64 th ANNUAL REPORT. Caisse de Chomedey Cartier Blvd. West Laval (Québec) H7V 1J4 Phone: Fax:

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1 64 th ANNUAL REPORT Caisse de Chomedey Head Office 3075 Cartier Blvd. West Laval (Québec) H7V 1J4 Phone: Fax: Samson Service Center 4595 Samson Blvd. Laval (Québec) H7W 2H2 Phone: Fax: Comptoir de services Résidence Villagia de l île Paton Visit our Web Site:

2 02 64 th ANNUAL REPORT Notice of Meeting To the Members of Caisse Desjardins de Chomedey, You are hereby convened to the Annual General Meeting of your Caisse, which will take place: Date: April 26, 2010 Time: Location: 7:00 p.m. Château Royal 3500, boulevard du Souvenir, Laval At the Meeting, members will receive information on the Annual Report and the Board of Supervision Report. They will decide on the distribution of annual surplus earnings and on the interest payable on permanent shares and on surplus shares, vote on the payment of member dividends from the reserve, adopt a budget for certain investments, elect members of the Board of Directors and the Board of Supervision, and deal with any other item on the agenda. There will be two question periods, one directed to the Board of Directors and the other to the Board of Supervision. Elections Any physical person who is a full member shall be considered eligible, as long as that person has been a member for at least 90 days and is not ineligible under the terms of the Act. Nominations may not be submitted to the General Meeting unless prior written notice, signed by five members and countersigned by the candidate, is given according to the rules defined by the Caisse Internal By-laws and remitted to the Caisse before closing time on April 16, All Members of the Caisse are cordially invited to attend and participate in this General Meeting. Signed, January 27, 2010 SERGE HAMELIN Secretary All members welcome!

3 64 th ANNUAL REPORT 03 Rapport Agenda du conseil de surveillance Annual General Meeting April 26, Welcome and introduction of guests 2. Approval of the agenda 3. Approval of the minutes of the last Annual General Meeting 4. Report by the Board of Directors 5. Report by the Board of Supervision 6. Presentation of financial statements 7. Report on the use of the Community Development Fund 8. Presentation of the Cooperative Difference Report 9. Questions for the Board of Directors 10. Questions for the Board of Supervision 11. Approval of interest rate on permanent shares and on surplus shares 12. Approval of the allocation of the year s surplus earnings 13. Elections to the Board of Directors 14. Elections to the Board of Supervision 15. Years of service 16. Acknowledgements 17. Closing

4 04 64 th ANNUAL REPORT Message from the President DANIEL ROUSSEAU President Board of Directors Caisse Desjardins de Chomedey is pleased to provide the following report to member-owners on the administration of your financial services cooperative in Throughout the year, your Caisse made every effort to maintain the highest quality services to members. Our staff benefited from numerous improvement programs focusing on products and services, the advisory relationship and service quality. Caisse officers also participated in training related to the challenges of efficient democratic governance for our cooperative financial group. Against a backdrop of economic recovery, Desjardins Group closed its books in 2009 with surplus earnings before member dividends approximating those recorded before the financial crisis. Despite increases in the Group s business volume and investment income, reduced interest rates had a negative effect on Caisse net interest income, thereby affecting the profitability of the network. In contrast, insurance activities, Desjardins Securities and Caisse centrale Desjardins all posted positive results over In spite of the economic challenges and highly competitive environment facing Desjardins, Caisse Desjardins de Chomedey posted excellent financial results in 2009, clearly demonstrating the effectiveness of the cooperative model in the financial services industry. This positive financial performance enables your Caisse to continue growing, while offering the best products and services on the market and playing an active role in the sustainable development of the community. The 2008 financial crisis has taught financial institutions a clear lesson, namely, the importance of maintaining, if not strengthening, their capital base. Desjardins Group s capital ratio remains among the highest in the Canadian banking industry. In fact, 2009 marks the first year that Desjardins Group made the list of the world's 50 safest banks. Desjardins ranked 26 th, according to Global Finance, a New York publication that has compared the world s largest banks for the past 18 years based on their total assets and long-term credit ratings. In 2009, our capitalization was strengthened through two debt security issues totalling $1 billion. We also launched an issue of permanent shares that was highly successful with members, exceeding sales of $700 million. This focus on protecting our capital base has not diminished your Caisse s commitment to support its community. In terms of the Desjardins Youth Focus program, various initiatives were implemented to advance the interests of young people, such as, establishing the School Caisse in nine primary schools and the Young Responsible Citizen Program in seven schools within the Caisse s territory. Training sessions on various subjects related to finance were organized for students at Laval Liberty High School. Also, at the Annual General Meeting, eight students of Saint- Maxime and Laval Liberty High Schools were awarded bursaries of $250 each for high achievement. These examples demonstrate how your Caisse effectively fulfills its commitment to promote the social, professional and financial integration of young people. Additionally, your Caisse provided substantial financial support to many community projects though our Community Development Fund, as well as through donations and sponsorships granted by the Caisse. Partnerships were established with various local organizations including: Greek Orthodox Community of Laval, Club Lions de Laval Inc., Carrefour d Intercultures de Laval, Société Alzheimer Laval, Sir-Wilfrid-Laurier Foundation, Alphonse Desjardins and Saint-Norbert Primary Schools, and École secondaire Saint-Maxime and Laval Liberty High Schools. Together, we can shape the future of Desjardins Group, founded on strong cooperative values, toward a more responsible, equitable and sustainable world. Desjardins Group thinks and acts long-term and, on a daily basis, knows how to combine assets with values thereby putting money to work for people and their communities.

