number of transactions) and public-privatepartnerships (first in the world).The public-private partnership to finance the McGill Hospitalin Canada, winner of the “Americas PPP Deal of the Year”,the public-private partnership to the Birmingham highways inEngland, which won the “Europe PPP Deal of the Year” andthe C-Power transaction in relation to the construction andoperation of a wind farm in the North Sea, named “EuropeRenewables Deal of the Year”, are just some examples of thissustained commercial dynamic. Tariff levels remained high inall geographic areas of activity, but more particularly in Franceand Spain.In corporate banking new commitments amounted toEUR 1.2 billion in 2010. These new commitments wererealised in Belgium with medium-sized corporates, using theuniversal bank platform.Debt restructuring activity, carried on in line with the principlesstated by the “charter of good conduct” between bankinginstitutions and local authorities, represented a volume ofEUR 11.1 billion in 2010. This amount, realised principally inFrance, Belgium and Spain, is based above all on a range of“plain vanilla” products.In accordance with the commercial strategy preferring amore diversified offer and aiming to improve Group liquidity,collection of deposits and investment products amountedto EUR 38.7 billion, up 4% on 2009. This progress wassustained in particular by a dynamic of collection in Franceand Germany, from para-public entities.Among the initiatives likely to guarantee the business line’sfunding, mention can also be made of the transfer ofEUR 14 billion of the business line’s assets to Group issuevehicles rated AAA.ResultsIn 2010, the business line benefited from a positive trend ofcommercial margins, growth of project finance fees and animprovement of the environment driving down the cost ofrisk. Nevertheless, these positive factors were more than offsetby the evolution of the business line’s funding mix, relyingon longer-dated and more stable resources and thereforemore costly maturities. As a consequence, pre-tax incomeamounted to EUR 544 million in 2010, down 4% on 2009.Total income fell by 18% in 2010, principally as a result ofthe increase in the costs of funding allocated to the businessline (EUR 290 million), and to a lesser extent lower incomeassociated with market activities. Restated from capital gainsrecorded in 2010, namely EUR 69 million for SPE in thesecond quarter and EUR 14 million for AdInfo in the thirdquarter, the recorded fall is 25%.Expenses amounted to EUR 521 million in 2010, down 3%on 2009, impacted by implementation of the transformationplan. The cost-income ratio was 51.7% in 2010.The cost of risk returned to the traditionally low levelsrecorded by the business line, after sustained provisioning inproject finance in the second half of 2009. The improvementof the economic situation resulted in the cost of risk falling byEUR 195 million compared to 2009. Provisions were recordedin a total amount of EUR 128 million in 2009, whilst reversalswere booked in 2010, particularly in the fourth quarter.Management reportConsolidatedfinancial statementsIn October 2010, Dexia presented its financial and commercialtargets for 2014, within the context of an Investor Dayorganised in Brussels. The commercial ambitions set up forPublic and Wholesale Banking are detailed in the chapter“Strategy” on page 18 of this annual report.consolidated Statement of income(in millions of EUR, except where indicated) 2009 (1) 2010 (2) VariationIncome (3) 1,227 1,007 -17.9%Expenses (535) (521) -2.6%Gross operating income 692 486 -29.7%Cost of risk (128) 67 n.s.Other impairments and provisions for legal litigations (1) 0 (9) n.s.Pre-tax income 564 544 -3.5%Cost-income ratio 43.6% 51.7%Total allocated equity (average) 2,916 2,638Weighted risks 44,926 43,167(1) The provisions for legal litigations were previously included in income (other net income).(2) The results of AdInfo, previously booked to the Public and Wholesale Banking business line, are recorded in Group Center.(3) Income (also mentioned as revenues) = interests, fees, commissions, trading and other income.Additional information Annual financial statementsAnnual report 2010 Dexia107

Activity and results of the business lines // Asset Management and ServicesManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAsset Management and ServicesAsset Management and Services includes Dexia’s activitiesin the field of Asset Management, Investor Services andInsurance.ActivityAsset ManagementDexia Asset Management (Dexia AM) has been a recognizedand well-diversified asset manager for fifteen years. Thecompany has four management centres, in Brussels, Paris,Luxembourg and Sydney, and enjoys a firm commercialfootprint in several European countries as well as in Australia,Canada and the Middle East.Dexia AM provides the benefit of its renowned expertise toinstitutional investors, distributors and private clients, coveringall asset classes. Its comprehensive offer spans diversifiedasset allocation solutions adapted to all risk profiles as wellas promising investment strategies such as socially responsibleinvestments (SRI), regulated alternative investments andregional or thematic sector strategies.In 2010 Dexia AM won several new mandates from pensionfunds, corporate and public sector clients in both fixedincome and equities. In particular Dexia AM also developedits innovative solutions in optimized asset allocation, anapproach perfectly adapted to different risk-return profiles andattracting the interest of both existing and new clients. DexiaAM confirmed its position as a pioneer in socially responsibleinvestment (SRI) management by further developing its rangeof SRI solutions and launching a new dedicated website. DexiaAM’s long standing commitment to sound, transparent andcomprehensive SRI disclosure was rewarded with the NovethicISR label for its SRI funds in all asset classes. Dexia AM alsoproved its leadership in alternative investment management,offering a diversified range of UCITS III products well suited toinvestor requirements in a more regulated environment.The performance of the funds managed by Dexia AM wasagain confirmed in 2010. Dexia AM received 3 awards asasset manager and 24 awards for specific funds in 10 differentcountries. More than 75% of its traditional funds have 3, 4and 5 Morningstar ratings for all asset classes.Assets under management reached EUR 86.4 billion atthe end of December 2010, up 5% on December 2009. ThisEUR 5 billion increase is due to inflows in institutional andprivate mandates (EUR 4.9 billion), enhanced by a positivemarket effect (EUR 4.0 billion). Inflows were partially offsetby outflows in retail (EUR -2.2 billion) and institutional funds(EUR -2.7 billion), mainly coming from low-margin moneymarket funds. Private and retail clients continued to show apreference for on-balance-sheet products given the uncertaineconomic and financial environment.Dexia AM’s client mix remained well balanced: as at31 December 2010 institutional assets represented two-thirdsof total assets under management, the remaining one-thirdconsisting of assets from retail (27%) and private bankingclients (6%).Assets under management remained well diversified betweenasset classes: 24% in equity, 31% in fixed income funds,29% in global balanced, 10% in money market and 6% inalternative and structured assets. SRI solutions represented23% of total assets.In October 2010, Dexia presented its financial and commercialtargets for 2014, within the context of an Investor Dayorganised in Brussels. The commercial ambitions set up forAsset Management are detailed in the chapter “Strategy” onpage 19 of this annual report.Investor ServicesRBC Dexia Investor Services is a key player, ranked among theworld’s top 10 global custodians in the world. It relies on anetwork of offices in 15 countries on 4 continents (Europe,North America, Asia and Australia). In 2009, RBC Dexiaexpanded its presence in Italy by acquiring the depositorybank activities of the UBI Banca group, consolidated in theaccounts from the end of May 2010.The equity market rebound in the United States and Canadawas confirmed in 2010, and this, combined with ongoingcommercial development, enabled an extremely satisfactoryperformance to be achieved.Assets under management (1)(in billions of EUR) 31/12/09 31/12/10 VariationTotal 82.4 86.4 +4.8%By type of managementMutual funds 42.6 40.0 -6.1%Institutional funds 18.6 16.9 -9.5%Retail funds 24.0 23.2 -3.5%Private mandates 3.6 5.4 +49.8%Institutional mandates 36.2 41.0 +13.2%By type of mutual fundEquities 16.2 20.1 +24.1%Fixed income 26.7 26.9 +1.1%Global balanced 22.3 25.3 +13.4%Money market 11.8 8.7 -26.1%Alternative and structured assets 5.5 5.4 -2.4%(1) Other funds are counted twice as commissions are received at both fund levels.108 Dexia Annual report 2010

Activity and results of the business lines // Asset Management and ServicesInvestor services 31/12/09 31/12/10 VariationAssets under administration (1) (in billions of EUR) 1,706 2,101 +23.2%Number of funds under administration 6,120 6,736 +10.1%Number of shareholder accounts in transfer agency(in thousands) 8,913 9,580 +7.5%(1) Assets in custody, administration and transfer agency.This momentum is reflected by a 23%-growth of assetsunder administration, to EUR 2,101 billion. This progressrests in particular on a positive foreign exchange impact(appreciation of the Canadian dollar against the euro by 12%and the US dollar against the euro by 7%). Integration of theUBI Banca depository bank activities in May 2010, resulted inan increase of EUR 20 billion in assets under administration.The number of shareholder accounts in transfer agencyrose by approximately 667,000 accounts compared to theend of 2009.In October 2010, Dexia presented its financial and commercialtargets for 2014, within the context of an Investor Dayorganised in Brussels. The commercial ambitions set up forInvestor Services are detailed in the chapter “Strategy” onpage 19 of this annual report.InsuranceDexia Insurance Services is Dexia’s insurance pool for Retailand Commercial Banking clients (individuals, private, SME)and Public and Wholesale Banking clients (public, socialprofit). It is mainly active in Luxembourg and Belgium.In Luxembourg, Dexia offers its insurance products especiallyto wealthy clients, supported by the banking network. InBelgium, Dexia combines the strength of DVV-LAP, a tiedagent network (mainly non-life) with a banking and insuranceapproach through the banking network. This multi-channeloffer, which is at the heart of the strategy of Dexia InsuranceServices, is completed by Corona Direct, a direct insurer.Dexia Insurance Services recorded an excellent commercialperformance in 2010. Total gross written premiumsincreased by 52% to EUR 3.5 billion, driven by life insurance(+64% to EUR 3 billion) which benefited from high customerdemand.In 2010, customers invested back in life insuranceinvestment products: guaranteed-yield insurance products(branch 21) or unit-linked investment contracts depending onthe market (Belgium or Luxembourg), the client segment andthe distribution channel.• In Belgium, the bank network collected twice as muchin life insurance premiums as in 2009. Dexia Life Capitalproducts achieved real success and Dexia Life Horizon (mix ofbranch 21 and branch 23) was awarded the Decavi Trophy forInnovation. In Public and Wholesale Banking, the cross saleof insurance products contributed positively to the businessline’s performance and growth was observed in all segments(public sector, social profit and corporate). Dexia InsuranceServices successfully entered the second pillar pension marketfor public-sector related counterparties, which was a majorcommercial achievement in 2010.• In Luxembourg, Dexia Life & Pensions performed verywell and collected EUR 1.1 billion within the context of theforthcoming European Savings Directive. This 75% increasein premiums compared to 2009 was supported by the closecollaboration with Dexia Banque Internationale à Luxembourg,in both retail and private banking, and the development ofextra-Group distribution channels.Consequently life insurance reserves grew by 13% in 2010 toreach EUR 18.4 billion at year-end.In non-life, the 4% premium growth was mainly due tothe fire and car insurance lines. DVV Insurance received theDecavi Trophy for the Best Comprehensive Car Insurance.The company also launched its investment programme toenhance customer satisfaction and to optimise efficiency, asannounced in the Dexia 2014 strategic plan.Direct insurer Corona Direct also contributed to growth witha 10% rise in life premiums and good progress in non-life.Dexia Épargne Pension, Dexia’s subsidiary specializing in thesale of life insurance products in France, left the scope of theGroup in 2010.In October 2010, Dexia presented its financial and commercialtargets for 2014, within the context of an Investor Dayorganised in Brussels. The commercial ambitions set up forInsurance are detailed in the chapter “Strategy” on page 19of this annual report.Total gross written premiums (1)(in millions of EUR) 31/12/09 31/12/10 VariationTotal premiums 2,327 3,526 +51.5%Non-life 486 504 +3.7%Life 1,841 3,022 +64.1%Branch 21 (classical life included) 1,317 2,219 +68.4%Branch 23 (unit-linked contracts) 524 803 +53.2%(1) Pro forma figures as Dexia Épargne Pension left the scope of the Group in the second quarter of 2010.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia109

Activity and results of the business lines // Asset Management and ServicesManagement reportConsolidatedfinancial statementsResultsIn 2010, the Asset Management and Services contribution tothe Group’s pre-tax income was sharply higher at EUR 308million, twice the level of 2009, supported by a strong driveof Insurance and Investor Services. Insurance contributed upto 60% to the business line’s total pre-tax income in 2010,while Asset Management and Investor Services representing ashare of 20% each.Asset ManagementPre-tax income amounted to EUR 63 million in 2010, up53% compared to 2009 and driven by higher revenues(+14%) while costs were under control.Total income stood at EUR 194 million in 2010, due to higherrecurrent management fees and financial income whichwas negative in 2009. The increase of management feesin 2010 (+18%) was driven by higher average assets undermanagement and a higher product-mix margin. Performancefees fell by 25% over the year.Expenses amounted to EUR 131 million, a +3% variationexplained by a low cost level in 2009 which included bonusreversals. The cost on average assets under management ratiodecreased from 16.2 basis points in 2009 to 15.5 basis pointsin 2010, reflecting the activity’s high level of efficiency.Investor ServicesPre-tax income amounted to EUR 60 million, more thandouble that recorded in 2009.As a consequence, the gross operating income amountedto EUR 61 million, of which EUR 1 million was associatedwith integration of the UBI Banca depository bank activities(impact of EUR +8 million on revenues and EUR -7 millionon costs).InsurancePre-tax income more than doubled (x2.3) compared to 2009,reaching EUR 185 million in 2010 due to improved revenuesand a halved cost of risk.Total income stood at EUR 434 million, one-third growthcompared to last year, as a result of higher financial resultssupported by outstandings and higher capital gains. Technicalaccounts were affected by increased profit sharing allocationsand a deteriorated loss ratio as a result of the storms and thefloods at the end of the year.At EUR 241 million, costs increased by EUR 4 million dueto higher expenses (like IT projects and IAS 19 provisionexpenses) at the end of the year.Cost of risk halved year-on-year to EUR 8 million.Additional information Annual financial statementsTotal income for the year 2010 was EUR 393 million, up 20%compared to 2009. This was driven by progress on the NorthAmerican markets (13% to 20%), generating a developmentof client assets. Foreign exchange activity was also sustained,contributing up to EUR 25 million to revenue growth.Expenses rose to EUR 332 million in 2010, up 13% on 2009,one half of that increase attributable to a foreign exchangeeffect.consolidated Statement of income(in millions of EUR, except where indicated) 2009 (1) 2010 (2) VariationIncome (3) 829 1,021 +23.1%Expenses (659) (704) +6.9%Gross operating income 171 317 +85.7%Cost of risk (21) (7) -64.7%Other impairments & provisions for legal litigation (1) (1) (2) n.s.Pre-tax income 149 308 x2.1of whichAsset Management 41 63 +52.8%Investor services (4) 27 60 x2.2Insurance 81 185 x2.3Cost-income ratio 79.4% 68.9%Total allocated equity (average) 1,091 1,115Weighted risks 2,533 2,205(1) The provisions for legal litigation were previously included in income (other net income).(2) The results of Dexia Épargne Pension (DEP) previously recorded in Asset Management and Services are now recorded in Group Center.(3) Income (also mentioned as revenues) = interest, fees, and commissions, trading and other income.(4) 2010 figures including UBI Banca depository activities bank business from 31 May 2010.110 Dexia Annual report 2010

Activity and results of the business lines // Group CenterGroup CenterGroup Center combines the contributions of the Treasury,ALM and Central Assets sub-segments. Central Assets mainlyholds the Group’s equity portfolios, the revenues on excesscapital, the interests on allocated capital paid to the othersegments, the share-leasing portfolio of Dexia Nederland andholding costs.The Group Center posted a pre-tax loss of EUR 421 millionin 2010, against a loss of EUR 222 million in 2009.Revenues amounted to EUR 36 million, down EUR 147 millioncompared to 2009. This fall of income is principally explainedby a EUR 155 million decline of Treasury revenues comparedto 2009 record results, following the ongoing reduction of theGroup’s liquidity gap and less favourable market conditions.Costs stood at EUR 425 million in 2010, up EUR 27 millionon 2009, as a result of restructuring costs for an amount ofEUR 145 million in 2010, booked mainly in the second halfof the year.Cost of risk and other impairments amounted toEUR 33 million in 2010, down EUR 26 million comparedto 2009, which was positively impacted by reversals ofimpairments.Management reportConsolidated statement of income(in millions of EUR) 2009 (1) 2010 (2) VariationIncome (3) 183 36 -147Expenses (398) (425) -27Gross operating income (215) (389) -174Cost of risk 6 (2) -8Other impairments and provisions for legal litigation (1) (13) (31) -18Pre-tax income (222) (421) -199Total allocated equity (average) 3,340 3,775Weighted risks 15,695 16,475(1) The provisions for legal litigation were previously included in income (other net income).(2) The results of Dexia Épargne Pension (DEP) previously recorded in AMS and the results of AdInfo previously recorded in PWB are now recorded in GroupCenter.(3) Income (also mentioned as revenues) includes interest, fees, and commissions, trading and other income.Additional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia111

Activity and results of the business lines // Legacy Portfolio Management DivisionManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsLegacy PortfolioManagement DivisionActivitySince the first quarter of 2010, Dexia has regrouped itsportfolios in run-off as well as some non-core Public andWholesale Banking loans and off-balance sheet commitmentswithin a specific division, the Legacy Portfolio ManagementDivision (Legacy Division) alongside the core business lines,now brought together in the Core Division.The Legacy Division contains:• the bond portfolio in run-off;• the Financial Products portfolio;• non-core public sector loans and off-balance sheetcommitments, mainly liquidity lines in the United States (1) ,referred to as Public and Wholesale Banking run-offcommitments.The Legacy Division is the subject of a voluntary asset disposalpolicy with the aim of reducing the Group’s short-term liquiditygap and limiting its risk profile. Dedicated and centralizedteams are responsible for monitoring the division’s variousportfolios and for implementing its asset sale programme.From EUR 227 billion at the end of 2008, the commitmentsof the Legacy Division (on and off-balance-sheet) werereduced to EUR 187 billion at the end of 2009. In 2010,Dexia accelerated its efforts to reduce those commitments,which amounted to EUR 153 billion as at 31 December 2010,after EUR 27.2 billion of asset disposal in 2010.The bond portfolio in run-off amounted to EUR 111.7billion at year-end 2010, a reduction of EUR 22.5 billion on2009, and of EUR 46.3 billion on 2008. Thanks to the Group’svoluntary balance-sheet deleveraging, EUR 18.8 billion bondswere disposed of from this portfolio, with an impact on thestatement of income of EUR 184 million, or a 1% averageloss on the nominal amount. Over the year, EUR 8 billionof bonds were amortized and the size of the portfolio wasinflated by a EUR 4.4 billion currency impact.The portfolio is well diversified by asset class, sector, countryand currency, and this enables Dexia to benefit from variousdisposal opportunities on the market. Sales made have enabledthis diversification to be maintained and the portfolio remainsof good credit quality, at 95% investment grade (against97% at year-end 2009). Rating migrations were principallydue to the impact of deleveraging and to the downgrade ofthe Greek Sovereign. The stock of impairments was down toEUR 884 million at year-end 2010, against EUR 956 million atyear-end 2009.At the end of 2008, Dexia also placed the FinancialProducts portfolio in run-off, amounting to USD 13.8 billion(EUR 10.3 billion) at the end of 2010. The majority of thisportfolio consists of US RMBS (68%) and it is 40% investmentgrade compared to 43% by the end of 2009. The mostsensitive assets of the Financial Products portfolio (about 75%of the total portfolio) are covered by a specific guaranteescheme, granted by the States of Belgium and France. Thatguarantee was approved by the European Commission on(1) Stand-By Purchase Agreements (SBPA).13 March 2009 and provides for Dexia to cover a first loss ofUSD 4.5 billion. If final losses exceed USD 4.5 billion, Dexiacan ask the States to fund the additional losses in exchangefor Dexia common shares or profit shares. In addition tothis scheme, the Guaranteed Investment Contracts (GICs),which amounted to USD 5.01 billion at the end of December2010 and are partly funding the Financial Products portfolio,benefit from a State liquidity guarantee. Importantly, since thefourth quarter of 2008, Dexia’s Tier 1 is protected against allfuture potential losses on this portfolio as the entire USD 4.5billion first loss has been fully accounted for in the Group’sregulatory solvency ratios (2) .Over 2010, the Financial Products portfolio was reduced byUSD 1.6 billion supported by USD 0.4 billion asset sales andby the natural amortization of the portfolio. The expectedweighted average life of the portfolio was 9.2 years at yearend2010.Public and Wholesale Banking run-off commitmentsamounted to EUR 31.5 billion as at 31 December 2010,down EUR 10.8 billion on 2009 and EUR 15.1 billion on2008. They comprised non-core public sector loans in runoff,including loans in Japan, Switzerland, Sweden, Centraland Eastern Europe, Australia, Mexico and the United Statesfor an amount of EUR 12.7 billion as at 31 December 2010as well as off-balance-sheet commitments, mainly undrawnliquidity lines in the United States for an amount of USD 24.0billion (EUR 18.7 billion) at the end of 2010.EUR 4.8 billion of non-core public sector loans, mainly bookedin Japan, were sold in 2010. The accelerated pace of sales willenable the Group to bring forward the closure of some of itsinternational entities in 2011.The amount of undrawn liquidity lines in the United Statesfell by USD 9.2 billion (EUR 5.7 billion) in 2010, reducing thepotential liquidity stress on those facilities.(2) More detailed information on the State guarantee is provided in thenote 9.4.C. to the consolidated financial statements in this Annual Report(page 184).112 Dexia Annual report 2010

Activity and results of the business lines // Legacy Portfolio Management DivisionTotal commitmentsof the Legacy Portfolio Management Division(in billions of EUR) 31/12/09 31/12/10 VariationTotal commitments (1) 187.2 153.4 -33.7Financial Products portfolio 10.7 10.3 -0.4Bond portfolio in run-off 134.2 111.7 -22.5PWB run-off commitments (1) 42.2 31.5 -10.8of whichdrawn US liquidity lines 0.1 0.1 0.0undrawn US liquidity lines 24.4 18.7 -5.7loans in run-off 17.7 12.7 -5.0Focus on loans in run-offJapan 5.1 0.5 -4.6International headquarters (Switzerland, Sweden…) 7.8 8.9 +1.1Central and Eastern Europe 2.3 2.0 -0.3Australia 1.4 0.0 -1.4Mexico 1.1 1.3 +0.1(1) Including off-balance-sheet commitments.Management reportResultsThe Legacy Portfolio Management Division includescontributions from the Group’s bond portfolios in run-off(including the Financial Products portfolio) and Public andWholesale Banking run-off commitments. The Division is alsoallocated part of the Treasury result. Entities to be divestedare still reported in the Core Division.Capital gains on the disposal of Crédit du Nord (EUR 153 million),booked in 2009, and on the sale of the stake in AssuredGuaranty, booked in 2010, were allocated to the Legacy Division.FSA Insurance was deconsolidated as from the secondquarter of 2009.In 2010, the legacy Division recorded a pre-tax loss ofEUR 216 million, against a EUR 376 million (including FSAInsurance) or EUR 305 million (excluding FSA Insurance)positive result in 2009.Over the year, the division posted a positive result in the firstquarter and losses in the last three quarters. This evolution isexplained, in particular, by the EUR 414 million (excluding FSAInsurance) fall in income compared to 2009 driven by:• EUR 373 million decrease in Treasury income allocated tothe division in line with the ongoing decrease of the liquiditygap,• the reduction of net margins on the PWB run-offcommitments (EUR -121 million) and on the bond portfolio inrun-off (EUR -162 million).The cost of risk, up by EUR 121 million (excluding FSAInsurance), was impacted by a reversal of collective provisionson ABS and subordinated debt booked in the bond portfolioin run-off, for an amount of EUR 184 million, and by aEUR 328 million increase in the provisions on the FinancialProducts portfolio.The significant changes impacting the different segments ofthe Legacy Division are set out in detail hereafter.The bond portfolio in run-off recorded a pre-tax loss ofEUR 10 million in 2010, against a loss of EUR 316 million in2009. Income was up EUR 115 million on 2009, principallydriven by EUR 293 million increase in trading income(CDS linked to synthetic securitization and CVA on CDSintermediation) which more than offset the reduction ofinterest margin (EUR -162 million) and deleveraging losses upby EUR 65 million given higher volumes of disposals in 2010.The cost of risk improved by EUR 184 million in 2010, markedby reversals of impairments, principally on ABS and on thebanking sector.The Financial Products portfolio posted a pre-tax loss ofEUR 299 million in 2010, against a EUR 169 million loss in2009. The EUR 204 million rise in income, to EUR 282 millionas a result of gains on own credit risk and of the sale of thestake in Assured Guaranty (EUR 153 million) did not totallyoffset the EUR 328 million rise of the cost of risk over the year,particularly because additional impairments were recorded inthe fourth quarter (more information on the Financial Productsportfolio is given in the chapter “Risk Management” of thisannual report on page 72).The total cash shortfalls and realised losses on the portfolioincreased by USD 431 million over the year, to USD 624 million.This includes USD 360 million shortfalls and USD 71 millionlosses on asset sales, mitigated by a release of collectiveimpairments.In a context characterized by a volatile economic environmentand large stocks of homes which will continue to weigh heavilyon the real estate market, at least in 2011, Dexia adaptedits US RMBS provisioning model to take more conservativeassumptions into account.As a consequence,• The expected economic losses (discounted expectedcash shortfalls) increased by USD 390 million in 2010 toUSD 1.796 billion. Such an estimate is made to the best ofDexia’s knowledge on the basis of market conditions as at theend of December 2010.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia113

Activity and results of the business lines // Legacy Portfolio Management DivisionManagement report• USD 86 million of specific impairments and USD 94 millionof collective impairments were booked in 2010 leading toa total of USD 2.252 billion impairments. In particular, theadjustment of Dexia's model on US RMBS resulted in USD259 million additional collective impairments in the fourthquarter of 2010.It is important to note that, as stated earlier on page 112,Dexia’s regulatory solvency ratio is immune from provisionsand losses on the Financial Products portfolio. Those additionalprovisions therefore have no impact on Dexia’s regulatorysolvency ratio.More detailed information about the US RMBS scenario relatedto the Financial Products portfolio is given in the chapter “Riskmanagement” of this annual report (pages 81-82).Public and Wholesale Banking run-off commitmentsposted a pre-tax income of EUR -14 million, downEUR 138 million compared to 2009. This decrease is principallyexplained by the EUR 170 million fall in income related to thedecrease in margin revenues, mainly due to reduced exposureon liquidity lines in the United States, and to an active loandeleveraging.The portfolio recorded a EUR 48 million loss on the EUR 4.8billion loans disposed of in 2010. Furthermore, income wasimpacted by the discontinuity of activities in Australia andJapan and subsequent asset repatriation.Given less favourable market conditions and in line with thesharp decrease in the Group’s liquidity gap, the Treasuryresult allocated to the Legacy Division was down sharplyin 2010 (EUR -376 million) compared to the 2009 recordresult. The 2010 result was mainly generated during the firsthalf-year.Consolidatedfinancial statementsAdditional information Annual financial statementsConsolidated statement of income(in millions of EUR) 2009 (1) 2010 VariationIncome (2) 1,180 395 -66.5%Expenses (162) (119) -26.8%Gross operating income 1,017 276 -72.9%Cost of risk (641) (490) -23.5%Other impairments & provisions for legal litigation (1) 0 (2) n.s.Pre-tax income 376 (216) n.s.o/w changes in scope (3) 254 0 n.s.Total allocated equity (average) 6,479 5,920Weighted risks 53,238 48,555(1) The provisions for legal litigation were previously included in income (other net income).(2) Income (also mentioned as revenues) = interest, fees, and commissions, trading and other income.(3) Mainly FSA Insurance and Crédit du Nord.114 Dexia Annual report 2010

118 Consolidated balance sheet120 Consolidated statement of income121 Consolidated statement of change in equity124 Consolidated statement of comprehensive income125 Consolidated cash flow statement126 Notes to the consolidated financial statements126 Note 1. Accounting principles and rules of consolidated financialstatements142 Note 2. Significant changes in scope of consolidation and list of mainsubsidiaries and affiliated enterprises of the Dexia Group144 Note 3. Business reporting147 Note 4. Significant items included in the statement of income147 Note 5. Post-balance-sheet events147 Note 6. Litigations148 Note 7. Notes on the assets of the consolidated balance sheet165 Note 8. Notes on the liabilities of the consolidated balance sheet174 Note 9. Other notes on the consolidated balance sheet193 Note 10. Notes on the consolidated off-balance-sheet items194 Note 11. Notes on the consolidated statement of income204 Note 12. Notes on risk exposure235 Statutory Auditor’s reporton the consolidated financial statementsfor the year ended 31 December 2010

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Consolidated balance sheetManagement reportAdditional information Annual financial statementsConsolidatedfinancial statementsAssets Note 31/12/09 31/12/10(in millions of EUR)I. Cash and balances with central banks 7.2. 2,673 3,266II. Loans and advances due from banks 7.3. 47,427 53,379III. Loans and advances to customers 7.4. 353,987 352,307IV. Financial assets measured at fair value through profit or loss 7.5. 10,077 9,288V. Financial investments 7.6. 105,251 87,367VI. Derivatives 9.1. 40,728 47,077VII. Fair value revaluation of portfolio hedge 3,579 4,003VIII. Investments in associates 7.8. 171 171IX. Tangible fixed assets 7.9. 2,396 2,346X. Intangible assets and goodwill 7.10. 2,177 2,276XI. Tax assets 7.11. & 9.2. 2,919 2,847XII. Other assets 7.12. & 9.3. 1,895 2,358XIII. Non-current assets held for sale 7.13. & 9.5. 4,350 50Total assets 577,630 566,735The notes on pages 126 to 234 are an integral part of these consolidated financial statements.118Dexia Annual report 2010

Liabilities Note 31/12/09 31/12/10(in millions of EUR)I. Due to banks 8.1. 123,724 98,490II. Customer borrowings and deposits 8.2. 120,950 127,060III. Financial liabilities measured at fair value through profit or loss 8.3. 19,345 20,154IV. Derivatives 9.1. 58,364 72,347V. Fair value revaluation of portfolio hedge 1,939 1,979VI. Debt securities 8.4. 213,065 210,473VII. Subordinated debts 8.5. 4,111 3,904VIII. Technical provisions of insurance companies 9.3. 13,408 15,646IX. Provisions and other obligations 8.6. 1,581 1,498X. Tax liabilities 8.7. & 9.2. 238 157XI. Other liabilities 8.8. 4,585 4,299XII. Liabilities included in disposal groups held for sale 8.9. & 9.5. 4,332 0Total liabilities 565,642 556,007Equity Note 31/12/09 31/12/10(in millions of EUR)XIV. Subscribed capital 9.6. 8,089 8,442XV. Additional paid-in capital 13,618 13,618XVI. Treasury shares (25) (21)XVII. Reserves and retained earnings (4,194) (3,548)XVIII. Net income for the period 1,010 723Core shareholders’ equity 18,498 19,214XIX. Gains and losses not recognised in the statement of income (8,317) (10,269)a) Available-for-sale reserve on securities (1,510) (3,927)b) “Frozen“ fair value adjustment of financial assets reclassified toLoans and Receivables (5,574) (5,320)c) Other reserves (1,233) (1,022)TOTAL SHAREHOLDERS’ EQUITY 10,181 8,945XX. Non-controlling interests 1,806 1,783XXI. Discretionary participation features of insurance contracts 9.3. 1 0Total equity 11,988 10,728Total liabilities and equity 577,630 566,735The notes on pages 126 to 234 are an integral part of these consolidated financial statements.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia119

Consolidated statementof incomeManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements(in millions of EUR) Note 31/12/09 31/12/10I. Interest income 11.1. 63,980 46,886II. Interest expense 11.1. (58,950) (43,004)III. Dividend income 11.2. 114 81IV. Net income from associates 11.3. 39 5V. Net income from financial instruments at fair value throughprofit or loss 11.4. 61 2VI. Net income on investments 11.5. 23 296VII. Fee and commission income 11.6. 1,507 1,642VIII. Fee and commission expense 11.6. (279) (309)IX. Premiums and technical income from insurance activities 11.7. & 9.3. 2,710 3,482X. Technical expense from insurance activities 11.7. & 9.3. (3,059) (3,844)XI. Other net income 11.8. 38 (1) 73Income 6,184 5,310XII. Staff expense 11.9. (1,847) (1,878)XIII. General and administrative expense 11.10. (1,096) (2) (1,156)XIV. Network costs 1.11. (366) (369)XV. Depreciation & amortization 11.11. (298) (300)Expenses (3,607) (3,703)Gross operating income 2,577 1,607XVI. Impairment on loans and provisions for credit commitments 11.12. (1,096) (641)XVII. Impairment on tangible and intangible assets 11.13. (51) (1)XVIII. Impairment on goodwill 11.14. (6) 0XIX. Provisions for legal litigations 11.15. (21) (1) (41)Net income before tax 1,403 924XX. Tax expense 11.16. (314) (127)Net Income 1,089 797Attributable to non-controlling interests 79 74Attributable to equity holders of the parent 1,010 723in EUREarnings per share 11.17.- basic 0.55 (3) 0.39- diluted 0.55 (3) 0.39(1) An amount of EUR -21 million of “Other net income“ is now included in “Provisions for legal litigations“.(2) The amount of EUR -7 million of Deferred acquisition costs is now included in “General and administrative expense“ and not displayed any longer in a specificline of the consolidated statement of income.(3) Figures as at 31 december 2009 were restated to consider the issuance of new ordinary shares free of charge (bonus shares), distributed to theshareholders.The notes on pages 126 to 234 are an integral part of these consolidated financial statements.120 Dexia Annual report 2010

Consolidated statementof changes in equityCore shareholders' equitySubscribedcapitalAdditionalpaid-in capitalTreasurysharesReservesand retainedearningsNet incomefor theperiodCoreshareholders’equity(in millions of EUR)As at 31 December 2008 8,089 13,618 (23) (870) (3,326) 17,488Movements of the period- Issuance of subscribed capital (1) (1)- Trading activities on treasury shares (2) (2)- Transfers to reserves (3,326) 3,326 0- Share based payments: value of employeeservices 9 9- Variation of scope of consolidation (5) (5)- Other movements (1) (1)Net income for the period 1,010 1,010As at 31 December 2009 8,089 13,618 (25) (4,194) 1,010 18,498Management reportGains and losses not recognisedin the statement of incomeGains and losses not recognised in the statement of incomeSecurities (1) Derivatives(CFH & FXInvt)Associates(AFS, CFH)Cumulativetranslationadjustments(CTA)Total gainsand lossesGroup share(in millions of EUR)As at 31 December 2008 (11,866) (1,156) (9) (541) (13,572)Movements of the period- Net change in fair value through equity –Available-for-sale investments 3,412 22 3,434- Transfers to income of available-for-sale reserve amountsdue to impairments 261 261- Transfers to income of available-for-sale reserve amountsdue to disposals 232 232- Amortization of net fair value on reclassified portfolio inapplication of IAS 39 amended 716 716- Net change in fair value through equity –Cash flow hedge reserve 454 454- Net change in cash flow hedge reserve due to transfers toincome (11) (11)- Translation adjustments 174 11 10 195- Variation of scope of consolidation (13) (13) (26)As at 31 December 2009 (7,084) (702) 0 (531) (8,317)(1) Includes both the available-for-sale reserve and the “frozen“ fair value adjustment of financial assets reclassified to Loans and Receivables.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia121

Management reportConsolidatedfinancial statementsNon-controlling interests(in millions of EUR)Core equity Gains andlosses notrecognised inthe statementof incomeNoncontrollinginterestsDiscretionaryparticipationfeatures ofinsurancecontractsAs at 31 December 2008 1,756 (54) 1,702 0Movements of the period- Increase of capital 2 2- Dividends (10) (10)- Net income for the period 79 79- Net change in fair value through equity 15 15 1- Transfers to income of available-for-sale reserve amountsdue to disposals 2 2- Translation adjustments 1 1- Variation of scope of consolidation (14) 13 (1)- Amortization of net fair value on reclassified portfolio inapplication of IAS 39 amended 16 16As at 31 December 2009 1,813 (7) 1,806 1Core shareholders’ equity 18,498Gains and losses not recognised in the statement of income attributable to equity holders of the parent (8,317)Non-controlling interests 1,806Discretionary participation features of insurance contracts 1TOTAL EQUITY AS AT 31 DECEMBER 2009 11,988Additional information Annual financial statementsCore shareholders’equity(in millions of EUR)SubscribedcapitalAdditionalpaid-incapitalTreasurysharesReservesand retainedearningsNet incomefor theperiodCoreshareholders’equityAs at 31 december 2009 8,089 13,618 (25) (4,194) 1,010 18,498Movements of the period- Issuance of subscribed capital 353 (355) (2)- Trading activities on treasury shares 4 4- Transfers to reserves 1,010 (1,010) 0- Share-based payments: value ofemployee services 3 3- Variation of scope of consolidation (13) (13)- Other movements 1 1- Net income for the period 723 723As at 31 december 2010 8,442 13,618 (21) (3,548) 723 19,214The notes on pages 126 to 234 are an integral part of these consolidated financial statements.122 Dexia Annual report 2010

Gains and losses not recognised in the statementof incomeGains and losses not recognised in the statement of incomeSecurities (1) Derivatives(CFH & FXInvt)Total gainsand lossesGroup shareCumulativetranslationadjustments(CTA)(in millions of EUR)As at 31 December 2009 (7,084) (702) (531) (8,317)Movements of the period- Net change in fair value through equity – Available-for-sale investments (2) (2,614) (2,614)- Transfers to income of available-for-sale reserve amounts due to impairments 243 243- Transfers to income of available-for-sale reserve amounts due to disposals 14 14- Amortization of net fair value on reclassified portfolio in application of IAS 39amended 625 625Management report- Net change in fair value through equity – Cash flow hedge reserve 83 83- Net change in cash flow hedge reserve due to transfers to income (4) (4)- Translation adjustments (431) (38) 170 (299)As at 31 December 2010 (9,247) (661) (361) (10,269)(1) Includes both the available-for-sale reserve and the “frozen“ fair value adjustment of financial assets reclassified to Loans and Receivables.(2) Following the publication of IFRIC guidance in July 2010 on deferred taxes on Other comprehensive income (OCI), an amount of 0.5 billion deferred taxes was derecognisedagainst “frozen“ fair value adjustment of financial assets reclassified to Loans and Receivables.Non-controlling interests(in millions of EUR)Core equity Gains andlosses notrecognised inthe statementof incomeNoncontrollinginterestsDiscretionaryparticipationfeatures ofinsurancecontractsAs at 31 December 2009 1,813 (7) 1,806 1Movements of the period- Increase of capital 5 5- Dividends (32) (32)- Net income for the period 74 74- Net change in fair value through equity (98) (98) (1)- Transfers to income of available-for-sale reserve amounts due todisposals 20 20- Translation adjustments (1) 7 6- Variation of scope of consolidation (1) (1)- Amortization of net fair value on reclassified portfolio in applicationof IAS 39 amended 4 4- Others (1) (1)As at 31 December 2010 1,858 (75) 1,783 0Core shareholders’ equity 19,214Gains and losses not recognized in the statement of income attributable to equity holders of the parent (10,269)Non-controlling interests 1,783Discretionary participation features of insurance contracts 0TOTAL EQUITY AS AT 31 DECEMBER 2010 10,728The notes on pages 126 to 234 are an integral part of these consolidated financial statements.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia123

Consolidated statementof comprehensive incomeManagement reportAdditional information Annual financial statementsConsolidatedfinancial statements(in millions of EUR) 31/12/09 31/12/10Before-taxamountTax (expense)benefitNet-of-taxamountBefore-taxamountTax (expense)benefitNet-of-taxamountResult recognised in the statementof income 1,403 (314) 1,089 924 (127) 797Unrealised gains (losses) on available-forsalefinancial investments and on “frozen“fair value adjustment of financial assetsreclassified to Loans and Receivables 6,086 (1,270) 4,816 (2,353) 123 (2,230)Gains (losses) on cash flow hedges 527 (59) 468 54 (20) 34Cumulative translation adjustments 9 0 9 176 0 176Other comprehensive income fromassociates 9 0 9 0 0 0Other comprehensive income 6,631 (1,329) 5,302 (2,123) 103 (2,020)Total comprehensive income 8,034 (1,643) 6,391 (1,199) (24) (1,223)Attributable to equity holders of theparent 6,265 (1,229)Attributable to non-controlling interests 126 6Following the publication of IFRIC guidance in July 2010 on deferred taxes on Other comprehensive income (OCI), an amount of EUR 0.5 billion deferredtaxes was derecognised against “frozen“ fair value adjustment of financial assets reclassified to Loans and Receivables.The notes on pages 126 to 234 are an integral part of these consolidated financial statements.124 Dexia Annual report 2010

Consolidated cash flow statement(in millions of EUR) 31/12/09 31/12/10Cash flow from operating activitiesNet income after income taxes 1,089 797Adjustment for:- Depreciation, amortization and other impairment 391 347- Impairment on bonds, equities, loans and other assets (112) 347- Net (gains) or losses on investments 659 (235)- Charges for provisions (mainly insurance provision) 1,441 2,000- Unrealised (gains) or losses 36 (8)- Income from associates (39) (5)- Dividends from associates 33 3- Deferred taxes 74 41- Other adjustments 9 3Changes in operating assets and liabilities (13,277) (3,530)NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (9,696) (240)CASH FLOW FROM INVESTING ACTIVITIESPurchase of fixed assets (636) (535)Sales of fixed assets 170 284Acquisitions of unconsolidated equity shares (1,534) (1,069)Sales of unconsolidated equity shares 2,412 1,937Acquisitions of subsidiaries and of business units (54) (49)Sales of subsidiaries and of business units 371 (47)NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 729 521CASH FLOW FROM FINANCING ACTIVITIESIssuance of new shares 1 0Issuance of subordinated debts 20 1Reimbursement of subordinated debts (217) (335)Dividends paid (10) (32)NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (206) (366)Net cash provided (9,173) (85)Cash and cash equivalents at the beginning of the period 22,911 14,167Cash flow from operating activities (9,696) (240)Cash flow from investing activities 729 521Cash flow from financing activities (206) (366)Effect of exchange rate changes and change in scope of consolidation on cash andcash equivalents 429 642Cash and cash equivalents at the end of the period 14,167 14,724ADDITIONAL INFORMATIONIncome tax paid (384) (159)Dividends received 147 85Interest received 65,824 48,346Interest paid (59,221) (45,411)Definition of cash and cash equivalents has been reviewed (see note 7.1.). As a consequence, some amounts have been restated in2009.The notes on pages 126 to 234 are an integral part of these consolidated financial statements.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia125

Notes to consolidated financialstatementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements1. Accounting principles andrules of consolidated financialstatementsGeneral information 1261.1. Basis of accounting 1271.2. Changes in accounting policies since the previousannual publication that may impact Dexia Group 1271.3. Consolidation 1281.4. Offsetting financial assets and financial liabilities 1301.5. Foreign currency translation and transactions 1301.6. Financial assets and liabilities 1301.7. Fair value of financial instruments 1331.8. Interest income and expense 1341.9. Fee and commission income and expense 1341.10. Insurance and reinsurance activities 1341.11. Network costs 1361.12. Hedging derivatives 1361.13. Hedge of the interest-rate risk exposure of aportfolio 1371.14. Day one profit or loss 137GENERAL INFORMATIONThe Dexia Group focuses on Retail and Commercial Bankingin Europe (mainly in Belgium, Luxembourg and Turkey) and onPublic and Wholesale Banking, providing local public-financeoperators with comprehensive banking and financial solutions.Asset Management & Services provides asset management,investor and insurance services, in particular to the clientsof the other two business lines. The different business linesinteract constantly in order to serve clients better and tosupport the Group's commercial activity.The parent company of the Group is Dexia SA, which is alimited liability company and is incorporated and domiciled inBelgium. Its registered office is located at: Place Rogier 11 –B-1210 Brussels (Belgium).Dexia is listed on the NYSE Euronext Stock Exchange inBrussels and also on the Luxembourg Stock Exchange. Theshares are also traded on NYSE Euronext Paris.These financial statements were authorised for issue by theBoard of Directors on 23 February 2011.1.15. Tangible fixed assets 1371.16. Intangible assets 1381.17. Non-current assets held for sale anddiscontinued Operations 1381.18. Goodwill 1381.19. Other assets 1391.20. Leases 1391.21. Sale and repurchase agreements and lendingOf securities 1391.22. Deferred income tax 1391.23. Employee benefits 1391.24. Provisions 1401.25. Share capital and treasury shares 1411.26. Fiduciary activities 1411.27. Cash and cash equivalents 1411.28. Earnings per share 141The principal accounting policies adopted in the preparationof these consolidated financial statements are set out below.The common used abbreviations below are:• IASB: International Accounting Standards Board• IFRIC: International Financial Reporting InterpretationsCommittee• IFRS: International Financial Reporting Standards.126 Dexia Annual report 2010

