Fédération des caisses Desjardins du Québec

Transcription

1 No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. This short form prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. These securities have not been, and will not be registered under the United States Securities Act of 1933, as amended, or any state securities laws and, subject to certain exceptions, may not be offered or sold in the United States. See Plan of Distribution. This short form prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of these securities in the United States. Information has been incorporated by reference in this prospectus from documents filed with the securities regulatory authority in the Province of Quebec. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of the issuer at 100 rue des Commandeurs, Lévis, Quebec G6V 7N5 (telephone: (418) ) and are also available electronically on SEDAR at: SHORT FORM PROSPECTUS New issue December 21, 2017 Fédération des caisses Desjardins du Québec Up to $125,000,000 12,500,000 Class F Capital Shares 12,500,000 Class F Capital Shares (the Federation Capital Shares ) of the Fédération des caisses Desjardins du Québec ( we or the Federation ) are offered under this short form prospectus (the Prospectus ) at a price of $10 per Federation Capital Share (the Offering ). The minimum amount of each subscription is $100. Under the terms of an exemption granted by the Quebec Autorité des marchés financiers (the AMF ), the Offering of Federation Capital Shares will end at the earlier of the following dates: (a) 12 months after the date of the receipt for this short form prospectus for the offering and amendments thereto, or (b) the date of the receipt for a Federation prospectus offering Federation Capital Shares that is filed after the date of the receipt for this short form prospectus for the offering and amendments thereto. See Exemptions. The Quebec caisses, which are financial services cooperatives governed by the Constituent Legislation (as defined hereinafter) and grouped together as members of the Federation, are defined hereinafter collectively as Caisses and individually, as a Caisse. An investment in Federation Capital Shares of the Federation is not an investment, direct or indirect, in the Caisses network. Federation Capital Shares are not guaranteed by Desjardins Group (as defined hereinafter) or by any other entity of Desjardins Group and the incorporation in this Prospectus of information concerning the results of operations and the financial position of Desjardins Group should not be read as creating any such guarantee. As of the date of this Prospectus, none of the securities of the Federation are listed or quoted on the Toronto Stock Exchange, a U.S. marketplace, or a marketplace outside Canada and the United States of America, except under the Caisse centrale Desjardins debt issuance programs listed on the Irish Stock Exchange, of which the Federation became the issuer as a consequence of the Amalgamation (as this term is defined in this prospectus) and is bound to honour any security it issues. Except for the possibility of their purchase and sale by the Federation s trust fund on certain conditions, there is currently no market through which the capital shares of the Federation may be sold and the Federation has not applied to list or quote any of the capital shares of the Federation and does not intend to apply to list or quote any of the capital shares of the Federation. Purchasers may not be able to resell the capital shares purchased under this Prospectus which may affect the pricing of the capital shares in the secondary market, the transparency and availability of their trading prices, the liquidity of the capital shares, and the extent of issuer regulation. See Risk Factors and Description of Federation Capital Shares. An investment in the securities offered hereunder involves risk. In reviewing this Prospectus and evaluating an investment in Federation Capital Shares, you should carefully consider the matters described under the headings Risk Factors and Caution Regarding Forward-Looking Statements elsewhere in this Prospectus. There is no minimum sum to be collected under the Offering. Therefore, the issuer may complete the Offering even if only a small part of the amount of the Offering indicated above is collected.

2 2 Federation Capital Shares will not be deposits guaranteed under the Deposit Insurance Act (Quebec) or the Canada Deposit Insurance Corporation Act. Federation Capital Shares may be redeemed, with the authorization of the AMF, only in the event of the liquidation, insolvency, dissolution or winding-up of the Federation. In the event that Federation Capital Shares are redeemed, the holders of Federation Capital Shares will receive from the remaining assets of the Federation, if any, after reimbursement of the deposits and other debts of the Federation and after payment to the holders of classes of investment shares, if any, and capital shares relating to investment funds, of the amounts to which they are entitled with respect to such shares (see Business structure Investment funds in the Annual Information Form (as defined hereinafter)), and equally with the other classes of capital shares and qualifying shares, an amount equal to the par value of such Federation Capital Shares. Notwithstanding the foregoing, in the event of the liquidation, insolvency, dissolution or winding-up of the Federation, Federation Capital Shares may only be redeemed with the authorization of the AMF if each of the Caisses satisfies the capital adequacy requirements applicable to it under the Act respecting financial services cooperatives (CQLR, chapter C-67.3) (the Constituent Legislation, on the understanding that when the expression Constituent Legislation is used in connection with the Federation, it includes the Act respecting the Mouvement Desjardins) and the regulations, by-laws, guidelines and directions made or given thereunder and with the AMF s authorization. In the event that a balance remains after the capital adequacy requirements of one or more of the Caisses, as the case may be, have been satisfied, the Federation Capital Shares will be redeemed on a pro rata basis. Insolvency of the Federation will not constitute an event of default of the Federation that will permit the holders of Federation Capital Shares to demand their redemption. In the event of insolvency, the Federation may take several different measures without necessarily triggering a redemption of the Federation Capital Shares. Federation Capital Shares are subordinate in all circumstances, with respect to the payment of interest, to the rights of the holders