5 64 th ANNUAL REPORT 05 Board of Supervision Report PIERRE JODOIN Chair Board of Supervision The function of the Board of Supervision is to supervise caisse operations with respect to ethics, professional conduct and cooperation, on behalf of the membership, as represented at the General Meeting. This report describes the main activities carried out during the past year. Supervision of Ethics The Board of Supervision ensured that the conduct, decisions and actions of the Caisse, its officers and its employees reflected the values and principles outlined in the Code of Ethics and Professional Conduct. Supervision of Professional Conduct The Board of Supervision ensured that the Caisse, its officers and its employees adhered to the rules of conduct outlined in the Code of Ethics and Professional Conduct. The Board s monitoring activities in terms of professional conduct focused mainly on the following aspects: Conflict of interest situations No conflict of interest situations were noted. Loans granted to restricted parties Total loans granted during the past year to restricted parties of the Caisse amounted to $359,442. Loans were granted in accordance with the applicable rules of ethics and professional conduct. Supervision of Cooperation The Board s monitoring activities in terms of the cooperation aspect focused mainly on the following: Democratic activities - Mechanisms to receive members comments, member consultations and distribution of information - Officer training and information provided to them Information and support on cooperative, economic and financial activity - Means used to support members, particularly young members, new members and members in financial difficulty - Staff training on the cooperative aspect of Desjardins Group and Caisse activities, specifically targeting new members to prepare them for their role in providing information and support to members Sustainable local development and collaboration with others - Actions carried out to support local development - Caisse and staff involvement in local organizations - Transparent, effective and efficient orientations and policies for granting donations and sponsorships as well as the use of the Community Development Fund (CDF) Permanent and cooperative values and commercial and management practices - Member satisfaction assessments - Our continuous improvement process and mechanism for handling complaints Finally, our Caisse s main challenges for the coming years are integrity, respect for members rights, cooperative, economic and financial education, and community involvement. The Board of Supervision promises to work with the Caisse Board of Directors and its general management to meet these challenges effectively.

6 06 64 th ANNUAL REPORT Message from the General Manager LAURENT CARON General Manager It is my pleasure to present to you the financial report for Caisse Desjardins de Chomedey for the fiscal year ended December 31, Volume of Business under Management Backed by $625,588,126 in business under management, up 18.9% over last year, the Caisse is very well positioned in its market. As part of Desjardins Group, the Caisse has access to a complete range of financial products and services to meet the ever-growing needs of its 13,127 members. Overall, the investment-savings outstanding (caisse and components combined) now represents 43.1% of business volume, while financing products (caisse and components combined) make up 56.9% of total business volume. Investment-savings Investment-savings (caisse and components combined) grew by $33,270,527 to $269,556,589, an increase of 14.1% compared to last year. In addition to the savings offer at the Caisse, substantial efforts have been made to provide the most comprehensive, one-stop offering of Desjardins financial products, from mutual funds and securities to discretionary management services. Financing Total Caisse financing was $356,031,537 with overall growth this year of 22.8%. Activities were largely made up of Caisse loans (personal and business combined), which grew by 11.7%, while financing through the components (loans sold or shared) increased sharply, resulting in annual growth of 70.2%. The components demonstrated the best performance, leading to very strong growth of the entire financing portfolio. NOTES ON THE FINANCIAL STATEMENTS Balance Sheet The assets of your Caisse grew by $27,926,359 to $286,816,844, representing growth of 10.8% over last year. Caisse liabilities were $262,666,461, representing growth of 10.4%. Borrowings increased by $3,519,822 or 6.9%, as a result of the rise in credit and now total $54,184,861. As at December 31, 2009, your cooperative s holdings had shown growth, from $20,936,744 to $24,150,383, an increase of 15.3%. In addition to Caisse equity, holdings are comprised of cooperative shares of $65,465, permanent shares of $4,425,830, dividend shares of $129,763, surplus earnings to be distributed of $884,608, accumulated other comprehensive income of $99,610, and reserves of $18,545,107. The Caisse has $15,798,935 accumulated in the General Reserve and Appreciation Reserve. The Caisse has approximately $662,418 in its Stabilization Reserve and $354,183 in its Community Development Fund. Additionally, your Caisse has accumulated a total of $1,729,571 in its Reserve for Member Dividends (RMD). Caisse equity, meanwhile, is in accordance with the 6.75% international capitalization standards for expansion assets and 10.8% standard for risk assets. Statement of Results During the past year, your Caisse generated surplus earnings before taxes and member dividends of $1,075,996, down by 74% compared to the previous year. Interest income was $12,018,517, a decrease of 12.8% over last year. Interest charges, meanwhile, fell by 7.5%, a difference of $431,611 over the previous year, due to the increase in savings and the fall in interest rates. Losses on loans were $206,918, or 0.08% of the total personal and business loan portfolio. Other income, generated largely from products and services of Desjardins components, was $2,086,337, up 4.7% compared to last year. Other charges also show slight overall growth, representing a variance of $231,553, or 3.4%. L état des résultats L état des résultats Au cours du dernier exercice, votre Caisse a réalisé des excédents avant juste valeur, impôts et ristournes de $, en hausse de 108,8 % par rapport à l année précédente.

