Financement-Québec FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 2015

Financement-Québec FINANCIAL STATEMENT FOR THE YEAR ENDED MARCH 31, 2015

Financement-Québec Financial Statement for the year ended March 31, 2015

TABLE OF CONTENTS MANAGEMENT S REPORT... 3 INDEPENDENT AUDITOR S REPORT... 5 FINANCIAL STATEMENTS... 7 INCOME AND ACCUMULATED SURPLUS... 7 STATEMENT OF REMEASUREMENT GAINS AND LOSSES... 8 STATEMENT OF FINANCIAL POSITION... 9 STATEMENT OF THE CHANGE IN NET FINANCIAL ASSETS... 10 CASH FLOWS... 11 NOTES TO THE FINANCIAL STATEMENTS... 13

MANAGEMENT S REPORT The financial statements of Financement-Québec have been drawn up by management, which is responsible for their preparation and their presentation, including significant judgments and estimates. This responsibility includes the selection of appropriate accounting methods that satisfy Canadian public sector accounting standards. The financial information contained in the operational report agrees with the information given in the financial statements. To carry out its responsibilities, management maintains a system of internal accounting controls designed to provide reasonable assurance that assets are protected and that operations are correctly accounted for in a timely fashion, are duly approved and are such as to produce reliable financial statements. Financement-Québec acknowledges that it is responsible for managing its affairs in accordance with the laws and regulations that govern it. The Board of Directors oversees how management at Financement-Québec carries out its responsibilities in terms of financial information and it approves the financial statements. The Auditor General of Québec has audited Financement-Québec s financial statements in accordance with Canadian generally accepted accounting standards. Its independent auditor s report sets out the nature and extent of the audit and expresses its opinion. The Auditor General of Québec may, without limitation, meet with the Board of Directors to discuss anything concerning its audit. Original French version signed Executive Vice President Original French version signed President and Chief Executive Officer Québec City, June 30, 2015

INDEPENDENT AUDITOR S REPORT To the Minister of Finance Report on the I have audited the accompanying financial statements of Financement-Québec, which comprise the statement of financial position as at March 31, 2015, and the statement of income and accumulated surplus, statement of remeasurement gains and losses, statement of change in net financial assets and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information included in the notes to the financial statements. Management's Responsibility for the Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of Financement-Québec as at March 31, 2015, and the results of its operations, its remeasurement gains and losses, changes in its net financial assets and its cash flows for the year then ended in accordance with Canadian public sector accounting standards. Report on Other Legal and Regulatory Requirements As required by Auditor General Act (CQLR, chapter V-5.01), I report that, in my opinion, these accounting policies have been applied on a basis consistent with that of the preceding year. Original French version signed Guylaine Leclerc, FCPA Auditor, FCA Auditor General of Québec Québec City, June 30, 2015

FINANCIAL STATEMENTS Statement of income and accumulated surplus Fiscal year ended March 31, 2015 Net interest income Budget 2015 2014 Actual results Actual results Interest on loans 616 153 594 673 751 347 Interest on investments 460 1 084 1 425 616 613 595 757 752 772 Interest on borrowings and advances (note 3) (570 805) (556 624) (716 436) Operation and administration expenses 45 808 39 133 36 336 Wages, salaries and allowances 980 898 883 Depreciation of fixed assets 152 152 115 Service agreement with the Financing Fund (425) (314) (70) Other 85 18 32 792 754 960 OPERATING SURPLUS FOR THE YEAR 45 016 38 379 35 376 ACCUMULATED OPERATING SURPLUS AT BEGINNING OF YEAR 252 113 234 249 Operations on accumulated surplus (note13) (37 691) (17 512) ACCUMULATED OPERATING SURPLUS AT END OF YEAR 252 801 252 113 The notes are an integral part of the financial statements. Financement-Québec 7

