Contents - Dexia · Customized financial arrangements, long-term loans, credit enhancement, account management, investment and insurance products – Dexia provides its public-sector

Dexia Annual Report 2001

1

Business Profile .......................................................................................... p. 2

Message from the Chairmen .................................................................... p. 4

Financial Highlights .................................................................................... p. 6

Organization, Corporate Governance and Management........................ p. 8

Corporate Spirit .......................................................................................... p. 24

Shareholders’ Review ................................................................................ p. 28

Businesses

Know-how and Expertise, Public / Project Finance

and Credit Enhancement............................................................................ p. 38

Availability and Service, Retail Financial Services .................................. p. 50

Professionalism and Discernment, Investment Management Services.. p. 58

Mastery and Creativity, Capital Markets and Treasury Activities .......... p. 66

Anticipation and Control, Risk Management .......................................... p. 70

Financial Performance ................................................................................ p. 78

Where to find Dexia .................................................................................. p. 86

Contents

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The “Annual Report 2001” and the “Accounts and Reports 2001” together constitute the annual report of the Dexia holding company.

Foreign exchange rates

1 EUR =40.3399 LUF6.55957 FRF40.3399 BEF1.95583 DEM1,936.27 ITL166.386 ESP13.7603 ATS2.20371 NLG200.482 PTE

The foreign exchange ratesapplied between the euro andother currencies are the rateson December 31, 2001.

The foreign exchange ratesapplied between the euro andEuroland currencies are theofficial exchange rates set onDecember 31, 1998.

1 EUR =

0.8813 USD7.4365 DKK

3.853659 ILS9.3012 SEK0.6085 GBP42.78 SKK

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Creative concept

Dexia’s Annual Report 2001 illustrates the Group’s fundamental values, which are shared and lived

by its 25,800 employees in 25 countries. These values, which cut across the different business lines

and nationalities, give Dexia its specific character. The Group’s personality is shaped by six

complementary values which interact and support one another – performance, balance, expertise,

enthusiasm, innovation and discipline.

Business Profile

Public / Project Financeand Credit Enhancement

Retail Financial Services

Investment Management Services

Capital Markets and Treasury Activities

World leader MARKET SHARE: 17% in Europe 25% in the United States

Second largest in Belgium, third largest in Luxembourg

MARKET SHARE: 24% in Belgium 13% in Luxembourg

RATING FROM AA TO AAA

Active in 25 countries, with a solid base in Europe, Dexia has implemented a

growth strategy focused on creating value since it was founded. With high

profitability in all its lines of business, Dexia applies a strict oversight policy that

allows it to keep a low risk profile.

Customized financial arrangements, long-term loans, creditenhancement, account management, investment and insuranceproducts – Dexia provides its public-sector clients with a fullrange of products and services adapted to their specific needs.

Responding to the financing, savings and insurance needs of itsretail banking customers by offering them diversity andperformance is one of the priorities of Dexia’s network of branches.Besides a strong position in Belgium and Luxembourg, the Groupalso develops this line of business in the Netherlands through DexiaBank Nederland, a company formed by the merger of Labouchereand Kempen&Co and in Slovakia, through Prvá Komunálna Banka.

Offering its private and institutional clients quality financialmanagement services (private banking, asset management, fundadministration and equity-related activities), Dexia confirms itsposition as one of the eurozone’s main banking groups active inthis sector.

Operating in many international financial markets, Dexia is arecognized player in the capital markets with expertise thatbenefits both the Group, for its refinancing needs, and its clients.

(1) Long-term, including off-balance sheet items.(2)Excluding Artesia BC.(3)PV of gross premiums collected by Financial Security Assurance in the United States.

New loans (1) (2): EUR 30.5 billion + 16.1%

Outstanding commitments (1): EUR 154.4 billion + 1.9%

Credit enhancement(3): EUR 790 million + 55.4%

Customer deposits and investment products:

EUR 79.7 billion + 34.7%

Outstanding customer loans: EUR 20.7 billion + 45.5%

Insurance premiums: EUR 1.9 billion + 95.3%

Assets under management: EUR 82.8 billion + 48.1%

Private banking client assets: EUR 37.5 billion + 22.2%

Administered funds(managed as a custodian bank): EUR 99.7 billion + 1.8%

Volume of long-term refinancing EUR 23.8 billion

of which EUR 13.3 billion in bonds rated AAA

Created in 1996, in anticipation of the introduction of

the euro, Dexia is a profoundly European banking

group. Very rapidly, it succeeded in developing an

authentic European identity beyond the diversity of the

national cultures of its 25,800 employees. As a forward-

looking banking group that has always been a pioneer,

Dexia is, of course, proud that the long awaited single

currency is today a reality for the 400 million citizens of

the European Union. The euro is the major event in

Europe at the beginning of the 21st century, and the

continent must benefit from this spectacular success to

pursue its integration and, in particular, its institutional

and fiscal reforms.

The year 2001 was the scene of major upheavals in the

world economy, from the bursting of the Internet

bubble to the decline in the financial markets and the

general economic slowdown which occurred after the

tragic events of September 11, 2001. The serenity that

characterized western economies at the end of the last

century gave way to uncertainty in 2001. In particular,

the financial markets became more chaotic and the

world’s stock exchanges recorded violent fluctuations.

In this turbulent environment, the group nevertheless

continued to grow and succeeded in posting good

results.

Dexia has expanded significantly over the last few years,

especially through external growth, by making many

acquisitions in Europe and the United States. This

development assures the Group of a strong presence

in Europe and throughout the world in its various

business lines. After the acquisition of Financial Security

Assurance (FSA) in the United States in 2000, a move

which allowed Dexia to become the world leader in

financial services to the public sector, the Group focused

on external growth in 2001 to develop its activities

in its two other businesses, Retail Financial Services

and Investment Management Services. Through the

acquisition of the Artesia Banking Corporation group

in Belgium, Dexia became a leader in bancassurance

in that national market. The merger in Belgium of Dexia

Bank and Artesia BC is currently moving forward, and

their new legal status was confirmed on April 1, 2002.

The acquisition of Kempen&Co. in the Netherlands,

followed by its merger with Bank Labouchere to form

Dexia Bank Nederland, makes Dexia a leading player

in Investment Management Services in Europe.

Today, Dexia aims to integrate its many acquisitions.

The company’s Board of Directors is proud to promote

the best practices in corporate governance. It has

created three specialized committees which report

regularly. These committees assure the Board of

objective and independent oversight of the Group’s

business and operations. At the six meetings it held in

2001, the Board of Directors approved Dexia’s growth

strategy, which should allow Dexia to pursue its

harmonious development in order to play a major role

in the Europe of tomorrow and more generally in the

world of banking, while continuing to increase its

profitability under strict conditions of risk management

and, as it has done in the last six years, create value for

its shareholders.

François Narmon,Chairman of the Board of Directors

Message from the Chairmen


4/5

Pierre Richard,Chief Executive Officer, Chairman of the Management Board2001 was once again a decisive year in Dexia’s development.

The Group truly moved up to another echelon as a result of

significant strategic external growth that has enabled Dexia

to figure in the principal international stock market indices and

to be recognized by investors throughout the world. With stock

market capitalization of approximately EUR 20 billion, Dexia is

now one of the top ten banking groups in the eurozone.

The Group had already strengthened its activities in 2000 in

public finance and credit enhancement through the acquisition

of a specialized insurance company in the United States,

Financial Security Assurance (FSA). Dexia is now the world

leader in this sector. The acquisition of Artesia Banking

Corporation in Belgium and of Kempen&Co. in the Netherlands,

which merged at the end of the year with Bank Labouchere to

become Dexia Bank Nederland, allowed Dexia to assume a new

dimension, that of a leading player in the European banking and

financial industry.

The integration of these new companies into the Group was

a major focus and it mobilized the efforts of all the employees

involved, in particular with regard to the merger of Dexia Bank

and Artesia Banking Corporation. A dozen work groups made

rapid progress on several fronts, including the merger of the

trading rooms, the creation of a single IT platform and the

reorganization of the departments at headquarters. The year

2002 will be particularly dedicated to the integration of the

banking networks in Belgium in order to offer the Group’s

expanded customer base a coherent range of quality products

and services.

At the same time, and to deal with these new priorities, Dexia

reinforced its management team by drawing in the reins at the

level of the Management Board. The sovereign functions of

general audit, compliance, risk management, management

control and the management of executive officers are now

centralized, without however breaking with the entrepreneurial

spirit that exists in all of the Group’s businesses and constitutes

the force of the operating subsidiaries, which are fully responsible

for day-to-day management.

The pursuit of Dexia’s growth strategy once again produced

positive results in 2001. Despite a particularly difficult economic

and financial environment, the Group reported significant growth

in results for the thirteenth year in a row since it began to be

traded on the stock exchange, with net income of EUR 1,426

million, up 42.5% from 2000. Earnings per share increased

by 9.1%, in line with the Group’s objective to double this figure

between 1999 and 2005. Return on equity rose for the fifth

consecutive year to 18.7%, again in line with the Group’s

medium-term objective of 20%. The cost-control measures

implemented in all of the Group’s entities allow the Group to

confirm its commitment for 2002 with confidence – this year,

operating expense on a constant basis should be less than in 2001.

Dexia again confirmed its profile, that of European banking

group specialized in three of business lines which make a

balanced contribution to its results. The Group is in excellent

shape with a solid capital base and a low risk profile. Its principal

characteristic is to offer its shareholders predictable prospects for

growth in income.

Backed by the enthusiasm of its 25,800 employees in 25 countries,

whom I here want to thank for what they have accomplished,

Dexia intends to pursue its growth strategy with confidence and

dynamism. In 2002, the Group’s results should continue to grow.

Dexia will thus remain one of the leading European banking

groups that create the most value.

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Cost/incomeratio

Balance sheet total

Financial Highlights

Total regulatorycapital

Tier I ratio

Net income Return on equity(ROE)

Capital adequacy ratio

186 199 245258

351

11.9

7.2

8.6

7.7

EUR billion

528605

761

1,001

1,426

13.214.0

15.7

17.7

18.7

56.356.1

53.9

55.1

59.5%

14.4 13.0

12.8

9.811.5

10.2

9.6

9.09.3 9.3

19992000

20011998

1997

EUR billion

% %

EUR million

%

19992000

20011998

19971999

20002001

19981997

19992000

20011998

1997

19992000

20011998

19971999

20002001

19981997

19992000

20011998

1997

V

7.7

Long-term ratings2

Dexia Dexia Dexia FSA Dexia Bank Crédit Local BIL MA

Moody’s Aa2 Aa2 Aa2 Aaa Aaa

Standard & Poor’s AA AA AA AAA AAA

Fitch AA+ AA+ AA+ AAA AAA

Customer deposits anddebt securities1

Total outstandingloans1

Stock marketcapitalization

Earningsper share

EUR billion

136.6

179.2

143.8 100.6

128.5

134.4

156.4

106.0

8.4

12.7

18.818.9

10.10.75

0.981.15

1.25

0.85

EUR billion EUR

EUR billion

19992000

20011998

19971999

20002001

19981997

19992000

20011998

19971999

20002001

19981997

186.8

224.9


8/96/7(1) Outstanding loans on the balance sheet(2) As of December 31, 2001(3) Including the branch network of Dexia Bank Belgium and of Artesia Banking Corporation

Workforce3

25,838 employees, including:

ab in Belgium3 16,363

ab in France 2,211

ab in Luxembourg 3,134

ab International 4,130

Organization,Corporate Governance

By its location in Brussels, in the heart of the

European Union office district, Dexia’s head office

and its counterpart in Paris, the Crystal Tower,

symbolize the Group’s European identity. Half of

the staff of the holding company, Dexia Group,

works in Brussels, and the other half in Paris,

thereby respecting Dexia’s French and Belgian

roots.

Board of Directors

As of December 31, 2001, Dexia’s Board of Directors is

composed of twenty members, seven of whom (more than

a third) are independent. Dexia’s Board of Directors reflects

the Group’s European identity – five nationalities are

represented. Its composition is also in line with Dexia’s

French-Belgian corporate structure. It counts an equal

number of Belgian and French members, with each

nationality representing at least a third of the Board.

Dexia has implemented corporate governance since the Group was created in 1996, and has made it a

priority to apply best practices by adapting or modifying its organization, discipline and regulatory

guidelines to comply with the many recent developments in this area. Dexia aims to spearhead progress

in the field of corporate governance at the international level to ensure shareholders of comprehensive

oversight and transparency.

and Management

Dexia Bank BelgiumHeadquarters : Brussels

Dexia Crédit LocalHeadquarters : Paris

Financial Security AssuranceHeadquarters : New York

Dexia Bank NederlandHeadquarters : Amsterdam

Dexia Banque Internationale à LuxembourgHeadquarters : Luxembourg

100%

8.4% 22.2%

65.7%

69.3%

5.8%

90%

100% 10%

28.4%


8/98/9

)

Corporate

Board of Directors as of December 31, 2001(1)

Beginning and Prime Other functionsend of mandate function

François Narmon 1996-2002 Chairman of the Chairman of the Board of Directors:67 years old Board of Directors, Dexia - Dexia BIL Belgian - DVV Insurance

Member of the Strategy Committee Chairman:and the Compensation Committee - Belgian Olympic and Interfederal CommitteeHolds 7,000 Dexia shares Member:

- International Olympic Committee

Pierre Richard 1996-2002 Group Chief Executive Director:60 years old Officer and Chairman of the - Crédit du NordFrench Management Board, Dexia - Le Monde

Member of the Strategy Committee - Air FranceHolds 20,000 Dexia shares - European Investment Bank

- Generali France Holding

Gilles Benoist 1999-2006 Chairman of the Executive Member of the Executive Board:55 years old Board, CNP Assurances - Groupe Caisse des depôtsFrench Member of the Supervisory Board:

Member of the Audit Committee - CDC IXIS

Philippe Bourguignon 1999-2006 Chairman of the Executive Director:53 years old Board, Club Méditerranée - eBayFrench Member:

Member of the Compensation Committee - Mouvement des entreprises de FranceIndependent director Former Chief Executive Officer:Holds 2,350 Dexia shares - Euro Disney

Rik Branson 2001-2002 Chairman of the Executive Chairman of the Executive Committee:57 years old Committee, Arcofin - Arcopar Belgian - Arcoplus

Member of the Strategy Committee - AuxiparCensor:- National Bank of Belgium

Thierry Breton 2000-2007 Chief Executive Officer and Director:46 years old Chairman, Thomson and - Schneider Electric French Thomson Multimedia - Rhodia

Independent director - Bouygues TélécomHolds 1,230 Dexia shares Member of the Supervisory Board:

- AXA

Guy Burton 2001-2003 Chief Executive Officer Chairman of the Board of Directors:53 years old Société Mutuelle - Union des associations Belgian des Administrations d’assurance mutuelle

Publiques - Belfinance

François-Xavier deDonnéa de Hamoir 1996-2002 Municipal Councillor,60 years old Brussels CityBelgian

Member of the Strategy CommitteeHolds 700 Dexia shares

Karel De Gucht 1996-2002 Municipal Councillor, Director:47 years old Berlare - Gemeentelijk Havenbedrijf AntwerpenBelgian

Member of the Strategy Committee

Didier Donfut 1999-2006 Burgomaster, Vice-Chairman45 years old Frameries of the Board of Directors:Belgian - Société Publique d’Électricité

Holds 500 Dexia shares

(1) Article 2 of the law of August 6, 1931 (M.B. August 14, 1931) forbids ministers, former ministers and State ministers, as well as members and former membersof Legislative Assemblies to mention their status as such in acts and publications of profit-making companies.

Ingénieur commercial (degree similar toMBA). Joined Crédit Communal in1957. Chairman of the ManagementCommittee of Crédit Communal (thenof Dexia) from 1979 to 1999. Co-Chairman of the Dexia group from 1996to 1999. Chairman of the Board ofDirectors of Dexia since 1999.

Studied at the Ecole polytechnique, Ecolenationale des Ponts et Chaussées andPennsylvania University. Chairman ofthe Executive Board of Crédit Local deFrance in 1987. Chief Executive Officer in1993. Co-Chairman of the Dexia Groupfrom 1996 to 1999. Since 1999, ChiefExecutive Officer of the Dexia Group andChairman of the Management Board.

Law degree. Graduate from the Institutd’Etudes Politiques and the Ecole Nationaled’Administration. Appointed SecretaryGeneral of Crédit Local de France in 1987.Member of the Executive Committee of Caissedes dépôts et consignations from 1993 to 1998.

Trained as an economist. Before joiningClub Méditerranée, he was ChiefExecutive Officer of Euro Disney, as wellas Executive Vice-Chairman of The WaltDisney Company (Europe).

Degree in economics. Worked in severalcapacities at the Regional InvestmentCompany of Flanders between 1980 and1989. Joined the Arco group in 1989, andbecame Chairman of the ExecutiveCommittee in 1992.

Engineer. Chief Executive Officer of theCGI group from 1990 to 1993. ExecutiveChairman and Vice-Chairman of theBoard of Directors of the Bull group from1993 to 1997. President of the Universitéde Technologie in Troyes.

Law degree. Joined Société Mutuelle desAdministrations Publiques in 1974.Appointed General Secretary in 1991 andChief Executive Officer in 1995.

Degree in Commercial and FinancialSciences (University of Louvain) Masterin Business Administration (Universityof California at Berkeley) HonoraryProfessor at the University of Louvain.Active in Belgian politics since 1981.

Law degree. Lawyer from 1976 to 2000.Active in national politics. TeachesEuropean law at the Vrije UniversiteitBrussel.

Ingénieur commercial (degree similar toMBA). Active in national politics and theBelgian energy sector. Burgomaster ofFrameries since 1992.

governance10/11

Beginning and Prime Other functionsend of mandate function

Denis Kessler 1999-2006 Chairman, Executive Vice-Chairman:49 years old FédérationFrançaise - Mouvement des Entreprises de FranceFrench des Sociétés d’Assurances Member of the Supervisory Board:

Member of the Strategy Committee - BNP ParibasIndependent director Member:Holds 1,000 Dexia shares - Commission Economique de la Nation

Daniel Lebègue 1998-2004 Chef executive officer, Director:58 years old and Chairman, - Thales French Caisse des dépôts - CNP

Member of the Strategy Committee et consignations - Gaz de France- C3D

André Lévy-Lang 2000-2006 Director, Director:64 years old AGF - SchlumbergerFrench - Fondation pour la recherche médicale

Member of the Strategy Committee Former Chairman of the Executive Board:Independent director - ParibasHolds 38,000 Dexia shares Professor:

- Université Paris-Dauphine

Roberto Mazzotta 2001-2002 Chairman, Banca Vice-Chairman of the Board of Directors:61 years old Popolare di Milano - Associazione Bancaria ItalianaItalian Director:

- Associazione Nazionale Banche Popolari

Theo Rombouts 2001-2002 Chairman of the Board of Chairman:60 years old Directors, Arco group - ACW Belgian - Institut Supérieur du Travail

- Conseil Fédéral pour le Développement Durable

Gaston Schwertzer 1999-2006 Doctor of law69 years old Companies DirectorLuxembourg

Member of the Compensation CommitteeIndependent directorHolds 55,660 Dexia shares

Anne-Claire Taittinger 2001-2007 Chairman of the Executive Chief Executive Officer:52 years old Board, Société du Louvre - - BaccaratFrench Groupe du Louvre - Société Immobilière de la Tour La Fayette

Independent director Director:Holds 850 Dexia shares - Marengo

Director:Marc Tinant 2001-2002 Member of the Executive - Arcopar 47 years old Committee, Arcofin - Arcoplus Belgian - Auxipar

Member of the Audit Committee Chief Executive Officer and Vice-Chairmanof the Board of Directors:- EPC

Sir Brian Unwin 2000-2006 Honorary President, Chairman:66 years old European Investment Bank - European Centre for Nature ConservationBritish Director:

Independent director - English National Opera CompanyMember:- British Institute of Management

Pieter Paul 1999-2006 Chairman, Director:Van Besouw Bank Nederlandse - Nederlandse Vereniging van Banken55 years old Gemeenten Commissioner:Dutch - N.V. Trustinstelling Hoevelaken

Member of the Audit Committee Secretary-General:Holds 10,760 Dexia shares - Centre international pour le crédit communal

Observer: Observer Burgomaster of GhentFrank Beke 1996-200154 years old Director:Belgian 2001-2002

Holds 1,400 Dexia shares

Degrees in political science, economicsand philosophy. Member of the Conseiléconomique et social, the EuropeanInsurance Committee and the ConseilNational des Assurances.

Law degree. Graduate from the EcoleNationale d’Administration. Before joiningCaisse des dépôts et consignations in 1997,he was a member of the Board of Directorsand Vice-Chairman of Banque Nationale deParis. Chairman of the Board of Directorsof the Institut d’Etudes Politiques in Lyon.

Graduate from the Ecole Polytechniqueand Ph.D. in Business Administrationfrom Stanford University. After workingas Chairman of the Executive Board ofParibas, he is now a member of theBoards of Directors of several compa-nies and a professor at the University ofParis-Dauphine.

Trained as an economist. Former profes-sor at the University of Genoa. Active inpolitics for 20 years. Began his bankingcareer in 1987.

Law degree and degree in economics.Before becoming Chairman of ACW, hewas Chief Executive Officer of theRegional Development Company ofAntwerp. Member of the Board ofDirectors of the Fondation Roi Baudouin.

Law degree. Long active in the gas indus-try. Member of the Board of Directors ofDexia BIL since 1984. Honorary Consulof the Republic of Nicaragua.

Graduate from the Institut d’EtudesPolitiques de Paris. Before becomingChairwoman of Société du Louvre -Groupe du Louvre, she was successivelySecretary General, Deputy ChiefExecutive Officer and Chief ExecutiveOfficer.

Master’s degree in economics. Beforejoining the Arco group in 1991, he wasgeneral advisor to the ExecutiveCommittee of the Regional InvestmentCompany of Wallonia.

Studied at Oxford and Yale. Worked as adiplomat and held several positions atthe Finance Ministry and on the PrimeMinister’s staff in the United Kingdom.Appointed Chairman of the EuropeanInvestment Bank in 1993. HonoraryChairman since 2000.

Economist and specialist in informationtechnology. After working for NCRNederland and Elsevier, he joined BankNederlandse Gemeenten in 1985. Hebecame Chairman of the ExecutiveCommittee in 1992.

Degree in philology and com-munication sciences. Beforebecoming Burgomaster ofGhent in 1995, he was a munic-ipal councilor and alderman.

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Independent members of the Boardof DirectorsThe Board of Directors counts seven independent members,

representing a third of the Board: Anne-Claire Taittinger,

Thierry Breton, Philippe Bourguignon, Denis Kessler,

André Lévy-Lang, Gaston Schwertzer and Sir Brian Unwin.

The criterion of independence is based on the definition

given in the Viénot II white paper according to which

directors are considered to be independent if they have no

relation whatsoever with the company or the Group which

may compromise their impartial judgment. In any case,

and notwithstanding the general character of the above-

mentioned rule, members of the Board cannot be considered

to be independent if they represent a reference shareholder

and/or exercise executive functions in the company

or a Group entity.

Non-executive membersof the Board of DirectorsNon-executive members of the Board of Directors exercise

no management functions in the company or any of its

subsidiaries. Except for Pierre Richard, who is both Chief

Executive Officer and Chairman of the Management Board,

the other members of the Board of Directors are all non-

executive members.

Responsibilities of the Boardof DirectorsThe Board of Directors determines the strategic objectives

and the general policy of both the holding company

and the Group. It oversees and sets guidelines for

management. The Board of Directors appoints the members

of the Management Board, approves the measures required

to achieve the strategic targets it defines, monitors

implementation of the company’s management and control

programs, and reports to shareholders.

Operation of the Board of DirectorsThe Board of Directors met six times in 2001. The rate of

attendance at Board meetings was 85.3%.

Since its creation in 1999, the Board of Directors has operated

according to a code of internal rules. Amended on several

occasions, these rules and recommendations are designed

to guarantee the full exercise of power by the Board

of Directors and to optimize the contribution of each member

of the Board. The code defines the rights and obligations of

the members of the Board in the exercise of their mandate,

operating and evaluation guidelines, relations with the

Management Board and the organization and operation of the

Board’s specialized committees.

In addition to statutory appointments, the Board primarily

addressed the following issues in 2001:

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Corporate


12/13

… discussion and approval of the parent-company and

consolidated financial statements and the 2000 business

results;

… discussion and approval of the Dexia Group’s budget for

2001;

… acquisition of Artesia BC (approval of the acquisition,

capital increase and merger);

… acquisition of Kempen&Co (approval of the acquisition

and merger);

… Dexia share split;

… approval of the protocol relating to Dexia’s prudential

control;

… employee share issue and stock option plan for 2001;

… reorganization of the Group’s internal audit and

compliance units;

… interim reports by the Audit Committee.