7 64 th ANNUAL REPORT 07 Message from the General Manager (continued) Surplus Earnings and Member Dividends Once again this year, our surplus distribution proposal includes the payment of member dividends totalling $455,209. For the past eleven years, total member dividends were $8,781,576. This year s distribution, which supports a larger contribution to the reserve, reflects the balanced and responsible approach that has been proposed to all caisses. In view of the current economic and financial context, it is important for your Caisse, and for Desjardins Group as a whole, to strengthen its capitalization. While banks have the option of issuing shares in order to raise their capitalization levels, our cooperative financial group must first ensure the balanced management of surplus earnings. Investment Funds Investment funds owned by the caisses enable the Fédération des caisses Desjardins du Québec to coordinate investments in Desjardins Group subsidiaries, as well as in regional investments. Through their activities, these subsidiaries in turn enable the caisses to provide an extensive range of financial products and services to individuals, groups and businesses. The following table shows the Caisse s investment in each of the funds, as well as the year-end yield. Investment Funds Shares held Average as at December 31, 2009 yield (Dollar amount) (Percentage) Provincial Funds Caisse centrale Desjardins (CCD) $2,404, % Société de Services des caisses Desjardins (SER) $(2,965) -- % Desjardins Venture Capital (INV) $184, % Desjardins Securities (VM) $161, % Desjardins Trust (FD) $327, % Desjardins Financial Corporation (RF 1) $179, % Desjardins Financial Corporation (FIN3) $4,150, % Regional Funds FID-YMC $ % FED $47,948 (1.20)% Outlook Your Board of Directors recently held a planning meeting in order to establish the Caisse s business plan and major budget orientations for the year. These orientations, supported by disciplined and effective management, will undoubtedly enable us to once again improve Caisse results. Conclusion In closing, I would like to thank the entire staff for their outstanding dedication and adaptability to our ever-evolving business practices. I would also like to thank the officers for their commitment and availability, and all the members of the Caisse for their confidence and their loyalty to the Caisse and its services.

8 08 64 th ANNUAL REPORT Auditor s Report To the members of Caisse Desjardins de Chomedey, Pursuant to section 139 of the Act respecting Financial Services Cooperatives, we have audited the balance sheet of Caisse Desjardins de Chomedey (the Caisse ) as at December 31, 2009, and the statements of income and of distributable surplus earnings, of distribution, of comprehensive income and accumulated other comprehensive income, of reserves, and of cash flows for the year then ended. These financial statements are the responsibility of the Caisse's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Caisse as at December 31, 2009, and the results of its operations and its cash flow for the year then ended in accordance with Canadian generally accepted accounting principles. 1 Chartered accountant auditor permit No Montréal (Québec), March 10, Desjardins Bureau for Financial Monitoring 7400, boulevard les Galeries d Anjou, bureau 500 Anjou (Québec) H1M 3M , poste 6001 Télécopieur :

9 64 th ANNUAL REPORT 09 Balance Sheet AS AT DEMEBER 31 Note Assets Liquid assets and investments 5 $18,968,316 $17,809,779 Loans 6 Personal 205,522, ,734,881 Business 56,977,568 54,309, ,499, ,044,179 Allowance for credit losses 1,481,646 1,523, ,018, ,520,488 Other assets Premises and equipment 7 1,489,665 1,627,103 Accrued interest and other 5,340,672 5,933,115 6,830,337 7,560,218 Total assets $286,816,844 $258,890,485 Liabilities Deposits Term savings $134,457,601 $124,736,745 Other 69,590,688 57,942, ,048, ,678,862 Other liabilities Borrowings 8 54,184,861 50,665,039 Accrued interest and other 4,433,311 4,609,840 58,618,172 55,274, ,666, ,953,741 Equity Capital stock 9 4,621,058 2,363,292 Distributable surplus earnings ,608 1,953,986 Accumulated other comprehensive income 11 99,610 (247,320) Reserves 18,545,107 16,866,786 24,150,383 20,936,744 Total liabilities and equity $286,816,844 $258,890,485 Signed for the Board of Directors DANIEL, ROUSSEAU (signed) Director SERGE, HAMELIN (signed) Director

10 10 64 th ANNUAL REPORT Statements of Income of Distributable Surplus Earnings DECEMBER 31 Results Note Interest income $12,018,517 $13,784,455 Interest expense 5,294,184 5,725,795 Net interest income 6,724,333 8,058,660 Provision and loan losses 206, ,159 Net interest income after provision and loan losses 6,517,415 7,642,501 Other income 12 2,086,337 1,993,090 Other expenses Personnel 13 3,226,047 3,063,402 Assessments paid to Desjardins components 697, ,892 Premises 574, ,149 General expenses 14 2,526,591 2,529,633 7,024,629 6,793,076 Surplus earnings before fair value, investments in Desjardins subsidiary companies, taxes and member dividends 1,579,123 2,842,515 Income (losses) related to fair value of derivative instruments (1,432,385) 2,936,362 Income (losses) related to investments in Desjardins subsidiary companies 5 929,258 (1,640,963) Surplus earnings before taxes and member dividends 1,075,996 4,137,914 Income taxes 15 67,743 1,364,782 Surplus earnings for the year before member dividends 1,008,253 2,773,132 Member dividends , ,869 Income tax savings relative to member dividends 15 (98,468) (139,356) Surplus earnings for the year after member dividends 656,285 2,289,619 Distributable surplus earnings Transfer from (allocation to) appreciation reserve: Investments in Desjardins subsidiary companies (917,445) 1,650,728 Derivative instruments 1,108,597 (2,225,838) Transfer from community development fund 46,719 94,386 Transfer from future member dividends reserve - 152,395 Allocation to statement of distribution (3,537) (7,304) Permanent share issuance costs, net of income taxes (6,011) - Distributable surplus earnings 10 $884,608 $1,953,986