Statement of remeasurement gains and losses Fiscal year ended March 31, 2015 2015 2014 ACCUMULATED REMEASUREMENT GAINS AT BEGINNING OF YEAR 121 790 158 076 Unrealized gains (losses) attributable to the following: Fair value financial derivatives 97 131 (32 382) Reclassified amounts in the income statement: Fair value financial derivatives 3 (3 904) NET REMEASUREMENT GAINS (LOSSES) OF THE YEAR 97 134 (36 286) ACCUMULATED REMEASUREMENT GAINS AT END OF YEAR 218 924 121 790 The notes are an integral part of the financial statements. 8 Financement-Québec

Statement of financial position As at March 31, 2015 2015 2014 Financial assets Loans (note 4) 16 753 824 20 542 918 Accrued interest on loans 170 071 213 436 Cash position 153 33 Accounts receivable 4 480 3 263 Financial derivatives 506 239 291 106 17 434 767 21 050 756 Liabilities Borrowings and advances (note 5) 16 534 959 20 326 139 Net accrued interest on borrowings and advances 166 026 206 373 Financial derivatives 263 702 145 702 Accounts payable 697 393 16 965 384 20 678 607 Net financial assets 469 383 372 149 Non-financial assets Tangible fixed assets 2 442 1 854 CAPITAL STOCK (NOTE 10) 100 100 ACCUMULATED SURPLUS 471 725 373 903 Accumulated surplus consists of: 2015 2014 Accumulated operating surplus 252 801 252 113 Accumulated remeasurement gains 218 924 121 790 TOTAL 471 725 373 903 The notes are an integral part of the financial statements. For the board of directors, Original French version signed Executive Vice President Original French version signed President and Chief Executive Officer Financement-Québec 9

Statement of the change in net financial assets Fiscal year ended March 31, 2015 Budget 2015 2014 Actual results Actual results NET FINANCIAL ASSETS AT BEGINNING OF YEAR 344 078 372 149 391 036 Changes due to tangible fixed assets Acquisitions (672) (740) (580) Depreciation 152 152 115 (520) (588) (465) Operating surplus for the year 45 016 38 379 35 376 Operations on accumulated surplus (note 13) (37 691) (17 512) Net remeasurement gains (losses) for the year 12 775 97 134 (36 286) Increase (Decrease) in net financial assets 57 271 97 234 (18 887) NET FINANCIAL ASSETS AT END OF YEAR 401 349 469 383 372 149 The notes are an integral part of the financial statements. 10 Financement-Québec

Statement of cash flows Fiscal year ended March 31, 2015 2015 2014 Operating activities Surplus for the year 38 379 35 376 Items not affecting cash and cash equivalents: Adjustment of loans to the effective rate (16 904) (20 229) Interest income charged to loan balances (39) (27 964) Adjustment of borrowings and advances to the effective rate 9 160 24 786 Adjustment of the value of futures contracts 1 27 Depreciation of tangible fixed assets 152 115 30 749 12 111 Change in financial assets and liabilities related to operations (note 11) 2 105 3 700 Cash flows from operating activities 32 854 15 811 Investment activities Loans made (15 544 136) (6 219 338) Loans transferred (note 13) (457 276) (763 889) Loan repayments 19 769 757 11 852 194 Cash flows from investment activities 3 768 345 4 868 967 Fixed asset investment activities Acquisition of tangible fixed assets and cash flows from fixed asset investment activities (740) (580) Financing activities Short-term borrowings and advances 11 423 451 54 165 358 Long-term borrowings and advances - 1 000 000 Repayments of long-term borrowings and advances (3 539 133) (3 779 522) Repayments of short-term borrowings and advances (11 684 657) (56 314 759) Cash flows from financing activities (3 800 339) (4 928 923) CHANGE IN CASH AND CASH EQUIVALENTS 120 (44 725) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 33 44 758 CASH AND CASH EQUIVALENTS AT END OF YEAR 153 33 The notes are an integral part of the financial statements. Financement-Québec 11

