Notes to the annual fi nancial statementsManagement <strong>report</strong>Consolidatedfinancial statements<strong>Annual</strong> financial statementsAdditional informationGuarantee for the Financial Products portfolio<strong>Dexia</strong> entered into an agreement for the sale of the insuranceactivities of Financial Security Assurance (FSA) toAssured Guaranty Ltd (Assured) on 14 November 2008; thesale was <strong>com</strong>pleted on 1 July <strong>2009</strong>. The Financial Productsactivity of FSA, managed by FSA Asset Management (FSAM),was carved out of the transaction and remains under <strong>Dexia</strong>’sownership.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(the First Demand Guarantee Agreement relating to the“financial products” portfolio of FSA Asset ManagementLLC and the Guarantee Reimbursement Agreement) enteredinto by the Belgian and French States and <strong>Dexia</strong>. The mainrelevant terms are the following:• <strong>Dexia</strong> SA and <strong>Dexia</strong> Crédit Local S.A. (“DCL”) entered intoa put agreement whereby FSAM is entitled to sell to <strong>Dexia</strong>and/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 <strong>Dexia</strong>).• The Belgian and French States have each undertakento guarantee, severally and not jointly, the obligations of<strong>Dexia</strong> 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 amountof USD 4.3 billion, such that the par value of the assetsincluded in the portfolio to which the put relates is equal toUSD 11.2 billion as at 31 December <strong>2009</strong>. <strong>Dexia</strong> will thereforecover a first loss tranche of USD 4.5 billion, of whichan amount of approximately USD 2 billion has already beenreserved as at 31 December <strong>2009</strong> (USD 1.804 billion on theFinancial Products portfolio and a USD 344 million collectiveimpairment on US RMBS).• The States are entitled to recover from <strong>Dexia</strong> 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 <strong>Dexia</strong>(ordinary shares or profit shares).• <strong>Dexia</strong> therefore issued subscription rights (warrants) to eachof the States for a period of 5 years, to allow the States tobe reimbursed through the issuance of new shares, followingthe contribution in kind to <strong>Dexia</strong> of their right of reimbursement.The cancellation and re-issuance of the existing warrantsfor a new period of 5 years will be submitted to theapproval of the general meeting of shareholders every year.In case of failure to re-issue the warrants, a penalty will beapplied (500bps per annum for a period of two years, <strong>com</strong>poundedon the guarantee <strong>com</strong>mission).• <strong>Dexia</strong> may also issue profit shares at the request of theStates instead of the shares. The profit shares would beissued for a price equal to the exercise price of the warrants,would not have voting rights, would be entitled to a specialdividend and be convertible at the option of the States intoordinary <strong>Dexia</strong> shares, one for one. The terms of the profitshares have been approved by the extraordinary shareholders’meeting of <strong>Dexia</strong> on 24 June <strong>2009</strong> and are set out inArticle 4bis of the Articles of Association of <strong>Dexia</strong>.• <strong>Dexia</strong> must semi-annually pay to the States a guaranteefee at a rate of 1.13% per annum, calculated on the averageoutstanding nominal amount of the FSAM portfolio(excluding the excluded assets) over a 6 month-period,plus a fee of 0.32% per annum calculated on the lowerof (i) the total amount of the liabilities pursuant to theGuaranteed Investment Contracts and (ii) the average outstandingnominal amount of the FSAM portfolio (excludingthe excluded assets) over a 6 month-period.