11 64 th ANNUAL REPORT 11 Statement of Distribution DECEMBER 31 Note Distributable surplus earnings from previous year $1,953,986 $1,722,361 Transfer from statement of distributable surplus earnings 16 3,537 7,304 Distribution by members: Interest on permanent shares (76,653) (95,090) Interest on surplus shares (3,161) (2,688) General reserve (1,146,392) (554,097) Stabilization reserve (14,673) (9,096) Future member dividends reserve (735,000) (941,966) Community development fund - (150,000) Income tax savings relative to interest paid on permanent shares and on surplus shares 18,356 23,272 Balance after distribution $- $-

12 12 64 th ANNUAL REPORT Statements of Comprehensive Income and Accumulated Other Comprehensive Income DECEMBER 31 Note Comprehensive income Surplus earnings for the year after member dividends $656,285 $2,289,619 Other comprehensive income Reclassification to the statement of income following amortization of gains on derivative instruments related to cash flow hedges discontinued in previous years, net of income taxes (4,598) (3,637) Share in other comprehensive income of Desjardins subsidiary companies for which the Caisse's investment is accounted for under the equity method 341,759 (616,235) Reclassification to the statement of income relative to the share in other comprehensive income of Desjardins subsidiary companies for which the Caisse's investment is accounted for under the equity method 9, , ,528 (402,068) Total other comprehensive income 346,930 (405,705) Comprehensive income $1,003,215 $1,883,914 Accumulated other comprehensive income Balance at beginning of year $(247,320) $158,385 Other comprehensive income for the year 346,930 (405,705) Balance at end of year 11 $99,610 $(247,320)

13 64 th ANNUAL REPORT 13 Statement of Reserves DECEMBER Appreciation reserve (total) Appreciation reserve investments in Desjardins subsidiary companies Balance at beginning of year $2,083,726 $3,732,950 Transactions in owners' equity by Desjardins subsidiary companies in which the Caisse's share is accounted for under the equity method 20,127 1,504 Increase from statement of distributable surplus earnings as a result of statutory provisions 917,445 - Allocation to statement of distributable surplus earnings as a result of statutory provisions - (1,650,728) Balance at end of year $3,021,298 $2,083,726 Appreciation reserve derivative instruments Balance at beginning of year $2,293,042 $67,204 Increase from statement of distributable surplus earnings as result of statutory provisions - 2,225,838 Allocation to statement of distributable surplus earnings as a result of statutory provisions (1,108,597) - Balance at end of year $1,184,445 $2,293,042 Appreciation reserve (total) $4,205,743 $4,376,768 General reserve Balance at beginning of year $10,446,800 $9,892,703 Increase resulting from distribution by members 1,146, ,097 Balance at end of year $11,593,192 $10,446,800

14 14 64 th ANNUAL REPORT Statement of Reserves (continued) DECEMBER Stabilization reserve Balance at beginning of year $647,745 $638,649 Increase resulting from distribution by members 14,673 9,096 Balance at end of year $662,418 $647,745 Future member dividends reserve Balance at beginning of year $994,571 $205,000 Increase resulting from distribution by members 735, ,966 Allocation to statement of distributable surplus earnings - (152,395) Balance at end of year $1,729,571 $994,571 Community development fund Balance at beginning of year $400,902 $345,288 Increase resulting from distribution by members - 150,000 Allocation to statement of distributable surplus earnings of amounts used during the year (46,719) (94,386) Balance at end of year $354,183 $400,902 Total reserves $18,545,107 $16,866,786

15 64 th ANNUAL REPORT 15 Statement of Cash Flows DECEMBER Operating activities Surplus earnings for the year after member dividends $656,285 $2,289,619 Adjustments to determine cash flows Provision and loan losses 206, ,159 Amortization of premises and equipment 298, ,267 Net change in accrued interest receivable and payable (479,761) 386,817 Losses (income) related to investments in Desjardins subsidiary companies (917,445) 1,650,728 Losses (income) related to fair value of derivative instruments 1,432,385 (2,936,362) Other 81, ,102 Cash flows from operating activities 1,277,818 2,675,330 Financing activities Net change in member deposits 20,751,301 24,069,568 Transactions related to borrowings Net change in line of credit 8,427,798 15,309,564 Increase in term loans 34,644,065 11,165,377 Term loans repaid (39,552,041) (13,500,000) New issue of permanent shares 2,187,060 - Other net change in capital stock 64, ,472 Interest on permanent shares and surplus shares, net of income tax savings (61,458) (74,506) Cash flows from financing activities 26,461,420 37,084,475 Investing activities Net change in loans (27,704,621) (39,247,821) Net change in investments (1,264,181) (1,515,897) Net change in premises and equipment (160,582) (29,562) Cash flows from investing activities (29,129,384) (40,793,280) Decrease in cash (1,390,146) (1,033,475) Cash at beginning of year 3,254,793 4,288,268 Cash at end of year $1,864,647 $3,254,793 Other cash flow information Amount of interest paid $5,374,624 $5,506,827 Amount of income taxes paid during the year 154,707 81,247