of investment shares and the holders of prior-ranking capitalization instruments, if any. Subject to the foregoing, Federation Capital Shares will rank, with respect to the payment of interest, equally with capital shares of all other classes. The Federation may not pay any interest on Federation Capital Shares if there are reasonable grounds for believing that it will or may be unable, as a result of such payment, to continue its operations in accordance with the Constituent Legislation and the regulations, by-laws, guidelines and directions made or given thereunder. The Federation is entitled, by resolution of the Board of Directors and with the AMF s authorization, to repurchase all or part of the outstanding Federation Capital Shares unilaterally at any time, in accordance with the terms and conditions set forth in this Prospectus. See Description of Federation Capital Shares. Federation Capital Share holder status confers only the rights attaching to Federation Capital Shares as specifically described in this Prospectus (including but not limited to documents incorporated by reference herein), excluding in particular any rights relating to the distribution of surplus earnings or to notice of or to attend or vote at meetings of the Federation s members. The interest rate payable on Federation Capital Shares is determined by the Board of Directors and calculated on the daily balance, prorated to the number of days the shares have been held by each shareholder. It is possible that no interest will be paid for a given year. See Description of Federation Capital Shares. Price: $10 per Federation Capital Share Price to the public Discount or underwriting commission 1 Net proceeds to the Federation 2 Per Federation Capital Share... $ $10.00 Total... Up to $125,000,000 - Up to $125,000, DFSF (as defined below) receives no compensation for distributing Federation Capital Shares. In consideration of their administrative support, the Caisses receive administrative fees from the Federation amounting to $100 for each purchase transaction. See Plan of Distribution. 2. Before deduction of certain expenses of the Offering, estimated at $150,000, and the administrative fees of the Caisses, estimated at a total of $500,000 and 0.25% of the average value of Federation Capital Shares held by their members, which will be paid from the general funds of the Federation. See Plan of Distribution Distribution Costs. 3. Each purchaser of Federation Capital Shares is required to subscribe for a minimum amount of $100. Federation Capital Shares are offered on a best efforts basis by Desjardins Financial Services Firm Inc. ( DFSF ), referred to in the section Plan of Distribution. DFSF is a direct wholly-owned subsidiary of the Federation. Consequently, the Federation may be considered a connected issuer or related issuer of DFSF within the meaning of the applicable securities legislation. See Plan of Distribution and Relationship between the Federation and DFSF. The Federation is a federation of financial services cooperatives incorporated under the Constituent Legislation. Its head office is located at 100 rue des Commandeurs, Lévis, Quebec, G6V 7N5.

3 3 TABLE OF CONTENTS Page MEANING OF CERTAIN REFERENCES... 4 CAUTION REGARDING FORWARD-LOOKING STATEMENTS... 4 DOCUMENTS INCORPORATED BY REFERENCE... 5 MARKETING MATERIALS... 6 RECENT DEVELOPMENTS... 6 DESJARDINS GROUP... 6 FÉDÉRATION DES CAISSES DESJARDINS DU QUÉBEC... 7 USE OF PROCEEDS... 9 PRIOR SALES... 9 DESCRIPTION OF AUTHORIZED CAPITAL STOCK... 9 ISSUED AND PAID-UP SHARES... 9 DESCRIPTION OF FEDERATION CAPITAL SHARES CONSOLIDATED CAPITALIZATION PLAN OF DISTRIBUTION RELATIONSHIP BETWEEN THE FEDERATION AND DFSF CERTAIN CANADIAN AND QUEBEC INCOME TAX CONSIDERATIONS RISK FACTORS TRANSFER AGENT AND REGISTRAR AUDITOR INTERESTS OF EXPERTS EXEMPTIONS PURCHASERS STATUTORY RIGHTS CERTIFICATE OF THE FÉDÉRATION DES CAISSES DESJARDINS DU QUÉBEC... C-1 CERTIFICATE OF DESJARDINS FINANCIAL SERVICES FIRM INC.... C-2

4 4 MEANING OF CERTAIN REFERENCES Unless otherwise indicated or the context otherwise requires, the expressions Federation, we and our refer to the Fédération des caisses Desjardins du Québec and its direct and indirect subsidiaries, its predecessors, its other constituent entities and the other entities controlled by it. All references to dollars or $ in this Prospectus are to Canadian dollars, unless otherwise indicated. Certain totals, subtotals and percentages throughout this Prospectus may not reconcile due to rounding. Purchasers should rely only on information contained in this Prospectus (including but not limited to documents incorporated by reference herein). The Federation has not authorized any other person to provide purchasers with different information. Purchasers should not rely on different or inconsistent information provided by any person other than the Federation. CAUTION REGARDING FORWARD-LOOKING STATEMENTS The Federation s public communications often include oral or written forward-looking statements. Such forwardlooking statements are contained in this Prospectus and in the documents incorporated by reference herein and may be incorporated in other filings with Canadian regulators or in any other communications. Forward-looking statements in this Prospectus (including but not limited to documents incorporated by reference herein) include, but are not limited to, comments about the net proceeds of the distribution for the Federation, the Federation s use of the net proceeds of the distribution and the objectives achieved through the use of such net proceeds, the Federation s objectives regarding financial performance, priorities, operations, the review of economic conditions and markets, as well as the outlook for the Canadian, U.S., European and other international economies. These forward-looking statements include, among others those appearing in Section 1.3, Financial outlook for 2017, Section 1.4, Changes in the economy, Section 2.0 Review of financial results, Section 3.0 Balance sheet review, and Section 5.0 Additional information in the Annual Management s Discussion and Analysis (as defined hereinafter) and Economic environment and outlook, Review of financial results, Balance sheet review and Additional information in the Interim Management s Discussion and Analysis (as defined hereinafter). Such statements are typically identified by words or phrases such as believe, expect, anticipate, intend, estimate, "plan" and may, words and expressions of similar import, and future and conditional verbs. By their very nature, such statements involve assumptions, uncertainties and inherent risks, both general and specific. It is therefore