• The guarantee of the States pursuant to an asset defaultor the insolvency of <strong>Dexia</strong> expires in 2035, unless the partiesdecide to extend the guarantee. The guarantee pursuant toa liquidity or collateral default expires on 31 October 2011.This guarantee was approved by the European Commissionon 13 March <strong>2009</strong>.For a more detailed description of the guarantee for theFinancial Products portfolio, see the Special Board Report of12 May <strong>2009</strong> available on the website of <strong>Dexia</strong> (www.dexia.<strong>com</strong>).4.4.7. LITIGATIONS4.4.7.1. <strong>Dexia</strong> Bank Nederland NV4.4.7.1.1. BackgroundThe difficulties linked to the share-leasing activities of theformer Bank Labouchere (now <strong>Dexia</strong> Bank Nederland NVs;hereinafter referred to as DBnl) appeared at the time ofthe fast and severe fall of the Amsterdam stock marketin late 2001. The value of the securities used as collateralagainst the loans granted by DBnl proved insufficient in alarge number of contracts, thus potentially ending with aresidual debt instead of the gain initially hoped for. Referenceis made to the detailed disclosures, as contained inthe <strong>Dexia</strong> <strong>Annual</strong> Report 2008 (particularly on pages 91to 92, including the consequences of the decision of theNetherlands Supreme Court of 28 March 2008, in respectof the so-called spouse consent matter) and in the FinancialReports published during the year <strong>2009</strong>, which are availableon www.dexia.<strong>com</strong>.4.4.7.1.2. Specific litigationsOn 5 June <strong>2009</strong>, the Netherlands Supreme Court made animportant ruling in respect of the share-leasing contracts ofDBnl. Many allegations have been rejected, including error,misleading advertising, abuse of circumstances, and theapplicability of the Netherlands Consumer Credit Act.However, this decision also states that, generally speaking,DBnl had a special duty of care to inform and to warn itsclients “... in clear and in unmistakable terms...” about therisks involved in share-leasing contracts, including the possibilityof a so-called residual debt. Additionally, this rulingstates that DBnl failed in respect of its obligation to check,prior to entering into the contract, on the in<strong>com</strong>e and wealthof the client. Therefore, for clients with sufficient financialcapacity at the date they entered the share-leasing contract,DBnl has to grant a discount basically of 60% of the total226<strong>Dexia</strong> <strong>Annual</strong> <strong>report</strong> <strong>2009</strong>
Notes to the annual fi nancial statementsresidual debt. Other clients, who have been faced with anunreasonable heavy financial burden, are also, in additionto a discount of the residual debt, awarded a repayment inmost cases of 60% of the instalments they have made. Thedistinction between those two categories of clients neededfurther interpretation by judges, based on the de facto position,and on a case-by-case basis.Subsequently, on 1 December <strong>2009</strong>, the Amsterdam Courtof Appeal made four detailed rulings, in respect of the preciseway the distinction of the Netherlands Supreme Courtbetween those two categories of clients should have beenmade. Clients stating that they have been faced with anunreasonable heavy financial burden, have the obligation tofurnish the facts. The Court of Appeal also ruled on someother issues, including the fact that profits from earlier shareleasingproducts should be taken into account, and the <strong>com</strong>mencingdate of the legal interest.4.4.7.1.3. Number of court casesAs at 31 December <strong>2009</strong>, DBnl is still involved in over 3,400civil cases. However, the vast majority of these cases havebeen suspended. The number of clients in proceedings willdecrease