NOTES TO THE FINANCIAL STATEMENTS 1. Establishment, Purpose and Financing Financement-Québec (the Corporation ) was established under the Act respecting Financement-Québec (CQLR, chapter F-2.01), which entered into force on October 1, 1999. The Corporation s mission is to provide financial services to public bodies covered by its statute of incorporation. The Corporation finances them directly by granting loans to them and by issuing titles of indebtedness in their name. It advises them with a view to facilitating their access to credit and minimizing the cost of financing and, for that purpose, develops financing programs. It may also manage the financial risks assumed by the public bodies. The Corporation may, in addition, provide technical services to them, in particular in the field of financial analysis and management. The Corporation charges loan issue expenses to borrowers to offset those incurred by it on borrowings made. It also charges administration expenses to borrowers. The level of expenses charged is subject to government approval. The Corporation issues titles of indebtedness guaranteed by the Québec government. The Corporation is a legal person with share capital and is a mandatary of the State. Consequently, it is not subject to Québec or Canadian income tax. 2. Main Accounting Methods The financial statements are established in accordance with the CPA Canada Public Sector Accounting Handbook. Use of any other source of generally accepted accounting principles must be consistent with that Handbook. In accordance with Canadian public sector accounting principles, the preparation of the Corporation s financial statements requires that management make use of accounting estimates and assumptions. These have an impact on the recognition of assets and liabilities and the recognition of income and charges of the period presented in the financial statements. The actual results may differ from management s best estimates. Financial Instruments Upon their initial recognition, financial instruments are classified either in the category of financial instruments valued at fair value or in the category of financial instruments valued at cost or at amortized cost. On the date of the transaction, for financial instruments valued at fair value, issue expenses are expensed while, for financial instruments valued at cost or at amortized cost, they are added to the book value of such instruments. The Corporation has classified financial derivatives in the category of financial instruments valued at fair value. The Corporation has classified loans, accrued interest on loans, cash position, accounts receivable, borrowings and advances, net accrued interest on borrowings and advances, and accounts payable in the category of financial instruments valued at cost or at amortized cost. Financial assets and financial liabilities are offset, and the net balance is shown in the statement of financial position, if and only if the Corporation has a legally enforceable right to offset the amounts recognized and if it intends either to settle the net amount or to simultaneously realize the asset and settle the liability. Financement-Québec 13

A financial instrument is derecognized when the contractual obligations are extinguished at expiration or the Corporation transfers the contractual rights to receive the cash flows linked to the financial instruments under a transaction in which practically all the risks and benefits inherent in the ownership of the financial instrument are transferred. Loans Loans are recorded at the amount disbursed at the time of issue, adjusted by the discount or premium and issue expenses and are valued at amortized cost using the effective interest rate method. The interest income on loans, valued using the effective interest rate method, is recognized when earned. Borrowings and Advances Borrowings and advances from the General Fund of the Consolidated Revenue Fund are recorded at the amount received at the time of issue, including the discount or premium and issue expenses. After their initial recognition, borrowings and advances from the General Fund of the Consolidated Revenue Fund are valued at amortized cost using the effective interest rate method. The corresponding interest expenses are shown under the heading Interest on borrowings and advances in the statement of operations. Financial Derivatives The Corporation makes use of financial derivatives to reduce risk related to fluctuations in currencies and interest rates. It is the Corporation s policy not to use financial derivatives for speculative purposes. Financial derivatives with a positive value are entered as financial assets and financial derivatives with a negative value are shown as financial liabilities. The change in the fair value of each financial derivative is recorded in the statement of remeasurement gains and losses until it is derecognized. The cumulative balance of remeasurement gains and losses associated with financial derivatives is then reclassified in the statement of operations. 14 Financement-Québec

Cash and Cash Equivalents The Corporation presents, under cash and cash equivalents, bank balances and investments that are easily convertible in the short term into a known amount of cash whose value is not likely to change significantly. 3. Interest on Borrowings and Advances Interest on borrowings and advances consists of the following: 2015 2014 Interest on borrowings and advances (512 620) (658 371) Interest on financial derivatives recorded under liabilities (114 814) (154 086) (627 434) (812 457) Interest on financial derivatives recorded under assets 70 810 96 021 TOTAL (556 624) (716 436) Financement-Québec 15

