Speech by Mr. Germain Carrière, President and Chief Operating Officer of Desjardins Securities, on the occasion of the 2008 Desjardins Group Annual General Meeting

Centre des congrès de Québec, March 29, 2008
(Actual speech may differ from this text)

Mr. D'Amours,
Ms. Leroux,
Dear delegates,
Distinguished guests,
Ladies and Gentlemen,

Good afternoon,

I take great pleasure in speaking to you today, reviewing the past year at Desjardins Securities and presenting our outlook for 2008.

Like the rest of the financial services industry, we have faced tough challenges in 2007, especially in the fourth quarter when the effects of the liquidity crisis were strongly felt. The slowdown in growth of the U.S. economy and fears of recession also helped make financial markets and the fixed income sector more nervous and, accordingly, more volatile.

In this uncertain environment, Desjardins Securities achieved a more than satisfying performance. We recorded very good results in the first three quarters, with total income of 230.8 million dollars. Our net profit then stood at 4.2 million dollars, and we were confident we would end 2007 with results well above expectations.

Unfortunately, 2007 lasted a full 12 months, and the fourth quarter was very hard on the financial sector. Numerous banks and brokerage firms were forced to announce billions of dollars in asset writedowns because of the subprime mortgage crisis. At Desjardins Securities, the quarter ended with a net loss of 3.6 million dollars.

For the year as a whole, Desjardins Securities had a net profit of 0.6 million dollars. This was actually a significant improvement over previous years, with losses of 6.1 million dollars in 2006 and 11 million dollars in 2005. The year 2007 did not enable us to achieve the level of earnings we would have liked, but it was a substantial advance, especially in the current financial market context.

Our total income in the past year reached 291 million dollars. As regards to growth, these results compare to those of our main competitors. Assets under management grew nearly 6 %, rising to 18.6 billion dollars. We were thus able to meet our strategic development goals, which focused on the profitable growth of our activities.

We can thus state that Desjardins Securities is a healthier and better-performing company. In exercising very tight control over spending, we can ensure that each new dollar spent generates maximum income, and this was shown in 2006 and 2007. With income growth exceeding spending growth, we were able, for the first time in three years, to show a profit.

The success of Desjardins Securities is also that of the Desjardins caisse network. As part of our agreement, you referred more than 796 million dollars in new assets to us. Desjardins Securities provided a contribution of some 15 million dollars in 2007. Since 2000, more than 63 million dollars has been returned to the caisses.

This partnership between Desjardins Securities and the caisses is mutually advantageous, enabling Desjardins Securities to increase its market share and to position itself more solidly in the face of increasingly tough competition.

From the standpoint of the caisses, Desjardins also comes out ahead because we can increase member satisfaction, achieve better customer retention and promote the repatriation of assets through a richer and more complete offering.

We also gain an advantage from our partnership with the Caisse centrale. It helps us position ourselves as a real force in the large business market and rival our bank-owned competitors. Let us mention, as an example, the mandate for the merger between the Montreal Exchange and TSX Group in which we advised TSX Group and the Caisse centrale was co-lead underwriter, providing about 500 million dollars in credit facilities to TSX Group.

Let's take a look now at our results by sector of activity.

In Full Service Brokerage, we achieved substantial growth in 2007, with income reaching 151.9 million dollars. Tighter cost management enabled us to improve earnings considerably in this sector.

We were delighted by the success achieved by our Darwin program in the sector of Discretionary Management. Darwin is an investment program providing clients with access to a selection of the best investment managers to take care of their capital.

Our assets under management in this sector of activity stand at nearly 920 million dollars, up from 653 million dollars a year earlier.

This makes us the brokerage firm with the highest relative asset growth and puts us third in monetary growth.

We should also mention the launch in 2007 of the private counsel group, whose role is to support investment advisers in dealing with customers whose needs go beyond just portfolio management. This service from Desjardins Securities targets well-off families and business owners, a market niche with a development outlook that is promising for Desjardins Securities and for Desjardins Group.

Our Online Brokerage division also did well in 2007. Despite heavy competition and a fierce price war with the average annual commission going from $39 to $25 between 2005 and 2007—and down to $18 in the month of December Disnat did quite well, with income up 6.3% from the previous year. Its market share also grew, rising from 20.1% to 22.6% in Quebec.