Notes to the consolidated financial statements1.1. BASIS OF ACCOUNTING1.1.1. GeneralDexia's consolidated financial statements are prepared inaccordance with the IFRS adopted by the EU.The European Commission published Regulation EC 1606/2002on 19 July 2002, requiring listed groups to apply IFRS as from1 January 2005. This regulation has been updated severaltimes since 2002.Dexia's financial statements have therefore been prepared“in accordance with all IFRSs as adopted by the EU“ andendorsed by the EC up to 31 December 2010, including theconditions of application of interest-rate portfolio hedgingand the possibility to hedge core deposits.Our accounting principles include only elements where anIFRS text allows the possibility of choice.The consolidated financial statements are prepared on a“going-concern basis“ and are given in millions of euro (EUR)unless otherwise stated.1.1.2. Accounting estimates and judgementsIn preparing the consolidated financial statements,management is required to make estimates and assumptionsthat affect the amounts reported. To make these assumptionsand estimates, management uses information availableat the date of preparation of the financial statements andexercises its judgement. While management believes that ithas considered all available information in developing theseestimates, actual results may differ from the estimates andthe differences could be material to the financial statements.Judgements are made principally in the following areas:• Classification of financial instruments;• Determination of whether there is an active market or not;• Consolidation (control, including SPE);• Identification of non-current assets and disposal groupsheld for sale and discontinued operations (IFRS 5);• Hedge accounting;• Existence of a present obligation with probable outflows inthe context of litigations;• Identification of impairment triggers.These judgements are entered in the corresponding sectionsof the accounting policies.Estimates are principally made in the following areas:• Determination of the recoverable amount of impairedfinancial assets;• Determination of the useful life and the residual value ofproperty, plant and equipment, investment property andintangible assets;• Measurement of liabilities for insurance contracts;• Actuarial assumptions related to the measurement ofemployee benefits obligations and plan assets;• Estimate of future taxable profit for the recognition andmeasurement of deferred tax assets;• Estimate of the recoverable amount of cash-generatingunits for goodwill impairment.1.2. CHANGES IN ACCOUNTING POLICIESSINCE THE PREVIOUS ANNUAL PUBLICATIONTHAT MAY IMPACT DEXIA GROUPThe overview of the texts below is made until the reportingdate of 31 December 2010.1.2.1. IASB and IFRIC texts endorsed by the EuropeanCommission and applied as from 1 January 2010The following standards, interpretations or amendments havebeen endorsed by the European Commission and are appliedas from 1 January 2010.• “Improvements to IFRSs“ (issued by IASB in April 2009),which are a collection of amendments to existing standardsand interpretations. Unless otherwise specified, theamendments are effective as from 1 January 2010. There isno impact for Dexia.• Amendments to “IFRS 2 Group Cash Settled Share-basedPayment Transactions“. These amendments aim to clarify thescope of IFRS 2. There is no impact for Dexia.• Revised IFRS 1 “First-Time adoption of International FinancialReporting Standards“, which replaces the standard as issuedin June 2003. The revision of this standard has no impact onDexia, which is not a first-time adopter anymore.• Amendments to IFRS 1 “Additional Exemptions for FirsttimeAdopters. The revision of this standard has no impact onDexia, which is not a first-time adopter anymore.• “Revised IFRS 3 Business Combinations“, which is appliedprospectively to business combinations for which theacquisition date is on or after 1 January 2010. There is noimpact on Dexia because there were no new significantbusiness combinations as from 1 January 2010.• Amendment to “IAS 39 Financial Instruments: Recognitionand Measurement: Eligible Hedged Items“. There is no impacton Dexia.• Amendments to “IAS 27 Consolidated and separate financialstatements. There is no impact on Dexia for the period ending31 December 2010 other than relabelling “minority interest“into “non-controlling interest“.• Amendments to “IFRS 5 Non-current Assets held for Saleand Discontinued Operations“ issued in May 2008 as part ofthe improvements to IFRSs. There is no impact on Dexia.• IFRIC 12 “Service Concession Arrangements“. This interpretationhas no impact on Dexia.• IFRIC 15 “Agreement for the Construction of Real Estate“.This interpretation has no impact on Dexia.• IFRIC 16 “Hedges of a Net Investment in a ForeignOperation“. This interpretation has no impact on Dexia.• IFRIC 17 “Distributions of non-cash-assets to owners“. Thisinter pretation has no impact on Dexia.• IFRIC 18 “Transfers of assets from customers“. This interpretationhas no impact on Dexia.1.2.2. IASB and IFRIC texts endorsed by the EuropeanCommission during the current year but not yetapplicable as from 1 January 2010• Amendment to IFRS 1 “Limited Exemption from ComparativeIFRS 7 Disclosures for First-time Adopters“ applicable as fromManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia127

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements1 January 2011. This amendment will have no impact onDexia, which is not a first-time adopter anymore.• Amendment to IFRIC 14 “Prepayments of a MinimumFunding Requirements“ applicable as from 1 January 2011.This amendment will not impact Dexia.• IAS 24 “Related Party Disclosures“ applicable as from1 January 2011. This standard supersedes IAS 24 “RelatedParty Disclosures“ (as revised in 2003). This amendment willnot significantly impact Dexia.• IFRIC 19 “Extinguishing Financial Liabilities with EquityInstruments“ applicable as from 1 January 2011. Thisinterpretation has no impact on Dexia.1.2.3. New IFRS standards, IFRIC interpretations andamendments issued during the current year but not yetendorsed by the European Commission• Amendment to IAS 12 “Deferred Tax: Recovery of UnderlyingAssets“. There is no impact for Dexia as Dexia measures theseassets at amortised cost.• Amendment to IFRS 1 “Severe Hyperinflation and Removalof Fixed Dates for First-time Adopters“. This amendment willhave no impact on Dexia, which is not a first-time adopteranymore.• “IFRS 9 Financial Instruments“ – Phase I Classification andMeasurement. Dexia performed several impact assessmentsand the main preliminary conclusions were the following:- Some structured loans, for which the embedded derivativeare currently bifurcated and measured at fair value while thehost contract is reported at amortised cost, will be measuredat fair value through profit or loss.- Bonds currently classified as available-for-sale and thusreported at fair value through other comprehensive income,will be reported either at amortised cost or at fair valuethrough profit or loss. Consequently the negative AFS reservewill either be reversed or reclassified to retained earnings.- For structured products (ABS, RMBS, …) a “look through“approach should be applied under the new standard in orderto determine the measurement model. As Dexia investedmostly in the highest tranche, these products could bemeasured at amortised cost under IFRS 9.- Some financial assets will probably be measured at fair valuethrough profit or loss as the business model criteria (collectingthe cash flows attached to the underlying instrument) foramortised cost are not respected.However, the outcome of these assessments is tentative andis subject to potentially important changes once the finalpolicies on impairment and hedge accounting are known.• Amendment to IFRS 7 “IFRS Disclosures – Transfers ofFinancial Assets“. This amendment will impact Dexia byrequiring more detailed disclosures on transferred assetswhich were not derecognised by Dexia.• “The Conceptual Framework for Financial Reporting 2010“completes the first phase of the review and comprises Chapter1 “The objective of general purpose financial reporting“ andChapter 3 “Qualitative characteristics of useful financialinformation“. There is no impact for Dexia because Dexiaalready complies with the principles of the ConceptualFramework.• “Improvements to IFRSs“ (issued by IASB in May 2010),which are a collection of amendments to existing InternationalFinancial Reporting Standards. These amendments areeffective as from 1 January 2011 and the impact mainlyrelates to disclosures.The IASB also published “IFRS Practice Statement:Management Commentary: A Framework for presentation“.This Practice Statement is not an IFRS but provides a nonbindingframework for the presentation of managementcommentary.1.2.4. Changes in presentationDue to the sale of FSA insurance activities, the publication lineXVI “Deferred Acquisition Costs“ became irrelevant and hasbeen removed. Consequently, in the consolidated financialstatements as at 31 December 2010 an amount of EUR-7 million of deferred acquisition costs has been reclassified to“General and administrative expense“.Dexia has decided to report as from 30 June 2010 as aseparate line item in statement of income all legal litigationsin the line “Provisions for legal litigations“ below Grossoperating income together with “Impairment on loans andprovisions for credit commitments“, “Impairment on tangibleand intangible assets“ and “Impairment on goodwill“. InDexia's previous reporting, such legal litigations were reportedin “Other net income“.The IASB amended IAS 39 in October 2008. By thisamendment, an entity is allowed to reclassify, if certainconditions are met, financial assets from “Held for Trading“or “Available-for-Sale“ to “Loans and Receivables“ and from“Held for Trading“ to “Available-for-Sale“. Dexia mainlyapplied this amendment to reclassify a part of its “Availablefor-Sale“portfolio to “Loans and Receivables“. These assetswere transferred at fair value on 1 October 2008, the date ofreclassification. The amortization of the discount on the bondis compensated by the amortization of the “frozen“ fair valueadjustment. The consequences were that (i) these assets aresubject to the impairment procedure applicable for the category“Loans and Receivables“ and (ii) any subsequent change infair value does no longer impact Dexia's financial statements.In order to distinct the “frozen“ fair value adjustments ofreclassified assets from the fair value adjustments relating tothe remaining “Available-for-Sale“ portfolio, Dexia decided tosplit these elements within its equity.1.3. CONSOLIDATION1.3.1. Business combinationsAcquisitions of businesses are accounted for using theacquisition method. The consideration transferred in abusiness combination is measured at fair value, which iscalculated as the sum of the acquisition-date fair values ofthe assets transferred by Dexia, the liabilities incurred by Dexiato former owners of the acquiree and the equity interests128 Dexia Annual report 2010

Notes to the consolidated financial statementsissued by Dexia in exchange for control of the acquiree.Acquisition-related costs are generally recognised in profit orloss as incurred. At the acquisition date, the identifiable assetsacquired and the liabilities assumed are recognised at theirfair value at the acquisition date.Non-controlling interests may be initially measured either at fairvalue or at the non-controlling interest's proportionate share ofthe recognised amounts of the acquiree's identifiable net assets.The choice of measurement basis is made on a transaction-bytransactionbasis. The equity and net income attributable to thenon-controlling interests are shown separately in the balancesheet and statement of income respectively.When the consideration transferred by Dexia in a businesscombination includes assets or liabilities resulting froma contingent consideration arrangement, the contingentconsideration is measured at its acquisition-date fair valueand included as part of the consideration transferred in abusiness combination. Subsequent changes in the fair valueof the contingent consideration are typically recognised inprofit or loss.When a business combination is achieved in stages, Dexia'spreviously held equity interest in the acquiree is remeasuredto fair value at the acquisition date (i.e. the date on whichDexia obtains control) and the resulting gain or loss, if any,is recognised in profit or loss. Amounts arising from interestsin the acquiree prior to the acquisition date that havepreviously been recognised in other comprehensive incomeare reclassified to profit or loss where such treatment wouldbe appropriate if that interest were disposed of.1.3.2. SubsidiariesSubsidiaries are those entities over whose financial andoperating policies Dexia, directly or indirectly, may exercisecontrol.Subsidiaries are fully consolidated as at the date on whicheffective control is transferred to Dexia and are no longerconsolidated as at the date on which Dexia's control ceases.Intercompany transactions, balances and unrealised gains andlosses on transactions among Dexia's companies have beeneliminated. Where necessary, the accounting policies of thesubsidiaries have been amended to ensure consistency withthe policies adopted by Dexia.Changes in the Dexia's ownership interests in subsidiaries thatdo not result in the Group losing control over the subsidiariesare accounted for as equity transactions. The carrying amountsof the Group's interests and the non-controlling interests areadjusted to reflect the changes in their relative interests in thesubsidiaries. Any difference between the amount by whichthe non-controlling interests are adjusted and the fair valueof the consideration paid or received is recognised directly inequity.When Dexia loses control of a subsidiary, the profit or loss ondisposal is calculated as the difference between:• the aggregate of the fair value of the consideration receivedand the fair value of any retained interest; and• the previous carrying amount of the assets (includinggoodwill) and liabilities of the subsidiary and any noncontrollinginterests.The fair value of any investment retained in the former subsidiaryat the date on which control is lost, is regarded as the fairvalue on initial recognition for subsequent accounting underIAS 39 “Financial Instruments: Recognition and Measurement“or, where applicable, the cost on initial recognition of aninvestment in an associate or a jointly controlled entity.1.3.3. Jointly controlled entitiesA joint venture (JV) is a contractual arrangement wherebytwo or more parties undertake an economic activity thatis subject to joint control. Joint ventures are accounted forvia the proportionate consolidation method. In the financialstatements, joint ventures are integrated by combining theirshare of the assets, liabilities, income and expenses on a lineby-linebasis.The same consolidation treatment as applied to subsidiaries,is applied to intercompany transactions. Where necessary, theaccounting policies of the jointly controlled entities have beenamended to ensure consistency with the policies adopted byDexia.1.3.4. AssociatesInvestments in associates are initially measured at cost andaccounted for using the equity method. Associates areinvestments in which Dexia has significant influence, but doesnot exercise control. This is usually the case, when Dexia ownsbetween 20% and 50% of the voting rights. The ownershipshare of net income for the year is recognised as income ofassociates, whereas the share in other comprehensive incomeof associates is carried on a separate line of the statement ofcomprehensive income and the investment is recorded in thebalance sheet at an amount that reflects its share of the netassets increased with related goodwill.Gains on transactions between Dexia and its “equity methodinvestments“ are eliminated to the extent of Dexia's interest.The recognition of losses from associates is discontinuedwhen the carrying amount of the investment reaches zero,unless Dexia has incurred or guaranteed legal or constructiveobligations in respect of the associates' undertakings. Wherenecessary, the accounting policies of the associates have beenamended to ensure consistency with the policies adopted byDexia.1.3.5. Special purpose entities (SPE's)An SPE shall be consolidated when the substance of therelationship between Dexia and the SPE indicates that the SPEis controlled by Dexia.Control may arise through the predetermination of theactivities of the SPE (operating on “autopilot“) or otherwise.The following circumstances may indicate a relationship inwhich Dexia controls an SPE (which it should consequentlyconsolidate):• The activities of the SPE are being conducted on behalf ofDexia according to its specific business needs;Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia129

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements• Dexia has the decision-making powers or delegated thesepowers to obtain the majority of the benefits of the activitiesof the SPE;• Dexia has the right to obtain the majority of the benefits ofthe SPE and may be exposed to its risks; or• Dexia retains the majority of the residual or ownership risksrelated to the SPE or its assets in order to obtain benefitsfrom its activities.1.4. OFFSETTING FINANCIAL ASSETS ANDFINANCIAL LIABILITIESFinancial assets and financial liabilities are offset (andconsequently, the net amount only is reported) when Dexiahas a legally enforceable right to offset and intends eitherto settle on a net basis, or to realise the asset and settle theliability simultaneously.1.5. FOREIGN CURRENCY TRANSLATION ANDTRANSACTIONS1.5.1. Foreign currency translationOn consolidation, the statements of income and cash flowstatements of foreign entities that have a functional currencydifferent from Dexia's presentation currency are translated intoDexia's presentation currency (EUR) at the average exchangerates for the year (annual reporting) or the period (interimreporting) and their assets and liabilities are translated at therespective year-end or quarter-end exchange rates.Exchange differences arising from the translation of the netinvestment in foreign subsidiaries, associates, joint venturesand of borrowings and other currency instruments designatedas hedges of such investments, are recorded as a cumulativetranslation adjustment within shareholders' equity. On disposalof a foreign entity, such exchange differences are recognisedin the statement of income as part of the gain or loss ondisposal.Goodwill and fair value adjustments arising from the acquisitionof a foreign entity are treated as assets and liabilities of theforeign entity and are translated at the closing rate.1.5.2. Foreign currency transactionsFor individual Dexia entities, foreign currency transactions areaccounted for using the approximate exchange rate at thedate of the transaction. Outstanding balances denominatedin foreign currencies at period- or year-end are translated atperiod or year-end exchange rates for monetary items andnon-monetary items carried at fair value. Historical rates areused for non-monetary items carried at cost. The resultingexchange differences from monetary items are recordedin the consolidated statement of income; except for theforeign exchange impact related to fair value adjustmentson available-for-sale bonds, which is recorded under “Othercomprehensive income“. For non-monetary items carried atfair value, the exchange differences are governed by the sameaccounting treatment as for fair value adjustments.1.6. FINANCIAL ASSETS AND LIABILITIESManagement determines the appropriate classification of itsinvestments at initial recognition. However, under certainconditions, financial assets could subsequently be reclassified.1.6.1. Recognition and derecognition of financialinstrumentsDexia recognises and derecognises financial assets heldfor trading on trade date. For these financial assets, Dexiarecognises in the statement of income and as at the tradedate, any unrealised gains or losses arising from revaluing thecontract to fair value at the reporting date. Dexia recognisesthese unrealised gains and losses under “Net income fromfinancial instruments at fair value through profit or loss“.All other “regular way“ purchases and sales of financialassets are recognised and derecognised on the settlementdate, which is the date of delivery to or by Dexia.Dexia recognises the financial liabilities on its balance sheetwhen it becomes party to the contractual provisions of theinstrument. Dexia derecognises financial liabilities only when,it is extinguished, i.e. when the obligation specified in thecontract is discharged or cancelled or expires.1.6.2. Loans and advances due from banks andcustomersDexia classifies non-derivative financial assets with fixed ordeterminable payments that are not quoted on an activemarket into this category (labelled by IAS 39 as Loans andReceivables – L&R) except for:• those that Dexia intends to sell immediately or in the nearterm, which are classified as held for trading, and those thatDexia, upon initial recognition, designates as being at fairvalue through profit or loss;• those that Dexia, upon initial recognition, designates asavailable-for-sale; or• those for which Dexia might not substantially recoverall of its initial investment, other than because of creditdeterioration, such L&R then being classified as available-forsale.Dexia recognises interest-bearing loans and advances initiallyat fair value plus transaction costs and subsequently atamortised cost, less any allowance for impairment. Interestis calculated using the effective interest-rate method andrecorded under “Net interest income“.The effective interest-rate is the rate that exactly discountsestimated future cash payments or receipts through theexpected life of the financial instrument or, when appropriate,a shorter period to the net carrying amount of the financialasset.1.6.3. Financial instruments measured at fair valuethrough profit or loss1.6.3.1. Loans and securities held for tradingDexia reports loans held for trading purposes in the line“Financial assets held for trading“ at their fair value, withunrealised gains and losses recorded in the statement ofincome under “Net income from financial instruments at fair130 Dexia Annual report 2010

Notes to the consolidated financial statementsvalue through profit or loss“. Interest income is accrued usingthe effective interest-rate method and is recorded under “Netinterest income“.Trading securities are securities acquired for generating a profitfrom short-term fluctuations in price or dealer's margins, orare securities included in a portfolio in which a pattern ofshort-term profit-taking exists. Dexia initially recognisestrading securities at fair value and subsequently re-measuresthem at fair value. All realised and unrealised gains and lossesare recorded under “Net income from financial instruments atfair value through profit or loss“. Interest earned is recordedunder “Interest income“, and dividends received under“Dividend income“.1.6.3.2. Liabilities held for tradingLiabilities held for trading are subject to the same accountingrules as those for “Loans and securities held for trading“.1.6.3.3. Loans and securities designated at fairvalue through profit or loss (“FVO“)In some cases and if appropriately documented, Dexia candesignate a financial asset, a financial liability or a group offinancial instruments as “at fair value through profit or loss“where:• such designation eliminates or significantly reduces ameasurement or recognition inconsistency that wouldotherwise arise;• a group of financial assets, financial liabilities or both ismanaged and its performance is evaluated on a fair valuebasis, in accordance with a documented risk management orinvestment strategy;• an instrument contains a non-closely related embeddedderivative:- that significantly modifies the cash flows that otherwisewould be required by the contract; orfor which it is not clear, with little or no analysis, that theseparation of the embedded derivative is prohibited.1.6.3.4. Liabilities designated at fair value throughprofit or loss (FVO)For subsequent measurement, these financial liabilities aresubject to the same accounting principles as described earlierunder the heading “Financial instruments measured at fairvalue through profit or loss“.1.6.3.5. Derivatives – Trading portfolioWhen a derivative is not designated in a hedge relationship, itis deemed to be held for trading. The main types of derivativesare the currency and the interest-rate derivatives. Dexia, whichalso makes use of credit derivatives and equity derivatives,initially and subsequently measures all derivatives at the fairvalue obtained from quoted market prices, discounted cashflow models or pricing models, as appropriate. All changes infair value are recognised in the statement of income.Dexia reports derivatives as assets when fair value is positiveand as liabilities when fair value is negative.Dexia treats certain derivatives embedded in other financialinstruments as separate derivatives:• when their risks and characteristics are not closely related tothose of the host contract; and• when the hybrid contract is not carried at fair value withunrealised gains and losses reported in the statement ofincome.1.6.4. Financial investments1.6.4.1 Held-to-maturityDexia classifies the interest-bearing financial assets with fixedmaturity quoted in an active market as held-to-maturity(HTM) when management has both the intent and the abilityto hold the assets to maturity.Dexia recognises such interest-bearing financial assets initiallyat fair value plus transaction costs and subsequently atamortised cost, less any allowance for impairment. Interestis recognised based on the effective interest-rate method andrecorded under “Net interest income“.1.6.4.2 Available-for-saleDexia classifies financial assets intended to be held for anindefinite period of time, but which may be sold in responseto needs for liquidity or changes in interest-rates, exchangerates or equity prices, as available-for-sale (AFS).Dexia recognises financial assets initially at fair value plustransaction costs. Interest is recognised based on the effectiveinterest-rate method and recorded under “Net interestincome“. Dexia recognises dividend income from equitiesunder “Dividend income“.Dexia subsequently re-measures available-for-sale financialassets at fair value (cf. I.7 Fair value of financial instruments).Unrealised gains and losses arising from changes in the fairvalue of financial assets classified as available-for-sale arerecognised within equity under the heading “Gains andlosses not recognised in the statement of income“. Whensecurities are disposed of, or impaired, Dexia recycles therelated accumulated fair value adjustments in the statementof income as “Net income on investments“.1.6.5. Impairments on financial assetsDexia records allowances for impairment losses when there isobjective evidence that a financial asset or group of financialassets is impaired as a result of one or more events occurringafter initial recognition and evidencing (a) a decline in theexpected cash flows and (b) the impact on the estimatedfuture cash flows that can be reliably estimated.1.6.5.1. Financial assets valued at amortised costDexia first assesses whether objective evidence of impairmentexists individually for financial assets. If no such evidenceexists, the financial assets is included in a group of financialassets with similar credit risk characteristics and collectivelyassessed for impairment.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia131

Notes to the consolidated financial statementsof income over the period of the borrowings using theeffective interest-rate method.The distinction between interest-bearing instruments andequity instruments issued is based on the substance of theirunderlying contracts rather than their legal form.1.7. FAIR VALUE OF FINANCIAL INSTRUMENTSFair value is the amount for which an asset could be exchanged,or a liability settled, between knowledgeable, willing partiesin an arm's-length transaction. Quoted market prices in anactive market (such as a recognised stock exchange) are to beused as fair value, as they are the best evidence of the fairvalue of a financial instrument. Quoted market prices are not,however, available for a significant number of financial assetsand liabilities held or issued by Dexia.If a financial instrument is not traded on an active market,recourse is provided by valuation models. A valuation modelreflects what the transaction price would have been on themeasurement date in an arm's length exchange motivatedby normal business considerations, i.e. the price that wouldbe received by the holder of the financial asset in an orderlytransaction that is not a forced liquidation or forced sale.The valuation model should take into account all factors thatmarket participants would consider when pricing the asset.Measuring the fair value of a financial instrument requiresconsideration of current market conditions. To the extent thatobservable inputs are available, they should be incorporatedinto the model.Dexia's approach to the valuation of its financial instruments(direct profit or loss, AFS and disclosures) can be summarisedas follows:1.7.1. Financials instruments measured at fair value(Trading, FVO, AFS, derivatives)1.7.1.1. Financial instruments measured at fair valuefor which reliable quoted market prices are availableIf the market is active – meaning that bid-offer prices areavailable representing effective transactions concluded onan arm's length basis between willing counterparties – thesemarket prices provide for the most reliable evidence of fairvalue and therefore shall be used for valuation purposes.The use of market prices quoted in an active market for identicalinstruments with no adjustments qualifies for inclusion in level 1within IFRS 7 fair value hierarchy, contrary to the use of quotedprices in inactive markets or the use of quoted spreads.1.7.1.2. Financial instruments measured at fairvalue for which no reliable quoted marketprices are available and for which valuations areobtained by means of valuation techniquesFinancial instruments for which no quoted market prices inactive markets are available are valued by means of valuationtechniques. The models that Dexia uses range from standardmarket models (discount models) to in-house developedvaluation models.In order for a fair value to qualify for level 2 inclusion, onlyobservable market data should be used. The market data thatDexia incorporates in its valuation models are either directlyobservable data (prices), indirectly observable data (spreads) orown assumptions about unobservable market data. Fair valuemeasurements that rely significantly on own assumptionsqualify for level 3 disclosure.For bonds for which no liquid market exists, these are valuedusing Dexia's Mark to Model approach. The valuation priceis composed of a market price component and a modelprice component. The weight granted to the model pricecomponent reflects an assessment of the liquidity of themarket considering the bond characteristics.For its Mark-to-Model price, Dexia uses a discount cash-flowmodel, based on a discounted spread that incorporates bothcredit and liquidity risk. The credit spread is estimated fromthe security specific characteristics (sector, rating, Loss GivenDefaut, …) and from the level of some liquid CDS indices.A liquidity component is added to the credit component toobtain the instrument's spread. The weight of the liquiditycomponent depends on the instrument's central bankeligibility character.Due to the financial crisis of 2008, many assets and liabilitiesfor which quoted prices were available became illiquid. RiskManagement developed models in 2008 to value thoseilliquid financial instruments. Risk Management adjustedits classification between fair value levels in 2009 based onthe recommendations included in the amendment to IFRS 7published in March 2009 and included in the Exposure Drafton Fair Value, published in May 2009.Regarding structured derivatives, Risk Management togetherwith the Modelling Team continue to implement the actionplan validated by the Management Board, focussing on thedevelopment of internal valuation models, the conduct of arobust external price reconciliation process and the use ofqualitative market data for its validations.1.7.2. Financial instruments measured at amortised cost(valuations in IFRS disclosures on fair value)1.7.2.1. Financial instruments reclassified fromTrading or AFS to L&RAs a response to the financial crisis, the IASB issued on13 October 2008 an amendment to IAS 39 permitting thereclassification of certain illiquid financial assets. Dexia decidedto benefit from this opportunity to reclassify assets for whichan active market, as well as reliable quoted prices, was nolonger available.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia133

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements134 Dexia Annual report 2010The Modelling team developed and implemented new modelson instruments that became and remained illiquid.1.7.3. Financial instruments classified in HTM and L&Rsince inception1.7.3.1. Loans and Receivables, includingmortgages loans, are valued based on thefollowing valuation principlesGeneral principles• the carrying amount of loans maturing within 12 months isassumed to reflect their fair value;• for bonds in HTM and L&R since inception, the valuation isdone as for bonds classified in AFS.Interest-rate part• the fair value of fixed-rate loans and mortgages reflectinterest-rate movements since inception;• embedded derivatives, like caps, floors and prepaymentoptions are included in determining the fair value of loansand receivables;• the fair value of variable-rate loans is assumed to beapproximated by their carrying amounts.Credit-risk part• for corporate loan and social profit portfolios, credit spreadevolutions since inception are reflected in the fair value. Forother sectors, mainly retail and public sector, the spread iskept unchanged as no reliable information is available forSME and no credit losses have been recognised on the publicsector where Dexia is present.1.8. INTEREST INCOME AND EXPENSEInterest income and expense are recognised in the statementof income for all interest bearing instruments on an accrualbasis using the effective interest-rate method based on theinitial carrying value (including transaction costs) for financialinstruments not valued at fair value through P&L.Transaction costs are the incremental costs that are directlyattributable to the acquisition of a financial asset or liabilityand are included in the calculation of the effective interest rate.An incremental cost is one that would not have been incurredif the entity had not acquired the financial instrument.Accrued interest is reported in the same line as the relatedfinancial asset or liability in the balance sheet.Once an interest bearing financial asset has been writtendown to its estimated recoverable amount, interest income isthereafter recognised based on the interest that was used todiscount the future cash flows for measuring the recoverableamount.1.9. FEE AND COMMISSION INCOME ANDEXPENSECommissions and fees arising from most of Dexia's activitiesare recognised on an accrual basis over the life of theunderlying transaction.Commissions and fees arising from negotiating, or participatingin the negotiation of a transaction for a third party, such asthe arrangement of the acquisition of loans, equity securitiesor other securities or the purchase or sale of businesses, arerecognised when the significant act has been completed.For asset management operations, revenue consists principallyof unit trust and mutual fund management and administrationfees. Revenue from asset management is recognised as earnedwhen the service is provided. Performance fees are recognisedwhen all underlying conditions are met and thus acquired.Loan commitment fees are recognised as part of the effectiveinterest-rate if the loan is granted, and recorded as revenueon expiry if no loan is granted.1.10. INSURANCE AND REINSURANCEACTIVITIES1.10.1. InsuranceDexia is mainly active in banking products. Some insuranceproducts sold by insurance companies have been requalifiedas financial instruments as they do not meet the requirementsof insurance products under IFRS 4.IFRS 4 allows a company to account for insurance contractsunder local GAAP if they qualify as such under IFRS 4.Hence, Dexia has elected to use the local accounting policiesto evaluate the technical provisions for contracts that fallunder IFRS 4 and investment contracts with discretionaryparticipation features (DPF).A contract that complies with the conditions of an insurancecontract remains an insurance contract until all rights andobligations cease to exist or expire. An insurance contractis a contract under which one party (the insurer) acceptssignificant insurance risk from another party (the policyholder)by agreeing to compensate the policyholder if a specifieduncertain future event (the insured event) adversely affectsthe policyholder.A contract can start out as an investment contract andbecome an insurance contract when containing significantinsurance components as time passes.The amounts received and paid relating to insurance products(including Non-life claims) are reported respectively under“Premiums and technical income from insurance activities“ orunder “Technical expense from insurance activities“, whereaslosses and changes in provisions for credit enhancementactivities, which are similar to banking activities, are reportedunder “Impairment on loans and provision for creditcommitments“.All other items arising from insurance activities are classifiedaccording to their nature in the balance sheet, except fortechnical provisions, which are identified under a separateheading.Dexia's insurance activities are mainly performed by DexiaInsurance Services (DIS) for Life and Non-life products.1.10.1.1. DIS activities: Life and Non-lifeDIS insurance products are recorded under Local GAAP. DIScomprises principally the Belgian and Luxembourg entities,which are governed by Local GAAP, if they are qualified assuch under IFRS 4. However, provisions for catastrophes andequalisations are reversed.The Life Insurance portfolio features:

Notes to the consolidated financial statements• Insurance contracts, including reinsurance contracts, andthe accepted reinsurance treaties, with the exception of thein-house-defined employee benefit plans;• Financial instruments issued with a discretionary profitsharing(a discretionary participation feature (DPF));• Unit-linked (UL) contracts stipulating that the policyholdercan switch at all times, at no expenses, to an investmentproduct with a guaranteed interest-rate and a probable profitsharing.1.10.1.2. ClassificationClassification is done policy by policy, whereas, for groupinsurances, classification is done at employer level.The Non-life insurance portfolio features include only insurancecontracts that contain significant insurance risk.1.10.1.3. Shadow accountingInsurers are permitted, but not required, to change theiraccounting policies so that a recognised but unrealised gainor loss on an asset affects those measurements in the sameway as a realised gain or loss does. The related adjustmentto the insurance liability (or deferred acquisition costs orintangible assets) shall be recognised in equity if, and onlyif, the unrealised gains or losses are recognised directly inequity.Dexia will limit the application of shadow accounting, if underlegal and/or contract conditions, the realisation of gains onan insurer's assets has a direct effect on the measurementof some or all of its DPF insurance contracts and investmentcontracts with discretionary participation features.1.10.1.4. Shadow-loss adjustmentTo determine the need for a shadow-loss adjustment, Dexiafirst has to determine whether additional liabilities would berequired, assuming current market-investment yields ratherthan the estimated return of the assets. If the level of liabilitiesrequired is higher than the total liabilities, then the deficiencyshould decrease the unrealised gains recorded in equity andincrease the liabilities through a shadow premium deficiencyadjustment.This requires the liability adequacy test (see I.10.1.9 LiabilityAdequacy Test – below) to be performed after all (if any)shadow adjustments. Should there be insufficient unrealisedcapital gains left in equity to accommodate the shadow lossadjustment, the additional liability increase should be chargedto the statement of income.1.10.1.5. Discretionary participation feature (DPF)Discretionary participation feature is a contractual rightto receive, as a supplement to the guaranteed benefits,additional benefits:• that are likely to be a significant portion of the totalcontractual benefits;• whose amount or timing is contractually at the discretion ofthe issuer; and• that are contractually based on:- the performance of a specified pool of contracts or aspecified type of contract; or- realised and/or unrealised investment returns on a specifiedpool of assets held by the issuer; or- the profit or loss of the company, fund or other entity thatissues the contract.All unrealised gains and losses coming from investmentsbacking insurance contracts and investment contracts withDPF are categorised proportionally for the part related to theinsurance contracts and investment contracts with DPF in aseparate line of the equity.Proportional calculation is performed on the basis of thecarried reserves and by separated management of the assets.1.10.1.6. Insurance contracts with depositcomponent (unbundling)All unit-linked products that contain both an insurancecontract and a deposit component will be unbundled.Accounting policies for insurance contracts are applied tothe insurance component; accounting policies for financialinstruments are applied to the deposit component.The unit-linked products that can be converted into aguaranteed investment product (branch 21) with profitsharing fall under IFRS 4 (investment with DPF) and will notbe unbundled.1.10.1.7. Embedded derivativesIAS 39 applies to derivatives embedded in an insurancecontract unless the embedded derivative is itself an insurancecontract. The requirements for insurance contracts with DPFalso prevail for financial instruments with DPF elements.As an exception to the IAS 39 requirement, Dexia does notneed to separate, and measure at fair value, a policyholder'soption to surrender an insurance contract for a fixed amount(or for an amount based on a fixed amount and an interestrate),even if the exercise price differs from the carryingamount of the host insurance liability. However, the IAS 39requirement does apply to any put option or cash surrenderoption embedded in an insurance contract if the surrendervalue varies in response to a change in a financial variable(such as an equity or commodity price or index), or anon-financial variable that is not specific to a party to thecontract.1.10.1.8. DPF in financial instrumentsIf the issuer classifies part of, or the entire feature as aseparate component of equity, the liability recognised for thewhole contract shall not be less than the amount that wouldresult from applying IAS 39 to the guaranteed element.At each reporting date, Dexia checks as to whether thisminimum requirement has been met: if it has not, thecorresponding liabilities are adjusted accordingly.1.10.1.9. Liability Adequacy TestsAn insurer applies a liability adequacy test (LAT) to its insuranceproducts and investment contracts with DPF. Dexia assesses ateach reporting date whether its recognised insurance liabilitiesManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia135

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsare adequate, using current estimates of future cash flowsunder its insurance contracts.If that assessment (based on all individual Life and Non-lifeinsurance portfolios) shows that the carrying amount of itsinsurance liabilities (less the related deferred acquisition costsand related intangible assets) is inadequate in the light of theestimated future cash flows, the entire deficiency shall berecognised in profit or loss.If an adequacy test of the life obligations imposed by thelocal authorities is available, it will show whether or not theinsurance liabilities are sufficient.If this test is not available, a test such as the one describedbelow will be carried out in order to examine if the currentvalue of the future cash flows is covered by the concordanttechnical provision. Should this prove not to be the case, theentire deficiency would be recognised in profit or loss.For Life insurance liabilities set up where no local LAT test isimposed by the authorities, an IFRS LAT test will be carriedout using thefollowing parameters:• premiums: collected premiums plus contractually providedfuture premiums;• interest rate for actualisation cash flows: average OLOon 10 year during the last (consecutive) year until the 15thbefore closing;• mortality table: Assuralia experience table;• costs: calculation based on the latest tariff costs and thebooked 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 arestipulated by product group and are indexed. Taking intoaccount lapses, death and the expiry period the annual deltais stipulated as being somewhere between the tariff costs andthe real assigned costs. Deltas are then actualised to the LATrate.For Non-life insurance, the LAT that examines whetherthe premium and claim provisions are sufficient to settledefinitively the opened claim files and the claims that willoccur within the contractual duration of the contracts toopen and to settle definitively.All products are subject to LAT. The test is subdivided intotwo parts. Dexia first examines whether the built-up reservesfor claim files already opened are sufficient, then makes anestimation of the expected loss burden for the insuranceportfolios and examines whether the unearned premiumreserves are sufficient.Regarding reserves for the files already opened, Dexiaperforms run-off calculations, using estimates for the claimshandlingexpenses.1.10.2. ReinsuranceDexia's reinsurance contracts with third parties that containenough insurance risk to be classified as an insurancecontract continue to be accounted for in accordance withLocal GAAP.A reinsurance asset is impaired if, and only if:• there is objective evidence, as a result of an event thatoccurred after initial recognition of the reinsurance asset, thatthe cedant may not receive all amounts due to it under theterms of the contract; and• that event has a reliably measurable impact on the amountsthat the cedant will receive from the reinsurer.To measure the solvency of a reinsurer, Dexia refers to itsattributed credit rating and the impairment rules.1.11. NETWORK COSTSThis heading records the commission paid to intermediariesassociated by exclusive sales mandate for drumming upbusiness.1.12. HEDGING DERIVATIVESHedging derivatives are categorised as either:• a hedge of the fair value of a recognised asset or liability ora firm commitment (fair value hedge); or• a hedge of a future cash flow attributable to a recognisedasset or liability or a forecast transaction (cash flow hedge);or• a hedge of a net investment in a foreign operation.Dexia designates derivatives as hedging instruments if certaincriteria are met:• formal documentation of the hedging instrument, hedgeditem, hedging objective, strategy and relationship is availablebefore hedge accounting is applied;• the hedge is documented in such a way as to show that itis expected to be highly effective (within a range of 80% to125%) in offsetting changes in the fair value or cash flowsattributable to the hedged risk in the hedged item throughoutthe reporting period; and• the hedge is effective at inception and on an ongoingbasis.Dexia records changes in the fair value of derivatives that aredesignated, and qualify, as fair value hedges in the statementof income, along with the corresponding change in fair valueof the hedged assets or the liabilities that is attributable tothat specific hedged risk.If the hedge no longer meets the criteria for a fair value hedge,Dexia amortises the adjustment to the carrying amount of ahedged interest-bearing financial instrument to the statementof income over the remaining life of the hedged or hedginginstrument if shorter by an adjustment of the yield of thehedged item.Dexia recognises the effective part of the changes in thefair value of derivatives that are designated and qualifyas cash flow hedges, in “Other comprehensive income“under the heading “Gains and losses not recognised inthe statement of income“ (see “Consolidated statement ofchanges in shareholders' equity“). Any non-effective portionof the changes in the fair value of the hedging instrumentis recognised in the statement of income. Amounts deferredin equity are transferred to the statement of income andclassified as revenue or expense in the periods during which136 Dexia Annual report 2010

Notes to the consolidated financial statementsthe hedged firm commitment or forecast transaction affectsthe statement of income.1.13. HEDGE OF THE INTEREST-RATE RISKEXPOSURE OF A PORTFOLIOAs explained in 1.1.1 General, Dexia makes use of theprovisions in IAS 39 as adopted by the European Union (“IAS39 carve-out“) because it better reflects the way in whichDexia manages its financial instruments.Hedge accounting is intended to reduce the interest-rate riskexposure stemming from the selected category of assets orliabilities designated as the qualifying hedged items.Dexia performs a global analysis of interest-rate risk exposure.It consists in assessing fixed-rate exposure, taking intoaccount all the exposure coming from balance sheet andoff-balance sheet items. This global analysis may excludecertain components of the exposure, such as financial marketactivities, provided that the risk exposure stemming fromthe excluded activities is monitored on an activity-by-activitybasis.Dexia applies the same methodology to select which assetsand/or liabilities will be entered into the hedge of interestraterisk exposure of the portfolio. Assets and liabilities areincluded in all the time buckets of the portfolio. Hence, whenthey are removed from the portfolio, they must be removedfrom all the time buckets in which they had an impact.Demand deposits and savings accounts may be includedin the portfolio based on behavioural study for estimatingexpected maturity date. Dexia may designate as qualifyinghedged items different categories of assets or liabilities suchas available-for-sale assets or loan portfolios.On the basis of this gap analysis, which is realised on a netbasis, Dexia defines, at inception, the risk exposure to behedged, the length of the time-bucket, the test method andthe frequency of the tests.The hedging instruments are a portfolio of derivatives,which may contain offsetting positions. Dexia recognises thehedging items at fair value with adjustments accounted for inthe statement of income.Dexia reports hedged interest-rate risk revaluation of elementscarried at amortised cost on the balance sheet under the line“Fair value revaluation of portfolio hedges“.1.14. DAY ONE PROFIT OR LOSSThe day one profit or loss is applicable to all transactionsmeasured at fair value through profit or loss.The day one profit or loss is the difference between:• the transaction price and the quoted market price; in caseswhere the transaction is quoted; or• the transaction price and the fair value determined by usinga valuation technique, (mark-to-model) adjusted with somemarket value adjustments, such as a liquidity adjustment,model adjustment or credit adjustment in cases where thetransaction is not quoted.If Dexia considers the main parameters of the model asobservable and if Risk Management validates the model, theday one profit or loss will be recognised immediately in thestatement of income.If Dexia does not consider the main parameters as observableor if Risk Management does not validate the model, the dayone profit or loss will be amortised linearly over the expectedlife of the transaction. However, if the data becomesobservable subsequently, Dexia will recognise the remainingportion of day one profit or loss in the statement of income.In cases of early termination, the remaining portion of day oneprofit or loss will be recognised in the statement of income. Incases of partial early termination, Dexia will recognise in thestatement of income the part of the day one profit or lossrelating to the partial early termination.1.15. TANGIBLE FIXED ASSETSTangible fixed assets include property, plant & equipment andinvestment properties.All property, plant & equipment are stated at their cost lessaccumulated depreciation and impairments. Subsequent costsare, where necessary, included in the carrying amount of theasset or recognised as a separate component, if it is probablethat future economic benefits will flow to the Group and thecost of the asset can be reliably measured.Depreciation is calculated using the straight-line method towrite down the cost of such assets to their residual valuesover their estimated useful lives.The main useful lives are as follows:• Buildings (including acquisition costs and non deductibletaxes): 20 to 50 years;• Computer equipment: 3 to 6 years;• Leasehold improvements, equipment and furniture: 2 to 12years;• Vehicles: 2 to 5 years.An item of property, plant & equipment can be composed ofsignificant parts with individually varying useful lives. In sucha case, each part is depreciated separately over its estimateduseful life. The following parts have been defined:• Structure of the building: 50 years;• Roof, and frontage: 30 years;• Technical installations: 10 to 20 years;• Fixtures and fittings: 10 to 20 years.As borrowing costs that are directly attributable to theacquisition, construction or production of a qualifying assetform part of the cost of that asset they are capitalised. Otherborrowing costs are recognised as an expense.Tangible fixed assets are tested for impairment when anindication of impairment loss exists. Where the carryingamount of an asset is greater than its estimated recoverableamount, it is written down to its recoverable amount. Wherethe recoverable amount of an asset cannot be determinedindividually the Group determines the recoverable amount ofthe cash generating unit or group of cash generating unitsto which the asset belongs. Gains and losses on disposalsof property and equipment are determined by reference toManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia137