4. Loans Borrowers Entities included in the government reporting entity: 2015 Effective rates (%) (1) 2014 School boards 3 885 307 1.69 to 9.75 6 446 889 General and vocational colleges 1 280 950 1.71 to 9.59 1 721 061 Health and social services institutions and agencies 5 328 869 1.69 to 10.17 6 624 907 Université du Québec and its constituents 548 285 1.71 to 5.35 738 027 Entities excluded from the government reporting entity: 11 043 411 15 530 884 Universities other than the Université du Québec and its constituents 2 775 460 1.49 to 6.66 2 733 576 Municipalities 954 447 2.77 to 4.12 1 016 075 Société de transport de Montréal 1 350 552 2.71 to 6.03 665 156 Non-profit and fiduciary organizations 629 954 1.04 to 6.48 597 227 5 710 413 5 012 034 TOTAL 16 753 824 20 542 918 (1) Excludes floating rate loans, which are at the rate of 3-month bankers acceptances and at the rate of 1-month bankers acceptances plus a spread ranging from 0.05 to 0.30%. Principal repayment amounts with regard to loans over the next fiscal years break down as follows: Schedule of principal repayments 2015 2016 3 293 972 2017 3 184 230 2018 2 952 743 2019 2 699 963 2020 1 763 322 2021-2025 1 597 285 2026-2030 746 307 2031-2035 534 383 2036-2038 27 156 TOTAL 16 799 361 Loans maturing during the fiscal year ending March 31, 2016 include short-term loans of $321.7 million. For the long-term loans, maturities and interest rates on loans made by the Corporation are, with a few exceptions, identical to those of borrowings and advances contracted for this purpose taking into consideration interest rate swap contracts, if any. However, depending on available capital, the Corporation may make new loans from repayments of existing loans. These new loans are made at interest rates and maturities that may differ from the conditions of the advance or borrowing initially received. 16 Financement-Québec

5. Borrowings and Advances Summary 2015 Effective rate (%) (1) 2014 Borrowings on markets 15 395 759 1.38 to 7.00 19 089 633 Advances from the General Fund of the Consolidated Revenue Fund 138 501 8.60 to 9.56 140 434 Canada Mortgage and Housing Corporation (CMHC) 947 425 2.77 to 4.12 1 016 075 Financing Fund 53 274 6.78 to 9.78 59 106 Société québécoise des infrastructures - - 20 891 TOTAL 16 534 959 20 326 139 (1) Effective rate paid on long-term borrowings and swaps. Excludes floating rate borrowings and swaps, which are at the rates of 3-month bankers acceptances plus a spread ranging between minus 0.67% and plus 1.80%. Borrowing schedule Due in Borrowings on markets Advance from the General Fund CMHC Financing Fund Total 2015 Total 2014 2015 4 152 411 2016 2 251 546 - - - 2 251 546 1 815 272 2017 3 031 726 - - - 3 031 726 3 030 798 2018 3 026 860 - - 683 3 027 543 3 028 835 2019 3 035 756 - - - 3 035 756 3 034 229 2020 2 495 098 - - - 2 495 098 2 494 092 2021 - - 174 343 5 317 179 660 206 401 2023-138 501-47 274 185 775 192 436 2026 - - 294 235-294 235 315 855 2031 - - 478 847-478 847 500 014 2035 1 554 773 - - - 1 554 773 1 555 796 TOTAL 15 395 759 138 501 947 425 53 274 16 534 959 20 326 139 Borrowings maturing during the fiscal year ending March 31, 2016 include short-term borrowings of $439.8 million. All borrowings are guaranteed by the Québec government. Short-term borrowings bear interest at rates varying from 0.69% to 0.75% (rates ranging from 0.96% to 1.01% at March 31, 2014). Financement-Québec 17

