Annual report 2010 - Dexia.com

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