in 2010 because of settlements expected after thejudgements of the Supreme Court and the Amsterdam Courtof Appeal.4.4.7.1.4. Litigations in generalA number of disputes have arisen between DBnl and itsclients with respect to share-leasing products. Particularly inview of the nature of these disputes, <strong>Dexia</strong> refers to its earlier<strong>report</strong>s and financial <strong>report</strong>s. Generally speaking, only theapproximately 19,000 clients that filed a so-called opt-outstatement before 1 August 2007, and did not enter into anysettlement since then, are still entitled to start or to continueproceedings against DBnl.4.4.7.1.5. Dutch Securities Institute (DSI)At the end of <strong>2009</strong>, no cases were still under considerationby the Grievance Committee of DSI, or under considerationby the Appeals Committee of DSI.4.4.7.1.6. Depot LeaseThe Duisenberg Arrangement is not applicable to the groupof approximately 5,500 clients who entered into share-leasingagreements in connection with securities deposit (“DepotLease”). At the end of <strong>2009</strong>, settlements had been reachedwith nearly all Depot Lease clients. DBnl faces fewer than tenremaining court cases with Depot Lease clients, but expectsto be able to settle most of them.4.4.7.1.7. Provisions as at 31 December <strong>2009</strong>In <strong>2009</strong>, DBnl increased its provisions to cover the estimatedconsequences that the above-mentioned rulings on its dutyof care might have under specific circumstances in certaincases. An additional provision was taken in relation to thespouse-consent matter, should DBnl’s appeal on the threeyearstatute of limitation be denied. However, DBnl maintainsits position that in many of those cases the three-year statuteof limitation period has expired and, as a result, these caseshave be<strong>com</strong>e void.Provisions are updated every quarter and may be influencedby fluctuations in the value of the underlying stock of theshare-leasing contracts, by client behaviour and by futurejudgments.4.4.7.2. Lernout & Hauspie<strong>Dexia</strong> Bank SA is concerned in various ways with the bankruptcyof Lernout & Hauspie Speech Products SA (LHSP) andthe consequences thereof. This was described in detail inthe 2007 and 2008 annual <strong>report</strong>s. Since the 2008 <strong>Annual</strong>Report, the following relevant events have occurred.4.4.7.2.1. Claim on Lernout & Hauspie SpeechProducts (LHSP)At 31 December <strong>2009</strong>, <strong>Dexia</strong> Bank has a claim in USDchargeable to the bankruptcy of LHSP for a principal sumof EUR 27,926,275.50 (exchange rate USD/EUR 1.43985), ofwhich EUR 176,941.28 reserved interest, for which an impairmenthas been recorded for EUR 23,377,584.70. This claimoriginates in the share taken by the former Artesia Bankingcorporation (ABC hereafter) in the syndicated loan of USD430,000,000 to LHSP on 5 May 2000. ABC’s share amountedto USD 50,000,000.The liquidation of LHSP’s assets is subject to separate proceedingsin Belgium and in the United States.According to the LHSP Belgian bankruptcy receivers, <strong>Dexia</strong>Bank and the other unsecured creditors are unlikely to receiveany dividend from the Belgian liquidation of LHSP.In 2008, <strong>Dexia</strong> Bank has waived its claim on the insolvencyof LHSP in the United States, in exchange for a waiver by theAmerican Litigation Trustee of LHSP of all its claims enteredagainst <strong>Dexia</strong> Bank.4.4.7.2.2. Claim on Lernout & HauspieInvestment CompanyThe entire outstanding balance of EUR 40,500,000 and theimpairments were finally written off in June <strong>2009</strong>.4.4.7.2.3. Prosecution of <strong>Dexia</strong> Bankin BelgiumOn 4 May 2007, <strong>Dexia</strong> Bank was summoned, together with20 other parties, to appear