possible that, due to many factors, these predictions, forecasts or other forward-looking statements as well as the Federation s objectives and priorities may not materialize or may prove to be inaccurate and that actual results differ materially. The Federation cautions readers against placing undue reliance on these forward- looking statements since actual results, conditions, actions and future events could differ significantly from the targets, expectations, estimates or intents in the forward-looking statements, either explicitly or implicitly. A number of factors, many of which are beyond the Federation s control and the effects of which can be difficult to predict, could influence the accuracy of the forward-looking statements in this Prospectus and in the documents incorporated by reference herein. These factors include those discussed in the Item Risk Factors in this Prospectus and elsewhere in this Prospectus, in the documents incorporated by reference herein, including but not limited to Section 4.0, Risk management in the Annual Management s Discussion and Analysis, in the item Risk factors in the Annual Information Form, in the section Risk management in the Interim Management s Discussion and Analysis and in other disclosure documents filed from time to time by the Federation with the Quebec securities regulatory authority, such as credit, market, liquidity, operational, insurance, strategic and reputation risk. Additional factors include regulatory and legal environment risk, including legislative or regulatory developments in Quebec, Canada or globally, such as changes in fiscal and monetary policies, reporting guidance and liquidity regulatory guidance, capital guidelines or interpretations thereof; and environmental risk, which is the risk of financial, operational or reputational loss for the Federation as a result of environmental impacts or issues, whether they are a result of the Federation s credit or investment activities or its operations. Lastly, there is the risk related to pension plans, which is the risk of losses resulting from pension plan commitments made by the Federation for the benefit of its employees arising primarily from interest rate, price, foreign exchange and longevity risks. Additional factors that may affect the accuracy of the forward-looking statements in this Prospectus (including but not limited to the documents incorporated by reference herein) also include factors related to technological advancement and regulatory developments, cybersecurity, household indebtedness and real estate market trends, geopolitical risks and communication and information. Furthermore, there are factors related to general economic and business conditions in regions in which the Federation operates; changes in the economic and financial environment in Quebec, Canada and globally, including short- and long-term interest rates, inflation, debt market fluctuations, foreign exchange rates, the volatility of capital markets, tighter liquidity conditions in certain markets, the strength of the economy and the volume of business conducted by the Federation in a given region; monetary policies; changes in standards; laws and regulations; the accuracy and completeness of information concerning clients and counterparties; the critical accounting estimates and accounting standards applied by the Federation; new products and services to maintain or increase the Federation s market share; the

5 5 ability to recruit and retain key management personnel, including senior management; geographic concentration; acquisitions and joint arrangements; and credit ratings. Other factors that could influence the accuracy of the forward-looking statements in this Prospectus (including but not limited to the documents incorporated by reference herein) to tax laws include amendments, unexpected changes in consumer spending and saving habits, the ability to implement the Federation s disaster recovery plan within a reasonable time, the potential impact of international conflicts or natural disasters, and the Federation s ability to anticipate and properly manage the risks associated with these factors, despite a disciplined risk management environment. It is important to note that the above list of factors that could influence future results is not exhaustive. Other factors could have an adverse effect on the Federation s results. Additional information about these and other factors is found in the Item Risk Factors in this Prospectus and elsewhere in this Prospectus, in the documents incorporated by reference herein, including but not limited to Section 4.0, Risk management in the Annual Management s Discussion and Analysis, in the item Risk factors in the Annual Information Form, in the section Risk management in the Interim Management s Discussion and Analysis and in other disclosure documents filed from time to time by the Federation with the Quebec securities regulatory authority. Although the Federation believes that the expectations expressed in these forward-looking statements are reasonable, it cannot guarantee that these expectations will prove to be correct. The Federation cautions readers against placing undue reliance on forward-looking statements when making decisions. Readers who rely on these statements must carefully consider these risk factors and other uncertainties and potential events. Any forward-looking statements contained in this Prospectus and the documents incorporated by reference herein represent the views of management only as at the date hereof (or, in the case of information contained in a document incorporated by reference herein, at the date of the document), and are presented for the purpose of assisting readers in understanding and interpreting the Federation s balance sheet as at the dates indicated or its results for the periods then ended, as well as its strategic priorities and objectives. These statements may not be appropriate for other purposes. The Federation does not undertake to update any oral or written forward-looking statements that could be made from time to time by or on behalf of the Federation, except as required under applicable securities legislation. DOCUMENTS INCORPORATED BY REFERENCE Information has been incorporated by reference in this Prospectus from documents filed with the securities authority in the Province of Quebec. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Corporate Secretary of the Federation at 100 rue des Commandeurs, Lévis, Quebec, G6V 7N5 ((418) ) and are also available electronically at The following documents and excerpts from documents, filed with the securities authority in the Province of Quebec, are specifically incorporated by reference into and form an integral part of this Prospectus, provided that such documents are not incorporated by reference to the extent that their contents are modified or superseded by a statement contained in this Prospectus or in any other subsequently filed document that is also incorporated by reference in this Prospectus: 1. The Federation s Annual Information Form dated March 15, 2017 for the year ended December 31, 2016 ( Annual Information Form ); 2. The Federation s audited consolidated financial statements (including notes thereto) for the years ended December 31, 2016 and 2015 and the independent auditor s report thereon; 3. The Federation s Management s Discussion and Analysis for the year ended December 31, 2016 ( Annual MD&A ); 4. The Federation s unaudited condensed interim consolidated financial statements (including notes thereto) for the quarters ended September 30, 2017 and 2016; 5. The Federation s Interim Management s Discussion and Analysis as at September 30, 2017 ( Interim MD&A ); Any documents of the type referred to the preceding paragraph or other disclosure documents required to be incorporated by reference into a Prospectus filed under Regulation respecting short form prospectus distributions ( Regulation ) subsequently filed by the Federation with the securities regulatory authority in Quebec, after the date of this Prospectus and prior to the completion or withdrawal of this Offering, shall be deemed to be incorporated by reference into this Prospectus. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is, or is deemed to be, incorporated by

6 6 reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document or statement that it modifies or supersedes. The making of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that was required to be stated or that was necessary to make a statement not misleading in light of the circumstances in which it was made. MARKETING MATERIALS Any template version of "Marketing Materials" (as defined in Regulation respecting general prospectus requirements ( Regulation )) filed with the securities regulatory authority in Quebec in connection with this Offering after the date of this Prospectus and prior to the completion or withdrawal of this Offering (including any amendments to, or an amended version of, the Marketing Materials) is deemed to be incorporated by reference into this Prospectus. Marketing Materials are not part of this Prospectus to the extent that the contents of the Marketing Materials have been modified or superseded by a statement contained in an amendment to this Prospectus. RECENT DEVELOPMENTS At special general meetings held on November 28, 2016, delegates of the members of the Federation and Caisse centrale Desjardins adopted, by a majority of over two thirds of the votes cast, a by-law to amalgamate the Federation with Caisse centrale Desjardins by absorption of the latter entity (the Amalgamation ). Once the required regulatory approvals, in particular from the AMF, were obtained, the Amalgamation took effect on January 1, As a result of the Amalgamation, Caisse centrale Desjardins continued to exist within the Federation, and their assets were merged, becoming the assets of the Federation. Since the effective date of the Amalgamation, the Federation has enjoyed all Caisse centrale Desjardins rights and will be responsible for all Caisse centrale Desjardins obligations, in addition to its own rights and obligations. The Federation also has the powers conferred to Caisse centrale Desjardins under the Constituent Legislation. Among other things, the roles of treasurer and official representative of Desjardins Group with the Bank of Canada and the Canadian banking system are now assumed by the Federation. The Federation also became an issuer under Caisse centrale Desjardins issuance programs and must honour all securities issued by Caisse centrale Desjardins. The Federation also succeeded Caisse centrale Desjardins in its dealings with clearing houses and payment associations. Following the Amalgamation, the four credit rating agencies (Moody s, Standard & Poor s (S&P), DBRS and Fitch) issued press releases confirming that the Amalgamation did not lead to any changes in the credit ratings assigned to Caisse centrale Desjardins and its issuance programs, since these ratings are based on Desjardins s financial strength. As a result, the Federation and its issuance programs were assigned the same credit ratings as Caisse centrale Desjardins had before the Amalgamation. DESJARDINS GROUP The Mouvement des caisses Desjardins ( Desjardins Group ) is the largest financial cooperative in Canada, with assets of $276.3 billion as at September 30, The organization brings together 293 Caisses in Quebec and Ontario, the Federation and its subsidiaries (including Capital Desjardins inc.), the Fédération des caisses populaires de l Ontario Inc. and the Fonds de sécurité Desjardins. A number of its subsidiaries and components are active across Canada, and Desjardins Group maintains a presence in the U.S. through Desjardins Bank, National Association. Through their Personal Services and Business and Institutional Services, Wealth Management and Life and Health Insurance, and Property and Casualty Insurance business segments, Desjardins Group offers a full range of financial products and services to members and clients, individuals and businesses alike, that are designed to meet their needs. As one of the largest employers in the country, Desjardins Group is driven by the skills of close to 48,000 employees and the commitment of over 4,300 elected officers. Furthermore, to ensure consistency among Desjardins Group s key business segments, certain functions affect all the activities of the Federation, its subsidiaries and components. These functions consists primarily of Finance, Treasury and Administration, Risk Management, Human Resources and Communications and Information Technology. As of the effective date of the Amalgamation, the Federation also carries out treasury operations and acts as Desjardins Group s official representative with the Bank of Canada and the Canadian banking system; these roles were formerly assumed by Caisse centrale Desjardins. In June 2013, the AMF determined that Desjardins Group met the criteria to be designated as a domestic systemically important financial institution ( D-SIFI ), which subjects Desjardins Group to additional obligations. See Risk Factors Changes in Regulation and Related Matters in this Prospectus. The Caisses are financial services cooperatives governed by the Constituent Legislation and grouped together as members of the Federation.

