Speech by Mr. Jean-Guy Langelier, President and Chief Operating Officer of the Caisse centrale and Chief of the Treasury of Desjardins Group, 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)

Thank you Mr. President,
Ladies and gentlemen, good afternoon,

I am pleased to be here today to provide an overview of Caisse centrale's main achievements in 2007 and to say a few words about our strategy for the coming year.

But first of all, I would like to say that we are very pleased with the latest fiscal year. Certainly, Caisse centrale's results are the reflection of our joint actions and its achievements represent the success of all of us present in this room today.

In 2007, our aim was more than ever to be a complement to our colleagues in the network, in order to contribute to the harmonious development of Desjardins Group.

This is the source of much pride, and please rest assured that our determination in this regard will remain the same throughout 2008. In everything we do, we will continue to second our owner, the network of caisses and their Business Centres, in its mission.

I believe that we have all the reasons to be proud of the past year. Thanks to our partnerships, we were able to ensure that the Caisse centrale's financial contribution to the network reached $112.3 million.

This is an all-time high, representing 17% growth over the contribution for fiscal 2006, which was itself a record. This trend toward higher contribution has been continuing steadily.

All our sectors have contributed to our excellent results and these are higher than both our budgets and last year's performance. Of course, several reasons help explain this, including the work of all our employees. I should also mention the contribution of the members of our Management Committee, who take on an active role and don't hesitate to get involved. We firmly believe in the value of participatory management and it is a part of our day-to-day activities.

Our employees are very important to us as they represent our most precious asset. We devote considerable energies to maintaining the level of proximity that we have established with them over the years. For example, we have set up quarterly meetings that allow us to exchange regularly with them. We also established additional meeting opportunities, such as the President's breakfasts. These allow employees from all sectors to ask questions or make comments in a less formal setting that is more conducive to exchanges.

There is another reason that explains our success, and it plays a key role. All of you, people in this room, elected officials and General Managers of caisses present here with us, as well as your teams, you are the partners of our success.

All sectors of Caisse centrale will continue to collaborate with our partners in the Fédération and with other parts of Desjardins Group in the various projects that we are working on.

As you know, Caisse centrale is the treasurer of Desjardins Group. What is our role, concretely, as treasurer? If I wanted to oversimplify, I would say that it may be summarized in two basic functions: First, our role is to ensure the network's suppy of funds. Second, it consists in managing the risk that caisses face regarding interest rate fluctuations. And third, we manage the portfolio of normative liquidities held by the cooperative network. Such is our role, if we boil it down to its essence.

In 2007, it is needless to say that the liquidity crisis which impacted the world wide capital markets has influenced our role as treasurer. We faced a tumultuous and highly volatile market and had to manage in such a way as to ensure that our operations could take place as normally as possible, while financing asset-backed commercial paper held by the various Desjardins companies.

The strategies that we implemented over the past five years, namely the extension of the term of our supply of funds and its diversification, allowed us to overcome this crisis. We will need to remain vigilant regarding the market's evolution and continue working together while being flexible and creative.

The diversification of our sources for the supply of funds in general, and Desjardins' securitization activities in particular, represent a vital element of our performance over the past fiscal years. As part of our securitization activities, we participate in the Canadian mortgage Bond issues carried out as part of the Canadian Mortgage and Housing Corporation's program.

More precisely, as part of these transactions Caisse centrale transfers mortgage-backed securities to a collaterized security entity in exchange for liquidities. The Canada Housing Trust, for its part, finances these purchases by issuing mortgage bonds to investors. In 2007, we took part in the Canadian Mortgage and Housing Corporation's 4 issues, which generated for us supply funds totalling $1.7 billion.

Our discussions are ongoing with credit unions in Western Canada to optimize their access to securitization as an alternative source of supply of funds. These exchanges have been more intense over the past few months and we expect to finalize a transaction with them by the end of the fiscal year.

In 2007, we continued to extend the term of our supply of funds. Indeed, early in the fiscal year we issued a fifth 500 million euro issue. The European market not only offers very competitive terms, but its size provides unequalled liquidity in other financial centres. Since the beginning of the financial crisis, several large Canadian banks have had to tap this market.

Among the 2007 achievements that we are proud of, I would like to mention the implementation of the unique gateway serving caisses and Business Centres. As you know, its purpose is to help ensure that the network is better aware of our service offering. The introduction of this gateway followed requests from our partners in the network, who had expressed a need for a centralized access to resources that could inform them about the overall specialized services we offer.