The amounts of principal payments to be made on borrowings and advances over the coming fiscal years are as follows: Schedule of principal payments 2016 2017 2018 2019 2020 2021 and following Borrowings on markets 2 249 404 3 034 000 3 020 000 3 042 000 2 500 000 1 522 350 Advances from the General Fund of the Consolidated Revenue Fund 1 740 1 740 1 740 1 740 1 740 127 785 CMHC 71 110 73 658 76 299 79 035 81 870 565 453 Financing Fund 5 852 5 852 5 852 5 624 5 624 24 531 TOTAL 2 328 106 3 115 250 3 103 891 3 128 399 2 589 234 2 240 119 6. Determination of Fair Value The fair value of a financial instrument corresponds to the price at which it would be traded between parties acting under normal competitive conditions. The Corporation applies widely used valuation techniques reflecting best practices and incorporating data observed on markets. The methodology Financement-Québec uses to arrive at the fair value of its financial instruments involves discounting future financial flows receivable less those payable. Swap contracts are traded on an over-the-counter market and prices are not published for these financial instruments. The fair value of these financial instruments is estimated using swap and CDOR rate curves published on recognized financial information systems available to all stakeholders, as well as financial discounting methods consistent with best practices. Futures contracts on three-month Canadian bankers acceptances are exchange-traded and their fair value is determined on the basis of the daily settlement price. 18 Financement-Québec

By way of indication, the fair value of the Corporation s financial instruments as at March 31, 2015 is shown in the following table: Fair value of financial instruments 2015 2014 Book value Fair value Book value Fair value Loans - Total 16 753 824 17 866 485 20 542 918 21 237 904 Borrowings and advances Borrowings on markets 15 395 759 16 365 270 19 089 633 19 661 225 Advances from the General Fund of the Consolidated Revenue Fund 138 501 209 392 140 434 202 464 CMHC 947 425 1 055 579 1 016 075 1 053 420 Financing Fund 53 274 66 802 59 106 71 789 Société québécoise des infrastructures - - 20 891 23 325 TOTAL 16 534 959 17 697 043 20 326 139 21 012 223 Financial derivatives Financial assets Interest rate swap contracts 506 239 506 239 291 106 291 106 Liabilities Interest rate swap contracts (263 702) (263 702) (145 698) (145 698) Futures contracts on three-month Canadian bankers acceptances - - (4) (4) (263 702) (263 702) (145 702) (145 702) TOTAL 242 537 242 537 145 404 145 404 The fair value of other financial instruments corresponds essentially to book value in view of their nature or their short-term maturity. 7. Financial Derivatives Financial derivatives are financial contracts whose value fluctuates on the basis of the underlying security and that do not require that the underlying security itself be held or delivered. This underlying item may be financial in nature (interest rate, currency, security or stock index) or merchandise (precious metal, commodity, oil). The outstanding face amount of a financial derivative represents the theoretical value of the principal, to which applies a rate or a price to determine the exchange of future cash flows, and does not reflect the credit risk pertaining to the derivative. The Corporation makes use of two (2) types of financial derivatives to manage its financial risks. Interest rate swap contracts are used to manage the interest rate risk exposure of long-term financial instruments, while futures contracts on three-month Canadian bankers acceptances are used to manage short-term risk. Financement-Québec 19

Interest Rate Swap Contracts The Corporation uses interest rate swap contracts to manage interest rate risks on its financial intermediation activities. Interest rate swap contracts give rise to the periodic exchange of interest payments without an exchange of the reference face amount on which the payments are based. The total outstanding face value of interest rate swap contracts in Canadian currency at March 31, 2015 is $11 971 million ($14 177 million at March 31, 2014). Futures Contracts on Three-Month Canadian Bankers Acceptances (BAX) The Corporation uses futures contracts on three-month Canadian bankers acceptances (BAX) to hedge the interest rate risk arising from its short-term financing activities. These positions are revalued and revised every day and daily financial offsets are applied to them based on the closing prices of the contracts. At March 31, 2015, the Corporation held a long position with an outstanding face value of $124 million ($334 million at March 31, 2014). 8. Hierarchy of Fair Value Valuations The fair value valuations of the Corporation s financial derivatives are classified according to a hierarchy that reflects the importance of the data used. The hierarchy of fair value valuations consists of the following levels: a) prices (unadjusted) quoted on active markets for identical assets or liabilities (level 1); b) data other than the quoted prices mentioned in level 1, that are observable for the asset or the liability, directly (i.e. prices) or indirectly (i.e. price derivatives) (level 2); c) data relating to the asset or the liability that are not based on observable market data (non-observable data) (level 3). 20 Financement-Québec