Each quarter, the Chief Executive Officer reports to the Board

of Directors on the activities of the different entities and their

subsidiaries. The report is organized around the Group’s three

business lines and gives a detailed picture of Dexia’s position

in these sectors.

Internal assessmentIn 2001, the Board of Directors conducted an evaluation of its

operations by means of a questionnaire that was sent to each

member of the Board. Overall, the Board members said they

were satisfied with the pertinence and quality of the

information provided. They decided to reinforce the role of

the Audit Committee to allow it to deal with cross-division

topics in addition to auditing the accounts. It also approved

the creation of a committee to prepare for the appointment

of a certain number of Board members in 2002.

Compensation of the membersof the Board of DirectorsEach member of the Board of Directors receives annual

compensation of EUR 30,000 for a full calendar year.

This amount was determined at the Annual Shareholders’

Meeting of May 10, 2000. For members of the Board

who have not held their positions for a full year, this amount

is reduced on a prorata basis according to the number of

quarters actually worked. The Chief Executive Officer receives

no compensation as a member of the Board of Directors, but

is paid for his contribution as Chief Executive Officer and

Chairman of the Management Board.

The Directors together hold 138,050 shares.

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governance

Specialized committeesThe Board of Directors has three specialized committees

which report on a regular basis. These committees assure

the Board of objective and independent oversight

of the Group’s business and operations.

Strategy CommitteeThe Strategy Committee is composed of eight members of the

Board of Directors, including the Chairman and the Chief

Executive Officer.

… François Narmon, Chairman of the Board of Directors

… Pierre Richard, Chief Executive Officer

… André Lévy-Lang (independent member of the Board)

… Denis Kessler (independent member of the Board)

… François-Xavier de Donnéa de Hamoir

… Karel De Gucht

… Daniel Lebègue

The Strategy Committee meets annually to review the Dexia

Group’s strategic position and study its further development.

In 2001, this meeting took place on June 22.

The Strategy Committee may also be convened at any time

upon the initiative of the Chief Executive Officer to discuss

market-sensitive issues before they are presented to the Board

of Directors. In 2001, the Strategy Committee met on

March 9 and May 2 to discuss, respectively, the acquisition

of Artesia BC and of Kempen&Co.

No compensation is paid to the members of the Strategy

Committee for their work on this committee.

The Audit CommitteeThe Audit Committee is composed of Gilles Benoist,

Marc Tinant and Pieter Paul Van Besouw. It assists the Board

of Directors in the exercise of its mission to oversee

the business and management of the Dexia Group. It verifies

that Dexia’s parent company and consolidated financial

statements (including Dexia Bank Belgium and Dexia Crédit

Local) are accurate and fairly stated. In particular,

its responsibilities involve analyzing the financial information

and accounting procedures and examining the conclusions,

comments and recommendations of the auditors.

In this connection, it may suggest that additional studies

be conducted. As well, it verifies the annual and semiannual

financial statements before they are approved by the Board of

Directors and published. The committee also gives advice on

the appointment of the auditors proposed to the shareholders’

meeting.

It verifies the existence and implementation of risk

management and control procedures for credit, market

and operating risks. To this end, the Audit Committee

oversees internal audit operations, in particular through

meetings with the Group’s audit division which presents

the conclusions of the audits conducted, the main files

analyzed and, more generally, for the Management Board,

a report on internal control procedures throughout the Group.

It may request complementary audit reports.

It also ensures compliance with regulations issued by stock

market authorities. In addition, the Audit Committee

is consulted on compliance rules in force throughout the Group.

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Corporate


14/15

The Audit Committee meets at least three times per year.

In 2001, meetings were held on March 8 and September 7,

and a third meeting to discuss the 2001 fiscal year took place

in January 2002.

The main subjects reviewed in 2001 included the following:

… Group financial statements and results as of

December 31, 2000, and June 30, 2001;

… 2001 report on oversight within the Group;

… 2001 report on internal audit activities in Group entities;

… 2001 report on risk assessment and management;

… organization and operation of internal audit activities

in the Group and updating of the Group’s audit charter;

… organization and operation of compliance in the Group

and introduction of a compliance charter for the Group;

… steering committees for the merger of Artesia BC and

Dexia Bank;

… operating risks linked to market activities.

No compensation is paid to the members of the Audit

Committee for their work on this committee.

Compensation CommitteeThe Compensation Committee is composed of members

of the Board, two of whom are independent – François

Narmon, Philippe Bourguignon (independent) and

Gaston Schwertzer (independent).

The committee’s role is to determine the amount and

nature of the compensation to be paid to the Chairman

of the Board of Directors and the Chief Executive Officer,

as well as, on the basis of the proposal of the Chief Executive

Officer, to the members of the Management Board

and of the subsidiaries’ executive committees. In addition,

the Compensation Committee decides how stock options are

to be granted in application of the general principles defined

by the Board of Directors. It makes recommendations on the

compensation of the members of the Board of Directors and

employee profit-sharing.

The Committee met three times in 2001. It discussed

the following subjects:

… guidelines for the 2001 stock option plan;

… proposals for the fixed and discretionary compensation

of the Chief Executive Officer, the members of Dexia’s

Management Board, the members of the Management

Board of Dexia Bank, Dexia BIL and Dexia Crédit Local;

… comparative analysis of the compensation of the members

of Dexia’s Management Board; regulations governing the

2001 capital increase reserved to employees.

…

governance

Corporate

Management

Management BoardThe Management Board is composed of a maximum

of eight members. They are appointed and removed

from office by the Board of Directors acting on

the recommendation of the Chief Executive Officer.

In the framework of the strategic objectives and general

policy guidelines defined by the Board of Directors,

the Management Board runs the holding company

and the Group and pilots the different business lines.

To this end, each member of the Management Board

is invested with operating responsibilities at the level

of the company or Group entities (by business, activity

or function).

The Management Board is chaired by the Chief Executive

Officer, whom the Board of Directors entrusts with the daily

management of the company and the implementation of the

decisions taken by the Board of Directors.

The Management Board meets at least once a week

and decides issues in a collegial manner under the authority

of the Chief Executive Officer.

Since its creation in 1999, the Management Board has operated

according to a code of internal rules. Amended on several

occasions, these rules and recommendations define its role and

mode of operation. The collegial decision-making process,

the Board’s powers and certain regulations governing the

status of members are also the object of specific provisions in

the protocol on the prudential control of the Dexia Group

signed with the Belgian Banking and Finance Commission.

>)

Management Board

Pierre Richard,

Chef Executive Officer,

Chairman of the Management Board

Chief Financial Officer;Vice-Chairman of the Supervisory Board,Dexia Crédit Local

Investment Management Services;Chairman of the Management Board,Dexia Banque Internationale à Luxembourg

Vice-Chairman of the Management Board;Retail Financial Services;Chairman of the Management Board,Dexia Bank Belgium

Chief Executive Officer;Chairman of the Management Board;Chairman of the Supervisory Board, Dexia Crédit Local;Vice-Chairman of the Board of Directors, Dexia BankBelgiumVice-Chairman of the Board of Directors, Dexia BanqueInternationale à Luxembourg

General Counsel;Member of the Management Board, Dexia Bank Belgium

Public/Project Finance and Credit Enhancement;Chairman of the Management Board,Dexia Crédit Local

Capital Markets and Treasury Activities

From left to right:

Rembert von Lowis

Marc Hoffmann

Luc Onclin

Pierre Richard

Axel Miller

Jacques Guerber

Dirk Bruneel

governance


16/17

Dexia Group holding company staffTo meet its operational needs, the Management Board relies

on a dozen small teams, 90 highly-educated people in all,

based in either Brussels or Paris. These teams are responsible

for ensuring and coordinating the Group’s vital functions,

especially in audit and oversight, risk management and

strategic planning, but also for defining and implementing

Dexia’s policies in corporate communications, human

resources, information technology, etc.

General audit activities are under the responsibility of

Alain Delouis (see page 20).

The strategic planning and management information unit

participates in the definition of Dexia’s long-term strategy.

Under the responsibility of Yves Guérit, this team, which

draws up Dexia’s preliminary budget, also monitors business

results and the profitability of the Group’s businesses.

Under Philippe Ducos, risk management defines, organizes

and manages the Group’s risk profile. It is also in charge

of adjusting and updating economic equity (see page 70).

Jacques Bellut coordinates Dexia’s activities in the capital

markets (see page 66).

The financial communication and investor relations unit,

directed by Robert Boublil, provides financial and strategic

information about the group to investors, financial analysts

and rating agencies.

Corporate communications, under the responsibility of

Françoise Lefebvre, enhances Dexia’s image with the general

public and particularly journalists, trendsetters and

individual shareholders.

Under the responsibility of Bernard-Franck Guidoni-Tarissi,

human resources and in-house communications develop

a group spirit and create a work community by implementing

a policy that fosters mobility, compensation, career

management and communication within the company.

Michel Van Schingen is responsible for information

technologies, which coordinates computer systems and tools

throughout the Group and ensures that they meet Dexia’s

strategic needs.

Xavier de Walque’s team manages and evaluates proposals

for mergers, acquisitions and sales, and studies the internal

reorganization of Dexia’s subsidiaries and affiliates.

The Chairman’s personal staff, under the management

of Mireille Eastwood, coordinates and monitors the activities

of the Chief Executive Officer and the Management Board

in cooperation with the secretary-general. This cell also

serves as an interface between the Group’s different units.

The secretary-general (Edouard du Roy de Blicquy) is in

charge of Dexia’s regulatory and legal organization. He is

responsible for the management of the Group’s cash reserves

and budgets as well as of logistics of the holding company in

cooperation with the Chairman’s personal staff.

>

Corporate

Management compensation

Management BoardCompensation for the members of the Management Board

is determined by the Board of Directors on the recommendation

of the Chairman of the Management Board and after approval

by the Compensation Committee.

In 2001, the Compensation Committee conducted a study on

the compensation of the members of the Management Board,

with the help of a specialized consultant, and its conclusions

were adopted by the Board of Directors.

The fixed portion of compensation is determined on the

basis of the nature and importance of the responsibilities

exercised by each member with a market benchmark for

comparable positions. The capped discretionary part is linked

to the Group’s performance, which is measured by the change

in earnings per share between 2000 and 2001. Members’

individual contributions to the company’s future success are

also taken into account.

The Chief Executive Officer received net compensation after

taxes and charges equivalent to EUR 490,500. This sum

corresponded to annual gross income of EUR 1,137,500. His

gross fixed compensation totaled EUR 750,000 and his

discretionary compensation was EUR 387,500.

The seven members of the Management Board (six members

in 2000) received a total of EUR 5.670 million in gross

compensation in 2001.

The members of the Management Board were granted

540,000 Dexia stock options in the framework of the

2001 stock option plan, of which 150,000 were granted

to the Chief Executive Officer.

Executive ManagementCompensation is reviewed once a year in the first quarter

for company managers in the Group’s different subsidiaries

in line with the general policy guidelines issued by

the respective compensation committees in compliance

with the recommendations of the Group’s Compensation

Committee.

Fixed salaries are determined on the basis of local market

benchmarks and individual levels of responsibility.

Discretionary compensation takes into account

the competitive practices observed in the Group’s different

business lines (financial markets, private banking, asset

management, retail banking, etc.). It also reflects individual

performance, which is assessed on the basis of the achievement

of the financial and business objectives set in the annual

budget process.

…

…>


18/19

governance

Internal audit

Dexia has a consistent audit unit that respects the highest

standards. The audit unit was bolstered in 2001 to enable

it to promote internal control in the Group and to monitor

the performance and effective application of internal audit

procedures.

This focus expresses the Group’s determination to maintain

its reputation and guarantee the coherence and efficiency of

its structures as core values.

In this framework, the internal audit unit verifies that

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

entities have been identified, analyzed and sufficiently hedged.

Internal audit also promotes continuous improvement

in Group operations.

The organization of internal audit adopted at the end of 2000

is based on three fundamental principles:

… internal audit’s strategy, level of requirements and

operating rules are defined by the Management Board

in a framework approved by Dexia’s Audit Committee;

… internal audit functions are exercised by a network of

audit divisions which operate under the authority of the

Group’s general auditor, who reports directly to the Chief

Executive Officer and Chairman of the Management

Board;

… each audit division in company subsidiaries reports to

the chairman of the entity’s executive committee, and also

to the Group’s general auditor.

This new organization, which is more structured than in the

past, will also make it easier to integrate new entities into the

audit system.

The Group’s comprehensive approach to risks, the common

audit policies introduced and the reporting and tracking

procedures conducted at the level of the holding company

also contribute to the efficiency of Dexia’s internal control

system. Finally, a new audit charter has been drawn up.

After final approval by the Board of Directors, it will be

distributed to the Group’s employees to allow them to be fully

aware of the role and practices of internal audit in the Dexia

Group.

Compliance

Operating in the highly-regulated sectors of finance

and insurance, Dexia complies with all legal, regulatory

and prudential standards. Such compliance is one of the first

conditions of client confidence. Beyond respect for the letter

of the law, in 2001 the Group continued to implement

efficient oversight procedures.

In fact, Dexia’s reputation is also based on its efforts

to ensure the integrity of the Group as a whole and of

all the employees in their banking or insurance activities.

These ethical principles have been codified in a charter

drawn up in 2001 and submitted to the Group’s Management

Board and to the Audit Committee of Dexia’s Board of

)

)

Corporate


20/21

Directors. The requirements defined in this framework aim

to match the highest standards in the financial world.

After approval by the bodies which represent the Group’s

operating entities, the charter will be distributed to the whole

workforce. The operating entities will be able to amend

the charter to integrate stricter local legal and regulatory

requirements.

Basic compliance principlesThe Dexia Group’s compliance policy is based on

the following principles:

… compliance with legal and regulatory requirements,

… professionalism and confidentiality,

… reliability and respect in dealing with clients,

… loyalty to the Dexia Group,

… mutual respect for people and opinions.

Each of the chapters presents the rules in force and gives

concrete applications.

Compliance proceduresOversight is an independent function that aims to ensure

the effective application of the compliance principles defined

by the Dexia Group. The definition, implementation and

updating of these principles are the responsibility of

compliance officers, who are named in the Group’s main

subsidiaries and who report to the Group’s chief compliance

officer. Correspondents are appointed in the other

subsidiaries, branches and representative offices.

Dexia’s chief compliance officer organizes regular meetings

with his counterparts in the three main operating entities to

monitor their activities, share information and experience

and seek appropriate solutions for the problems posed.

…

…

governance

Dexia employees are proud to participate in the construction of a company

that is a pioneer in many fields and has never stopped growing. In order to

enable its employees to benefit from the company’s growth and to reinforce

Enthus ias

Si meliora dies, ut vina, poemata reddit, scire velim, chartis pretium quotus arroget annus. scriptor abhinc annos centum quidecidit, inter perfectos veteresque referri debet an inter vilis atque novos Excludat iurgia finis, Est vetus atque probus,centum qui perficit annos. Deperiit minor uno mense vel anno.

Dexia rapport annuel 2001

14/15

the sense of belonging to a dynamic group, Dexia has introduced an

attractive employee shareholding plan.

m

22/23

As a result of sustained external growth, the

number of employees in the Group rose from

10,000 in 1996 to more than 25,800 at the end

of 2001. Working in 25 countries, the men and

women who make up Dexia are, for the most

part, located in Europe and particularly in

Belgium, France and Luxembourg, the three

countries in which the Group originally operated.

A priority at Dexia has always been to develop

a corporate spirit based on shared values,

to create a work community and to promote

commitment to the Group’s development

strategy. A major contribution is made by

the many projects conducted in cooperation

with the operating companies in the fields of

inhouse communications, human resources

and employee savings plans.

Corporate Spirit


24/25

Informing and promotingcommitment

Convinced of the importance of in-house communications

in the building of a common culture, Dexia uses a variety

of tools to promote employee commitment to projects and

corporate strategy. Complementary to the information

channels utilized in the operating companies and developed

in cooperation with “local” internal communications teams,

these media tools keep employees up to date on what is going

on in the Group – news, strategy, work organization, social

events, businesses, etc. Three supports (a quarterly magazine,

a video magazine and an intranet site) develop a feeling

of belonging to a unified social structure with common

objectives. In order to be accessible to the greatest number,

these tools are produced in three languages: English, French

and Dutch.

Since the objectives of in-house communications and

of human resources are increasingly complementary,

it was decided to merge the two functions in 2002.

Ensuring their coherence represents a key step forward

in the implementation of a powerful, clearly defined strategy.

Portrait of the Group

The event of the year 2001 was, without a doubt,

the merger of the teams of Artesia Banking Corporation

and Dexia Bank in Belgium. The consolidation of other

companies, like Kempen&Co in the Netherlands, Ely Fund

Managers in the United Kingdom and Financière Opale in

France, also had an impact on the profile of the Group’s

staff. Altogether, no fewer than 9,600 employees came to

work for Dexia in 2001.

Geographic breakdown1

… Belgium2: 16,363

… Luxembourg3: 3,134

… France: 2,211

…The Netherlands: 1,729

… Slovakia: 623

… United States: 414

… Italy: 265

… Switzerland: 250

… Spain: 195

… United Kingdom: 164

… Ireland: 144

… Singapore: 81

… Germany: 67

… Monaco: 66

… Jersey: 34

… Denmark: 27

… Israel: 26

… Sweden: 17

… Australia: 17

… Other: 9

)

)

Gender breakdown (1) & (2)

ab44%56%

6,0327,478

)

(1) As of December 31, 2001(2) Employees of Dexia Bank Belgium, including Artesia

Banking Corporation, Dexia Crédit Local and Dexia BILonly

(1) As of December 31, 2001(2) Including the branch network of Dexia Bank Belgium and Artesia Banking

Corporation

Development and internationalmobility

One of the principal missions of the Group’s human

resources department is to ensure that Dexia has the staff

it needs to meet the challenges of tomorrow. To achieve

this objective, it is first necessary to identify the skills

required to further the Group’s strategy, to find people

who have the needed potential, to help them develop

the required know-how and, finally, to build career plans

that are adapted and motivating.

The Group’s human resources department thus introduced

a comprehensive process for managers who will be Dexia’s

executive officers tomorrow.

Launched in 2001, the Dexia Executive Assessment

Leadership (DEAL) project is the first stage in the process.

DEAL is based on a univocal system that is fair and objective.

It is now common to Dexia Bank, Dexia BIL and Dexia

Crédit Local and will be progressively extended to the other

Group entities. This development tool will make evaluation

criteria and career prospects more transparent for employees.

Training programs are also offered, particularly in management

and languages. More than 25% of the Group’s employees

work outside of the three countries in which Dexia first

operated (Belgium, France and Luxembourg) and some

14 different languages are spoken every day in the Group.

English has thus become the language of business and, in

particular, of the financial world in which Dexia operates.

“Discovering Dexia” programs were again organized

in 2001. These two-day training programs allow new

employees to meet and discover the organization and

history of the Group, its businesses and human resources

and communications policies.

Dexia gives special importance to international mobility,

which makes it possible to transfer certain know-how

from one entity to another. A passport for mobility was

introduced to serve as a reference document, defining

the procedures to be followed in the two types of mobility –

assignment and expatriation – and answering practical

questions concerning taxation, social security and housing.

Merger of Artesia BankingCorporation and Dexia Bank Belgium

In 2001, Dexia faced a major challenge in Belgium,

as it sets out to merge the teams of Artesia BC and Dexia

Bank. Although the merger of the two structures has begun

(for example, the trading rooms were merged at the end

of 2001), the process is not expected to be completed until

2005, with a major step in 2003.

Coordinated by an ad hoc committee composed of

representatives of the two entities’ executive committees,

the merger involved 14 project groups which piloted

approximately 75 work groups and a hundred sub-groups.

Altogether, the process required the active participation

of 600 to 700 people.

Specific information channels were developed and employed

to keep employees up to date on almost a daily basis

concerning the progress realized.

In addition, in order to make sure employees were treated

fairly in terms of job status, job stability, working conditions

and corporate culture, Dexia consulted and involved labor

representatives.

C o r p o r a

)

)

Age Men Women

Breakdown by age (1) & (2) Breakdown by seniority (1) & (2)

(1) As of December 31, 2001.(2) Employees of Dexia Bank Belgium, including Artesia Banking

Corporation, Dexia Crédit Local and Dexia BIL only.

(1) As of December 31, 2001.(2) Employees of Dexia Bank Belgium, including Artesia Banking

Corporation, Dexia Crédit Local and Dexia BIL only.

> 60

56-60

51-55

46-50

41-45

36-40

31-35

26-30

21-25

< 21

17

276

851

1,100

1,223

1,418

1,069

1,035

476

13

4

81

270

705

805

1,241

1,106

1,006

751

63

Age Men Women> 4036-4031-3526-3021-2516-2011-156-100-5

2

39

167

487

600

669

1,137

533

2,398

8

54

326

638

816

968

1,437

757

2,474


26/27

Encouraging employee savings plans

The objectives of the employee shareholding plan launched

by the group in 2000 were to reinforce the feeling of

belonging to a socially unified group, involve employees

in the Group’s strategy and growth, and encourage

the creation of employee savings plans under favorable

conditions.

After the success of the first operation, the Board of

Directors decided, at the suggestion of the Management

Board, to launch a new plan in 2001. The second capital

increase reserved to employees was likewise successful.

Almost six out of ten employees subscribed Dexia shares

for a total of approximately EUR 167 million. The plan

was well received in Belgium, with subscribers representing

approximately 65% of total staff. In France, 72%

of the employees participated, while in the international

subsidiaries (excluding Belgium, France and Luxembourg),

participation increased by more than 50% over 2000.

Employees now own almost 2.3% of Dexia’s capital.

The objective targets 5% of the capital in employees’ hands

in five years.

Pioneer in European labor relations

Dexia’s European Works Council was set up in 1998.

It is composed of management representatives and

26 statutory employee representatives and 17 alternates

from seven Dexia entities.

The European Works Council is a forum for consultation

and the exchange of information. It meets twice a year,

alternately in Brussels and Paris, to study economic,

financial and labor questions, such as the employment

situation, business trends, major organization changes,

mergers and acquisitions.

In 2001, the European Works Council met in February,

June and December. The February meeting was dedicated to

the Group’s organization and the creation of Dexia

Financial Markets, the acquisitions made in 2000, IT

synergies and Internet strategy. In June, the agenda included

the introduction of the Group’s compliance charter, the

merger of Artesia BC and Dexia Bank, the Group’s financial

and labor situation and employee shareholding. Finally, in

December, the Works Council focused on the acquisition of

Kempen&Co. and decided to convene a work group to draw

up a Dexia labor charter which will be submitted

to management at the end of the first half of 2002.

The objective of such a charter is to set minimum labor

standards, primarily in terms of labor negotiations

and employment management, in all Group companies,

whatever the legislation in the individual country.

t e S p i r i t

) )

An information portal and data base as much as

a forum to share best practices, the Group’s

intranet system was launched at the beginning of

2001. This internal communications tool allows

employees to access the latest company news, the

price of Dexia shares in real time, financial

information, labor statistics, available job offers,

electronic press reviews and an employee

directory.

Creating value for both individual and

institutional shareholders over the long term

through regular growth in income is a priority

for the Dexia Group. For 13 years in a row,

earnings per share have grown more than 10%

per year, increasing regularly from one year to

the next.

Dexia is committed to transparency in its

relations with shareholders. To this end, the

Group develops and makes available a large

number of tools, involves shareholders in its

communications strategy via a European advi-

sory committee and organizes meetings on a

regular basis.

Shareholders’ Review


28/29

) Shareholding structure

By the terms of the agreement signed by Dexia and Arcofin

on March 13, 2001, Arcofin transferred to Dexia on July 3,

2001, the shares it held of Artesia Banking Corporation

in exchange for new Dexia shares. Arcofin received

178,934,630 new Dexia shares through a reserved capital

increase. After this operation, Arcofin owned 15.34% of

Dexia’s capital. In keeping with the terms of the agreement,

Arcofin committed to support Dexia’s strategy fully and to

remain a stable shareholder of the Group for a period of at

least 18 months.

At the end of 2001, Dexia launched a second capital increase

reserved to its 25,800 employees in 25 countries. With six out

of ten employees subscribing, almost EUR 170 million were

invested. Subsequent to this operation, Dexia employees own

2.3% of the Group’s capital, versus 1.5% at the end of 2000.

Dexia counts approximately 400,000 individual

shareholders, mostly in Belgium and France, who own

13.9% of the Group’s capital.

