This is not financial institution like the others Desjardins by alicejenny

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									 This
 is not
 a financial
 institution like
 the others




2003 ANNUAL REPORT
  The emissary of
  Desjardins on financial
  markets around the world.
  A partner for
  businesses in their
  search for new markets.

  And its name is
  Caisse centrale




With approximately $100 billion in assets, Desjardins is the
largest financial institution in Québec and the sixth largest
in Canada. Its five million members and clients have chosen
to do things differently.
DESJARDINS GROUP
AN INTEGRATED COOPERATIVE FINANCIAL GROUP

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                                                                                                                                       December 31, 2003

      Ownership link               ■ Corporations linked                   ■ Intermediary                                              Note:
      Auxiliary members              to the Fédération                         holding-companies                                       Chart does not reflect the legal
                                   ■ Holding companies                     (*) Shared ownership                                        ownership-structure.

(1) On January 1, 2004, the Fédération des caisses populaires de l’Ontario became a voting auxiliary member of the Fédération des caisses Desjardins du Québec;
    member Ontario caisses now benefit from the same rights and assume the same responsibilities as Québec caisses. Support for caisse operations was assigned to the
    Fédération des caisses Desjardins du Québec, a result of which was the establishment of a regional executive division for Ontario caisses populaires.
(2) Desjardins Venture Capital primarily manages the funds of Capital régional et coopératif Desjardins, a public corporation created in 2001 by Desjardins Group in
    accordance with legislation adopted by Québec’s National Assembly.


OTHER INFORMATION
As at December 31
                                                                                      2003                                                                    2002
                                                                             Outside (2)                   Group                                      Outside (2)                 Group
                                                          Québec              Québec                        Total                Québec                Québec                      Total

      Total number of employees              36,139                                   1,989                38,128                  37,320                     1,932               39,252
        Cooperative network
          of Desjardins caisses              27,135                                   1,989                29,124                  27,245                     1,932                29,177
        Holding companies and
          other Group components (1)          9,004                                   –                   9,004                     10,075                        –              10,075
      Number of members                   5,162,662                             391,947               5,554,609                  5,161,120                  394,339           5,555,459
      Number of elected officers              7,431                                 696                   8,127                      7,980                      761               8,741
      Number of member caisses                  608                                  68                     676                        671                       77                 748
      Number of service centres                 898                                 179                   1,077                        849                      178               1,027
      Number of automated teller machines     2,728                                 211                   2,939                      2,688                      210               2,898

(1) Includes employees of subsidiary companies active outside Québec.
(2) The caisses and federations in Ontario, Manitoba and New Brunswick.
PURPOSE



Caisse centrale Desjardins (Caisse centrale) is a cooperative institution belonging to Desjardins Group. It is
Desjardins Group’s financial arm stretching across the world as well as its ambassador without borders on
capital markets. It is a dynamic team player complementing the other Desjardins entities, and a solid partner
for businesses and institutions.

Caisse centrale is also a robust team of specialists in many areas, with a mandate encompassing the four main
roles of:


■   FINANCIAL AGENT supplying in particular funds and various treasury products, providing clearing settlement
    services for instruments moving through the caisse network, and managing cash for Desjardins Group as
    well as major liquidity and investment portfolios for Desjardins entities.


■   CUSTOMIZED FINANCING AND SERVICES PROVIDER for both other Desjardins entities and various external
    clienteles which can directly benefit from its special expertise, such as large corporations, medium-sized
    businesses, and public and parapublic agencies. Such services include operating credits, term loans, bank
    accounts and bill payments, to name a few. In the business segment, where Caisse centrale focuses on the
    service and manufacturing sectors, many of its team specialize in agrifood, forest products, high technology,
    communications, real estate, steel and transportation.


■   INTERNATIONAL SERVICES MANAGER for individuals and businesses: foreign exchange contracts, foreign
    currency accounts, import/export letters of credit, funds transfers, export financing or U.S. bank accounts
    through its Florida-based subsidiary, Desjardins Bank.