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementstheir carrying amount and are included under “Net incomeon investments“.Investment properties are those properties held to earnrentals or for capital appreciation. Dexia may also partlyuse such properties. If the “own use“ portions can be soldseparately or leased out separately under finance lease, thenthese portions are accounted for separately. If the “ownuse“ portions cannot be sold separately, the property will beconsidered as an investment property only if Dexia holds aninsignificant portion for its own use.Investment properties are recorded at its cost less accumulateddepreciation and impairments. The investment properties aredepreciated over their useful lives on a straight-line basis.Depreciation on buildings and other assets given in operatinglease are booked under “Other net income“.1.16. INTANGIBLE ASSETSIntangible assets consist mainly of (a) internally generated and(b) acquired software. The costs associated with maintainingcomputer software programs are recognised as expense asincurred. However, expenditure that enhances or extends thebenefits of computer software programs beyond one year isused to increase the original cost of the software. Computersoftware development costs recognised as assets are amortisedusing the straight-line method over their useful lives fromthe time the software is available for use. This amortisationperiod is usually between three and five years, except for corebusiness applications, for which the amortisation period is canbe up to 10 years.As borrowing costs that are directly attributable to theacquisition, construction or production of a qualifying assetform part of the cost of that asset they are capitalised. Otherborrowing costs are recognised as an expense.Intangible assets (other than goodwill) are tested for impairmentwhen an indication of impairment loss exists. Where thecarrying amount of an asset is greater than its estimatedrecoverable amount, it is written down to its recoverableamount. Gains and losses on disposals of intangible assetsare determined by reference to their carrying amount and areincluded under “Net income on investments“.1.17. NON-CURRENT ASSETS HELD FOR SALEAND DISCONTINUED OPERATIONSIf the carrying amount of a non-current asset (or disposalgroup) is recovered principally through a sale transaction,rather than through continuing use, it will be classified as“held for sale“.Dexia measures a non-current asset (or disposal group)classified as held for sale at its carrying amount or at itsfair value less costs to sell (whichever is the lower). Noncurrentassets (or disposal groups) classified as held forsale are presented separately in the balance sheet, withoutrestatement for previous periods. These assets are no longerdepreciated once they qualify as assets (or disposal groups)held for sale.A discontinued operation is defined as a component of anentity that either has been disposed of or is classified as heldfor sale and represents a separate major line of business orgeographical area of operations. Post-tax profit or loss ofdiscontinued operations is presented under a separate line inthe statement of income.1.18. GOODWILL1.18.1. Measurement of goodwillGoodwill is as an asset representing the future economicbenefits arising from other assets acquired in a businesscombination that are not individually identified and separatelyrecognised.It is measured as the difference between• The sum of the following elements:- Consideration transferred,- Amount of any non-controlling interests in the acquiree,and- Fair value of the acquirer's previously held equity interest inthe acquiree (if any) and is• Net of the acquisition-date amounts of the identifiableassets acquired and the liabilities assumed.If, after reassessment, this difference is negative (“negativegoodwill“), it is recognised immediately in profit or loss as abargain purchase gain.Variations in the percentage of ownership in fully-consolidatedcompanies are considered as transactions with shareholders.Therefore neither fair value adjustments nor goodwilladjustments are made whenever percentage increases ordecreases take place without any change in the consolidationmethod. The difference between the purchase or the sale ofa net asset and the purchase or sale price is directly recordedin equity.1.18.2. Impairment of goodwillThe carrying amount of goodwill is reviewed at year-end.For the purpose of this impairment testing, Dexia allocatesgoodwill to cash-generating units (CGUs) or groups of suchunits.When circumstances or events indicate that there may beuncertainty about the carrying amount, goodwill is writtendown for impairment when the recoverable amount of theCGU or group of cash-generating units to which it has beenallocated is lower than the carrying value.The recoverable amount is the “fair value less cost to sell“ orthe “value in use“ (whichever is the higher). The “value inuse“ is the sum of the future cash flows that are expected tobe derived from a CGU Expected cash flows used by Dexia arethose of the 3-year management-improved financial plan.The calculation of the “value in use“ shall also reflect thetime value of money (current market risk-free rate of interest)adjusted for the price for bearing the uncertainty inherent inthe asset. This is reflected in the discount rate.For subsidiaries operating in economically mature andfinancially stable markets, the discount rate used is the Costof Equity of Dexia defined under a dividend discount model.For subsidiaries operating in emerging markets, a specificdiscount rate is applied on a case-by-case basis.138 Dexia Annual report 2010

Notes to the consolidated financial statements1.19. OTHER ASSETSOther assets mainly include accrued income (non-interestrelated), prepayments, operational taxes and other accountsreceivable as well as insurance products (reinsurance, insurancepremiums receivables, etc.), construction contracts, inventories,plan assets relating to employee benefit obligations. Theseother assets are measured in accordance with the applicablestandard less any allowance for impairment if applicable orfollowing the applicable standard. Plan assets are recognisedin accordance with IAS 19 requirements.1.20. LEASESA finance lease is one that transfers substantially all the risksand rewards incidental to ownership of an asset. An operatinglease is a lease other than a finance lease.1.20.1. Dexia is the lesseeDexia grants operating leases principally for the rental ofequipment or real estate. Lease rentals are recognised in thestatement of income on a straight-line basis over the leaseterm.When an operating lease is terminated before the lease periodhas expired, any payment to be made to the lessor by wayof penalty is recognised as an expense in the period in whichtermination takes place.If the lease agreement substantially transfers the risk andrewards of ownership of the asset, the lease is recorded as afinance lease and the related asset is capitalised. At inceptionthe asset is recorded as the the present value of the minimumlease payments or the fair value (whichever is the lower) andis depreciated over its estimated useful life unless the leaseterm is short and the title is not expected to be transferred toDexia. Subsequent to initial recognition, the asset is accountedfor in accordance with the accounting policies applicable tothat asset. The corresponding rental obligations are recordedas borrowings and interest payments are recorded using theeffective interest-rate method.1.20.2. Dexia is the lessorDexia grants both operating and finance leases.Revenue from operating leases is recognised in the statementof income on a straight-line basis over the lease term. Theunderlying asset is accounted for in accordance with theaccounting policies applicable to this type of asset.For finance leases, Dexia recognises “leases receivable“ atan amount equal to the net investment in the lease, whichcan be different from the present value of minimum leasepayments.The interest-rate implicit in the lease contract acts as thediscount rate. Interest income is recognised over the term ofthe lease using the interest-rate implicit in the lease.1.21. SALE AND REPURCHASE AGREEMENTSAND LENDING OF SECURITIESSecurities sold subject to a linked repurchase agreement(“repos“) are not derecognised and remain in their originalcategory. The corresponding liability is entered under “Dueto banks“ or “Customer borrowings and deposits“, asappropriate. The asset is reported as “pledged“ in the notes.Securities purchased under agreements to resell (“reverserepos“) are recorded as off-balance sheet items and thecorresponding loans recorded as “Loans and advances duefrom banks“ or “Loans and advances to customers“.The difference between the sale and repurchase price istreated as interest income or expense and is accrued overthe life of the agreements using the effective interest-ratemethod.Securities lent to counterparties are not derecognised but,rather recorded in the financial statements in the sameheading.Securities borrowed are not recognised in the financialstatements.If they are sold to third parties, the gain or loss is enteredunder “Net income from financial instruments at fair valuethrough profit or loss“ and the obligation to return them isrecorded at fair value under “Financial liabilities measured atfair value through profit or loss“.1.22. DEFERRED INCOME TAXDeferred income tax is recognised in full, using the liabilitymethod, on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts inthe financial statements.The principal temporary differences arise from the depreciationof property, plant & equipment, the revaluation of certainfinancial assets and liabilities (including derivative contracts,provisions for pensions and other post-retirement benefits),provisions for loan and other impairments and, in relation toacquisitions, from the difference between the fair value of thenet assets acquired and their tax base.The rates enacted or substantively enacted at the balancesheetdate are used to determine the deferred income tax.Deferred tax assets and liabilities are not discounted. Deferredtax assets on deductible temporary differences and tax losscarry-forwards are recognised to the extent that it is probablethat future taxable profit will be available against which thetemporary differences and tax losses can be utilised.Deferred tax liability is provided on taxable temporarydifferences arising from investments in subsidiaries, associatesand joint ventures, except where the timing of the reversal ofthe temporary difference can be controlled and it is probablethat the difference will not reverse in the foreseeable future.Deferred tax related to the fair value remeasurement ofavailable-for-sale investments and cash flow hedges, andother transactions recorded directly in equity, are also creditedor charged directly to equity.1.23. EMPLOYEE BENEFITS1.23.1. Short-term benefitsShort-term benefits, payable within 12 months of the servicebeing rendered, are measured on an undiscounted basis andrecognised as an expense.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia139

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements1.23.2. Post-employment benefitsIf Dexia has a legal or constructive obligation to pay postemploymentbenefits, the plan is either classified as “definedbenefit“ or “defined contribution plan“. Dexia offers anumber of defined benefit and defined contribution plansthroughout the world, the assets of which are generally heldby insurance companies or pension funds. The pension plansare generally funded by payments from both Dexia and itsemployees.In some cases, Dexia provides post-retirement health carebenefits to its retirees.1.23.2.1. Defined benefit plansEmployee benefit obligations are measured at the presentvalue of the estimated future cash outflows using theinterest-rates of AA-rated corporate bonds, which have termsto maturity approximating to the terms of the related liability.Assumptions on which assessment of pension expenses arebased, among other things, on actuarial and demographicassumptions, and on the inflation rate.Pension costs are determined based on the Projected UnitCredit Method, under which each period of service gives riseto an additional unit of benefit entitlement and each unitis measured separately to built up the final obligation. Netcumulative unrecognised actuarial gains and losses exceedingthe corridor (greater than 10% of the present value of thegross defined benefit obligation and 10% of the fair value ofany plan assets) are recognised in income over the averageremaining working lives of the plan participants.The amount recognised in the balance sheet is the presentvalue of the defined benefit obligation (i.e., the presentvalue of the expected future payments required to settle theobligation resulting from the employee service in the currentand prior periods), as adjusted for unrecognised actuarialgains and losses and unrecognised past service cost, andreduced by the fair value of plan assets at the balance sheetdate. The defined obligation is presented net of plan assetsas a liability or an asset. Therefore an asset may arise wherea plan has been overfunded and are recorded separately ifthose assets are held by a Group entity.Any asset recognised is limited to the total of any cumulativeunrecognised net actuarial losses and past service cost, andthe present value of any economic benefits available inthe form of refunds from the plan or reductions in futurecontributions to the plan.Qualified internal and external actuaries carry out valuationsof these obligations. All valuations assumptions and results arereviewed and validated by an external actuary for Dexia thatensures that all calculations are harmonised and calculated incompliance with IAS 19.1.23.2.2. Defined contribution pension plansDexia's contributions to defined contribution pension plansare charged to the statement of income in the year to whichthey relate. Under such plans, Dexia's obligations are limitedto the contributions that Dexia agrees to pay into the fund onbehalf of its employees.1.23.2.3. Post-employment medical careThe entitlement to these benefits is usually based on theemployee remaining in service up to retirement age and thecompletion of a minimum service period. The expected costsof these benefits are accrued over the period of employment,using a methodology similar to that for defined benefitpension plans.1.23.3. Other long-term benefitsThese mainly includes provisions for jubilee premiums thatemployees receive after completion of specified periods ofservice.Unlike defined benefit plans, actuarial gains and lossesrelating to these benefits are immediately recognised. All pastservice costs are recognised immediately in the statement ofincome.Employee entitlement to annual leave or long-service leave isrecognised when it is granted to the employee. A provisionis made for the estimated liability for annual leave and longserviceleave as a result of services rendered by employees upto the balance-sheet date.1.23.4. Termination benefitsA termination benefit provision is only recorded when Dexiais obliged to terminate the employment before the normaldate of retirement or to provide benefits as a result of anoffer made in order to encourage voluntary redundancy. Insuch cases Dexia has a detailed formal plan and no realisticpossibility of withdrawal.1.23.5. Share-based paymentDexia offers equity-settled share based payments like stockoptions plans (SOPs) and employee share purchase plans(ESPPs) and cash-settled share-based payments.The fair value of equity-settled plans is measured at grantdate by reference to the fair value of the underlying equityinstrument based on valuation techniques and on market dataand takes into account market-based vesting conditions. Theimpact of other vesting conditions is reflected in the accountsvia an adjustment of the number of equity instrumentsincluded in the measurement. The fair value, recognised as aremuneration expense, is credited against equity.In cash-settled share-based payments, the services receivedand the liability incurred, to pay for those services, aremeasured at the fair value of the liability. This fair value ismeasured at the grant date and at each reporting date untilsettled. The fair value is recognised as a remuneration expensewith a corresponding increase in liabilities.1.24. PROVISIONSProvisions are mainly recognised for litigations claims,restructuring, and loan commitments.Provisions are measured at the present value of theexpenditures expected to be required to settle the obligation.The discount rate is the pre-tax rate that reflects currentmarket assessments of the time value of money.140 Dexia Annual report 2010

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statements2. Significant changes inscope of consolidation andlist of main subsidiaries andaffiliated enterprises of theDexia Group2.1. Significant changes in scope ofconsolidationIn 2009As from 1 April 2009, Dexia stopped consolidating the activitiesof Financial Security Assurance Holdings Ltd. (hereafter FSAInsurance) sold to Assured Guaranty Ltd. (Assured).FSA Insurance's result for the first quarter was consolidatedon a line by line basis and the net result was offset in “Netincome on Investments“.The sale was completed on 1 July 2009. The sales price ofUSD 816.5 million was partially paid in cash (USD 546 million)and partially with 21.85 million Assured shares. The shareswere included in Available-for-sale Portfolio as Dexia did nothave a significant influence in Assured.As from the fourth quarter 2009, Crédit du Nord is no longerincluded in Dexia's consolidated financial statements pursuant tothe agreement under which Société Générale buys Dexia's 20%stake in Crédit du Nord for a cash consideration consisting ofEUR 676 million. The EUR 30 million first nine-month result ofCrédit du Nord was considered in Dexia's annual result 2009.The transaction generated a capital gain of around EUR 153 million.Simultaneously to this transaction Dexia purchased Crédit duNord's 20% stake in Dexia Crédit Local de France Banquefor a cash consideration of EUR 13 million. As a result ofthis acquisition, Dexia controls 100% of Dexia Crédit Localde France Banque.As at 9 December 2009, Dexia signed an agreement relatingto the sale of Dexia Epargne Pension (“DEP“) to BNP ParibasAssurance.Following the signing of the agreement, DEP was recorded in“Non current assets held for sale“ and in “Liabilities included indisposal groups held for sale“ for amounts around EUR 4.3 billionas at 31 December 2009.In 2010Following its sale in April 2010, Dexia Epargne Pension leftthe scope of consolidation. Its results of the first three months2010 have been consolidated.Dexia sold its 51% stake in Adinfo. Adinfo's results for thefirst six months 2010 have been consolidated.See also note 9.5. Acquisitions and disposals of consolidatedcompanies.Additional information Annual financial statements2.2. Main subsidiaries and affiliated enterprises of the Dexia Group (1)Name Head Office % of capital held ConsolidationmethodDIRECT PARTICIPATIONS OF DEXIA SAAssociated Dexia Technology Services SA(ADTS)Dexia Funding Luxembourg SA23, Atrium Business Park, z.a. Bourmicht,L-8070 Bertrange180, rue des AubépinesL-1145 Luxembourg100 fully100 fullyDexia Participations Belgique SA Place Rogier 11, B-1210 Bruxelles 100 fullyDexia Participations Luxembourg SA 69, route d’Esch, L-2953 Luxembourg 100 fullyGroup DenizBank AŞ Büyükdere Cad. No: 10699.85 fullyT-34394 Esentepe/IstanbulGroup Dexia Nederland NV Piet Heinkade 55, NL-1019 GM Amsterdam 100 fullyDEXIA BANQUE BELGIQUE SA: MAIN SUBSIDIARIES AND AFFILIATESDexia Auto Lease SA Place Rogier 11, B-1210 Bruxelles 100 fullyDexia Bank Belgium SA Boulevard Pachéco 44, B-1000 Bruxelles 100 fullyDexia Commercial Finance SA Place Rogier 11 - B-1210 Bruxelles 100 fullyDexia Crédits Logement SA Boulevard Pachéco 44, B-1000 Bruxelles 100 fullyDexia Funding Netherlands NVStrawinskylaan 3105 NL-1077 ZX100 fullyAmsterdamDexia Insurance Belgium SA Avenue Livingstone 6, B-1000 Bruxelles 99.79 fullyDexia Insurance Belgium Invest SA Rue Joseph II 96, B-1000 Bruxelles 100 fullyDexia Investment Company SA Boulevard Pachéco 44, B-1000 Bruxelles 100 fullyDexia Investments Ireland SA 6 George’s Dock, IRL-IFSC Dublin 1 100 fullyDexia Lease Belgium SA Place Rogier 11, B-1210 Bruxelles 100 fullyDexia Lease Services SA Place Rogier 11, B-1210 Bruxelles 100 fullyDexia Life and Pensions SA 2, rue Nicolas Bové, L-1253 Luxembourg 100 fullyDIS Finance SA 2, rue Nicolas Bové, L-1253 Luxembourg 100 fully(1) Complete list available on request.142 Dexia Annual report 2010

Notes to the consolidated financial statementsDEXIA BANQUE INTERNATIONALE À LUXEMBOURG SA: MAIN SUBSIDIARIES AND AFFILIATESDexia Asset Management Luxembourg SA 136, route d’Arlon, L-1150 Luxembourg 100 (1) fullyDexia Banque Internationale à69, route d’Esch99.95 fullyLuxembourgL-2953 LuxembourgDexia LdG Banque SA 69, route d’Esch, L-1470 Luxembourg 100 fullyRBC Dexia Investor Services Ltd77 Queen Victoria Street50 proportionallyUK-London EC4N 4AYRBC Dexia Investor Services Bank SA 14, rue Porte de France,50 proportionallyL-4360 Esch-sur-AlzetteRBC Dexia Investor Services Trust Ltd 77 King Street West - 35 th floor50 proportionallyRoyal Trust Tower,Toronto, ON, Canada M5W-1P9DEXIA CRÉDIT LOCAL SA: MAIN SUBSIDIARIES AND AFFILIATESDexia banka Slovensko Hodzova ul 11 – 010 11, Zilina – Slowakia 85.47 fullyDexia CLF Banque1, Passerelle des Reflets, Tour Dexia,100 fullyLa Défense 2F-92919 La DéfenseDexia Crediop Spa Via Venti Settembre 30, I-00187 Roma 70 fullyDexia Crediop Ireland 6 George’s Dock, IRL-IFSC Dublin 1 100 fullyDexia Crédit Local SA1, Passerelle des Reflets, Tour Dexia,100 fullyLa Défense 2F-92919 La DéfenseDexia Delaware LLC 15 East North Street, Delaware, 19901100 fullyDover – USADexia FP Holdings Inc.445 Park Avenue, 5 th floor New York100 fullyNY 10022 USADexia Holdings Inc.445 Park Avenue, 5 th floor New York100 fullyNY 10022 USADexia Israel Bank19 Ha’arbaha st., “Hatihon“ building65.99 fullyTel Aviv 61200. P.O.B 7091Dexia Kommunalbank Deutschland AG Charlottenstrasse 82, D-10969 Berlin 100 fullyDexia Kommunalkredit Bank AG Fischhof 3A-1010 Vienne − Autriche 100 fullyDexia Kommunalkredit Bank Polska ul Sienna 39 - 00-121 Warschau – Pologne 100 fullyDexia Municipal Agency SA1, Passerelle des Reflets, Tour Dexia100 fullyLa Défense 2F-92919 La DéfenseDexia Sabadell Banco Local Paseo de las 12 Estrellas 460 fullyCampo de las Naciones E-28042 MadridDexia Sofaxis Route de Créton, 18110 Vasselay France 100 fullyFSA Global Funding LtdPO Box 1093GT, Boundery Hall, Cricket100 fullySquare – Grand Cayman – Cayman Islands(1) 49% held by Dexia Bank Belgium, 51% held by Dexia Banque Internationale à Luxembourg.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia143

Notes to the consolidated financial statements(in millions of EUR)As AT 31 December 2009Incomeo/winvestmentsin associateso/winvestmentsin associatesNet incomebefore taxCore division 5,004 9 3,796 1,027Retail and Commercial Banking 2,765 2 1,894 537Public and Wholesale Banking 1,227 2 954 564Asset Management and Services 829 2 626 149Asset Management 169 0 3 41Investor Services 327 0 59 27Insurance 332 2 565 81Group Center 183 4 322 (222)Legacy Portfolio Management Division 1,180 30 1,232 376Total 6,184 39 5,030 1,403Net income before tax 1,403Taxes (314)Non-controlling interests (79)Net income-Group share 1,010Some amounts may not add up due to roundings off.Figures as at 31 December 2009 have been restated to enable comparisons.Incomeo/winvestmentso/winvestmentsNet incomebefore tax(in millions of EUR)in associates in associatesAs AT 31 December 2010Core division 4,916 5 3,519 1,140Retail and Commercial Banking 2,852 2 1,990 709Public and Wholesale Banking 1,007 (1) 617 544Asset Management and Services 1,021 1 700 308Asset Management 194 0 (50) 63Investor Services 393 0 49 60Insurance 434 1 701 185Group Center 36 3 212 (421)Legacy Portfolio Management Division 395 0 363 (216)Total 5,310 5 3,882 924Net income before tax 924Taxes (127)Non-controlling interests (74)Net income-Group share 723Some amounts may not add up due to roundings off.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia145

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsOther segmentinformation31/12/09 31/12/10CapitalexpendituresDepreciation&amortizationImpairments(1)Othernon-cashexpenses(2)CapitalexpendituresDepreciation&amortizationImpairments(1)Othernon-cashexpenses(2)(in millions of EUR)Core division (464) (297) 234 (46) (368) (293) (64) (138)Retail and CommercialBanking (150) (75) (364) (20) (84) (163) (204) (5)Public and WholesaleBanking (141) 0 (129) (1) (254) (28) 73 4Asset Management andServices 0 0 500 (1) 0 (21) 50 (6)Asset Management 0 0 116 2 0 0 12 0Investor Services 0 0 (8) (3) 0 0 0 (6)Insurance 0 0 392 0 0 (21) 38 0Group Center (173) (222) 227 (24) (30) (80) 18 (131)Legacy PortfolioManagement Division 0 (1) (630) 5 (1) (8) (438) (2)Total (464) (298) (395) (42) (369) (300) (501) (139)Some amounts may not add up due to roundings off.Figures as at 31 December 2009 have been restated to enable comparisons.(1) Includes impairments on tangible and other intangible assets, impairments on securities, impairments on loans and provisions for credit commitmentsimpairments on goodwill.(2) Includes IFRS 2 costs, net allowances to provisions for restructuring costs, net allowances to provisions related to IAS 19, capital losses on exchange of assetsand provisions for legal litigations.Additional information Annual financial statementsRelations between business lines, and especially betweencommercial business lines, financial markets and productionand service centers are subject to retrocessions and/oranalytical transfers, governed by service level agreementsbased on normal commercial terms and market conditions.The results of each business line also include:• The earnings from commercial transformation, includingthe management costs of this transformation and the Groupequity allocated to this activity on the basis of medium andlong-term outstanding;Geographicreporting(in millions of EUR)As at 31 December 2009Belgium France Luxembourg• Interest on economic capital: economic capital is allocatedto the business lines for internal purposes and the return oneconomic capital is used to measure the performance of eachbusiness line;• Funding cost.Tangible and intangible assets are allocated to “Group Center“except when they are directly managed by a commercial orfinancial business line.TurkeyUnitedStatesIncome 2,337 516 628 983 421 1,299 6,184As at 31 December 2010Income 2,399 302 642 979 90 898 5,310Geographic information is done based on booking centers, being the country of the company having recorded the transaction and notthe country of the customers.Figures as at 31 December 2009 have been restated to enable comparisons.OtherTotal146 Dexia Annual report 2010

Notes to the consolidated financial statements4. Significant items includedin the statement of incomeReported amounts are significant and/or unusual transactionsand not only large transactions. The amounts mentioned arebefore tax and year-to-date.The sale of 21.8 million Assured Guaranty Ltd common sharesacquired by Dexia as part of the sales price in connection withthe FSA transaction generated a positive result of EUR 153 millionin VI. Net income on investments.In 2010, the European Commission approved the State supportprovided by the Belgian, French and Luxembourg States toDexia and Dexia undertook to restructure its activities.In order to comply with the commitments taken with theEuropean Commission, Dexia continued to deleverage its balancesheet. Assets were sold for an amount of EUR 27.2 bil lion. In thiscontext, a capital loss net of provision has been recognised forEUR -212.5 million.Dexia sold its stake in SPE, Dexia Epargne Pension and inAdinfo with a capital gain of respectively EUR 69 million, EUR29 million and EUR 14 million disclosed in VI. Net income oninvestments.In the context of its restructuration plan, Dexia booked anamount of EUR -145.2 million as restructuration costs.A charge of EUR 380 million was recognised in interest marginfor the retribution of the Belgian, French and Luxembourgstates for the guarantee they give for Dexia's financing andanother EUR 110 million interest charge was recognised forthe guarantee received from the Belgian and French States forFinancial Products' portfolio and the related GIC's liabilities.Otherwise, Dexia recorded a charge of 73 million in II. Interestexpense as contribution to the Belgian deposit guarantymechanism.The Group recorded in XI. Other net income an incomeamounting to EUR 44 million, as a compensation for losseswhich were incurred in the context of the fraud occured inthe dealing room of Dexia Bank Belgium between 1998 and2001, and which were fully accounted for between 2000 and2004 (included).The CDS purchased within the framework of the syntheticsecuritisations Dublin Oak and Wise, together with the CDSintermediation activity, led to a positive mark-to-marketbefore tax of EUR 89.9 million in V. Net income from financialinstruments at fair value through profit or loss.An amount of USD 35 million of deferred tax assets wasrecognised on temporary differences on the Financial Productsportfolio and, following the new carry-back rules on the taxreturn in the US, a tax refund product of USD 51 million hasbeen recorded in XX. Tax expense.On 25 January 2011, the Regional Court of Bratislavarendered a judgment in favour of Dexia, cancelling thefirst-instance judgment of May 2010 by which Dexia bankaSlovensko was condemned to pay an amount in principal ofEUR 138 million. As a result the case will revert back to theFirst-Instance Court of Bratislava which will have to rendera new judgment taking into account the legal evaluation ofthe Regional Court. This does not affect the sale of Dexiabanka Slovensko in accordance with the agreement reachedin November 2010.This decision lead to the reversal of the provision of EUR 138 millionrecognized in 2Q 2010 in XIX. Provisions for legal litigations.However, a provision of EUR 39 million is still being maintainedto cover potential charges, related to the Ritro case.For the significant items included in the statement of incomeof 2009, we refer to Dexia's Annual Report 2009.5. Post-balance-sheet eventsNil.6. LitigationsWe refer here to the chapter Risk Management – part Legalrisk – presented in the Management report on page 89.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsImpairment on loans and provisions for credit commitmentsincludes EUR -559 million in relation with Financial Productsportfolio.Annual report 2010 Dexia147

Notes to the consolidated financial statements7.2. Cash and balances with central banksAnalysis by nature31/12/09 31/12/10Cash in hand 666 767Balances with central banks other than mandatory reserve deposits 1,163 600Mandatory reserve deposits 844 1,899Total 2,673 3,266of which included in cash and cash equivalents 2,668 3,264Management report7.3. Loans and advances due from banksA. Analysis by nature31/12/09 31/12/10Nostro accounts and cash collaterals 28,367 34,157Reverse repurchase agreements 3,385 6,307Loans and other advances 10,500 8,354Debt instruments 5,233 4,577Impaired loans 11 13Impaired debt instruments 2 22Less:Specific impairment on impaired loans or impaired debt instruments (9) (25)Collective impairment (62) (26)Total 47,427 53,379of which included in cash and cash equivalents (1) 7,683 8,534(1) Cash collaterals have been removed from cash and cash equivalents; figures as at December 2009, have been restated.B. Analysis of qualitySee note 7.15. Quality of financial assets.C. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.D. Analysis of the fair valueSee note 12.1.E. Reclassification of financial assets (IAS39 amended)See note 7.7.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia149

Notes to the consolidated financial statements7.4. Loans and advances to customersManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsA. Analysis by counterpart31/12/09 31/12/10Public sector (1) 181,372 180,415Other (1) 171,880 170,834Impaired loans 2,781 2,715Impaired debt instruments 2,026 2,839Less:Specific impairment on impaired loans or impaired debt instruments (2) (2,657) (3,214)Collective impairment (3) (1,415) (1,282)Total 353,987 352,307of which included in finance lease 5,125 5,302(1) 31 Dec. 2009 the lending activity of the Social Housing London Branch have been reclassified as “Public Sector“ to “Other“ for an amount of EUR 4,392million.(2) 31 Dec. 2009: of which EUR 1,150 million relating to Dexia FP; 31 Dec. 2010: of which EUR 1,300 million relating to Dexia FP.(3) 31 Dec. 2009: of which EUR 239 million relating to Dexia FP; 31 Dec. 2010: of which EUR 327 million relating to Dexia FP.B. Analysis by nature31/12/09 31/12/10Cash Collaterals 3,789 3,883Reverse repurchase agreements 1,158 1,428Loans and other advances 258,183 264,300of which bills and own acceptances 167 150of which finance leases 5,125 5,302of which securitized loans 18,549 19,893of which consumer credit 3,003 4,128of which mortage loans 18,798 19,425of which term loans 178,306 180,103of which current accounts 5,729 6,444of which other loans and advances 28,506 28,856Debt instruments 90,122 81,637Impaired loans 2,781 2,715Impaired debt instruments 2,026 2,839Less:Specific impairment on impaired loans or impaired debt instruments (1) (2,657) (3,214)Collective impairment (2) (1,415) (1,282)Total 353,987 352,307(1) 31 Dec. 2009: of which EUR 1,150 million relating to Dexia FP; 31 Dec. 2010: of which EUR 1,300 million relating to Dexia FP.(2) 31 Dec. 2009: of which EUR 239 million relating to Dexia FP; 31 Dec. 2010: of which EUR 327 million relating to Dexia FP.C. Analysis of qualitySee note 7.15. Quality of financial assets.D. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.E. Analysis of the fair valueSee note 12.1.F. Reclassification of financial assets (IAS39 amended)See note 7.7.150 Dexia Annual report 2010

Notes to the consolidated financial statements7.5. Financial assets measured at fair value through profit or loss31/12/09 31/12/10Financial assets held for trading 6,362 5,347Financial assets designated at fair value 3,715 3,941Total 10,077 9,2887.5.1. Financial assets held for tradingA. Analysis By counterpart31/12/09 31/12/10Public sector 1,200 572Banks 377 545Other 4,784 4,229Total 6,362 5,347B. Analysis by nature31/12/09 31/12/10Loans 0 214Bonds issued by public bodies 1,105 506Other bonds and fixed-income instruments 5,081 4,491Equity and variable-income instruments 176 136Total 6,362 5,347C. Treasury bills and other eligible bills for refinancing to the central banks31/12/09 31/12/10Treasury bills and other eligible bills for refinancing to the central banks 669 35D. Securities pledged under repurchase agreements with other banks31/12/09 31/12/10Fair valueFair valueIncluded in bonds issued by public bodies 570 53Included in other bonds and fixed-income instruments 259 5E. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.F. Analysis of the fair valueSee note 12.1.G. Reclassification of financial assets (IAS39 amended)See note 7.7.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia151

Notes to the consolidated financial statements7.5.2. Financial assets designated at fair valueManagement reportConsolidatedfinancial statementsA. Analysis By counterpart31/12/09 31/12/10Public sector 209 111Banks 29 31Other 3,477 3,799Total 3,715 3,941B. Analysis by nature31/12/09 31/12/10Loans 49 43Bonds issued by public bodies 46 36Other bonds and fixed-income instruments 394 285Equity and variable-income instruments 31 34Unit-linked products Insurance – bonds and loans 655 459Unit-linked products Insurance – equity and variable-income instruments 2,539 3,085Total 3,715 3,941Financial assets on public sector are disclosed in bonds issued by public bodies and also partially in loans and in unit-linkedproductsC. Treasury bills and other eligible bills for refinancing to the central banksNil.Additional information Annual financial statementsD. Securities pledged under repurchase agreements with other banksNil.E. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.F. Analysis of the fair valueSee note 12.1.The Fair Value Option (FVO) for financial assets is mainly usedin the following situations:1) by the insurance business for unit-linked products (branch23), the return of the unit-linked product belongs totally toits policy holder.2) the FVO is used as an alternative method in order to reducevolatility in profit or loss when, at inception, there is a riskthat the hedge accounting requirements will not be met.The methodology followed to determine the fair valueof financial assets designated at fair value is presented innote 1. Accounting principles and rules of consolidatedfinancial statements – subsection 1.7. Fair value of financialinstruments.152 Dexia Annual report 2010

Notes to the consolidated financial statements7.6. Financial investmentsA. Analysis By counterpart31/12/09 31/12/10Public sector 45,578 43,059Banks 43,508 28,669Others 15,751 15,195Impaired financial investments 1,267 1,166Total financial investments before impairment 106,104 88,089Less:Specific and collective impairment on impaired financial investments (853) (722)Total 105,251 87,367of which included in cash and cash equivalents 3,690 2,926B. Analysis of qualitySee note 7.15.Quality of financial assets.C. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.D. Analysis by natureAvailable-for-sale Held to maturity Total31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10Loans 43 42 0 0 43 42Bonds issued by public bodies 41,023 38,323 887 881 41,910 39,204Other bonds and fixed-income instruments 59,838 45,470 679 565 60,517 46,036Equity and variable-income instruments 3,634 2,806 0 0 3,634 2,806Total financial investments beforeimpairment 104,538 86,643 1,565 1,446 106,104 88,089Specific and collective impairment onimpaired financial investments (853) (722) 0 0 (853) (722)Total financial investments 103,685 85,921 1,565 1,446 105,251 87,367E. Convertible bonds included in the available-for-sale portfolio (position greaterthan EUR 50 million)Nil.F. Transfers between portfoliosNil.G. Analysis of the fair valueSee note 12.1.H. Reclassification of financial assets (IAS39 amended)See note 7.7.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia153

Notes to the consolidated financial statements7.7. Reclassification of financial assets (IAS 39 amended)Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsFrom Trading toLoans andReceivablesFrom Trading toAvailable-for-SalePortfolioFrom Availablefor-SalePortfolioto Loans andReceivables(1) (2) (3)Carrying amount of assets reclassified at 1 Oct. 2008 6,591 2,704 90,784Carrying amount of assets reclassified at 1 Jan. 2009 874Carrying amount of assets reclassified at 31 Dec. 2009 (A) 5,214 589 83,763Fair value of assets reclassified at 31 Dec. 2009 (B) 5,070 713 83,201Amount not taken in income (1)&(2)due to reclassification (B)-(A) (144) 124 n.aAmount not taken in AFS Reserve (3)due to reclassification (B)-(A) n.a n.a (562)Premium/Discount amortization in P&L during the year 103 59 n.aPremium/Discount amortization of “frozen” fair value adjustmentof financial assets reclassified to Loans and receivables during theyear n.a n.a 892Carrying amount of assets reclassified at 31 Dec. 2010 (A) 3,801 342 75,759Fair value of assets reclassified at 31 Dec. 2010 (B) 3,513 324 74,557Cumulated amount not taken in income (1)&(2)due to reclassification (B)-(A) (288) (18) n.aCumulated amount not taken in AFS Reserve (3)due to reclassification (B)-(A) n.a n.a (1,202)Premium/Discount amortization in P&L during the year 18 20 n.aPremium/Discount amortization of “frozen” fair value adjustmentof financial assets reclassified to Loans and receivables during theyear n.a n.a 816Dexia decided to apply the 13 October 2008 amendment ofIAS 39 & IFRS 7 – Reclassification of Financial Assets for someassets. Reclassifications have been made on 1 October 2008(see annual report 2008) and 1 January 2009.The effective interest rates at reclassification date on assetsreclassified on 1 January 2009 ranged from 2.4% to 37.1%.The reimbursement amount of those assets reclassified wasEUR 1,061 million while their carrying amount was EUR 874million. If these financial assets had not been reclassified, in2009, there would have been a further positive movement inshareholders' equity (“Net gains (losses) not recognized in theincome statement“) of EUR 129 million.Impacts of reclassifications of 2008 and 2009on equity and resultsTransfer from “Held for Trading“ to “Loans andReceivables“(L&R) and “Available-for-Sale“(AFS)The difference between the carrying amount at reclassificationdate and the reimbursement amount is amortized on theremaining period. The impact of this amortization on theresult of the period is shown in the line “Premium/Discountamortization in P&L during the year“.The difference between the “Carrying amount of reclassifiedassets at 31 December“ and the fair value represents thecumulated changes in fair value as from reclassification dateuntil respectively 31 December 2009 and 31 December 2010and also includes the cumulated amortization of the premiumdiscount since reclassification. In 2009, the difference waspositive for trading assets reclassified in AFS as markets havebecome more liquid and spreads have decreased, whereas in2010, spreads increased, leading to a negative difference.For trading assets reclassified in “Loans & Receivables“,markets remain illiquid and the difference is estimatednegative, based on model valuations.Transfer from “Available-for-Sale“ (AFS) to “Loans andReceivables“ (L&R)Dexia has a particular “Available-for-Sale“ portfolio with avery long maturity, resulting in significant change in valuefollowing small shifts in spreads.154 Dexia Annual report 2010

Notes to the consolidated financial statementsThe impact on the result regarding the “cost of risk“ is thenet of allocation and use of collective impairment and specificimpairments. In 2009, the net impact was estimated to anadditional charge of EUR 108 millions before tax while in2010, the net impact was estimated to reduce the cost of riskby EUR 13 million.If there is objective evidence of impairment for a financialasset initially classified as “Available-for-sale“ but reclassifiedto “Loans and receivables“ in accordance with the amendedIAS39, any difference between the net present value ofexpected future cash flows, discounted at the effective interestrate at date of reclassification, and the carrying amount isrecognised as an impairment loss. Consequently, any nonamortisedoutstanding amount recognised in the “frozen“fair value adjustment of financial assets reclassified to Loansand Receivables is recognised as an impairment loss as well.The decrease of the carrying amount of the reclassified assetscomes from repayments, prepayments or opportunistic sale ofbonds in the context of balance sheet management and alsofrom bonds on which an impairment has been recorded.In comparison with 2009, the increase of the differencebetween the carrying amount of reclassified asset and itsfair value reflects the increase of the carrying amount duringthe period by the effect of the amortization of the premium/discount for the year (EUR 816 million) and the changesdue to the variations of credit and liquidity spreads on themarkets.Impact on interest marginFor assets transferred from AFS to L&R, the amortization ofthe premium discount on the bond is compensated by theamortization of the "frozen" AFS reserve, so that the netimpact on result is zero.For assets transferred from trading to AFS and L&R, the impacton the interest margin of the amortization of the negativemark-to-market of previous periods amounted to EUR 162million in 2009 and to EUR 38 million in 2010.Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia155

Notes to the consolidated financial statements7.8. Investments in associatesManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsA. Carrying value2009 2010Carrying value as at 1 Jan. 682 171- Acquisitions 0 1- Disposals (1) (392) (4)- Change in scope of consolidation (out) (7) 0- Share of result before tax 55 6- Share of tax (15) 0- Dividend paid (33) (3)- Changes in goodwill (see below) (142) 0- Share of gains and losses not recognized in the statement of income 22 0- Other 1 0Carrying value as AT 31 Dec. 171 171(1) Crédit du Nord in 2009.B. Positive goodwill included in carrying value2009 2010Acquisition cost as at 1 Jan. 210 33- Disposals (1) (178) 0Acquisition cost as at 31 Dec. (A) 33 33Accumulated amortization (2) and accumulated impairmentas at 1 Jan. (41) (6)- Disposals (1) 36 0Accumulated amortization (2) and accumulated impairmentas at 31 Dec.(B) (6) (6)Net carrying amount as at 31 Dec. (A)+(B) 27 27(1) Crédit du Nord.(2) Accumulated amortization represents the amount of depreciation recognised until 1 January 2004, before IFRS were applied. As at 1 january 2009, itrepresented an amount of EUR -36 million for Crédit du Nord and of EUR -6 million for Popular Banca Privada. As at 1 january 2010 and as at 31 December2010, it represents the amount for Popular Banca Privada.C. List of major associatesAssociates 2009 2009 2010 2010 WebsiteBook value Fair value ofinvestmentBook value Fair value ofinvestmentSLF Finances SA 64 64 63 63 www.slf.bePopular Banca Privada 48 64 49 64 www.popularbancaprivada.esTotal 112 128 112 127156 Dexia Annual report 2010

Notes to the consolidated financial statements7.9. Tangible fixed assetsA. Net book valueLand and buildingsOwn useownerOwn usefinanceleaseOwn useownerOffice furnitureand other equipmentOwn usefinanceleaseOperatinglease(1)InvestmentPropertyAcquisition cost as AT 1 Jan.2009 2,046 3 1,137 65 124 988 4,363- Acquisitions 186 0 88 14 43 134 464- Subsequent expenditures 5 0 0 0 0 27 32- Disposals (123) 0 (80) 0 (18) (11) (233)- Change in scope of consolidation(out) (5) 0 (1) 0 0 (1) (8)- Transfers and cancellations (68) 0 (19) 0 (9) (25) (122)- Translation adjustments 1 0 0 0 0 0 1- Other 0 0 0 0 1 0 1Acquisition cost as AT 31 Dec.2009 (A) 2,041 3 1,124 78 141 1,112 4,499Accumulated depreciationand impairment as AT 1 Jan.2009 (583) 0 (831) (41) (42) (513) (2,010)- Depreciation booked (81) (1) (71) (9) (20) (22) (204)- Impairment booked 0 0 0 0 0 (51) (51)- Write-back 0 0 1 0 0 0 1- Disposals 17 0 36 0 10 8 71- Change in scope of consolidation(out) 1 0 1 0 0 1 2- Transfers and cancellations 15 0 20 0 8 47 90- Translation adjustments 0 0 0 0 0 0 (1)Accumulated depreciationand impairment as at 31 Dec.2009 (B) (632) (1) (845) (50) (44) (531) (2,103)Net book value as AT 31 Dec.2009 (A)+(B) 1,409 2 279 28 96 581 2,396(1) Mainly cars.TotalManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia157

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsLand and buildingsOwn useownerOwn usefinanceleaseOwn useownerOffice furnitureand other equipmentOwn usefinanceleaseOperatinglease (1)InvestmentPropertyAcquisition cost as at 1 Jan. 2010 2,041 3 1,124 78 141 1,112 4,499- Acquisitions 173 0 92 10 81 13 369- Subsequent expenditures 6 0 0 0 0 45 51- Disposals (254) 0 (17) 0 (28) (35) (334)- Change in scope of consolidation (out) (13) 0 (6) 0 (2) 0 (21)- Transfers and cancellations (18) 0 (231) 0 0 53 (198)- Translation adjustments 4 0 9 3 0 5 20- Other 0 0 0 0 1 0 1Acquisition cost as at 31 Dec. 2010 (A) 1,938 3 971 90 194 1,192 4,387Accumulated depreciation andimpairment as AT 1 jan. 2010 (632) (1) (845) (50) (44) (531) (2,103)- Depreciation booked (72) 0 (76) (9) (32) (22) (211)- Impairment booked 0 0 0 0 0 (1) (1)- Write-back 0 0 0 0 0 1 1- Disposals 6 0 12 0 14 28 60- Change in scope of consolidation (out) 9 0 5 0 1 0 16- Transfers and cancellations 32 0 231 0 0 (55) 208- Translation adjustments (1) 0 (5) (2) 0 (2) (10)Accumulated depreciation andimpairment as AT 31 Dec. 2010 (B) (658) (1) (678) (59) (62) (583) (2,041)Net book value as AT 31 Dec. 2010(A)+(B) 1,280 2 293 31 132 608 2,346(1) Mainly cars.B. Fair value of investment propertyTotal31/12/09 31/12/10Fair value subject to an independent valuation 58 59Fair value not subject to an independent valuation 522 578Total 581 637C. Expenditures31/12/09 31/12/10Expenditures capitalised for the construction of property, plant & equipment 3 0D. Contractual obligations relating to Investment property at the end of theperiodNil.158 Dexia Annual report 2010

