Annual report 2010 - Dexia.com

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