7 7 This Prospectus includes, for the reader s information, certain financial information of Desjardins Group since the Federation is a cooperative entity whose primary role is to provide orientation, coordination, oversight and development activities to Desjardins Group. Specific financial information for the Federation is contained in the documents incorporated by reference in this Prospectus. Financial Results and Ratios of Desjardins Group For the years ended December 31 (in millions of dollars and as a percentage) Operating income Total income $15,201 $15,242 $15,235 Provision for credit losses Claims, benefits, annuities and changes in insurance contract liabilities 5,446 5,431 6,303 Non-interest expense 7,204 6,959 6,554 Surplus earnings before member dividends 1,772 1,959 1,593 Amount returned to members and the community Balance sheet Assets $258,367 $248,128 $229,387 Net loans and acceptances 166, , ,312 Deposits 160, , ,324 Equity 23,293 21,725 18,893 Key ratios Return on equity (2) 8.0 % 9.1 % 8.7 % Desjardins Group productivity index (2) Tier 1 capital Total capital (1) Data for 2015 and 2016 have been reclassified to conform to the current period's presentation. (2) See the section Basis of presentation of financial information in the annual MD&A of Desjardins Group for the fiscal year ended December 31, Desjardins Group s annual reports for 2016 and 2015 may be viewed on the SEDAR profile of Capital Desjardins inc. ( FÉDÉRATION DES CAISSES DESJARDINS DU QUÉBEC The Federation resulted from the amalgamation, on July 1, 2001, of the various regional federations and the Confédération des caisses populaires et d économie Desjardins du Québec. The Federation, which is governed by the Constituent Legislation, acts as the coordinating organization of the Caisses and the affiliated institutions and corporations of Desjardins Group. It promotes the development and effectiveness of the Caisses by providing them with various technical, administrative and financial services. The Federation is a cooperative entity which is responsible for orientation, oversight, coordination and development activities for Desjardins Group. The member Caisses collectively control the Federation and each of the member Caisses has influence over the Federation. The Federation enables the Caisses and other Desjardins Group components to accelerate their development and better meet the needs of their members and clients. See the Item Description of business in the Annual Information Form for more information about the history of the Federation over the last three fiscal years. The Federation s subsidiaries include the following, among others: Capital Desjardins inc., which issues securities on capital markets and invests the proceeds therefrom in securities issued by the Desjardins caisses and Desjardins Financial Holding Inc. which is, among other things, the parent company of Desjardins Trust Inc. and which is active in asset custody and trust services; Desjardins Technology Group Inc., which is responsible for the development, maintenance and evolution of Desjardins Group technology systems and applications; Desjardins Securities Inc., which offers securities brokerage products and services. Desjardins Financial Corporation Inc. is the parent company of Desjardins International Asset Management Inc., a group of investment experts that, among other activities, manages the assets from insurance subsidiaries and items entrusted to it by other subsidiaries of Desjardins Group; Desjardins General Insurance Group Inc., which offers property and casualty insurance products; and Desjardins Financial Security Life Assurance Company, which offers life and health insurance products and financial services. Also of note are Zag Bank (financial institution), Desjardins

8 8 Wealth Management Inc. (portfolio and investment fund managers) and Qtrade Canada Inc. (online brokerage and wealth management services), all subsidiaries of Desjardins Financial Holding Inc. Lastly, the Federation manages various funds in accordance with the provisions of the Internal By-laws adopted at its general meeting. The following organizational chart presents a simplified view of the legal structure of Desjardins Group as at the date hereof and shows the relationships between the Federation and its main components, including its direct and indirect subsidiaries, which, except as indicated below, are all wholly-owned, and their respective jurisdiction of incorporation. The subsidiaries that have been omitted represent individually no more than 10% of the consolidated assets and no more than 10% of the consolidated revenues of the Federation or, collectively, no more than 20% of the total consolidated assets and consolidated revenues of the Federation. Caisses Desjardins of Quebec and Ontario Fédération des caisses Desjardins du Québec La Fédération des caisses populaires de l Ontario Inc. Capital Desjardins inc. Desjardins Financial Holding Inc. (Quebec) (Quebec) Desjardins Société Financière inc. (Quebec) Desjardins Trust Inc. (trust services) Desjardins General Insurance Group Inc. (property and casualty insurance) (1) Desjardins Financial Security Life Assurance Company (life and health insurance) Desjardins Global Asset Management Inc. (asset management) Desjardins Securities Inc. (discount and full brokerage) (Canada) (Canada) (Quebec) (Quebec) (Canada) (1) The subsidiaries of this entity are 10%-owned by Groupe des Assurances du Crédit Mutuel SA (France) as at the date of this Prospectus. In addition, Groupe des Assurances du Crédit Mutuel SA (France) and State Farm Mutual Automobile Insurance Company hold the non-voting preferred shares of the operating subsidiaries of this entity. For the year ended December 31, 2016, the Federation posted surplus earnings before member dividends of $1,191 million and, as at December 31, 2016, the Federation s stabilization reserve was $436 million. To learn more about the Federation s financial outlook for 2017, see Section 1.3 Financial outlook for 2017 in the Annual Management s Discussion and Analysis and to learn more about Desjardins Group s financial objectives for 2017, see Section 1.3 Financial Strategy and objectives in Desjardins Group s 2016 Annual Report, which may be viewed on the SEDAR profile of Capital Desjardins inc. (