Notes to the consolidated financial statements7.10. Intangible assets and goodwillPositiveGoodwill (1)Internally developedsoftwareOtherintangibleassets (2)Aquisition cost as at 1 Jan 2009 1,936 714 612 3,262- Acquisitions 0 85 48 133- Disposals 0 (2) (1) (3)- Change in scope of consolidation (out) (10) 0 (1) (11)- Transfers and cancellations 0 (1) (27) (28)- Translation adjustments 0 3 (1) 2- Other 0 0 (1) (1)Acquisition cost as AT 31 Dec. 2009 (A) 1,926 800 628 3,353Accumulated amortization and impairment asat 1 Jan. 2009 (186) (521) (361) (1,069)- Booked (6) (62) (68) (135)- Change in scope of consolidation (out) 8 0 1 9- Disposals 0 0 1 1- Transfers and cancellations 0 1 19 20- Translation adjustments (2) (1) 0 (2)Accumulated amortization and impairment asat 31 Dec. 2009 (B) (186) (583) (408) (1,176)Net book value as AT 31 Dec. 2009 (A)+(B) 1,740 217 220 2,177(1) Accumulated amortization of positive goodwill represented an amount of EUR -175 million as at 31 Dec. 2009. This amount was booked before theapplication of IFRS.(2) Other intangible assets include purchased software and intangible assets identified for a net amount of EUR 120 million in the purchase of DenizBank group.These will be amortised at the latest end 2016.PositiveGoodwill (1)Internally developedsoftwareOtherintangibleassets (2)Acquisition cost as at 1 JAN. 2010 1,926 800 628 3,353- Acquisitions 28 75 68 171- Disposals 0 (4) 2 (2)- Change in scope of consolidation (in) 1 3 0 4- Change in scope of consolidation (out) 0 (10) (1) (11)- Transfers and cancellations 0 (11) (50) (61)- Translation adjustments 54 9 12 75Acquisition cost as at 31 Dec. 2010 (A) 2,007 860 660 3,528Accumulated amortization and impairment asat 1 Jan. 2010 (186) (583) (408) (1,176)- Booked 0 (64) (73) (137)- Change in scope of consolidation (out) 0 7 1 8- Disposals 0 0 2 2- Transfers and cancellations 0 11 50 61- Translation adjustments (2) (3) (5) (10)Accumulated amortization and impairment asAT 31 Dec. 2010 (B) (188) (631) (433) (1,252)Net book value as AT 31 Dec. 2010 (A)+(B) 1,820 229 227 2,276(1) Accumulated amortization of positive goodwill represent an amount of EUR -177 million as at 31 Dec. 2010. This amount was booked before the applicationof IFRS.(2) Other intangible assets include purchased software and intangible assets identified for a net amount of EUR 98 million in the purchase of DenizBank group.These will be amortised at the latest end 2016.TotalTotalManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia159

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsPositive goodwill31/12/09 31/12/10(amounts larger than EUR 100 mios)DenizBank 1,125 1,173Group RBC Dexia 171 203Crediop 131 131DIS 104 104The evaluation of the recoverable amount of a cash-generatingunit (CGU) requires incorporating the cash outflows associatedwith the funding. Because the capital deployed is managedon group basis, the Economic Equity allocated to a CGUrepresents the net assets generating the margin. The carryingamount of the CGU is therefore the economic equity plus theallocated goodwill.If a subsidiary is only active on a single CGU, the entiregoodwill is allocated to this CGU. If a subsidiary is activeon several CGU's, the goodwill is allocated to CGU's basedon the cash flows attributable to each one at the date ofacquisition. If one activity is highly integrated, a CGU mayinclude several legal entities or related CGU from differentlegal entities (Asset management is considered as one CGU,as well as Investor services)Impairment on goodwill under IAS 36 is recognised inprofit or loss if the recoverable amount of an investmentis lower than its carrying value. The recoverable amount isdefined as the higher of the value in use (calculated basedon discounted cash flow - DCF - analysis) and the fair value(transaction multiples for comparable businesses, share pricedata for listed companies with comparable businesses) lesscosts to sell.The DCF method is based on a number of assumptions interms of future revenues and expenses for each businessunit. These parameters are based on financial planning asapproved by management, extrapolated over a sustainablegrowth period and then in perpetuity based on long termgrowth rates thereafter.The tests take into account the cost of capital based on arisk-free rate plus risk premium specific to the CGU. The keyparameters which are sensitive to the assumptions made aretherefore the cost/income ratio, the long term growth rateand the cost of capital.The test did not result in any impairment on goodwill for anyof the Cash-Generating Units.Additional information Annual financial statements7.11. Tax assets31/12/09 31/12/10Current taxes 200 136Deferred tax assets (see note 9.2.) 2,718 2,710Total 2,919 2,847Deferred tax assets (DTA) are constituted for an amount ofEUR 2.03 billion (1.95 billion in 2009) by DTA coming fromnegative Available-for-sale reserve on bonds and “frozen“ fairvalue adjustment of financial assets reclassified to Loans andReceivables and by DTA on cash flow hedges reserves for EUR0.13 billion (0.15 billion in 2009).Apart from this, it relates to other elements includingrecoverable tax losses and provisions.160 Dexia Annual report 2010

Notes to the consolidated financial statements7.12. Other assets31/12/09 31/12/10Other assets 1,713 2,094Other assets specific to insurance companies 182 264Total 1,895 2,358A. Other assetsAnalysis by nature 31/12/09 31/12/10Accrued income 109 123Deferred expenses 60 60Other accounts receivables 902 1,044Plan assets (1) 19 17Inventories 18 5Operational taxes 76 73Other assets 529 772Total 1,713 2,094(1)See note 8.6.i.B. Other assets specific to insurance companiesAnalysis by nature (acquisition costs and share of reinsurers) 31/12/09 31/12/10Share of the reinsurers in the technical reserves 76 77Receivables resulting from direct insurance transactions 50 47Premiums still to be issued 0 50Deferred acquisition costs 0 2Other insurance assets 57 89Total 182 2647.13. Non-current assets held for sale31/12/09 31/12/10Assets of subsidiaries held for sale (1) 4,296 0Tangible and intangible assets held for sale 54 50Other assets 1 1Total 4,350 50(1) 2009: Dexia Epargne Pension. See note 9.5.C. Analysis of Groups held for sale.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia161

Notes to the consolidated financial statements7.14. LeasingManagement report7.14.1. Dexia as lessorA. Finance leaseGross investment in finance leases: 31/12/09 31/12/10Not later than 1 year 1,124 1,206Later than 1 year and not later than 5 years 2,075 2,385Later than 5 years 2,760 2,642Subtotal (A) 5,959 6,233Unearned future finance income on finance leases (B) 835 862Net investment in finance leases (A)-(B) 5,124 5,371Consolidatedfinancial statementsAdditional information Annual financial statementsThe net investment in finance leases: 31/12/09 31/12/10Not later than 1 year 957 1,011Later than 1 year and not later than 5 years 1,756 1,993Later than 5 years 2,412 2,367Total 5,124 5,37131/12/09 31/12/10Amount of uncollectible finance lease receivables included in the provision forloan losses at the end of the period 37 131Estimated fair value of finance lease 4,849 5,171Accumulated allowance for uncollectible minimum lease payments receivable 27 62B. Operating leaseFuture net minimum lease receivables under non-cancellable operating leases are31/12/09 31/12/10as follows:Not later than 1 year 41 45Later than 1 year and not later than 5 years 92 93Later than 5 years 48 36Total 181 174Amount of contingent rents recognised in statement of income during the period 1 1162 Dexia Annual report 2010

Notes to the consolidated financial statements7.14.2. Dexia as lesseeA. Finance leaseAmounts involved are immaterial. See note 7.9.B. Operating leaseFuture net minimum lease payments under non-cancellable operating leases are31/12/09 31/12/10as follows:Not later than 1 year 108 95Later than 1 year and not later than 5 years 268 270Later than 5 years 232 300Total 608 665 (1)(1) Mainly lease payments for buildings, cars and IT equipment.Amount of future minimum sublease payments expected to be received undernon-cancellable subleases at the balance sheet date 8 7Lease and sublease payments recognised as an expense during the period:- minimum lease payments 177 168- sublease payments (3) (2)Total 175 166Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia163

Notes to the consolidated financial statements7.15. Quality of financial assetsManagement reportAnalysis of normal loans and securitiesGross amount (A)31/12/09 31/12/10Normal loans and advances due from banks 47,485 53,395Normal loans and advances to customers 353,252 351,249Normal investments held to maturity 1,565 1,446Normal financial assets available-for-sale 103,272 85,477of which fixed-income instruments 100,094 83,042of which equity instruments 3,178 2,435Collective impairment on not specifically impaired loans (-) (1,477) (1,308)Total 504,097 490,259Consolidatedfinancial statementsAnalysis of impaired loans and securities Gross amount (B) Specific loan loss allowance(C)Total (B)+(C)31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10Impaired loans and advances due frombanks 13 35 (9) (25) 4 10Impaired loans and advances to customers 4,807 5,554 (2,657) (3,214) 2,151 2,340Impaired financial assets available-for-sale 1,267 1,166 (853) (722) 413 444of which fixed-income instruments 810 794 (652) (571) 158 222of which equity instruments 457 372 (201) (151) 256 221Total 6,087 6,755 (3,519) (3,961) 2,568 2,794Additional information Annual financial statementsNormal + impaired Gross amount (A)+(B) Specific loan loss allowance Total (A)+(B)+(C)(C)31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10Loans and advances due from banks 47,498 53,430 (9) (25) 47,489 53,405Loans and advances to customers 358,059 356,803 (2,657) (3,214) 355,402 353,589Investments held to maturity 1,565 1,446 0 0 1,565 1,446Financial assets available-for-sale 104,538 86,643 (853) (722) 103,685 85,921of which fixed-income instruments 100,904 83,836 (652) (571) 100,252 83,265of which equity instruments 3,634 2,806 (201) (151) 3,433 2,656Collective impairment on not impairedloans (-) (1,477) (1,308) 0 0 (1,477) (1,308)Total 510,184 497,014 (3,519) (3,961) 506,665 493,053164 Dexia Annual report 2010

Notes to the consolidated financial statements8. Notes on the liabilities of the consolidated balance sheet(in millions of EUR – some amounts may not add up due to roundings off)8.1. Due to banks 1658.2. Customer borrowings and deposits 1658.3. Financial liabilities measuredat fair value through profit or loss 1668.4 Debt securities 1678.5 Subordinated debts 1688.6 Provisions and other obligations 1698.7 Tax liabilities 1738.8 Other liabilities 1738.9 Liabilities included in disposal groupsheld for sale 173Management report8.1. Due to banksA. Analysis by nature31/12/09 31/12/10On demand 3,356 6,999Term 9,852 7,624Repurchase activity 31,512 34,873Central banks 54,502 25,520Other borrowings 24,502 23,474Total 123,724 98,490Consolidatedfinancial statementsB. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.C. Analysis of the fair valueSee note 12.1.8.2. Customer borrowings and depositsA. Analysis by nature31/12/09 31/12/10Demand deposits 34,174 32,257Savings deposits 33,859 37,990Term deposits 24,217 26,892Other customer deposits 5,489 7,863Total customer deposits 97,739 105,001Repurchase activity 20,180 19,161Other borrowings 3,030 2,898Total customer borrowings 23,211 22,058Total 120,950 127,060B. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.Additional information Annual financial statementsC. Analysis of the fair valueSee note 12.1.Annual report 2010 Dexia165

Notes to the consolidated financial statements8.3. Financial liabilities measured at fair value through profit or lossManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements31/12/09 31/12/10Financial liabilities held for trading 275 763Financial liabilities designated at fair value 19,070 19,390Total 19,345 20,1548.3.1. Financial liabilities held for tradingA. Analysis by nature31/12/09 31/12/10Bonds issued by public bodies 191 457Other bonds 12 235Equity instruments 72 71Total 275 763B. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.C. Analysis of the fair valueSee note 12.1.8.3.2. Financial liabilities designated at fair valueA. Analysis by nature31/12/09 31/12/10Non-subordinated liabilities 15,520 15,588Subordinated liabilities (1) 353 332Unit-linked products 3,197 3,471Total 19,070 19,390(1) List available on request.B. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.C. Analysis of the fair valueSee note 12.1. and 12.2.H. for own credit risk.166 Dexia Annual report 2010

Notes to the consolidated financial statementsThe “Fair Value Option“ (FVO), for financial liabilities is mainlyused in the following situations:1) by the insurance business for unit-linked contracts (branch23).2) by Dexia Financial Products Inc and FSA Global FundingLtd for liabilities where the hedge accounting requirementsare not met or there is a risk that they will not be met, theFVO is used as an alternative in order to reduce volatility inprofit or loss.The following types of liabilities are subject to the FVOclassification:a) Fixed rate liabilities that are highly customised fundingcontracts that are tailored to the specific needs ofthe investor (GIC activities). The own credit spread iscalculated based on benchmark spread;b) FSA Global Funding fixed rate liabilities.The credit spread used is the Long Term Funding spread usedby Dexia for its own funding.3) by companies issuing debt with embedded derivatives.Management report8.4. Debt securitiesA. Analysis by nature31/12/09 31/12/10Certificates of deposit 33,246 16,077Customer savings certificates 13,136 12,430Convertible debts (1) 2 1Non-convertible bonds 166,681 181,964Total 213,065 210,473(1) The list of convertible debts is available on request.Consolidatedfinancial statementsB. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.C. Analysis of the fair valueSee note 12.1.Additional information Annual financial statementsAnnual report 2010 Dexia167

Notes to the consolidated financial statements8.5. Subordinated debtsManagement reportA. Analysis by natureNon-convertible subordinated debt 31/12/09 31/12/10Loan capital perpetual subordinated notes 732 877Other 3,146 2,795Total 3,879 3,672List available on request.31/12/09 31/12/10Hybrid capital and redeemable preference shares 232 232Dexia Banque Internationale à Luxembourg has issued on 6 July 2001 an hybrid capital instrument perpetual of EUR 225 millionat the rate of 6.821%, refunding only possible annually as from 6 July 2011.Consolidatedfinancial statementsB. Analysis of subordinated debt convertible in dexia sharesNil.Additional information Annual financial statementsC. Analysis by maturity and interest rateSee notes 12.4., 12.5. and 12.6.D. Analysis of the fair valueSee note 12.1.168 Dexia Annual report 2010

Notes to the consolidated financial statements8.6. Provisions and other obligationsA. Analysis by nature31/12/09 31/12/10Litigation claims (1) 329 250Restructuring 160 189Long-term defined benefit plans 686 702Other postretirement obligations 54 56Other long-term employee benefits 39 41Provision for off-balance-sheet credit commitments (2) 152 142Onerous contracts 52 35Other provisions (non insurance) (3) 109 84Total 1,581 1,498(1) We refer here to the chapter Risk Management – part Legal risk – presented in the Management report on page 89.(2) Of which EUR 109 million and EUR 100 million relating to Dexia Nederland (Legio Lease Provision) for 2009 and 2010 respectively.(3) The Other provisions mainly contain : provisions to restore property, plant and equipment to their original state and a number of provisions for non-materialevents.B. Analysis of movementsLitigation RestructuringclaimsPensionsand otheremployeebenefitsProvision foroff-balancesheetcreditcommitmentsOnerouscontractsOtherprovisionsAs at 1 January 2009 248 181 764 121 54 119 1,487Exchange difference (4) 0 1 (3) 0 (1) (7)Additional provisions 106 57 105 58 5 24 355Unused amounts reversed (49) (34) (29) (6) 0 (19) (137)Utilised during the year (14) (44) (65) (6) (7) (14) (150)Transfers 43 0 3 (12) 0 0 34As at 31 December 2009 329 160 778 152 52 109 1,581LitigationclaimsRestructuringPensionsand otheremployeebenefitsProvision foroff-balancesheetcreditcommitmentsOnerouscontractsOtherprovisionsAs at 1 January 2010 329 160 778 152 52 109 1,581Exchange difference 13 0 1 2 0 3 19Additional provisions 184 96 124 8 1 25 438Unused amounts reversed (188) (32) (18) (10) (9) (41) (298)Utilised during the year (15) (34) (84) (10) (9) (14) (166)Changes in scope ofconsolidation (out) 0 (1) (6) 0 0 (1) (8)Transfers (73) 0 3 0 0 2 (68)Other movements (1) 0 0 0 0 0 (1)As at 31 December 2010 250 189 798 142 35 84 1,498C. Analysis by maturitySee note 12.6.TotalTotalManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia169

Notes to the consolidated financial statementsD. Provisions for pensions and other long term benefitsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsa. Change in benefit obligation 31/12/09 31/12/101. Benefit obligation as at beginning of year 1,897 2,0012. Current service cost 81 863. Interest cost 105 974. Plan participants’ contributions 7 55. Amendments (2) (1)6. Actuarial (gains)/losses 183 97. Benefits paid (69) (92)8. Premiums paid (4) (4)9. Acquisitions/divestitures 0 (11)10. Plan curtailments (8) (1)11. Plan settlements (195) (11)12. Exchange rate changes 5 1013. Benefit obligation as at end of year 2,001 2,088b. Change in plan assets 31/12/09 31/12/101. Fair value of plan assets as at beginning of year 1,287 1,2372. Expected return on plan assets 65 613. Actuarial gains/(losses) on plan assets 47 (16)4. Employer contributions 95 1005. Member contributions 6 56. Benefits paid (69) (91)7. Premiums paid (4) (4)8. Plan settlements (195) (11)9. Acquisitions/divestitures 0 (7)10. Exchange rate changes 5 1011. Fair value of plan assets as at end of year 1,237 1,284c. Amounts recognised in the balance sheet 31/12/09 31/12/101. Present value of funded obligations 1,390 1,4552. Fair value of plan assets 1,237 1,2843. Deficit/(surplus) for funded plans 153 1714. Present value of unfunded obligations 611 6335. Unrecognised net actuarial gains/(losses) (16) (39)6. Unrecognised past service (cost)/benefit 1 07. Effect of paragraph 58(b) limit 9 128. Net liability/(asset) 758 777Amounts in the balance sheet1. Liabilities 780 7972. Assets (22) (20)3. Net liability/(asset) 758 777170 Dexia Annual report 2010

Notes to the consolidated financial statementsd. Components of pension cost 31/12/09 31/12/10Amounts recognised in statement of income1. Current service cost 82 862. Interest cost 106 963. Expected return on plan assets (65) (61)4. Amortization of past service cost incl. §58(a) (1) (1)5. Amortization of net (gain)/loss incl. §58(a) (11) 06. Effect of paragraph 58(b) limit 2 27. Curtailment (gain)/loss recognised (8) 48. Total pension cost recognised in the statement of income 105 126Actual return on assetsActual return on plan assets 112 45Actual return on reimbursement assets 5 0Management reporte. Balance-sheet reconciliation 31/12/09 31/12/101. Balance-sheet liability/(asset) as at beginning of year 747 7582. Pension expense recognised in statement of income in the financial year 105 1263. Amounts recognised in SORIE in the financial year 0 04. Employer contributions made in the financial year 60 715. Benefits paid directly by company in the financial year 35 296. Credit to reimbursements 0 07. Net transfer in/(out) (including the effect of any business combinations/divestitures) 0 (7)8. Exchange rate adjustment – (gain)/loss 1 09. Balance sheet liability/(asset) as at end of year (1)+(2)+(3)-(4)-(5)+(6)+(7)+(8) 758 777Consolidatedfinancial statementsf. Plan assets Percentage of plan assetsAsset category 31/12/09 31/12/101. Equity securities 12.32% 12.30%2. Debt securities 84.94% 84.98%3. Real estate 0.33% 0.32%4. Other (1) 2.41% 2.40%(1) Includes qualifying insurance policies.g. History of experience gains and losses 31/12/07 31/12/08 31/12/09 31/12/101. Difference between the actual and expectedreturn on plan assetsa. Amount (44) (141) 47 (16)b. Percentage of plan assets -3.00% -11.00% 4.00% -1.00%2. Experience gains (-) and losses on planliabilitiesa. Amount (53) (5) (18) (28)b. Percentage of present value of planliabilities -3.00% 0.00% -1.00% -1.00%Additional information Annual financial statementsAnnual report 2010 Dexia171

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsh. Range of assumptions to determine pension expenseDiscount Rate Inflation Expectedreturnon assets31/12/09Expectedreturn on bondsExpectedreturnon sharesSalaryIncreaseRateEurope 3.50% – 5.00% 2.50% 4.20% – 5.55% 2.95% – 4.68% 5.95% – 7.68% 2.50% – 5.50%Switzerland 3.25% 0.90% 3.50% 3.25% 6.70% 2.50%United Kingdom 5.70% 3.60% 6.74% 4.20% 8.40% 4.70%Discount Rate Inflation Expectedreturnon assets31/12/10Expectedreturn onbondsExpectedreturnon sharesSalaryIncreaseRateEurope 3.25% – 4.50% 2.00% 3.75% – 5.55% 2.25% – 4.25% 5.75% – 7.38% 2.50% – 5.00%Switzerland 2.75% 0.80% 3.50% 2.75% 6.60% 1.50%United Kingdom 5.30% 3.70% 6.46% 4.10% 8.30% 5.10%Comment on assumptions:(1) Due to decrease in interest-rates, discount rates have been reduced by 25bp to 50 bp in comparison with 2009.(2) The inflation rate has been reduced from 2.5% to 2.0% taking into account the low level of inflation of the last period.(3) Return on shares takes into account a risk premium.The expected return on assets is function of the asset allocation.i. Reconciliation with financial statementsLong-term obligations 2009 2010Outstanding liability relating to defined benefit plans 686 702Outstanding liability relating to other postretirement obligations 54 56Outstanding liability relating to other long-term employee benefits 39 41Total outstanding liability reported in the financial statements (1) 779 799Total liability calculated by actuaries 780 797Total liability relating to insignificant plans (1) (2)Outstanding asset reported in the financial statements (2) 19 17Total assets analysed by actuaries 22 20Total assets relating to insignificant plans (3) (3)(1) See note 8.6.A.(2) See note 7.12.A.j. Concentration riskSome of Dexia's plan assets are insurance policies issued by Ethias.The fair value of the plan assets amounts to respectively EUR 870 million as at 31 December 2009 and EUR 887 million as at31 December 2010.Sensibility to changes of interest rateAn increase/decrease of 25 bp of interest rate would lead to the following consequences on 2010 amounts:The Benefit Obligation as at end of the year 2010 would decrease/increase by 2,9/3,1% but the amount reported in “provision“would remain unchanged for the pension plans as the actuarial gains and losses would absorb the differences.The service cost for the year 2011 would decrease/increase by 3.0/3.2%, interest cost would increase/decrease by 2.4/2.8% andthe expected return on plan assets would increase/decrease by 5.4%/5.4%.The total net pension cost would decrease/increase in 2011 by 3.3/3.0% as a decrease of 25bp would result in a higheramortization of actuarial losses.Without any amortization, the decrease/increase of total net pension cost would be 2.9/2.5%.E. Defined contribution planContributions to legal pensions are not included in the amounts.The amount recognised as an expense for defined contribution plans was EUR 25 million for 2010 compared to EUR 26.7 millionfor 2009.172 Dexia Annual report 2010

Notes to the consolidated financial statements8.7. Tax liabilitiesAnalysis by nature 31/12/09 31/12/10Current income tax 207 123Deferred tax liabilities (see note 9.2.) 31 33Total 238 1578.8. Other liabilities31/12/09 31/12/10Other liabilities (except relating to insurance companies) 4,350 4,102Other liabilities specific to insurance activities 235 197Total 4,585 4,299Management reportA. Other liabilities (except relating to insurance companies)31/12/09 31/12/10Accrued costs 529 287Deferred income 408 408Subsidies 91 94Other accounts payable 2,116 1,925Other granted amounts received 1 1Salaries and social charges (payable) 291 299Shareholder dividends payable 101 101Operational taxes 165 174Other liabilities 649 813Total 4,350 4,102B. Liabilities specific to insurance activities31/12/09 31/12/10Debts for deposits from assignees 31 64Debts resulting from direct insurance transactions 189 120Debts resulting from reinsurance transactions 14 13Other insurance liabilities 0 0Total 235 1978.9. Liabilities included in disposal groups held for sale31/12/09 31/12/10Liabilities of subsidiaries held for sale (1) 4,332 0Total 4,332 0(1) 2009: Dexia Epargne Pension. See note 9.5.C “Analysis of Groups held for sale“.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia173

Notes to the consolidated financial statements9. Other notes on the consolidated balance sheetManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements(in millions of EUR – some amounts may not add up due to roundings off)9.1. Derivatives 1749.2. Deferred taxes 1769.3. Insurance contracts 1789.4. Related parties transactions 1839.5. Acquisitions and disposals of consolidated companies 1869.6. Equity 1899.7. Share-based Payments 1909.1. DerivativesA. Analysis by nature31/12/09 31/12/10Assets Liabilities Assets LiabilitiesDerivatives held for trading 30,585 31,891 32,575 34,878Derivatives designated as fair value hedges 4,674 17,438 7,806 26,658Derivatives designated as cash flow hedges 811 1,285 512 1,170Derivatives of portfolio hedge 4,658 7,728 6,183 9,641Derivatives designated as hedge of a net investmentin foreign operations 0 22 1 1Total 40,728 58,364 47,077 72,347B. Detail of derivatives held for trading31/12/09 31/12/10Notional amount Assets Liabilities Notional amount Assets LiabilitiesTo receive To deliver To receive To deliverForeign exchange derivatives 82,149 82,641 1,331 1,530 82,326 83,045 2,830 3,159FX forward 40,518 40,484 555 461 40,575 40,728 434 381FX future 17 16 1 0 81 82 1 2Cross currency swap 28,555 28,988 750 1,029 28,083 28,656 2,344 2,729FX option 1,665 1,682 23 38 2,367 2,368 49 47FX forward rate agreement 19 20 0 0 1,427 1,441 0 0Other currency derivatives (FX) 11,375 11,451 2 2 9,793 9,770 2 0Interest-rate derivatives 789,390 821,490 26,958 28,378 816,589 839,022 27,000 29,252Options-Caps-Floors-Collars-Swaptions 55,414 88,517 788 999 102,918 123,233 1,312 1,628IRS 687,041 688,008 26,133 27,348 630,168 630,921 25,603 27,581FRA 36,092 33,787 35 28 59,734 60,559 41 41Forward 5 2 0 0 0 0 0 0Interest future 10,838 11,089 2 2 23,769 24,227 15 1Other interest-rate derivatives 0 87 0 1 0 82 29 1Equity derivatives 5,125 6,250 437 455 4,691 5,800 336 404Equity forward 8 33 17 6 9 45 14 6Equity future 34 7 0 0 78 12 0 0Equity option 1,853 2,750 221 231 1,263 2,121 110 131Warrant 54 107 2 5 56 225 2 7Other equity derivatives 3,176 3,353 197 213 3,285 3,397 210 260Credit derivatives 24,272 18,515 1,856 1,524 22,520 16,686 2,405 2,059Credit default swap (1) 20,599 14,842 1,803 1,319 18,794 12,960 2,119 1,667Total return swap 3,673 3,673 53 205 3,726 3,726 286 392Commodity derivatives 35 22 3 4 10 1 4 4Total 900,971 928,918 30,585 31,891 926,136 944,554 32,575 34,878(1) Figures as at 31 December 2009 have been restated.9.8. Minority interests – Core equity 1919.9. Contribution of joint ventures in the financialstatements 1919.10. Management of capital 1929.11. Exchange rates 1929.12. Compensation of the Auditor 192174 Dexia Annual report 2010

Notes to the consolidated financial statementsC. Detail of derivatives designated as fair value hedgesD. Detail of derivatives designated as cash flow hedges31/12/09 31/12/10Notional amount Assets Liabilities Notional amount Assets LiabilitiesTo receive To deliver To receive To deliverForeign exchange derivatives 32,341 34,008 1,104 3,020 28,321 30,150 2,073 5,539Cross currency swap 26,328 27,795 1,077 2,498 28,321 30,150 2,073 5,539FX forward rate agreement 6,013 6,213 27 522 0 0 0 0Interest-rate derivatives 186,781 186,573 3,157 14,209 192,547 192,325 5,343 20,979Options-Caps-Floors-Collars-Swaptions 498 400 4 9 325 232 0 7IRS 186,283 186,173 3,153 14,200 192,222 192,093 5,343 20,972Equity derivatives 9,387 10,005 395 207 6,888 7,345 389 140Equity option 91 792 48 26 91 619 51 27Other equity derivatives 9,296 9,213 347 181 6,797 6,726 338 113Credit derivatives 17 20 0 2 0 0 0 0Credit default swap 17 20 0 2 0 0 0 0Commodity derivatives 62 62 18 0 20 20 0 0Total 228,588 230,668 4,674 17,438 227,776 229,840 7,805 26,65831/12/09 31/12/10Notional amount Assets Liabilities Notional amount Assets LiabilitiesTo receive To deliver To receive To deliverForeign exchange derivatives 2,909 2,371 241 316 2,043 2,075 125 359FX forward 149 146 0 0 670 670 0 0Cross currency swap 2,687 2,140 239 316 1,373 1,405 125 359FX forward rate agreement 73 85 0 0 0 0 0 0Other currency derivates (FX) 0 0 2 0 0 0 0 0Interest-rate derivatives 50,424 46,924 570 969 25,602 25,611 386 810IRS 49,924 46,924 570 967 25,602 25,611 386 810FRA 500 0 0 2 0 0 0 0Other interest-rate derivatives 1 0 0 0 0 0 0 0Total 53,333 49,295 811 1,285 27,645 27,686 511 1,169E. Detail of derivatives of portfolio hedge (1)31/12/09 31/12/10Notional amount Assets Liabilities Notional amount Assets LiabilitiesTo receive To deliver To receive To deliverForeign exchange derivatives 282 244 2 14 227 163 2 11Interest-rate derivatives 379,720 379,710 4,656 7,714 311,798 311,789 6,181 9,630Total 380,002 379,954 4,658 7,728 312,025 311,952 6,183 9,641(1) Used only in a fair value hedge strategy.F. Detail of derivatives designated as hedge of a net investment in foreign operations31/12/09 31/12/10Notional amount Assets Liabilities Notional amount Assets LiabilitiesTo receive To deliver To receive To deliverFX forward 366 388 0 22 469 468 1 1Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia175

Notes to the consolidated financial statements9.2. Deferred taxesManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsA. Analysis31/12/09 31/12/10Net deferred income tax assets/(liabilities) 2,688 2,677Deferred income tax liabilities (31) (33)Deferred income tax assets 4,302 5,700Deferred tax 4,271 5,667Unrecognized deferred tax assets (1,583) (2,990)B. Movements2009 2010As at 1 Jan. 3,908 2,688Movements of the year:- Amounts recognised in the statement of income (1) 107 (27)- Items directly computed by equity (1,297) (10)- Changes in consolidation scope 0 (12)- Exchange differences (31) 109- Other movements 1 (70)As at 31 Dec. 2,688 2,677(1) In 2009, the movements of the deferred tax income of the Insurance activity of FSA Holdings during the first quarter of 2009 are recorded in “Non currentassets held for sale“. As a consequence, an amount of 184 million, included in the statement of income is not recorded on this line (see note 11.15).In 2010, an amount of USD 35 million of deferred tax assets was recognised on temporary differences on the Financial Products portfolio.Deferred tax coming from assets of31/12/09 31/12/10the balance sheetTotal o/w impact inresultTotal o/w impact inresultCash, loans and loan loss provisions (1,549) 541 (2,800) (1,255)Securities 1,177 659 2,000 174Derivatives (1,686) 372 (3,718) (1,994)Tangible and intangible fixed assets (181) (7) (200) (9)Other assets specific to insurancecompanies 0 (1) (1) (1)Other 13 0 31 10Total (2,226) 1,564 (4,688) (3,074)Deferred tax coming from liabilities of31/12/09 31/12/10the balance sheetTotal o/w impact inresultTotal o/w impact inresultDerivatives 3,771 (767) 6,756 2,912Borrowings, deposits and issuance ofdebt securities 933 (333) 1,285 344Provisions 98 0 84 (18)Pensions 113 (1) 108 (4)Other liabilities specific to insurancecompanies (5) 28 3 7Legal tax free provisions (114) (2) (105) 9Other 129 7 151 112Total 4,925 (1,068) 8,282 3,362176 Dexia Annual report 2010

Notes to the consolidated financial statementsDeferred tax coming from other elements 31/12/09 31/12/10Totalo/w impact inresultTotalo/w impact inresultTax losses carried forward 1,665 (136) 2,153 369Tax credit carried forward 17 11 1 (17)Entities with special tax status (110) 51 (82) 28Total 1,572 (74) 2,073 380Total deferred tax 4,271 5,667C. Expiry date of unrecognised deferred tax assetsNatureLess than 1yearBetween 1 to 5years31/12/09Over 5 yearsUnlimitedmaturityTemporary difference 0 0 0 (1,220) (1,220)Tax losses carried forward (6) (4) (194) (143) (347)Tax credit carried forward 0 0 (16) 0 (16)Total (6) (4) (210) (1,363) (1,583)NatureLess than 1yearBetween 1 to5 years31/12/10Over 5 yearsUnlimitedmaturityTemporary difference 0 0 0 (1,206) (1,206)Tax losses carried forward (4) (131) (1,457) (190) (1,782)Tax credit carried forward 0 (1) 0 0 (1)Total (4) (132) (1,457) (1,396) (2,989)TotalTotalManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia177

Notes to the consolidated financial statements9.3. Insurance contractsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsPremium incomeInsurance contracts31/12/09 31/12/10Investment Total Insurance contracts Investmentcontracts with DPF (1) contracts with DPF (1)Individual Group Individual Group Individual Group Individual GroupGross premiums written 329 315 1,092 34 1,770 288 372 1,741 39 2,440Premiums ceded to reinsurers (3) (80) (4) 0 (87) (5) (103) (1) 0 (109)Change in gross unearnedpremium reserves (UPR) (2) 0 0 0 (2) (1) 0 0 0 (1)Net premium afterreinsurance 324 235 1,088 34 1,681 282 269 1,740 39 2,330(1) Discretionary Participation Features.Claims expensesLifecontractsInsurance contracts31/12/09 31/12/10Non-lifeTotalLife Non-lifecontractscontracts contractsGross reserves (1) 12,617 790 13,407 14,797 848 15,645Gross reserves – share of reinsurers (2) 11 65 76 12 66 78Premiums and contributions received (3) 1,770 453 2,223 2,440 478 2,918Claims incurred and changes in technical35 10 45 44 18 62reserves – part of reinsurers (3)Premiums transferred to reinsurers (4) (87) (34) (121) (109) (38) (147)Claims incurred (4) (1,311) (265) (1,576) (852) (283) (1,135)Change in technical reserves (4) (1,085) (44) (1,129) (2,331) (58) (2,389)(1) Liabilities VIII. Technical provisions of insurance companies.(2) see note 7.12. Other assets, table B.(3) see note 11.7. Technical margin of insurance contracts - Premiums and technical income from insurance activities.(4) see note 11.7. Technical margin of insurance contracts - Technical expense from insurance activities.A. Life contractsA.1. Income and expenses2009 2010Investmentcontracts with DPFTotal Insurance contracts Investmentcontracts with DPFIndividual Group Individual Group Individual Group Individual GroupGross claims paid (194) (144) (943) (30) (1,311) (186) (143) (505) (18) (852)Claims reserve as at 1 Jan. 36 10 22 0 68 39 6 26 0 71Claims reserve as at 31 Dec. (39) (6) (26) 0 (71) (43) (6) (31) 0 (80)Transferred claims reserves 1 0 (1) 0 0 0 0 0 0 0Share of reinsurers 3 32 1 0 36 4 41 0 0 45Net claims incurred (193) (108) (946) (30) (1,277) (186) (102) (510) (18) (816)TotalTotalTotal178 Dexia Annual report 2010

Notes to the consolidated financial statementsChanges in technical reserves1) Change in life insurance reserve2) Change in profit sharing reserveInsurance contractsInsurance contracts2009 2010Investmentcontracts with DPF2009 2010Investmentcontracts with DPFTotal Insurance contracts Investmentcontracts with DPFIndividual Group Individual Group Individual Group Individual GroupLife insurance reserve as at Jan. 1 2,755 808 12,059 269 15,891 2,459 871 8,984 131 12,445Variation in opening due to conversionrate and to variation of scope ofconsolidation (1) (47) 0 0 (48) 1 0 0 0 1Life insurance reserve as at 31 Dec. (2,710) (871) (12,656) (280) (16,517) (2,499) (1,028) (10,862) (191) (14,580)of which Dexia Epargne Pension as at31 Dec. (1) (251) 0 (3,672) (149) (4,072)Life insurance reserve as at 31 Dec.without Dexia Epargne Pension (1) (2,459) (871) (8,984) (131) (12,445)Transferred Life insurance reserve (262) (22) (54) (5) (343) 3 (26) 10 0 (13)Share of reinsurers in Life insurancereserve as at 1 Jan. (13) (3) 0 0 (16) (7) (3) 0 0 (10)Share of reinsurers in Life insurancereserve as at 31 Dec. 8 3 31 0 42 6 3 0 0 9of which Dexia Epargne Pension as at31 Dec. 2009 (1) 1 0 31 0 32Share of reinsurers in Life insurancereserve as at 31 Dec. without DexiaEpargne Pension (1) 7 3 0 0 10Share of reinsurers in transferred Lifeinsurance reserve 171 0 (198) 0 (27) 0 0 0 0 0Net change in Life insurance reserve (52) (132) (817) (16) (1,017) (37) (183) (1,868) (60) (2,148)Change in Life insurance reserve 2010 dueto Dexia Epargne Pension (1) (6) 0 (117) (4) (127)Change in share of reinsurers in Lifeinsurance reserve 2010 due to DexiaEpargne Pension (1) 1 0 0 0 1(1) Dexia Epargne Pension was transferred to held for sale in application of IFRS 5 in 2009 and consolidated until 31 March 2010.Total Insurance contracts Investmentcontracts with DPFIndividual Group Individual Group Individual Group Individual GroupProfit sharing reserve as at 1 Jan. 13 6 9 1 29 5 8 74 1 88Profit sharing reserve as at 31 Dec. (5) (8) (74) (1) (88) (6) (11) (109) (1) (127)Transferred profit sharing reserve (12) 0 9 (1) (4) 0 0 (8) (1) (9)Net change in profit sharing reserve (4) (2) (56) (1) (63) (1) (3) (42) (1) (47)TotalTotalManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia179

Notes to the consolidated financial statementsA.2. Assets and liabilitiesManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsGross reservesShare of reinsurersInsurance contractsInsurance contracts31/12/09 31/12/10Investmentcontracts with DPF31/12/09 31/12/10Investmentcontracts with DPFTotal Insurance contracts Investmentcontracts with DPFIndividual Group Individual Group Individual Group Individual GroupLife insurance reserve local GAAP 2,710 871 12,656 280 16,517 2,499 1,028 10,862 191 14,580Figures of Dexia Epargne Pensiontransferred to Liabilities held for sale (249) 0 (3,672) (149) (4,070) 0 0 0 0 0Reserves due to shadow accountingadjustments 0 5 0 0 5 0 5 0 0 5Total life insurance reserve 2,461 876 8,983 131 12,451 2,499 1,033 10,862 191 14,584Claims reserves 39 6 26 0 71 43 6 31 0 80Gross unearned premium reserves (UPR) 5 0 0 0 5 6 0 0 0 6Other technical reserves 5 8 74 1 88 6 11 109 1 127Total gross reserves 2,511 891 9,083 132 12,617 2,553 1,050 11,002 192 14,797Total Insurance contracts Investmentcontracts with DPFIndividual Group Individual Group Individual Group Individual GroupShare of reinsurers in life insurancereserve as at 31 Dec. 8 3 31 0 42 6 3 0 0 9Share of Dexia Epargne Pensiontransferred to Assets held for sale (1) 0 (31) 0 (32) 0 0 0 0 0Share of reinsurers in claims reserves 1 0 0 0 1 2 0 0 0 2Total share of reinsurers 8 3 0 0 11 9 3 0 0 12Discretionary participation feature included in equity31/12/09 31/12/10Contracts with DPFContracts with DPFIndividual Group Total Individual Group TotalNet discretionary participation feature included in equity 1 0 1 0 0 0Insurance or investment contracts with DPF that have embedded derivatives that need to be separated and fair valued through profit and lossare limited to two products. Their amounts are not significant.TotalTotal180 Dexia Annual report 2010

Notes to the consolidated financial statementsReconciliation of changes in Life insurance reserveGrossamount2009 2010ReinsuranceamountNetamountGrossamountReinsuranceamountNetamountLife insurance reserve as at 1 Jan. 15,892 16 15,876 12,453 10 12,443Net payments received/premiumsreceivable 1,545 44 1,501 1,790 1 1,788Additional reserves due to shadowadjustments 4 0 4 0 0 0Claims paid (1,226) (10) (1,216) (661) (2) (659)Results on death and on life (74) 5 (79) (82) 0 (82)Attribution of technical interest 487 (1) 488 426 0 426Other changes (59) (11) (48) 658 0 658Variation due to Dexia Epargne Pension (1) (4,070) (33) (4,037) 0 0 0Variation of scope of consolidation (47) 0 (47) 0 0 0Life insurance reserve as at 31 Dec. 12,453 10 12,443 14,584 9 14,575(1) Dexia Epargne Pension is transferred to “Assets held for sale” and to “Liabilities included in disposal groups held for sale”.B. Non-Life CONTRACTSB.1. Income and expensesPremium income31/12/09 31/12/10Gross premiums written 453 478Premiums ceded to reinsurers (34) (38)Net premiums after reinsurance (A) 419 440Change in gross Unearned Premium Reserves (UPR) (6) (4)Share of reinsurers in change of Unearned Premium Reserve (UPR) 0 0Change in net unearned premium reserve (UPR) (B) (6) (4)Total net earned premiums (A)+(B) 413 436Claims expenses2009 2010Gross claims paid (265) (283)Claims reserve as at 1 Jan. 631 667Claims reserve as at 31 Dec. (667) (720)Share of reinsurers 10 18Net claims incurred (291) (318)Change in other Non-life insurance reserves2009 2010Other Non-life insurance reserves as at 1 Jan. 19 21Other Non-life insurance reserves as at 31 Dec. (21) (22)Share of reinsurers in other Non-life insurance reserves as at 1 Jan. (1) (1)Share of reinsurers in other Non-life insurance reserves as at 31 Dec. 1 1Net changes in insurance liabilities (2) (1)Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia181

Notes to the consolidated financial statementsB.2. Assets and liabilitiesManagement reportGross reserves31/12/09 31/12/10Claims reserves 610 652Reserves Unallocated Loss Adjustment Expenses (ULAE) 23 26Premium deficiency reserves (Non-life LAT) 0 0Reserves for claims Incurred But Not Reported (IBNR) 34 42Total claims reserves 667 720Other technical reserves 21 21Unearned Premium Reserve (UPR) 102 107Total gross reserves 790 848Consolidatedfinancial statementsAdditional information Annual financial statementsShare of reinsurers31/12/09 31/12/10Share of reinsurers in claims reserves 61 62Share of reinsurers in total claims reserve 61 62Share of reinsurers in other technical reserves 1 1Share of reinsurers in UPR 3 3Total share of reinsurers 65 66Reconciliation of changes in claims reservesGrossamount2009 2010ReinsuranceamountNet amountGrossamountReinsuranceamountNet amountClaims reserves as at 1 Jan. 631 66 565 667 62 605Claims paid on previous years (117) (8) (109) (124) (2) (122)Change in claim charges on previous years (44) 1 (45) (47) (2) (45)Liabilities on claims current year 197 3 194 224 4 220Claims reserve as at 31 Dec. 667 62 605 720 62 658Claims developmentRunoff triangle total costs (gross figures)Occurrence yearLiquidation year Previous 2006 2007 2008 2009 20102006 463 2382007 353 133 2672008 295 77 144 2852009 245 57 77 167 3302010 206 51 58 93 162 377The runoff shows us that the ratio per occurrence year total loss remains very stable during the liquidation years, but theincurred losses increased in 2010 due to the storms and flood.182 Dexia Annual report 2010

Notes to the consolidated financial statements9.4. Related parties transactionsA. Related parties transactionsKeymanagement (1)Entities with jointcontrol or significantinfluence over theentity (2) Subsidiaries Associates Joint ventures inwhich the entityis a venturer31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10 31/12/09 31/12/10Loans (3) 1,674 1,529 2 7 217 235 32 69Interest income 72 57 12 11 1 1Deposits (3) 2 8 1,675 3,388 96 72 104 114 838 1,271Interest expense (39) (60) (7) (3) (2) (1) (25) (6)Net commission (4) 36 34 1 19 22 (9) (7)Guarantees issued andcommitments provided bythe Group 349 415 9 1 63 124 1,709 2,281Guarantees andcommitments received bythe Group 740 534 9 92 30 30(1) Key management includes the Board of Directors and the Management Board.(2) We refer here to the main shareholders of Dexia (2009-2010): Arcofin, Holding Communal, Caisse des dépôts et consignations.Dexia applies IAS 24 § 25 for those transactions concluded at general market conditions.As a consequence, transactions with the Belgian and French States are not disclosed in the table A.However, significant transactions which are carried out on non-market terms are described in 9.4 C.(3) Transactions with related parties are concluded at general market conditions.(4) Figures as at 31 December 2009 have been restated.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 compensations31/12/09 31/12/10Short-term benefits 5 6Post-employment benefits 1 1Other long-term benefits 0 0Termination benefits 0 1Details per person are reported in the Compensation report on page 44 of the annual report.Short-term benefits include the salaries, bonuses and other advantages. Payment of bonuses is subject to some conditions andis partially deferred as explained in the Compensation report on page 44.Post-employment benefits: service cost calculated in accordance with IAS 19.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia183