As of December 31, 2001, Dexia’s equity totaled

EUR 4,684,744,917 and the number of shares

was 1,166,813,164.

Dexia and the stock market

Dexia shares are traded in the Euronext Paris and Euronext

Brussels markets as well as on the Luxembourg stock

exchange. With stock market capitalization of approximately

EUR 19 billion at the end of 2001, the Group ranks among

the twenty largest European banks and among the top ten

in the eurozone.

Dexia is included in the main European stock market indexes

– Euronext 100, FTSE Eurotop 100, MSCI Europe Banks,

Dow Jones EuroStoxx Banks, ASPI Eurozone and FTSE4

Good Europe and Global Index, as well as the CAC 40

in Paris and the BEL20 in Brussels.

Dexia share split After approval by the shareholders at the Extraordinary

Shareholders’ Meeting of June 6, 2001, Dexia divided

the par value of its share by ten. The exchange of one

share for ten shares began on June 14, 2001.

This division was also applied to VVPR strips, warrants

and certificates. The new share was quoted in Brussels

and Paris on June 18.

This operation increased the liquidity of the shares

and also facilitates the access of individual shareholders

to Dexia shares.

A difficult year for the stock market In addition to the global economic slowdown, the events

of September 11, the crisis in Argentina and the bankruptcy

of Enron adversely affected an already lackluster market

environment. In the United States, the Dow-Jones was

down 7.1% at the end of the year, its biggest decline since

1990, while in Europe, the Dow-Jones EuroStoxx50 index

fell 20.3%, the CAC 40 22.0% and the BEL20 8.0%.

)

41.25%

13.90% 15.34%

7.00%

5.17%

15.04%

>

>2.30%

As of December 31, 2001

Holding Communal

Institutionaland otherinvestors

SMAPgroup

Individual shareholders

Caisse desdépôts etconsignations

Arcofin

Dexia Group employees

With very few exceptions, banking stocks did not escape the

general downturn. Only some British banks and a handful

of banks in the eurozone reported a rise in their share price

at the end of the year. The Dow-Jones EuroStoxx Banks

index was down 18.51%.

If Dexia’s stock market performance reflected this

environment and did not escape the general trend, the year

2001 was, nevertheless, rich in events, particularly the

acquisition of Artesia Banking Corporation in March and

of Kempen&Co in June. Likewise, the Dexia share split

contributed to a significant increase in the total volume traded

annually in Brussels and Paris.

Under the political and economic conditions of the year

2001, Dexia’s stock market performance was negative for

the first time since the share was listed; at year end, the

price was down 16.15% in Euronext Brussels and 16.28%

in Euronext Paris. However, this decline was not greater than

the decrease reported by the majority of banking shares

in 2001. In a longer perspective, Dexia’s performance since

the creation of the company on November 20, 1996,

remains very satisfactory with an increase of 17.89% on

a yearly basis through to the end of 2001.

DJ EuroStoxx Banks DJ EuroStoxx 50Average Dexia Brussels and Paris

0

5

10

15

20

25

11/9

6

06/9

7

02/9

8

10/9

8

06/9

9

02/0

0

10/0

0

06/0

1

02/0

2

Dexia’s stock market performance (average prices) (1)

Stock market capitalization EUR billion

12.7

18.8

19992000

200128/02/02

18.920.2

10.1

1998

(1) Average of Dexia shares listed in Brussels and Paris.

S h a r e h o l d e

>


30/310

18,000,000

36,000,000

54,000,000

72,000,000

90,000,000

0

18000000

36000000

54000000

72000000

90000000

CAC 40 Total daily trading volume (monthly average)Dexia

11/9

6

06/9

7

02/9

8

10/9

8

06/9

9

02/0

0

10/0

0

06/0

1

02/0

2

Feb. 2, 2002EUR 17.34

0

5

10

15

20

25

Dexia’s stock market performance in Brussels

Dexia’s stock market performance in Paris

r s ’ R e v i e w

>

>

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

BEL20 Total daily trading volume (monthly average)Dexia

11/9

6

06/9

7

02/9

8

10/9

8

06/9

9

02/0

0

10/0

0

06/0

1

02/0

2

Feb. 2, 2002EUR 17.32

0

5

10

15

20

25

Brussels ParisShare price Dec. 29, 2000 (EUR) 19.26 8 19.35

Share price Dec. 29, 2001 (EUR) 16.15 16.20

Highest/lowest price (EUR) (1) 19.50-13.02 19.55-13.12

Average daily trading volume (in millions of EUR) (1) 24.91 25.74

Number of shares traded daily1 (thousands of shares) (1) 1,105 1,489

EUR 1998 1999 2000 2001Earnings per share 0.85 0.98 1.15 1.25

Net assets excluding generalbanking risks reserve (group share) 6.37 6.69 7.02 6.84

Net assets including general banking risksreserve (group share) 8.08 8.51 8.78 8.53

Gross dividend - 0.39 0.43 0.48 (7)

Net dividend (2) - 0.29 0.32 0.36 (7)

Stock market performance

Data per share

EUR million 1998 1999 2000 2001Payout ratio % (3) 40.9 41.4 41.9 39.3

Price earnings ratio P/E (4) 16.1 16.5 16.8 12.9

Price to book ratio (5) 2.2 2.4 2.8 2.4

Annual yield % (6) 2.5 2.4 2.2 3.0

Stock market ratios

(1) For 2001.(2) After payment of Belgian withholding tax (précompte mobilier) at a rate of 25%, reduced to 15% for shares with a VVPR strip(3) Ratio between total dividend and net income.(4) Ratio between the average share price as of December 31 and net earnings per share.(5) Ratio between the average share price as of December 31 and net assets (excluding the general banking risks reserve - group

share) per share as of December 31.(6) Ratio between the gross dividend per share and the share price as of December 31.(7) Proposed to the annual shareholder’s meeting on May 7, 2002(8) As of December 28, 2000.

S h a r e h o l d e


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)

)

Creation of value

Dexia has developed a value-based management approach,

which is used to adjust the targets and measure the performance

of the 40 business sectors in which the Group operates.

The results allow the Management Board to optimize the

allocation of equity capital based on the potential of each

activity to create value over the long term. This method also

makes it possible to identify and develop value creation

levers.

This approach is based on discounted cash flows, segment by

segment. Future cash flows are estimated by breaking down

the timeframe into three periods:

… the first five years, for which detailed business plan

projections are used;

… the next five years, for which, following discussion with

each business line manager, cash flow projections are

carried out, based on medium-term trends;

… the final period, for which external macroeconomic

criteria are employed, with a highly conservative bias.

Customized tools for shareholders

In 2001, Dexia upgraded the system it employs to provide

individual shareholders with regular, transparent

and interactive information. This system comprises

a shareholders’ club, an international advisory board

of shareholders, meetings in different cities, a telephone

information service and specific publications.

The Group makes a particular effort to ensure that

shareholders in Belgium and France are treated on an equal

footing in the framework of the very different tax regulations

and shareholder cultures of the two countries.

Shareholders’ clubDexia’s shareholders’ club serves as a financial information

forum. Mainly made up of Belgian and French shareholders,

it has more than 15,000 members who benefit from

information and publications designed specifically for club

members. Dexia shareholders can join the club by e-mail,

over the telephone (there is a toll-free number in France:

0 800 35 50 00) or via the Group’s website. There is no charge

for membership.

Shareholders’ meetingsIn order to discuss the Group’s businesses, strategy and

results with individual shareholders, Dexia regularly organizes

information meetings. In 2001, Pierre Richard, Chief

Executive Officer and Chairman of the Management Board,

met with a total of 3,000 shareholders in Lille, Paris and Lyon

at events organized in partnership with French financial

newspapers. Shareholders meetings with individual Belgian

shareholders are also planned in 2002.

The Group also participated, together with other firms, in

meetings organized by Euronext and the Centre de liaison

des informateurs financiers. In 2001, shareholder meetings

were also held in Poitiers, Reims, Paris, Nancy, Montpellier

and Nantes.

Every year, Dexia has a stand at the Forum de l’investissement

and the Actionaria shareholder convention, in partnership

with Dexia Banque Privée. Pierre Richard takes part in the

plenary sessions which are attended by several thousand

shareholders.

>

r s ’ R e v i e w

>

Targeted informationDexia publishes a shareholders’ letter in French and Dutch

three or four times a year. This publication keeps individual

shareholders up to date on developments in the Group,

its results and decisions taken at shareholders’ meetings.

Sent to members of the shareholders’ club and to anyone

who so requests, these newsletters are also available on

the Group’s website.

Dexia also produces a condensed annual report, which

is greatly appreciated by individual shareholders.

Internet site The Internet site www.dexia.com is a complete information

tool that is updated in real time. In addition to the share

price, statistics and a daily commentary on trends in

Dexia’s stock market performance, shareholders may

also access press releases and download detailed semiannual

and annual reports and financial statements.

In 2001, the creation of a multimedia area dedicated to

shareholders allows them to watch information meetings

and the Annual Shareholders’ Meeting live or at a later date.

Telephone information serviceShareholders can take advantage of the Group’s telephone

information service, which is accessible via a toll-free

number in France (0 800 35 50 00). This service frequently

answers questions concerning VVPR strips, the share price,

taxation of Dexia shares, the French PEA savings plan,

taxation of dividends and the French-Belgian tax

agreement.

Annual Shareholders’ MeetingA major event in the life of a listed company, the Annual

Shareholders’ Meeting is the occasion for Dexia to make

use of specific forms of communication, such as

announcements in major financial newspapers in France

and Belgium, reminders via the telephone information

service and shareholder information kits distributed with

invitations to the meeting, which are available in English,

French and Dutch. This information is also available

on the company’s website, and Dexia was one of the first

companies, as of 2000, to broadcast the Shareholders’

Meeting live over the Internet.

European advisory board ofindividual shareholdersIn June 2001, Dexia created one of the first European

advisory boards of individual shareholders, which took

over from the shareholders’ advisory board of Dexia

France, formed in 1992. Its composition reflects the

Group’s European identity; there are 11 shareholders – four

from Belgium, four from France and three from Luxembourg.

Dexia plans to open this board to other European

nationalities.

A meeting, chaired by Pierre Richard, was held in Brussels

on October 16, 2001, to launch the board.

Through the proposals and studies in which its members

participate, this advisory board plays an important role in

optimizing Dexia’s communication with individual

shareholders.

Dexia, best shareholder services in 2001 In 2001, Dexia was awarded first prize for the quality of itsshareholder services out of the forty companies in theCAC 40 stock market index (Euronext Paris). The eventwas organized by the French financial magazine La Vie

financière and Synerfil, a company specialized inshareholder relations. The Group was selected by anindependent jury composed of CEOs of major firms andrepresentatives of individual shareholders and thespecialized press. Dexia won particular note for thequality of its dedicated telephone service, its Web site andits publications.

>

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S h a r e h o l d e


34/35

Eligibility of Dexia sharesin the French PEA savings planSince January 1, 2002, the French PEA savings plan allows

investments in European shares, including Dexia shares,

of course. This new legislation should benefit French

shareholders and Dexia, prompting a significant rise

in the number of individual shareholders.

Investor relationsThroughout the year, Dexia organizes meetings on specific

subjects, conference calls, Web conferences and road shows

for institutional investors and financial analysts, especially

when results are published. About 750 contacts were made

in this respect during the year. The Group produces

financial reports and posts all pertinent economic, strategic

and financial data concerning the Group in a section on its

website, which has been upgraded in 2001.

SHAREHOLDERS’ CALENDAR>

>

r s ’ R e v i e w

… April 4, 2002: shareholders’ meeting in Marseillesin partnership with Journal des Finances

… May 7, 2002: Shareholders’ Meetings inBrussels broadcast live on Dexia’s Internetsite (www.dexia.com)

… May 14, 2002: meeting of individual shareholdersin Paris in partnership with Investir

… May 23, 2002: publication of first quarterresults

… June 1, 2002: Dexia takes part in the dayof the share in Brussels, in cooperation with Cash!

… June 14, 2002: dividend paid… June 18, 2002: Dexia participates in a meeting

organized by the Cercle de liaison des informateursfinanciers in Dijon

… September 12, 2002: publication of 2002semiannual results

… October 4 - 6, 2002: Dexia participatesin the Forum de l’investissement in Paris

… November 22 - 23, 2002: Dexia participatesin the Actionaria shareholder convention in Paris

… November 27, 2002: Dexia participatesin a meeting organized by the Cercle de liaisondes informateurs financiers in Tours

… November 28, 2002: publication of thirdquarter results

… December 4, 2002: Dexia participatesin a meeting organized by Investir in Nancy

… December 11, 2002: Dexia participates ina meeting organized by Euronext and Cortal in Paris

An individual shareholder meeting is being organizedin Belgium.

Dexia’s regular growth in income and the quality of its high value added

products and services define the Group’s performance. Earnings per share

have risen an average of 10% per year over the last 13 years. Day in and day

Balance

36/37

out, Dexia’s 25,800 employees in 25 countries enable the Group’s increasingly

demanding client base to benefit from their expertise and creativity.

Recognized for its expertise and know-how, Dexia

is the world leader in the market for public / proj-

ect finance and credit enhancement. The Group

operates in its domestic market (Belgium and

France) as well as internationally (Germany,

North America, Austria, Spain, Israel, Italy, the

United Kingdom, Slovakia and Sweden).

Know-how and Expertise

Public / Project Financeand Credit Enhancement

World leader in public and projectfinance

A market share of 17% in Europe,and in particular of more than 80%in new tenders in Belgium and of42% in France, as well as of 25%in the United States

New long-term loans:EUR 30.5 billion (+ 16,1%) (1) (2)

Outstanding balance sheetcommitments:EUR 154.4 billion (+ 1,9%) (1)

Credit enhancement:EUR 790 million (+ 55,4%) in grosspresent value premiums collectedby Financial Security Assuranceand EUR 341.7 billion (+ 33,6%)in net capital insured at the endof the period

>

>

>

>

>

(1) Long-term, including off-balance sheet items, companies100% accounted for by the equity method and Artesia BC.

(2) Excluding Artesia BC.


38/39

) Strategy

The Dexia Group’s ambition to become a world leader has two

focuses:

… a geographic dimension which aims to expand and/or

reinforce the Dexia Group’s presence throughout the world.

Dexia has broadened its base in the main countries

of the European Union with a market share of 15% to 20%;

… a product focus which involves developing the range of

products and services the Group offers its local public-sector

clients. In addition to financing, the Dexia Group proposes

insurance, asset management, advisory and financial

engineering services. Local public-sector employees, who total

15 million at the European level, also represent a market that

has significant growth potential.

In this business line, in which it is a global leader, Dexia benefits

from major growth opportunities created by increased outsourcing

to the private sector of the delivery and management of public

facilities, by the development of the range of products and services,

and by the introduction of synergies among the Group’s different

entities and businesses. Financial engineering and debt rescheduling

are vectors for sharing know-how at the level of the Group. Another

growth target is the development of insurance for local

governments, their debt and their employees. Finally, in Europe, the

rapidly growing securitization market provides prospects for

expansion for both FSA and Dexia, as well as for the combined

products they will now be able to offer their clients.

These factors have driven growth in this business line and in its

financial results at a higher rate than the market, and will continue

to generate a high level of recurring profitability in a market

characterized by low risk with a limited cost of capital.

Highlights

January 2001 …Dexia sold its 40% equity interest in Banco de Crédito Local

subsequent to the merger of BBV and Argentaria.

…Dexia increased its equity interest in the capital of the Austrian

bank Kommunalkredit Austria, specialized in local government

financing, from 26.7% to 49%.

…Dexia took control of Otzar Hashilton Hamekomi (OSM),

an Israeli public finance bank. Dexia now owns 45.3%

of the capital and 60.7% of the voting rights of OSM.

March 2001Dexia announced the acquisition of Artesia Banking Corporation

in Belgium. The Artesia Group, which is active in retail banking,

insurance and asset management, is also a financial partner of

the Belgian local public sector and, in particular, helps to finance

hospitals, non-profit organizations and schools.

July 2001 Banco Sabadell, Spain’s fourth largest private banking group,

acquired a 40% interest in Dexia Banco Local. Now called

Dexia Sabadell Banco Local, this joint subsidiary spearheads

the development of products and services for local governments

in Spain, in particular to help finance their investments.

October 2001In the United States, Dexia acquired 75% of the capital of

Global Structured Finance (GSF), specialized in project finance

advisory and financing services. The acquisition was finalized

in January 2002.

December 2001 Dexia increased its equity interest in Dexia Crediop from 60%

to 70% by acquiring, via Dexia BIL, the 10% previously owned

by Banca Popolare di Bergamo.

)

K n o w - h o w a

The environment of local financein Europe

Moderate growth in local publicexpenditures between 1995 and 2000In 2000, local public expenditures totaled EUR 932 billion, a

figure which represented EUR 2,500 per capita and 11% of the

European gross domestic product (GDP). Between 1995 and

2000, local public expenditures increased by 1.5% in volume on a

yearly average, less than general economic growth (+ 2.5%) but

more than the rise in total public-sector expenditures (- 0.4% in

volume). This trend was due to the impact of lower interest rates

on financial expense and to the implementation of stability pacts

in several countries to involve local governments in efforts to

control public spending.

Slight rise in local public-sector investmentLocal public-sector investment totaled EUR 122 billion in 2000,

i.e. EUR 320 per capita. Local investment represented 1.4%

of GDP and 63% of all public-sector investment. Between 1995

and 2000, the average annual increase was very moderate

(+ 0.4% in volume), less than total local expenditures, but

nevertheless more than overall public-sector investment

(- 0.2% in volume).

Local budget surpluses reinforcedOverall, the European Union moved from a budget deficit of

- 0.13% of GDP in 1995 to a budget surplus of + 0.15% in 2000.

In 2000, only four countries still reported a local budget deficit,

but the break-even point was almost attained by two of them.

Local public debt containedIn 2000, local public debt totaled EUR 478 billion, or EUR 1,250

per capita, down in volume between 1995 and 2000 (- 0.6% on a

yearly average), and its weight in GDP contracted, falling from

6.6% in 1995 to 5.6% in 2000.

2001: local finances only slightly affected bythe economic slowdownSince the economic downturn occurred at the end of the year,

it had only a minimal impact on local finances in 2001. Local

governments might be affected to a greater extent in 2002,

in particular owing to a decline in tax revenues, a rise in certain

welfare benefits and budget readjustments at the central

government level.

Stable investment, but needs as great as everIn 2001, local investment remained generally stable, especially

in Nordic countries, and even increased in some nations, such

as France (+ 4%).

Nevertheless, investment needs remained significant, in large

measure because they must ensure the compliance of public

facilities with European standards, especially with regard to

regional planning and sustainable development. For example,

the mandatory installation of waste water collection systems

by 2005 has not yet been completed. The investment required

has been estimated at EUR 150 billion for the period 1993-2005.

Further transfers of responsibility andresources to local governmentsIn France, since January 2002, regional governments are

responsible for the management of regional passenger rail traffic,

and responsibility for sea ports and airports will also be

transferred. Spain continued to harmonize the responsibilities of

the country’s autonomous communities, all of which are now in

charge of healthcare. The autonomous communities also benefit

from the transfer of new tax revenues. In Italy, “administrative

and fiscal federalism” is gradually being established.

The constitutional law of October 2001 confirmed the principle

New long-term Outstanding long-termloans in 2001 commitments as of Dec. 31, 2001

(EUR million) (EUR million)

Belgium(1) 2,132 - 16.6% 22,823 - 4.3%

France 6,935 + 7.7% 52,767 + 1.2%

International 20,087 + 30.3% 70,876 + 17.6%

Germany 5,826 + 22.0% 26,887 + 2.1%

North America 7,691 + 45.0% 17,373 + 46.1%

Spain 735 - 2,315 -

Israel 92 - 434 -

Italy 3,110 + 45.8% 14,693 + 0.6%

United Kingdom 425 - 56.1% 2,702 + 4.1%

Slovakia 54 - 27.0% 254 + 12.9%

Sweden 758 - 4.4% 2,637 + 24.3%

Other 1,396 + 2.0% 3,581 + 43.5%

Austria(2) 1,365 + 25.7% 4,031 + 46.8%

Total including subsidiaries 30,519 + 16.1% 150,497 - 0.7%accounted for by the equity method

(1) Does not include Artesia BC data; in 2001 outstanding loans totaled EUR 3.95 billion.(2) via Kommunalkredit Austria, in which Dexia has a 49% interest since 2001 and which is accounted for by the equity method.

> >)

n d E x p e r t i s e

of subsidiarity and guaranteed the financial autonomy of local

governments. In the United Kingdom, studies are currently

under way to reform local government financing and create

regional governments in England. Concrete steps may be taken

beginning in 2003.

Business review

The volume of long-term loans granted by Dexia in 2001

totaled EUR 30.5 billion (1), up 16.1% from the end of 2000.

Total outstanding long-term commitments amounted to

EUR 154.4 billion (2), representing an increase of 1.9%.

This result confirmed the Group’s commercial expertise

in a mature market characterized by slow growth, especially

in Belgium and France.

At EUR 25.6 million, there was a significant rise in income from

commissions on advisory and underwriting activities, revenues

which are not included in new loans and outstanding

commitments.

In BelgiumDexia is a leader in the local public-sector market and to a lesser

degree helps finance the projects of large companies. The Group’s

strategy is to increase profitability while limiting exposure to the

risk involved in corporate financing.

Outstanding long-term loans totaled EUR 26.8 billion as of

December 31, 2001 (EUR 22.8 billion excluding Artesia BC),

representing an increase of 12.3% over the previous year. This

rise was due to two contrasting trends:

… on the one hand, a voluntary decrease in the large corporate

client segment in which Dexia continues to reduce its risk

exposure. Outstanding commitments in this sector declined

from EUR 3.4 billion to EUR 2.1 billion between the end of

2000 and the end of 2001 (excluding Artesia BC which

reported outstanding loans of EUR 3.0 billion as of

December 31, 2001);

… and on the other hand, outstanding loans to the public sector

increased by 5.8% to EUR 21.7 billion (EUR 20.7 billion

excluding Artesia BC) at the end of 2001.

At EUR 2.1 billion, the volume of new long-term loans

(excluding Artesia BC) decreased by 16.6% compared with 2000,

impacted by a voluntary reduction in loans to large

corporate clients (EUR 280 million paid out in 2001 versus

EUR 695 million in 2000).

In the local public sector, in addition to raising margins slightly,

Dexia Bank was able to maintain its market share at

approximately 82% of new tenders. This was mainly due to the

introduction of an active debt management policy which made it

possible to restructure EUR 839.5 million in public-sector debt.

In asset management activities in Belgium, Dexia managed assets

of EUR 13.1 billion, up 39.5% from December 31, 2000.

On a constant basis (excluding Artesia BC), the amount was

EUR 8.4 billion, representing a slight decrease.

Finally, strong growth was reported in disintermediated

financing arrangements for local governments. For Belgium’s

regions and communities, Dexia Bank organized a volume of

issues totaling EUR 12 billion in 2001, up almost 18% from the

year 2000.

In FranceDespite a lackluster environment, marked by municipal elections

in March 2001, business in France was satisfactory. In 2001,

new loans totaled EUR 6.9 billion, up 7.7% from the previous

year. All sectors contributed to this increase.

Loans to local governments increased by 7.8% to EUR 5.1 billion,

while loans to other local public-sector entities stood

at EUR 1.4 billion, up 6.4%.

New long-term structured financing loans totaled

EUR 518 million, representing an increase of 10.0% over 2000.

Dexia Crédit Local thus helped finance major projects in 2001

in the sectors of environmental protection, urban heating and

transport.

(1) Balance sheet and off-balance sheet, excluding Artesia BC.(2) Balance sheet and off-balance sheet, excluding FSA’s credit enhancement activities and including Artesia BC.

In Belgium

(EUR million)(1)

2,530

2,556

19992000

2001

2,132

New loans(EUR million)(2)

23,76123,839

19992000

2001

22,823

Outstanding commitments

(1) Long-term balance sheet, excluding Artesia BC.(2) Does not include Artesia BC’s outstanding loans, which totaled EUR 3.95 billion.


40/41

)

>>

In France

(EUR million)(1)

7,113

6,441

19992000

2001

6,935


51,91952,166

19992000

2001

52,767


(1) Long-term balance sheet.

At EUR 52.8 billion, outstanding long-term commitments were

up slightly (+ 1.2%) from the end of 2000, in spite of the decrease

in the total indebtedness of local governments.

The year 2001 was also marked by a sustained level of debt

rescheduling (approximately EUR 5 billion) and by dynamic

diversification which demonstrates the potential for synergies

among the Group’s different business lines.