The following table shows the fair value of financial instruments recognized at fair value in the statement of financial position and classified according to the valuation hierarchy described above: Hierarchical structure of fair value valuations at March 31, 2015 Financial derivatives Financial assets Level 1 Level 2 Level 3 Total Interest rate swap contracts - 506 239-506 239 Liabilities Interest rate swap contracts - (263 702) - (263 702) TOTAL - 242 537-242 537 Hierarchical structure of fair value valuations at March 31, 2014 Financial derivatives Financial assets Niveau 1 Niveau 2 Niveau 3 Total Interest rate swap contracts - 291 106-291 106 Liabilities Interest rate swap contracts - (145 698) - (145 698) Futures contracts on three-month Canadian bankers acceptances (4) - - (4) TOTAL (4) 145 408-145 404 9. Financial Risk and Risk Management The Corporation s general philosophy is to avoid unnecessary risk and to limit, as much as possible, any risk associated with its activities. The Corporation avoids taking any risk not related to the normal course of its business. It does not engage in speculative activities but recognizes that the conduct of its activities exposes it to various risks, including credit, liquidity and market risk, and that it must manage these risks on an ongoing basis. To limit the effect of these risks on its results and on its financial position, the Corporation gives preference to ongoing risk management through its day-to-day operations but may also make use of financial derivatives. Financial derivatives are used solely for risk management purposes. Financement-Québec 21

a) Credit Risk Credit risk is the risk that the Corporation suffers a financial loss as a result of the failure of the counterparty of a financial instrument to fulfil a financial commitment. The Corporation s credit risk is negligible in view of the securities put in place and, consequently, the book value of the financial assets adequately represents the maximum credit risk exposure of the financial instruments. Bodies receiving a subsidy for the repayment of long-term borrowings contracted with the Corporation must pledge this subsidy in favour of the Corporation as security. For the other loans without subsidy, the Minister responsible for the body undertakes to act, in the event of the body s default, so that it remedies the situation as soon as possible. All credit risks are associated with the Québec government. In any case of default, the Québec government s intervention is stipulated under the terms of the various contracts in question, both for the Corporation s assets and its liabilities. Accordingly, the Québec government is the ultimate counterparty of the financial instruments held or incurred by the Corporation. b) Liquidity Risk Liquidity risk is the risk that the Corporation is unable to honour its financial commitments when they are due. The Corporation forecasts cash flows to ensure that it has the necessary funds to meet its obligations in a timely fashion. The Corporation is of the view that the cash flows generated by ongoing operations and available sources of funding are sufficient to satisfy its obligations as they arise. The Corporation obtains funding through long-term borrowings and short-term credit facilities, ensuring sufficient entries of funds to meet financial commitments when required. The Corporation is authorized, under a government-authorized borrowing plan, to contract short-term and long-term borrowings on financial markets. 22 Financement-Québec