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsC. Transactions with the Belgian,French and luxembourg StatesGuarantee mechanism in favour of Dexia'sfinancingOn 9 December 2008, the French, Belgian and LuxembourgStates and Dexia entered into a First Demand GuaranteeAgreement implementing the principles set forth in theProtocol of 9 October 2008 between the three States andDexia. Pursuant to this guarantee agreement, the threeStates' guarantee severally, but not jointly, the performanceby Dexia SA, Dexia Banque Internationale à Luxembourg,Dexia Bank Belgium and Dexia Crédit Local (including certainof their branches and issuance vehicles) of their repaymentobligations resulting from certain financings provided bycentral banks, credit institutions and other institutional orprofessional investors, provided that these financings werecontracted or issued between 9 October 2008 and 31 October2009 and maturing at the latest on 31 October 2011.The States' guarantee the repayment obligations in thefollowing proportion:(i) 60.5% for the Belgian State;(ii) 36.5% for the French State; and(iii) 3.0% for the Luxembourg State.To supplement the Guarantee Agreement on operational andprocedural aspects, the three States and Dexia have enteredinto an Operational Memorandum. This memorandumprovides, among other things, for a monitoring process ofthe guaranteed financings on a daily basis, including a dailypublication of the aggregate guaranteed amount and, withrespect to guaranteed bond issues of Dexia, a system ofeligibility certificates whereby the States issue, on Dexia'srequest, certificates confirming for each bond issue that it iscovered by the Guarantee Agreement.On 19 November 2008, the European Commission authorisedthis guarantee mechanism for a period of 6 months asfrom 3 October 2008, with an automatic extension untilthe Commission's definitive decision, on condition that arestructuring plan be filed with the Commission. In March2009, the three States confirmed the extension of theguarantee in accordance with the decision of the EuropeanCommission of 13 March 2009.By an Addendum to the above-mentioned GuaranteeAgreement of 9 December 2008, dated 14 October 2009, theBelgian, French and Luxembourg States and Dexia agreed torenew the guarantee scheme for a period of one year, coveringfinancings contracted or issued at the latest on 31 October2010. The parties also wished to effect certain changes to theguarantee in order to limit the States' intervention to a strictminimum and to allow an orderly exit out of the guaranteewithin a credible time-horizon. The changes include:(i) the decrease of the maximum of the total amount ofguaranteed financings from EUR 150 billion to EUR 100billion, with a commitment by Dexia to undertake its bestefforts to limit this amount to EUR 80 billion;(ii) the extension to 4 years of the maximum duration of thenew financings contracted or issued; and(iii) the waiver by Dexia of the benefit of the guarantee, asfrom 16 October 2009, for all new contracts with a maturityof less than one month and all contracts with an indefiniteterm.The Guarantee Agreements provided for the followingremuneration to be paid by Dexia to the States:(i) for financings with a maturity of less than 12 months:50 bps on an annual basis calculated on the average amountguaranteed financings outstanding; and(ii) for financings with a maturity of 12 months or more:50 bps on an annual basis, increased by the lowest of (i) themedian of the Dexia CDS 5 years spread calculated between1 January 2007 and 31 August 2008 or (ii) the median of the5 years CDS spreads of all credit institutions with a long-termcredit rating equivalent to that of Dexia, calculated on theaverage amount guaranteed financings outstanding.The renewal and modifications as provided for in theAddendum of 14 October 2009 have been duly authorised byan interim decision of the European Commission for a periodof 4 months as from 30 October 2009 (i.e., until 28 February2010) or until the final decision – if such decision is adoptedprior to 28 February 2010 – of the European Commission inthe context of the State aid procedure opened on 13 March2009.By separate agreement dated 17 March 2010, the Belgian,French and Luxembourg States and Dexia amended andsupplemented the above-mentioned Addendum to theGuarantee Agreement of 14 October 2009 to reflect theterms of the final decision of the European Commission inthe context of the State aid procedure of 26 February 2010.The changes include:(i) advancing the latest issue date for guaranteed financingsto 31 May 2010 (for financings with a maturity of less than12 months) resp. 30 June 2010 (for financings with a maturityof more than 12 months);(ii) advancing the expiry date of the guarantee on deposits(and equivalents) to 1 March 2010;(iii) a gradual increase of the remuneration payable by Dexia,pro rata temporis, if the outstanding amount of repaymentobligations guaranteed by the States exceeds certainthresholds (by 50bps if and to the extent the amount exceedsEUR 60 billion but not higher than EUR 70 billion, 65bps ifand to the extent the amount exceeds EUR 70 billion but nothigher than EUR 80 billion, and 80bps above EUR 80 billion).As at 30 June 2010, Dexia has fully exited the States'guarantee liquidity framework. All outstanding instrumentsissued under the government guarantee framework before30 June 2010 will continue to benefit from the governmentguarantee in accordance with their terms and conditions.184 Dexia Annual report 2010

Notes to the consolidated financial statementsAs at 31 December 2010, the total outstanding amountof repayment obligations guaranteed by the States wasEUR 44 billion and in 2010, Dexia paid a total remunerationof EUR 380 million to the States for this guarantee.All the above mentioned agreements, as well as the totaloutstanding amount of guaranteed repayment obligations andthe list of securities for which the States have issued eligibilitycertificates are available on the website www.dexia.com.Guarantee for the Financial ProductsportfolioDexia entered into an agreement for the sale of the insuranceactivities of Financial Security Assurance (FSA) to AssuredGuaranty Ltd (Assured) on 14 November 2008; the sale wascompleted on 1 July 2009. The Financial Products activity ofFSA, managed by FSA Asset Management (FSAM), was carvedout of the transaction and remains under Dexia's ownership.In that context, the Belgian and French States have agreedto provide a guarantee on the Financial Products assetsportfolio.The terms of this guarantee are set out in two agreements (theFirst Demand Guarantee Agreement relating to the “financialproducts“ portfolio of FSA Asset Management LLC and theGuarantee Reimbursement Agreement) entered into by theBelgian and French States and Dexia. The main relevant termsare the following:• Dexia SA and Dexia Crédit Local S.A. (“DCL“) entered intoa put agreement whereby FSAM is entitled to sell to Dexiaand/or DCL certain assets included in the FSAM portfolio asat 30 September 2008 upon the occurrence of certain triggerevents (asset default, liquidity default, collateral default andinsolvency of Dexia).• The Belgian and French States have each undertakento guarantee, severally and not jointly, the obligations ofDexia SA pursuant to the put agreement up to an aggregateamount equal to USD 16.98 billion and up to 62.3711% forthe Belgian State and 37.6289% for the French State.• The portfolio to which this put relates is the FSAM portfolioafter deduction of certain “excluded assets“ for an amount ofUSD 4.5 billion, such that the par value of the assets includedin the portfolio to which the put relates is equal to USD 9.7billion as at 31 December 2010. Dexia will therefore cover afirst loss tranche of USD 4.5 billion.• The States are entitled to recover from Dexia the amountsthat they will have paid pursuant to their guarantee. Thisrecourse of the States can be exercised either in cash or inthe form of instruments representing Tier 1 capital of Dexia(ordinary shares or profit shares).• Dexia therefore issued subscription rights (warrants) to eachof the States for a period of 5 years, to allow the States to bereimbursed through the issuance of new shares, following thecontribution in kind to Dexia of their right of reimbursement.The cancellation and re-issuance of the existing warrants fora new period of 5 years will be submitted to the approvalof the general meeting of shareholders every year. In caseof failure to re-issue the warrants, a penalty will be applied(500bps per annum for a period of two years, compoundedon the guarantee commission).• Dexia may also issue profit shares at the request of theStates instead of the shares. The profit shares would be issuedfor a price equal to the exercise price of the warrants, wouldnot have voting rights, would be entitled to a special dividendand be convertible at the option of the States into ordinaryDexia shares, one for one. The terms of the profit shares havebeen approved by the Extraordinary Shareholders' Meeting ofDexia on 24 June 2009 and are set out in Article 4bis of theArticles of Association of Dexia.• Dexia must semi-annually pay to the States a guaranteefee at a rate of 1.13% per annum, calculated on theaverage outstanding nominal amount of the FSAM portfolio(excluding the excluded assets) over a 6 month-period, plus afee of 0.32% per annum calculated on the lower of (i) thetotal amount of the liabilities pursuant to the GuaranteedInvestment Contracts and (ii) the average outstanding nominalamount of the FSAM portfolio (excluding the excluded assets)over a 6 month-period.• The guarantee of the States pursuant to an asset defaultor the insolvency of Dexia expires in 2035, unless the partiesdecide to extend the guarantee. The guarantee pursuant to aliquidity or collateral default expires on 31 October 2011.This guarantee was approved by the European Commissionon 13 March 2009.As at 31 December 2010, Dexia recognised EUR 110 millioninterest charge for this guarantee.For a more detailed description of the guarantee for theFinancial Products portfolio, see the Special Board Report of12 May 2009, as updated by the Special Board Report of 24February 2010 relating to the first reissue of the warrants,both available on the website of Dexia (www.dexia.com).Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia185

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statements9.5. Acquisitions and disposals ofconsolidated companiesA. Main acquisitionsThere were no significant acquisitions in 2009.On 31 May 2010 RBC Dexia Investor Services completed itsacquisition and transfer of the Unione di Banche Italiane scpa(“UBI Banca“) Group's depository bank business.Under the terms of the agreement, RBC Dexia will providedepositary and fund administration services to UBI Pramerica,UBI Banca's subsidiary and Italy's third largest fund manager.Certain correspondent bank agreements which relate to theprovision of paying agent services in Italy for LuxembourgSICAVs and Dublin UCITS were also included in the transaction,subject to client consent.The value of the transaction was EUR 93 million. The impactfor Dexia is only 50% as RBC Dexia Inverstor Services isproportionnally consolidated.The impact on total asset is not significant.B. Main disposalsYear 2009On 14 November 2008 Dexia has signed a binding agreementto sell the Insurance activity of FSA Holdings to AssuredGuaranty Ltd.As required by IFRS 5, the Insurance activity of FSA Holdingshas been recorded as a group held for sale as from 1 October2008.The sale was completed as at 1 July 2009.The sales price of USD 816.5 million was partially paid in cash(USD 546 million) and partially with 21.85 million Assuredshares.Year 2010On 30 April 2010, Dexia Epargne Pension has been sold toBNP Paribas Assurance. DEP offers life insurance products inFrance. As at 31 December 2009, Dexia Epargne Pension wasrecorded in Assets and liabilities included in disposal groupsheld for sale as required by IFRS 5.On 6 September 2010, the 51% stake in the group Adinfohas been sold to Network Research Belgium. Adinfo is agroup active in IT services for Belgian local authorities.Additional information Annual financial statementsThe assets and liabilities disposed were as follows: 2009 2010 2010Insurance activityof FSA HoldingsGroup AdinfoDexia EpargnePensionCash and cash equivalents 8 0 66Loans and advances due from banks 76 13 1Loans and advances to customers 18 0 369Financial assets measured at fair value through profit andloss 0 0 1,769Financial investments 4,464 0 2,147Derivatives 79 0 0Tax assets 554 3 5Other assets 1,987 25 42Due to banks 0 (2) (86)Customer borrowings and deposits 0 0 0Financial liabilities measured at fair value through profitand loss 0 0 0Derivatives (673) 0 0Debt securities (543) 0 0Subordinated debts 0 0 (108)Technical provisions of insurance companies (1,399) 0 (4,224)Other liabilities (4,027) (15) (23)Net assets 543 24 (42)Proceeds from sale (in cash) 398 26Less: cost of the transaction (19) 0Less: cash and cash equivalents in the subsidiary sold (8) 0Net cash inflow on sale 371 26 (*)(*) In accordance with sale contract, the sales conditions can not be disclosed.186 Dexia Annual report 2010

Notes to the consolidated financial statementsC. Assets and liabilities included indisposal groups held for saleYear 2009As required by IFRS 5, the assets and liabilities of DexiaEpargne Pension (DEP) have been recorded as a group heldfor sale as from 31 December 2009.On 9 December 2009, Dexia signed an agreement relating tothe sale of Dexia Epargne Pension to BNP Paribas Assurance.The transaction has been closed on 30 April 2010.The assets and liabilities included in the group held for sale are as follows: 2009Cash and cash equivalents 126Loans and advances due from banks 2Loans and advances to customers 377Financial assets measured at fair value through profit and loss 1,658Financial investments 2,066Other assets 66Non current assets held for sale 4,295Due to banks (109)Subordinated debts (108)Technical provisions of insurance companies (4,072)Other liabilities (43)Liabilities included in disposal groups held for sale (4,332)Net assets (37)DEPManagement reportConsolidatedfinancial statementsYear 2010There are no assets and liabilities transferred to disposalgroups held for sale as at 31 December 2010.D. Dexia banka SlovenskoOn 11 November 2010, in compliance with the DexiaGroup's strategic disinvestment plan, Dexia KommunalkreditBank (a 100% subsidiary of Dexia SA, via Dexia Crédit Local)concluded an agreement to sell its Dexia banka Slovenskosubsidiary (“DBS“) to Penta Investments Ltd.This agreement provides for:− the sale of the 88.7057% of DBS held by DexiaKommunalkredit Bank;− clauses amending the transaction (price, possibilities torescind) depending on the outcome of the Ritro litigation;− the purchase, by Dexia, of a portfolio of EUR 110 million inGreek securities that were previously acquired by DBS fromits parent company Dexia Kommunalkredit Bank, withoutany impact on DBS's net assets.The agreement also provides for funding adapting in such away as to guarantee the transition: funding currently receivedby DBS by nature of its being a Dexia Group subsidiary, andwhich would be changed on its exit from the Group, will bereplaced by guaranteed funding with maturities of up to twoyears. Other existing funding will be maintained for the fullterm.Considering the uncertainties – as at 31 December 2010 –surrounding the conditions for implementation of this agreement(Ritro litigation, authorisations and so on), it was decided, on31 December 2010, to keep DBS globally integrated. DBSwas also valued for provisioning on the basis of its long-termvalue (EUR 82 million); this gave rise to a depreciation of EUR3 million in compliance with IAS 36 “Impairment of assets“.Additional information Annual financial statementsAnnual report 2010 Dexia187

Notes to the consolidated financial statementsManagement reportAdditional information Annual financial statementsConsolidatedfinancial statements2010Assets andLiabilities2010Contribution tothe consolidatedaccountsCash and cash equivalents 90 90Loans and advances due from banks 183 70Loans and advances to customers 1,851 1,851Financial assets measured at fair value through profit and loss 40 40Financial investments 396 396Derivatives 13 0Tax assets 16 16Other assets 36 36Intercompany accounts – Net liabilities less assets 0 (501)Due to banks (673) (196)Customer borrowings and deposits (1,662) (1,662)Financial liabilities measured at fair value through profit and loss (8) (8)Derivatives (29) (16)Debt securities (122) (32)Subordinated debts (47) 0Other liabilities (9) (9)Net assets 75 75188 Dexia Annual report 2010

Notes to the consolidated financial statements9.6. EquityBy category of share 2009 2010Number of shares authorized and not issued 1,760,513,402 1,767,244,371Number of shares issued and fully paid 1,762,478,783 1,846,406,344Number of shares issued and not fully paidValue per share no nominal value no nominal valueOutstanding as at 1 Jan. 1,762,478,783 1,762,478,783Number of shares issued (1) 83,927,561Number of shares cancelledOutstanding as at 31 Dec. 1,762,478,783 1,846,406,344Number of treasury shares 293,570 307,548Number of shares reserved for issue under stock options and contracts for the saleof share 293,570 307,548(1) Issuance of bonus shares.See 9.4.C. Warrants granted to the Belgian and the French States.See 9.7. Stock option plan.Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia189

Notes to the consolidated financial statements9.7. Share-based PaymentsManagement reportStock Option Plans settled in Dexia shares 31/12/09 31/12/10Number ofoptions (1)Number ofoptionsOutstanding at the beginning of the period 71,787,214 71,242,716Expired during the period (544,498) (3,548,469)Adjustment (2) 0 3,266,240Outstanding at the end of the period 71,242,716 70,960,487Exercisable at the end of the period 49,972,641 59,776,398(1) Outstanding options also include the call options granted to Dexia Crédit Local’s employees in 1999.(2) In order to protect warrant holders against adverse economic consequences arising from the issue of bonus shares following the resolution passed by theExtraordinary Shareholders’ Meeting held on 12 May 2010, the exercise price for warrants was reduced and the number of warrants increased in accordancewith an adjustment ratio determined in line with the Corporate Action Policy of Euronext NYSE Liffe.Consolidatedfinancial statementsAdditional information Annual financial statementsRange ofexerciseprices (EUR)Number ofoutstandingoptions31/12/09 31/12/10Weightedaverageoptionsexercise price(EUR)Weightedaverageremainingcontractuallife (year)Range ofexerciseprices (EUR)(1)Number ofoutstandingoptionsWeightedaverageoptionsexerciseprice (EUR)Weightedaverageremainingcontractuallife (year)10.09 7,093,355 - 8.50 9.63 7,378,529 0.00 7.5010.97 - 11.37 7,752,122 11.37 3.56 10.47 - 10.85 8,069,375 10.85 2.5611.88 - 13.66 17,609,369 13.20 4.86 11.34 - 13.04 18,363,514 12.60 3.8613.81 - 14.58 3,083,963 14.58 1.00 13.18 - 13.92 0 0.00 0.0015.17 - 15.88 0 - 0.00 14.48 - 15.16 0 0.00 0.0017.23 - 17.86 5,269,212 17.86 2.00 16.45 - 17.05 5,499,997 17.05 1.0018.03 - 18.20 10,059,822 18.03 5.41 17.21 - 17.37 10,339,793 17.21 4.5018.62 - 21.25 10,052,323 18.67 6.42 17.77 - 20.28 10,530,954 17.82 5.4223.25 10,322,550 - 7.50 22.19 10,778,325 22.19 6.50(1) In order to protect warrant holders against adverse economic consequences arising from the issue of bonus shares following the resolution passed by theExtraordinary Shareholders’ Meeting held on 12 May 2010, the exercise price for warrants was reduced and the number of warrants increased in accordancewith an adjustment ratio determined in line with the Corporate Action Policy of Euronext NYSE Liffe.31/12/09 31/12/10Equity-settled arrangements 9 3Cash-settled arrangements (1) 0 3Arrangements with settlement alternatives 0 0Total expenses 9 6Liabilities for cash-settled arrangements 0 3Liabilities for arrangements with settlement alternatives 0 0Total liabilities 0 3(1) The Board of Directors decided to apply the principles of the Belgian regulations which are applicable to the variable compensation for 2009 to be paidin 2010: a deferment of the variable compensation over three years, a measure of performance over the long term and a link of the deferred part with theshare price.190 Dexia Annual report 2010

Notes to the consolidated financial statements9.8. Non-controlling interests – Core equityAs at 1 January 2009 1,756- Increase of capital 2- Dividends (10)- Net income for the period 79- Variation of scope of consolidation (14)As at 31 December 2009 (1) 1,813As at 1 January 2010 1,813- Increase of capital 5- Dividends (32)- Net income for the period 74- Translation adjustments (1)- Variation of scope of consolidation (1)As at 31 December 2010 (1) 1,858(1) This amount includes:- the undated deeply subordinated non-cumulative Notes for EUR 700 million, issued by DCL and booked for EUR 698 million in 2009 and for EUR 700 millionin 2010.- the undated subordinated non-cumulative Notes for EUR 500 million, issued by Dexia Funding Luxembourg and booked for EUR 498 million.9.9. Contribution of joint ventures in the financial statements31/12/09 31/12/10Total assets 9,531 9,709Total liabilities 9,224 9,60431/12/09 31/12/10Income 342 393Expenses (296) (333)Gross operating income 46 60Net Income 29 45Attributable to non-controlling interests 0 0Attributable to equity holders of the parent 29 45Mainly group RBC-DIS.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia191

Notes to the consolidated financial statements9.10. Management of capitalManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsThe information regarding management of capital is presented in the Management report on pages 95 to 98.9.11. Exchange rates31/12/09 31/12/10Closing rate Average rate Closing rate Average rateAustralian dollar AUD 1.6028 1.7641 1.3118 1.4388Canadian dollar CAD 1.5104 1.5830 1.3346 1.3675Swiss franc CHF 1.4832 1.5076 1.2490 1.3700Koruna (Czech republic) CZK 26.4515 26.5315 25.0425 25.2419Danish krone DKK 7.4423 7.4464 7.4531 7.4477EURO EUR 1.0000 1.0000 1.0000 1.0000Pound sterling GBP 0.8879 0.8908 0.8573 0.8570Hong Kong dollar HKD 11.1648 10.8220 10.4144 10.2718Forint HUF 270.6846 281.7823 278.3240 276.2157Shekel ILS 5.4491 5.4740 4.7457 4.9283Yen JPY 133.4453 130.5573 108.7690 115.2675Mexican peso MXN 18.8445 18.8996 16.5478 16.7025Norwegian Krone NOK 8.2997 8.7083 7.8065 8.0048New Zealand dollar NZD 1.9811 2.2081 1.7245 1.8343Swedish krona SEK 10.2514 10.5881 8.9795 9.4884Singapore dollar SGD 2.0195 2.0241 1.7174 1.7955Turkish lira TRY 2.1427 2.1505 2.0551 1.9880US dollar USD 1.4399 1.3962 1.3399 1.32219.12. Compensation of the AuditorWe refer here to the table presented in the Management report on page 63.192 Dexia Annual report 2010

Notes to the consolidated financial statements10. Notes on the consolidated off-balance-sheet items(in millions of EUR – some amounts may not add up due to roundings off)10.1. Regular way trade31/12/09 31/12/10Loans to be delivered and purchases of assets 9,299 8,126Borrowings to be received and sales of assets 13,049 13,268Management report10.2. Guarantees31/12/09 31/12/10Guarantees given to credit institutions 3,019 2,580Guarantees given to customers 15,751 16,173Guarantees received from credit institutions 653 1,732Guarantees received from customers 59,506 53,784Guarantees from the States (1) 58,554 50,825(1) See 9.4.C.10.3. Loan commitments31/12/09 31/12/10Unused lines granted to credit institutions 895 419Unused lines granted to customers 72,979 82,857Unused lines obtained from credit institutions (1) 16,371 9,999(1) Figures as at 31 December 2009 have been restated.10.4. Other commitments31/12/09 31/12/10Insurance activity – Commitments given 1 0Insurance activity – Commitments received 28 31Banking activity – Commitments given 165,728 142,033 (1)Banking activity – Commitments received 86,387 110,221(1) Mainly related to repurchase agreements.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia193

Notes to the consolidated financial statements11. Notes on the consolidated statement of incomeManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements(in millions of EUR – some amounts may not add up due to roundings off)11.1. Interest income - Interest expense 19411.2. Dividend income 19411.3. Net income from associates 19511.4. Net income from financial instrumentsat fair value through profit and loss 19511.5. Net income on investments 19611.6. Fee and commission income and expense 19711.7. Technical margin of insurance activities 19811.8. Other net income 19911.9. Staff expense 19911.1. Interest income – Interest expense31/12/09 31/12/10Interest income 63,980 46,886a) Interest income of assets not at fair value through profit and loss 18,653 16,429Cash and balances with central banks 58 41Loans and advances due from banks 835 609Loans and advances to customers 13,144 11,947Financial assets available for sale 4,257 3,396Investments held to maturity 116 127Interest on impaired assets 86 170Other 157 139b) Interest income of assets at fair value through profit and loss 45,327 30,457Financial assets held for trading 370 183Financial assets designated at fair value 25 14Derivatives held for trading 29,558 19,623Derivatives used for hedging 15,374 10,637Interest expense (58,951) (43,004)a) Interest expense of liabilities not at fair value through profit and loss (11,121) (9,661) (1)Due to banks (1,917) (1,011)Customer borrowings and deposits (1,972) (1,613)Debt securities (6,516) (6,388)Subordinated debts (158) (114)Preferred shares and hybrid capital (15) (15)Expenses linked to the amounts guaranteed by the States (493) (490)Other (50) (30)b) Interest expense of liabilities at fair value through profit and loss (47,831) (33,342)Financial liabilities held for trading (5) (9)Financial liabilities designated at fair value (624) (629)Derivatives held for trading (29,616) (19,724)Derivatives used for hedging (17,586) (12,980)Net interest income 5,029 3,882(1) In 2010, an amount of EUR -73 million was booked as contribution to the Belgian deposit guaranty mechanism.11.2. Dividend income11.10. General and administrative expense 20011.11. Depreciation and amortization 20011.12. Impairment on loans and provisions forcredit commitments 20111.13. Impairment on tangible and intangible assets 20111.14. Impairment on goodwill 20211.15. Provisions for legal litigation 20211.16. Tax expense 20211.17. Earnings per share 20331/12/09 31/12/10Financial assets available for sale 112 80Financial assets held for trading 1 1Financial assets designated at fair value through profit and loss 1 0Total 114 81194 Dexia Annual report 2010

Notes to the consolidated financial statements11.3. Net income from associates31/12/09 31/12/10Income from associates before tax 55 6Share of tax (15) 0Total 39 511.4. Net income from financial instruments at fair valuethrough profit and loss31/12/09 31/12/10Net trading income (96) (98)Net result of hedge accounting (47) 3Net result of financial instruments designated at fair value through profit or lossand result from the related derivatives (1) 70 (34)Change in own credit risk (2) (154) (26)Forex activity and exchange differences 289 157Total 61 2(1) Among which trading derivatives included in a fair value option strategy (240) 102(2) See also note 12.2.H. Credit-risk information about financial liabilities designated at fair value through profit or loss.Result of hedge accounting31/12/09 31/12/10Fair value hedges 7 34Fair value changes of the hedged item attributable to the hedged risk (4,760) 6,081Fair value changes of the hedging derivatives 4,768 (6,046)Cash flow hedges (1) (2)Fair value changes of the hedging derivatives – ineffective portion (1) (2)Discontinuation of cash flow hedge accounting(Cash flows no longer expected to occur) 5 2Hedges of net investments in a foreign operation 3 (48)Fair value changes of the hedging derivatives – ineffective portion (1) 3 (48)Portfolio hedge (61) 16Fair value changes of the hedged item (1,383) 1,221Fair value changes of the hedging derivatives 1,322 (1,204)Total (47) 3Discontinuation of cash flow hedge accounting (cash flows still expected to occur) –amounts recorded in interest margin 11 5(1) Dexia hedged its investment in Dexia Holding Investments (DHI), parent company of FSA group. As this company did a loss on the sale of FSA Inc. and onimpairments on assets of Dexia Financial Products, the FSA GIC activity kept by Dexia, hedge became inefficient and was broken.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia195

Notes to the consolidated financial statements11.5. Net income on investmentsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements31/12/09 31/12/10Gains on loans and advances 91 198Gains on financial assets available for sale 691 708Gains on tangible fixed assets 17 17Gains on assets held for sale 6 15Gains on liabilities 74 68Other gains 3 0Total Gains 882 1,006Losses on loans and advances (144) (391)Losses on financial assets available for sale (1,406) (425)Losses investments held to maturity (1) 0Losses on tangible fixed assets (15) (14)Losses on liabilities (50) (18)Other losses (1) 0Total Losses (1,617) (850)Net impairment 758 139Total 23 296Net impairmentSpecific RiskTotalAllowances Write-backsAs at 31 December 2009Securities available for sale (99) 857 758Total (99) 857 758As at 31 December 2010Securities available for sale (55) 194 139Total (55) 194 139196 Dexia Annual report 2010

Notes to the consolidated financial statements11.6. Fee and commission income and expense31/12/09 31/12/10Income Expense Net Income Expense NetManagement of unit trusts and mutualfunds 289 (19) 270 297 (19) 278Administration of unit trusts and mutualfunds 114 (12) 102 136 (10) 126Insurance activity 62 (4) 58 59 (2) 58Credit activity 173 (13) 160 190 (17) 173Purchase and sale of securities 100 (15) 86 104 (13) 91Purchase and sale of unit trusts andmutual funds 20 (4) 16 23 (3) 19Payment services 263 (89) 174 275 (99) 176Commissions to not exclusive brokers 24 (19) 5 25 (25) 0Financial engineering 30 (1) 29 21 (1) 20Services on securities other thansafekeeping 33 (7) 26 41 (7) 34Custody 166 (37) 129 190 (36) 154Issues and placements of securities 26 (2) 24 17 (1) 16Private banking 29 (6) 24 35 (5) 30Clearing and settlement 19 (10) 9 26 (16) 10Securities lending 47 (16) 31 49 (29) 20Other 112 (28) 84 153 (26) 127Total 1,507 (279) 1,228 1,642 (309) 1,333Fees and commissions related to financial assets and financial liabilities which are not at fair value through profit or loss are belowmateriality.Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia197

Notes to the consolidated financial statements11.7. Technical margin of insurance activitiesManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementspremiums and Technical income from insurance activities31/12/09 31/12/10Premiums and contributions received (1) (2) 2,252 2,918Claims incurred – part of reinsurers (2) 51 62Changes in technical reserves – part of reinsurers (2) (5) 2Other technical income 414 500Income 2,710 3,482Technical expense from insurance activities31/12/09 31/12/10Premiums transferred to reinsurers (1) (2) (125) (147)Commissions and contributions paid (148) (168)Claims incurred (2) (1,575) (1,135)Change in technical reserves (2) (1,129) (2,389)Other technical expenses (82) (5)Expenses (3,059) (3,844)(1) As at 31 December 2009, amounts from FSA were disclosed for EUR 29 million in premiums received and for EUR -4 million in premiums transferred toreinsurers.(2) See also note 9.3. Insurance contracts.Insurance activities are reported in the Dexia banking scheme.Financial income is presented under the various headings of the profit and loss account whilst technical income is to be foundin the technical margin on insurance activities.Technical income is negative in Life insurance.Insurance activities consist of receiving premiums which are invested in financial assets generating revenues to cover:(1) obligations to Life insurance clients: a certain return on investments in Life or to hedge mortality or inactivity risk(2) obligations to Non-life insurance clients in case of claim(3) the company's operating costs.In Life, technical accounts are negative in view of the reservation mechanism: the premium is placed in a reserve and the reserveis capitalised to cover the guaranteed rate (and the profit sharing obligation) due to the client. Financial income generated onLife assets offsets the negative technical accounts. The result of the activity should be assessed taking into account that financialincome.198 Dexia Annual report 2010

Notes to the consolidated financial statements11.8. Other net income31/12/09 31/12/10Exploitation taxes 2 3Rental income from investment property 20 22Other rental income 31 38Other banking income 21 7Other income on other activities (1)(2) 258 289Other income 331 359Exploitation taxes (37) (51)Repair and maintenance on investment properties that generated income duringthe current financial year (2) (2)Other banking expenses (9) (14)Other expense on other activities (3)(4) (245) (219)Other expense (292) (286)Total 38 73(1) Other income on other activities includes other operational income, write-back provisions for other litigation claims and subsidies.(2) Figures as at 31 December 2009 have been restated. An amount of EUR 27 million representing write-back for legal litigations is transferred from “Othernet income“ to “Provisions for legal litigations“.(3) Other expenses on other activities includes other operational expenses for operating lease (other than rental expenses and contingent rents), depreciation andamortization on office furniture and equipment given in operational lease, other operational expenses, provisions for other litigations claims and depreciationand amortization on investment property.(4) Figures as at 31 December 2009 have been restated. An amount of EUR 48 million representing provisions for legal litigations is transferred from “Othernet income“ to “Provisions for legal litigations“.Management reportConsolidatedfinancial statements11.9. Staff expense31/12/09 31/12/10Wages and salaries 1,360 1,358Social security and insurance costs 325 309Pension costs-defined benefit plans 48 68Pension costs-defined contribution plans 27 25Other post-retirement benefits 1 2Stock compensation expense (1) 9 6Long-term employee benefits 4 5Restructuring expenses 1 35Other expenses 72 71Total 1,847 1,878(1) See note 9.7. Share-based payments.(Average FTE) 31/12/09 31/12/10Fully Proportionally TotalFully Proportionally Totalconsolidated consolidatedconsolidated consolidatedSenior Executives 440 20 460 445 20 465Employees 24,076 2,714 26,790 23,908 2,741 26,649Other 29 1 30 33 1 34Total 24,545 2,735 27,280 24,386 2,762 27,148Additional information Annual financial statementsAnnual report 2010 Dexia199

Notes to the consolidated financial statementsManagement report(Average FTE) as at31 Dec. 2009Belgium France Luxembourg Turkey OtherEuropeUnitedStatesSenior Executives 273 38 68 23 36 7 15 460Employees 8,895 2,384 3,076 8,453 2,210 225 1,547 26,790Other 3 17 0 0 5 0 5 30Total 9,171 2,439 3,144 8,476 2,251 232 1,567 27,280(Average FTE) as at31 Dec. 2010Belgium France Luxembourg Turkey OtherEuropeUnitedStatesSenior Executives 270 38 62 42 32 9 12 465Employees 8,340 2,206 2,963 9,296 2,150 202 1,492 26,649Other 1 19 0 0 6 2 6 34Total 8,611 2,263 3,025 9,338 2,188 213 1,510 27,148OtherOtherTotalTotalConsolidatedfinancial statementsAdditional information Annual financial statements11.10. General and administrative expense31/12/09 31/12/10Occupancy 82 79Operating leases (except technology and system costs) 110 112Professional fees 162 199Marketing advertising and public relations 100 114Technology and system costs 197 196Software costs and research and development costs 58 54Repair and maintenance expenses 15 15Restructuring costs other than staff (18) 0Insurance (except related to pension) 18 21Transportation of mail and valuable 56 52Operational taxes 107 88Other general and administrative expense 209 227Total 1,096 1,15611.11. Depreciation and amortization31/12/09 31/12/10Depreciation on land and buildings 90 79Depreciation on other tangible assets 82 85Amortization of intangible assets 127 136Total 298 300200 Dexia Annual report 2010

Notes to the consolidated financial statements11.12. Impairment on loans and provisions for credit commitmentsCollective impairment 31/12/09 31/12/10Allowances Reversal Total Allowances Reversal TotalLoans (416) 412 (5) (331) 500 170Total (416) 412 (5) (331) 500 170Specific impairment 31/12/0911.13. Impairment on tangible and intangible assetsAllowances Reversals Losses Recoveries TotalLoans and advances due from banks 0 93 (6) 0 87Loans and advances to customers (1,037) 272 (93) 9 (850)Other receivables (1) (9) 2 0 0 (7)Commitments (58) 8 0 0 (49)Credit enhancement (specific reserve) (272) 0 0 0 (272)Total (1,376) 376 (99) 9 (1,091)(1) Is published in heading XII. of the Assets.Specific impairment 31/12/10Allowances Reversals Losses Recoveries TotalLoans and advances due from banks (18) 1 0 0 (17)Loans and advances to customers (1,056) 455 (221) 13 (809)Other receivables (1) (1) 47 (34) 0 13Commitments (9) 11 0 0 2Total (1,084) 514 (254) 13 (811)(1) Is published in heading XII. of the Assets.31/12/09 31/12/10Impairment on investment property (1) (51) (1)Impairment on other tangible assets 1 0Impairment on assets held for sale 0 1Impairment on intangible assets (1) (1)Total (51) (1)(1) 2009: impairment on investment property by Pupa Gayrimenkul Kiralama ( EUR -50 million).Impairments are recorded when the criteria are met. A review of the market and sale’s conditions are performed on a regularbasis, at least once a year. If the expected loss on sale is lower than the existing impairment, a reversal of impairment isrecorded.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia201

Notes to the consolidated financial statements11.14. Impairment on goodwillManagement report31/12/09 31/12/10Impairment on goodwill (6) 0The goodwill on Dexia banka Slovensko and Dexia Kommunalkredit Bank Polska has been reviewed and found impaired in2009.11.15 .Provisions for legal litigationsThe information regarding the provisions for legal litigations is presented in the Management report – chapter legal risk –onpage 89.Consolidatedfinancial statementsAdditional information Annual financial statements11.16. Tax expense31/12/09 31/12/10Income tax on current year (248) (140)Deferred taxes on current year (126) (30)Tax on current year result (A) (375) (170)Income tax on previous year 40 2Deferred taxes on previous year 52 (11)Provision for tax litigations (31) 52Other tax expense (B) 61 43Total (A)+(B) (314) (127)Effective corporate income tax chargeThe standard tax rate applicable in Belgium in 2009 and 2010 was 33.99%.Dexia effective tax rate was respectively 27.3% and 18.5% for 2009 and 2010.The difference between the standard and the effective tax rate can be analysed as follows:31/12/09 31/12/10Net income before tax 1,403 924Income and losses from companies accounted for by the equity method 39 5Impairment on goodwill (6) 0Tax base 1,370 919Statutory tax rate 33.99% 33.99%Tax expense using statutory rate 466 312Tax effect of rates in other jurisdictions (133) (166)Tax effect of non-taxable revenues (1) (357) (262)Tax effect of non-tax deductible expenses 192 194Tax effect of utilisation of previously unrecognised tax losses (4) (1)Tax effect from reassessment of unrecognised deferred tax assets 314 695Items taxed at a reduced rate (60) (106)Other increase (decrease) in statutory tax charge (2) (44) (495)Tax on current year result 374 170Tax base 1,370 919Effective tax rate 27.3% 18.5%(1) Mainly non-taxable gains on sales of equity shares.(2) Includes tax deduction on impairment on consolidated shares.202 Dexia Annual report 2010

Notes to the consolidated financial statements11.17. Earnings per shareBasicBasic earnings per share are calculated by dividing the net income attributable to equity holders of the parent by the weightedaverage number of ordinary shares in issue during the year, excluding the average number of ordinary shares purchased by thecompany and held as treasury shares.31/12/09 31/12/10Net income attributable to equity holders of the parent 1,010 723Weighted average number of ordinary shares (millions) (1) 1,846 1,846Basic earnings per share (expressed in EUR per share) (1) 0.55 0.39(1) Figures as at 31 December 2009 have been restated to consider the issuance of new ordinary shares free of charge (bonus shares), distributed to theshareholders.DilutedDiluted earnings per share are calculated by adjusting the weighted average number of ordinary shares outstanding to assumeconversion 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 thesubscription 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 theexercise of the shares options.The potential ordinary shares calculated as above are treated as dilutive when, and only when, their conversion to ordinaryshares would decrease earnings per share.They are antidilutive and not taken into account when their conversion to ordinary shares would decrease loss per share.No adjustment is made to net income attributable to equity holders of the parent as there are no financial instrumentsconvertible in Dexia shares.31/12/09 31/12/10Net income attributable to equity holders of the parent 1,010 723Weighted average number of ordinary shares (millions) (1) 1,846 1,846Adjustment for share options (millions) 0 0Weighted average number of ordinary shares for diluted earnings per share(millions) (1) 1,846 1,846Diluted earnings per share (expressed in EUR per share) (1) 0.55 0.39(1) Figures as at 31 December 2009 have been restated to consider the issuance of new ordinary shares free of charge (bonus shares), distributed to theshareholders.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia203

Notes to the consolidated financial statements12. Notes on risk exposureManagement report(in millions of EUR – some amounts may not add up due to roundings off)12.1. Fair value 20412.2. Credit-risk exposure 21012.3. Information about collaterals 22112.4. Interest-rate repricing risk: breakdownby remaining maturity until next refixinginterest rate 22212.5. Market risk & BSM 22512.6. Liquidity risk 23012.7. Currency risk 23412.8. Insurance risks 234As requested by IFRS 7 § 34, disclosures are based on information internally provided to key management.We also refer to the chapter Risk Management in the Management report.Consolidatedfinancial statementsAdditional information Annual financial statements12.1. Fair valueA. Breakdown of fair valueIn accordance with our valuation rules, fair value is equal to accounting value for some kinds of items.A.1. Breakdown of fair value of assetsCarryingamount31/12/09 31/12/10Fair value Difference CarryingamountFair valueDifferenceCash and balances with centralbanks 2,673 2,673 0 3,266 3,266 0Loans and advances due from banks 47,427 46,018 (1,409) 53,379 53,463 84Loans and advances to customers 353,987 350,503 (3,485) 352,307 346,344 (5,963)Financial assets held for trading 6,362 6,362 0 5,347 5,347 0Financial assets designated at fairvalue 3,715 3,715 0 3,941 3,941 0Financial assets available for sale 103,685 103,685 0 85,921 85,921 0Investments held to maturity 1,565 1,686 121 1,446 1,480 34Derivatives 40,728 40,728 0 47,077 47,077 0Fair value revaluation of portfoliohedge 3,579 3,579 0 4,003 4,003 0Investments in associates 171 187 16 171 186 15Other assets (1) 9,387 9,387 0 9,827 9,827 0Non-current assets held for sale 4,350 4,423 73 50 50 0Total 577,629 572,946 (4,684) 566,735 560,905 (5,830)(1) Includes Tangible fixed assets, Intangible assets and goodwill, Tax assets and Other assets.Figures as at 31 December 2009 have been restated.The line “Fair value revaluation of portfolio hedges“ corresponds to the remeasurement of the interest-rate risk on assetscovered by portfolio hedges. These assets are included in the lines “Loans and advances due from banks“, “Loans and advancesto customers“.204 Dexia Annual report 2010

Notes to the consolidated financial statementsA.2. Breakdown of fair value of liabilitiesCarryingamount31/12/09 31/12/10Fair value Difference CarryingamountFair valueDifferenceDue to banks 123,724 121,157 (2,567) 98,490 97,285 (1,205)Customer borrowings and deposits 120,950 120,740 (210) 127,060 126,887 (173)Financial liabilities held for trading 275 275 0 763 763 0Financial liabilities designated at fairvalue 19,070 19,070 0 19,390 19,390 0Derivatives 58,364 58,364 0 72,347 72,347 0Fair value revaluation of portfoliohedge 1,939 1,939 0 1,979 1,979 0Debt securities 213,065 208,788 (4,277) 210,473 210,002 (471)Subordinated debts 4,111 3,912 (199) 3,904 4,083 179Other liabilities (1) 19,811 19,811 0 21,600 21,600 0Liabilities included in disposal groupsheld for sale 4,332 4,332 0 0 0 0Total 565,641 558,388 (7,253) 556,006 554,336 (1,670)(1) Includes Technical provisions from insurance companies, Provisions and other obligations, Tax liabilities, Other liabilities.Except for liabilities “Held for trading“ and “Designated at fair value“, the own credit spread on liabilities has been consideredas unchanged in the determination of the fair value.The line “Fair value revaluation of portfolio hedge“ corresponds to the remeasurement of the interest-rate risk on liabilitiescovered by portfolio hedges. These liabilities are included in the lines “Due to banks“, “Customer borrowings and deposits“and “Debt securities“.B. Analysis of fair value of financial instrumentsThe following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fairvalue, grouped into Levels 1 to 3 based on the degree to which the fair value is observable.B.1. Assets31/12/09 31/12/10Level 1 (1) Level 2 (2) Level 3 (3) Total Level 1 (1) Level 2 (2) Level 3 (3) TotalFinancial assets held fortrading 1,432 1,607 3,323 6,362 1,119 720 3,508 5,347Financial assets designatedat fair value – equities 2,539 31 0 2,570 3,072 47 0 3,119Financial assets designatedat fair value – other thanequities 769 166 210 1,145 491 44 287 822Financial assets available forsale – loans and receivables 0 43 0 43 0 43 0 43Financial assets available forsale – bonds 30,577 18,546 51,087 100,209 24,428 16,155 42,639 83,222Financial assets available forsale – equities 2,369 207 856 3,433 1,585 234 837 2,656Derivatives 25 37,464 3,239 40,728 17 42,028 5,032 47,077Total 37,711 58,064 58,715 154,490 30,712 59,271 52,303 142,286(1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.(2) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (i.e. as prices) or indirectly (i.e. derived from prices).(3) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observablemarket data (unobservable inputs).Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia205

Notes to the consolidated financial statementsManagement reportB.2. Liabilities31/12/09 31/12/10Level 1 (1) Level 2 (2) Level 3 (3) Total Level 1 (1) Level 2 (2) Level 3 (3) TotalFinancial liabilities held fortrading 212 62 1 275 450 313 0 763Financial liabilitiesdesignated at fair value 0 15,691 3,379 19,070 238 17,556 1,596 19,390Derivatives 3 54,492 3,869 58,364 3 63,484 8,860 72,347Total 215 70,245 7,249 77,709 691 81,353 10,456 92,500(1) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.(2) Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (i.e. as prices) or indirectly (i.e. derived from prices).(3) Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observablemarket data (unobservable inputs).Consolidatedfinancial statementsC. Transfer between Level 1 and Level 2 fair value hierarchy31/12/09 31/12/10Assets From 1 to 2 From 2 to 1 From 1 to 2 From 2 to 1Financial assets held for trading 321 32 3 15Financial assets available for sale – bonds 33 1,105 1,968 95Financial assets available for sale – equities 0 0 0 3Derivatives 130 0 0 0Total 484 1,137 1,971 113In 2010, bonds emitted by Republic of Greece and Republic of Portugal were transferred from level 1 into level 2.Additional information Annual financial statements31/12/09 31/12/10Liabilities From 1 to 2 From 2 to 1 From 1 to 2 From 2 to 1Financial liabilities held for trading 0 1 0 0Total 0 1 0 0206 Dexia Annual report 2010