In the disintermediated financing market, through Dexia

Capital Markets, the Dexia Group was chosen as lead manager

for the joint issue by the City of Marseilles and the City of

Genoa. This EUR 80 million issue will take the form of private

bond placements launched simultaneously by the two cities,

at a fixed rate for Marseilles and a floating rate for Genoa.

The insurance premiums collected by Dexia Sofaxis, a broker

specialized in the insurance of employer risks for local

governments, increased by 52.8% to EUR 230 million.

Assets managed, in particular, for other local public-sector

organizations (social housing companies, joint public-private

companies, healthcare and welfare organizations, non-profit

organizations, etc.) increased by 20% over December 31, 2000.

At the end of 2001, they totaled EUR 2.1 billion.

Strong growth in international businessNew long-term loans outside of Belgium and France increased

by 30.3% to EUR 20.1 billion at the end of 20011. Outstanding

commitments totaled EUR 70.9 billion as of December 31, 2001(1),

up 17.6%. These good results were due to specific trends in

the different national markets in which the Group operates,

to the excellence of the Group’s teams, and to commercial

synergies which are propagating rapidly among the different

international subsidiaries and branches. For example,

financial engineering techniques applied to new loans and debt

management activities, which had first been developed

in the French and Belgian markets, were successfully exported

to Italy and Spain. In a similar fashion, cooperation between

FSA in the United States and different Group entities made it

possible to conduct many transactions in common in

the market for American municipal bond issues and US leases.

In GermanyDexia Hypothekenbank Berlin reported excellent results in 2001.

New long-term loans totaled EUR 5.8 billion, up 22% from 2000,

and at EUR 26.9 billion, outstanding commitments rose 2.1%

in comparison with the previous year.

In addition, in line with its efforts to diversify its portfolio,

Dexia Hypothekenbank Berlin conducted several transactions

outside of Germany, in close cooperation with Dexia Capital

Markets. The Group’s German subsidiary helped arrange issues

for the Niederösterreich Land in Austria, the City of Montreal in

Canada and the City of Madrid in Spain.

In North AmericaDexia operates in North America through Dexia Crédit Local

New York Agency, Financial Security Assurance (FSA), Astris

Finance (an investment advisory firm that works with local

authorities) and, since February 2002, Dexia Global Structured

Finance, which is specialized in advising and arranging

structured financing projects.

In 2001, subsequent tot the acquisition of FSA in 2000, North

America became the largest market for the Dexia Group in

terms of new long-term loans.

Dexia Crédit Local New York AgencyDexia Crédit Local New York Agency is active in guarantees

for American municipal bonds, structured financing and direct

public-sector financing. New loans totaled EUR 7.7 billion

in 2001, up 45.0% from 2000. Total outstanding commitments

thus rose 46.1% to EUR 17.4 billion as of December 31, 2001.

In project finance, Dexia helped arrange many transactions

in the energy sector for a total of EUR 261 million.

>

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In Germany

(EUR million)(1)

8,364

4,776

19992000

2001

5,826

New loans

26,134

26,331

19992000

2001

26,887

(1) Long-term balance sheet and off-balance sheet.

In North America

(EUR million)(1)

3,990

5,304

19992000

2001

7,691

New loans

6,517

11,889

19992000

2001

17,373


Dexia Crédit Local New York Agency

K n o w - h o w a(1) Excluding companies accounted for by the equity method.

(EUR million)(1)

Outstanding commitments(EUR million)(1)


16/1716/17


42/43

Financial Security AssuranceA Dexia subsidiary since the middle of 2000, Financial Security

Assurance (FSA) is active in the credit enhancement of

municipal bonds and asset-backed securities. The credit

enhancement of municipal bonds involves guaranteeing bond

issues by borrowers that are primarily municipalities. By enabling

them to take advantage of its excellent AAA rating, FSA allows

them, in exchange for a fee, to issue bonds under favorable

conditions.

The credit enhancement of asset-backed securities (ABS) concerns

guarantees for banks and companies which place their debt issues

directly on the market.

FSA reported a record level of new business in 2001, especially

in the credit enhancement of asset-backed securities. In 2001,

FSA collected EUR 790 million in gross present value premiums,

up 55% from 2000.

The American municipal bond marketBecause of the low interest rates and the economic slowdown,

this market was very profitable in 2001. In this favorable

environment, FSA increased its market share significantly

to 27% of insured new issues. FSA insured municipal bonds

in the amount of EUR 41.4 billion, generating EUR 252 million

in gross present value premiums.

The American asset-backed securities marketFSA insured ABS totaling EUR 64.3 billion, thereby generating

EUR 402 million in gross present value premiums, representing

an increase of 77.9% in comparison with the end of 2000.

The structured financing sector was particularly dynamic,

in large measure owing to favorable credit spreads on arbitrage

transactions. FSA also confirmed its leadership as a guarantor

of automobile loan securitizations. In the mortgage loan market,

FSA insured a great number of triple A-rated tranches.

For example, FSA insured the securitization of a part of the Bank

of America’s home equity loan portfolio for EUR 11.8 billion.

International activitiesIn 2001, the gross par insured internationally totaled

EUR 23.9 billion versus EUR 15.0 billion in 2000. In

infrastructure financing in Europe, a market with strong growth

potential, FSA was awarded mandates and took part in major

transactions which are expected to have a significant impact in

2002. In Asia, FSA was among others selected to organize

consumer loan securitizations, as was the case for the first three

ABS issues in South Korea. In Australia, FSA guaranteed

refinancing in the amount of AUD 250 million for Envestra

Victoria Pty Limited, which operates one of the three gas

distribution networks privatized by the State of Victoria.

SynergiesIn 2001, 56 transactions were conducted jointly by FSA and

other entities in the Dexia Group, mainly with Dexia Crédit

Local New York Agency, in both the municipal bond and ABS

market. Since 2000, FSA has insured EUR 32.2 billion through

joint operations – almost 10% of the total amount insured by

FSA – and generated EUR 158 million in premiums.

In AustriaThrough its equity interest in Kommunalkredit Austria, which

was increased to 49.0% at the beginning of 2001, Dexia benefits

in Austria from the expertise of a specialist in local government

financing with experience in eastern European countries.

In 2001, new loans granted in Austria rose more than 25%

to EUR 1.4 billion. Outstanding commitments also increased

by more than 46% to EUR 4 billion.


In Austria

(EUR million)(1)

363

1,086

19992000

2001

1,365


1,419

2,745

19992000

2001

4,031


Dexia via Kommunalkredit Austria à 100%

…

…

…

…


In North America

premiums(EUR million)

508

20002001

790

255,788

20002001

341,664

Gross present valuethe end of the period

(EUR million)

Net capital insured at

Financial Security Assurance

>

In SpainThe Dexia Group is active in the Spanish market through Dexia

Sabadell Banco Local, a joint-venture with Banco Sabadell,

in which Dexia has a 60% interest and Banco Sabadell a 40%

stake.

Initial business at Dexia Sabadell Banco Local was excellent.

Outstanding commitments totaled EUR 2.3 billion at the end

of December 2001 after nine months of activity

(EUR 1.4 billion at the start of operations). For example, Dexia

Sabadell Banco Local contributed EUR 10 million to help

finance the acquisition of the company which operates a toll

highway between Bilbao and Saragossa.

Many intra-group synergies have already been implemented,

in particular with Dexia Finance (financial engineering and

structured products) and Dexia Capital Markets (co-lead

manager of the first bond issue in euro by the City of Madrid).

In IsraelAt the beginning of 2001, Dexia took over Otzar Hashilton

Hamekomi (OSM), the Israeli bank specialized in local

government financing. OSM reported very satisfactory results

in 2001. New loans totaled EUR 92 million and outstanding

commitments EUR 434 million as of December 31, 2001.

In ItalyIn a particularly difficult market environment due to strong

competition from a non-competitive public-sector rival,

Dexia Crediop had a very good year in terms of pay-outs

and outstanding commitments. At EUR 3.1 billion, new

loans were up 45.8% from the previous year. Outstanding

commitments totaled EUR 14.7 billion, representing a rise

of 0.6% in comparison with the end of 2000. In particular,

Dexia Crediop was chosen to finance the Campagna region

(EUR 142 million), the Marches region (EUR 232 million)

and the City of Genoa (EUR 58 million).

Dexia Crediop also reported a very good year with regard

to financial engineering operations for debt restructuring.

The volume of rescheduled debt totaled EUR 1.4 billion

versus a little more than EUR 0.6 billion in 2000. Finally,

structured financing totaled EUR 369 million, compared

with EUR 234 million in 2000.

In Italy

(EUR million)(1)

1,728

2,133

19992000

2001

3,110

New loans

13,906

14,609

19992000

2001

14,693

>

>

>

K n o w - h o w a

In the United Kingdom

(EUR million)(1)

773

968

19992000

2001

425

New loans

2,4602,595

19992000

2001

2,702

(1) Long-term balance sheet and off-balance sheet(1) Long-term balance sheet and off-balance sheet.

(EUR million)(1)

Outstanding commitments(EUR million)(1)



16/1716/1744/45

In the United KingdomSince 1994, the British market for local government financing

has been almost exclusively in the hands of a public body,

the Public Works Loan Board. For this reason, Dexia has

concentrated on financing projects in the sectors of social

housing, healthcare and education. The Dexia Group also

participates in Private Finance Initiative projects, which provide

private financing for public-service facilities, an area that

has generated significant results.

New loans by the London subsidiary totaled EUR 425 million

in 2001, down 60% from the previous year owing to the

sluggish environment in the social housing market and the lack

of opportunities that corresponded to Dexia’s profitability

objectives.

Outstanding commitments nonetheless rose 4.1%

to EUR 2.7 billion as of December 31, 2001.

In particular, Dexia London was chosen as lead arranger

in the education sector to help finance the reconstruction

of twelve schools in Essex for a total of GBP 15 million.

In SlovakiaDexia operates in Slovakia with Prvá Komunálna Banka (PKB),

a subsidiary of Dexia and Kommunalkredit Austria through

their joint venture Dexia Kommunalkredit Holding. PKB

is active in local government financing, structured financing

and also retail banking for individual and professional

customers.

In 2001, new long-term loans to public-sector clients totaled

EUR 54 million, down 26.7% from 2000, mainly owing to

a slowdown in the public-sector market in anticipation of

the elections scheduled for 2002 and to current decentralization

reforms. In this environment, outstanding commitments

nevertheless increased by 12.9% to EUR 254 million.

In structured financing, PKB was awarded significant mandates

in the energy sector to finance operations in the amount

of EUR 12 million.

In SwedenNew loans by Dexia Public Finance Norden for the year 2001

totaled EUR 758 million. Outstanding commitments rose

more than 24% to EUR 2.6 billion at the end of 2001. Dexia

Public Finance Norden now has a 7.5% share of the Swedish

public-sector facility financing market. Dexia’s Swedish

subsidiary acquired new clients, especially in Finland.

>

>

>


(1) Long-term balance sheet and off-balance sheet.(1) Long-term balance sheet and off-balance sheet.

In Sweden

(EUR million)(1)

556

793

19992000

2001

758


1,453

2,121

19992000

2001

2,637


In Slovakia

(EUR million)(1)

74

20002001

54225

20002001

254



K n o w - h o w a

Other geographic areasThis section includes operations conducted by teams at

the headquarters of Dexia Crédit Local

in countries in which Dexia has no base, as well as those

arranged with the support of its representative offices.

In 2001, new loans negotiated by the teams at headquarters and

the representative offices increased by 2% to EUR 1,396 million.

Up 43.5% from the end of 2000 outstanding commitments

totaled EUR 3.6 billion.

For example, in 2001 Dexia helped finance local governments

and arranged structured financing in Asia, western and eastern

Europe (Switzerland, Portugal, the Netherlands, Poland,

the Czech Republic, Hungary, Slovakia, etc.) particularly

in the sectors of transport, energy and telecommunications.

Financial analysis

Net income rose by a strong 71.6% to reach EUR 665 million for

the year 2001. This evolution came both from the changes in the

scope of consolidation(1) (for a total of EUR 197 million), from

exceptional items(2) (EUR 42 million) and from the organic

growth of the business at constant scope (EUR 39 million).

The revenues increased strongly in 2001 (+54.7%) to reach

EUR 1,769 million. This growth is linked to:

… the impact of the changes in scope of consolidation

(EUR 563 million of additional revenues) and exceptional

items (a negative EUR 10 million contribution in 2001);

… the underlying improvement of the business (EUR 72 million

or +6.3%). This came mainly from the very good

performances of FSA and the structured and project finance

activities. At FSA, revenues in the second half of the year 2001

increased by 20% over the same period of 2000 to reach

EUR 195 million. In structured and project finance, the

activity recorded a strong increase of 17.2% in underlying

revenues. This segment of activity now represents

EUR 150 million of revenues.

The costs have been contained to an underlying increase of 5.2%

to reach EUR 441 million (+ 65.1% or EUR 693 million globally).

This evolution, lower than that of the revenues led to an

improvement of the underlying cost/income ratio from 36.7%

in 2000 to 36.2% in 2001. Globally, the business’ cost/income ratio

went up, from 36.7% to 39.1%, due to the acquisition of Artesia

Banking Corporation whose cost/income ratio in this area of

activity is higher than that of the other entities in the business

line.

The gross operating income of the business experienced a strong

total growth of 48.6%. On an underlying basis (excluding

EUR 311 million of changes in scope of consolidation impact,

1) The additions to the scope of consolidation between the two periods comparedare: Artesia BC (12 months 2001), Dexia Sabadell Banco Local (12 months2001), OSM in Israel (12 months 2001), and FSA (only for the first half of2001).

(2)The main exceptional items concern the unwinding in 2001 of the distributionagreement between Dexia Crediop and a joint venture partner (-EUR 10 mil-lion), and a EUR 56 million capital gain on sale of holdings in Spain.

2000 2001 Change

Net banking income 1,144 1,769 + 54.7%

- net interest and related income 904 1,193 + 32.1%

- net commissions and other income 119 229 + 91.8%

- insurance 121 347 + 186.5%

Operating expense (419) (693) + 65.1%

Gross operating income 725 1,077 + 48.6%

Write-downs and allowances for loan losses and off-balance sheet items (65) (116) + 78.6%

Earnings from equity-accounted companies 16 20 + 22.7%

Corporate income tax (235) (262) + 11.3%

Net income before minority interests 441 719 + 63.1%

Minority interests 53 54 + 0.9%

Net income 388 665 + 71.6%

Cost/income ratio% 36.7 39.1

)>

Statement of income - Public / Project Finance EUR million


16/1716/1746/47


and - EUR 10 million of non-recurring items), the business’ gross

operating income grew by a very satisfying 7.0% to reach

EUR 775 million.

Write-downs for loan losses and allowances went up from

EUR 65 million in 2000 to EUR 116 million in 2001. This

stemmed partly from the contribution of the newly-consolidated

companies (EUR 53 million). For the rest, other than

the exceptional items listed in note 2 below, the increase is almost

fully explained by the impact of one single default, linked

to a fraud uncovered in the books of a Chicago hospital. This

occurred in the first half and caused an unprecedented provision

of EUR 51 million as well as high legal costs. Going in the other

direction, exceptional capital gains were made in Spain on the

unwinding of the former joint venture with BBVA in Banco de

Crédito Local, and the inception of the new subsidiary Dexia

Sabadell Banco Local (+ EUR 56 million).

The return on economic equity allocated to the business line

improved significantly over the year to reach 21.4%.

These results are particularly satisfying in a year of great turmoil

in the economic environment. They reflect the capacity of this

business, where Dexia is the global leader, to produce strong and

resilient profits. Even in a more difficult environment, the

business line succeeded in maintaining the cost of risk at a very

low level (around 0.11% of total long-term outstandings) despite

the impact of the Argentina crisis and the specific case in the US

healthcare sector.

I n n o v a t

Innovation is at the heart of the group’s commercial strategy. Through the devel-

opment of new products and the expansion of its range of customized services,

Dexia develops its know-how in order to maintain its technological leadership in

i o n

48/49

very competitive markets, which are constantly changing. At the European level,

Dexia has made considerable commitments as far as sustainable development is

concerned in order to reconcile economic growth and environmental protection.

The acquisition in 2001 of Artesia Banking

Corporation, which is composed of Artesia

Bank, BACOB Bank and DVV Insurance,

enabled Dexia to become the second largest

bancassurer in Belgium. Also offering retail

banking services in Luxembourg, the

Netherlands and Slovakia, Dexia advises its

individual customers, small businesses and the

self-employed on financing, investment, savings

and insurance products and services.

Availability and ServiceRetail Financial Services

No. 2 in bancassurance in Belgiumwith a market share of 24%

No. 3 in bancassurance in Luxembourgwith a market share of 13%

Deposits and investment products: EUR 79.7 billion (+34,7%)

Outstanding customer loans: EUR 20.7 billion (+45,5%)

Bancassurance: EUR 1,927 million (+95,3%) (1)

(1) Premiums received.

>

>

>

>

>

Strategy

The merger of the networks of Dexia Bank and BACOB Bank

under the Dexia masthead as of January 1, 2003, will make it

possible not only to broaden the Group’s customer base, but

also to adapt the distribution strategy to the new, expanded

network. Customers of the newly merged network will then

benefit from a single, broader range of products and services.

Negotiations with trade unions should result in the creation of

a joint network composed of 1,066 branches – 900 Dexia Bank

branches and 166 BACOB Bank branches.

With its network of 44 branches, Dexia BIL is a leading player

in Retail Financial Services in Luxembourg.

In order to meet ever greater demand for Internet and Mobile

Banking (WAP), call centers, etc., Dexia continues to diversify

its distribution networks.

Bancassurance activities also represent a development focus in

terms of risk coverage and investment solutions, particularly in

Belgium. Dexia Insurance, which coordinates the Group’s

insurance activities in different countries, and DVV Insurance,

Artesia BC’s insurance company, design and market a wide

range of life and non-life insurance products, mainly in

Belgium.

Highlights

February 2001Dexia Bank Belgium launched DexiaInvestors.net, a gateway site

that targets the segment of investors who track financial

information on the Internet.

Mars 2001… Dexia announced the acquisition of Artesia Banking

Corporation in Belgium.

… Dexia created Dexia Epargne Pension in France, a life-insurance

and retirement savings company. This new entity aims to

develop its activities in asset management in cooperation with

the Dexia Banque Privée network and in the institutional sector

through the network of Dexia Crédit Local.

June 2001 In keeping with the agreement signed with SMAP, Dexia

Insurance and Dexia Life & Pensions took respective control

of 100% of the capital of Mega Life and Mega Life Lux.

July 2001Dexia finalized the acquisition of Artesia Banking Corporation

to become the second largest bancassurer in Belgium.

April 2002Merger of Dexia Bank Belgium and Artesia Banking

Corporation.


50/51

)

)

Artesia BankingCorporation

In 2001, Dexia acquired the ArtesiaBanking Corporation Group, which

is composed of three major companies active in theBelgian financial services market. Artesia Bank isspecialized in financial management and engineering,BACOB Bank in retail banking services and DVVInsurance in insurance.Artesia BC is also the reference shareholder ofCordius Asset Management, Banque Vernes Artesia(a French private bank), both specialized in wealthmanagement, Artesia Securities (a broker specializedin small and medium-sized capitalizations and indexproducts) and subsidiaries specialized in leasing,rental and factoring. Artesia BC has subsidiaries orrepresentative offices in Austria, Denmark, Irelandand the United States.

Business review

The year 2001 was marked by contrasting trends in product

performance reflecting the market environment and changes

in legislation and tax policies. They were also due to Dexia’s

continued efforts to increase the contribution of disintermediated

products (euro-bonds, mutual funds and life insurance

products). In this environment, excluding the impact of the

acquisition of Artesia BC, the Group maintained its market

share for its different products, except for savings bonds, for

which the relative decline in market share was deliberate.

The satisfactory trend in Dexia’s business results in Belgium

was concomitant with the first steps in the merger of Dexia

Bank and Artesia BC, in line with the plan presented when the

transaction was finalized. The work accomplished by the teams

of both banks in the different work groups has led the Group

to upgrade the objectives for synergies linked to the merger.

The first concrete result of the merger for customers of both

banks was the installation of ATMs at the end of 2001 for cash

withdrawals and account information. Work is also under way

to harmonize procedures, fees and characteristics of products

and services.

Customer deposits and investmentproductsCustomer deposits and investment products (excluding

Artesia BC) totaled EUR 59.6 billion as of December 31, 2001,

representing a slight increase compared with the end of 2000.

Including Artesia BC, customer deposits and investment

products totaled EUR 79.7 billion at the end of 2001, up 1.6%

on a proforma basis. This slight rise was due to contrasting

trends in product performance. The percentage of disinter-

mediated investments continued to grow, in line with the Group’s

voluntary policy in this regard and in spite of a relatively

unfavorable market environment for mutual funds in 2001.

At EUR 31.7 billion, disintermediated products represented

almost 40% of customer deposits and investment products at

the end of 2001 versus a little more than 37% a year earlier

(on a pro forma basis). In particular, at EUR 17.8 billion at

the end of 2001, investments in mutual funds (fonds communs

de placement and sicav) rose 3.8%, in spite of a lackluster

environment.

Reflecting the combined impact of a change in fiscal policies

in Europe and the high volatility of equity markets, Dexia euro-

bonds marketed by the Dexia Bank and Artesia BC networks

totaled EUR 7.0 billion, up 13.9%.

Investments in savings bonds were down 11.3% from the end

of 2000 to EUR 18.8 billion. The decrease was mainly the result

of the Group’s marketing strategy that aims to propose

alternative investment products. Conversely, deposits on the

balance sheet increased by 4.5% to EUR 29.2 billion as of

December 31, 2001, mainly owing to the decline in long-term

interest rates which occurred in the second half and to the

uncertain stock market environment which favored temporary

investments.

Retail lending activitiesIncluding Artesia BC (on a pro forma basis), outstanding loans

increased by 6.2% to EUR 20.7 billion as of December 31, 2001.

Outstanding loans to retail banking customers totaled EUR

14.5 billion, representing an increase of 3.4% (on a proforma

basis). In particular, outstanding mortgage loans, which

amounted to EUR 12.3 billion at the end of 2001, rose 5.9%.

At EUR 2.2 billion, consumer loans and overdrafts were down

8.8% from the end of 2000. This decline in short-term loans

was particularly due to the downturn in equity markets and

the decrease in advances against securities.

Loans to the self-employed and small businesses increased by

13.4% (on a proforma basis) to EUR 6.3 billion as of

December 31, 2001.

Loans to individual customers account for some 70%

of outstanding loans versus 65% excluding Artesia BC.

>

1999 2000(3) 2001(3) Change

Deposits 19.9 19.9 29.2 + 47.0%Savings bonds 19.3 18.1 18.8 + 3.5%Dexia euro-bonds(1) 4.6 5.6 7.0 + 24.6%Mutual funds(2) 11.7 13.1 17.8 + 35.5%Cooperative shares - - 1.2 -Life insurance (technical reserves) 1.8 2.4 5.7 + 136.6%

Total 57.2 59.2 79.7 + 34.7%

(1) Euro-bonds issued by the Dexia Group and marketed by the Belgian network of Dexia(2) Mutual funds marketed by Dexia Bank Group network of agents(3) Excluding Slovakia, including Artesia BC

(1) Excluding Slovakia(2) Including Artesia BC

>

Customer deposits and investments products (EUR billion)

1999 2000(1) 2001(1)(2) Change

Loans to individual customers 8.9 9.5 14.5 + 51.4%mortgage loans 7.0 7.6 12.3 + 60.7%consumer loans 1.9 1.9 2.2 + 14.1%

Loans to small businessesand the self-employed 3.9 4.7 6.3 + 33.7%

Total 12.8 14.2 20.7 + 45.5%

Outstanding loans (EUR billion)

)

Ava i l ab i l i t y


52/53

BancassuranceDexia reported significant growth in new contracts and total

premiums from life and non-life insurance products in 2001.

The volume of premiums received totaled EUR 1,927 million,

representing an increase of 95.3% over 2000, and of 18.5%

on a constant basis. The rapid growth in the insurance business

mainly reflected the success of the line of life insurance

products marketed in Belgium, where revenues from newly

subscribed “branch 23” unit-linked products grew more than

51% to EUR 1,224 million (+ 38.1% on a constant basis).

This type of product now represents 63.6% of all premiums

collected and 73.9% of newly subscribed life insurance premiums.

Dexia also reported a significant increase in revenues from

non-life insurance activities, mainly due to the merger

of Artesia BC and its insurance subsidiary DVV Insurance.