■   SAVINGS PRODUCTS DESIGNER AND CAPITAL MARKET SERVICES PROVIDER offering an extensive line of derivatives
    such as interest rate and cross-currency swaps, forward exchange contracts, options and “Desjardins
    Acceptances”. In recent years, innovative and high-performing indexed term savings solutions have
    periodically been added to the product line, and have been particularly successful in their target markets.


Caisse centrale represents a quarter of a century of expertise generating significant benefits for Desjardins
Group. It is a front-line player promoting the Group’s development in existing markets and in penetrating
new ones.
                                                                                                          page 1
MISSION




Caisse centrale Desjardins is a cooperative institution that is owned by the Desjardins caisses.


Its mission consists mainly of carrying on activities on domestic and international markets:

■   it fulfils this complementary role in cooperation with the other Desjardins components;


■   it thus generates attractive financial benefits for Desjardins Group.




Desjardins Group’s mission is to contribute to the improved economic and social well-being of
people and groups within the compatible limits of its field of activity:


■   by developing an integrated cooperative network of sound and profitable financial services,
    on an ongoing basis, that are owned and administered by the members, as well as a network
    of complementary financial enterprises, all performing well in their respective fields of activity,
    controlled by their members;


■   by teaching democracy, economics, solidarity and individual and collective responsibility,
    especially to members, officers and employees.
HIGHLIGHTS




RESULTS OF OPERATIONS
As at December 31

                                                                      2003          2002          2001
    Gross income                                                 $      130 M   $    123 M    $    116 M
    Provision for credit losses                                  $       16 M   $     21 M    $     13 M
    Net income                                                   $       40 M   $     35 M    $     40 M
    Total contribution to network                                $       67 M   $     60 M    $     64 M




FINANCIAL POSITION

    Total assets                                                 $ 13,433 M     $ 10,604 M    $ 10,176 M
    Average assets                                               $ 10,486 M     $ 10,722 M    $ 10,257 M
    Securities                                                   $ 3,619 M      $ 3,868 M     $ 3,132 M
    Loans
      Caisse network                                             $   1,350 M    $     179 M   $     413 M
      Other                                                      $   6,772 M    $   4,908 M   $   5,088 M
      Total                                                      $   8,122 M    $   5,087 M   $   5,501 M
    Deposits and subordinated debenture                          $ 10,246 M     $   7,914 M   $   7,665 M
    Members’ equity                                              $    687 M     $    532 M    $    532 M
    Off-balance sheet financial instruments                      $ 79,546 M     $ 96,476 M    $ 67,613 M
    Capital ratio*                                                   16.4 %         13.7 %          14 %

    * Based on the risk-weighted off-balance sheet commitments and assets.
                                                                                                                      page 3
                                                                                                                      Summary
GROSS INCOME                      TOTAL NETWORK                                        LOAN PORTFOLIO
(in $M)                           CONTRIBUTION                                         (in $B)
                                  (in $M)


140                                80                                                  10




                                                                                                               8.1
                        130




                                                            67
                                            64


130                                                 60                                  8
                 123




                                   60




                                                                                                 5.5
120                                                                                     6
          116




                                                                                                        5.1
                                   40
110                                                                                     4

                                   20
100                                                                                     2

   0                                 0                                                  0
          2001

                 2002

                        2003




                                            2001

                                                    2002

                                                            2003




                                                                                                 2001

                                                                                                        2002

                                                                                                               2003
       CREDIT RATINGS
                                                   Moody’s         Standard & Poor’s         D.B.R.S.

           Short-term                                     P-1                  A-1+           R-1 M
           Medium and long term                          Aa3                    AA-         AA (low)


                                                                                                                      Caisse centrale
DESJARDINS GROUP
STRATEGIC PLAN ACHIEVEMENTS


MAINTAINING SOUND PROFITABILITY,
MAXIMIZING OUR PRODUCTIVITY AND
OPTIMIZING DEVELOPMENT CAPITAL

■   Record contribution of $67 million to the caisse network in 2003, up 13%
    from 2002

■   Increase of more than $2 billion in loans to the caisse network and to
    Desjardins entities