16 16 64 th ANNUAL REPORT Notes to the Financial Statements DECEMBER 31, 2009 Note 1. Applicable Legislation and Operations Carried on by the Caisse The Caisse is a cooperative whose object is to receive the savings of its members and to invest them profitably, to extend credit and supply other financial products and services to its members, to foster cooperation and to promote economic, social and cooperative education. It is governed by the Act respecting Financial Services Cooperatives (the Act ). The Caisse is listed with the Autorité des marchés financiers. It is also a member of Fonds de sécurité Desjardins, whose main object is to establish and administer a security, liquidity or mutual benefit fund for the benefit of the Desjardins caisses in Québec. Note 2. New Accounting Standards Credit risk and the fair value of financial assets and financial liabilities On January 1, 2009, the Caisse retrospectively adopted the new abstract of the Emerging Issues Committee (EIC) of the Canadian Institute of Chartered Accountants (CICA) entitled Credit Risk and the Fair Value of Financial Assets and Financial Liabilities (EIC-173). This new EIC abstract states that an entity s own credit risk and the credit risk of the counterparty should be taken into account in determining the fair value of financial assets and financial liabilities, including derivative instruments. The adoption of EIC-173 did not have any significant impact on the valuation models used to determine the fair value of financial instruments or on the Caisse s results or financial position. Treatment of embedded derivatives upon reclassification of a financial asset In June 2009, the Accounting Standards Board (AcSB) amended CICA Handbook Section 3855 Financial Instruments Recognition and Measurement by adding guidance concerning the assessment of embedded derivatives upon reclassification of a financial asset out of the held-fortrading category. The Caisse has applied this new guidance to reclassifications made since July 1, This amendment did not have any impact on its financial statements. Improvement to disclosure requirements about financial instruments In June 2009, the AcSB issued amendments to CICA Handbook Section 3862 Financial Instruments Disclosures in order to incorporate the improvements to disclosure requirements about fair value measurements of financial instruments and liquidity risk, issued by the International Accounting Standards Board (IASB) in March These amendments include in particular the requirement to classify financial instruments reported at fair value using a hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels: Level 1 Measurement based on quoted prices (unadjusted) in active markets for identical assets and liabilities. Level 2 Valuation techniques based primarily on observable market data. Level 3 Valuation techniques not based primarily on observable market data. The Caisse has applied the amendments to this standard to its financial statements as at December 31, For this first year of application, it will not be required to provide comparative information for the disclosures required by the amendments. Since these amendments specifically concern disclosures, they will not have any impact on the Caisse s results or financial position.

17 64 th ANNUAL REPORT 17 Notes to the Financial Statements DECEMBER 31, 2009 Note 2. New Accounting Standards (continued) Note 3. Impairment of Financial Assets In August 2009, the CICA amended CICA Handbook Section 3855 Financial Instruments Recognition and Measurement to change the categories into which debt instruments are required or permitted to be classified and to eliminate the distinction between debt securities and other debt instruments. These amendments include the following: Debt instruments not quoted in an active market may be classified as loans and receivables, and impairment will be assessed using the incurred credit loss model. Loans and receivables that the Caisse intends to sell immediately or in the near term must be classified as held for trading, while loans and receivables for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, must be classified as available for sale. Reclassifying financial assets from the held-for-trading and available-for-sale categories into the loans and receivables category is permitted under specified circumstances. Reversing an impairment loss relating to an available-for-sale debt instrument is required when, in a subsequent period, the fair value of the instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized. The Caisse is applying the amendments to this standard retrospectively as at January 1, These amendments have not had any impact on the Caisse s financial statements. Accounting Policies In preparing the financial statements according to Canadian generally accepted accounting principles, management is required to make certain estimates and assumptions that have an impact on the amounts reported in the financial statements and the Notes. These estimates, reviewed periodically, are based on circumstances and available information as at the data of the financial statements, thus representing management s best estimate. Items for which management had to make estimates include mainly the allowance for credit losses. Actual results may therefore differ from these estimates. Financial Instruments The Caisse has accounted for its financial instruments according to the CICA accounting standards entitled Financial Instruments Recognition and Measurement (Section 3855), Hedges (Section 3865) and Comprehensive Income (Section 1530). The main requirements of these standards are set out hereinafter. Since January 1, 2008, the Caisse has adopted the new CICA accounting standards entitled Capital Disclosures (Section 1535), Financial Instruments Disclosures (Section 3862), and Financial Instruments Presentation (Section 3863). The purpose of Section 1535 is to require the disclosure of information that enables financial statement users to evaluate the Caisse s objectives, policies and processes for managing capital. The disclosures required by this new standard are presented in Note 22.