At EUR 271 million, new contracts rose 161.3% compared with

the end of 2000. On a constant basis, non-life insurance

activities were down 9.4% (EUR 94 million), reflecting a

voluntary policy to improve margins and restructure the

portfolio in this regard.

In its insurance activities, Dexia operates as a broker for

EUR 147.7 million, with the remaining business corresponding

to products developed by Dexia Insurance or DVV Insurance.

The success encountered in marketing insurance products

and the merger of Artesia BC led to a significant increase in

technical reserves. At EUR 5.7 billion as of December 31, 2001,

they were up 17.3%. Their relative weight in total customer

deposits and investments was 7.2% versus 6.2% in 2000 (on a

pro forma basis).

(1) Including Artesia BC

>

and se r v i c e

1999 2000 2001(1) Change

Life insurance premiums 710 883 1,656 + 87.5%

Non-life insurance premiums 101 104 271 + 161.3%

Total 811 987 1,927 + 95.3%

Bancassurance activities (EUR million)

Merger of Artesia Banking Corporationand Dexia Bank makes progress

Since the project was announced in March 2001,the merger of Artesia BC and Dexia Bank hasmoved forward rapidly. The trading rooms havealready been merged, the IT platform chosen andasset management activities regrouped under themasthead Dexia Asset Management. The legalmerger of the companies took place on April 1,2002.As far as the integration of the Dexia Bank andBACOB Bank networks is concerned, negotiationswith the trade unions resulted in a decision tomaintain a double status – independent branchmanagers for Dexia Bank and salaried positions atBACOB Bank. Organizing the new network, whichwill count 1,066 branches by 2005, involves applyingcriteria of productivity, outstanding commitments,geographic coverage and real estate considerations.On January 1, 2003, the BACOB Bank name will bereplaced by that of Dexia Bank.Synergies are expected to total between EUR 220 mil-lion and EUR 255 million as of 2005.

Financial analysis

Net income has increased by 38.9% to reach EUR 216 million.

The results of this business line have been greatly impacted

by the acquisition of Artesia Banking Corporation

(EUR 63 million of additional net income), the only material

change in scope of consolidation.

The organic growth of the net income was EUR 5 million,

3.5% more than in 2000. This underlying growth is satisfying

given the global economic environment and particularly the

downturn in the capital markets in the second part of the

year, which put a halt to the customers’ appetite for security-

related services, and provoked a shift to more defensive

savings products. It is also a reflection of the intensive

integration activity which has put a heavy charge on

the business line’s costs. Revenues were up 58.1% to

EUR 1,762 million, the acquisition of Artesia BC bringing

EUR 634 million. Underlying revenues, at EUR 1,130 million,

grew by EUR 35 million, or 3.2%. This satisfying evolution

has been achieved despite a decline of 2.8% in the

commissions and other income linked with the bear stock

markets. On the contrary insurance results grew strongly

(+49.1% underlying revenues).

Total costs in 2001 amounted to EUR 1,443 million (+67.4%).

The integration of Artesia BC has brought an additional

EUR 545 million. Underlying costs grew by 5.3% and reached

EUR 896 million for the year. This evolution, although single-

digited, is unfavorable if compared to that of the underlying

revenues. There are two reasons for this:

… 2001 was a year of intensive integration workload and all

the costs related to these tasks and projects have not always

been treated as exceptional items;

… the expense budgets for 2002 did not anticipate the

dramatic downturn of the economy and the markets in the

second half, and the corresponding reduction of the

revenues. Obviously budget revisions took place during

the 3rd and 4th quarters, which has led to cost savings

compared to what was budgeted in the first place. But this

was not enough to compensate the less favorable evolution

of the revenues.

The underlying gross operating income thus decreased by - 4.1%

to EUR 234 million, whilst the total gross operating income

increased by 26.3% to EUR 319 million.

The cost/income ratio of the business line now stands

at 81.9%. This high level must be understood in the light

of three essential facts:

… the business model which Dexia conducts in Belgium

principally, is one of retail deposit and financial asset

gathering. This means that the revenues include only

marginally earnings from corporate business, and by

the same token imply a very low level of the cost of risk.

This leads to a seemingly high cost/income ratio compared

to the other retail banks, whilst the profit margin may be

commensurate;

… the conditions prevailing in 2001 caused the revenues

to grow at a slower pace than the costs; and

… the cost/income ratio of the new consolidated entities

(Artesia BC essentially) stands at 86%; this obviously

distorts negatively the overall cost/income ratio of this

business line. But the very purpose of the acquisition and

of the integration of this new subsidiary is to release

substantial cost and revenue synergies, aimed at improving

the cost/revenue structure.

The decrease in the underlying provisions and taxation have

more than compensated the decrease of the gross operating

income, and led to an increase in the net income before

minority interests of the business line, both in total (+39.9%)

and underlying (+1.7%).

)

Ava i l ab i l i t y


54/55

Globally, the return on economic equity of the business line

stood at 12.4%, a level which is expected to be considerably

enhanced in the coming years through the release of cost and

revenue synergies accruing from the merger in Belgium of

Artesia BC and Dexia Bank. Yet it is today higher than the

cost of capital of the business line, which means that it is

creating value.

and se r v i c e

2000 2001 Change

Net banking income 1,114 1,762 + 58.1%

- net interest and related income 756 1,131 + 49.7%

- net commissions and other income 316 391 + 23.9%

- insurance 43 239 + 456.4%

Operating expense (862) (1,443) + 67.4%

Gross operating income 253 319 + 26.3%

Write-downs and allowances for loan losses and off-balance sheet items (30) (34) + 14.4%

Earnings from equity-accounted companies 25 27 + 9.4%

Corporate income tax (88) (89) + 1.3%

Net income before minority interests 160 223 + 39.9%

Minority interests 4 7 + 80.7%

Net income 156 216 + 38.9%

Cost/income ratio% 77.3 81.9

Statement of income - Retail Financial Services EUR million

E x p e r t i s e

Expertise is a core value in Dexia’s business plan. The Group has developed

specific know-how to ensure excellence in its highly specialized activities.

Dexia’s expertise has gained worldwide recognition, particularly in financing

56/57

for local public-sector organizations and investment fund administration.

Dexia’s teams apply this expertise by developing synergies among the Group’s

different line (business lines).

Dexia has progressively affirmed its position as

a major participant in the market for Investment

Management Services in Europe. This status has

been achieved through the strategic acquisition of

specialized companies, a systematic search for

synergies as well as organic growth in business.

Dexia develops products and services adapted

to the needs of its customers in private banking,

asset management, investment fund adminis-

tration and equity-related activities.

Professionalism and Discer Investment Management Services

Assets under management: EUR 82.8 billion (+ 48.1%)

Total private banking client assets:EUR 37.5 billion (+ 22.2%)

Capital managed as a custodian bank: EUR 99.7 billion (+ 1.8%) (1)

>

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58/59

Strategy

In light of demographic trends in Europe and the expected

development of pension funds, Investment Management

Services show strong growth potential in the coming years.

Dexia has anticipated this trend and, in the last few years,

has made crucial acquisitions in this sector. Today, the Group

ranks among the main European players in the field.

Dexia has a strong position in Luxembourg in private banking.

The Group aims to strengthen its presence in other European

countries, especially Belgium, France and the Netherlands.

In this business line, the strategy is based on multi-channel

distribution, as is the case in Luxembourg and France, and

on targeting high net worth clients.

Coordinated by Dexia Asset Management, asset management

activities have significant growth potential as the Group works

to enhance fund performance.

Dexia is determined to remain a leader in Europe in investment

fund administration, a position it acquired through its

predominance in the Luxembourg market, Europe’s largest

financial center for this business line.

Under the name Dexia Securities, the Group is developing

equity-related activities involving advisory and brokerage

services in European equities.

Highlights

January 2001 … Through Dexia BIL, Dexia acquired Bikuben Girobank

International S.A. Luxembourg, which became Dexia Nordic

Private Bank Luxembourg, a Luxembourg private bank

targeting Scandinavian clients.

… Banco Popular acquired a 25% equity interest in the

Iberagentes group, which belongs to the holding company

Fortior Holding, specialized in wealth management.

Subsequent to the transaction, the shareholders of Fortior

Holding are Banco Popular, Dexia BIL and the founding

shareholders. This agreement will enable the three Groups

to exploit synergies in private banking, financial advisory

services and asset management.

March 2001Through Dexia BIL, Dexia acquired 100% of the Financière

Opale Group in France. Financière Opale is composed of several

companies, the largest being is ODB Equities. Now Dexia

Securities France, this firm offers its institutional clients equity

and derivative brokerage services, as well as equity research and

analysis services.

April 2001 Prigérance 2, a subsidiary of Dexia Banque Privée France,

became Dexia Fund Services France. An investment fund

administration company, it is specialized in the administrative,

legal and accounting management of mutual funds.

May 2001 Dexia announced its takeover bid, via Dexia BIL, of 100%

of the shares of Kempen&Co listed on the Euronext Amsterdam

exchange. Kempen&Co is a recognized player in asset

management, private banking, brokerage and commercial

banking in the Netherlands.

July 2001 Dexia’s takeover bid for Kempen&Co met with success.

Dexia now owns 99.98% of the capital of Kempen&Co.

August 2001Through Dexia BIL, Dexia acquired Ely Fund Managers

in the United Kingdom. Ely Fund Managers manages assets

for high net worth individuals, family trusts, charities and

pension funds.

nment)

)

Professionalism a

December 2001Labouchere, acquired in 2000, and Kempen&Co, which became

part of Dexia in 2001, merged to become Dexia Bank Nederland,

which offers a wide range of investment products and services

for individuals, corporate clients and institutional investors.

January 2002 Dexia Asset Management and Cordius Asset Management,

an Artesia BC subsidiary, merged to become Dexia Asset

Management and to spearhead Dexia’s asset management

activities at the European level.

Business review

Investment Management Services comprise different

complementary businesses – private banking, asset

management and investment fund administration, as well as

equity-related activities since 2001.

The significant downturn in the stock market in 2001 not only

reduced the value of the assets and funds managed for clients,

but also provoked a shift to investments with less exposure to

equity risks, such as bonds and money market products which

generate less income for the bank.

This trend was only partly corrected by the market upswing

that occurred in the last quarter of 2001.

Private bankingDexia is active in private banking in many European countries –

particularly in Luxembourg, Belgium, Denmark, Spain, France,

Italy, the Netherlands, the United Kingdom and Switzerland –

and in Singapore. The Group makes available to its affluent

individual and institutional clientele its expertise in wealth

management, including discretionary management and

investment advisory services, and financial engineering.

Private banking activities concern assets managed for private

banking clients, but also share leasing products distributed in the

Netherlands by Dexia Bank Nederland.

Private banking client assets, excluding share leasing, totaled

EUR 37.5 billion at the end of 2001, up more than 22% from 2000,

owing to the consolidation of Artesia BC in Belgium, Kempen&Co

in the Netherlands and Dexia Nordic Private Bank Luxembourg.

On a constant basis, private banking client assets would have

totaled EUR 29.5 billion, down 3,8%, owing to the decrease in

the value of the assets.

In a breakdown, discretionary management mandates and

advisory management respectively declined 15.3% and 5%. In an

uncertain market environment, clients tended to opt for

temporary investments, such as bonds, cash deposits and short-

term mutual funds.

Share leasing products totaled EUR 4.1 billion, down

EUR 2.1 billion.

In an unfavorable environment, new loans in 2001 amounted to

EUR 0.7 billion, excluding renewals.

Asset managementMost of the Group’s asset management activities are coordinated

by Dexia Asset Management.

These activities comprise fund management – via investment

funds – for mutual fund promoters and institutional investors,

and discretionary management and advisory services for private

banking clients. Dexia Asset Management, which employs

some 400 people, has commercial and management offices

in Luxembourg, Belgium, France, Singapore and Switzerland.

The Group is also active in this field through commercial

structures in Germany, Austria, Spain, Italy and Japan.

Assets under management by Dexia totaled EUR 82.8 billion(1) at

the end of 2001, representing an increase of more than 48% over

)

>

26%

45%

29%

Mutual funds Dexia

Securities

Cashdeposits

>

(1) Before corrections for overlapping.

Breakdown of private banking activities (as of December 31, 2001)(1)

19%

50%

31%

Discretionarymanagement

Nomandate

Advisorymanagement

By type of product By type of management

(1) Excluding Kempen&Co.

nd Discernment


60/61

December 31, 2000, owing to the consolidation of new

acquisitions – Artesia BC and its subsidiary Cordius Asset

Management, Kempen&Co and Ely Fund Managers in the

United Kingdom. On a constant basis, assets under management

totaled EUR 54.3 billion as of December 31, 2001, down

EUR 1.6 billion from the end of the previous year. The decline was

primarily the result of the market downturn (- EUR 2.9 billion),

which was partly offset by organic growth (+ EUR 1.3 billion).

There was an increase in fund management, which now

represents 49.6% of total assets under management versus 45.9%

at the end of 2000. Rising from 17.8% at the end of 2000

to 25% at the end of 2001, institutional management was also

on the rise. These trends were mainly due to the consolidation

of the asset management activities of Cordius Asset Management

and Kempen&Co.

Investment fund administrationInvestment fund administration comprises custodian bank,

central administration and transfer agent services. In this market,

Dexia has a prominent position in Luxembourg, Europe’s largest

financial center in terms of total capital managed and number

of funds administered. The Group is also active in this field

in Belgium, Spain, France, Ireland, Italy and Singapore. Two new

cities, Milan and Zurich were added to Dexia’s international fund

administration network in 2001.

Despite the downturn in the stock market in 2001, which had

a negative impact on business, fund administration activities

reported sustained growth.

Custody servicesActing as a custodian, the bank is responsible for the custody

of securities and cash which make up a third party’s assets.

The amount of these funds increased by 1.8% compared with

the end of 2000 to EUR 99.7 billion as of December 31, 2001.

The number of transactions was up 17.9% and some 15 new fund

promoters came aboard in 2001.

Central administration servicesThe administrative and accounting management of investment

funds includes creating the funds, writing the articles

of association, keeping the accounts and calculating the net

asset value.

The volume of these funds, which totaled EUR 92.2 billion

as of December 31, 2001, declined 10.9%. This decrease,

a consequence of the decline in the value of securities,

does not properly reflect business volume, which was very

satisfactory, since the number of calculations of net asset

value increased by 15.4% and the total number of portfolios

administered rose from 944 at the end of 2000 to

1,067 at the end of 2001. In particular, Dexia Fund Services,

which is specialized in this field, is the leader in the

Luxembourg market with, at the end of 2001, a market share of

19% of the total volume administered and of almost 15% of the

number of funds.

Transfer agent servicesTransfer agent services involve receiving and transmitting

investment fund purchase and sale orders. Capital administered

by Dexia in this segment increased by 15.1% in 2001, rising

from EUR 185.8 billion at the end of 2000 to EUR 213.8 billion

at the end of 2001, thus making Dexia the European leader in

this strong growth market. The number of accounts rose more

than 15% and the number of purchase and sale orders executed

was up almost 17% in 2001.

In this segment, in an unfavorable market environment, the

Group’s commercial results confirmed its strategy and the

excellence of its teams. This market still has strong growth

potential, linked to the development of the asset management

market in Europe and especially of pension funds.

1999 2000 2001 Change

Fund management 22.0 25.7 41.1 + 60.1%Advisory management 9.6 10.8 10.5 - 2.9%Discretionary management 7.3 9.4 10.5 + 11.5%Institutional management 7.2 10.0 20.7 + 107.1%

Total assets under management 46.1 55.9 82.8 + 48.1%

Assets under management (EUR billion)

>

…

…

…

Equity-related activitiesIn 2001, Dexia broadened its range of expertise by acquiring

companies active in the very profitable equity and derivative

brokerage market as well as in equity research and analysis.

Under the name Dexia Securities, Dexia can now offer its

individual and institutional clients high value added services

in France, the Netherlands, Italy, Spain, Belgium and Luxembourg.

Financial analysis

In a very difficult market environment for this business,

characterized by a strong downturn in the stock markets over

the year and a more defensive attitude of the customers, the

net income of the business line stands at EUR 253 million, a

decrease of -17.9%. This evolution stems from:

… the change in the scope of consolidation(1), which have

brought in additional income of EUR 84 million;

… the exceptional items2, which had a negative impact of

EUR 31 million in 2001, as compared to a negative impact

of EUR 25 million in 2000;

… the underlying income which went down by -40.9%

(or -EUR 136 million).

Revenues increased overall by 30.6% (or EUR 279 million),

whilst underlying revenues went down by 13.6% (or -EUR

129 million). This came from:

… a slight decrease of the underlying net interest and related

income of EUR 6 million, (or -2.1%);

… a more significant fall in the underlying commissions and

other income (-EUR 123 million, or -18.7%). By contrast,

in 2000, this revenue line reflected a particularly buoyant

activity in the field of securities, wealth and asset

management, which generated new business as well as

an increase in the valuation of the assets managed, thus

enhancing the basis of commissions and the performance

fees.

Total costs went up by 63.2%. Excluding the changes in

the scope of consolidation (which added EUR 233 million

to the cost base), and the exceptional items (which added

EUR 4 million), the underlying costs amounted to

EUR 495 million, an increase of EUR 46 million (or 10.3%)

which has its origins in two main factors. First, the acquisitions

made during 2001 by the business line have generated a very

high level of activity, both in the acquisition phase and in the

integration process, creating vast amounts of effort and

expense. These have weighted heavily on the general expense,

whilst none of them were treated as exceptional. Secondly, the

momentum of revenues in 2000 in all the business segments

of Investment Management Services, led the Group to approve

the 2001 budgets for expense and capital expenditure which

reflected the expectation that the revenue trend in 2001

would be commensurate with what it was in 2000.

This assumption was defeated by the sudden change in trends

and market environment, and then by the consequences

of the September 11 events. Naturally, the cost budgets were

quickly revisited in this new environment, but this was not

enough to make up for the curbing of the revenues.

The cost/income ratio of the business line as a whole was up,

and stood at 61.5%. This increase can be explained by the

very adverse market conditions, which provoked a scissor’s

effect between costs and revenues and led to a decrease in

the gross operating income of the business of EUR 9 million

or - 1.0% globally. On an underlying basis, the gross operating

income went down by 34.8% (or - EUR 175 million). The

)

1999 2000 2001 Change

Capital administered 81.2 97.9 99.7 + 1.8%in custody

Capital under 87.1 103.5 92.2 - 10.9%central administration

Capital managed 132.7 185.8 213.8 + 15.1%as a transfer agent

Investment fund administration(1) (EUR billion)

Professionalism a

>


16/17


62/63

different activities composing this business line had various

performances over the year, some of them showing a

remarkable resilience in the very difficult market

environment which characterized the year 2001.

The increase in the level of write-downs (+EUR 74 million)

is linked mainly to:

… exceptional capital losses made on the divestment of some

subsidiaries of Dexia BIL; and

… a provision of EUR 25 million set against the credit risks

in the share leasing portfolio.

Private banking achieved a gross operating income of

EUR 248 million in 2001, against EUR 197 million in 2000,

an increase of 25.9% of which EUR 84 million are due

to the change in the scope of consolidation and EUR 39 million

to exceptional items. Thus, the underlying gross operating

income was down EUR 72 million (or -30.4%).

The asset management business recorded a gross operating

income of EUR 107 million for the year 2001 compared with

EUR 153 million in 2000 (or a 30.1% decrease). In this global

2001 gross operating income figure, EUR 22 million are due

to the change in the scope of consolidation, and a decrease

of EUR 4 million comes from the exceptional items. Thus, the

underlying decrease of the gross operating income was 41.8%.

The fund administration business achieved a gross operating

income of EUR 79 million in 2001, against EUR 82 million in

2000. This stability in fact hides a very satisfactory increase in

revenues (11.7%), while the costs went up by a greater

percentage (+ 28.8%). This is due to restructuring the resources

of the business to meet the growth in demand.

The equity-related activities had a very difficult year given the

market environment. The activity recorded a gross operating

income of EUR 25 million, of which EUR 21 million stem from

the change in the scope of consolidation, and EUR 3 million

are due to exceptional items.

Overall, despite the very difficult market conditions and the

circumstances in which the business line operated, the return

on economic equity of the business line stood at a high 47.2%,

much above the Group’s objective as a whole, thus continuing

to create value.

2000 2001 ChangeNet banking income 911 1,190 + 30.6 %

- net interest + related income 294 397 + 34.8 %- net commissions 617 793 + 28.6 %- insurance 0 0 n.s.

Coperating expense (449) (732) + 63.2 %Operating income before allowances 462 458 - 1.0 %Write-downs and allowances for loan losses and off-balance sheet items (4) (78) n.s.Income from companies accountedfor by the equity method 0 0 n.s.Corporate income tax (143) (124) - 13.3 %Net income before minority interests 316 256 - 18.9 %Minority interests 8 3 - 60.9 %Net income 308 253 - 17.9 %

Operating efficiency ratio % 49.2 61.5

Statement of income - Investment Management Service EUR million

nd Discernment(1) The additions to the scope of consolidation of the business line come from Kempen&Co and Ely Fund Managers (second half of 2001), Financière Opale

Group, Dexia P-H Bank Denmark, Dexia Nordic Private Bank and Artesia BC (12 months) and Labouchere (1st half).(2) The main exceptional items concerned: EUR 40 million deferred acquisition costs (pre tax) at Labouchere treated as an exceptional charge in 2000; loss

on sale of holdings (-EUR 38 million); restructuring costs at Dexia BIL London, Dexiam (-EUR 2.8 million) in 2001.

Perfor

Dexia’s regular growth in income and the quality of its high value added

products and services define the Group’s performance. Earnings per share have

risen an average of 10% per year over the last 13 years. Day in and day out,

mance

64/65

Dexia’s 25,800 employees in 25 countries enable the Group’s increasingly

demanding client base to benefit from their expertise and creativity.

Dexia is a recognized player in the international

capital markets thanks to its expertise in money

market operations, which is profitable both for

the Group and its customers.

Mastery and creativityCapital Markets and Treasury Activities


66/67

Under the heading “Capital Markets and Treasury Activities”,

Dexia conducts a number of activities either relating to

the central treasury functions of the Group and/or giving

the necessary support to the first three business lines so as to

supply the most efficient services to their respective clienteles.

The aims of this business line are:

… to secure the long and short-term funding of the Group,

and to manage its liquidity;

… to provide financial expertise and added-value products

and services to the Group’s first three business lines;

… to be instrumental in the Group’s assets and liabilities

management process;

… to contribute to the net income of the Group as a profit

center.

These functions are conducted in accordance with the Group’s

risk management policy – maintaining a low risk profile,

and ensuring that the revenue streams provide stable cash flow.

There are seven segments of activity, each with a specific mission:

… Long-term funding;

… Credit spread portfolio;

… Money market;

… Fixed income;

… Financial engineering and derivatives;

… Foreign exchange;

… Proprietary management.

In 2001, some organizational changes occurred within

the business line:

As of July 1, the ABS related credit enhancement activities

of FSA, previously reported as part of “Capital Markets and

Treasury Activities”, became part of the “Public/Project Finance

and Credit Enhancement” business line. Following this change,

all of FSA’s activities are now reported under the same

management line, and are no longer split into two.

The equity brokerage activities which were one of

the sub-segments of the business line prior to the acquisitions

of Financière Opale Group, Kempen&Co and Artesia BC,

are now under the management and the scope of the “Investment

Management Services” business.

The capital markets activities of Artesia BC have been merged

with those of Dexia Bank. A business of proprietary market

strategies, which existed within Artesia BC, has been maintained,

albeit with much reduced limits. It constitutes a new segment

of activity.

Overall, 2001 was a very good year for the Group in these

activities despite volatile and difficult market conditions.

It generated a total revenue stream of EUR 636 million, despite

the exposure to market risks being kept at a very low level

(Average VaR of EUR 28 million including Artesia BC activities –

see Risk Management section). This reflects the very nature

of the business handled here. The division is intensively

associated to the business sourced from the Group’s customers,

and from the management of the Dexia balance sheet;

it is scarcely involved in pure proprietary trading.

Long-term fundingThis activity is the only one within the business line which

has no set profit objectives. Its sole objective is to fund the long-

term needs of the Group, at the best possible conditions.

In 2001, it was successful in this, in a difficult market

environment characterized by widening credit spreads.

This goal was achieved in the first place through Dexia Municipal

Agency (DMA) in particular by issuing AAA-rated bonds

(Pfandbriefe or Obligations foncières) and further completed by a

number of “tailor-made issues”.

The volume of the new issues in 2001 reached EUR 23.8 billion

with an average life of slightly above 6 years.