■   Record issue of 500 million euros on European markets

■   Very high quality loan portfolio

GUARANTEEING BUSINESSES
THE BEST SERVICE OFFERING

■   New business up 30%

■   Role of agent or coagent in half of the new corporate business

■   Satisfaction rate among business and institutional clients of over 90%

■   Almost perfect retention score

■   Increase of 26% in outstanding loans to private, public and parapublic
    sectors



                 ENSURING PROFITABLE BUSINESS DEVELOPMENT
                 IN OUR NEW MARKETS

                 ■   Oversight role in development of Desjardins Credit Union

                 ■   Commercial charter obtained for Desjardins Bank

                 ■   Support for business clients across Canada and internationally

                 ■   Major financing for credit unions in British Columbia
                                                                                              page 5
MAXIMIZING THE PERFORMANCE
AND SYNERGY OF OUR DISTRIBUTION NETWORKS




                                                                                              Summary
■   Business agreements made with Corporate Financial Centres and
    Desjardins Securities

■   Growth in business volume of international services

■   Over 90% satisfaction rate on the part of the caisses and Corporate
    Financial Centres.

BECOMING THE PREFERRED WEALTH
MANAGEMENT INSTITUTION (DESJARDINS GROUP)
IN QUEBEC

■   Success of Tactical Rate Management Term Savings (TRMTS) with
    Desjardins members (close to $400 million outstanding)

■   Major contribution to the offering of other Desjardins indexed savings
    products

■   Deposits up significantly at Desjardins Bank



                  DEMONSTRATING OUR COOPERATIVE DIFFERENCE

                  ■   Capital infusion of $154 million in Caisse centrale by the Desjardins
                      caisses

                  ■   Cooperative movement strengthened in many ways across Canada

                  ■   Donations and sponsorships provided to some 300 charitable
                      organizations




                                                                                              Caisse centrale
A team of experts
supporting its clients
in their search
for new markets.

And its name is
Caisse centrale
                                                      page 7
     TABLE OF CONTENTS



8    MANAGEMENT’S MESSAGE

13   REVIEW OF OPERATIONS

14      Foresight and Sustainability

18      Close Business Relationships

22      New Markets

26      Unity of Action Among Distribution Networks

30      Savings Product Offering

33      Cooperative Difference

35   MANAGEMENT’S REPORT




                                                      Caisse centrale
ALBAN D’AMOURS                                    JEAN-GUY LANGELIER
Chairman of the Board and                         President and
Chief Executive Officer                           Chief Operating Officer




                 A SENSE OF DIRECTION


                 IT IS WITH GREAT PRIDE AND ENTHUSIASM THAT WE REVIEW THE 2003 RESULTS
                 FOR THE CAISSE CENTRALE TEAM, LOOKING BACK OVER A YEAR OF CONTINUED
                 DEVELOPMENT IN ALL OUR BUSINESS SEGMENTS.
                                                                                              page 9
First, in quantitative terms, we need only consider the more than
$3 billion increase in the financing portfolio, the 30% annual growth in
new corporate business and the capital infusion of $154 million in Caisse
centrale by the caisse network. Also worth mentioning are public issues




                                                                                              Management’s Message
of $2 billion in deposit liabilities during the year under our various funding
programs. A record issue of 500 million euros deserves to be singled out
in this area. All issues were made to meet robust credit demand from
Desjardins Group entities.

Particularly noteworthy is the record contribution of $67 million to the
caisse network by Caisse centrale for 2003, which was up 13% over the
previous year and 60% over the past five years.

Our 2003 results are also remarkable in qualitative terms. Against a
backdrop of steadily rising numbers, there is a sound growth dynamic
within not only Caisse centrale, but also the entire Desjardins Group. This
encouraging trend is based on trust, commitment, solidarity and the high
quality of the relationships with our members, customers, colleagues,
partners and various stakeholders in the financial industry. More and
more doors are opening to us, and new markets as well.



                REMAINING ALERT, RESPONDING TO NEEDS
                This dynamic has led us to Ontario in particular, where Caisse centrale
                is playing a key role in the Desjardins Credit Union development on the
                Group’s behalf. In the United States as well, our Florida-based subsidiary,
                Desjardins Bank, has acquired more leeway under its new charter to help
                its business clients reach greater heights. We are tapping all markets
                offering sustainable and profitable development opportunities, such as
                for instance the Canada-wide market for companies such as Rona, CGI
                and Sun Media, and south of the border for clients including Shermag,
                Alimentation Couche-Tard and Polycor. During this prosperous year, Caisse
                centrale also took a leadership role in extending the geographic reach and
                scope of Desjardins Group in quantitative and qualitative terms.