More than ever, this gateway allows us to maintain a constant contact with caisses and Business Centres across the territory we serve in Quebec and Ontario.

Over the past fiscal year, the internal risk management of banking activities, which we refer to under the GIRAB acronym, was undoubtebly a major project for Desjardins Group. Caisse centrale's efforts in this regard are part of the Group's overall risk management strategy. The deadline is fast approaching for this important issue. Indeed, on January 1st, 2009, Desjardins Group will fall under the Basel II capital accord, which frames banking institutions' risk management worldwide. It is with this date in mind that the GIRAB project was established and we, at Caisse centrale, are pleased to play a key role in it.

In the current environment, this project will help set Desjardins' risk management practices at the highest level in the industry, while also further enhancing the uniformity of its practices and risk management systems. At Caisse centrale, we will continue contributing to this global challenge facing the Group.

Let's now review briefly our main achievements in our primary areas of activity. First of all, the large entreprise.

In this sector, our organization's growth strategy is based on three elements, namely:

First: increase the number of files where we act as agent and co-agent in banking syndicates active with large corporate clients. Second: continue increasing our expertise and name recognition in four specific economic sectors, more specifically: agribusiness, communications, forestry and energy. In 2008, we will develop a fifth sector, namely transportation, which is very promising. Third, our growth will continue to be based on our capacity to accompany and support Quebec companies in their operations across Canada and the United States.

Over the past five years, Caisse centrale has distinguished itself as one of the financial institutions that participate in banking syndicates associated with a number of large companies. In our role as agent or co-agent, we are called upon to structure, enter into and syndicate financing agreements.

Doing so, we become a choice resource for these clients, which allows us to provide them with counsel while further consolidating the ties that bind us together. This status also provides Desjardins with greater name recognition and visibility in the overall enterprise market in Quebec.

This status also translates into positive effects for the overall network. For example, clients with whom we collaborate as agent or co-agent include companies such as Rona, Cascades and Coop fédérée, to name but a few.

In 2007, we acted as agent or co-agent in a total of 31 financing deals, compared with 29 in the previous fiscal year. Obviously, we are proud that year after year, we succeeded in growing the number of clients where we work as agent or co-agent.

This strategy allowed us to attain $2.1 billion in new business, representing growth of 31% compared with 2006.

In 2007, consistent with our strategy to accompany Quebec companies outside the province, close to 50% of our growth came from outside markets. In order to support our efforts in this area, we have decided to open a business office in Calgary. This will help us further enhance our business relationships with clients who have a presence in Western Canada. Over the past few years, this market has been expanding very rapidly and its potential remains highly promising.

Throughout the fiscal year, we continued to significantly increase our US presence, in part through our subsidiary Caisse centrale U.S. Branch. This subsidiary allows us to provide financing products that support medium and large Quebec-based companies already present or expanding in the US.

It also allows us to serve US clients that want to establish a presence in the Canadian market place.

In 2007, cumulative outstanding loans granted by Caisse centrale U.S. Branch had increased by more than 30% compared with the previous fiscal year. Without this subsidiary in the US, it is obvious that we could not provide our current range of products and services. Also, our capacity to accompany large Canadian clients in outside markets, as well as the clients of caisses and Business Centres, would not be what it is today.

So, this Branch allowed us to grow business while protecting our established base and, without it, we might have faced the risk of losing a significant part of this clientele.

Desjardins Bank represents the other segment of our US presence and it complements the Caisse centrale U.S. Branch's service offering by fulfilling the needs of individuals and smaller business clients. It has been present in Florida since 1992.

In the last fiscal year, Desjardins Bank continued to progress in several areas. It continued to expand its product range, it added to its network by establishing a third service point in Lauderhill, and it maintained its profitability despite the US housing crisis.

On December 5, in line with its stated goal of building ties with other North American cooperative institutions, Desjardins Group signed an agreement with Business Partners LLC, a group of 180 US credit unions. This participation program now allows Desjardins to buy and sell participation in commercial loans within this network of US credit unions. This agreement represents an additional tool at our disposal in order to support Quebec SMEs in their US expansion.

In the institutional sector, working closely with our partners in the network we have continued to meet the needs of utilities, municipalities and universities. Desjardins Group, including the network of caisses and Business Centres as well as Caisse centrale, is the leader in Québec in regards to the institutional sector. We are a key player in education, health care and especially municipalities, where we hold significant market shares. We owe this market presence first and foremost to our partners in the network, with whom we collaborate closely as part of our approach to business development.