18 18 64 th ANNUAL REPORT Notes to the Financial Statements DECEMBER 31, 2009 Note 3. Accounting Policies (continued) It should be noted that Sections 3862 and 3863 supersede Section 3861 Financial Instruments Disclosure and Presentation. Section 3863 carries forward unchanged the presentation standards contained in Section The purpose of Section 3862 is to inform users in order to enhance their understanding and evaluation of the significance of financial instruments for the Caisse s financial position and performance, as well as to help them better evaluate the nature and extent of risks arising from financial instruments and how they are managed. Financial instruments Recognition and measurement Financial assets should be classified as one of the following: held for trading, available for sale, held to maturity, or loans and receivables. Financial liabilities should be classified as held for trading, or other. Financial assets and liabilities are initially recognized at fair value. Financial instruments held for trading by the Caisse are comprised exclusively of derivative instruments for the reasons mentioned below. Available-for-sale financial assets are equity securities that are not traded on an active market and are therefore recorded at cost. The held to maturity category is not used. Finally, loans and receivables and financial liabilities not held for trading are recorded at cost after amortization, using the effective interest rate method. Interest income and expense on these assets and liabilities are recorded with net interest income. Transaction costs related to financial instruments are basically attributable to loans and receivables and are capitalized and amortized over the life of the instrument, according to the effective interest rate method. Derivative instruments and hedges The Caisse uses swaps and options to manage the risks inherent in its financial assets and liabilities. As provided for in Canadian generally accepted accounting principles, the Caisse elected not to adopt hedge accounting for these derivatives in light of the complexity of the new requirements for documenting hedging relationships. The Caisse recognizes its derivative instruments at fair value, whether they are stand-alone or embedded. Stand-alone derivative instruments are recorded on the balance sheet as other assets and liabilities while embedded derivative instruments are presented with their host contract according to their nature, under Term savings or Other assets. Any change in the fair value of stand-alone derivatives is recognized in the statement of income under Income (losses) related to the fair value of derivative instruments, except for any change in relation to term savings linked to the market, which is recognized under Interest expense. Moreover, any change in the fair value of embedded derivatives is recorded as an interest expense adjustment. Comprehensive income Other comprehensive income includes amortization of the balance related to cash flow hedges discontinued in previous years and the share in other comprehensive income of Desjardins Group subsidiary companies for which the Caisse s investment is accounted for under the equity method. The financial statements include a statement of comprehensive income. Accumulated other comprehensive income is presented as an equity item on the balance sheet. Other accounting policies To facilitate understanding of these financial statements, the significant accounting policies other than the foregoing have been integrated into the Notes.

19 64 th ANNUAL REPORT 19 Notes to the Financial Statements DECEMBER 31, 2009 Note 4. Future Accounting Changes Note 5. Note 6. Effective interest method In June 2009, the AcSB issued an amendment to CICA Handbook Section 3855 Financial Instruments Recognition and Measurement in order to clarify the interest calculation method for a financial asset after recognition of an impairment loss. The Caisse will adopt this amendment retrospectively in its fiscal year beginning on January 1, It is currently analyzing the impact of this amendment on its financial statements. International Financial Reporting Standards In February 2008, the AcSB issued a news release confirming that publicly accountable enterprises, which includes the Caisse, will be required to apply International Financial Reporting Standards (IFRS) in The Caisse, through the Fédération des caisses Desjardins du Québec (the FCDQ), is taking part in the Desjardins Group IFRS conversion project, which began in summer The Caisse will adopt IFRS on January 1, Liquid Assets and Investments Cash $1,864,647 $3,254,793 Investments in Desjardins Group subsidiary companies 7,759,065 6,243,059 Investments in liquidity fund under management 9,344,604 8,311,927 $18,968,316 $17,809,779 Cash includes cash and other sums used in current operations. Investments in Desjardins Group subsidiary companies are accounted for under the equity method. So that the Caisse can manage liquidity risk, it keeps the amounts necessary to maintain a minimum level of liquidity in a fund under management designed specifically for this purpose. The amounts paid into this fund by all the caisses are invested in a portfolio of securities that must satisfy high safety and negotiability standards so that, if the need arises, these could be cashed without incurring a material loss on their value. The amounts paid into this fund are excluded from cash because regulations do not permit them to be used for current operations. The investment in this fund is recorded at cost and classified as available for sale. At year-end 2009 and 2008, no write-down was required to reflect a permanent impairment in value under investments. Loans Loans are recorded at amortized cost, using the effective interest rate method, net of the allowance for credit losses, which reflects management s best estimate of potential losses on the loan portfolio. This allowance is made up of specific allowances and a general allowance.

20 20 64 th ANNUAL REPORT Notes to the Financial Statements DECEMBER 31, 2009 Note 6. Loans (continued) Specific allowances are determined for all loans considered to be impaired. A loan is considered impaired when one of the following situations arises: in the opinion of management, there is reasonable doubt as to the ultimate collectibility of principal and interest; the loan is more than 180 days in arrears; or the interest or principal repayment is 90 days or more past due, unless the loan is fully secured. The value of impaired loans is adjusted by discounting the expected future cash flows from these loans, and the allowance is equal to the difference between this valuation and the balance of the loan. Any variation in the allowance for credit losses due either to the passage of time or to a revision of expected payments is recorded under Provision and loan losses in the statement of income. The Caisse ceases to record interest as soon as a loan is considered impaired. When there is no longer any reasonable doubt concerning the collectibility of principal and interest on an impaired loan, it is restored to current status. Interest on this loan is once again accounted for under the accrual method, and the related allowances are reversed to income. The general allowance is intended to evaluate loan losses that cannot be determined on an individual basis, and is notably based on the profile of the loan portfolio as at the date of the balance sheet. Loans by category of borrower Personal Mortgages $166,396,982 $151,446,388 Consumer and other 39,125,287 29,288,493 Business Commercial and industrial 55,918,232 53,302,176 Agriculture, forestry and fishing 1,013, ,582 Government and public institutions 45,685 44,540 $262,499,837 $235,044,179 Loans and provision 2009 Personal Business General allowance Total Loans, neither past due nor impaired, gross amount $193,159,296 $56,659,174 $- $249,818,470 Loans, past due but not impaired, gross amount 11,413, ,696-11,549,253 Gross impaired loans 949, ,698-1,132,114 Total gross loans 205,522,269 56,977, ,499,837 Specific allowances (187,821) (86,661) - (274,482) General allowance - - (1,207,164) (1,207,164) Total net loans $205,334,448 $56,890,907 $(1,207,164) $261,018,191