Notes to the consolidated financial statementsD. Reconciliation Level 3D.1. AssetsOpeningbalanceTotalgains/losses inP&L2009Total Purchase Sale SettlementTransfersgains/losses inOCIinLevel3Transferout ofLevel 3Changesin scopeof consolidationConversiondifferencesOther (1) ClosingFinancial assets heldfor trading 4,459 1,086 0 260 (2,321) (99) 0 (224) 0 162 0 3,323Financial assetsdesignated at fair value– other than equities 184 (32) 0 173 (15) 0 0 (102) 0 2 0 210Financial assets availablefor sale – bonds 51,411 844 1,108 1,124 (1,429) (1,206) 1,828 (2,376) 0 (191) (26) 51,087Financial assets availablefor sale – equities 959 7 16 85 (80) (5) 13 (32) (2) 20 (125) 856Derivatives 5,034 404 0 5 (734) (1,618) 0 (52) 0 200 0 3,239Total 62,047 2,309 1,124 1,647 (4,579) (2,928) 1,841 (2,786) (2) 193 (151) 58,715(1) The assets of Dexia Epargne Pension are transferred to non-current assets held for sale.OpeningbalanceTotal gains/losses inP&LTotalgains/losses inOCITransfersin Level3Transferout ofLevel 32010Purchase Sale SettlementConversiondifferencesFinancial assets held fortrading 3,323 257 0 15 (1,430) (14) 1,257 (15) 115 3,508Financial assetsdesignated at fair value– other than equities 210 4 0 0 (97) (4) 173 0 1 287Financial assets availablefor sale – bonds 51,087 779 (740) 586 (6,714) (3,196) 1,024 (1,320) 1,133 42,639Financial assets availablefor sale – equities 856 (3) 41 55 (128) (13) 65 (46) 10 837Derivatives 3,239 1,333 3 2 (9) (328) 459 (461) 794 5,032Total 58,715 2,370 (696) 658 (8,378) (3,555) 2,978 (1,842) 2,053 52,303ClosingManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia207

Notes to the consolidated financial statementsD.2. LiabilitiesManagement reportOpening balanceTotal gains/losses in P&LPurchase2009DirectoriginationSettlementTransfer out ofLevel 3ConversiondifferencesFinancial liabilities held fortrading 0 0 1 0 0 0 0 1Financial liabilitiesdesignated at fair value 3,331 29 0 88 (69) 0 0 3,379Derivatives 4,843 (707) 0 0 (63) (5) (199) 3,869Total 8,174 (678) 1 88 (132) (5) (199) 7,249ClosingConsolidatedfinancial statementsAdditional information Annual financial statementsOpeningbalanceTotal gains/losses inP&LEvolution of level 3 instruments during 2009:• Some markets recovered during 2009, such as for Germanand French covered bonds and some bank securities, so thoseinstruments moved in the fair value hierarchy from level 3 tolevel 2;• The column “Total gains/losses in P/L“ can not be analysedon a stand alone basis, as some assets/liabilities classified inamortized cost or in level 1 or 2 may be hedged by derivativesclassified in level 3. We refer to the note 11.4. – Result ofhedge accounting – to have an economic view on the P/Limpact;• Improvement in internal model as well as increasing theback-testing resulted in a transfer between levels; mainlyfrom level 3 to level 2;• During its review of classification in levels in 2009, Dexiaidentified that some senior banks bonds, classified as liquidand therefore level 2, became illiquid. By consequence, theywere transferred to level 3;• High sales and low purchases of financial instruments aremainly explained by management decision to:(i) stop proprietary trading activities; and(ii) decrease Dexia's bond portfolio.However, impact in P&L is rather limited due to fact thatstructured financial instruments are fully hedged: not only theinterest-rate risk but also the risks attached to the structurevia back-to-back derivatives.Evolution of level 3 instruments during 2010:2010Purchase Sale Direct SettlementoriginationFollowing the reassesment of some assumptions on derivatives,derivatives included in some structured issuances are nowvalued as level 3.Transfers inLevel3Transfer outof Level 3ConversiondifferencesFinancial liabilities held fortrading 1 0 0 (1) 0 0 0 0 0 0Financial liabilitiesdesignated at fair value 3,379 5 0 0 365 (1,145) 621 (1,629) 0 1,596Derivatives 3,869 3,531 23 (2) 0 (990) 3,608 (639) (540) 8,860Total 7,249 3,536 23 (3) 365 (2,135) 4,229 (2,268) (540) 10,456ClosingE. sensitivity of level 3 valuations toalternative assumptionsFor its Mark-to-Model price, Dexia uses a discount cash-flowmodel. The sensitivity measures the impact on fair value ofalternative assumptions used for unobservable parameters atclosing date.When using its models, Dexia decided to elaborate alternativeassumptions on the unobservable parameters, mainly:• credit spreads; depending on availability of credit spreadsfor the same counterparty, or credit spreads based on similarcounterparties, similar sectors or by using credit risk indexedon liquid CDS indexes;• liquidity premiums; that are mainly used in the context ofcalculating the fair value for bonds and mainly depend on theability of qualifying as eligible for the refinancing at CentralBanks;• illiquidity of the financial instrument; depending on theliquidity of the market for the same instrument, similarproducts, including the analysis of the difference between bidand ask prices for real transactions.Tests have been performed on all financial instrumentsclassified in level 3. The main impacts are the following:• For level 3 bonds in AFS, in 2010, the sensitivity of the AFSreserve to alternative assumptions was estimated between apositive impact of EUR +563 million and a negative impact ofEUR -372 million, while in 2009, it was estimated between apositive impact of EUR +377 million and a negative impact ofEUR -189 million;• Negative Basis Trades are considered as one single producton the market, and are therefore tested for the bond and itsrelated CDS together. The main assumption having an impact208 Dexia Annual report 2010

Notes to the consolidated financial statementson their fair value is the unwinding (bid-ask spread) impact. In2010, based on the important number of unwinds performedby Dexia since 2009, and taking into account the stock ofremaining NBT transactions, the positive impact (unwindpremium of 2009) was EUR +7 million whereas the negativeimpact (unwind premium of 2010) gave an impact of EUR-52 million. For 2009, the positive impact (median unwindpremium of 2009) was EUR +5 million whereas the negativeimpact (highest unwind premium of 2009) gave an impact ofEUR -18 million.Dexia tested the impact of different unobservable parametersfor its derivatives, like exotic currencies, interest-rate volatility(unobservable vega and smile) and correlation, modeluncertainties, extrapolation for long term periods, equities'sensitivities (unobservable vega, dividend volatility, correlation,etc). The main impacts relate to credit spread on CDS, wherethe impact in 2010 was estimated at EUR +8.8 million (positivescenario) versus EUR -9 million (negative scenario) before tax,while in 2009, it was estimated at EUR +32 million (positivescenario) or EUR -28 million (negative scenario) before tax.F. Disclosure of difference betweentransaction prices and modeled values(deferred Day One Profit)No significant amounts are recognised as deferred Day OneProfit (DOP) as at 31 December 2009 nor as at 31 December2010.DOP is recognised up-front on simple products, like Interest-Rate Swaps (IRS) or complex products (like structuredtransactions) that are backed-to-back.Day one profit taken up-front amounted respectively EUR 23million and EUR 28 million as at 31 December 2009 and asat 31 December 2010. The amounts are recognised in Nettrading income (disclosure 11.4.).Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia209

Notes to the consolidated financial statementsManagement report12.2. Credit-risk exposureA. Analysis of total Dexia GroupexposureCredit-risk exposure is disclosed in the same way as reportedto the Management and is:• the net carrying amount for balance-sheet assets other thanderivative contracts (i.e. accounting value after deduction ofspecific impairment);• the fair value for derivatives contracts;• the full commitment amount for off-balance-sheet commitments.The full commitment amount is either the undrawnpart of liquidity facilities or the maximum amount Dexia iscommitted to pay for the guarantees it has granted to thirdparties.Credit-risk exposure is broken down by geographical regionand by counterpart taking into account the guaranteesobtained. This means that when credit-risk exposure isguaranteed by a third part whose weighted risk (for Baselreglementation) is lower than the one of the direct borrower,the exposure is then reported to the guarantor's geographicalregion and activity sector.As an exception, Dexia does not apply this “substitutionprinciple“ to the Dexia Financial Products' portfolio in thisbreakdown. Consequently the guarantee provided by theFrench and the Belgian governments on this portfolio is nottaken into account.Credit-risk exposure is based on a scope that encompasses thefully-consolidated subsidiaries of Dexia Group and includes50% of the joint venture RBC Dexia Investor Services.Consolidatedfinancial statementsAdditional information Annual financial statementsA.1. Exposure by geographical region31/12/09 31/12/10Belgium 110,645 111,300France 103,520 99,549Germany 40,085 36,743Greece 6,812 5,349Ireland 2,619 2,167Italy 58,263 51,078Luxembourg 12,725 13,145Spain 37,710 34,698Portugal 7,647 5,942Other EU countries 56,145 51,331Rest of Europe 14,005 11,180Turkey 10,629 14,600United States and Canada 82,262 74,758South and Central America 3,950 4,015Southeast Asia 3,483 2,672Japan 15,072 9,079Other (1) 20,558 20,011Total 586,131 547,617(1) Includes supranational entities, like European Central Bank.A.2. Exposure by category of counterpart31/12/09 31/12/10Central governments 74,518 63,877Local public sector 265,223 253,067Corporate 49,949 51,014Monoline 11,056 11,544ABS/MBS 36,272 26,047Project finance 17,508 19,127Individuals, SME, self-employed 45,197 48,324Financial institutions 85,812 74,359Other 596 258Total 586,131 547,617210 Dexia Annual report 2010

Notes to the consolidated financial statementsA.3. Credit quality of Dexia FinancialProducts' financial assetsA.3.1. History and nature of the portfolioOn 14 November 2008, Dexia entered into a sale andpurchase agreement with Assured Guaranty (Assured)relating to the sale of Financial Security Assurance HoldingsLtd (hereafter FSA Insurance), excluding its Financial Productsactivity (hereafter Dexia FP).The Dexia FP activity consisted, in substance, in (i) takingdeposits from third parties (in general from issuers – localauthorities or ABS issuers of instruments which whereenhanced by FSA Inc.) in favor of whom Dexia FP undertakesto remunerate such deposits at a determined level, pursuantto Guaranteed Investment Contracts, (“GICs”) and (ii)the reinvestment of these deposits, with the objective ofgenerating a net positive interest rate margin.Even though its initial rating was mostly AAA, Dexia FP’s assetportfolio includes a substantial proportion of instrumentsdirectly or indirectly linked to the American real-estate sectorwith a rating and/or a market value that have significantlydeteriorated because of the sub-prime crisis and the globalfinancial crisis.A.3.2. Consequences of the exclusion of the FPand States’ guaranteeThe FP activity was excluded from the sale to Assured.However, to the extent that FSA Inc. (the former subsidiaryof FSAH, renamed Assured Guaranty Municipal Holdings Inc.which provides, directly or through its subsidiaries, the creditenhancement activities of the Group) guarantees assets andliabilities of the FP activity, the exclusions of this activity fromthe scope of the sale necessarily means that the Dexia Groupmust guarantee the FP activities, so that guarantees given byFSA Inc. are not called upon. Given the financial situation ofthe Dexia Group, and to the maximum theoretical amountof the guarantee given by Dexia, it was considered vital bythe purchaser, that Dexia be itself guaranteed by the Belgianand French States. The share sale agreement entered intowith Assured therefore stipulated as a condition to the salethat either Dexia should post collateral (e.g. cash securities oreligible instruments), but in excessive proportions, at the timeof the signature of the agreement, or that a state guaranteeshould be given.The Belgian and French States consented to giving thisguarantee, and agreed with Dexia, under certain conditions,that their recourse against Dexia under this guarantee wouldbe converted into Dexia shares. That conversion right isorganized through the subscription rights.For a more detailed description of the guarantee, we referto the note 9.4.C. to the consolidated financial statements,Related parties transactions – Transactions with the Belgian,French and Luxembourg StatesThe main conditions of the Guarantee Agreement and theGuarantee Reimbursement Agreement are, in substance, thefollowing:• Dexia FP put. Dexia SA and Dexia Crédit Local SA (“DCL”)(Dexia and DCL are hereafter referred to as the “DexiaGuarantors”) entered into a put agreement whereby Dexia FPis entitled to sell to Dexia and/or DCL certain assets includedin the Dexia FP portfolio existing at the signature of theguarantee upon the occurrence of certain trigger events.• States’ guarantee. The Belgian and French States eachundertook to guarantee, severally and not jointly, theobligations of Dexia SA pursuant to the put agreement up toan amount equal to USD 16.98 billion and up to 62.3711%for the Belgian State and 37.6289% for the French State.• Guaranteed portfolio. The portfolio to which this putrelates is the Dexia FP portfolio after deduction of the“excluded assets” for a nominal amount of USD 4.5 billion,to the effect that the par value of the assets included in theportfolio to which the put relates is equal to USD 9.7 billionon 31 December 2010. The excluded assets are subject toa put contract between the Dexia Guarantors on the onehand and Dexia FP on the other, but the obligations of Dexiapursuant to this second put contract are not guaranteed bythe States.• Trigger events. Dexia FP has undertaken vis-à-vis Assuredto exercise the put in certain situations in order to assure theeffectiveness of the protection mechanism. These differentsituations are:(i) an asset default, i.e. a failure to pay the principal or theinterest due on the assets of the portfolio at the final maturity;in this case the put relates to those assets and the assets aresold to the Dexia Guarantors at their residual par value (i.e.face value) increased by the amount of interest due.(ii) a liquidity default, i.e. a failure by Dexia (at any date priorto 31 October 2011) to comply with its obligations pursuantto the liquidity agreement entered into or to be entered intoin favor of Dexia FP; in this case the put relates to a numberof assets whose residual par value is equal to the amountof the liquidity default, and the assets will be sold to theDexia Guarantors at their residual par value increased by theamount of interest due.(iii) a collateral default, i.e. a failure by Dexia to provide,between 29 September and 31 October 2011, collateral toDexia FP in an amount equal to the difference between theamount of the liabilities pursuant to the GICs and the marketvalue of the assets of Dexia FP after applying a haircut tothese assets; in this case, the put relates to a number ofassets whose residual par value is equal to the amount ofthe collateral default and the assets are sold to Dexia at theirresidual par value increased by the amount of interest due.(iv) an insolvency of Dexia (a defined in the GuaranteeAgreement) in which case the put relates to all the assetsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia211

Notes to the consolidated financial statementsManagement reportof Dexia FP portfolio to which the put option relates or ona number of assets whose par value is equal to the totalamount of the liabilities pursuant to the GICs if this amount islower. The assets are sold at their residual par value increasedby the amount of interest due.A.3.3. Credit quality of assetsWithin the portfolio, the most sensitive exposures as at31 December 2010, are mainly USD 9 billion of US RMBSof which 89% are Non Investment Grade as well asUSD 200 million of Triple-X exposures (Structured Financepositions) of which 50% are Non Investment Grade.The expected weighted average life is around 9.2 years. Asignificant portion of the RMBS portfolio has contractualmaturity after 2035 and up until 2057 for the longestmaturity.Consolidatedfinancial statementsAdditional information Annual financial statementsBalance (in millions of USD)AAA AA A BBB BB B CCC&below TOTALRMBS 185 573 182 55 348 398 7,300 9,041Subprime 141 481 167 45 281 315 5,026 6,456Alt-A 44 75 15 9 67 22 1,556 1,788Option ARM - 11 - - - 11 475 497CES - - - - - 9 113 122HELOCs - 7 - - - 42 101 150ABS CDO - - - - - - 30 30Other ABS - 359 127 225 100 - - 811CLO - 174 92 74 - - - 340CMBS - - - 151 - - - 151FSA Refi - 119 - - - - - 119Triple-X - 65 35 - 100 - - 200Other assets 1,978 466 400 895 100 65 - 3,905Corporate 125 - - - - - - 125Demutualization - 63 - 25 - - - 88Domestic IOU - - 68 14 - - - 82Full Faith US 1,067 - - - - - - 1,067Military Housing - - 59 504 - - - 563Municipal - 392 77 225 100 65 - 858Trust Preferreds - 11 - - - - - 11UK Regulated Utility - - 196 129 - - - 325US Agency 786 - - - - - - 786TOTAL December 2010 2,163 1,398 709 1,175 548 463 7,300 13,757% Total 16% 10% 5% 9% 4% 3% 53% 100%TOTAL December 2009 2,464 1,644 1,400 1,161 1,071 1,435 6,213 15,387% Total 16% 11% 9% 8% 7% 9% 40% 100%The main macroeconomic evolutions and assumptionsdeveloped by Dexia’s economists that may impact the recoveryof the portfolio are the following ones:A volatile economic environment despite recentpositive indicatorsAccording to Dexia’s economists, the economic situation inthe US has recently evolved positively. After a difficult secondand third quarter 2010, in the fourth quarter 2010 weobserved an improvement in consumption, investment fromcorporations and GDP. This improvement in GDP is expectedto continue in first quarter 2011 mainly driven by recent taxcuts.As a whole since the beginning of the crisis, GDP hasbeen very volatile and according to Dexia’s economists, thissituation may not stabilize before 2013 and as long as theUS households and the US states continue to re-balance theirfinances. GDP is expected to grow by 2.6% in 2011 versus2.9% in 2010.On the unemployment side, while new jobs are slowlybeing created, employment remains substandard, and theunemployment rate is likely to decline at a slow pace. Finally,due to the expectation of mild to low inflation, Dexia’seconomists expect real term wages to improve in 2011, thussustaining consumption.212 Dexia Annual report 2010

Notes to the consolidated financial statementsThe stock of homes will continue to weigh heavilyon the US real estate market at least in 2011According to Realty Trac (1) , foreclosures reached 1 millionunits in 2010 and should continue at this level into andbeyond 2011. The US real estate market is still in the midstof a deep crisis and there remains a large stock of homesfor sale. Based on the current level of housing stocks andthe assessed shadow inventory (properties from borrowers indefault on their loan and which are very likely to appear onthe market for sale in the next few months) that may cometo the market within the next 2 to 3 years, it could take 4 to6 years before the real estate market normalizes. Therefore,Dexia’s economists expect a slight further decline in prices in2011.A.3.4. Accounting value and treatmentThe Dexia FP portfolio has a net accounting value of USD 9.9billion as at 31 December 2010. This amount is the net of atotal portfolio at par of USD 14.3 billion, less collective andspecific impairments amounting USD 2.2 billion and negativeAFS reserves amounting USD 2.2 billion as well. Within thetotal portfolio of USD 14.3 billion, USD 0.4 billion are notguaranteed bonds (2) and interests accruals amounts USD 0.1billion, giving the portfolio analyzed in point A.3.3. “Creditquality of assets”, of USD 13.8 billion.On 1 October 2008, in accordance with IAS 39, Dexiareclassified in Loans and Receivables (from the Available-for-Sale category) the illiquid part of the Dexia FP portfolio, whichincludes all instruments exposed to the US RMBS market.As a consequence of the reclassification, the Dexia FP portfoliois now composed of two parts:1/ Available-for-Sale assets, which are high quality liquidinvestments at fair value through other comprehensiveincome. The net accounting value of USD 2,742 millionincludes USD 408 million of highly liquid bonds not coveredby the States’ guarantee.The net AFS portfolio includes a negative AFS reserve (beforetax) of USD 0.2 billion. The AFS portfolio value varies withthe evolution of the fair value of the underlying bonds. Nocollective impairment can be recorded on assets classifiedin AFS portfolio. In case of specific impairment, the AFSreserve is recorded in result of the period, and the differencebetween the recoverable amount and the net accountingvalue is recorded in the net interest income, based on theremaining life of the related asset (amortization using theeffective interest rate). No impairment is recorded on this AFSportfolio.2/ Reclassified Loans and Receivables which are illiquidinvestments and subject to both specific and collectiveimpairments: net accounting value of USD 7,196 million asat 31 December 2010.The Loans & Receivables portfolio includes bonds that havebeen reclassified at fair value on 1 October 2008, due to theilliquidity of some markets. The negative AFS reserve fromthat date was “frozen” and is amortized on the remaininglife of the related bonds via the effective interest rate, withrecording in P&L this net negative AFS reserve in case ofsale or of impairment. The negative AFS reserve (before tax)amounts USD 2 billion as at 31 December 2010.A collective impairment has been set up at the moment ofreclassification and is updated on a quarterly basis based onthe evolution of the not individually impaired portfolio. Thecollective impairment is based on different assumptions thatmay influence the level of impairments (see points A.3.3. andA.3.5.) and amounts USD 438 million as at 31 December2010.Specific impairments amount to USD 1,742 million as at 31December 2010. Specific impairments are decided by theImpairment Committee based on its evaluation of incurredlosses. This evaluation takes into account the expectedshortfall of payment of principal and/or interests, theirprobable realization in the near future and its own overallestimation of the situation of the underlying portfolio. Oncea security is deemed impaired on a specific basis, all its futurecash-flows are taken into account for the calculation of theimpairment. According to IAS 39, for reclassified bonds in L&R,the interest rate used to calculate the Net Present Value ofCash Flows is not the original interest rate (at purchase date)but the effective interest rate at reclassification date, meaningthat this interest rate may be high if the market value of thebond at reclassification date was low. This implies that thenet unamortized “frozen” AFS reserve is recycled into result,in addition with expected missing cash flows. The differencebetween the recoverable amount and the net accountingamount after impairment is subsequently recorded in the netinterest income, like for AFS bonds.The total impairments amount therefore to USD 2,252million on Reclassified Loans and Receivables which iscomposed of collective impairments of USD 438 million,specific impairment of USD 1,742 million and effect of theloss of USD 72 million recorded on the exchange of assets(commutation) .(1) Founded in 1996, RealtyTrac® (www.realtytrac.com), is the leading online marketplace of foreclosure properties, with more than 1.5 million default, auctionand bank-owned listings from over 2,200 U.S. counties, along with detailed property, loan and home sales data. The company’s mission is to make it easier forconsumers, investors and real estate professionals to locate, evaluate, buy and sell properties. RealtyTrac collects and aggregates foreclosure data from morethan 2,200 counties, covering more than 90 percent of U.S. households, appends the data with estimated property values, comparable sales, loan history, taxlien and bankruptcy records, trustee and lender information and property details and updates the entire database twice daily.(2) Bonds purchased after the granting of the guarantee.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia213

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsEvolution of the portfolio (in millions) 2009 – USD 2009 – EURO 2010 – USD 2010 – EUROAFS portfolio 2,467 1,713 2,742 2,046L&R portfolio 8,273 5,746 7,197 5,371Shape of the Conditional Default Rate (CDR) curve (weighted average) – Subprime 06 & 073025201510Gross amount 10,273 7,135 9,377 6,998Specific impairments (1,656) (1,150) (1,742) (1,300)Collective impairment (344) (239) (438) (327)Total 10,740 7,459 9,938 7,417Exchange rate USD/EUR: 31/12/10: 1.3399 and as at 31/12/09: 1.4399Dexia FP has also realised losses based on sale of assetsand on missing cash flows (shortfalls). The realised lossesrecognized from inception until 31 December 2010 amountsto USD 624 million.A.3.5. Assessment of expected economic lossesRisk management estimates quarterly expected losses onthe total remaining portfolio (AFS and L&R portfolio) based onmodels using discounted cash flows, including assumptionsthat are also used for the collective impairments on notimpaired bonds included in the L&R portfolio. Projectedeconomic losses are based on models and assumptions andalso include a reserve for model and parameters risksThe total future economic losses estimated by Dexiatherefore amount USD 1,796 million, being expected in thefuture, up to the maturity of the securities involved whichcan be far on time, over 20 years. They represent themanagement’s evaluation as at 31 December 2010 of the netpresent value (discounted at purchase spread) of the lossesthe portfolio could generate. Dexia confirms its estimates aredone with the best of Dexia’s knowledge and appreciation ofthe US market.TodayBase Case 2007 SubprimeThus, Dexia adjusted its 4Q 2010 scenario for US RMBSbased on the prior economic uncertainties but also takinginto account the recent events on the real estate market. Asat end December 2010, the amount of projected economiclosses have been estimated at USD 1.79 billion in addition toUSD 0.6 billion of realised losses.In a context characterised by a volatile economic environmentdespite recent positive indicators in the United States andlarge stocks of homes which will continue to weigh heavilyon the real estate market at least in 2011, Dexia adapted itsscenario taking into account the following considerations:• Over the past two years, servicers of mortgage loans havedramatically changed the way they treat seriously delinquentloans by modifying a significant part of borrowers by extendingthe scheduled maturity of the loans or reducing the interestrates (especially Subprime borrowers).These modifications aretranslating into new amortization schedules for borrowers bydecreasing the interest rate and thus reducing the monthlypayments. However, Dexia considers that a significantproportion of these modified borrowers should re-defaulton time. While default rates have improved in the last fewmonths due to these modifications, Dexia decided to extendits default curves to reflect this risk. Then, Dexia does notexpect default rates to come back to the level of thepre-crisis before 7 years.Base Case 2006 Subprime50jan-08apr-08jul-08oct-08jan-09apr-09jul-09oct-09jan-10apr-10jul-10oct-10Month 2Month 5Month 8Month 11Month 14Month 17Month 20Month 23Month 26Month 29Month 32Month 35Month 38Month 41Month 44Month 47Month 50Month 53Month 56Month 59Month 62Month 65Month 68Month 71Month 74Month 77Month 80Month 83Month 86Month 89Month 92Month 95Month 98Month 101Month 104Month 107Month 110214 Dexia Annual report 2010

Notes to the consolidated financial statements• In addition, the modifications have also been translated inthe model into interest rate reductions between 100 and 300bps (reducing the projected excess cash flow in our structures)and capitalization of the previously unpaid balances, bothbased on data observed over the previous 6 months.• At last, due to the weak visibility of home prices, the recentslight increase in observed severities, and trying to considerthe potential impact “foreclosure freeze” could have onloss severity, Dexia decided to take a more conservativeseverity assumption by applying a severity curve flatfor life (previously in 3Q 2010 it declined over timeafter two years).At last an active workout process has been recently launchedby Dexia to optimize recovery on the US RMBS portfolio:• In January 2011, Dexia filed lawsuit against certain partiesrelating to US RMBS purchased by Dexia during 2005, 2006and 2007;• Full-time RMBS recovery activity with a dedicated experiencedteam in New York will be implemented in 2011;• However, at this stage Dexia does not take intoaccount any potential positive impacts of initiatives inthe market but also within Dexia related to Put Backs orLitigation procedures (1) .A.3.6. Sensitivity analysisAs at 31 December 2010, based on the recent evolution ofthe portfolio, Dexia Base Case Scenario showing a USD 1,796million of projected economic losses assumes the followingkey changes in the model parameters: (i) the current defaultrates used for projections (end November 2010) would notimprove within the next 3 years and would need 4 additionalyears to go back to the levels which, in most cases, wouldstay above pre-crisis ones, (ii) current loss severity rates (lossexpected on a property that would have been sold followinga foreclosure process) would not show any improvement upuntil the end of the transactions.Dexia quarterly performs a sensitivity analysis on theestimation of economic losses. Key results of this analysis arethe following:• For instance, under a scenario based on deteriorated defaultrates vs. the base case (more limited recovery of defaultswithin 7 years) coupled with a higher loss severity (+5%compared to the current levels) that would imply a futherdeterioration in home prices with no improvement up untilthe end of the transactions, the expected economic losseswould increase to USD 2.3 billion;• As another example, under a scenario based on a flat CreditDefault Rates, severity loss rates and prepayments rates curves“for ever” starting from the current levels (thus assumingthat the current levels for these key parameters would neverimprove up until the end of the transactions), the expectedeconomic losses would increase to USD 2.8 billion;• A faster recovery in the US economy by 18 months comparedto the Base Case (improvement expected in 30 months insteadof 48 months in the Base Case), would decrease the expectedeconomic losses to USD 1.3 billion.B. Credit-risk exposure by class of financial instruments31/12/09 31/12/10Financial assets available for sale (excluding variable income securities) 101,441 81,976Financial assets designated at fair value (excluding variable income securities) 490 364Financial assets held for trading (excluding variable income securities) 6,056 4,919Loans and advances (at amortised cost) 359,846 349,310Investments held to maturity 1,611 1,460Derivatives 8,111 9,043Other financial instruments 1,801 2,401Loan commitments granted 68,624 57,397Guarantee commitments granted 38,152 40,748Total 586,131 547,617Management reportConsolidatedfinancial statementsAdditional information Annual financial statements(1) Recovery options to consider for every RMBS platform or CUSIP include (i) remedies based on the RMBS contracts, including the right to putback loansand (ii) non-contractual remedies, such as direct lawsuits against defendants such as the RMBS underwriters, originators, servicers and other parties based onfraud, securities law violations and other wrongdoing. Litigation can also result from pursuing contractual remedies, in the form of ‘breach of contract’ litigation(e.g., to force a party to honor its obligation to repurchase bad loans).Annual report 2010 Dexia215

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsDexia holds financial collateral and physical collateral.The bulk of the financial collateral is composed of cashcollaterals and term deposits, and to a lesser extent, ofinvestment grade bonds (mainly AAA- AA sovereigns orbanking issuers).Physical collateral is mainly composed of mortgages onAs Dexia rating methodology is not yet fully implementedin DenizBank's organization, and as few external ratings areavailable on Turkish exposures, Dexia reports DenizBank in aseparate column. However, the preservation of the internalAAA to AA-A+ to BBBgrade31/12/09Non Unrated DenizBank (1) TotalinvestmentgradeFinancial assets available for sale(excluding variable income securities) 45,857 46,327 5,220 585 1,035 99,023Financial assets designated at fair value(excluding variable income securities) 82 238 20 149 0 490Financial assets held for trading(excluding variable income securities) 2,862 2,518 208 403 50 6,040Loans and advances (at amortised cost) 176,716 132,982 31,579 8,316 9,038 358,633Investments held to maturity 563 677 1 0 370 1,611Derivatives 3,250 3,764 555 434 39 8,042Other financial instruments 98 47 21 1,614 15 1,795Loan commitments granted 41,828 18,059 4,292 1,768 2,393 68,340Guarantee commitments granted 18,557 13,927 2,264 873 2,428 38,051Total 289,813 218,539 44,161 14,143 15,368 582,024AAA to AA-A+ to BBBgraderesidential or small commercial real estate and pledges onvarious other assets (receivables, business goodwill).Only financial collateral eligible under Basel II and directly heldby Dexia are considered.Collateral held mainly covers Loans and Advances and Offbalance-sheetcommitments.C. Credit quality of financial assets neither past due nor impairedscorings of DenizBank and of the credit risk monitoringsystems allowed to keep a complete view on DenizBank'sportfolio risks.31/12/10Non Unrated DenizBank (1) TotalinvestmentgradeFinancial assets available for sale(excluding variable income securities) 36,448 38,942 4,700 234 1,551 81,876Financial assets designated at fair value(excluding variable income securities) 61 252 21 28 0 361Financial assets held for trading(excluding variable income securities) 2,081 2,388 257 40 142 4,908Loans and advances (at amortised cost) 157,062 134,928 35,897 5,973 11,895 345,755Investments held to maturity 556 500 0 0 405 1,460Derivatives 3,536 4,495 797 56 78 8,961Other financial instruments 14 63 74 1,940 310 2,401Loan commitments granted 34,335 15,629 4,592 984 1,639 57,178Guarantee commitments granted 13,373 18,881 2,681 647 5,051 40,633Total 247,465 216,077 49,020 9,901 21,071 543,534(1) As the DenizBank portfolio is composed of 90% of Turkish assets, the majority of the DenizBank financial assets are therefore in the “Non-InvestmentGrade“ category.Ratings indicated are either internal or external ones. Indeed,Dexia applies the AIRBA (Advanced Internal Ratings BasedApproach) for the calculation of capital requirements forcredit risk within the context of Pillar I of Basel II. Except forABS positions for which credit risk is calculated within theRatings based Approach, based on external ratings (Fitch,Standard & Poors or Moody's) and, part of its portfolio,mostly DenizBank, for which credit-risk exposure is calculatedconforming the Basel II Standard method.216 Dexia Annual report 2010

Notes to the consolidated financial statementsCredit quality of DenizBank's financial assetsAs Dexia rating methodology is not yet fully implementedin DenizBank's organisation, and as few external ratingsare available on Turkish exposures, Dexia reports the creditquality in a separate column. The average credit quality ofDenizBank's financial assets remains closely linked to therating of the Turkish government (internal rating: BB+ stable(foreign currency) / BBB- stable (local currency)).In 2010, the management and monitoring of DenizBankcredit risks continued to be more integrated into Dexia'sglobal credit risk management, particularly with the ongoingdevelopment of internal rating systems specific to Turkishcounterparties aimed at covering the main asset categories, anincreased participation in the different committees at Grouplevel as well as the adaptation and integration of policies andguidelines of the Dexia Group.The average credit quality of DenizBank financial assetsremains closely linked to the rating – positive evolution in2010 – of the Turkish sovereign (internal rating 2010: BB+stable (foreign currency) / BBB- stable (local currency); internalrating 2009: BB- positive (foreign currency)/ BB+ positive (localcurrency)). In fact, a financial asset cannot have a higher ratingthan that of the State where it is issued. As the DenizBankportfolio is composed of 90% of Turkish assets, the majorityof the DenizBank financial assets remain therefore in the“Non-Investment Grade“ category.Detail on the credit quality of the most significant financialassets:• The Corporate & MidCorporate portfolio is entirely composedof Turkish counterparties or related to. The credit risk of thisportfolio is therefore closely linked to the evolution of theTurkish economy. Each of these counterparts is rated annuallywith a Basel II compliant internal rating system, specificallydeveloped for Turkish counterparts, the calibration of whichis on the basis of an average rating BB- area (in 2009 it hasbeen realised on the basis of an average rating between B+et BB-);• DenizBank's financial assets on financial institutions as at theend of 2010 are mainly on “Investment Grade“ internationalbanks. The remaining exposures are concentrated on Turkishbanks with an average rating between BB and BBB (averagerating of BB in 2009);• Exposure to the central government and assimilated to issolely associated with Turkish sovereign risk;• Exposure to the local public sector has a rating betweenB and BB+ (in 2009, the rating was between B and BB-), aconsequence of the rules set by the Dexia credit committeefor this type of assets;• The credit-risk profile of the Retail & PME portfolio ismonitored by the Retail Expertise Centre of the Dexia Groupand is also included in the quarterly risk reviews of thisactivity. Specific PD (Probability of Default) and LGD (LossGiven Default) models have been developed and are beingdeveloped for the Retail & PME parts (including agriculture)and will be completely deployed during the 2011 financialyear.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia217

Notes to the consolidated financial statementsD. Information on past-due or impaired financial assetsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsA financial asset is past due when the counterparty has failed to make a payment when contractually due. This is consideredby contract.As an example, if a counterpart fails to pay the required interests at due date, the entire loan is considered as past due.Past-due but not impaired financialassets≤ 90 days>90 days≤ 180days> 180days31/12/09Carrying amountof individuallyimpaired financialassets, beforededucting anyimpairment lossCollateral receivedon past due orimpaired loans anddebt instrumentsFinancial assets available for sale (excludingvariable income securities) 1 0 0 810 0Loans and advances (at amortized cost) (1) 1,112 399 769 4,820 1,724Other financial instruments 0 3 3 335 0Total 1,113 402 772 5,965 1,724(1) The carrying amount of individually impaired financial assets, before deducting any impairment loss included debt instruments accounted for in the category“Loans and receivables“ for an amount of EUR 2,028 million, of which an amount of EUR 1,780 million for Dexia FP. For the latter, no collaterals are declared inthis disclosure. However, this amount benefits from the guarantee mechanism of the Belgian and French States described in disclosure 9.4.Past-due but not impaired financialassets≤ 90days>90 days≤ 180days> 180days31/12/10Carrying amountof individuallyimpaired financialassets, beforededucting anyimpairment lossCollateral receivedon past due orimpaired loans anddebt instrumentsFinancial assets available for sale (excludingvariable income securities) 0 0 0 794 0Loans and advances (at amortized cost) (1) 917 181 420 5,589 1,339Other financial instruments 0 1 2 287 0Total 917 182 422 6,670 1,339(1) The carrying amount of individually impaired financial assets, before deducting any impairment loss included debt instruments accounted for in the category“Loans and receivables“ for an amount of EUR 2,861 million, of which an amount of EUR 2,237 million for Dexia FP. For the latter, no collaterals are declared inthis disclosure. However, this amount benefits from the guarantee mechanism of the Belgian and French States described in disclosure 9.4.Collaterals held are mainly composed of mortgages on residential or small commercial real estate and pledges on various otherassets (receivables, business goodwill).Past due outstandings are mainly retail and corporate. Financial assets are determined as impaired according to the descriptionmade in valuation rules (see note 1.6.5.).E. Collateral and other credit enhancements obtained by taking possession ofcollateral holdNature of the assets obtained during the period by taking possessionCarrying amountof a collateral31/12/09 31/12/10Cash 22 13Debt instruments 4 4Property plant and equipment 42 35Investment Property 58 0Total 126 52Usually, Dexia does not intend to keep the collateral and converts into cash the collaterals obtained, respecting the legalprocedures thereon specific to each country for seizure of property and for seizure of goods.218 Dexia Annual report 2010

Notes to the consolidated financial statementsF. Allowances movements for credit lossesAs at1 Jan.2009UtilizationAmountssetaside forestimatedprobableloan lossesAmountsreversedfor estimatedprobableloan lossesOtherAs at31 Dec.2009Recoveriesdirectlyrecognizedin profit orlossCharge-offsdirectlyrecognisedin profit orlossSpecific allowancesfor financial assets 3,842 (736) 1,135 (592) (130) 3,519 9 (99)Loans and advances due frombanks 98 0 0 (93) 4 9 0 (6)Loans and advances tocustomers 2,083 (85) 1,036 (272) (105) 2,657 9 (93)Financial assets available forsale 1,661 (651) 99 (227) (29) 853of which fixed incomeinstruments 817 (13) 7 (133) (26) 652of which equityinstruments 844 (638) 92 (94) (3) 201Allowances forincurred but notreported losses onfinancial assets 1,506 (16) 361 (356) (18) 1,477Loans and advances due frombanks 65 0 51 (53) (1) 62Loans and advances tocustomers 1,441 (16) 310 (303) (17) 1,415Total 5,348 (752) 1,496 (948) (148) 4,996 9 (99)Management reportConsolidatedfinancial statementsAs at1 Jan.2010UtilizationAmountssetaside forestimatedprobableloan lossesAmountsreversedforestimatedprobableloan lossesOtherAs at31 Dec.2010Recoveriesdirectlyrecognizedin profit orlossChargeoffsdirectlyrecognisedin profit orlossSpecific allowancesfor financial assets 3,519 (301) 1,124 (361) (21) 3,960 13 (80)Loans and advances due frombanks 9 0 15 (1) 2 25 0 0Loans and advances tocustomers 2,657 (181) 1,054 (286) (30) 3,214 13 (80)Financial assets available forsale 853 (119) 55 (74) 8 722of which fixed incomeinstruments 652 (25) 13 (74) 6 572of which equityinstruments 201 (94) 41 0 2 150Allowances forincurred but notreported losses onfinancial assets 1,477 (40) 331 (500) 40 1,308Loans and advances due frombanks 62 0 7 (44) 0 25Loans and advances tocustomers 1,415 (40) 324 (457) 40 1,282Total 4,996 (341) 1,455 (861) 19 5,268 13 (80)Additional information Annual financial statementsAnnual report 2010 Dexia219

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsG. Credit-risk information for loans designated at fair value through profit orlossMaximumexposure to credit riskMaximumexposure to credit risk31/12/09Amount of change in loans at fair value through profit and loss attributable tochanges in the credit riskChange of the periodCumulative amount49 1 131/12/10Amount of change in loans at fair value through profit and loss attributable tochanges in the credit riskChange of the periodCumulative amount37 0 1No credit derivative is held to mitigate the maximum exposure to credit risk.Dexia estimates the fair value of the loans by calculating the amount of future contractual cash flows from the assets anddiscounting the payments to a present value at a discount rate that reflects the uncertainty associated with those payments.The change in credit spread is not significant and credit risk is not hedged.H. Credit-risk information about financial liabilities designated at fair valuethrough profit or lossCarrying amount31/12/09Amount of change in fair value attributable tochanges in the credit risk of the liabilityChange of the periodCumulative amountDifference between carryingamount and contractual amountrequired to be paid at maturity (1)19,070 161 (313) 170(1) This amount includes the premium/discount and the accumulated change in the market value.The change of the period results from the decrease of Dexia's credit spread.Carrying amount31/12/10Amount of change in fair value attributable tochanges in the credit risk of the liabilityChange of the periodCumulative amountDifference between carryingamount and contractual amountrequired to be paid at maturity (1)19,390 10 (303) 354(1) This amount includes the premium/discount and the accumulated change in the market value.See also note 8.3. Financial liabilities measured at fair value through profit or loss-Financial liabilities designated at fair value.220 Dexia Annual report 2010

Notes to the consolidated financial statements12.3. Information about collateralsA. Assets received as collateral if this collateral can be sold or repledgedAssets received as collateral Collateral received as at 31 Dec. 2009 Collateral received as at 31 Dec. 2010Fair values ofcollateral heldFair value ofcollateral sold/repledgedFair values ofcollateral heldFair value ofcollateral sold/repledgedEquity instruments 795 0 596 0Debt instruments 4,930 1,795 8,199 3,028Loans and advances 178 165 222 179Cash collaterals 5,625 5,625 4,417 4,417Total 11,528 7,585 13,434 7,624Management reportCollaterals are obtained within the framework of repurchase agreement activities and of bond lending activities.Cash is obtained as collateral within the framework of Credit Support Annex (CSA).Contracts which determine the conditions of repledge are either Overseas Securities Lending Agreement (OSLA) – possiblyamended by the legal department or the ones written by the legal department. Repledge is an usual market practice.Figures as at 31 December 2009 have been restated.B. Information on financial assets pledged as collateralCarrying amount of financial assets pledgedas collateral as at 31 Dec. 2009Carrying amount of financial assets pledgedas collateral as at 31 Dec. 2010For liabilities For contingent liabilities For liabilities For contingent liabilities158,309 0 144,499 0Assets are mainly pledged to collateralise repurchase agreements and debts to central banks and to the European CentralBank.Carrying amount is not limited to the amount effectively borrowed.Cash is given as collateral within the framework of Credit Support Annex (CSA) (see notes 7.3.A and 7.4.B).Repurchase agreements reimbursement amount was EUR 53 billion as at 31 December 2009 and EUR 54 billion as at31 December 2010.Figures as at 31 December 2009 have been restated.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia221

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements12.4. Interest-rate repricing risk: breakdown by remaining maturity until next refixinginterest rateCurrent accounts and saving deposits are presented in the column “Atsight and on demand“ as the information presented below takes intoaccount the remaining maturity until the next date at which interesta. Assets 31/12/09At sightand ondemandUp to 3monthsMore than3 monthsto 1 yearMore than1 to 5yearsrates are reset from an accounting point of view, rather than onassumptions based on observed behavioral data. This latter approachis realised in the BSM sensitivity (see note12.5.).Over 5yearsUndeterminedmaturityAccruedinterestCash and balances withcentral banks 2,466 202 0 0 0 0 5 0 0 2,673Loans and advances duefrom banks 13,721 23,075 2,676 5,008 2,247 0 128 643 (71) 47,427Loans and advances tocustomers 15,923 73,054 63,229 51,067 140,864 1,236 2,855 9,831 (4,072) 353,987Financial assets held fortrading 6 2,947 1,119 631 1,826 177 24 (368) 0 6,362Financial assetsdesignated at fair value 0 358 97 82 61 3,143 4 (30) 0 3,715Financial assets availablefor sale 657 21,680 9,458 18,356 48,261 2,522 1,559 2,046 (853) 103,686Investments held tomaturity 0 381 180 194 760 0 50 0 0 1,565Derivatives 8,129 32,599 0 40,728Fair value revaluation ofportfolio hedge 3,579 3,579Investments in associates 171 171Tangible fixed assets 2,396 2,396Intangible assets andgoodwill 2,177 2,177Tax assets 2,919 2,919Other assets 428 651 233 26 40 800 0 19 (302) 1,895Non-current assets heldfor sale 4,395 0 35 (80) 4,350Total 33,201 122,348 76,992 75,364 194,059 19,936 12,754 48,354 (5,378) 577,630Fair valueadjustmentImpairmentTotal222 Dexia Annual report 2010