9 9 USE OF PROCEEDS The net proceeds to the Federation from the Offering, after deducting certain administrative fees of the Caisses, estimated at a total of $500,000 and certain other expenses of the Offering, amounting to approximately $150,000, but before deducting administrative fees of the Caisses representing 0.25% of the average value of Federation Capital Shares held by their members, are estimated to be up to $124,350,000. The Caisses administrative fees and the expenses of the Offering will be paid out of the general funds of the Federation. See Plan of Distribution Distribution Costs. The net proceeds of the Offering will be added to the Federation s funds and will be used to improve the network capital base of the Caisses and the Federation; it will also be used for general purposes of the Federation, the Caisses and for the capitalization of the Federation s subsidiaries, if necessary. While the Federation intends to use the net proceeds of the Offering as described above, it is not able to state any specific time period for the accomplishment of these objectives. PRIOR SALES During the 12-month period prior to the date hereof, the Federation regularly issued between December 21, 2016 and December 21, 2017, a total of 24,967,040 Federation Capital Shares at a subscription price of $10 per share under the Federation s Capital Shares program for the issuance of a maximum total of 25,000,000 Federation Capital Shares, and as at April 20, 2017, a total of 12,535,746 Federation Capital Shares at the rate of one Federation Capital Share for each tranche of interest equal to the $10 par value of one Federation Capital Share issued and outstanding in respect of which a payment of interest was made in accordance with the terms described under Description of Federation Capital Shares Interest. DESCRIPTION OF AUTHORIZED CAPITAL STOCK As at the date hereof, the authorized capital stock of the Federation is made up of the following qualifying shares and capital shares: An unlimited number of qualifying shares having a par value of $5. These shares can be issued only to members of the Federation and are redeemable only at the option of the Board of Directors in certain situations provided for by by-law. An unlimited number of A and G Capital Shares having a par value of $5 and an unlimited number of Federation Capital Shares having a par value of $10. A and G Capital Shares can be issued only to members of the Federation, while Federation Capital Shares can be issued only to members of the Caisses, including their auxiliary members. The Federation may, by resolution of the Board of Directors and with the AMF s authorization, redeem all or part of the A and G and Federation Capital Shares unilaterally at any time. The Federation may also at any time, and with the AMF s authorization, purchase all or part of the A and G and Federation Capital Shares by mutual agreement. In addition, all or part of the A and G Capital Shares may, by resolution of the Board of Directors, be converted at any time into another class of shares issued for such purpose. The rate of interest on A and G and Federation Capital Shares is determined by the Board of Directors. The repayment of the principal amount and the payment of interest on Federation Capital Shares are subject to compliance with certain conditions. An unlimited number of FIN-5A, INV, SER and FED-7 Capital Shares in relation to an investment fund. These shares can be issued only to members of the Federation; they are without par value and bear no interest. Subject to the provisions of the Federation s by-law on investment funds, the holders of these shares are entitled to share the net revenue of the funds. These shares are redeemable, with the AMF s authorization, at the option of the Board of Directors or by mutual agreement. In addition, all or part of these shares may, by resolution of the Board of Directors, be converted into another class of shares issued for such purpose. On January 1, 2017, namely the date of the Amalgamation, the CCD capital shares issued and outstanding were converted into G shares issued to members of the Federation. CCD capital shares have not been part of the Federation s authorized capital stock since the Amalgamation date. The holders of qualifying shares and capital shares of the Federation are not entitled to notice of or to attend or vote at meetings of the Federation s members. ISSUED AND PAID-UP SHARES The following table sets out, as of the date hereof, the number and value (in thousands of dollars) of the shares of the Federation that are issued and outstanding. The said shares, other than Federation Capital Shares, are owned in their