21 64 th ANNUAL REPORT 21 Notes to the Financial Statements DECEMBER 31, 2009 Note 6. Loans (continued) 2008 Personal Business General allowance Total Loans, neither past due nor impaired, gross amount $170,338,802 $54,086,915 $- $224,425,717 Loans, past due but not impaired, gross amount 10,237, ,442-10,374,318 Gross impaired loans 158,203 85, ,144 Total gross loans 180,734,881 54,309, ,044,179 Specific allowances (158,203) (13,967) - (172,170) General allowance - - (1,351,521) (1,351,521) Total net loans $180,576,678 $54,295,331 $(1,351,521) $233,520,488 Past due loans are loans on which the counterparty has failed to make a payment when contractually due. Loans past due but not impaired 1 to 29 days 30 to 59 days to 89 days 90 days and more Personal $9,124,255 $1,464,550 $372,562 $452,190 $11,413,557 Business 110,514 25, ,696 Total $9,234,769 $1,489,732 $372,562 $452,190 $11,549, to 29 days 30 to 59 days 60 to 89 days 90 days and more Total Personal $8,700,207 $849,210 $596,868 $91,591 $10,237,876 Business 136, ,442 $8,836,649 $849,210 $596,868 $91,591 $10,374,318

22 22 64 th ANNUAL REPORT Notes to the Financial Statements DECEMBER 31, 2009 Note 6. Loans (continued) Changes in the provision 2009 Specific allowances Personal Specific allowances Business General allowance Total Balance at beginning of year $158,203 $13,967 $1,351,521 $1,523,691 Provision and loan losses shown in the statement of income 225, ,392 (144,357) 206,918 Write-offs and other (196,265) (52,698) - (248,963) Balance at end of year $187,821 $86,661 $1,207,164 $1,481,646 Specific allowances Personal Specific allowances Business 2008 General allowance Balance at beginning of year $134,171 $32,798 $1,127,590 $1,294,559 Provision and loan losses shown in the statement of income 229,238 (37,010) 223, ,159 Write-offs and other (205,206) 18,179 - (187,027) Balance at end of year $158,203 $13,967 $1,351,521 $1,523,691 Total Note 7. Premises and Equipment Useful Life (years) Cost Accumulated Depreciation Net Amount Net Amount Land $531,355 $- $531,355 $531,355 Building 20 1,205, , , ,858 Equipment and other 3 to 10 1,413,957 1,107, , ,210 Leasehold improvements , , , ,680 $3,846,284 $2,356,619 $1,489,665 $1,627,103 Premises and equipment are amortized according to the straight line method, based on their useful life. The amount of depreciation charged to income for the year totalled $298,020 (2008: $300,267).

23 64 th ANNUAL REPORT 23 Notes to the Financial Statements DECEMBER 31, 2009 Note 8. Borrowings Note 9. Line of credit with an interest rate of 1.27%, variable $48,758,525 $40,330,727 Term loans - 8,500,000 Term loan with an interest rate of 4.73% variable, repayable periodically, maturing in December , ,377 Term loans bearing interest at fixed rates or rates renegotiable quarterly, some of which loans have a prepayment before maturity clause (1) Fixed Rate Maturing Repayable 3.89% March 2014 March ,010, June 2017 June , , April 2019 April ,213, June 2021 June ,245,262 - Rate renegotiable Maturing Repayable 4.64% April 2014 n.a. 947, June 2016 n.a. 1,237,770 - $54,184,861 $50,665,039 (1) Term borrowings include subordinated securities with a related company, redeemable at the option of the holder under certain conditions and for specified purposes. Capital Stock The capital stock is composed of qualifying shares, permanent shares and surplus shares. The Caisse is authorized to issue an unlimited number of qualifying shares with a par value of $5, which are redeemable at the Caisse s option under certain circumstances provided for in the Act. Members have only one vote each, no matter how many qualifying shares they own. The Act authorizes the issue of an unlimited number of permanent shares and surplus shares with par values of $10 and $1 respectively. These shares do not carry any voting rights and cannot be redeemed except under certain circumstances provided for in the Act. Their interest rate is determined at the general meeting of the Caisse. Under the interest reinvestment plan, interest on surplus shares is paid in shares, while interest on permanent shares can be paid in cash or in shares. In addition to this interest, the Caisse issued new permanent shares for $2,187,060 during the year. Issued and fully paid capital stock is as follows: Qualifying shares $65,465 $64,455 Permanent shares 4,425,830 2,208,060 Surplus shares 129,763 90,777 $4,621,058 $2,363,292