                                                                                              Caisse centrale
NOTEWORTHY GROWTH
Our 2003 results were achieved, however, in a context of economic
growth that was significantly less remarkable than initially expected
by specialists. Since the turn of the millennium, businesses in certain
industries have been grappling with trying economic conditions. Many of
them must now ensure that they do not lose in sales and profits what our
Canadian dollar is gaining in value against the greenback. Once again,
they are finding customized tools and advice at Desjardins. Our reputation
for prudence has persuaded them that Caisse centrale can be a valuable
ally in protecting their assets.

AN EVEN MORE INTEGRATED
SERVICE OFFERING
Caisse centrale solutions are largely distributed by other Desjardins
entities, particularly by the caisse network and their Corporate Financial
Centres. For us, the quality of our service offering is inseparable from
the synergy of the distribution channels. Throughout 2003, we invested
time and energy in this critical aspect of the Group’s strategic plan. As
a result, not only did we establish closer connections that were highly
lucrative, but we also launched a number of innovative initiatives.
These include, in particular, formal business agreements between Caisse
centrale and certain affiliated entities: first, with the Corporate Financial
Centres in order to develop the medium-sized business market even more
effectively; and second, with Desjardins Securities, which will now work
more closely with Caisse centrale to enhance Desjardins’ full line of
financing offered to business clients.



               By being constantly innovative, Caisse centrale also helps the caisse
               network and its clients to find a position of strength under all economic
               conditions. Our integrated service offering was enhanced once again this
               year through the addition of derivatives, one of the leading specialized
               tools used today by astute financial managers. Since 2003, our business
               and institutional clients have been able to obtain these tools from Caisse
               centrale, while benefiting from the expertise of our specialists. One has
               only to think of certain derivatives and the same market makers who are
               instrumental, for instance, in the ample return earned by the Tactical Rate
               Management Term Savings product, which is successfully offered by the
               caisses to their members. This product’s return may, in fact, be about 40%
               more than that of other traditional term savings products with the same
               maturity. In addition, with its various areas of expertise, Caisse centrale
               continues to play a major role in offering the full line of Desjardins
               indexed savings products.
                                                                                           page 11
CONTINUED APPLICATION OF PRINCIPLES
Like all Desjardins entities, Caisse centrale will continue to implement the
Group’s strategic orientations by 2006, which, as the following pages will
show, have so effectively underpinned its success in recent years. Being




                                                                                           Management’s Message
committed to a series of common principles considerably promotes the
growth dynamic mentioned at the beginning of this message. We intend
to see to it that such a successful formula will continue to be applied for
some time to come.

The entire Caisse centrale team therefore continues to build on this
remarkable momentum for the greater benefit of those who envision
the same promising future. A future with certain milestones that already
inspire confidence and enthusiasm, such as the upcoming opening of a
Caisse centrale point of service in the United States in order to provide
better support for companies in pursuing their plans south of the border.
We are also continuing to form partnerships not only with businesses,
but also with governments, with which we forged closer ties in 2003. We
will also ensure the geographic and industrial diversification of our loan
portfolio in the pan-Canadian market, as well as further diversification
of our capital funding sources in order to meet the Group’s needs on
an ongoing basis. Finally, let us note the large-scale optimization of our
technology investments; namely the systems and processes on which
Caisse centrale depends to fulfil its mandate as expeditiously and
effectively as our day and age requires.



                 In short, we have come to the successful conclusion of a chapter in our
                 history. We are now about to embark upon other eventful, challenging
                 and enriching episodes.




ALBAN D’AMOURS                                 JEAN-GUY LANGELIER
Chairman of the Board and                      President and Chief Operating Officer
Chief Executive Officer




                                                                                           Caisse centrale
A team of financial
experts tapping global
markets and constantly
making money work
for its partners.
Never the other way
around.