Dexia Municipal Agency is the largest issuer within the Group

and has become one of the leading European issuers

of collateralized bonds. DMA’s jumbo issues cover most

of maturity curve from 3 to 10 years.

>

M a s t e r y a n d

Credit spread portfolioThis profit center represents about one half of the earnings

stream of the whole business line and its contribution

to the operating profit has been very stable over the years.

The integration of Artesia BC has substantially increased the size

of this portfolio but also its average quality. The Group is now

looking at downsizing and streamlining, in order to reduce

the use of capital, and to optimize the liquidity and the risk

profile of the portfolio.

The operating result of this activity was very good in 2001

notwithstanding the fact that it was materially impaired by

the fraud detected in the early part of 2001. The restructuring

and coverage of the corresponding portfolio Credit Linked Notes

(CLN) resulted in substantial provisions and costs.

The average quality of this EUR 53 billion portfolio (excluding

CLN) shows an average rating of A and an average life

of 4.5 years.

Money marketAll the major entities of the Group have a money market desk

whose role is to monitor liquidity and to ensure short-term

funding. These divisions are coordinated through daily reports

(including the calculation of a daily VaR), weekly conference calls

and monthly steering committees. Artesia BC has joined

this coordinated organization. It is now taking part in the effort

to rationalize access to the markets and the intra-group flows

with the objective to optimize the Group’s cost of funding

(through, among other things, an intra-group money market).

The desk is active in all instruments (commercial paper

programs, CDs, interbank deposits, repos…) and operates on

all major currencies, the main ones being the EUR, USD and

GBP.

This activity realized very good results in 2001. The money

market teams have successfully handled the liquidity crisis

that occurred in the US because of the US Banking markets’

disruption in the aftermath of the September 11 events.

Fixed incomeThis activity line was extremely strong in 2001 due mainly to

the demand from retail customers who favored fixed-income

instruments, in the context of a difficult stock market and owing

to the announced harmonization of taxes on euro-bonds at

the European level.

The origination and syndication’s teams lead-managed 25 issues

(17 of them being Dexia Group’s issues) for a total par amount

of EUR 2.5 billion.

Dexia is one of the leading players in the Belgian Government

bonds market.

Financial engineering and derivativesThis activity was also very successful in 2001. Its performance

is mainly linked to the revenues on structured products and

to synergies with FSA in the field of ABS transactions. The high

level of cooperation with FSA allowed intermediation on Credit

Default Swaps, which generates revenues without impairing

the risk profile of the Group.

Structured products are developed for customers and for retail

distribution products that are marketed through the retail

networks and through Dexia Asset Management.

In the field of option plans, the Group acquired three mandates

from Belgian corporate customers to set up employee

shareholding schemes or stock option plans.

Foreign exchangeThe Group has become a significant player in this market thanks

to a regular flow of orders from institutional customers and

from the fund administration activities of Dexia Banque

Internationale à Luxembourg.

Because of its strong involvement in this market, Dexia has been

invited by the European Central Bank to become an active

member of the Forex Working Committee.

The contribution of this business was very good in 2001, despite

the fact that a sizeable portion of the revenues generated

by intra-group flows (fund administration, asset management,

private banking…), is credited to the business line which

originates the transaction.

>

>

>

Amounts issued

Dexia Municipal Agency 9.0Dexia Crédit Local 3.3Dexia Bank Belgium(1) 2.5Dexia BIL 0.4Dexia Crediop 2.5Dexia Hypothekenbank Berlin 6.1

Total 23.8

New issues in 2001 (EUR billion)

(1) Artesia BC included.

> >

c r e a t i v i t y


68/69

Proprietary managementThis activity, which was brought to the Dexia Group through

the acquisition of Artesia BC, consists of building market strategies

taking advantage of arbitrage opportunities both in equity and

interest rate environments. The time horizon is short to medium

term and results are recognized in a most conservative way.

In view of Dexia’s risk policy, the VaR limits, allocated to this

activity have been lowered (see Risk Management section

for details). Nonetheless, this activity contributed positively to

the business line’s results in 2001.

Financial analysis

The net income, at EUR 295 million, has more than doubled over

the year 2000 (+114.5%). This is the result of:

… a strong organic growth of the different activities, explained

partly by the poor results that were recorded in 2000 (notably

in the credit spread portfolio and the money market

activities);

… the changes that occurred in the scope of consolidation,

principally the inclusion of the market activities of Artesia BC.

Revenues have more than doubled in 2001, amounting

to EUR 636 million. Beside the effect of the changes in the scope

of consolidation (a EUR 220 million impact), and of

the exceptional items (a -EUR 10 million contribution),

the organic growth amounted to EUR 131 million, an increase of

40.4% over the underlying revenues of 2000. This very strong

rise is due to both the good performances of certain business

units in 2001 (fixed income, money market, credit spread

portfolio), and to the relatively weak performance, in 2000, of

the main contributors to this activity line (credit spread portfolio

and money market). In 2001 those two units contributed jointly

to almost 60% of the business line’s total revenues and

experienced growth of 88% and 66% respectively in

their underlying revenues.

On the costs side, the global increase was +56.2%, total costs

in 2001 amounting to EUR 184 million. Without the impact

of the changes in the consolidation (which amounted to

EUR 156 million) and exceptional items of +EUR 8 million,

the organic costs have increased by EUR 9 million or 8.3%.

This lower growth of the costs compared to the revenues, both

global and underlying, led to a strong rise in the gross operating

income. It now stands at EUR 452 million (a total 155.6%

increase). Without any effect of consolidation or exceptional

items, the increase was a very healthy +56.7%.

The cost/income ratio of the business line now stands at 29.0% in

total (as compared to 40.0% over the year 2000).

On an underlying basis, the cost/income ratio stands at 26.0%,

compared to 34.0% in 2000.

Despite the increase in the provision level (+EUR 22 million over

the year), mainly due to the Enron’s bankruptcy, the underlying

net income before minority interests of the activity jumped to

EUR 221 million, a strong 36.3% increase over the previous year.

Overall, the business line has brought its return on economic

equity to 23.7%, above the Group’s objective, and a strong

improvement over the previous year’s level (16.9%).

)

>

2000 2001 ChangeNet banking income 295 636 + 115.8 %

- net interest + related income 308 628 + 103.6 %- net commissions and other income (14) 8 n.s.- insurance 0 0 n.s.

Operating expense (118) (184) + 56.2 %Gross operating income 177 452 + 155.6 %Write-downs and allowances for loan lossesand off-balance sheet items 1 (21) n.s.Earnings from equity-accountedcompanies 0 0 n.s.Corporate income tax (39) (135) + 246.6 %Net income before minority interests 139 295 + 112.1 %Minority interests 2 1 - 60.6 %Net income 137 295 + 114.5 %

Cost/Income ratio 40.0 29.0

Statement of income - Capital Markets (EUR million)

Anticipation and controlThe year’s major event was the acquisition of Artesia Banking

Corporation. Special attention was paid to controlling risks

in the merger process. Two major issues were carefully

addressed:

… in assessing Artesia BC’s impact on Dexia’s risk profile, it was

necessary to assess the type and level of risks (loans, ALM,

capital markets) of Artesia BC. Dexia’s Management Board

then adjusted the risk limits and policies applying to Artesia

BC’s activities in order to keep Dexia’s low risk profile;

… in terms of organization and methods of the control

framework, Artesia BC’s merger required substantial

consolidation of data and computer system adjustments.

This process concerned mainly Dexia Bank and is not

completely finished. In certain cases, in particular for

the Capital Markets and Treasury business line, it was also

necessary to adapt risk guidelines by rewriting rules and

procedures and overhauling the Market Committees.

The other major project pursued in 2001 consisted in tightening

liquidity risk control.

This section on risk management consists of five parts: one

for each type of risk (credits, markets, ALM including liquidity,

insurance, operational) plus a section devoted to Economic

Equity and a summary of the proposed new Basel capital accord.

Credit risks

OrganizationCredit risk management within the Dexia Group is organized

as follows.

The Group Risk Management (GRM) oversees Dexia’s Risk

Policy under the guidance of Dexia’s Management Board or

specialized risk committees. It sets Group guidelines on limits

and delegations, it sets and manages the risk surveillance

function and the decision processes and it implements group-

wide risk assessment methods for each of the bank’s activities

and operational entities (Dexia Crédit Local, Dexia Bank

Belgium, Dexia Banque Internationale à Luxembourg).

Three specialized risk committees have been set up at

the Group’s level in the field of credit risk management:

… the Credit Risk Policy Committee defines the Group’s risk

profile and the risk measurement rule;

… the Limits Committee sets the limits for each type of

counterpart and/or sector and their allocation between

the entities;

… the Dexia Credit Committee rules on questions that are

beyond the scope of the delegations granted to the entities.

As far as the ’Capital Markets and Treasury Activities’ business line is

concerned, a delegation is also given to a specific committee

to oversee the Credit Spread Portfolio.

The major projects in 2001In 2001, one of Dexia’s major risk management projects was

the merger of Artesia BC with the rest of the Dexia Group.

The financial statements were consolidated in July 2001 with

retroactive effect to January 1. Consolidation had limited impact

on total exposure (16%) and on the breakdown in terms of

geographic region and business sector. Total exposure in Belgium

increased while there was a decrease in exposure to the local

public sector.

Consolidation was also an opportunity for putting into place

new risk management tools by drawing on Artesia BC’s advanced

methods, particularly in the area of corporate finance.

The risk guidelines already applied at Dexia were also adjusted

to adapt to the size of the new combined Dexia Bank-Artesia BC

entity while maintaining Dexia’s low risk profile.

In 2001, GRM also formalized the delegation given to FSA

by laying down new guidelines defining:

… the types of transactions that FSA is authorized to carry out

and their maximum amounts;

… procedures ensuring strict control of the Group’s consolidated

exposures including FSA’s credit exposures.

Risk management

)

>

>

A n t i c i p a t i o n


70/71

Industry analyses In 2001, GRM conducted thematic reviews of specific industries

such as the telecommunications and aeronautics industries

which resulted in the implementation of specific limits and

commitments policies reflecting the Group’s conservative risk

policy.

After a review of the Group global exposures to the corporate

sector, the Group narrowed its target customer segments,

focusing exclusively on companies involved in project finance

and on companies having a strong presence in Belgium

or Luxembourg.

Dexia’s consolidated exposure as of December 31, 2001

Exposure by category of counterpartsThe Group’s total exposure rose 18% to EUR 610 billion

compared with December 31, 2000.

Loans to the local public sector stood at approximately

EUR 260 billion, making them the bulk of total loans (42.2%)

although there was a slight decrease over the previous year in

relative terms. Dexia’s exposure to central governments was

also significant. At EUR 51 billion, it accounted for 8.4% of

total exposure.

Dexia’s exposure to ABS rose to 23% of assets from 17%

the previous year owing to the increase in FSA’s business.

These exposures have excellent quality with nearly 50% of

the Group’s ABS exposure being rated AAA (before any

enhancement by Dexia or FSA).

Exposure by geographical region As of December 31, 2001, the Group’s exposure is concentrated

mostly in Western Europe (52%) and North America (43%).

Belgium (17%) and France (13%) are the two biggest country

exposures within Western Europe.

Only 0.7% of total exposure is in Eastern Europe, Southeast Asia

and South and Central America i.e. a negligible percentage and

even a slight decrease compared to the previous year.

Total exposure in emerging countries i.e., classified as “non-

investment grade” by the rating agencies stood at

EUR 275 million. Exposures in the riskiest Latin American

countries are tightly contained. As a result, exposure subject

to provisions for country risk in Argentina amounted to

EUR 40 million, corresponding mostly to loans or bonds

granted to local governments. Fifty percent of these have

already been written down, even though most of these loans

and bonds are still performing.

The proposed new Basel capitalaccord

The new capital accord proposed by the Basel committee

is intended to make comprehensive changes to the way credit

institutions are controlled by their regulators.

The reform comprises three major components called “pillars”.

Pillar 1 redefines minimal requirements for regulatory capital

that better reflects banking risks and their economic reality.

Credit risks will be better assessed with different capital

requirements depending on the quality of the counterparts.

In addition the new rules will impose capital requirements for

operational risks. A general objective is to make the concepts of

economic capital converge with regulatory capital. Pillar 2

emphasizes risk control and strengthens prudential monitoring

by national regulators. Pillar 3 defines market discipline and

new rules for financial communication and disclosure.

Credit risksThe new Basel capital accord proposes a gradual approach with

three options for calculating capital requirements for credit risks.

For credit portfolios of average and high quality, capital

requirements should be more favorable for banks being more

advanced in their risk management techniques.

This will obviously encourage banks to adopt better practices.

A standardized approach will define the requirements for

regulatory capital in relation to the external rating of

the counterparts. Two other approaches are based on banks’ own

internal credit rating systems to determine the regulatory capital

)

>

>

>

42.3%

1.4%

6.0%8.4%

4.4%

23.4%

0.7%

12.6%Other

Local publicsector

Monoline

CorporateCentralgovernments

PPEI (Individuals,professionals,self-employed,SME)

ABS/MBS

Project finance

FinancialInstitutions

0.8%

42.8%

0.6%

9.1%1.3%

5.5%

5.6%

12.6%

3.6%Central and LatinAmerica

United Statesand Canada

Rest of Europe

0.2%EasternEurope Other EU

countries Luxembourg

Italy

Germany

17.4%Belgium

France

Other0.2%

Southeast Asia0.3%

Japan0.8%

a n d c o n t r o l

Breakdown of the Dexia Group’sexposure category of counterparts

(as of Dec. 31, 2001)

Breakdown of Dexia exposureby geographical region (as of Dec. 31, 2001)

requirements, subject to an overall validation and supervision

by the regulators; The second of these approaches, the “advanced”

one, leaves more to the bank’s own estimates but at the price

of greater requirements. The internal rating used in

this advanced approach is called bi-dimensional in that it aims

to measure both the borrower’s default risk and the specific risk

of the transaction at the same time.

The effects of the proposed reform on capital requirements

for credit risks vary considerably from one bank to another

depending on its risk profile. When compared to the current

situation, high quality risks get a clear benefit whilst more

mediocre risks should be covered by significantly higher capital.

The Dexia Group’s healthy risk profile, notably thanks to

its strong presence in the local public sector, should enable it

to benefit over time from a substantial reduction of its regulatory

capital requirement.

Preparing for this reform will take a natural part in Dexia’s

permanent effort to improve and enhance its risk management

tools. It is indeed expected that the Group will draw important

synergies from this effort with the work already being undertaken

to achieve internal objectives in upgrading economic capital allo-

cation and in implementing “RAROC” type approaches (pricing

of individual transactions adjusted to account for the risk).

Operational risksOperational risks are defined as “risks of losses resulting from

the inadequacy or the lack of internal procedures, humans and

systems or external events”. The regulatory capital requirements

for equity in respect of operational risk will represent

approximately 12% of total requirements.

Three approaches will be proposed: the “basic” approach, the

“standard” approach and the “sophisticated” approach. The choice

can be differentiated depending on the Group’s business lines

(the Group may choose the more sophisticated approaches

for business lines where traditionally the operational risk is

strongest, market activities or asset management for example).

Banks will, in any case, have to set up an efficient organization

to manage operational risks, for instance by collecting

operational risk events and losses.

Diagnosis carried out and action planlaunched Being ready for an optimal implementation of the new Basel

capital accord is a strategic priority for Dexia. In 2001, as soon as

the proposed reform was known with a certain degree of

precision, a preparatory project was carried out throughout

the Group with the support of a team of specialized external

consultants. It included a diagnosis on the necessary preparation

for the Group and the drawing up of an action plan.

As regards credit risks, all business units and the main divisions

in the Group were reviewed within all aspects of the project:

the fundamental methodologies as well as the information

systems, going through all the procedures and internal credit

scoring systems. A detailed action plan has been drawn up to

bring all these aspects up to the high level of requirements

needed for the internal rating methods as soon as possible.

Under the supervision of a steering group set up at the highest

level of the Group, four teams corresponding to the four main

types of counterparts will bring together specialists from Dexia

Crédit Local, Dexia Bank Belgium and Dexia Banque

Internationale à Luxembourg and will work together in 2002 and

2003 on the specific implementation of the project. Dexia has

the advantage of having a strong mix of skills in its three major

businesses that will drive this project forward for the benefit of

the whole Group.

As for operational risks, the design of the new capital accord is

less advanced and still somewhat imprecise. A management unit

for operational risks was created at the Group level with sub-units

in the three principal entities (Dexia Bank Belgium, Dexia Crédit

Local, Dexia Banque Internationale à Luxembourg). Its task

working with management in some operating segments

(information systems, human resources, back-office…) is to

develop plans for operational risk management in line with

the new reforms and best practice. This risk management plan

will be regularly reviewed by the internal audit department.

Today, even if regulatory capital does not account for operational

risks, Dexia’s internal valuation and allocation of economic

equity are already taking into consideration operational risks,

as they do for all other types of risks to which Dexia is exposed.

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Market risks

Market risks are all the risks linked to the fluctuation of market

prices (interest rates, exchange rates, share prices...) that result

from the Group’s capital market activities. The market risks

generated by the other businesses are generally hedged and

residual risks are handled by the Asset and Liability Management

function (or ALM).

Dexia’s market risk exposure is mainly to European interest rates.

The risks in equities remain much smaller although they

increased in 2001 with the integration of Artesia BC. Foreign

Exchange risks are very small.

The main risk indicator within the Group is the Value at Risk

(VaR). The VaR calculated by Dexia is a measure of the potential

loss that can be experienced with a level of confidence of 99%

and for a holding period of 10 days. It can be roughly compared

to a VaR with a level of confidence of 99% and a holding period

of 1 day trough the division by 3.16. For most positions,

the “parametric” method is applied. For some optional positions,

a “historical” VaR, or a specific VaR on the “vega” (sensitivity to

market volatilities) is computed.

Besides the VaR, the risk level is also constrained by nominal

volume limits, limits on basis point interest rate sensitivity and

spread sensitivity, limits on option sensitivities (delta, gamma,

vega, theta, rho). The main decisions for the Market Risk

Management (overall risk limits, choice of the risk indicators,

organization of the reporting and of the decision processes)

are taken by Dexia’s Management Board, advised by the Group

Risk Management (GRM).

It is then the task of the GRM, in collaboration with the Risk

Management teams of the entities, to translate these decisions

into precise and detailed limits and procedures. The GRM is also

in charge of defining the calculation methods that are to be

applied within the Group for the computation of the P&L as well

as for measuring the risks.

The day-to-day operational control (computation of the risk

indicators, control of the limits...) is first carried out by the entities.

The work is coordinated by the GRM responsible for ensuring

the coherence and the quality of risk control within the Group.

The risk indicators are further consolidated by activity line in

the entity where the line is the most important and are finally

consolidated at the Group level by the GRM.

The reporting process ensures that the Group’s management

is closely involved. The main risk exposures are monitored

in a weekly committee meeting composed of the Management

Board of the entity concerned as well as the head of Capital

Markets at Group’s level (member of the Management Board)

and the GRM. The Management Board of the Group is informed

by the GRM of any change in the risk profile at least every

three months, more frequently if necessary.

Risk exposureThe integration of Artesia BC, in mid 2001, has had a noticeable

impact on the Group’s market risk exposure. Artesia BC

was indeed more involved than Dexia on market activities.

As it has been decided to maintain Dexia’s low risk exposure,

the market limits of Artesia BC were reduced in order to preserve

a stable ratio between the Group’s overall VaR limit and its capital.

From an operational point of view, Artesia BC was quickly and

efficiently integrated within the risk control framework of Dexia

and from the third quarter of the year, it was possible to compute

a VaR integrating Artesia BC at Group level. Hence, we show

below two series of VaR statistics, figures for Dexia without

Artesia BC for the first three quarters of the year and figures with

Artesia BC for the last quarter. Notice that Artesia BC has

brought in a new activity line, “Proprietary Management”,

which operates both in the interest rates and equities markets

(see section on Capital Markets and Treasury Activities).

The above figures show an increase of the risks levels with the

arrival of Artesia BC, which is not surprising. Nevertheless,

Dexia’s market risk exposure still remains low. The “average VaR

to Tier1 Capital ratio” for the last quarter is indeed, at 0.29%,

lower than what it was in 1999 for Dexia alone (0.36%), though

higher than in 2000 (0.18%) when the risk exposure was very

low. Finally, it should be noted that the market limits, especially

of the Proprietary Management, were further reduced at

the beginning of 2002.

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VAR 10 days – 99% First 9 months Last quarterEUR million (without Artesia BC) (with Artesia BC)

Average Maximum Average Maximum

Total 14.9 29.6 27.8 36.4

a n d c o n t r o l

In 2001, Dexia also purchased Kempen&Co in the Netherlands.

The process of integrating the positions of Kempen&Co, mostly

in equities, into Dexia’s risk control framework is still under way.

The positions are small and will have little effect on the final

results. Notice that this new acquisition led to a global

reorganization of the equity line within Dexia. In particular,

the small trading activity that existed in Kempen&Co was closed.

Asset and liability management(ALM) risks

Measurement of the balance-sheet risks is harmonized among

the Group’s various entities. A calculation of “Value at Risk”

(VaR) – with a confidence level of 99% and a holding period

of 20 days – and of the sensitivity of the Net Present Value of the

ALM positions (sensitivity of the NPV) are used. The risk

exposure is primarily to long-term interest rates in Europe and

results from the difference between the amortization profiles of

the fixed-rate assets and liabilities.

Even though the operational asset and liability management

remains decentralized in Dexia’s three major subsidiaries,

two regular monitoring processes allow Dexia’s ALM risks to be

supervised globally:

… A monthly meeting of the ALM managers where they share

their views on the evolution of the markets and the details of

the hedging policy contemplated for the coming month.

This meeting gives rise to a proposal which is formally

validated by the Dexia Management Board.

… The Dexia ALM committee, which meets quarterly and

includes the members of the Management Board, monitors

the overall consistency of the Group’s asset/liability

management. The ALM committee also decides on

the methodologies and the risk measurement guidelines,

notably on the investment of shareholders’ equity and

on internal transfer pricing mechanisms.

In addition, a monthly report on the positions is made to

the Management Board.

As part of its general policy of prudence the Dexia Group has

continued its policy of low exposure to ALM risks in 2001.

Artesia BC’s arrival has not changed this situation. Artesia BC’s

ALM risk profile was in fact lower proportionally than Dexia’s

and the monitoring methods (VaR and sensitivity of the Net

Present Value were the same. The ALM management division of

Dexia Bank and Artesia BC has been unified and it has naturally

taken its place in the existing organization.

Liquidity managementGiven the size of Dexia’s balance sheet, the balance between

its resources and their use is carefully managed. In practice,

attention is paid to two main concerns:

… the adequacy of expected new lending (in maturity and

amount) with the available resources;

… ensuring the Group’s liquidity needs, even in troubled times.

The first question is addressed in the annual planning process.

Each year, the forecasts for new lending are compared with

the funding capacity. The purpose is to preserve an acceptable

liquidity gap profile for the Group (i.e. the evolution over

the years of the cash shortages/surplusses resulting from

the difference between the repayments dates of the assets and

of the liabilities). Besides, the Group has decided to improve

its analytical accounting process, in order to reflect more

accurately the funding cost of the transactions originated

by the business lines, whether they require funding or bring

funding. The purpose of this sort of “internal market” for

liquidity is to provide the right incentive to the business lines to

achieve a natural match between lending and funding capacity.

The second question is addressed by way of various scenarios

representing highly-stressed situations. These scenarios are then

translated into a set of limits and ratios. They are designed so

that Dexia can withstand for several months, thanks to

its liquidity reserve, a total shortage of funding and stress on

deposits while maintaining its lending activity. The liquidity

position is monitored and controlled from one day up to several

months. Hence, great care is given to the forecast of the expected

liquidity needs in the main currencies as well as to the estimate

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of the liquidity reserve. Special attention is also paid to

off-balance sheet liquidity commitments of the Group.

Given their importance, all the main issues regarding

the liquidity of the Group are directly controlled by the Group’s

ALM committee which includes all the members of

the Management Board.

Insurance risks (excluding creditinsurance of FSA)

The main risks to which the insurance businesses are exposed

(DVV Insurance and Dexia Insurance) are risks related to

their investment portfolio and to technical risks such as correct

pricing and adequate technical provisions.

The Dexia Group’s insurance companies have put in place

a certain number of rules and procedures to comply

with regulations and internal management goals.

Risks related to the investment portfolioDVV Insurance’s investment portfolio is managed by DVV’s

Finance Division, and audited by its middle office which is

independent and part of DVV’s Risk Management Department.