24 24 64 th ANNUAL REPORT Notes to the Financial Statements DECEMBER 31, 2009 Note 10. Distributable Surplus Earnings Distribution comes under the jurisdiction of the general meeting. However, according to the standards of the FCDQ, distributable surplus earnings must be applied first for the purpose of ensuring the payment of interest on the permanent shares, as well as for the purpose of establishing or maintaining the required level of capitalization through transfers to the stabilization reserve and the general reserve. Note 11. Accumulated Other Comprehensive Income The following table describes the key items included in accumulated other comprehensive income, net of income taxes: Note 12. Gain on derivative instruments related to cash flow hedges discontinued in previous years $11,369 $15,967 Share in other comprehensive income of Desjardins subsidiary companies for which the Caisse s investment is accounted for under the equity method 88,241 (263,287) $99,610 $(247,320) Over the next three years, the balance of the accumulated other comprehensive income from cash flow hedges will be reclassified to the statement of income, including $6,101 in income within the next twelve months. Other Income Accrued mainly from deposit administration $925,989 $886,254 Accrued from administration of other services 698, ,720 Accrued from distribution of Desjardins products and services 462, ,116 $2,086,337 $1,993,090 Note 13. Income accrued from deposit administration consisted mainly of service charges and charges related to payment orders issued without sufficient funds and to service charges, while income accrued from the administration of other services was made up of fees, in the amount of $169,005 (2008: $84,618), of charges relating to collections made on behalf of various organizations, and of income accrued from intercaisse transactions. Income accrued from the distribution of Desjardins products and services comprises fees for the financial activities carried on by Desjardins subsidiary companies through the Caisse. Employee Future Benefits The Caisse participates in the Desjardins Group defined benefit multi-employer pension plan which guarantees the payment of pension benefits. Benefits are calculated based on the number of years of participation in the plan, and the employee s salary. In addition, the Caisse provides life and health insurance coverage to its active and retired employees and their dependents, also through Desjardins Group.

25 64 th ANNUAL REPORT 25 Notes to the Financial Statements DECEMBER 31, 2009 Note 13. Employee Future Benefits (continued) These plans are accounted for under the provisions for defined benefit plans. The cost of these plans recognized during the year is presented under Personnel in the income statement and is broken down as follows: Pension plan $206,286 $191,633 Group insurance plan 166, ,332 Note 14. General Expenses Note 15. Note 16. Computer services $790,030 $751,438 Office supplies and communications expenses 258, ,625 Intercaisse transactions 387, ,031 Other 1,091,042 1,109,539 Income Taxes $2,526,591 $2,529,633 The difference between the income tax expense of $193,924 (2008: $1,089,664), calculated at the basic federal and provincial tax rate, and the income tax savings of $30,725 (2008: expense of $1,225,426) presented in the statement of income is mainly attributable to the small business deduction, the non-taxable portion of transactions related to investments in Desjardins Group subsidiary companies, and the revaluation of future income taxes. Member Dividends The member dividends presented in the statement of income can be broken down as follows: Amounts based on a management decision recommending that the general meeting approve this payment of member dividends $455,209 $- Amounts based on a resolution of the Board of Directors recommending that the general meeting approve this payment of member dividends - 632,495 Difference between the amount of member dividends paid and the amount recorded based on the resolution of the Board of Directors: Paid in 2009 and recorded as at December 31, 2008 (4,773) (1) - Paid in 2008 and recorded as at December 31, (9,626) (1) $450,436 $622,869 (1) The amount transferred between the Statement of Distributable Surplus Earnings and the Statement of Distribution was $3,537 (2008: $7,304) because of the tax impact. Member dividends are calculated based on interest on loans and deposits, and on average outstandings for Desjardins Funds purchased by the member through the Caisse.

26 26 64 th ANNUAL REPORT Notes to the Financial Statements DECEMBER 31, 2009 Note 17. Related Party Transactions Note 18. The Caisse is a member of the FCDQ, which provides the Caisse with various services of a technical, financial and administrative nature. The FCDQ is a cooperative which is the majority owner of the other Desjardins components. In the ordinary course of business, the Caisse carries out transactions with other Desjardins components. It also carries out financial transactions with its officer members. Transactions with related parties are accounted for at the exchange value, which represents the amount agreed upon by the parties. Conditions are similar to those offered on financial markets. The table below shows the main transactions other than those specifically identified elsewhere in the financial statements. Balance sheet Income Liquid assets and investments $18,968,316 $17,809,779 $1,347,489 $(1,211,254) Other assets 3,479,084 3,687, Income from other sources n.a. n.a. 3,854,552 6,168,729 Borrowings 54,184,861 50,665,039 1,051,013 1,586,780 Other liabilities 405, , Other charges n.a. n.a. 2,783,104 1,382,109 Income from other sources is derived chiefly from intercaisse transactions, swaps and fees related to the distribution of Desjardins products and services, while other charges relate mainly to swaps, data processing services, intercaisse transactions and insurance services. During the year, the Caisse sold and purchased loans at market value. Sales exceeded purchases by $41,259,231, and a gain of $1,930,355 was realized on the loans sold. Fair Value of Financial Instruments The following table shows the fair value of financial instruments carried or not carried on the Caisse s balance sheet. Interest rate sensitivity is the main cause of fluctuation in the fair value of the Caisse s financial instruments. The carrying value of financial instruments other than derivatives is not adjusted to take into account increases or reductions in fair value as a result of interest rate fluctuations. The fair value of financial instruments is as follows: Carrying value Estimated fair value Carrying value Estimated fair value Assets Liquid assets and investments $18,968,316 $19,298,066 $17,809,779 $17,917,303 Loans 261,018, ,068, ,520, ,130,953 Other financial assets 1,733,427 1,733, , ,898