And its name is
Caisse centrale
                                                                                     page 13
                                                                                     Review of Operations
STRATEGIC ORIENTATIONS

Desjardins Group has established a three-year plan with six major strategic
orientations which Caisse centrale will continue to underpin until 2006.

■   Maintaining sound profitability, maximizing productivity and optimizing
    development capital to enhance competitiveness and ensure Desjardins Group’s
    sustainability. FORESIGHT AND SUSTAINABILITY

■   Ensuring business development by mobilizing every resource to become Quebec’s
    leading wealth manager for individuals and to be recognized as the SMB partner
    with the best integrated service offering. CLOSE BUSINESS RELATIONSHIPS

■   Ensuring profitable business development in new markets in order to increase
    revenues, diversify market risk and broaden the spectrum of services offered.
    NEW MARKETS

■   Maximizing the performance and synergy of physical and virtual distribution
    networks. UNITY OF ACTION AMONG DISTRIBUTION NETWORKS

■   Assuming a leadership role in quality business relations through its unique
    customized approach and integrated product and consulting service offering and
    through the ongoing development of highly qualified advisory staff committed
    to the satisfaction of members and customers. SAVINGS PRODUCT OFFERING

■   Demonstrating the cooperative difference especially through the involvement
    of members and a commitment to community development and commercial and
    management practices. COOPERATIVE DIFFERENCE




                                                                                     Caisse centrale
5-YEAR TOTAL CONTRIBUTION
TO NETWORK
(in $M)


 80


 60


 40


 20


   0
          1999

                 2000

                        2001

                               2002

                                      2003




                                             FORESIGHT AND SUSTAINABILITY


                                             CAISSE CENTRALE IS A KEY PLAYER WITHIN THE EXTENDED
                                             DESJARDINS FAMILY. IT IS RECOGNIZED AS THE FINANCIAL
                                             ARM OF DESJARDINS GROUP, AND IT PLAYS A LEADING ROLE
                                             BOTH AT THE LOCAL LEVEL AND IN THE LARGEST AND MOST
                                             INFLUENTIAL INTERNATIONAL FORUMS. GIVEN ITS MULTIPLE
                                             FUNCTIONS AS SUPPLIER OF FUNDS, FINANCIAL PARTNER OF
                                             BUSINESSES AND INSTITUTIONS, AMBASSADOR AND PREFERRED
                                             CONTACT, SPECIALIZED PRODUCTS DESIGNER AND LIQUIDITY
                                             MANAGER, IT HAS A MAJOR IMPACT ON THE DEVELOPMENT AND
                                             SUSTAINABILITY OF DESJARDINS GROUP.
                                                                                             page 15
The 2003 balance sheet contains some very telling figures that are worth




                                                                                             Review of Operations
mentioning: first of all, the annual contribution of $67 million to the
network. This is certainly a record, up 13% from 2002 and 60% over five
years.

This growth is also fundamentally sound because it is keeping with the
undeniable prudence of the Caisse centrale team. Proof of this is the ratio
of low-risk loans in our aggregate portfolio, which rose to 99% in 2003,
even higher than the prior year’s excellent rate of 97.6%.



               As a result, Caisse centrale, backed by Desjardins Group, has enjoyed
               exemplary credit ratings to date from the main credit rating agencies. Its
               ratings rank among the best in the entire financial industry, not only in
               Canada, but also internationally, in the financial cooperative sector.

               The role of Caisse centrale is to support Desjardins Group in its business
               development. Consequently, it must also maintain a high level of
               capitalization and constantly increase its funding sources. This is exactly
               what it strived to do in 2003, as shown by various key achievements.