10 10 entirety by the Caisses and the Fédération des caisses populaires de l Ontario. Federation Capital Shares are owned in their entirety by the members of the Caisses. (thousands) 32,810 Qualifying Shares $ ,789,467 A Capital Shares 68, ,125,823 Federation Capital Shares 4,521,258 (1) 600,532,931 G Capital Shares 3,002, ,258,599 FIN-5A Capital Shares 916,974 47,856,914 INV Capital Shares 18,946 2,865,680 SER Capital Shares 23,395 1,084,566 FED-7 Capital Shares 4,676 $ 8,557,025 (1) Net of certain expenses of the Offering and the Caisses administrative fees, this amount is $4,501,237,299. DESCRIPTION OF FEDERATION CAPITAL SHARES issued. The following is a summary of the material attributes and characteristics of the Federation Capital Shares to be The Federation Capital Shares will not be deposits guaranteed under the Deposit Insurance Act (Quebec) or the Canada Deposit Insurance Corporation Act. Par Value Issue The par value of the Federation Capital Shares is set at $10 per share. Federation Capital Shares can be issued only to members of the Caisses, including their auxiliary members. A Federation Capital Share holder must retain his or her qualifying shares of a Caisse of which he or she is a member for the entire time that his or her Federation Capital Shares are held. Payment for Federation Capital Shares must be made in full before they can be issued. Payment must be made in a single instalment, by cheque or authorized debit from the member s savings account. At no time shall the Federation and the Caisses offer, directly or indirectly, any financing for purposes of purchasing Federation Capital Shares. Interest No fractional Federation Capital Share may be issued. The rate of interest payable on Federation Capital Shares is determined by the Board of Directors, and is computed daily, in proportion to the number of days that such shares are held by their respective holders. See Policy with respect to the Payment of Interest on Federation Capital Shares. Holders may opt to have their interest, if any, paid in Federation Capital Shares, at the rate of one Federation Capital Share for each tranche of interest equal to the par value of one Federation Capital Share. Interest on Federation Capital Shares, if any, is paid out of the Federation s surplus earnings. Surplus earnings are allocated by the general meeting, at the annual meeting, after the members of the Federation have considered the recommendations of the Board of Directors and taking into account the operating results for the preceding fiscal year. Interest on Federation Capital Shares, if any, may also be paid out of the Federation s stabilization reserve. During the fiscal year, the Board of Directors may determine the interest payable on Federation Capital Shares out of the amounts allocated to the stabilization reserve. The general meeting, at the annual meeting, may also determine the additional interest to be paid on those shares out of the stabilization reserve.

11 11 In no case may the interest on Federation Capital Shares, if any, exceed the rate determined by the Board of Directors. Interest on Federation Capital Shares, if any, is payable only if the annual surplus earnings and the sums allocated to the Federation s stabilization reserve so permit. Federation Capital Shares are subordinate in all circumstances, with respect to the payment of interest, to the rights of the holders of investment shares and the holders of prior-ranking capitalization instruments, if any. Subject to the foregoing, Federation Capital Shares will rank, with respect to the payment of interest, equally with capital shares of all other classes. The Federation may not pay any interest on Federation Capital Shares if there are reasonable grounds for believing that it will or may be unable, as a result of such payment, to continue its operations in accordance with the Constituent Legislation and the regulations, by-laws, guidelines and directions made or given thereunder. At no time will the failure to determine or pay any interest on Federation Capital Shares constitute an event of default of the Federation. See Description of Business Caisse network in the Annual Information Form and Risk Factors Payment of Interest in this Prospectus. Policy with respect to the Payment of Interest on Federation Capital Shares Pursuant to the Federation s policy on the maximum rate of return on Federation Capital Shares, the rate of interest set by the Board of Directors from time to time with respect to Federation Capital Shares may not exceed the higher of the following rates: (a) the average annual percentage yield on Government of Canada bonds with a term to maturity of five years, based on the yield on Government of Canada bonds with a term to maturity of five years at the close of markets on the last business day of each month of the applicable fiscal year, and (b) 4.25%. The Board of Directors may amend this policy in its discretion at any time. Purchase and Sale by the Federation s Trust Fund Federation Capital Shares held by the trust fund may be sold to a member of a Caisse, including an auxiliary member. A holder of Federation Capital Shares may request the Federation, through its trust fund, to purchase all or any part of its shares. The Federation is not obliged to agree to such a request and may, in its sole discretion, refuse to purchase the shares, based on the need to balance supply and demand (see Risk Factors Purchase and Sale by the Federation s Trust Fund and Description of Federation Capital Shares ). It should be noted that the Federation recommends that the Caisses collect fees, currently set at $30, from members of a Caisse who sell Federation Capital Shares to the trust fund prior to holding them for two years. See Plan of Distribution Fees. In case of financial difficulty, the Federation may at any time terminate the acquisition of shares issued by a particular Caisse, shares issued by all the Caisses or shares it issues itself. In any of these cases, the Federation will instruct the administrator of the trust fund, Desjardins Trust Inc., to cease any acquisition of shares for which transfer requests are subsequent to a date it specifies. The Federation s instruction will be effective upon its receipt by Desjardins Trust Inc. Redemption Federation Capital Shares may be redeemed, with the AMF s authorization, only in the event of the liquidation, insolvency, dissolution or winding-up of the Federation. In the event that Federation Capital Shares are redeemed, the holders of Federation Capital Shares will receive from the remaining assets of the Federation, if any, after reimbursement of the deposits and other debts of the Federation and after payment to the