Notes to the consolidated financial statementsb. Liabilities 31/12/09At sight andon demandUp to 3monthsMore than 3months to 1yearMore than 1to 5 yearsOver 5 yearsUndeterminedmaturityAccruedinterestFair valueadjustmentDue to banks 19,536 59,127 42,003 1,450 1,184 2 267 155 123,724Customer borrowingsand deposits 74,262 33,570 6,046 4,729 1,462 41 791 49 120,950Financial liabilitiesheld for trading 4 102 5 52 98 13 1 0 275Financial liabilitiesdesignated at fairvalue 323 1,745 2,165 8,161 3,086 3,121 250 219 19,070Derivatives 10,081 48,283 58,364Fair value revaluationof portfolio hedge 1,939 1,939Debt securities 2,525 58,135 33,720 59,128 54,485 0 2,969 2,103 213,065Subordinated debts 418 855 377 855 1,281 138 98 89 4,111Technical provisionsof insurancecompanies 13,408 13,408Provisions and otherobligations 1,581 1,581Tax liabilities 238 238Other liabilities 1,996 1,386 105 38 101 955 4 0 4,585Liabilities included indisposal groups heldfor sale 4,332 0 0 4,332Total 99,064 154,920 84,421 74,413 61,697 23,829 14,461 52,837 565,642TotalManagement reportConsolidatedfinancial statementsc. Net position 31/12/09At sight and ondemandUp to 3 months More than 3months to 1yearMore than 1 to5 yearsOver 5 yearsUndeterminedmaturityOn-balance-sheet sensitivity gap (65,863) (32,572) (7,429) 951 132,362 (3,893)Balance-sheet sensitivity gap is hedged through derivatives.Additional information Annual financial statementsAnnual report 2010 Dexia223

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsa. Assets 31/12/10At sightand ondemandUp to 3monthsMore than3 monthsto 1 yearMore than1 to 5yearsOver 5yearsUndeterminedmaturityAccruedinterestCash and balances withcentral banks 2,874 390 0 0 0 0 2 0 0 3,266Loans and advances duefrom banks 19,384 24,104 3,044 3,300 2,701 37 133 727 (51) 53,379Loans and advances tocustomers 18,143 74,256 48,592 56,509 139,522 1,872 2,768 15,141 (4,496) 352,307Financial assets held fortrading 59 1,969 305 1,099 1,674 138 25 77 0 5,346Financial assetsdesignated at fair value 5 188 69 88 28 3,577 4 (18) 0 3,941Financial assets availablefor sale 522 14,330 5,027 16,232 46,663 2,290 1,450 128 (722) 85,920Investments held tomaturity 0 346 119 243 655 0 84 0 0 1,447Derivatives 6,683 40,394 0 47,077Fair value revaluation ofportfolio hedge 4,003 4,003Investments in associates 171 171Tangible fixed assets 2,346 2,346Intangible assets andgoodwill 2,276 2,276Tax assets 2,847 2,847Other assets 492 744 157 53 10 1,141 0 17 (256) 2,358Non-current assets heldfor sale 56 0 0 (5) 51Total 41,479 116,327 57,313 77,524 191,253 16,751 11,149 60,469 (5,530) 566,735b. Liabilities 31/12/10At sightand ondemandUp to 3monthsMore than 3months to 1yearMore than 1to 5 yearsOver 5 yearsImpairmentUndeterminedmaturityAccruedinterestFair valueadjustmentFair valueadjustmentDue to banks 20,772 67,474 6,498 1,903 1,573 3 125 143 98,491Customer borrowingsand deposits 82,487 30,964 5,952 4,542 2,263 72 694 85 127,059Financial liabilities heldfor trading 1 3 7 428 312 12 8 (8) 763Financial liabilitiesdesignated at fair value 81 1,300 1,702 7,238 4,941 3,471 257 401 19,391Derivatives 7,748 64,599 72,347Fair value revaluation ofportfolio hedge 1,979 1,979Debt securities 386 51,491 39,648 58,008 54,732 0 2,954 3,255 210,474Subordinated debts 431 751 596 335 1,055 554 88 94 3,904Technical provisions ofinsurance companies 15,646 15,646Provisions and otherobligations 1,498 1,498Tax liabilities 157 157Other liabilities 1,829 1,192 211 39 83 940 4 0 4,298Total 105,987 153,175 54,614 72,493 64,959 22,353 11,878 70,548 556,007c. Net position 31/12/10At sight and ondemandUp to 3 months More than 3months to 1yearMore than 1 to 5yearsOver 5 yearsTotalTotalUndeterminedmaturityOn-balance-sheet sensitivity gap (64,508) (36,848) 2,699 5,031 126,294 (5,602)Balance-sheet sensitivity gap is hedged through derivatives.224 Dexia Annual report 2010

Notes to the consolidated financial statements12.5. Market risk & BSMOverviewMarket Risks' measures:a) Treasury and Financial Market:• Trading book risks: general interest rate, foreign exchange,equity, credit spread and other risks (inflation, CO ²) whichare managed within Value at Risk limits and adequate risklimits;• Cash and Liquidity Management (CLM) – only banking –followed by means of Value at Risk (VaR) and interest-ratesensitivity limits;• Bond portfolio spread risk – managed through credit spreadsensitivities.A. Treasury and Financial MarketactivitiesTreasury and Financial Markets (TFM) activities of Dexia areoriented as a support function for the Group.TFM assumes trading activities as well as non-trading riskpositions that arise from cash and liquidity managementactivities.Following the reorientation of TFM activities, the Risk PolicyCommittee on 7 November 2008 decided to reduce VaRlimits of TFM.The global TFM limits have been reduced from EUR 178 toEUR 130 million in 4Q 2008 and since 1Q 2009 from EUR130 to EUR 100 million.TFM also manages the Bond Portfolio securities on bankingbooks which have been largely put in run-off.Management reportb) Balance-Sheet Management (BSM):• Interest-rate risk is followed within sensitivity limits andindicate Value at risk (VaR) for BSM and for the Dexia FPactivities;• Credit spread risk is followed through spread sensitivities;• Equity exposure is followed within Value at Risk (VaR)limits.Additional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia225

Notes to the consolidated financial statementsa. Trading book and CLMManagement reportDexia Group calculated:• an Interest-rate (IR) and Foreign Exchange (FX) VaR mainlybased on parametrical method (99% 10 days), complementedby a historical full valuation VaR to measure the FX derivativesand IR volatility risk;• an Equity VaR based on a full valuation historical method;• a historical credit-spread VaR based on sensitivities;• a historical VaR on inflation based on sensitivities and anhistorical Var in full revaluation on carbon (C0 2) risks.The detailed VaR usage of Dexia Group is disclosed in thetable below.However, the Bond Portfolio exposure on banking books isnot included in the table below as it is followed throughspread sensitivity and not in VaR- see further.Consolidatedfinancial statementsAdditional information Annual financial statementsValue at Risk – 99% 10 days (in millions of EUR)By riskfactorGlobal2009IR (1) &FX (2) (Trading and EQT (4) Trading Spread Trading Other risks (5)Banking) (3)1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QAverage 58.9 24.0 17.2 20.3 6.3 5.6 4.2 2.4 43.4 43.4 42.0 28.6 4.9 4.4 4.6 4.4Max 86.5 32.3 23.1 26.3 7.6 9.7 8.6 4.5 59.2 51.2 47.3 37.7 7.8 5.3 5.1 4.7Average 78.4Maximum (6) 137.8End period 45.7Limit 1Q: 130 2Q, 3Q, 4Q: 100(1) IR: interest-rate.(2) FX: forex.(3) IR & FX: without BSM.(4) EQT: equities.(5) Other risks: inflation, commodities & CO 2.(6) Temporary limit overdraft in January due to high volatility of Bond Market Association (BMA) spread on Tender Option Bond (TOB).By riskfactorGlobal2010IR (1) &FX (2) (Trading and EQT (4) Trading Spread Trading Other risks (5)Banking) (3)1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QAverage 14.7 16.5 19.2 16.0 1.8 2.0 2.6 2.0 24.3 23.9 23.4 18.2 3.3 3.6 3.4 3.7Max 19.8 28.0 23.3 19.5 2.9 3.8 4.7 4.3 29.2 30.0 29.5 23.6 3.9 5.8 3.8 5.3Average 44.6Maximum 55.5End period 39.1Limit 100(1) IR: interest-rate.(2) FX: forex.(3) IR & FX: without BSM.(4) EQT: equities.(5) Other risks: inflation, commodities & CO 2.The CLM and trading risks are also followed on sensitivity limits.As at 31 December 2009 the CLM sensitivity was of EUR -81 million against a limit of EUR 200 million/%. As at 31 December2010 the CLM sensitivity was of EUR -66 million.226 Dexia Annual report 2010

Notes to the consolidated financial statementsb. Dexia bond Portfolio exposure (banking book only – portfolio largely in run-off – excludingBSM and FP scope)Outstanding (in billions of EUR)The amounts also include PWB exposures (principally DKD and Crediop) which are not in run-off.Interest-rate sensitivity2009 2010165.5 138Management reportThe interest-rate risk of the Bond portfolio is hedged & match funded on the coupon rolls, as its purpose is the credit spread;therefore it has a very limited sensitivity to change of interest rate.Credit spread sensitivity (in millions of EUR)It estimates the sensitivity of the AFS reserve after a basis point spread increase.B. BSM interest rate, equity & credit-spreadriskBSM falls under the direct decision and control authority of theALCO Group and of the Funding and Liquidity Committee.The sensitivity measures the change in the balance-sheet net2009 2010(36) (35)economic value if interest rates rise by 1% across the entireinterest-rate curve.For the sensitivity calculation, residual maturity of theportfolio until next refixing interest-rate date is defined usingassumptions on the observed behaviour of the customersand not on legal repayment date (see note 12.4.).a. Banking and insurance companies, excluding Dexia Financial Products (Dexia FP)(in millions of EUR)2009Interest rate (2) (3) Equity (4) Credit spread (5)1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QBanking companies Sensitivity (158) (201) (97) (104) (16) (15) (16) (16)BSM (1) VaR 99% 10d 169 170 195 173 53 45 37 16Sensitivity (48) (53) (77) (99) (11) (10) (12) (11)InsuranceMitigated VaR99% 10d 53 80 142 119(1) CLM excluded.(2) Sensitivities to 1% shift.(3) As at 31 December 2009 the interest-rate sensitivity limit for BSM amounted to EUR 400 million/%.(4) Equity risks are more detailed below.(5) Sensitivities to 1bp shift on AFS reserve.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia227

Notes to the consolidated financial statementsManagement report2010Interest rate (2) (3) Equity (4) Credit spread (5)1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QBanking companies Sensitivity (83) (116) 29 (148) (16) (13) (14) (13)BSM (1) VaR 99% 10d 48 45 21 85 7 11 12 14Sensitivity 22 45 168 84 (12) (10) (11) (10)InsuranceMitigated VaR99% 10d 102 89 101 116(1) CLM excluded.(2) Sensitivities to 1% shift.(3) As at 31 December 2010 the interest-rate sensitivity limit for BSM amounted to EUR 400 million/%.(4) Equity risks are more detailed below.(5) Sensitivities to 1bp shift on AFS reserve.Consolidatedfinancial statementsAdditional information Annual financial statementsFocus on BSM equity exposure –Listed shares sensitivityThe Equity Value at Risk (VaR) measures the potential changein market value, whereas the Equity Earnings at Risk (EaR)measures the impact in the accounting result if the VaRmaterializes.A. Banking companies(BSM portfolio)The Equity VaR calculated by Dexia is a measure of the potentialloss that can be experienced with a level of confidence of99% and for a holding period of 10 days.Market value VaR % VaR EaR AcquisitionValue31/12/09 (1) 503 16 9.0% 0 31631/03/10 89 7 8.0% 0 4530/06/10 59 11 18.5% 0 1730/09/10 58 12 21.5% 0 1731/12/10 (2) 64 14 21.5% 0 17(1) The market value includes EUR 336 million Assured Guaranty stake as at 31 December 2009 (not included in the VaR). The VaR limit for BSM Bankingportfolio amounted to EUR 70 million as at 31 December 2009 (the limit excludes Assured Guaranty stake).(2) The VaR limit for BSM Banking portfolio amounted to EUR 15 million as at 31 December 2010.B. Insurancecompaniesportfolio (1) (2) Market value VaR MitigatedVaR (3) % VaR EaR AcquisitionValue31/12/09 1,435 149 119 8.0% (52) 1,54131/03/10 1,388 96 102 6.9% (46) 1,46430/06/10 1,063 99 89 9.3% (85) 1,23230/09/10 1,180 111 101 9.4% (42) 1,26731/12/10 1,359 127 116 9.3% (32) 1,392(1) The VaR limit for BSM Insurance portfolio amounted to EUR 150 million as at 31 December 2010. The limit is applied to the mitigatedVaR as the gross VaR captures additionally the risk which is not borne by Dexia (the risk which is supported by the policy holders).The equity VaR limit for the insurance unit remained unchanged versus end-of-year 2009.(2) The VaR limit of EUR 150 million is composed of EUR 130 million for the insurance company (DIS) itself and EUR 30 million on pension funds, that areconsidered to be at full risk (defined benefit plans for Dexia employees).(3) Mitigated VaR takes into consideration the repartition of risks between the insurance policy holder and the insurer.228 Dexia Annual report 2010

Notes to the consolidated financial statementsb. Dexia FP's interest-rate & credit-spreadsensitivityDexia's FP Segment Investment Portfolio consists primarily ofUS dollar-denominated asset-backed securities, US agencyand government securities and mortgage-backed securities.They are part of the run-off portfolio.Dexia FP portfolioThe assets and liabilities supporting the FP GIC business arehedged using interest-rate swaps or futures.Certain categories of assets and liabilities are economicallyhedged, without the use of derivatives.31/12/09 31/12/10Amount (in billion EUR) 10.9 10.4Interest-rate sensitivity (in million EUR/%) (6.2) (8.5)Interest-rate sensitivity limit (in million EUR/%) 42.0 42.0Credit spread sensitivity on AFS reserve (in million EUR/bp) (1.1) (1.3)Management reportAdditional information Annual financial statementsConsolidatedfinancial statementsAnnual report 2010 Dexia229

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements12.6. Liquidity riskDexia's approach to liquidity risk management has beenreviewed in the light of the financial and liquidity crisis.Overall policy is that its future funding needs should neverexceed its proven secured funding capacity.A. Breakdown residual maturityAssets 31/12/09At sightand ondemandBreakdown of gross amount and premium/discountUp to 3monthsMorethan 3monthsto 1 yearMorethan 1 to5 yearsOver 5yearsSince 2009, Dexia is subject to the liquidity reporting of theBelgian regulator (CBFA).Current accounts and saving deposits are included in thecolumn “At sight and on demand“ even though they haveno fixed repayment date.ImpairmentUndeterminedmaturityAccruedinterestFairvalueadjustmentCash and balances withcentral banks 2,295 373 0 0 0 0 5 0 0 2,673Loans and advances duefrom banks 13,360 19,719 1,903 7,304 4,441 0 128 643 (71) 47,427Loans and advances tocustomers 13,700 13,338 17,689 69,862 229,548 1,236 2,855 9,831 (4,072) 353,987Financial assets held fortrading 4 79 761 1,106 4,579 177 24 (368) 0 6,362Financial assets designatedat fair value 0 2 172 277 147 3,143 4 (30) 0 3,715Financial assets availablefor sale 321 3,337 7,959 27,613 58,695 3,008 1,559 2,046 (853) 103,685Investments held tomaturity 0 101 78 504 833 0 50 0 0 1,566Derivatives 8,129 32,599 0 40,728Fair value revaluation ofportfolio hedge 3,579 3,579Investments in associates 171 171Tangible fixed assets 2,396 2,396Intangible assets andgoodwill 2,177 2,177Tax assets 2,919 2,919Other assets 311 649 233 29 139 817 0 19 (302) 1,895Non-current assets heldfor sale 4,395 0 35 (80) 4,350Total 29,991 37,598 28,795 106,695 298,382 20,439 12,754 48,354 (5,378) 577,630Total230 Dexia Annual report 2010

Notes to the consolidated financial statementsLiabilities 31/12/09At sightand ondemandBreakdown of gross amount and premium/discountUp to 3monthsMore than3 monthsto 1 yearMore than1 to 5yearsOver 5yearsFair valueadjustmentUndeterminedmaturityAccruedinterestDue to banks 18,766 49,588 42,207 5,134 7,605 2 267 155 123,724Customer borrowingsand deposits 73,570 30,373 4,647 8,427 3,052 41 791 49 120,950Financial liabilities heldfor trading 0 102 5 54 101 12 1 0 275Financial liabilitiesdesignated at fair value 0 760 1,082 7,472 6,166 3,121 250 219 19,070Derivatives 10,081 48,283 58,364Fair value revaluation ofportfolio hedge 1,939 1,939Debt securities 474 32,720 24,153 79,651 70,995 0 2,969 2,103 213,065Subordinated debts 1 334 35 717 1,942 895 98 89 4,111Technical provisions ofinsurance companies 9 149 408 4,872 7,912 58 13,408Provisions and otherobligations 1,581 1,581Tax liabilities 238 238Other liabilities 1,891 1,481 112 38 101 958 4 0 4,585Liabilities included indisposal groups heldfor sale 4,332 0 0 4,332Total 94,711 115,507 72,649 106,365 97,874 11,238 14,461 52,837 565,642TotalManagement reportConsolidatedfinancial statementsAt sight andon demandUp to 3monthsMore than 3months to 1year31/12/09More than 1to 5 yearsOver 5yearsUndeterminedmaturityNet liquidity gap (64,720) (77,909) (43,854) 330 200,508 9,201This table does not take into account the liquidity nor theeligibility to refinancing the asset; some listed long-termassets may be sold or refinanced with central banks in caseof need of liquidity.The liquidity position of a bank results from the differencebetween contractual maturities of assets and of liabilities. Thisallows the presentation of the liquidity gap.A bank uses derivatives to hedge its risks. The cash flows aretherefore dependent on the evolution of the underlying index(interest-rate, exchange rate, credit spreads, etc.) for whichexpected cash flows can significantly change. As Dexia usesderivatives for banking and trading activities, including suchexpected cash flows in the table, would make the figuresless relevant for readers. Dexia therefore reports the marketvalue of derivatives in the fair value, in the same way it isreported for fair value adjustments on other financial assetsand liabilities.Additional information Annual financial statementsAnnual report 2010 Dexia231

Notes to the consolidated financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAssets 31/12/10At sightand ondemandBreakdown of gross amount and premium/discountUp to 3monthsMorethan 3monthsto 1 yearMorethan1 to 5yearsOver 5yearsImpairmentUndeterminedmaturityAccruedinterestFairvalueadjustmentCash and balances withcentral banks 2,874 390 0 0 0 0 2 0 0 3,266Loans and advances duefrom banks 17,709 22,676 3,445 4,813 3,890 37 133 727 (51) 53,379Loans and advances tocustomers 13,908 14,590 18,548 75,070 214,691 2,087 2,768 15,141 (4,496) 352,307Financial assets held fortrading 1 109 146 1,159 3,691 138 25 77 0 5,346Financial assets designatedat fair value 0 37 20 231 91 3,576 4 (18) 0 3,941Financial assets availablefor sale 388 2,617 2,382 24,956 52,428 2,293 1,450 128 (722) 85,920Investments held tomaturity 0 23 66 572 702 0 84 0 0 1,447Derivatives 6,683 40,394 0 47,077Fair value revaluation ofportfolio hedge 4,003 4,003Investments in associates 171 171Tangible fixed assets 2,346 2,346Intangible assets andgoodwill 2,276 2,276Tax assets 2,847 2,847Other assets 378 641 169 132 110 1,167 0 17 (256) 2,358Non-current assets heldfor sale 56 0 0 (5) 51Total 35,258 41,083 24,776 106,933 275,603 16,994 11,149 60,469 (5,530) 566,735Total232 Dexia Annual report 2010

Notes to the consolidated financial statementsLiabilities 31/12/10At sightand ondemandBreakdown of gross amount and premium/discountUp to 3monthsMore than3 monthsto 1 yearMore than1 to 5yearsOver 5yearsFair valueadjustmentUndeterminedmaturityAccruedinterestDue to banks 19,009 58,640 4,217 8,483 7,871 3 125 143 98,491Customer borrowingsand deposits 82,123 27,927 6,579 6,765 2,814 72 694 85 127,059Financial liabilities heldfor trading 0 2 7 430 312 12 8 (8) 763Financial liabilitiesdesignated at fair value 0 203 1,295 8,542 5,222 3,471 257 401 19,391Derivatives 7,748 64,599 72,347Fair value revaluation ofportfolio hedge 1,979 1,979Debt securities 126 17,401 31,123 88,888 66,727 0 2,954 3,255 210,474Subordinated debts 0 248 255 239 2,000 980 88 94 3,904Technical provisions ofinsurance companies 8 268 802 6,299 7,782 487 15,646Provisions and otherobligations 1,498 1,498Tax liabilities 157 157Other liabilities 1,726 1,232 261 45 90 940 4 0 4,298Liabilities included indisposal groups heldfor sale 0 0 0 0Total 102,992 105,921 44,539 119,691 92,818 7,620 11,878 70,548 556,007TotalManagement reportConsolidatedfinancial statementsAt sightand ondemandUp to 3monthsMore than3 monthsto 1 year31/12/10More than1 to 5yearsOver 5yearsUndeterminedmaturityNet liquidity gap (67,735) (64,838) (19,763) (12,758) 182,785 9,372This table does not take into account the liquidity nor theeligibility to refinancing the asset; some listed long-termassets may be sold or refinanced with central banks in caseof need of liquidity.The liquidity position of a bank results from the differencebetween contractual maturities of assets and of liabilities. Thisallows the presentation of the liquidity gap.A bank uses derivatives to hedge its risks. The cash flows aretherefore dependent on the evolution of the underlying index(interest-rate, exchange rate, credit spreads, etc.) for whichexpected cash flows can significantly change. As Dexia usesderivatives for banking and trading activities, including suchexpected cash flows in the table, would make the figuresless relevant for readers. Dexia therefore reports the marketvalue of derivatives in the fair value, in the same way it isreported for fair value adjustments on other financial assetsand liabilities.We also refer to the Management report, on page 87.Additional information Annual financial statementsAnnual report 2010 Dexia233

Notes to the consolidated financial statements12.7. Currency riskManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsEUROther EUcurrencies31/12/09USD Other TotalTotal assets 430,282 29,848 67,994 49,506 577,630Total liabilities and equity 443,102 19,212 74,304 41,012 577,630Net balance position (12,820) 10,636 (6,310) 8,494 0EUROther EUcurrencies31/12/10USD Other TotalTotal assets 424,655 31,344 61,240 49,496 566,735Total liabilities and equity 434,066 18,859 77,546 36,264 566,735Net balance position (9,411) 12,485 (16,306) 13,232 0The on-balance position is hedged by derivatives, so that nearly all foreign exchange positions are closed.12.8. Insurance risksInsurances activities are performed in Dexia Group by DISGroup (see Accounting principles point 1.10.)DIS-group is active in life (84% of gross premium written) andNon-life activities and has no major concentration of risks.Regarding the activities of Dexia Group, Non-life insuranceactivities are not significant.Some of the risks are reinsured (see note 9.3.). Because of itsactivities, the reinsurance of a part of the risks and the sizeof DIS-group activities in comparison with total activities andrisks of Dexia Group, change of insurance variables will nothave a significant impact on Dexia's financial position.234 Dexia Annual report 2010

Dexia saStatutory Auditor's reporton the consolidated financial statementsfor the year ended 31 December 2010to the Shareholders’ MeetingManagement reportTo the shareholdersAs required by law and the company’s articles of association,we are pleased to report to you on the audit assignmentwhich you have entrusted to us. This report includes ouropinion on the consolidated financial statements togetherwith the required additional comment.Unqualified audit opinion on theconsolidated financial statementsWe have audited the accompanying consolidated financialstatements of Dexia SA (“the company”) and its subsidiaries(jointly “the Group”), prepared in accordance with InternationalFinancial Reporting Standards as adopted by the EuropeanUnion and with the legal and regulatory requirementsapplicable in Belgium. Those consolidated financial statementscomprise the consolidated balance sheet as at 31 December2010, the consolidated statement of income, the consolidatedstatement of changes in equity, the consolidated statementof comprehensive income and the consolidated cash flowstatement for the year then ended, as well as the summaryof significant accounting policies and other explanatory notes.The consolidated balance sheet shows total assets of 566,735million EUR and the consolidated statement of income showsa consolidated profit (Group share) for the year then endedof 723 million EUR.The Board of Directors of the company is responsible forthe preparation of the consolidated financial statements.This responsibility includes among other things: designing,implementing and maintaining internal control relevant to thepreparation and fair presentation of consolidated financialstatements that are free from material misstatement, whetherdue to fraud or error, selecting and applying appropriateaccounting policies, and making accounting estimates thatare reasonable in the circumstances.Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audit. We conducted ouraudit in accordance with legal requirements and auditingstandards applicable in Belgium, as issued by the “Institutdes Réviseurs d’Entreprises/Instituut van de Bedrijfsrevisoren”.Those standards require that we plan and perform the auditto obtain reasonable assurance whether the consolidatedfinancial statements are free from material misstatement.In accordance with these standards, we have performedprocedures to obtain audit evidence about the amountsand disclosures in the consolidated financial statements.The procedures selected depend on our judgment, includingthe assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud orerror. In making those risk assessments, we have consideredinternal control relevant to the Group’s preparation andfair presentation of the consolidated financial statementsin order to design audit procedures that are appropriate inthe circumstances but not for the purpose of expressing anopinion on the effectiveness of the Group’s internal control.We have assessed the basis of the accounting policies used,the reasonableness of accounting estimates made by thecompany and the presentation of the consolidated financialstatements, taken as a whole. Finally, the Board of Directorsand responsible officers of the company have replied to all ourrequests for explanations and information. We believe thatthe audit evidence we have obtained provides a reasonablebasis for our opinion.In our opinion, the consolidated financial statements give atrue and fair view of the Group’s financial position as at 31December 2010, and of its results and its cash flows for theyear then ended, in accordance with International FinancialReporting Standards as adopted by the European Union andwith the legal and regulatory requirements applicable inBelgium.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia235

Statutory Auditor’s reportManagement reportAdditional information Annual financial statementsConsolidatedfinancial statementsAdditional commentThe preparation and the assessment of the information thatshould be included in the Directors’ report on the consolidatedfinancial statements are the responsibility of the Board ofDirectors.Our responsibility is to include in our report the followingadditional comment which does not change the scope of ouraudit opinion on the consolidated financial statements:• The Directors’ report on the consolidated financialstatements includes the information required by law and isin agreement with the consolidated financial statements.However, we are unable to express an opinion on thedescription of the principal risks and uncertainties confrontingthe Group, or on the status, future evolution, or significantinfluence of certain factors on its future development. Wecan, nevertheless, confirm that the information given is notin obvious contradiction with any information obtained in thecontext of our appointment.Diegem, 21 March 2011The Statutory AuditorDELOITTE Bedrijfsrevisoren / Reviseurs d’EntreprisesBV o.v.v.e. CVBA / SC s.f.d. SCRLRepresented byFrank VerhaegenBernard De Meulemeester236 Dexia Annual report 2010

240 Balance sheet241 Off-balance-sheet items242 Statement of income243 Notes to the annual financial statements259 Statutory Auditor's reportfor the year ended 31 december 2010

A n n u a l f i n a n c i a l s t a t e m e n t sF i n a n c i a l s t a t e m e n t s a s a t 3 1 D e c e m b e r 2 0 1 0

Balance sheet(before income appropriation)Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAssets 31/12/09 31/12/10(in EUR)Fixed assets 28,311,697,399 23,281,422,407I. Formation expenses 6,320,373 4,919,173II. Intangible fixed assets 4,460,437 6,377,311III. Tangible fixed assets 2,055,224 1,572,037B. Plant, machinery and equipment 94,656 78,890C. Furniture and vehicles 1,751,069 1,373,239E. Other tangible fixed assets 209,499 119,908IV. Financial fixed assets 28,298,861,365 23,268,553,886A. Affiliated enterprises 28,298,051,207 23,267,894,0731. Participating interests 24,880,923,728 20,434,693,4612. Amounts receivable 3,417,127,479 2,833,200,612C. Other financial assets 810,158 659,8132. Amounts receivable and cash guarantees 810,158 659,813Current assets 436,214,840 116,429,193V. Amounts receivable after more than one year 40,505,613 47,613,359B. Other amounts receivable 40,505,613 47,613,359VII. Amounts receivable within one year 52,210,512 20,239,159A. Trade debtors 2,455,752 3,798,773B. Other amounts receivable 49,754,760 16,440,386VIII. Current Investments 315,469,173 16,682,529B. Other investments and deposits 315,469,173 16,682,529IX. Cash at bank and in hand 18,116,499 23,801,003X. Deferred charges and accrued income 9,913,043 8,093,143Total assets 28,747,912,239 23,397,851,600240 Dexia Annual report 2010

Shareholders' equity and liabilities 31/12/09 31/12/10(in EUR)Equity 24,370,965,752 19,182,759,152I. Capital 8,089,020,254 8,441,935,648A. Issued capital 8,089,020,254 8,441,935,648II. Share premium account 13,617,667,343 13,617,667,343IV. Reserves 1,542,980,946 1,190,065,552A. Legal reserve 572,934,774 572,934,774D. Available reserves 970,046,172 617,130,778V. Profit carried forward 1,215,112,379 1,121,297,209V. bis. Net income/loss (-) for the year (1) (93,815,170) (5,188,206,600)Provisions and deferred taxes 55,534,467 162,304,401VII. A. Provisions for liabilities and charges 55,534,467 162,304,4011. Pensions and similar obligations - 715,5004. Other liabilities and charges 55,534,467 161,588,901Amounts payable 4,321,412,020 4,052,788,047IX. Amounts payable within one year 4,308,170,603 4,042,666,513A. Current portion of amounts payable after more than oneyear falling due within one year 200,000,000 -B. Financial liabilities 3,862,857,740 3,863,200,6121. Credit institutions 3,862,857,740 3,863,200,612C. Trade debts 62,791,488 50,914,3161. Suppliers 62,791,488 50,914,316E. Taxes, remuneration and social security 18,522,886 25,989,6371. Taxes 313,743 1,269,8082. Remuneration and social security 18,209,143 24,719,829F. Other amounts payable 163,998,489 102,561,948X. Accrued charges and deferred income 13,241,417 10,121,534Total liabilities 28,747,912,239 23,397,851,600(1) See note 1 to the financial statements.Off-balance-sheet items(in EUR) 31/12/09 31/12/10Miscellaneous rights and commitments:Temporary guarantee given by the French, Belgian and Luxembourg States PM PMGuarantee given by the French and Belgian States for the Financial Products portfolio PM PMPersonal guarantees given on behalf of third parties 45,600 39,450Personal guarantees given on behalf of Dexia Funding Lux SA 500,000,000 500,000,000Real guarantees given on own assets 13,972 14,172Foreign currency transactions receivable (USD) 97,758,197 -Foreign currency transactions receivable (EUR) - Currency interest-rate swap 141,168,500 -Foreign currency transactions to be delivered (USD) - Currency interest-rate swap 93,226,225 -Commitment to issue shares linked to stock options (exercise price) 1,141,694,336 1,087,085,599Commitment to issue shares to the Belgian and French States PM PMCommitment towards Dexia Bank Nederland NV PM PMManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia241

Statement of incomeManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements(in EUR) 31/12/2009 31/12/2010I. Operating income 7,926,197 35,806,312D. Other operating income 7,926,197 35,806,312II. Operating charges (167,797,864) (183,807,548)B. Services and other goods (133,671,022) (116,537,566)C. Remuneration, social security costs and pensions (40,580,189) (59,109,038)D. Depreciation of and amounts written off on formation expenses,intangible and tangible fixed assets (5,879,606) (6,520,382)F. Increase (-); decrease (+) in provisions for liabilities and charges 13,226,809 (1,150,728)G. Other operating charges (893,856) (489,834)III. Operating loss (159,871,667) (148,001,236)IV. Financial income 111,000,792 133,864,195A. Income from financial fixed assets 62,594,834 37,658,336B. Income from current assets 3,950,759 89,382,696C. Other financial income 44,455,199 6,823,163V. Financial charges (86,443,868) (54,966,383)A. Debt charges (72,452,681) (47,051,697)C. Other financial charges (13,991,187) (7,914,686)VI. Current profit/loss (-) before taxes (135,314,743) (69,103,424)VII. Exceptional income 24,610,006 64,413D. Gains on disposal of fixed assets 6 64,413E. Other exceptional income 24,610,000 0VIII. Exceptional charges (50,037,098) (5,191,625,699)A. Exceptional depreciation of and exceptional amounts written offformation expenses, intangible and tangible fixed assets 0 (6,493)B. Amounts written financial fixed assets 0 (5,086,000,000)C. Provisions for exceptional liabilities and charges (49,330,849) (105,619,206)D. Loss on disposal of fixed assets (706,249) 0IX. Profit/loss (-) for the period before taxes (160,741,835) (5,260,664,710)X. Income taxes 66,926,665 72,458,110A. Income taxes 0 (1,396)B. Adjustment of income taxes and write-back of tax provisions 66,926,665 72,459,506XI. Profit/loss (-) for the period (93,815,170) (5,188,206,600)XIII. Profit/loss (-) to be appropriated (93,815,170) (5,188,206,600)Profit brought forward of the previous period 1,215,112,379 1,121,297,209Profit/loss (-) for the period to be appropriated (93,815,170) (5,188,206,600)Profit/(loss) (-) to be appropriated 1,121,297,209 (4,066,909,391)242 Dexia Annual report 2010

Notes to the annualfinancial statements1. Presentation of thefinancial statementsDexia SA presents its financial statements before appropriation.The loss for the 2010 financial year amounts to EUR 5,188.2million. The profit carried forward from the previous yearstands at EUR 1,121.3 million, making a total loss forappropriation of EUR 4,066.9 million.2. Financial statements andchart of accountsDexia SA, a financial firm, is a company governed by Belgianlaw whose financial instruments are authorised for trading ina regulated Belgian market, and it is therefore subject to theobligation to publish yearly financial statements as prescribedby the Belgian Company Code and its decree of applicationdated 30 January 2001.The accounting plan is presented in accordance with theaccounting plan prescribed in the Royal Decree of 12September 1983. The items provided for in the accountingplan that do not apply to Dexia have been excluded.The financial statements are presented in EUR.3. Accounting policies3.1. General policies3.1.1. LEGISLATIONAccounting policies are in conformity with the Royal Decree of30 January 2001, in application of the Belgian Company Code.If legislation allows options or authorises a waiver, theaccounting policies hereafter shall mention the option chosenof whether such a waiver has been applied.3.1.2. FOREIGN CURRENCY TRANSLATION INTO EURMonetary assets, liabilities, rights and commitmentsdenominated in foreign currencies are translated into EUR atthe last day average year-end exchange rate.Non-monetary items are translated into EUR at the exchangerate ruling in effect on the transaction date.Foreign currency income and expense are translated into EURat the exchange rate ruling in effect on the date on which theincome or expense is recognised in the statement of income.3.2. Assets3.2.1. FORMATION EXPENSES (ITEM I.)Formation expenses are recorded as an asset and amortisedon a straight-line basis at the rate of at least 20% per year.3.2.2. INTANGIBLE FIXED ASSETS (ITEM II.)License acquisitions, external costs linked to software definitionand to the development of the website of Dexia Group arerecorded as intangible fixed assets when the acquisition priceis at least equal to EUR 495.79 per item, or when delivery isbroken down into partial shipments representing less than EUR495.79 each but the total delivery is at least EUR 495.79.Intangible fixed assets recorded in the assets are depreciatedover a maximum of five years.Furthermore, the internal costs related to the development ofsoftware and the website are entirely charged in the financialyear in which they are exposed.3.2.3. TANGIBLE FIXED ASSETS (ITEM III.)If necessary, exceptional depreciations will be recorded to alignthe accounting value of fixed assets to their utilisation value forthe company to take into account their alteration or changesof economic or technological circumstances.Exceptional depreciations are reversed if they are no longerjustified.3.2.4. FINANCIAL ASSETS (ITEM IV.)Participating interests and shares are stated at acquisition costor contribution cost. Related transaction costs are recordeddirectly in the statement of income.Impairments are recorded in the case of capital losses orlasting depreciation. They are determined by reference to thefinancial position, profitability and prospects of the companyin which shares and/or equity interests are held.Participating interests and shares may also be revalued. In thisit is therefore required that their value, determined on thebasis of their utility to the company, presents a certain andlasting surplus in relation to their book value.Debts appearing under financial fixed assets are valuedaccording to the same principles as debts at more than oneyear and up to one year.3.2.5. AMOUNTS RECEIVABLE AFTER MORE THANONE YEAR AND WITHIN ONE YEAR (ITEMS V. AND VII.)Receivables are stated at their nominal value. Allowances arebooked to cover any risk of non-recovery.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia243

Notes to the annual financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statements3.2.6. SHORT-TERM INVESTMENTS AND CASHASSETS (ITEMS VIII. AND IX.)Cash is stated at nominal value.Securities are stated at acquisition cost, while the accessorialcosts are recorded in the statement of income in the year inwhich they are incurred.At balance-sheet date, impairments are recorded on shortterminvestments and liquid assets if their realisation value islower than their book value.Additional impairments are recorded on these assets in orderto reflect either a change in their realisation or market value,or the risks inherent in the nature of the products concernedor the activities conducted.Nevertheless, own shares acquired with a view to cancellationare valuated at cost as they may only be destroyed further tothe agreement of the Shareholders’ Meeting.3.3. Liabilities3.3.1. REVALUATION SURPLUSES (ITEM III.)Shares and participating interests that are recorded as longterminvestments may be revaluated in the case of a certain,permanent increase in their fair value for the companycompared with their book value.Revaluation surpluses are maintained in this heading until therealisation of the assets concerned or their inclusion in thecapital.3.3.2. PROVISIONS FOR LIABILITIES AND CHARGES(ITEM VII.)At balance-sheet date, the Board of Directors, acting withprudence, sincerity and good faith, examines the provisionsto be built up in order to cover all possible risks or lossesthat might have occurred during the financial year or previousfinancial years.Provisions relating to previous financial years are regularlyreviewed and reversed if they no longer serve a purpose.3.3.3. DEBTS OF OVER ONE YEAR AND UP TOONE YEAR (ITEMS VIII. AND IX.)Debts are stated in the balance sheet for their nominal value.3.4. Off-balance-sheet itemsOff-balance-sheet items are recorded for the nominal value ofthe rights and commitments mentioned in the agreement orfor their assessed value.4. Notes to the annualfinancial statementsDexia SA is a cross-border holding company which has twopermanent establishments in Paris and Luxembourg. From anaccounting point of view, the financial statements of DexiaSA include the accounts of Brussels, the Dexia SA headoffice, and those of the permanent establishments in Parisand Luxembourg.4.1. The balance-sheet total (beforeincome appropriation)The balance-sheet total was EUR 23,397.9 million as at31 December 2010, against EUR 28,747.9 million as at31 December 2009, a decrease of 19%.4.2. AssetsFIXED ASSETS4.2.1. FORMATION EXPENSESAll the expenses related to the capital increases are recordedin the assets as “Formation expenses” and are amortised overa period of five years.The net book value of formation expenses amounts toEUR 4.9 million.Formation expenses include the fees directly associated withcapital increases and expenditure associated with the shareownership plans of previous years aimed at all members ofstaff of the Group in the different countries in which theDexia Group is active.4.2.2. INTANGIBLE FIXED ASSETSIntangible fixed assets totalled EUR 6.4 million and concernedthe acquisition and the development of software as wellas external costs related to the development of the Dexiawebsite. These intangible fixed assets are depreciated on astraight-line basis over a period of three years.4.2.3. TANGIBLE FIXED ASSETSTangible fixed assets which have a net book value ofEUR 1.6 million have a gross acquisition value ofEUR 8.5 million.Property, plant and equipment contribute a gross acquisitionvalue of EUR 3.3 million and are depreciated on a straight-linebasis over a period of ten years.Office and IT equipment represented a gross investment ofEUR 4.7 million, depreciated on a straight-line basis at a rateof 25%.Other tangible fixed assets involving the installation of theleased premises (gross acquisition value of EUR 0.5 million)depreciated on a straight-line basis over the period of thelease contracts.244 Dexia Annual report 2010

Notes to the annual financial statements4.2.4. FINANCIAL FIXED ASSETSCURRENT ASSETSParticipating interests in affiliatedcompaniesThe item “Participating interests” representing EUR 24,880.9million as at 31 December 2009 was EUR 20,434.7 million asat 31 December 2010.It includes the following equity interests:EUR 6,714.8 million: 100% of Dexia Crédit Local SA, Paris,France.On 22 December 2010, Dexia SA increased the capital of itssubsidiary Dexia Crédit Local by EUR 639.8 million with a cashcontribution. In addition, an impairment of EUR 4,039 millionwas registered on Dexia Crédit Local at the end of 2010.EUR 7,950.0 million: 100% of Dexia Bank Belgium SA,Brussels, Belgium.On 31 December 2010, an impairment of EUR 1,047 millionwas noted on Dexia Bank Belgium.EUR 2,644.4 million: 95.39% of Dexia ParticipationBelgique SA, Brussels, Belgium, whichowns 99,84% of DenizBank AS.EUR 1,751.8 million: 57.68% of Dexia Banque Internationaleà Luxembourg SA (Dexia BIL),Luxembourg.EUR 1,279.2 million: 99.99% of Dexia ParticipationLuxembourg SA, Luxembourg, whichowns 42.23% of Dexia BIL.EUR 93.0 million: 100% of Dexia Nederland BV,Amsterdam, The Netherlands.On 28 May 2010, Dexia Nederland Holding NV proceededwith a merger by absorption of Dexia Bank Nederland NV andchanged its name to Dexia Nederland BV.EUR 1.5 million: 99.40% of Associated DexiaTechno logy Services SA (ADTS),Luxembourg.PM:10% of Dexia Holdings Inc. in NewYork, USA, a holding company whichowns 100% of Dexia FP Holdings Inc.An impairment of EUR 284.1 million was noted in 2008 onthe participating interest held in Dexia Holdings Inc.PM:100% of Dexia Funding LuxembourgSA, Luxembourg.PM:0.01% of Deniz Faktoring, Istanbul,Turkey.On 9 July 2010, Dexia SA transferred to Dexia Crédit LocalSA its participating interest of EUR 0.02 million held in DexiaManagement Services Ltd. This sale resulted in a capital gainof EUR 0.06 million (cf. note 4.5.3.).Receivables on affiliated companiesThis item only relates to subordinated loans granted toGroup entities. It decreased from EUR 3,417.1 million as at31 December 2009 to EUR 2,833.2 million as at 31 December2010 due to the repayment of two subordinated loans, oneof EUR 640 million granted to Dexia Crédit Local and theother of EUR 75 million in favour of Dexia Bank Nederland.There was also a loan revaluation in USD (+EUR 131.1 million)as a result of the appreciation of that currency.4.2.5. RECEIVABLES AFTER MORE THAN ONE YEAROther amounts receivablesSince 2002, Dexia SA’s permanent establishment in Parishas headed the tax consolidation group in France, which as at31 december 2010 included the following companies:• CBX Gestion• CBXIA1• CBXIA2• CLF Marne-la-Vallée Participation• Compagnie pour le Foncier et l’Habitat (CFH)• Dexia Bail• Dexia CLF Avenir• Dexia CLF Banque• Dexia CLF Développement• Dexia CLF Immo• Dexia CLF Organisation• Dexia Crédit Local• Dexia DS Formation• Dexia DS Service• Dexia Éditions• Dexia Établissement Stable Paris• Dexia Habitat• Dexia Flobail• Dexia Investissements• Dexia Municipal Agency• Dexia Projets• Dexiarail• Dexia Sofaxis• Dexint Développement• Floral• Genebus Lease (formerly Dexia CLF Energia)• Guide Pratique de la Décentralisation.• PubliservicesBecause the commitments subscribed by Dexia Crédit Localand its subsidiaries allow Dexia, through its permanentestablishment, to lock in temporary tax savings, it was agreedthat the resources produced by the permanent establishmentwill be lent to the tax consolidation Group’s subsidiaries thatmade it possible to realise these tax savings through advancescalled “tax deferred advances”.Tax deferred advances granted by the permanent establishmentwith contractual maturity after 31 December 2011 amountedto EUR 47.6 million as at 31 December 2010..4.2.6. AMOUNTS RECEIVABLE WITHIN ONE YEARTrade debtorsThe item “Trade debtors” relates to commercial receivables forservices rendered to subsidiaries of the Group (EUR 3.5 million),and non-Group receivables (EUR 0.3 million) for the balance.Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsOther financial assetsDexia SA paid EUR 0.7 million by way of rental guarantee forthe premises located in the Dexia Tower – CBX.Annual report 2010 Dexia245