At March 31, 2015, the summary of maturities expressed in face value of cash flows of financial assets and financial liabilities is shown in the following table. The net exposure to liquidity risk shows, for each interval, the excess amount (positive) or shortfall (negative) of monetary flows. Maturity schedule of monetary flows at March 31, 2015 (millions of dollars) Due in Nonderivatives (1) Assets Liabilities Net exposure Derivatives Nonderivatives (2) Derivatives By maturity Cumulative, after reinvestment of available capital (3) 2016 3 812 77 2 791 108 990 990 2017 3 574 74 3 474 91 83 1 081 2018 3 253 52 3 398 55 (148) 945 2019 2 918 38 3 346 33 (423) 536 2020 1 922 33 2 749 19 (813) (268) 2021-2025 2 034 114 992 24 1 132 906 2026-2031 1 113 125 758 1 479 1 611 2032-2038 467 110 1 802 3 (1 228) 634 (1) Financial assets that limit liquidity risk are loans, accrued interest on loans, and accounts receivable. (2) Financial liabilities that expose the Corporation to liquidity risk are borrowings and advances, net accrued interest on borrowings and advances, and accounts payable. (3) In the normal course of its business, the Corporation reinvests its available capital productively to honour its financial commitments when they are due. Maturity schedule of monetary flows at March 31, 2014 (millions of dollars) Due in Nonderivatives (1) Assets Liabilities Net exposure Derivatives Nonderivatives (2) Derivatives By maturity Cumulative, after reinvestment of available capital (3) 2015 6 025 52 4 771 108 1 198 1 198 2016 3 322 60 2 367 64 951 2 163 2017 3 405 47 3 520 26 (94) 2 113 2018 3 125 30 3 440 7 (292) 1 876 2019 2 804 16 3 368 4 (552) 1 381 2020-2024 3 165 57 3 592 5 (375) 1 178 2025-2030 913 35 791 (1) 158 1 703 2031-2038 408 65 1 923 1 (1 451) 688 (1) Financial assets that limit liquidity risk are loans, accrued interest on loans, and accounts receivable. (2) Financial liabilities that expose the Corporation to liquidity risk are borrowings and advances, net accrued interest on borrowings and advances, and accounts payable. (3) In the normal course of its business, the Corporation reinvests its available capital productively to honour its financial commitments when they are due. Financement-Québec 23

c) Market Risk Market risk is the risk that changes in market price affect the value of the Corporation s financial instruments. Market risk includes price, interest rate and exchange rate risks. i) Price Risk Price risk is the risk that the fair value or the future cash flows of the Corporation s financial instruments vary with fluctuations in market price, where such fluctuations do not stem from interest rates or exchange rates. Because of the nature of its activities, the Corporation is not exposed to price risk. ii) Interest Rate Risk Interest rate risk refers to uncertainty relating to the current fair value, fair value at maturity or future cash flows of financial securities taking into account possible changes in applicable interest rates, in the interval between the execution of a transaction on financial securities and the disposition or maturity of such securities. The Corporation s interest rate risk exposure arises in the normal course of its operations as financial intermediary. The borrowings and loans made generate uncertainty on future interest rate determination dates. To control interest rate risk, the Corporation s strategy is to match the maturities of future monetary flows of its assets and liabilities and, if necessary, change the composition of its portfolios using financial derivatives. By managing interest rate risk, the Corporation must be able to contain the effects of interest rate fluctuations within the limits it has set. Thus, the Corporation s strategy, given the Corporation s nature as financial intermediary, is intended to contain its net exposure to future interest rate fluctuations. The following table shows the net interest rate risk exposure of long-term financial assets and liabilities, as well as of short-term financial liabilities assigned to long-term financing transactions, broken down according to the sensitivity specific to each financial instrument and the attendant future monetary flow. It shows the reinvestment and refinancing risks related to these financial instruments. Thus, the management strategy, which consists in matching future monetary flows, is aimed at containing net interest rate risk exposure both globally and on a time interval basis. Short-term financial instruments, that is, short-term loans, short-term borrowings other than those mentioned above, and short-term financial derivatives, are excluded from this table because the associated interest rate risk is eliminated by day-to-day risk management operations. 24 Financement-Québec