In addition, Disnat launched a brand new online brokerage-trading platform in the autumn, with many improvements for users. One such improvement is an ability to trade all types of products.

Disnat can also point to major achievements in training for the investing public, with more than 200 seminars and online training sessions across Canada.

The acquisition of Market Perspectives Inc., a Calgary-based firm specializing in investor training, has added to our offering and consolidated Disnat's leadership role. Disnat has thus become the reference portal for independent investors.

In our Fixed Income group, the volumes traded nearly doubled in 2007 compared to 2006, reaching 269.2 billion dollars. The growth in volumes traded has a significant impact on our ability to increase our presence and participation in new issues. As a result, we had major growth in income from new issues, which rose by 35%.

Moreover, I wish to mention that for the first time in its history, DS has been named as co-lead underwriter in a bond issue of 500 million dollars by the Government of Quebec. This positions us in the 2nd place ranking, right behind our main competitor. It is without any doubt a remarkable progression.

All these performances enabled us to improve our Canadian positioning significantly, putting us just behind the large Canadian banks.

I would like now to let my colleague Steve Shelton present a few of our achievements.

Our Capital Market activities felt a heavy impact in the fourth quarter. Our total income in this sector fell by 26% compared to 2006, because of the liquidity crisis that occurred in the third quarter. However, we are continuing our development efforts with institutional clients. A great majority of income in the capital market field, close to 85% of the total, comes from outside Quebec, nearly 30% of it from the United States and Europe.

We must mention the performance of our Research Department, which forms the cornerstone of our strategy. We were able to give a new mandate to this Department without affecting the quality of its products: our ninth-place ranking in Canada among brokerage firms is proof of this. In addition, allow me to mention that five of our analysts are among the top five in Canada in seven sectors, a result never achieved before.

Our Corporate Finance division was very active in 2007. We were able to adjust to market trends, and we diversified our sectoral involvement, especially in mining, biotech and financial services.

We were involved in major files in addition to having a busy year in the market for issues by small— and medium-cap companies. Also, I cannot fail to mention that, for the first time in its history, Desjardins Securities, thanks to its innovative ideas, was co-lead underwriter in an issue of preferred shares by a Canadian chartered bank.

Allow me once again to yield the floor to another of my colleagues, Gary Littlejohn.

In 2007, even though management of our business required plenty of our time, we would not have had a full sense of satisfaction if we had neglected our role as good corporate citizens. We are involved more than ever in the cause of children across Quebec who are ill, underprivileged or who have special needs. The firm, along with its employees and customers, donated more than 340,000 dollars last January to the Montreal Canadiens Children's Foundation, with which it has been associated for six years.

More than 1.7 million dollars have been collected by Desjardins Securities for the Foundation.

Even though 2007 was not an easy year, we at Desjardins Securities produced major accomplishments and achieved significant progress in numerous sectors of activity. We also consolidated our operations and improved our organizational performance.

In the first quarter of 2008, financial markets have enjoyed no respite. Brokerage firms have been put to the test both in Canada and the United States. The case of Bear Sterns very much reflects this reality. It would be wrong, though, to generalize and think that all brokerage firms are at risk. The first half of the year will be difficult, but things should improve after that. We can expect 2008 to be filled with challenges.

In the coming years, we intend to continue growing, both in Quebec and elsewhere in Canada, by relying on organic growth and an orderly program of acquisitions. We can count on various strategic assets in fulfilling our development plan, foremost among them the fact that we belong to Canada's biggest cooperative financial group, the Desjardins Group. On this point, allow me to pay tribute to the visionary spirit and unfailing support shown by Alban D'Amours toward Desjardins Securities. M. D'Amours, a huge thank you from Desjardins Securities and from all its employees.

I have no doubt that we can also count on our new President, Ms. Leroux, a new frontline ally. Ms. Leroux, allow me to congratulate you warmly on your election to the head of our great cooperative organization and to wish you the best of luck in your new mandate.

Finally, a special thank you to Mr. Pierre Tardif, Chairman of the Desjardins Securities Board of Directors, and to the other Board members, to the members of Desjardins Securities management and to all employees who contributed to fulfilling our goals.

To all of you, thank you for your support and your attention.