before the Court of CriminalAppeal in Ghent. According to the writ of summons, <strong>Dexia</strong>Bank is prosecuted by virtue of the former ABC being accusedas an alleged accessory to the falsification of the financialstatements of LHSP (valsheid in de jaarrekening/faux dans les<strong>com</strong>ptes annuels) and other related offences among whichforgery (valsheid in geschrifte/faux en écriture), securitiesfraud (emissiebedrog/délit d’émission) and market manipulation(koersmanipulatie/manipulation de cours).The Public Prosecutor alleges in substance that Artesia ABCaided and abetted LHSP in the creation of fictitious revenue,by granting a USD 20 million loan to Messrs Lernout, Hauspieand Willaert, whilst ABC allegedly knew that the managementof LHSP would utilize these funds for improper revenuerecognition. The Public Prosecutor has asked the court toimpose a “substantial fine” on <strong>Dexia</strong> Bank, without howeverspecifying an amount. Furthermore, the Public ProsecutorManagement <strong>report</strong>Consolidatedfinancial statements<strong>Annual</strong> financial statementsAdditional information<strong>Annual</strong> <strong>report</strong> <strong>2009</strong> <strong>Dexia</strong> 227
- Page 1 and 2:
9Annual report 2009
- Page 3 and 4:
9Annual report 2009Management repor
- Page 5 and 6:
9Management report
- Page 7 and 8:
Group profi leSIMPLIFIED GROUP STRU
- Page 9 and 10:
Group profi leQUALITY OF RISKS Dexi
- Page 11 and 12:
In accordance with the agreement wi
- Page 13 and 14:
2009 and early 2010 highlightsExit
- Page 15 and 16:
2009 and early 2010 highlightsCreat
- Page 17 and 18:
Corporate governanceIntroduction: t
- Page 19 and 20:
Corporate governanceThe European Ad
- Page 21 and 22:
Corporate governanceNAMEPIERREMARIA
- Page 23 and 24:
Corporate governanceNAMEROBERTDE ME
- Page 25 and 26:
Corporate governanceNAMESPECIALISTC
- Page 27 and 28:
Corporate governanceNAMEKOEN VAN LO
- Page 29 and 30:
Corporate governanceNew directors a
- Page 31 and 32:
Corporate governanceConsidering tho
- Page 33 and 34:
Corporate governancemade and the fi
- Page 35 and 36:
Corporate governanceDIRECTORS’ AN
- Page 37 and 38:
Corporate governanceOperation and a
- Page 39 and 40:
Corporate governanceThe Appointment
- Page 41 and 42:
Corporate governanceResponsibilitie
- Page 43 and 44:
Corporate governanceVariable compen
- Page 45 and 46:
Corporate governancetional entities
- Page 47 and 48:
Corporate governance• It identifi
- Page 49 and 50:
Shareholder informationStock market
- Page 51 and 52:
Shareholder informationPRINCIPAL DE
- Page 53 and 54:
Human resourcesAGE PYRAMID> 5955-59
- Page 55 and 56:
Sustainable developmentThe 2009 Dex
- Page 57 and 58:
Risk managementIntroductionIn 2009,
- Page 59 and 60:
Risk managementThe Rating Committee
- Page 61 and 62:
Risk managementAsset qualityBy the
- Page 63 and 64:
Risk managementBond portfolioDexia
- Page 65 and 66:
Risk managementThis good performanc
- Page 67 and 68:
Risk managementRisk and control sel
- Page 69 and 70:
Risk managementECONOMIC CAPITALBY T
- Page 71 and 72:
Financial resultsPreliminary notes
- Page 73 and 74:
Financial resultsSolvency31/12/08 3
- Page 75 and 76:
Financial resultsAssetsLoans and ad
- Page 77 and 78:
Activity and results of the busines
- Page 79 and 80:
Activity and results of the busines
- Page 81 and 82:
Activity and results of the busines
- Page 83 and 84:
Activity and results of the busines
- Page 85 and 86:
Activity and results of the busines
- Page 87 and 88:
Activity and results of the busines
- Page 89 and 90:
General information3. Overview of t
- Page 91 and 92:
General informationAll the above-me
- Page 93 and 94:
General information4.5. Dexia banka
- Page 95 and 96:
General information6.3. Notificatio
- Page 98 and 99:
Consolidated balance sheet ........