At March 31, 2015, the summary of maturities expressed in face value of future cash flows of financial assets and financial liabilities whose fair value is sensitive to fluctuations in interest rates is as follows: Net interest rate risk exposure (millions of dollars) Loans 2015 Financial assets Financial liabilities Net exposure Derivatives Borrowings and advances Derivatives Floating rate 41 (2 577) 5 714 (8 294) 44 Fixed rate: 2016 3 481 250 2 198 1 511 22 2017 3 571 623 1 905 2 230 59 2018 3 250 448 1 948 1 671 79 2019 2 916 402 1 785 1 496 37 2020 1 920 478 1 745 627 26 2021-2025 2 022 (107) 992 836 87 2026-2031 1 099 77 758 397 21 2032-2038 459 1 612 1 802 260 9 TOTAL 18 759 1 206 18 847 734 384 Net interest rate risk exposure (millions of dollars) 2014 Financial assets Financial liabilities Net exposure Loans Derivatives Borrowings and advances Derivatives Floating rate 47 25 7 666 (7 844) 250 Fixed rate: 2015 5 725 (466) 2 137 3 104 18 2016 3 317 175 2 092 1 292 108 2017 3 401 539 1 905 1 993 42 2018 3 122 (70) 1 948 1 038 66 2019 2 801 (445) 1 785 546 25 2020-2024 3 151 (307) 2 584 192 68 2025-2030 897 32 791 126 12 2031-2038 398 1 608 1 923 79 4 TOTAL 22 859 1 091 22 831 526 593 Financement-Québec 25

The following table shows the sensitivity of the annual operating surplus to the interest rate, measured by an increase or decrease in the applied interest rate of 100 basis points over the entire fiscal year: Sensivity of the annual operating surplus to the interest rate Simulated interest rate shock estimate of the impact 2015 2014 Increase of 100 basis points (1 406) (3 586) Decrease of 100 basis points 1 419 3 466 The following table shows the sensitivity of the year s net remeasurement gains (losses), measured by an increase or decrease in the rate of interest of 100 basis points over the entire fiscal year: Sensitivity of net remeasurement gains (losses) for the fiscal year to the interest rate Simulated interest rate shock estimate of the impact 2015 2014 Increase of 100 basis points 9 723 16 528 Decrease of 100 basis points 17 067 9 190 iii) Exchange Risk Exchange risk is the risk that the fair value or future cash flows of a financial instrument fluctuate as a result of changes in exchange rates. In view of its mission, the Corporation avoids any exposure to exchange risk. At March 31, 2015, the Corporation holds no financial instrument denominated in foreign currency and consequently is not exposed to exchange risk. 10. Capital Stock Description The Corporation s shares are part of the public domain and are attributed to the Minister of Finance of Québec. Authorized 1 000 000 shares with a par value of $100 each. Issued and paid for 1 000 shares: $100 000 The Corporation's shares are held by the Minister of Finance of Québec. 26 Financement-Québec

11. Cash Flows For the fiscal year ended March 31, 2015, the change in financial assets and liabilities relating to operations consists of the following items: Change in financial assets and liabilities 2015 2014 Accrued interest on loans 43 365 1 186 Accounts receivable (1 217) (629) Net accrued interest on borrowings and advances (40 347) 3 836 Accounts payable 304 (693) TOTAL 2 105 3 700 Interest paid by the Corporation during the year amounted to $593.7 million ($711.3 million at March 31, 2014). 12. Related Party Transactions In addition to the related party transactions already disclosed in the financial statements and recorded at exchange value, the Corporation is related to all the ministries and special funds, as well as to all the bodies and enterprises controlled directly or indirectly by the Québec government or subject either to joint control or to significant common influence by the Québec government. All the Corporation's business transactions with these related parties were carried out in the normal course of its activities and under usual business conditions. These transactions are not separately disclosed in the financial statements. 13. Operations on Accumulated Surplus On March 31, 2015, the transfer of ownership of certain loans of the Financing Fund from the Agence métropolitaine de transport to the Société de transport de Montréal, an entity excluded from the government reporting entity, led to the transfer of ownership of these loans to the Corporation s Financing Fund. The book value and accrued interest relating to these loans are $419.6 million and $4.2 million. The consideration paid by the Corporation was $461.5 million dollars, corresponding to their fair value. The excess of the amount paid over the transferred assets, $37.7 million, was posted directly to the accumulated surplus. 14. Comparative Figures Some comparative figures for 2014 have been reclassified for consistency with the presentation adopted in 2015. Financement-Québec 27