holders of classes of investment shares, if any, and capital shares in relation to investment funds, of the amounts to which they are entitled with respect to such shares (see Business structure Investment funds in the Annual Information Form), and equally with the other classes of capital shares and qualifying shares, an amount equal to the par value of such Federation Capital Shares. Notwithstanding the foregoing, in the event of the liquidation, insolvency, dissolution or winding-up of the Federation, Federation Capital Shares may only be redeemed with the AMF s authorization if each of the Caisses satisfies the capital adequacy requirements applicable to it under the Constituent Legislation and the regulations, by-laws, guidelines and directions made or given thereunder and with the AMF s authorization. In the event that a balance remains after the capital adequacy requirements of one or more of the Caisses, as the case may be, have been satisfied Federation Capital Shares will be redeemed on a pro rata basis. Insolvency of the Federation will not constitute an event of default of the Federation that will permit the holders of Federation Capital Shares to demand their redemption. In the event of insolvency, the Federation may take several different measures without necessarily triggering a redemption of the Federation Capital Shares. Repurchase The Federation is entitled, by resolution of the Board of Directors and with the AMF s authorization, to repurchase all or part of the outstanding Federation Capital Shares unilaterally at any time, the whole in accordance with the following terms and conditions:

12 12 (a) the Federation shall convey to each registered holder of Federation Capital Shares a notice of repurchase in writing or using any other electronic written communication method, which notice shall inform the holder of the repurchase and specify the date on which the repurchase is to take effect (the repurchase date ), which date must be at least 10 days later than the date on which the Federation gave or transmitted the notices of repurchase; any holder may waive receipt of a notice of repurchase; (b) on the repurchase date, the Federation Capital Shares shall be cancelled automatically and their holders shall be entitled, on surrendering the certificates for the said shares or following cancellation of the relevant book-entry, as the case may be, to payment of their par value; if a part only of the Federation Capital Shares represented by such certificates or book-entry is being repurchased, a new certificate shall be issued for the balance of the Federation Capital Shares, or a new book-entry shall be made, as the case may be; (c) with respect to holders of Federation Capital Shares who fail to surrender the certificates representing such shares for cancellation, the Federation may deposit an amount corresponding to their par value with the Minister of Finance of the Province of Quebec, in accordance with the provisions of the Deposit Act, CQLR, c. D-5, or at such other location as may be designated in the notice of repurchase, for such holders. The rights of such holders shall be limited to having the amount so deposited credited to them on surrendering the certificates representing the repurchased shares, and if applicable, having new certificates issued to them for the balance of the Federation Capital Shares; (d) in the case of a partial repurchase, the repurchase shall be made in proportion to the number of Federation Capital Shares outstanding; (e) the terms and conditions set out in subsections (a), (c) and (d) above do not apply to the repurchase of Federation Capital Shares held in the Federation s trust fund. At no time may the holders of Federation Capital Shares require any such shares to be repurchased. Purchase and Exchange by Mutual Agreement The Federation may, at any time, without notice, with the AMF s authorization, when it sees fit, without taking the other classes of shares into account and without being bound by the rule which, in the case of repurchase, requires Federation Capital Shares to be redeemed pro rata from the holders of Federation Capital Shares, purchase all or any part of the outstanding Federation Capital Shares by mutual agreement, at an agreed price, which price, if applicable, may be paid in full or in part in the form of shares of another class issued for such purpose by the Federation. On the purchase date, the purchased shares shall be cancelled automatically and their holders shall be entitled, on surrendering the certificates for the said shares or following cancellation of the relevant book-entry, as the case may be, to payment of the agreed price; if a part only of the shares represented by such certificates or book-entry is being purchased, a new certificate shall be issued for the balance of the shares or a new book-entry shall be made, as the case may be. Voting Right The holders of Federation Capital Shares are not entitled to notice of or to attend or vote at meetings of the Federation s members. Other Rights Federation Capital Share holder status confers only the rights attaching to Federation Capital Shares as specifically described in this Prospectus (including but not limited to documents incorporated by reference herein), excluding in particular any rights relating to the distribution of surplus earnings or to notice of or to attend or vote at meetings of the Federation s members. CONSOLIDATED CAPITALIZATION With the exception of the following, there have been no material changes in the share capital or in the loan capital of the Federation since September 30, 2017, the date of the Federation s last financial statements. Between October 1, 2017 and December 21, 2017, the Federation issued 2,131,192 Federation Capital Shares for cash consideration of $21,311,920, corresponding to the gross proceeds of issue of these shares, excluding expenses of issue.