                               OUTSTANDING LOANS
                               (in $B)



                               5.0
                                                       4.7




                               4.0


                               3.0
                                                2.4
                                         2.1




                               2.0


                               1.0


                                 0
                                         2001

                                                2002

                                                       2003




                               ■ Outstanding Loans
                                  to the Caisse Network
                               ■ Outstanding Loans
                                  to affiliated companies
                                                                                             Caisse centrale
BREAKDOWN
OF DEPOSITS
As at December 31, 2003

                                   FARSIGHTED SUPPLIER
                                   Residential real estate is booming in Quebec, which translates into
                                   soaring demand for mortgages at Desjardins. After starting off 2003
                                   with surplus liquidity, the caisse network had to call upon its funds
                                   supplier in early autumn after further boosting its market shares in
                                   the sector. In barely the space of a quarter, Caisse centrale supplied
                                   almost $1.5 billion to support the network. Outstanding loans to
                                   the caisse network therefore rose from $28 million in August to
■ 63% Canada                       $1.4 billion as at December 31, 2003. Concurrently, outstanding
■ 37% International
                                   loans to other Desjardins companies also grew annually by more
                                   than $1 billion to stand at $3.4 billion. However, they were able to
                                   rely on Caisse centrale’s multi-disciplinary team, which had, over the
                                   years, set up a series of complementary funding programs across
                                   well-diversified sources.



              Take, for example, the public issue of 500 million euros under the medium-
              term European note program. This historic record was achieved not only
              because of the quality of the securities offered but also as a result of
              the road show held before they were issued. A Caisse centrale team
              had, in fact, travelled throughout Europe, establishing the soundness
              of Desjardins Group in various financial circles. Meanwhile, in Canada, a
              new program was launched under which $2 billion in medium-term notes
              could be issued over the next few years. Two campaigns were conducted
              in 2003, raising more than $600 million.

              Total proceeds for 2003 under all programs exceeded $2 billion. Such an
              accomplishment, which guarantees the financial health of Desjardins as a
              whole, also enhances the Group’s reputation and credibility in the global
              financial community.
                                                                                                      page 17
CONSTANT CONSOLIDATION




                                                                                                      Review of Operations
OF CAPITAL
In 2003, Caisse centrale benefited from the caisse network’s second capital
infusion scheduled under its five-year capitalization plan. The $154 million
investment is evidence of the scope of the mandate conferred to it by its
members. As a result of this infusion, the capital ratio of Caisse centrale,
based on the risk-weighted off-balance sheet commitments and assets,
climbed from 13.7% to 16.4%, a very sound capitalization level. The Group
thus demonstrated its commitment to support its ambassador in financial
circles in order to build its vision of the future.



               Another essential condition for the success of Caisse centrale is its investment in
               information technology. By the end of 2004, employees in various work units will
               have access to new systems and highly sophisticated management applications. This
               infrastructure project, initiated in 2002 and vigorously pursued in 2003, presages
               considerably enhanced services to members and clients. As in the case of the work
               required under the Basel accord, the "Présage" project will also help improve Caisse
               centrale’s risk management.


                               CAPITAL RATIOS
                               1999 - 2003
                               %


                               18

                               16

                               14

                               12

                               10

                                8

                                6
                                                                       2003
                                                  2000




                                                                2002
                                                         2001
                                        1999




                               — Total Capital
                               — Tier 1 Capital




                                                                                                      Caisse centrale
CUSTOMER
RELATIONS
■   Retention rate of 99%.

■   Satisfaction rate of 90%.

■   Relationship with 40
    of Quebec’s major
    employers.

                                CLOSE BUSINESS RELATIONSHIPS


                                WHATEVER FINANCIAL NEEDS BUSINESSES AND ORGANIZATIONS
                                HAVE, CAISSE CENTRALE CAN MEET THEM. SINCE ITS INTEGRATED
                                OFFERING EXPANDS EACH YEAR, BUSINESSES AND PUBLIC
                                AND PARAPUBLIC INSTITUTIONS ARE IN A POSITION TO SELECT
                                THE EXACT PRODUCTS AND SERVICES THAT BEST SUPPORT
                                THEIR STRATEGIES. THE CAISSE CENTRALE TEAM MAY ALSO
                                FREQUENTLY DESIGN ORIGINAL SOLUTIONS WHICH, ONCE
                                CUSTOMIZED, WILL CONTRIBUTE TO THEIR DEVELOPMENT.
                                                                                            page 19
How can such a process be explained, except by the quality of business




                                                                                            Review of Operations
relationships? Would an institution founded on only quantitative values
have an over 90% customer satisfaction rate and an almost 100% client
retention rate as Caisse centrale does? Would it have managed to do
business, like Caisse centrale, with 40 of the 50 largest employers with a
head office in Quebec? Caisse centrale greatly appreciates the 2003 survey
results and more than ever it intends, through its productive relationships
with its customers and partners, to continue to further help them create,
build up and manage their assets.