- Page 100 and 101:
Consolidated balance sheetManagemen
- Page 102 and 103:
Consolidated statementof incomeMana
- Page 104 and 105:
Management reportConsolidatedfinanc
- Page 106 and 107:
Consolidated statementof comprehens
- Page 108 and 109:
Notes to the consolidated financial
- Page 110 and 111:
Notes to the consolidated fi nancia
- Page 112 and 113:
Notes to the consolidated fi nancia
- Page 114 and 115:
Notes to the consolidated fi nancia
- Page 116 and 117:
Notes to the consolidated fi nancia
- Page 118 and 119:
Notes to the consolidated fi nancia
- Page 120 and 121:
Notes to the consolidated fi nancia
- Page 122 and 123:
Notes to the consolidated fi nancia
- Page 124 and 125:
Notes to the consolidated fi nancia
- Page 126 and 127:
Notes to the consolidated fi nancia
- Page 128 and 129:
Notes to the consolidated fi nancia
- Page 130 and 131:
Notes to the consolidated fi nancia
- Page 132 and 133:
Notes to the consolidated fi nancia
- Page 134 and 135:
Notes to the consolidated fi nancia
- Page 136 and 137:
Notes to the consolidated fi nancia
- Page 138 and 139:
Notes to the consolidated fi nancia
- Page 140 and 141:
Notes to the consolidated fi nancia
- Page 142 and 143:
Notes to the consolidated fi nancia
- Page 144 and 145:
Notes to the consolidated fi nancia
- Page 146 and 147:
Notes to the consolidated fi nancia
- Page 148 and 149:
Notes to the consolidated fi nancia
- Page 150 and 151:
Notes to the consolidated fi nancia
- Page 152 and 153:
Notes to the consolidated fi nancia
- Page 154 and 155:
Notes to the consolidated fi nancia
- Page 156 and 157:
Notes to the consolidated fi nancia
- Page 158 and 159:
Notes to the consolidated fi nancia
- Page 160 and 161:
Notes to the consolidated fi nancia
- Page 162 and 163:
Notes to the consolidated fi nancia
- Page 164 and 165:
Notes to the consolidated fi nancia
- Page 166 and 167:
Notes to the consolidated fi nancia
- Page 168 and 169:
Notes to the consolidated fi nancia
- Page 170 and 171:
Notes to the consolidated fi nancia
- Page 172 and 173:
Notes to the consolidated fi nancia
- Page 174 and 175:
Notes to the consolidated fi nancia
- Page 176 and 177:
Notes to the consolidated fi nancia
- Page 178 and 179: Notes to the consolidated fi nancia
- Page 180 and 181: Notes to the consolidated fi nancia
- Page 182 and 183: Notes to the consolidated fi nancia
- Page 184 and 185: Notes to the consolidated fi nancia
- Page 186 and 187: Notes to the consolidated fi nancia
- Page 188 and 189: Notes to the consolidated fi nancia
- Page 190 and 191: Notes to the consolidated fi nancia
- Page 192 and 193: Notes to the consolidated fi nancia
- Page 194 and 195: Notes to the consolidated fi nancia
- Page 196 and 197: Notes to the consolidated fi nancia
- Page 198 and 199: Notes to the consolidated fi nancia
- Page 200 and 201: Notes to the consolidated fi nancia
- Page 202 and 203: Notes to the consolidated fi nancia
- Page 204 and 205: Notes to the consolidated fi nancia
- Page 206 and 207: Notes to the consolidated fi nancia
- Page 208 and 209: Notes to the consolidated fi nancia
- Page 210 and 211: Notes to the consolidated fi nancia
- Page 212 and 213: Notes to the consolidated fi nancia
- Page 214: Statutory Auditor’s reportManagem
- Page 217 and 218: 9Annual financial statementsFINANCI
- Page 219 and 220: SHAREHOLDERS’ EQUITY AND LIABILIT
- Page 221 and 222: Notes to the annualfinancial statem
- Page 223 and 224: Notes to the annual fi nancial stat
- Page 225 and 226: Notes to the annual fi nancial stat
- Page 227: Notes to the annual fi nancial stat
- Page 231 and 232: Notes to the annual fi nancial stat
- Page 233 and 234: Notes to the annual fi nancial stat
- Page 235 and 236: Notes to the annual fi nancial stat
- Page 237 and 238: Notes to the annual fi nancial stat
- Page 239 and 240: Notes to the annual fi nancial stat
- Page 241 and 242: Notes to the annual fi nancial stat
- Page 243 and 244: Notes to the annual fi nancial stat
- Page 245 and 246: Statutory Auditor’s report• Wit
- Page 247 and 248: Additional informationGeneral dataN
- Page 249 and 250: Additional informationDexia FP Hold
- Page 251 and 252: Dexia’s annual report 2009 has be