If there is one thing that we are fully aware of, it's that winning a large banking services contract requires a lot more than simply providing advantageous financial conditions. It requires building a close personal and business relationship, one that is based on confidence, and taking an overall, long-term vision of the business client's needs. This is why the Desjardins approach is second to none.

During the latest fiscal year, working with the network of caisses and Business centres, our banking services team increased our market share. It won requests for proposals from organizations in the health, education and municipal sectors. We also continue to collaborate closely with the Fédération in our capacity as primary banking services provider to the Ministère des Finances du Québec and to several public sector companies.

During the last fiscal year, Desjardins' International Service Centre continued to offer its broad range of international transactions services to both individuals and business clients of caisses and Business Centres. For example, these services include currency management, transfers, as well as bills of exchange and letters of credit.

Our international services experts have helped establish Desjardins' innovative program that allows SMEs doing business with caisses and Business Centres to have ongoing access to traders working on our foreign exchange desk. To date, more than 1,100 companies have taken advantage of these services, which are not offered on a regular basis by any other Canadian financial institution.

Speaking of international services, I would like to say a few words about the survey that we conducted in 2007 with clients and companies that use these services.

As part of this initiative, our SME clients said clearly that they face ever stronger competition from international players. In order to counter the arrival of such global players, local companies need to be proactive by opening new outside markets and identifying the niche they want to occupy. At Desjardins, we have a unique ability to accompany companies that do business in outside markets and we put our resources at their disposal to support their expansion.

With our US platform well in place, we will develop additional strategies as part of our 2008-2010 action plan in order to improve our capacity to accompany clients.

In 2008, Caisse centrale will continue to adapt to the new economic reality, as it is clear that we operate in an increasingly competitive environment, especially given the dollar's current high valuation.

Caisse centrale will also continue supporting Desjardins Group in its role as a leading cooperative institution in Quebec, in Canada and across North America.

On this topic, I would like to emphasize the fact that the Group maintains credit commitments of almost one billion $ with agribusiness and forestry cooperatives in Quebec and with cooperatives in Western Canada.

The recent signing of an agreement with Business Partners LLP illustrates perfectly the Group's capacity to play a cooperative role, not only nationally, but also in North America and even Europe. Closer to home, we will be in a position to share our know-how with credit unions in Western Canada in supporting their supply of funds activities through securitization.

Through our business activities and by leveraging our expertise, we will support Desjardins Group as it continues to broaden its footprint.

Only two months ago and through Caisse centrale, Desjardins Group successfully completed the issue of two debt securities on the European market, with a total value of nearly 1.3 billion $. As part of the largest of these issues, Caisse centrale actually partnered with three important European financial cooperatives, namely Crédit Agricole via Calyon, DZ Bank and the Groupe des banques populaires et des caisses d'épargne via Natixis.

I would now like to say a few words on the results of the latest satisfaction survey. If I may play with words, I would say that we are very "satisfied" with the score that Caisse centrale achieved, since it shows an improvement in the satisfaction levels, in terms of the added value that we generate for our partners.

As you can see from the table on the screen, all the satisfaction indicators have been moving in the right direction since 2002. These improvements can be seen both in terms of the overall satisfaction regarding our services and for the added value provided to the network. We are extremely proud of these results and we thank you sincerely for your confidence and appreciation. Please rest assured that we will do all we can to continue improving.

In 2008 and beyond, we will maintain our efforts toward providing our employees with the best training opportunities. We will continue unfailingly to improve our operational efficiency. And in all we do, we will support our network partners by providing them with the full added value that Caisse centrale can bring.

Because of its strengths, Caisse centrale represents a powerful tool in the hands of the caisses and Business Centres. It is by joining our efforts that we will be able to continue increasing the satisfaction of our various members and our clients.

I firmly believe that, together, we will achieve great things in 2008.

In closing, I would like to say a few words to the President Alban D'Amours in my name, and on behalf of the Caisse centrale's management team, as well as all our employees.

Mr. D'Amours, we had the pleasure of collaborating closely over many years and I would like to thank you for your confidence and for the latitude your granted us in managing responsibilities.

We are deeply grateful that we were so fortunate as to collaborate with you during these years. We had ample opportunity to appreciate your distinctive vision, as well as your profound human qualities. Mr. D'Amours, thank you.

Prior to closing, I would like to greet our new President, Ms Leroux, wishing her that she may accomplish all that she will seek to achieve for Desjardins Group.

Ladies and gentlemen, thank you for your attention. I wish you all great meetings!