BUSINESS SEGMENT:
“WHOLESALE” INVOLVEMENT
After the downturn experienced in 2002 as a result of uncertain economic
conditions, Caisse centrale’s business financing activities rebounded
in response to the more promising outlook for 2003. New business
consequently rose to more than $800 million, or nearly 30% in 12 months.
Moreover, not only did average outstanding loans rise by 7% over the
prior year, but they traced a rather spectacular five-year ascending curve,
with an increase of close to 50% since 1998. Major breakthroughs were
achieved in 2003 through banking syndicates; namely Dorel, Aliments Prince,
and Norampac. In addition, given its privileged role as agent or coagent
at the head of 20 banking syndicates, Caisse centrale consolidates, renews
and broadens its mandates. During 2003, it thus concluded new business
worth $325 million as agent or coagent and provided further support to
our economic success stories. For instance, Caisse centrale was coagent
for the financing which allowed the hardware giant Rona to acquire the
Réno-Dépôt chain. It also sustained the development of companies such as
Cirque du Soleil, SITQ, CGI and many others to propel their expansion in
Quebec, across Canada and throughout North America.



               Providing support to these businesses until they achieve their vision is a
               great privilege. The role of financing agent or coagent, among others,
               is very rewarding from many standpoints. The remuneration for it is, of
               course, higher than for simply participating in a banking syndicate. As an
               agent or coagent, Caisse centrale is also exposed to numerous business
               opportunities which extend well beyond financing. It may also position
               itself, in its own name or that of Desjardins Group, as a provider of
               complete solutions or even as a partner in growth.


                                                                                            Caisse centrale
Such a privilege challenges Caisse centrale to continue to innovate to
meet a host of new needs. The innovations which attracted considerable
attention in 2003 included the extended line of derivatives, currency
options and interest rate swaps, for instance, which businesses may
now obtain to optimize their risk management. The value of such
products obviously lies mainly in the expertise added by Caisse centrale’s
capital markets team. Behind the impressive numbers, there is a team
of specialists who ensure the judicious operation of many highly
sophisticated financial instruments and securities. More than ever, this
same team will now make its skills available to the business and
institutional segments.



               EXCHANGE RATES:
               SAFEGUARD STRATEGIES
               As we know, the higher the Canadian dollar climbs, the less money exports bring in.
               Fortunately, our businesses have tools at their disposal to protect themselves, to a certain
               extent, against sharp fluctuations in the dollar, such as forward exchange contracts and
               direct access to foreign exchange traders. This no doubt explains, for the most part, why
               foreign exchange transactions rose by 12% in 2003. In addition, an increasing number
               of businesses that are caisse members carry out this type of operation directly with the
               foreign exchange traders at Caisse centrale. Their numbers, in fact, grew again by 10%
               in 2003.

               Caisse centrale clients get invaluable advice from the foreign exchange market specialists,
               who make their observations available to businesses and institutions on a daily basis.
               The best hedging strategies are then proposed to each client depending on the client’s
               specific situation.


                              FOREIGN EXCHANGE VOLUME
                              WITH THE CAISSES
                              (in US$B)


                              2.5
                                                        1.9




                              2.0
                                                 1.7
                                          1.3




                              1.5

                              1.0

                              0.5

                                0
                                          2001

                                                 2002

                                                        2003
                                                                                                               page 21
ORGANIC TIES WITH THE PUBLIC




                                                                                                               Review of Operations
AND PARAPUBLIC SECTORS
Ties with business members and clients were not the only ones to be further
strengthened in 2003. Caisse centrale is also reaping the benefits of building a closer
relationship with public and parapublic agencies, as demonstrated by its results.
Authorized credit has grown over 40% in the past five years to $5.2 billion as at December
31, 2003. Mandates have not only been renewed, but also broadened, as in the case
of Hydro-Québec, where Caisse centrale, as coagent, increased the authorized credit.
This was also the case for the Société de développement de Montréal, for which Caisse
centrale acts as agent. Furthermore, Caisse centrale has concluded new banking service
contracts with prestigious clients such as la Régie des rentes and le ministère des Finances
du Québec for certain banking activities with le ministère du Revenu and also le ministère
de l’Emploi, de la Solidarité sociale et de la Famille du Québec.