Dexia Insurance’s investment portfolio is managed by Dexia

Asset Management under a discretionary asset management

mandate.

The portfolio’s investment policies in terms of credit risk are very

conservative. Only investments with a rating higher than BBB are

authorized. Only 25% of the portfolio’s assets may have ratings

of A or lower. Currently, the portfolio’s average rating is AA-.

Other rules are in place to ensure that the portfolio is diversified.

Market risks such as interest rate risk are closely tracked.

Technical risksThe acceptance and rate policy is set and updated by

continuously tracking the underwriting results of the insurance

divisions and systematically monitoring competitor’s rates.

An efficient acceptance and rates system has been put in place for

ordinary risks on the retail market (auto insurance, fire

insurance, etc.). There are specific delegation rules and certain

files must be sent to the head office for acceptance. A team of

managers handles the acceptance process for non-standardized

risks.

The insurance businesses also use reinsurance in order to curtail

certain risks and to improve solvency ratios.

Claims management A quality claims handling system has been implemented to raise

sales staff ’s awareness and encourage a professional and ethically

correct approach to processing claims.

Level of technical reservesThe rules for calculating technical reserves are very conservative.

The adequacy of these reserves is checked systematically.

If the amount is deemed inadequate, the businesses may decide

to allocate additional provisions and/or change the rates and risk

acceptance policies.

Economic equity

The Group implemented a risk-based equity allocation system

at the end of June 1998. The aim is to provide each business line

with the capital required to cover its maximum potential losses

under a worst case scenario and thus to measure the economic

profitability. The economic equity allocated to the Group’s

business lines covers all types of risks (credit risk, market risk,

operational risk, business risk…).

During the year 2001, economic equity was adjusted to take

account of changes in Dexia’s businesses, the expansion of

the Group and the ongoing drive to control risks.

As of the end of December 2001, total economic equity amounted

to EUR 7.93 billion (EUR 6.96 billion as of the end of the year

2000), before the “portfolio effect”. After diversification between

the Group’s business lines, this figure was EUR 6.65 billion

(EUR 5.98 billion as of the end of the year 2000). This difference

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a n d c o n t r o l

of EUR 1.28 billion (EUR 0.98 billion as of the end of 2000)

corresponds to the portfolio effect due to the presence of different

business lines within the Dexia Group which are subject to

partially independent risks. This portfolio effect is estimated

through a very conservative “top-down” approach.

The amounts allocated by business lines at year-end 2001 are

the following:

… Public/Project Finance and Credit Enhancement:

EUR 3.52 billion (EUR 3.34 billion as of the end of 2000). This

increase is a result of the integration of Artesia BC’s corporate

lending business. FSA’s credit enhancement activities (municipal

and asset-backed securities) represent EUR 1.43 billion.

… Retail Financial Services: EUR 1.73 billion (EUR 1.35 billion

as of the end of 2000). This increase is explained by

the integration of Artesia BC’s retail (BACOB Bank) and

insurance (DVV Insurance) businesses.

… Investment Management Services: EUR 0.59 billion

(EUR 0.60 billion as of the end of 2000).

… Capital Markets and Treasury Activities: EUR 1.33 billion

(EUR 0.99 billion as of the end of 2000). This increase is due

to the integration of Artesia BC’s capital market activities.

The new limits of Dexia Bank were reduced in the process of

integrating Artesia BC and Dexia Bank.

… Equity not allocated to the business lines: EUR 0.76 billion

(EUR 0.68 billion as of the end of 2000).

Economic equity takes into account all the risks faced by

the Group under catastrophic scenarios. The difference between

this amount and the shareholders’ equity is thus an indication of

the equity funds available. The difference represents 20% of

the shareholders’ equity as of the end of 2001 (8% as of the end

of 2000). It should be noted that the general banking risks

reserve is still an additional reserve fund.

Capital adequacy and risk-weighted assets

Capital adequacyThe Group’s Tier 1 capital and total regulatory capital increased

in 2001, by 40% and 64% respectively, owing mainly

to the inclusion of Artesia BC into the Dexia Group and,

to a lesser extent, thanks to retained earnings.

The equity and capital adequacy ratios remain high and

are slightly ahead of the Group’s goals: 9.3% for the Tier 1

equity ratio and 11.5% for the capital adequacy ratio.

Risk-weighted assetsThe Dexia Group’s total risk-weighted assets remain modest

because a sizable portion of the assets are low or zero-weighted

assets. As of December 31, 2001, they amounted to EUR 103.6

billion, a rise of 40% over the end of 2000.

The main reason for the sharp rise of the 100%-weighted

counterparts was the inclusion of Artesia BC into the Dexia

Group in 2001 which brought EUR 27.3 billion in risk-weighted

assets.

Asset quality

The rise in provisions as from June 2001 is due mainly on

the one hand to the merging of Artesia BC into the Dexia Group

and on the other hand to the deterioration of economic and

business conditions. Despite this increase, asset quality remains

high and the coverage ratio of doubtful and non-performing

loans amounts to 58.3%, a conservative level though decreasing

compared to the previous year. At 0.53%, the bad debt ratio

is still very small as a percentage of total outstanding loans.

At the beginning of 2002 a major loan transaction was settled,

which will have a positive impact on the level of doubtful and

non-performing loans as from March 31, 2002. Excluding this

transaction, the coverage ratio would amount to 62%.

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Ratings

The high rating levels reflect Dexia Group’s solidity. In june 2001,

Moody’s ratings of Dexia Bank Belgium and Dexia Crédit Local

were changed to Aa2 from Aa1 following the acquisition of

Artesia BC. During 2001 last quarter, Fitch confirmed its AA+

rating.

The rating of FSA and Dexia Municipal Agency are the best

financial ratings that could be given to a counterpart

(Aaa/AAA/AAA by Moody’s, Standard & Poor’s and Fitch).

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a n d c o n t r o l

Consolidated balance sheet (1) (in EUR million)

Consolidated statement of income(1) (in EUR million)

F i n a n c i a l p e

Financial performance

1998 1999 2000 2001 ChangeBalance-sheet total 198,996 245,096 257,847 351,355 + 36.3%

Liabilities

Shareholders’ equity 4,749 5,499 6,537 8,337 + 27.5%

Customer deposits 39,463 46,924 52,356 84,007 + 60.5%

Debt securities 104,360 132,266 134,446 140,861 + 4.8%

Assets

Customer loans 106,032 128,531 134,370 156,379 + 16.4%

Bonds, equities and other securities 45,440 63,667 70,684 116,780 + 65.2%

1998 1999 2000 2001 ChangeNet banking income 2,593 3,143 3,735 5,665 + 51.7%

Operating expense (1,455) (1,694) (2,057) (3,371) + 63.9%

Gross operating income before allowances 1,138 1,449 1,678 2,294 + 36.7%

Write-downs and allowances for loan lossesand off-balance sheet items (195) (134) (233) (283) + 21.5%

Corporate income tax (334) (524) (411) (534) + 30.0%

Income from companies accountedfor by the equity method 54 23 29 48 + 64.4%

Income before minority interests 663 814 1,063 1,525 + 43.5%

Minority interests 58 53 62 99 + 59.6%

Net income 305 761 1,001 1,426 + 42.5%

(1) Pro forma for 1998, 1999 and 2000

(1) Pro forma for 1998, 1999 and 2000


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Changes in the scopeof consolidation

The Dexia Group’s consolidated financial statements as of

December 31, 2001 include more than 100 companies.

The scope of consolidation changed in 2000 mainly due to

the acquisitions of FSA and Labouchere, both fully consolidated

as of July 1, 2000. The scope of consolidation for 2001 changed

primarily following the:

… acquisition of 100% of Artesia Banking Corporation, fully

consolidated as of January 1, 2001;

… acquisition of 100% of the capital of the Financière Opale

Group in France, fully consolidated as of January 1, 2001;

… deconsolidation of Banco de Crédito Local in Spain, as of

January 1, 2001;

… full consolidation of Dexia Sabadell Banco Local in Spain,

as of the date of creation in the first half of 2001(1);

… acquisition of 100% of Dexia Nordic Private Bank, fully

consolidated as of January 1, 2001;

… consolidation of Petersen-Henrichsen Holding and

its subsidiary Dexia P-H Bank in Denmark (79.71%),

as of January 1, 2001;

… full consolidation of Otzar Hashilton Hamekomi (OSM),

an Israeli bank, owned by Dexia for 45.3%, fully

consolidated as of January 1, 2001, as 60.7% of voting rights

are controlled by Dexia;

… acquisition of 100% of Kempen&Co in the Netherlands,

fully consolidated as of July 1, 2001, and merged with

Labouchere in December 2001 to form Dexia Bank

Nederland;

… acquisition of 100% of Ely Fund Managers, fully

consolidated as of July 1, 2001;

… increase of Dexia’s interest in Dexia Crediop from 60%

to 70% in December 2001;

… increase of Dexia’s interest in Kommunalkredit

Austria from 26.7% to 49%; the consolidation by

the equity method has been maintained; decrease of Dexia’s

interest in Dexia Kommunalkredit Holding from 60%

to 51%;

… decrease of Dexia’s interest in Fortior, a Spanish holding

company, from 34% to 25%;

… deconsolidation of ZeBank (20%), which was accounted for

by the equity method, as of January 1, 2002.

Changes in the methods of consolidation

Financial statements were restated for 2000 and 1999 as

depositors’ guarantee premiums and some product-linked taxes

are now deducted from the net banking income.

They were previously counted as operating expense.

Changes in the presentationof segment’s financial data

RationaleIn order to provide the market with a more useful and

understandable information, it has been decided to change

the conventions leading to the presentation of the financial data

of the business lines. This change has been made effective as of

January 1, 2002 and applied to the financial statements of 2000

and 2001.

Nature of the changesCentral costsPast conventions were set on the idea that almost all of

the costs incurred centrally, and not identified as having

a direct link with a particular business line (“central costs”),

had to be eventually shared among the 4 business lines.

In order to do so, an arbitrary allocation key was applied,

made of the 2 following ingredients:

… 50% on the “central costs” base were allocated in the same

proportions as the economic equity allocated to the business

line;

… the balance, i.e. 50%, was allocated in the same proportions as

the net earnings of the business lines.

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(1) 60% in july 2001 as 40% stake was taken by Sabadell


This convention has proven to be inadequate and even

misleading, for three reasons:

… The amount of the “central costs” which were re-allocated

under this convention were fairly substantial (approximately

15% of the total cost base of the Group), and this had

therefore a material impact on the business line’s profitability.

The Group’s Management Board and the management of

the business lines regard this convention as ill-suited,

as it is more preferable to let the operating management track

down the costs directly related to their business and act on

them, rather than having them pay their share of a large lump

sum of central costs over which they have no direct control.

… The ability of each individual business line to directly manage

its consumption of economic capital differs greatly: Management

of Public Finance, Capital Markets and Treasury for instance

have a very direct action on the level of capital employed;

this is less the case in Retail Financial Services, and almost

irrelevant in Investment Management Services which uses

a very limited amount of economic capital. Consequently,

a voluntary reduction of capital employed in the Capital

Markets and Treasury line for instance, would immediately

raise the share of the central costs borne by the other lines,

and adversely affect their profitability.

… Considering that the “Central Assets/Unallocated” segment

was left with some economic capital, it still bore its share

of the central costs, which was self defeating considering

the ruling principle of sharing all the central costs among

the business units.

For these reasons, the new conventions which will be applied

from now on consist in identifying, as closely as possible,

the various items making up the “central costs”, and charge them

to the business lines accordingly. As for the balance, it will be

kept in the “Central Assets/Unallocated” segment and will not be

re-allocated. Following the review made in 2001, the amount of

cost that cannot be allocated to any business line should not

represent more than around 7% of the whole Group’s cost base.

RevenuesThe management, through the central ALM Committee, of

the Belgian Government bonds portfolio (OLOs), generates

revenues (capital gains) which have up to now been both

sizeable and uneven, year after year, and throughout the year.

In the past conventions, these revenues were allocated to

the business lines, there again according to quite arbitrary

allocation keys.

This convention proved to be inadequate, for two reasons:

… given the nature of the transactions creating those revenues,

and their irregular timing, this caused volatility in the revenue

streams of the business lines, and had constantly to be isolated

– although they were not reported as “exceptional items” –

so as to have a correct reading of the underlying trends;

… as the crystallization of these capital gains was not at

the discretion of the individual business line’s management

but rather a decision of the Group’s Asset and Liability

Management Committee, it was not appropriate to credit

the business lines when in fact the revenues accrue

to the entire Group across all of its business lines.

Consequently, under the new convention, the capital gains

on the OLOs will remain in the “Central Assets/Unallocated”

segment, and be treated as non-recurring items.

Implementation of the changesThese new conventions are being introduced for the first time

in this publication for the presentation of the 2001 results by

business line. In order to allow a full comparison year on year,

the 2000 full year results of the businesses were restated

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Consolidated balance sheet

The total of the consolidated balance sheet as of December 31,

2001 amounted to EUR 351.4 billion. Compared to Decem-

ber 31, 2000, when a total of EUR 257.9 billion was posted,

the rate of growth was 36.3%, due to the growth in business

and the changes in the scope of consolidation (mainly Artesia

BC but also Kempen&Co).

The balance sheet is shown in the new bancassurance scheme and

the details from previous years have been restated pro forma.

DebtsCustomer deposits and debt securities (savings bonds, certificates

and bonds) amounted to EUR 224.9 billion in 2001, i.e. an increase

of 20.4% since the end of 2000. Their relative part in the total

of the balance sheet decreased: they represented 64.0% against

72.5% at the end of 2000.

An increase of 60.5% posted for customer deposits brings

this figure to EUR 84.0 billion: savings deposit accounts

increased by 79.7%, sight deposits and time deposits increased

by 22.3% and 82.5% respectively. The rises are mainly explained

by the integration of Artesia BC in the financial statements.

Savings deposit accounts in the total deposits grew from 19.8%

at the end of 2000 to 22.2% at the end of 2001.

Debt securities increased to EUR 140.9 billion, i.e. an increase

of 4.8%.

Customer loansThe growth of the customer loans was 16.4% compared to

the end of 2000, standing now at EUR 156.4 billion.

SecuritiesThe total amount of investments in government securities, bonds

and other fixed-income securities as well as variable-income

securities amounted to EUR 124.4 billion, i.e. an increase of

62.3% compared to December 31, 2000.

Bonds and other fixed-income securities increased by 65.1%,

reaching EUR 110.4 billion, as the rise in the banking activity

and the insurance activity was 62.1% and 129.1% respectively,

mainly explained by the impact of Artesia BC.

EquityShareholders’ equity in the Dexia Group (capital, additional

paid-in capital, reserves, profit for the year before allocation,

goodwill deducted and GBRR not included) amounted to

EUR 8,337 million as of December 31, 2001 against

EUR 6,537 million at the end of 2000, i.e. a growth of 27.5%.

This development is mainly explained by the increase in capital

carried out for an amount of EUR 3.3 billion for the acquisition

of Artesia BC and by the deduction of goodwill for the last

acquisitions, mainly Artesia BC and Kempen&Co for respectively

EUR 1.7 billion and EUR 896 million.

Consolidated statement of income

Year 2001 net income before minority interests rose 43.5%

to EUR 1,525 million and net income increased by 42.5%

to EUR 1,426 million, compared to 2000. At constant

scope of consolidation the increase in net income would

have been +5.1%.

RevenuesNet banking income amounted to EUR 5,665 million against

EUR 3,735 million in 2000, representing an increase of 51.7%, or

EUR 1,930 million. Excluding the effects of changes in the scope

of consolidation (a positive variance amounting to EUR 1,745

million), and exceptional items (a variance of -EUR 2 million),

the rise would have been 5.3% or EUR 187 million. This growth

stands out when seen in the general context of the pressure on

revenues in the banking industry in 2001, and it clearly reflects

the sustainability of Dexia’s revenue streams. It stems from

contrasted trends in its different components.

Net interest and related income stood at EUR 3,496 million,

an increase of EUR 941 million (+ 36.9%) arising from

the following factors:

)

>

>

>

>

>

)

… changes in the scope of consolidation account for

EUR 850 million to this change (net of funding costs);

… gains on the OLO (Belgian Government bonds) portfolio

were EUR 88 million in 2001, compared to EUR 182 million

in 2000, thus explaining a variance of -EUR 94 million

included as exceptional item;

… exceptional items stood at EUR 66 million in 2001, against

EUR 96 million in 2000, thus accounting for a decrease

of EUR 30 million in the evolution (itemized in note 1);

… the balance increased by EUR 216 million, or +9.5%.

This largely reflects the evolution of the Group’s main balance

sheet and off-balance sheet drivers, at constant scope

Net commissions and other income rose by 52.2% to EUR 1,470 mil-

lion. This occurred largely because of the changes in the scope

of consolidation (EUR 450 million), and also because of

the variations of the exceptional items (+EUR 122 million;

see note 2). Excluding those two factors, the commissions and

other income dropped by 6.4% to EUR 1,001 million. This

essentially reflects the downturn in the capital markets and its

influence on customers’ appetite for products that generate

commissions for the bank, in contrast with the previous year,

which was exceptionally good.

Technical and financial margin on insurance increased by a hefty

EUR 484 million and stood at EUR 699 million in 2001.

This was by and large due to the changes in the consolidation

scope (notably that concerning FSA and Artesia BC’s subsidiary

DVV Insurance) but without this element, the growth was

nevertheless very high at +18.4%, or EUR 40 million, reflecting

the continued strong performance of Dexia Insurance.

CostsGeneral operating expense in 2001 amounted to EUR 3,371 mil-

lion, up by EUR 1,314 million or 63.9%. This rise naturally

stems, to a very large extent, from the effect of changes in

the scope of consolidation of EUR 1,124 million. The exceptional

costs were high again in 2001 (EUR 98 million), but

EUR 10 million less than those of 2000 (see detail in note 3).

One of the main components of these exceptional costs is

a EUR 119.5 million provision for future integration costs of

Artesia BC. In addition to the burden of the exceptional costs,

Dexia also incurred integration costs on the same project in

the course of 2001, amounting to EUR 8 million.

Consequently the increase in general operating expense

without these items was 9.8%.

Staff costs amounted to EUR 1,600 million against

EUR 847 million in 2000, representing an increase of 88.9%.

The changes in the scope of consolidation explain

EUR 593 million of this increase, and the variation of

the exceptional items account for +EUR 78 million of it.

Therefore, without these factors, the underlying growth of staff

costs was 9.8%.

Network commissions, representing the commissions paid

by the Group to its networks of independent agents and

business introducers, rose by 36.5% (or +EUR 93 million)

to EUR 348 million. The increase was largely due

(+EUR 89 million) to the changes in the scope of consolidation,

and in the other direction, to a negative variation of

the exceptional items (-EUR 10 million). Without these elements,

the growth was 5.6%.

Other operating expense climbed by 61.8%, or EUR 390 million,

to EUR 1,021 million. Of this increase, EUR 332 million

stemmed from changes in the scope of consolidation, and -

EUR 1 million are explained by the variations of the exceptional

items. Without these two factors, the underlying growth was

9.6%.

Depreciation and amortization expanded by 17.1% to

EUR 356 million. The increase of EUR 52 million arose from

changes in the scope of consolidation (EUR 88 million), and

also to the variation of exceptional costs between 2000 and 2001

(-EUR 70 million). Without these two factors, the underlying

growth was 14.5%.

Deferred acquistion costs in the amount of EUR 46 million

correspond to the business of FSA.

The cost/income ratio (ratio between operating expense and net

banking income) stood at 59.5%, compared with the ratio of

55.1% for the whole year in 2000. Excluding exceptional income

and expense generated by the large number of significant


>

external growth transactions carried out during the period,

the cost/income ratios would have been 57.3% in 2001 and

54.7% in 2000 respectively.

Gross operating incomeThe gross operating income before allowances amounted to

EUR 2,294 million in 2001, up 36.7% from EUR 1,678 million

in 2000. Without the changes in scope of consolidation,

the exceptional items and the integration costs borne on

the Artesia BC project, the gross operating income would have

been roughly stable (-0.3%).

The leveling of the underlying gross operating income has

its origins in two main factors. First, the acquisitions made by

the Group have generated a very high level of activity, both

in the acquisition and in the integration stages, creating a vast

amount of effort and expense, which have added to the general

expense, in addition to the costs specifically identified as

“integration costs”. Secondly, the momentum of revenues in 2000,

particularly in the booming business of Investment Management

Services at that time, led the Group to approve a 2001 budget for

expense and capital expenditure which reflected the expectation

that the revenue trend in 2001 would be commensurate to what

it was in 2000. This assumption was contradicted by the rapid

change in the market environment of 2001, and then by

the consequences of the September 11 events. Naturally, the cost

budgets were revisited in the second half in consideration of

these evolutions, and the 4th quarter figures reflect the effects of

the actions undertaken, as there was no increase in

the underlying costs of the Group, compared to the 3rd quarter.

Write-downs and allowancesWrite-downs and allowances including the net allocation to

the general banking risks reserve and the amortization of

goodwill, rose by 21.5% to EUR 283 million in 2001. It was

EUR 233 million in 2000. Its components evolved as follows.

Write-downs and allowances for loan losses and off-balance sheet

items came to EUR 281 million in 2001, up EUR 167 million,

partly under the effect of the changes in scope of consolidation

(EUR 69 million). The main one of these was Artesia BC, whose

contribution to net charge in the 2001 P&L was EUR 63 million.

The increase is also explained by several factors impacting

the various business segments, and linked to five specific

situations:

… a provision of EUR 51 million was written on a single debtor

(a hospital in Chicago) which is in default following

the uncovering of a fraud perpetrated against the US

healthcare agencies; this risk is now almost fully covered;

… it was decided to raise the level of existing provisions to 50%

of the country risk exposure on Argentina, requiring a charge

of EUR 6 million on the 2001 financial statements;

… a provision of EUR 22 million was made to cover exposure on

Enron;


82/83

r f o r m a n c e

>

Accounting treatment of Artesia BCintegration costs

The total integration costs to be incurred from 2002onwards amount to EUR 246.8 million. Provisions havebeen set aside in the 2001 consolidated financialstatements for that amount. Those provisions areshared by the three banks which will be merged in2002: Dexia Bank Belgium (EUR 119.5 million); BACOBBank (EUR 74.3 million) and Artesia BC (EUR 53.0 mil-lion). The fiscal effect attached to these chargestotal respectively EUR 48.0 million for Dexia Bank,EUR 29.8 million for BACOB Bank, and EUR 21.3 mil-lion for Artesia BC. The accounting treatment will bedifferent in the three merging banks: at Dexia Bank,the impact is on the statement of income, whereas atArtesia BC and BACOB Bank the charges are writtenoff on the reserves, resulting on consolidation to a netincrease of goodwill of EUR 76.1 million.The impact of the EUR 246.8 million provision onthe consolidated net income in 2001 is thus a netcharge of only EUR 71.5 million. It is treated asan exceptional item.

>


… a provision of EUR 25 million was set aside against the risks

of default on the loan book of Labouchere’s share leasing

contracts;

… provisions of EUR 16 million were set against a Belgian airline

company default.

However, the Dexia Group’s level of risk remains very low

compared to the rest of the banking industry. The net charge

represents 14 basis points of the total customer loans and

off-balance sheet commitments outstanding, about one third

of the average peer group ratio.

Net gains or write-downs on long-term investments totaled

+EUR 13 million in 2001 compared with +EUR 31 million in

2000. This -EUR 18 million decrease stems from the changes in

scope of consolidation (-EUR 2 million), and for -EUR 9 million

to gains and losses on the sale of holdings, or unwinding of

business ventures (see note 4).

A write-back of the general banking risks reserve has taken place in

2001, in the amount of EUR 41 million, whereas

EUR 101 million was allocated to it in 2000. This reflects various

events incurred in 2001, particularly the charges generated

by integration and restructuration of Artesia BC.

Amortization of goodwill stood at EUR 56 million, up

EUR 7 million from the charge for 2000 (EUR 49 million).

Other itemsCorporate income tax, comprising both current and deferred

taxes, increased by EUR 123 million (or 30.0%) to

EUR 534 million. This change is due to the changes in scope

of consolidation (adding +EUR 142 million to the tax charge)

on the one hand, and to the fiscal effect of the various

exceptional items referred to above on the other hand

(+EUR 81 million; see note 5). Without these elements, the

underlying tax charge was EUR 380 million in 2001, against

EUR 480 million a year before.

Net income from companies accounted for by the equity method,

net of goodwill amortization, rose by 64.4% (or EUR 19 million)

to EUR 48 million. The increase largely stems from the changes

in scope of consolidation (EUR 30 million). The balance of the

variation is negative (-EUR 11 million), mainly as a result of the

sale of the 40% holding in Banco de Crédito Local in the early

part of 2001.