Notes to the annual financial statementsManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsOther amounts receivablesIn 2000, the acquisition of the US group Financial SecurityAssurance by head office was partially hedged by a currencyand interest-rate swap contract concluded with Dexia CréditLocal for an amount of USD 134.2 million against EUR 141.2million matured on 12 July 2010.Following the value reduction on the holding in DexiaHoldings Inc., shareholder of the Dexia FP Holdings group andin order to hedge the risk arising from that swap, the headoffice of Dexia SA concluded a transaction to purchase USD134.2 million forward for EUR 97.8 million, also matured on12 July 2010.The receivable resulting from this specific hedge (EUR 43.4million) was therefore settled on 12 July 2010.The permanent establishment of Dexia SA in Paris is the head ofthe tax consolidation group in France. In this regard it is solelyliable for corporation tax and the lump-sum annual taxationdue from the Group in relation to its fiscal integration, giventhat taxes due from companies which form part of the fiscalconsolidation must be paid to the permanent establishment.As at 31 December 2010, the tax receivable of the permanentestablishment in Paris to the French tax authorities as thehead of the tax consolidation group in France amounted toEUR 1.4 million.For subsidiaries, belonging to the tax consolidation group hasa neutral effect in relation to the tax situation they mighthave in the absence of integration. Subsidiaries shouldtherefore pay the permanent establishment their contributionto the corporate tax of the fiscally integrated Group. As at 31December 2010, the amount due from the French subsidiarieswith regard to the tax they owe the holding company is EUR7.9 million.Furthermore, as from 1 January 2007, the permanentestablishment of Dexia SA in Luxembourg is the head of theGroup within the scope of tax integration in Luxembourg.As a consequence, it alone is also liable for corporation taxand local commercial tax on group companies integrated inLuxembourg.The companies forming part of the Group fiscally integratedin Luxembourg are:• BIL Ré SA• Dexia Banque Internationale à Luxembourg SA• Dexia SA, Luxembourg branch• Dexia Participation Luxembourg SA• Experta Corporate and Trust Services SA• Société Luxembourgeoise de Leasing BIL Lease.As at 31 december 2010, the permanent Luxembourgestablishment had a claim of EUR 1.9 million on the companiestaking part in the tax consolidation in Luxembourg, whichcorresponds to the tax due from those companies on theirshare of the consolidated tax result.For its part, the head office has a withholding tax claim(EUR 0.1 million). To this is added a tax claim of EUR 3.3 millionon the Belgian fiscal authorities resulting from reliefsobtained after claims made as well as arrears interest ofEUR 0.7 million.The work rules state that salary is to be paid in advance. Theserepresent a claim of EUR 1.1 million as at 31 december 2010.4.2.7. CURRENT INVESTMENTSOther investments and depositsAs at 31 December 2009, the permanent establishment in Parisheld a portfolio of shares in Assured Guaranty Ltd at a valueof EUR 256.6 million. These shares originate from the disposalof Financial Security Assurance Holdings Ltd by Dexia HoldingsInc. to Assured Guaranty Ltd and were resold by Dexia HoldingsInc. to the permanent establishment of Dexia SA in Paris. Theywere sold on 16 March 2010, achieving a gross capital gain ofEUR 87.9 million (cf. note 4.5.2.) as well as a foreign exchangegain of EUR 3.6 million (cf. note 4.5.2.).This heading also includes a term deposit from the headoffice representing EUR 16.5 million and VVPR Dexia stripsworth EUR 0.2 million.4.2.8. CASH AT BANK AND IN HANDAvailable cash at banks and in hand totalled EUR 23.8 million.4.2.9. DEFERRED CHARGES AND ACCRUED INCOMEDeferred charges totalled EUR 0.4 million and accrued incomewas EUR 7.7 million.Among accrued income are the interest pro ratas of interestrelating to subordinated loans granted to Group entities (EUR7.1 million), to tax deferred advances (EUR 0.1 million) andservices rendered to other entities of the Group (EUR 0.5million).4.3. Shareholders’ equity andliabilitiesSHAREHOLDERS’ EQUITYAs at 31 December 2010, the holding company’s shareholderequity including 2010 net result before profit appropriationtotalled EUR 19,182.8 million and is composed of thefollowing items.4.3.1. CAPITALAs at 31 December 2010, subscribed capital totalledEUR 8,441.9 million against EUR 8,089 million as at31 December 2009. There was an increase of subscribedcapital on 11 June 2010 following the issue of bonus sharesdecided by the Extraordinary Shareholders’ Meeting held on12 May 2010.As at 31 December 2010 the capital is thus represented by1,846,406,344 shares of which 9,591,069 bearer shares,1,508,960,651 dematerialised shares and 327,854,624registered shares. The total number of Dexia VVPR strips was684,333,504.4.3.2. SHARE PREMIUM ACCOUNTEach of the previous capital increases involved an issuepremium so the total of these premiums amount to EUR13,617.7 million as at 31 December 2010.246 Dexia Annual report 2010

Notes to the annual financial statements4.3.3. RESERVES AND RETAINED EARNINGSThe heading “Reserves” includes the legal reserve (EUR 572.9million) and an available reserve amounting to EUR 617.1 million.The attribution of bonus shares decided by the ExtraordinaryShareholders’ Meeting held on 12 May 2010 was realisedon 11 June 2010 by incorporation of the available reserveamounting to EUR 970 million as at 31 December 2009 up toEUR 352.9 million in the capital.The retained earnings, taking account of the distribution forthe 2009 financial year which showed a loss of EUR 93.8million amounts to EUR 1,121.3 million.4.3.4. NET RESULT OF THE YEARThe loss for the year 2010 is EUR 5,188.2 million. Thisloss arises from the financial results (EUR +78.9 million),exceptional results (EUR -5,191.6 million) and net tax income(EUR +72.5 million) from which are deducted the holdingcompany’s net operating expenses (EUR -148 million).Considering this undertaking and the risks of losses or chargeswhich might arise, therefrom on 31 December 2010 DexiaSA made a provision for other risks and exceptional chargesamounting to EUR 116 million, through an additional EUR66.6 million booked to the 2010 financial year.Moreover, as a matter of prudence, Dexia SA provisionedan exceptional charge of EUR 39 million with regard to itssubsidiary Dexia banka Slovensko. This provision does notraise any issue regarding the sale of Dexia banka Slovenskoto Penta Investments following an agreement concluded inNovember 2010.In view of the above, the balance of provisions for otherliabilities and charges as at 31 December 2010 amountsto EUR 161.6 million against EUR 55.5 million as at31 December 2009.LIABILITIES4.3.7. AMOUNTS PAYABLE WITHIN ONE YEARManagement reportPROVISIONS AND DEFERRED TAXES4.3.5. PROVISIONS FOR PENSIONS AND SIMILAROBLIGATIONSWithin the context of the Group restructuring, individualagreements were signed in 2010, in accordance with thecollective agreements negotiated with the social partners. Theseagreements provide that certain employees will be exempt fromfuture performance, with or without proportional reduction oftheir remuneration. Consequently Dexia SA set aside provisionsof EUR 0.7 million to cover the payment of remunerations tobe paid in the context of the undertakings made.4.3.6. PROVISIONS FOR OTHER LIABILITIES ANDCHARGESSucceeding Dexia Crédit Local at the head of the taxconsolidation group in France, Dexia, through its permanentestablishment, assumed vis-à-vis the former head of the taxconsolidation group commitments initially subscribed by DexiaCrédit Local within the context of a tax leverage operationcarried out in France with the approval of French tax authorities.For the 2010 financial year, these operations resulted in taxsavings of EUR 0.4 million (immediate cash savings) includedin the amount of EUR 67.9 million mentioned in the note4.5.4. “Corporate income tax”, and in an allowance in thesame amount. The total of these commitments amounts toEUR 6.6 million as at 31 December 2010.On 1 February 2010, Dexia SA and Dexia Crédit Local SAconfirmed their intention in a letter of comfort to ensurethat Dexia Holdings Inc. is in a position to fulfill its financialobligations to third parties. That letter of comfort was drawnin favour of Dexia Holdings Inc. as a direct subsidiary of DexiaSA and Dexia Crédit Local, and Dexia Holdings Inc. is itssole beneficiary. Dexia SA and Dexia Crédit Local make thisundertaking individually and not jointly, in proportion to theirdirect holding in Dexia Holdings Inc. (namely 10% and 90%respectively to date). The economic losses expected at DexiaHoldings Inc. are greater than the total equity funding.Financial liabilitiesThese liabilities relate to short-term financing concluded withGroup companies for an amount of EUR 3,863.2 million.Trade liabilitiesSuppliers’ invoices not yet paid amount to EUR 13.5 millionand invoices to be received EUR 37.4 million. Among tradeliabilities are invoices for intercompany services for an amountof EUR 14.2 million.Taxes, remuneration and social securityThis item includes:• VAT to be paid (EUR 0.7 million);• professional withholding tax due (EUR 0.6 million);• liabilities corresponding to compensation and socialcontributions (EUR 24.7 million).Other amounts payableThe balance of dividends remaining to be paid for previousfinancial years is EUR 101.8 million.The remaining balance of EUR 0.8 million is related to othervarious liabilities, including EUR 0.7 million due to otherGroup companies.4.3.8. ACCRUED CHARGES AND DEFERRED INCOMEThis item is composed exclusively of expenses to be accruedas follows:• financial charges linked to loans due with Group companies(EUR 9.8 million);• pro rata operating expenditures attributable to the 2010fiscal year (EUR 0.3 million).Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia247

Notes to the annual financial statements4.4. Off-balance-sheet items –commitmentsDexia SA has significant commitments that are recorded offbalancesheet:4.4.5. TRANSACTIONS WITH THE BELGIAN, FRENCHand luxembourg STATESWe refer here to the Consolidated financial statement - note9.4.C. of the consolidated financial statements.Management reportConsolidatedfinancial statementsAdditional information Annual financial statements4.4.1. On 2 November 2006, Dexia SA issued a subordinatedguarantee within the context of a subordinated “hybrid Tier1” issue by Dexia Funding Luxembourg SA (DFL), a 100%subsidiary of Dexia SA (perpetual non-cumulative securitiesat a guaranteed fixed/floating rate, for a global amount ofEUR 500 million). This subordinated guarantee was issuedin favour of the security holders who subscribed to the saidsecurities and cover the payment by DFL of (i) any couponwhich has not been waived in accordance with the issueconditions and (ii) the redemption price in the case of theliquidation or insolvency of DFL (or similar situations) or (iii)the redemption price in the case of redemption in accordancewith the issue conditions.4.4.2. As at 31 December 2010, the number of optionsattributed to staff and management and not yet exercisedstood at 70,960,487. Taking exercise prices into account, thisoperation generates an off-balance sheet of EUR 1,087.1million. In order to protect warrant holders against adverseeconomic consequences arising from the issue of bonusshares following the resolution passed by the extraordinarygeneral meeting held on 12 May 2010, the exercise price forwarrants was reduced and the number of warrants increasedin accordance with an adjustment ratio determined in linewith the Corporate Action Policy of Euronext NYSE Liffe.4.4.3. On 18 May 2005, Dexia SA purchased 100% of theshares of Dexia Nederland Holding NV from Dexia FinancièreSA on the basis of a valuation made of these at EUR 93 millionsubject to a return to better fortune clause granted to DexiaBIL and Dexia Bank, also shareholders of Dexia Financière,for the case where the value of Dexia Nederland Holding,including the Dexia Bank Nederland (DBnl), should be revisedupwards as a consequence of decisions in favour of DBnl.4.4.4. On 5 December 2002, Dexia SA undertook vis-àvisits subsidiary Dexia Bank Nederland NV and each of theentities which will result from the demerger of Dexia BankNederland, excluding any other entity, to ensure that DexiaBank Nederland or the entities are at any time in a position tofulfil their commitments vis-à-vis third parties and to continuetheir activities, including the maintenance of their relationswith account holders and other clients; in particular, theaim of this undertaking was to prevent third parties beingprejudiced by the demerger of Dexia Bank Nederland. Theamendment or withdrawal of this undertaking was subjectto prior agreement from DNB (De Nederlandsche Bank). Thesale of Kempen & Co NV to a group of financial investors andmanagement was finalized on 15 November 2004. Withinthe context of this sale, SA reconfirmed by letter dated thesame day its undertaking vis-à-vis Dexia Bank Nederland,which remains a 100% subsidiary of Dexia to the exclusionof any other entity. In addition to the usual guarantees givento purchasers to which Dexia SA is also bound, Dexia SA willindemnify Kempen & Co against the risks relating to shareleasing contracts sold by Dexia Bank Nederland NV, formerlyLabouchere, and undertakes to compensate Kempen & Cofor damage resulting from a limited and identified numberof elements.Dexia SA commits itself to the issuers of guaranteed fundingto collect the fee payable under the Guarantee Agreementconcluded with the French, Belgian and Luxembourggovernments and for paying it to those governments.The same applies to the remuneration due to the Belgianand French governments for the guarantee of the FinancialProducts portfolio of FSA Asset Management LLC.4.4.6. LITIGATIONSWe refer here to the Management report – chapter RiskManagement – part Legal risk – presented on page 89.4.5. Statement of incomeThe Dexia Group transformation plan provides for thetransformation of business lines as well as the reorganisationof support lines (Finance, Risks, Compliance, Legal and Tax,Human Resources, Communication and Brand, Operationsand IT Systems, Audit).One of the principal objectives of this plan is to reinforce thetask of steering the Group and the development of its rolesof impulse and control. Therefore the implementation of thisplan required during the second half of 2010, the transfer ofsome 152 employees of various Group entities to all threelocations (Brussels, Paris and Luxembourg) of the holdingcompany Dexia SA.4.5.1. OPERATING RESULTOther operating income include services provided by DexiaSA during the second half of 2010 as part of its new missionin the transformation plan (EUR 28.4 million). The transfer ofemployees from other Group entities to the holding companyresulted in payment by those entities of provisions for thepension plan established in those entities, which representedan income of EUR 2.8 million. Also included in this item isthe recovery of costs from Group companies (EUR 4.3 million)as well as structural reductions regarding the professionalwithholding tax (EUR 0.3 million).Services and other goods amounting to EUR 133.7 million asat 31 December 2009 fell 13 % to EUR 116.5 million, whichreflects the cost reduction target set by the Dexia Group.This item includes fees paid to consultants, external providers,experts, auditors and Group subsidiaries for their services, aswell as compensations for the members of the ManagementBoard, or EUR 46.6 million against EUR 58.4 million in 2009,corresponding to a reduction of 20%.The Dexia Corporate University, which is intended to developtop-level training programs for members of staff of the entireDexia Group, generated a cost of EUR 1.1 million, againstEUR 1 million in 2009.248 Dexia Annual report 2010

Notes to the annual financial statementsOther operating costs (leasing of premises, telecommunications,travel, trainings, memberships, supplies, etc.) were reduced toEUR 30 million against EUR 29.7 million in 2009.Printing and advertising costs linked to corporate publicationswere EUR 0.7 million compared to EUR 1.3 million in 2009,whilst costs associated with the Group transformation planare EUR 35.9 million.Compensation paid to members of the Board of Directorsamount to EUR 2.2 million.The cost of remuneration and social charges rose from EUR40.6 million in 2009 to EUR 59.1 million in 2010, up 46%.The payroll increase is associated with several factors: thereduction or loss of variable compensation for all membersof staff of Dexia SA in 2009, as well as the increase of theaverage number of people directly employed by Dexia in 2010following the transfers due to the transformation plan (301FTE in 2010 against 260 FTE in 2009), with the correspondingpayroll increase.4.5.3. EXCEPTIONAL RESULTThe sale of its participation interest in Dexia ManagementServices Ltd to Dexia Crédit Local generated a gain of EUR0.06 million (cf. note 4.2.4.).Taking into account the rules of evaluation, it was decidedto perform exceptional value reductions on participations inDexia Crédit Local SA and Dexia Bank Belgium SA of EUR4,039 million and EUR 1,047 million respectively, in orderto align their value on the consolidated shareholders equityexcluding the non-realised losses and gains those sharesrepresent.The exceptional charges include a provision for exceptionalrisks and charges of EUR 66.6 million in relation to the directsubsidiary Dexia Holdings Inc., direct subsidiary of Dexia SAfor 10% as well as a provision of EUR 39 million related to itssubsidiary Dexia banka Slovensko (cf. note 4.3.6.).Management reportAmortization of formation expenses represented EUR 3.4million, amortization of intangible fixed assets EUR 2.6 millionand depreciation of tangible fixed assets EUR 0.5 million.Comments on provisions for risks and charges are to befound under note 4.3.5. “Provisions for pensions and similarobligations”, and note 4.3.6. “Provisions for other liabilitiesand charges”.4.5.2. FINANCIAL RESULTFinancial income from financial fixed assets only consists ofinterest received and earned for subordinated loans (EUR 37.7million).Income from current assets includes the interest generated bythe currency swap contracted with Dexia Crédit Local (EUR0.5 million), proceeds from tax deferred advances (EUR 0.2million) and dividends from shares in Assured Guaranty Ltdheld in the investment portfolio until their sale on 16 March2010 (EUR 0.8 million). The sale of Assured Guaranty sharesgenerated a gain of EUR 87.9 million.Other financial income results from net foreign exchangegains of EUR 3.1 million related to the appreciation of thedollar against the euro, including a profit of EUR 3.6 millionon the sale of Assured Guaranty shares.To this is added the arrears interest received by Dexia SA ontax relief obtained as a result of introduced claims (EUR 3.7million).Interest paid and due in relation to the loans and advancesgranted by Group entities totalled EUR 42.8 million. Financialcharges relating to the currency and interest rate swap withDexia Crédit Local were EUR 4 million and other interestcharges were EUR 0.3 million.Other financial charges include the commission paid on thedisposal of Assured Guaranty shares (EUR 7.2 million), chargeslinked to the quotation of the Dexia share (EUR 0.3 million),service costs related to the management of actions (EUR 0.2million) and other financial charges (EUR 0.2 million).4.5.4. CORPORATE INCOME TAXDexia SA obtained tax relief of EUR 3.3 million as a result ofclaims made previously.Proceeds from other income taxes are explained by thefact that the permanent establishments in Paris and inLuxembourg are each head of the tax consolidation groupin their respective country. The tax savings realised by eachtax consolidation group are recorded in these permanentestablishments and considered as an immediate gain (EUR 1.3million in Luxembourg and EUR 67.9 million in France).4.5.5. loss for the Financial yearConsidering the above, the 2010 financial year closed with aloss of EUR 5,188.2 million.The 2009 financial year also closed with a loss of EUR93.8 million, so it is necessary to justify application of thecontinuity accounting rules provided in Article 96, § 1,6° ofthe Companies Code.It should be stressed in this regard that the losses incurredby Dexia SA over these last two financial years arose on theone hand from exceptional events resulting in a non-recurrentcost of EUR 5,191.5 million in 2010 and EUR 25.4 million in2009, and on the other hand from the fact that the holdingcompany has not received any dividends from its subsidiariesamong other things due to the European Commission’srequirements over these last two financial years.We can nonetheless foresee a recovery of the results in the2011 financial year, and that is why we must continue toapply the continuity accounting rules.A proposal will be made to the Extraordinary Shareholders’Meeting convened for 11 May 2011 to reduce the sharecapital in order to discharge the loss carried forward as aresult of the allocation of the 2010 result, and if necessaryto enable Dexia SA to implement its dividend distributionpolicy. The technical feature which was chosen (share capitalreduction) to discharge this accounting loss does not impactthe value of Dexia SA's net assets.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia249

Notes to the annual financial statements4.6. Statement of formation expenses(in EUR)AmountsNet book value as at 31/12/09 6,320,373Movements during the period:- New expenses incurred 2,021,182- Depreciation (3,422,382)Net book value as at 31/12/10 4,919,173Detailing: Formation or capital increase expenses, loan issue expenses and other formation expenses 4,919,173Management reportConsolidatedfinancial statementsAdditional information Annual financial statements4.7. Statement of intangible fixed assets (licences)(in EUR)AmountsAcquisition value as at 31/12/09 12,710,960Movements during the period:- Acquisitions, including produced fixed assets 4,491,732Acquisition value as at 31/12/10 17,202,692Depreciation as at 31/12/09 8,250,523Movements during the period:- Recorded 2,574,858Depreciation as at 31/12/10 10,825,381Net book value as at 31/12/10 6,377,3114.8. Statement of tangible fixed assets(in EUR)Plant, machineryand equipmentFurniture andvehiclesOther tangiblefixed assetsAcquisition value as at 31/12/09 568,411 7,919,396 513,570Movements during the period:- Acquisitions 0 47,484 3,129- Sales and disposals (279,877) (229,144) (57,955)Acquisition value as at 31/12/10 288,534 7,737,736 458,744Depreciation as at 31/12/09 473,755 6,168,327 304,071Movements during the period:- Recorded 15,766 425,314 88,555- Cancelled due to sales and disposals (279,877) (229,144) (53,790)Depreciation as at 31/12/10 209,644 6,364,497 338,836Net book value as at 31/12/10 78,890 1,373,239 119,9084.9. Statement of financial fixed assets1. Participating interests and shares in affiliated enterprises(in EUR)AmountsAcquisition value as at 31/12/09 25,165,069,861Movements during the period:- Acquisitions 639,786,218- Sales and disposals (16,485)Acquisition value as at 31/12/10 25,804,839,594AmountsAmounts written down as at 31/12/09 284,146,133Movements during the period:- Recorded 5,086,000,000Amounts written down as at 31/12/10 5,370,146,133Net book value as at 31/12/10 20,434,693,4612. Amounts receivable(in EUR) 1. Affiliated 2. Other enterprisesNet book value as at 31/12/09 3,417,127,479 810,158Movements during the period:- Additions 0 312,084- Repayments (715,000,000) (462,429)- Exchange differences 131,073,133 0Net book value as at 31/12/10 2,833,200,612 659,813250 Dexia Annual report 2010

Notes to the annual financial statements4.10. Share in the capital and other rights in other companiesList of enterprises in which the enterprise holds a participating interest, and other enterprises in which the enterprise holdsrights in the amount of at least 10% of the capital issued.Name, full address of the registeredoffice and for the enterprise governedby Belgian law, the company numberShares held byThe enterprise(directly)Information from the most recent periodfor which annual accounts are availablePrimaryfinancialstatementSubsidiariesMonetaryunitCapitaland reserveNet resultNumber % % (+) or (-) (in monetary unit)Associated Dexia TechnologyServices SA – FC (1)23, Z.A. BourmichtL-8070 BertrangeCommon shares1,491 99.40 0.60 31/12/09 EUR 1,575,982 2,448Deniz Faktoring – FC (1)Rihtim Caddesi - Karaköy 26T-IstanbulCommon shares1 0.01 99.99 31/12/09 TRY 108,695,704 31,017,405Dexia Banque Belgique SABoulevard Pachéco 44B-1000 BrusselsBE 0403.201.185Common sharesDexia Banque Internationale àLuxembourg SA – FC (1)69 route d’EschL-1470 LuxembourgCommon shares359,412,6091,163,720100.0057.680.0042.2331/12/0931/12/09EUR 6,055,609,304EUR 2,193,359,915440,669,010172,243,3571, passerelle des Reflets, Tour Dexia –La Défense 2F-92919 ParisCommon shares87,045,744 100.00 0.00 31/12/09 EUR 1,969,613,116 699,114,408Dexia Crédit Local SA – FC (1)Dexia Funding Luxembourg SA – FC (1)180 rue des AubépinesL-1145 LuxembourgCommon shares31 100.00 0.00 31/12/09 EUR (50,687) (55,294)31 West 52nd streetNew York, NY 10019, USACommon shares1 10.00 90.00 31/12/09 USD 244,709,765 (3,261,108,204)Dexia Holdings Incorporated – FC (1)Piet Heinkade 55NL-1919 GM AmsterdamCommon shares50,000 100.00 0.00 31/12/09 EUR 440,717,849 (11,428,854)Dexia Nederland Holding NV – FC (1)Dexia Participation Belgique SAPlace Rogier 11B-1210 BrusselsBE 0882.068.708Common sharesDexia Participation Luxembourg SA – FC (1)69 route d’EschL-1470 LuxembourgCommon shares103,51525,75995.3999.994.610.0131/12/0931/12/09EUR 2,768,833,137EUR 1,408,200,721(100,967)(157,377)(1) FC: foreign companyManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia251

Notes to the annual financial statements4.11. Investments: other investments and deposits(in EUR) Previous period PeriodShares 256,599,975 0- Book value increased with the uncalled amount 256,599,975 0Fixed term deposits with credit institutions falling due: 58,686,669 16,500,000- Within one month 58,686,669 16,500,000Other investments 182,529 182,529Management reportConsolidatedfinancial statementsAdditional information Annual financial statements4.12. Deferred charges and accrued income from the assets(in EUR)PeriodDeferred charges 457,322Accrued income: Interest 7,159,250Accrued income: Reinvoicing of costs 476,5714.13. Statement of capital and shareholder's structureA. Issued capitalAmounts(in EUR)Issued capital as at 31/12/09 8,089,020,254Number of sharesChanges during the period:- capital increase due to the issuance of bonus shares 352,915,394 83,927,561Issued capital as at 31/12/10 8,441,935,648B. Structure of the capitalAmounts Number of shares(in EUR)Different categories of shares- Shares without indication of nominal value, each representing1/1 846 406 344 of the issued capital 8,441,935,648 1,846,406,344- Registered shares 327,854,624- Bearer shares and/or dematerialized 1,518,551,720C. Own shares held byAmount of capital Number of shares(in EUR)- the company itself 0 0- its direct subsidiaries 1,405,494 307,548D. Commitments to issue sharesAmount of capital Number of shares(in EUR)Following the exercising of subscription rights- Number of outstanding subscription rights 70,960,487- Amount of capital to be issued 324,289,426- Corresponding maximum number of shares to be issued 70,960,487E. Amount of authorized capital, not issuedAmounts(in EUR)8,080,000,000252 Dexia Annual report 2010

Notes to the annual financial statementsF. Structure of shareholdings of the enterprise as at the annual balancingof the books, as it appears from the statement received by the enterpriseCaisse des dépôts et consignations: 17.61%Holding Communal: 14.14%Group Arco: 13.81%Société de Prise de Participation de l'Etat (SPPE): 5.73%Société Fédérale de Participations et d'investissement (SFPI): 5.73%Ethias Group: 5.04%CNP Insurances: 2.96%Walloon Region: 2.01%Flemish Region through Vlaams Toekomstfonds: 2.87%Brussels-Capital Region: 0.86%4.14. Provisions for liabilities and charges(in EUR)PeriodCommitment as head of a fiscal consolidation (France) 6,638,846Coverage negative equity of group Dexia Holdings Inc. (DHI) 115,950,055Provision related to Dexia banka Slovensko 39,000,000Management report4.15. Amounts payable for taxes, remuneration and social security(in EUR)PeriodTaxesa) Expired taxes payable 0b) Non-expired taxes payable 1,269,808c) Estimated taxes payable 0Remuneration and social securitya) Amounts due to the National Office of Social Security 0b) Other amounts payable relating to remuneration and social security 24,719,829Consolidatedfinancial statements4.16. Accrued charges and deferred income in the liabilities(in EUR)PeriodAccrued charges: interest 9,793,962Accrued charges: general operating expense 327,572Additional information Annual financial statementsAnnual report 2010 Dexia253

Notes to the annual financial statements4.17. Operating resultsManagement reportConsolidatedfinancial statements(in EUR) Previous period PeriodOperating IncomeOther operating incomeWhereof: the total amount of subsidies and compensatory amountsobtained from public authorities 137,998 298,877Operating ChargesEmployees recorded in the personnel register in Belgiuma) Total number at the closing date 245 359b) Average number of employees in full-time equivalents 234.7 275.9c) Number of actual working hours 352,431 415,344Personnel chargesa) Remuneration and direct social benefits 27,219,704 42,498,712b) Employers' contribution for social security 8,318,393 9,981,878c) Employers' premium for extra statutory insurance 4,301,373 5,592,011d) Other personnel charges 740,719 737,601e) Old-age and widow's pensions 0 298,836Provisions for pensionsAdditions (uses and write-back) 0 715,500Provisions for liabilities and chargesIncreases 141,690 1,151,131Decreases 13,368,499 403Other operating chargesTaxes related to operations 866,929 410,142Other charges 26,927 79,692Temporary personnel and persons placed at the disposal of the enterprisea) Total number at the closing date 0 0b) Average number of employees in full-time equivalents 0 0c) Number of actual working hours 0 0d) Charges to the enterprise 0 04.18. Financial resultsAdditional information Annual financial statements(in EUR) Previous period PeriodOther financial incomeExchange differences 662,289 3,091,172Income related to a swap 43,410,303 0Reimbursment of commission provisions concerning the payment of dividends 377,949 0Other financial income 4,658 31,658Interest on arrears 3,700,333Other financial chargesCharges linked to the payment of dividends 76,214 43,424Loss on disposal of current assets 13,367,151 0Exchange differences 8,315 26,005Conversion differences 13,429 26,787Other financial charges 144,581 66,863Charges in connection with the quotation of the Dexia share 0 310,458Service costs related to the management of actions 381,497 230,842Commission sales actions Assured Guaranty 0 7,210,307254 Dexia Annual report 2010

Notes to the annual financial statements4.19. Income taxes(in EUR)PeriodIncome taxes of the current period:a) Taxes and withholding taxes due or paid 997b) Excess of income tax prepayments and withholding taxes capitalized 997Income taxes on previous periods: 1,396Additional charges for income taxes due or paid 1,396Impact of the exceptional results in the taxes on the profit of the year:The write off on on financial fixed assets and the exceptional provision for liabilitiesand charges are not tax deductible.The gain on disposal of fixed assets is tax exempted.Status of deferred taxes:Deferred taxes representing assets 309,725,858Accumulated tax losses deductible from future taxable profits 137,863,288Other deferred taxes representing assets- Surplus of revenues definitively taxed 169,753,390- Surplus on depreciations 2,109,180Management report4.20. Value added tax and taxes borne by third parties(in EUR) Previous period PeriodTotal amount of value added tax charged during the period :1. To the enterprise (deductible) 928,784 59,4742. By the enterprise 37,181 5,427Amounts retained on behalf of third parties for:1. Payroll withholding taxes 10,199,604 11,561,8982. Withholding taxes on investment income 0 04.21. Rights and commitments not reflected in the balance sheet(in EUR)PeriodPersonal guarantees, provided or irrevocably promised by the enterprise,as security for debt and commitments of third parties 500,039,450Whereof:- Maximum amount for which other debts or commitments of third parties are guaranteed500,039,450by the enterpriseInformation concerning important litigations and other commitments.See note 4.4. to the annual financial statementsIf there is a supplementary retirement or survivor's pension plan in favour of the personnel or the executives ofthe enterprise, a brief description of such plan and of the measures taken by the enterprise to cover the resultingcharges.Members of staff benefit from a supplementary retirement and survival pension scheme for wich both employees and staffpremiums have been paid to a group insurance. Some members of the Management Board also benefit from a supplementaryscheme of which the contributions are paid to an external insurance company.Consolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia255

Notes to the annual financial statements5. Financial relationships5.1. Relationships with affiliated enterprises and enterprises linked byparticipating interestsManagement reportConsolidatedfinancial statementsAffiliated enterprises(in EUR) Previous period PeriodFinancial fixed assets 28,298,051,207 23,267,894,073Investments 24,880,923,728 20,434,693,461Subordinated amounts receivable 3,417,127,479 2,833,200,612Amounts receivable 46,359,446 60,840,872After one year 40,505,613 47,613,359Within one year 5,853,833 13,227,513Current investments 58,686,669 16,500,000Amounts receivable 58,686,669 16,500,000Amounts payable 4,091,069,598 3,877,381,011Within one year 4,091,069,598 3,877,381,011Personal guaranteesProvided or irrevocably promises by the enterprise,as security for debts or commitments of affiliated enterprises 500,000,000 500,000,000Financial resultsIncome from financial fixed assets 62,594,834 37,658,336Income from current assets 2,576,806 752,077Debt charges 72,451,555 46,996,261Other financial charges 13,650,827 291,705Gains and losses on disposal of fixed assetsObtained captial gains 6 64,412Obtained capital losses 706,249 05.2. Transactions with related parties outside of normal market conditionsNil.Additional information Annual financial statements5.3. Relationships with directors and managers, individuals or bodiescorporate who control the enteprise without being associated therewithor other enterprises controlled by the mentioned persons without beingassociated therewithAmount of direct and indirect remuneration and pensions, included in the income statement, as long as this disclosure does notconcern exclusively or mainly, the situation of a single identifiable personTo the directors 2,205,4225.4. Relationships with affiliated auditorRemuneration of the Statutory Auditor 200,400Remuneration for exceptional tasks executed within the enterprise by the Statutory AuditorOther attestation missions 184,531Other missions external to the audit 21,328256 Dexia Annual report 2010

Notes to the annual financial statements6. Declaration concerning the consolidated accountsThe enterprise has established and published the consolidated accounts and a consilidated financial statement.7. Social report7.1. Statement of the persons employed in 2010A. Employees recorded in the staff register in Belgium1. During the periodand during the previous periodFull-time(Period)Part-time(Period)Total (T)or total full-timeequivalents (FTE)(Period)Total (T)or total full-timeequivalents (FTE)(Previous period)Average number of employees 232,3 64.3 275.9 (ETP) 234.7 (ETP)Number of actual working hours 407,635 7,709 415,344 (T) 352,431 (T)Personnel charges (in EUR) 50,701,935 958,913 51,660,848 (T) 34,760,781 (T)2. As at the closing date of the period Full-time Part-time Total of full-timeequivalentsa. Number of employees recorded in the personnel register 284 75 333.8b. By nature of the employment contractContract of indefinite period 282 75 331.8Contract of definite period 2 2.0c. According to gender and by level of educationMale : 180 47 210.5secondary education 14 2 14.8higher non-university education 21 5 24.1university education 145 40 171.6Female : 104 28 123,3secondary education 6 2 7.6higher non-university education 30 8 35.1university education 68 18 80.6d. By professional categoryManagement staff 31 26 48.8Employees 253 49 285.0B. Hired temporary staff and personnel placed at the enterprise's disposalDuring the period Temporary personnel Persons placedat the disposalof the enterpriseAverage number of employees 0 0Number of hours actually worked 0 0Charges of the enterprise (in EUR) 0 0Management reportConsolidatedfinancial statementsAdditional information Annual financial statementsAnnual report 2010 Dexia257

Notes to the annual financial statements7.2. Table of personnel movements during the periodManagement reportConsolidatedfinancial statementsAdditional information Annual financial statementsA. EntrIesFull-time Part-time Total of full-timeequivalentsa. Number of employees recordedon the staff register in Belgium during the period 125 24 139.3b. By nature of the employment contractContract for an indefinite period 122 24 136.3Contract for an definite period 3 3.0B. DeparturesFull-time Part-time Total of full-timeequivalentsa. Number of employees with a in the Belgian staff registerlisted date of termination of the contract during the period 29 6 33.2b. By nature of the employment contractContract for an indefinite period 27 6 31.2Contract for an definite period 2 2.0c. According to the reason for terminationof the employment contractPension 1 1.0Dismissal 9 3 11.6Other reason 19 3 20.6Of which: the number of persons who continue to render servicesto the enterprise at least half-time on a self-employed basis - - -7.3. Information on training provided during the financial year to employeesrecorded on the staff register in BelgiumTotal of formal continuing vocational training initiativesMaleFemalefor workers paid by the employerNumber of employees involved 145 98Number of training hours 3,138 2,034Costs for the enterprise (in EUR) 561,186 363,752- whereof gross costs directly associated with the company (in EUR) 561,186 363,752Total of less formal and informal continuing vocational training initiativesfor workers paid by the employerNumber of employees involved 41 29Number of training hours 143 52Costs for the enterprise (in EUR) 92,458 33,621258 Dexia Annual report 2010

Dexia SAStatutory Auditor’s report for theyear ended 31 December 2010to the Shareholders’ MeetingTo the shareholdersAs required by law and the company’s articles of association,we are pleased to report to you on the audit assignment whichyou have entrusted to us. This report includes our opinion onthe financial statements together with the required additionalcomments.Unqualified audit opinion onthe financial statements, withexplanatory paragraphWe have audited the financial statements of Dexia SA for theyear ended 31 December 2010, prepared in accordance withthe accounting principles applicable in Belgium, which showtotal assets of 23,397,851,600 EUR and a loss for the year of5,188,206,600 EUR.and disclosures in the financial statements. The proceduresselected depend on our judgment, including the assessmentof the risks of material misstatement of the financialstatements, whether due to fraud or error. In making thoserisk assessments, we have considered internal control relevantto the company’s preparation and fair presentation of thefinancial statements in order to design audit proceduresthat are appropriate in the circumstances but not for thepurpose of expressing an opinion on the effectiveness of thecompany’s internal control. We have assessed the basis of theaccounting policies used, the reasonableness of accountingestimates made by the company and the presentation ofthe financial statements, taken as a whole. Finally, the Boardof Directors and responsible officers of the company havereplied to all our requests for explanations and information.We believe that the audit evidence that we have obtainedprovides a reasonable basis for our opinion.Management reportConsolidatedfinancial statementsThe Board of Directors of the company is responsible for thepreparation of the financial statements. This responsibilityincludes among other things: designing, implementing andmaintaining internal control relevant to the preparationand fair presentation of financial statements that are freefrom material misstatement, whether due to fraud or error,selecting and applying appropriate accounting policies, andmaking accounting estimates that are reasonable in thecircumstances.Our responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit inaccordance with legal requirements and auditing standardsapplicable in Belgium, as issued by the “Institut des Réviseursd’Entreprises/Instituut van de Bedrijfsrevisoren”. Thosestandards require that we plan and perform the audit toobtain reasonable assurance whether the financial statementsare free from material misstatement.In accordance with these standards, we have performedprocedures to obtain audit evidence about the amountsIn our opinion, the financial statements as of 31 December2010 give a true and fair view of the company’s assets,liabilities, financial position and results in accordance with theaccounting principles applicable in Belgium.Despite the fact that the company has incurred significantlosses over the last two years that impact its financial position,the financial statements have been drafted using the goingconcern principle. This assumption is only justified to theextent that the results of Dexia Group continue to demonstratea sustainable recovery and taking into account the level of theshareholders’ equity of the company at closing date.Without modifying the above unqualified opinion, wedraw your attention to the notes to the annual financialstatements, in which the Board of Directors, in accordancewith Belgian legal requirements, justifies the applicationof the going concern principle. No adjustments have beenrecorded with respect to the valuation or the classification ofcertain balance-sheet items, which would be required, shouldthe Group no longer be able to continue its operations.Additional information Annual financial statementsAnnual report 2010 Dexia259

Statutory Auditor's reportManagement reportAdditional information Annual financial statementsConsolidatedfinancial statementsAdditional commentsThe preparation and the assessment of the information thatshould be included in the Directors’ report and the company’scompliance with the requirements of the Companies Codeand its articles of association are the responsibility of theBoard of Directors.Our responsibility is to include in our report the followingadditional comments which do not change the scope of ouraudit opinion on the financial statements:• The Directors’ report includes the information requiredby law and is in agreement with the financial statements.However, we are unable to express an opinion on thedescription of the principal risks and uncertainties confrontingthe company, or on the status, future evolution, or significantinfluence of certain factors on its future development. Wecan, nevertheless, confirm that the information given is notin obvious contradiction with any information obtained in thecontext of our appointment.• Without prejudice to certain formal aspects of minorimportance, the accounting records are maintained inaccordance with the legal and regulatory requirementsapplicable in Belgium.• No transactions have been undertaken or decisions takenin violation of the company’s articles of association or theCompanies Code such as we would be obliged to reportto you. The appropriation of the results proposed to theShareholders’ Meeting is in accordance with the requirementsof the law and the company’s articles of association.Diegem, 21 March 2011The Statutory AuditorDELOITTE Bedrijfsrevisoren / Reviseurs d’EntreprisesBV o.v.v.e. CVBA / SC s.f.d. SCRLRepresented byFrank VerhaegenBernard De Meulemeester260 Dexia Annual report 2010

Additional informationCertificate from the responsible personI the undersigned, Pierre Mariani, Chief Executive Officer and Chairman of the Management Board of Dexia SA, certify that tothe best of my knowledge:a) the financial statements, established in accordance with applicable accounting standards, present a true and fair view of theassets, the financial situation and the earnings of the company and of all the companies included in the consolidation;b) the management report contains a true and fair view of changes in the revenues, earnings and financial position of thecompany and of all the companies included in the scope of consolidation and a description of the main risks and uncertaintiesto which they are exposed.Management reportBrussels, 21 March 2011For the Management BoardPierre MarianiChief Executive Officer and Chairman of the Management BoardDexia SAConsolidatedfinancial statementsAdditional informationAnnual financial statementsAnnual report 2010 Dexia261

Additional informationManagement reportConsolidatedfinancial statementsAnnual financial statementsGeneral dataNameThe company is called “Dexia”.Registered officeThe registered office of the company is in Belgium atPlace Rogier 11, 1210 Brussels(RPM Brussels VAT BE 0458.548.296).Legal form, incorporation, durationThe company is a limited company under Belgian law thatmakes a public appeal for investment. It was incorporated on15 July 1996 for an indefinite period. The company has twopermanent offices located in France and in Luxembourg.Corporate objectArticle 3 of the articles of association reads as follows:“The company has the object, both in Belgium and in othercountries, of:1. the acquisition, holding, management and sale, by whatevermeans, of all equity interests in companies or any otherlegal entities, whatever their legal form, existing or to becreated, which operate as credit institutions, insurance orreinsurance companies or which carry on financial, industrial,commercial or civil, administrative or technical activities, aswell as all types of shares, bonds, public funds and any otherfinancial instruments of whatever nature;2. the provision of assistance or administrative, commercialand financial services and accomplishment of all research onbehalf of third parties and in particular on behalf of companiesand other legal entities, whatever their legal form, inwhich it holds a direct or indirect equity interest, as well asthe provision of loans, advances, guarantees or securities, inwhatever form;3. the conducting of all movable property, real property,financial, industrial, commercial or civil transactions includingthe acquisition, management, leasing and sale of all movableand real property, related directly or indirectly to the realisationof its corporate object or likely to contribute to suchrealisation.”Places where the public may consultdocumentsThe articles of association of the company are available at theoffice of the Clerk to the Commercial Court of Brussels andat the company’s registered office. The annual reports aswell as the annual financial statements and the consolidatedfinancial statements are lodged with the National Bank ofBelgium. These documents may also be obtained from thecompany’s registered office. Decisions in relation to appointmentsand resignations of members of the Board of Directorsare published in the Appendix to the Belgian Gazette. Financialnotices concerning the company are published on itswebsite (www.dexia.com). The convocations to Shareholders’Meetings are published on the website and in the financialnewspapers, the daily press and periodicals.Additional information262 Dexia Annual report 2010

Dexia’s annual report 2010 has been published by the Financial 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 Brusselsor in Paris or via the company website at www.dexia.com.Dexia SAPlace Rogier 11B-1210 BrusselsIBAN BE61-0682-1136-2017BIC GKCC BE BBRPM Brussels VAT BE 0458.548.296In Paris1, passerelle des RefletsTour Dexia – La Défense 2F-92919 La Défense CedexIn Luxembourg69, route d’EschL-2953 LuxembourgCONTACTPress departmentE-mail: pressdexia@dexia.comPhone Brussels: + 32 2 213 50 81Phone Paris: + 33 1 58 58 59 05Investor RelationsE-mail: dexia.investor-relations@dexia.comPhone Brussels: + 32 2 213 57 46Phone Paris: + 33 1 58 58 85 97Websitewww.dexia.comFINANCIAL CALENDAROrdinary Shareholders’ Meeting for the 2010 financial year11 May 2011Results as at 31 March 201111 May 2011Results as at 30 June 20114 August 2011Results as at 30 September 20119 November 2011Results as at 31 December 201122 February 2012Ordinary Shareholders’ Meeting for the 2011 financial year9 May 2012

Photographs: page 8: C. LEBEDINSKY/Challenges-REA – page 43: Olivier Polet (www.polet.tv) – Printed by Antilope – Lier – Belgium

SDXI 0149-5 04-11

Annual report 2010 - Dexia.com

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