Net incomeNet income before minority interests totaled EUR 1,525 million,

up 43.5% year on year. Without the changes in the scope

of consolidation, the progression would have been +4.3%.

Minority interests came to EUR 99 million against

EUR 62 million in 2000. The variation of EUR 37 million

is largely explained by the changes in scope of consolidation

(EUR 43 million).

Net income for the period amounted to EUR 1,426 million,

representing an increase of 42.5%. Without the changes in

the scope of consolidation, the progression would have been

+5.1%.

Return on equity (ROE), representing the ratio between net

income for the period and average shareholders’ equity

(excluding the general banking risks reserve and after income

appropriation), stood at 18.7% in 2001. It was 17.7% in 2000.

Earnings per share (EPS) have progressed by 9.1%, to EUR 1.25

per share, against EUR 1.15 in 2000.

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84/85

r f o r m a n c e

Note 1: net interest and related incomeIn 2000: provision for swap cancellation followingDexint and DCL merger (-EUR 42.6 million);gains on sale of equity holding participations(+EUR 139.7 million); gains on convertible bondsDexia (+EUR 11.4 million); changes in accountingmethods (+EUR 60.2 million); impairment ofa credit-linked note portfolio (CLN) followinga fraud (-EUR 75.3 million); write-back exceptionalprovisions (+EUR 2.9 million).In 2001: unwinding of the Crediop/SP IMIdistribution agreement (-EUR 10.0 million);gains on sale of equity participations(+EUR 28 7 million); gains on convertible bondsDexia (+EUR 77.9 million); impairment CLNportfolio (-EUR 28.5 million).

Note 2: net commissions and other incomeIn 2000: Insurance CLN portfolio (-EUR 17.0 mil-lion); interests on payment of acquisitionof Labouchere (-EUR 11.8 million); provision forlitigation with EEC (-EUR 15.0 million); provisionfor the direct bank project (-EUR 20.0 million);accounting treament of Labouchere’s deferredacquisition costs (-EUR 39.8 million).In 2001: Insurance CLN portfolio (-EUR 9.6 million);write-back provision direct bank project(+EUR 10.0 million); write-back provision forlitigation EEC (+EUR 15.0 million). The reversalof the exceptional accounting treatment in 2000of Labouchere’s deferred acquisition costs(+EUR 39.8 million) is treated in 2001 inthe change of the consolidation scope.

Note 3: costsIn 2000: adjustment to BIL pension fund (-EUR 10.0 million); provision for change to theeuro (-EUR 8.4 million); commission to the networkfor Dexia capital increase (-EUR 10.6 million); costsof the capital increase (-EUR 70.3 million);legal costs CLN portfolio (-EUR 9.5 million).In 2001: write-back provision euro (+EUR 5.4 mil-lion); fees Artesia BC (-EUR 10.0 million); provisionfor future integration costs Artesia BC (-EUR 119.5 million); commission to the networkfor change to the euro (-EUR 1.4 million); write-back provision for litigation on VAT (+EUR 38.9million); restructuring costs Dexiam, BIL Londonand Dexia Crediop (-EUR 7.3 million); provision forshift to IAS and Basel 2 (-EUR 2.3 million); legalcosts CLN portfolio (-EUR 2.1 million).

Note 4: provisionsIn 2000: gain on sale of holding in MBIA (+EUR 22.3 million); gain on sale of other holdings(+EUR 6.9 million).In 2001: gain on Banco de Crédito Local (+EUR 49.0million); gain on Fortior (+EUR 3.6 million); sale ofSwiss subsidiaries of Artesia BC and Rekord (-EUR 37.6 million); sale of holding in ZeBank (-EUR 5.7 million); other gains (+EUR 11.0 million).

Note 5: taxesAll the items above are before tax. The amountof corresponding taxes, at appropriate rates,is treated as an exceptional item in the totalamount of taxation.

Main items reported as exceptional (other than OLOs) in 2000 and 2001

AMCCN.W. Juniper St. 710 – Suite 202

USA - Issaquah, WA 98027

Telephone: (1) 425 313 4600

Fax: (1) 425 313 1005

www.artesiamortgage.com

Artesia BC representative officeAustriaKärtnerstrasse 45

A-1010 Vienna

Telephone: (43) 1 512 26 12

Fax: (43) 1 512 26 13 80

Artesia Leasing & Renting and ArtesiaLeaseAvenue Livingstone 6

B-1000 Brussels

Telephone: (32) 2 285 29 29

Fax: (32) 2 285 39 99

Assureco7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 43 92 77 49

Fax: (33) 1 43 92 78 99

Astris Finance1730 K Street, NW

Suite 900

Washington, DC 20006

Telephone: (1) 202 223 94 20

AusBIL DexiaVeritas House – Level 23

207 Kent Street

Sydney NSW 2000

Australia

Telephone: (61) 2 925 90 200

Fax: (61) 2 925 90 222

www.ausbil.com.au

Bancoval20 Fernando el Santo

E-28010 Madrid

Telephone: (34) 91 360 99 00

Fax: (34) 91 360 99 95

www.bancoval.es

Banque Artesia NederlandHerengracht 539-543

NL-1017 BW Amsterdam

P.O. Box 274

NL-1000 AG Amsterdam

Telephone: (31) 20 520 49 11

Fax: (31) 20 624 75 02

www.artesia.nl

Banque Vernes Artesia 15, rue des Pyramides - BP 451

F-75026 Paris Cedex 01

Telephone: (33) 1 44 86 80 00

Fax: (33) 1 44 86 82 82

www.banque-vernes.fr

BelstarRiverside Business Park

Avenue Internationale 55 - B37

B-1070 Brussels

Telephone: (32) 2 556 01 75

Fax: (32) 2 524 01 88

BILIAMP.O. Box 1427

2-6 Church Street

St Helier, Jersey JE4 2YN

Telephone: (44) 1534 83 44 83

Fax: (44) 1534 83 44 99

CeviBisdomplein 3

B-9000 Ghent

Telephone: (32) 9 225 48 60

Fax: (32) 9 233 05 24

CigerRue de Néverlée 12

B-5020 Namur

Telephone: (32) 81 55 45 11

Fax: (32) 81 55 45 06

CoronaAvenue de la Métrologie 2

B-1130 Brussels

Telephone: (32) 2 244 22 11

Fax: (32) 2 216 15 15

www.corona.be

Where to find Dexia

Dexia

Square de Meeûs 1B-1000 BrusselsTel.: (32) 2 213 57 00Fax: (32) 2 213 57 01

In Paris7-11, quai André CitroënBP 1002F-75901 Paris Cedex 15Tel.: (33) 1 43 92 77 77Fax: (33) 1 43 92 70 00

www.dexia.com


86/87

Créatis34, rue Nicolas Leblanc BP 5911

F-59011 Lille

Telephone: (33) 3 20 40 51 32

Fax: (33) 3 20 30 16 15

Crédit associatif75, rue Saint-Lazare

F-75009 Paris

Telephone: (33) 1 42 80 42 24

Fax: (33) 1 42 81 42 98

Dexia Asset ManagementHeadquarters

Rue Royale 180

B-1000 Brussels

Telephone: (32) 2 222 52 42

Fax: (32) 2 222 91 48

Dexia Asset ManagementFukoku Seimei Building 12F

2-2-2, Uchisaiwa-cho, Chiyoda-ku

Tokyo 100-0011

Telephone: (81) 3 5251 3560

Fax: (81) 3 5251 3561

Dexia Asset Management9 Raffles Place #42-01

Republic Plaza

Singapore 048619

Telephone: (65) 62 36 24 25

Fax: (65) 65 36 96 34

Dexia Asset ManagementRoute d’Arlon 283

L-1150 Luxembourg

Telephone: (352) 25 43 43 1

Fax: (352) 25 43 43 4940

Dexia Asset ManagementWashington Plaza

40, rue Washington


Telephone (33) 1 53 93 40 00

Fax: (33) 1 45 63 31 04

www.dexia-am.com

Dexia Asset ManagementLuxembourg, Geneva Branch2, rue de Jargonnant

CH-1207 Geneva

Telephone: (41) 22 707 90 00

Fax: (41) 22 707 90 90

Dexia Auto LeaseAvenue Livingstone 6

B-1000 Brussels

Telephone: (32) 2 285 35 88

Fax: (32) 32 2 282 66 01

www.artesia-auto-lease.be

Dexia Bank BelgiumBoulevard Pachéco 44

B-1000 Brussels

Telephone: (32) 2 222 11 11

Fax: (32) 2 222 40 32

www.dexia.be

www.axionweb.be

Dexia Bank BelgiumCopenhagenBredgade 75, 2. floor

P.O.B. 9046

DK-1260 Copenhagen K

Telephone: (45) 33 74 51 00

Fax: (45) 33 91 50 02

Dexia Banque Internationaleà LuxembourgRoute d’Esch 69

L-2953 Luxembourg

Telephone: (352) 45 90 1

Fax: (352) 45 90 20 10

www.dexia-bil.com

Dexia Bank NederlandBeethovenstraat 300

PO Box 75666

NL-1070 AR Amsterdam

Telephone: (31) 20 348 50 00

Fax: (31) 20 348 55 55

www.dexiabank.nl

www.alex.nl

Dexia Bank New York Branch445 Park Avenue

New York -NY 10022

Telephone: (1) 212 705 0700

Fax: (1) 212 705 0701

Dexia Banque Privée37-39, rue d’Anjou

F-75383 Paris

Telephone: (33) 1 40 06 60 00

Fax: (33) 1 42 65 00 98

www.dexiaplus.fr

Dexia BIL Asia Singapore9 Raffles Place #42-01

Republic Plaza

Singapore 048619

Telephone: (65) 62 22 76 22

Fax: (65) 65 36 02 01

Dexia BIL Dublin BranchGeorge’s Quay House

43 Townsend Street

IRL - Dublin 2

Telephone: (353) 1 613 04 44

Fax.: (353) 1 613 04 45

Dexia BIL London BranchShackleton House

Hay’s Galleria

Battle Bridge Lane 4

London SE1 2GZ

Telephone: (44) 207 556 30 00

Fax: (44) 207 556 30 55

Dexia BIL Milan BranchProcaccini Center

38 via Messina

Torre B, Piano 5

I-20154 Milan

Telephone: (39) 2 336 232 01

Fax: (39) 2 336 232 30

Dexia BIL Singapore Branch9 Raffles Place #42-01

Republic Plaza

Singapore 048619

Telephone: (65) 62 22 76 22

Fax: (65) 65 36 02 01

Dexia CLF Banque7-11, quai André Citroën

BP 546


Telephone: (33) 1 44 37 45 02

Fax: (33) 1 44 37 45 07

www.dexia-clf.fr

Dexia CLF Lease Services7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 41 14 57 78

Fax: (33) 1 46 90 10 89

Dexia CrediopVia Venti Settembre 30

I-00187 Rome

Telephone (39) 06 47 71 29 05

Fax: (39) 06 47 71 59 59

www.dexia-crediop.it

Dexia Crédit Local7-11, quai André Citroën

BP 1002


Telephone: (33) 1 43 92 77 77

Fax: (33) 1 43 92 70 00

www.dexia-clf.fr

www.dexia-creditlocal.com

Dexia Crédit Local Dublin BranchWest Black Building

IRL - Dublin

Telephone: (353) 1 670 27 00

Fax: (353) 1 670 27 05

Dexia Crédit Local New York Agency445 Park Avenue

New York, NY 10022

Telephone: (1) 212 515 7000

Fax: (1) 212 753 5522

www.dexia-americas.com

Dexia Crédit Local PortugalEstrella Office

Rua Domingos Sequeira 27-5G

P-1350-119 Lisboa

Telephone: (351) 21 395 15 16

Fax: (351) 21 397 77 33

Dexia Crédit Local Singapore9 Raffles Place

# 43-01 Republic Plaza

Singapore 048619

Telephone: (65) 62 36 01 25

Fax: (65) 65 32 12 31

Dexia Crédits LogementHeadquarters

Boulevard Pachéco 44

B-1000 Brussels

Operations

• Chaussée de Dinant 1033

B-5100 Wépion

Telephone: (32) 81 46 82 11

Fax.: (32) 81 46 05 55

• H. Consciencestraat 6

B-8800 Roeselare

Telephone: (32) 51 23 21 11

Fax.: (32) 51 23 21 45

Dexia Editions7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 43 92 79 13

Fax: (33) 1 43 92 76 72

Dexia Epargne Pension62, rue de la Chaussée d’Antin

F-75009 Paris

Telephone: (33) 1 43 92 77 02

Fax: (33) 1 45 26 34 20

www.dexia-ep.com

Dexia FactorsAvenue Livingstone 6

B-1000 Brussels

Telephone: (32) 2 282 66 33

Fax: (32) 2 282 66 99

www.artesia-factors.be


88/89

Dexia Finance7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 43 92 75 28

Fax: (33) 1 43 92 75 35

Dexia Flobail7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 43 92 73 89

Fax: (33) 1 45 75 34 59

Dexia Fund Services BelgiumRue Royale 180

B-1000 Brussels

Telephone: (32) 2 222 5898

Fax: (32) 2 222 3425

Dexia Fund Services CaymanUgland House

P.O. Box 309

George Town

BWI Grand Cayman

Telephone: (1345) 945 85 00

Fax: (1345) 945 85 01

Dexia Fund Services DublinGeorge’s Quay House

43 Townsend Street

IRL - Dublin 2

Telephone: (353) 1 613 0400

Fax: (353) 1 613 0401

Dexia Fund Services France39, rue d’Anjou

F-75008 Paris

Telephone: (33) 1 49 35 68 01

Fax: (33) 1 49 35 68 97

Dexia Fund Services ItaliaProcaccini Center

38, via Messina

Torre B, Piano 5

I-20154 Milan

Telephone: (39) 02 3362 3203

Fax: (39) 02 3362 3230

Dexia Fund Services Singapore9 Raffles Place # 42-01

Republic Plaza

Singapore 048619

Telephone: (65) 64 35 33 36

Fax: (65) 65 36 02 19

Dexia Fund Services SwitzerlandBeethovenstrasse 48

Case Postale 970

CH-8039 Zurich

Telephone: (41) 1 286 9701

Fax: (41) 1 286 9750

Dexia Hypothekenbank BerlinCharlottenstrasse 82

D-10969 Berlin

Telephone: (49) 30 25 59 8-0

Fax: (49) 30 25 59 8-2 00

www.dexia.de

Dexia InsuranceAvenue des Arts 23

B-1000 Brussels

Telephone: (32) 2 237 15 11

Fax: (32) 2 237 16 99

Dexia investments Ireland BelgiumInternational House

Harbourmaster Place 3

IRL-IFSC Dublin 1

Telephone: (353) 1 829 1566

Fax: (353) 1 829 1577

www.artesia.ie

Dexia Lease BelgiumHeadquarters

Boulevard Pachéco 44

B-1000 Brussels

Operations

Rue de la Charité 15/7

B-1210 Brussels

Telephone: (32) 2 222 37 08

Fax: (32) 2 222 37 13

Dexia Lease France7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 43 92 75 13

Fax: (33) 1 47 75 34 59

Dexia Life & Pensions2, rue Nicolas Bové

L-1253 Luxembourg

Telephone: (352) 262 54 41

Fax: (352) 262 54 45 480

www.dexia-life.com

Dexia London55 Tufton Street – Westminster

UK - London SW1P 3QF

Telephone: (44) 207 799 3322

Fax: (44) 207 799 2117

www.uk-dexia.com

Dexia Municipal Agency7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 43 92 77 77

Fax: (33) 1 43 92 70 00

www.dexia-ma.com

Dexia Nordic Private BankLuxembourg18-20, avenue Marie-Thérèse

L-2015 Luxembourg

Telephone: (352) 45 78 68 1

Fax: (352) 45 78 60

Dexia Partenaires France2, rue de Messine

F-75008 Paris

Telephone: (33) 1 40 76 03 74

Fax: (33) 1 40 76 03 71

Dexia P-H Private Bank DenmarkGronningen 17

DK-1270 Copenhagen

Telephone: (45) 33 46 11 00

Fax: (45) 33 32 42 01

www.phbank.dk

Dexia PrévoyanceSite BRGM-BP 6009

F-45060 Orléans Cedex 2

Telephone: (33) 2 38 64 39 80

Fax: (33) 2 38 64 33 68

Dexia Private Bank (Switzerland)Beethovenstrasse 48

Case postale 970

CH-8039 Zürich

Telephone: (41) 1 286 92 92

Fax: (41) 1 201 14 71

www.dexia.ch

Dexia Private Bank JerseyP.O. Box 12

2-6, Church Street

St Helier, Jersey JE4 9NE

Telephone: (44) 1534 83 44 00

Fax: (44) 1534 83 44 11

Dexia Public Finance NordenBox 7573

Engelbrektsplan 2

S-103 93 Stockholm

Telephone: (46) 8 407 57 00

Fax: (46) 8 407 57 01

Dexia Sabadell Banco LocalPaseo de las Doce Estrellas, 4

E-28042 Madrid

Telephone: (34) 91 721 33 10

Fax: (34) 91 721 33 20

Dexia Santé40, rue Sadi Carnot

F-78120 Rambouillet

Telephone: (33) 1 61 08 66 00

Fax: (33) 1 61 08 66 11

Dexia SecuritiesW.T.C. Tour 1

Boulevard du Roi Albert II 30 – B18

B-1000 Brussels

Telephone: (32) 2 204 41 11

Fax: (32) 2 204 49 25

www.artesiasecurities.be

Dexia Securities France112, Avenue Kléber

F-75116 Paris

Telephone: (33) 1 56 28 52 06

Fax: (33) 1 56 28 52 90

www.dexia-securities.fr

Dexia Securities USA747 Third Avenue, 22nd floor

US - New York, NY 10017

Telephone: (1) 212 3760 130

Fax: (1) 212 3760 139

Dexia SIM Italia12 via Rovello

I-20121 Milan

Telephone: (39) 02 80284 1

Fax: (39) 02 80284 284

Dexia SIM Italia, Turin BranchVia Principessa Felicita di Savoia 8/12

I-10131 Torino

Telephone: (39) 011 63 06 701

Fax: (39) 011 63 06 700

Dexia Société de CréditHeadquarters and operations

Rue des Clarisses 38

B-4000 Liège

Telephone: (32) 4 232 45 45

Fax: (32) 4 232 45 01

Operations

Boulevard Saint-Michel 50

B-1040 Brussels

Telephone: (32) 2 732 12 12

Fax: (32) 2 737 29 27

Dexia SofaxisRoute de Créton

F- 18100 Vasselay

Telephone (33) 2 48 48 10 10

Fax: (33) 2 48 48 10 11

www.sofaxis.com

www.sofcah.com

www.sofcap.com


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Dexia Trust Services JerseyP.O. Box 300

2-6 Church Street

St Helier, Jersey JE4 8YL

Telephone: (44) 1534 83 44 44

Fax: (44) 1534 83 44 55

Dexia Trust Services Singapore PTE9 Raffles Place # 42-01

Republic Plaza

Singapore 048619

Telephone: (65) 64 35 33 36

Fax: (65) 65 36 02 19

Dexia VenturesBoulevard Pachéco 44

B-1000 Brussels

Telephone: (32) 2 222 82 98/83 06

Fax: (32) 2 222 83 08

DVV InsuranceAvenue Livingstone 6

B-1000 Brussels

Telephone: (32) 2 286 61 11

Fax: (32) 2 286 15 15

www.dvvlap.be

Ely Fund Managers (Holdings)Audrey House

Ely Place

UK - London EC1N 6SN

Telephone: (44) 20 7404 5333

Fax: (44) 20 7404 5747

www.ely.uk.com

EuralW.T.C. Tour 1

Boulevard du Roi Albert II 30 - B 37

B-1000 Brussels

Téléphone: (32) 2 204 39 99

Téléfax: (32) 2 204 38 00

www.eural.be

FidexisRue de la Charité 13-17

B-1210 Brussels

Telephone: (32) 2 209 02 30

Fax: (32) 2 209 02 37

Financial Security Assurance350 Park Avenue

USA-New York, NY 10022

Telephone: (1) 212 826 0100

Fax: (1) 212 688 3101

www.fsa.com

First European Transfer Agent11, bd Grande-Duchesse Charlotte

L-1331 Luxembourg

Telephone: (352) 25 47 01 1

Fax: (352) 25 47 01 9500

Floral7-11, quai André Citroën

F-75015 Paris

Telephone: (33) 1 45 77 33 93

Fax: (33) 1 43 92 70 57

Fortior HoldingIberagentes Activos/Iberagentes Gestion

Colectiva

Edificio Torre Europa

95 P. de la Castellana - 4

E-28046 Madrid

Telephone: (34) 914 18 93 26

Fax: (34) 914 18 93 28

www.iberagentes.es

Kempen Capital ManagementBeethovenstraat 300

PO Box 75666

NL-1070 AR Amsterdam

Telephone: (31) 20 348 8800

Fax: (31) 20 348 8850

www.kempen.nl

Kempen Capital ManagementDorpsstraat 1

PO Box 44

NL-5260 AA Vught

Telephone: (31) 73 6580 490

Fax: (31) 73 6580 499

www.kempen.nl

Kempen Capital Management BelgiumFrankrijklei 103

B-2000 Antwerpen

Telephone: (32) 3 224 82 00

Fax: (32) 3 224 82 26

Kempen Capital ManagementSwitzerland49 rue de Villereuse

CH-1207 Geneva

Telephone: (41) 22 5929141

Fax: (41) 22 5929142

Kempen Capital Management (UK)41 Melville Street

UK-EH3 7JF Edinburgh

Telephone: (44) 131 2266 985

Fax: (44) 131 2266 984

Kommunalkredit AustriaTürkenstrasse 9

A-1092 Vienna

Telephone: (43) 1 316 31 0

Fax: (43) 1 316 31 503

www.kommunalkredit.at

Linde Partners Asset Management134, route d’Arlon

L-8008 Strassen

Telephone: (352) 31 51 55

Fax: (352) 31 51 55 31

www.lindepartners.com

LuxstarBoulevard Prince-Henri 47

L-1724 Luxembourg

Telephone: (352) 46 34 401

Fax: (352) 46 34 49

www.luxstar.lu

Otzar Hashilton Hamekomi3 Heftman Street

64737 Tel-Aviv

Telephone: (972) 3 695 7211 5

Fax: (972) 3 691 9503

ParfibankBoulevard du Régent 40

B-1000 Brussels

Telephone: (32) 2 513 90 20

Fax: (32) 2 512 73 20

www.parfibank.be

Prvá Komunálna BankaHodzova 11

01011 Zilina

Slovak Republic

Telephone: (421) 89 51 11 517

www.pkb.sk

Société Luxembourgeoise de LeasingBIL-Lease14-16, avenue Pasteur

L-2310 Luxembourg

Telephone: (352) 22 77 33 1

Fax: (352) 22 77 44

Société Monégasque de Banque Privée9, boulevard d’Italie

MC-98000 Monaco

Telephone: (377) 93 15 23 23

Fax: (377) 93 15 23 32

Van Lieshout & PartnersMaliebaan 45

PO Box 13224

NL-3507 LE Utrecht

Telephone: (31) 30 2345 432

Fax: (31) 30 2345 400

W.G.H. InformatiqueAvenue de l’Expansion 7

B-4432 Ans

Telephone: (32) 4 246 10 46

Fax: (32) 4 246 03 03


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Dexia’s Annual Report is published by the Group’s

corporate communications division in cooperation with the corporate

communications departments of Dexia Bank Belgium,

Dexia Crédit Local and Dexia Banque Internationale à Luxembourg.

The Annual Report is also available in French,

Dutch and German. A copy may be obtained on request

from Dexia headquarters in Brussels or Paris.

Dexia S.A.Square de Meeûs, 1

B-1000 Brussels

Paris

7-11 quai André Citroën

F-75015 Paris

PhotographsDavid Carr, Bruno Boissonnet, Michel Labelle, Bios: N. Peka / Okapia, H. Stichtinger / Zefa, Getty Images,

Archipress: Michel Denancé / Architecte: Renzo Piano Building Workshop, Claudie Aubriac: Grandeur Nature /

Parc Arboretum de Kalmthout, Jean-Marc Pettina, Crampon.

DesignTERRE DE SIENNE

Lay-outNORD COMPO - Tel. 33 (3) 20 41 40 01

PrintingSnoeck-Ducaju & Zoon, B-9000 Ghent

Documents

Contents - Dexia · Customized financial arrangements, long-term loans, credit enhancement, account management, investment and insurance products – Dexia provides its public-sector