               In addition to its direct involvement with public or parapublic institutions, Caisse centrale
               provides various agencies with money market financing products through the caisse
               network and the CFCs. Equipped with such solutions, the Desjardins caisses and their
               CFCs have an additional competitive advantage to ensure the loyalty of institutional
               members such as CÉGEPS or community colleges, school boards, health institutions and
               municipalities, to which they already provide banking services. At year-end, the average
               outstandings for financings in participation with the network had exceeded $1 billion, up
               60% over the previous year.

               Conclusion: confidence reigns and for good reason. It is a very good sign, considering, for
               instance, how many municipal administrations will soon be looking for financial partners
               to meet the growing financial needs of their new city.


                               5 - YEAR COMMITMENTS PUBLIC
                               & PARAPUBLIC SECTORS
                               (in $B)


                               6
                                                                     5.2
                                                       5.0


                                                              4.7




                               5
                                         4.1


                                                3.9




                               4

                               3

                               2

                               1

                               0
                                         1999

                                                2000

                                                       2001

                                                              2002

                                                                     2003




                                                                                                               Caisse centrale
                                NEW MARKETS


                                CAISSE CENTRALE IS ONE OF THE ENTITIES THAT HAVE WORKED
                                DILIGENTLY TO KEEP AN OPEN CIRCUIT FOR DESJARDINS
                                GROUP ACROSS CANADA AND NORTH AMERICA, AND EVEN
                                WORLDWIDE. AS A SUPPLIER OF FUNDS, IT HAS FOR QUITE
                                SOME TIME REPRESENTED THE GROUP AND ESTABLISHED ITS
                                SOUNDNESS IN ORDER TO EARN THE TRUST OF FINANCIAL
                                MARKETS BOTH IN CANADA AND ABROAD, ON BOTH PUBLIC
                                AND PRIVATE MARKETS.




NEW BUSINESS 2003




■ 82% of the companies have
  a national or international
  scope
                                                                                                           page 23
Established in the heart of Toronto’s financial district since the 1980s,




                                                                                                           Review of Operations
Caisse centrale also enjoys a solid reputation in Florida, where its
subsidiary, Desjardins Bank, was formed about 12 years ago. Caisse
centrale’s considerable expansion in the business financing segment, both
domestically and internationally, should also of course be mentioned,
especially as a growth partner for many business people often associated
with Desjardins from their first steps. The main achievements in
developing new markets in 2003 are therefore the result, in a sense, of
long-term work that is paying off in doors and borders being opened to
Caisse centrale today.



               PRESENCE ON ALL FRONTS
               Nav Canada, Alimentation Couche-Tard, CGI. Three names among so many other Quebec
               and Canadian companies with an outreach across Canada or even North America. Three
               names that say much about the geographic scope of the financings arranged by Caisse
               centrale in 2003. An even more telling fact: more than 80% of new business in 2003 was
               with large corporations or medium-sized businesses operating across Canada, other parts
               of North America or throughout the world.

               Caisse centrale also contributes very significantly to the development of financial
               cooperative sector institutions. Its commitment in this regard, particularly as agent
               or coagent at the helm of cooperative banking syndicates, has made possible major
               breakthroughs with many credit unions in British Columbia since 2002. During 2003,
               Envision Credit Union joined the ranks of dynamic Canadian institutions such as Van City,
               Coast Capital and North Shore Credit Union. These financial cooperatives, which are
               among the largest in British Columbia, are counting on Caisse centrale to carve out the
               strategic niche to which they aspire. The aggregate of the financings granted to them
               over the year exceeded $300 million.




                                                                                                           Caisse centrale
ONTARIO:
A SUPPORT MANDATE FOR DESJARDINS CREDIT UNION
Not only does Caisse centrale circulate in the Canadian market with ease because it has
provided support to many members or clients across the country, but it also understands
how the banking industry works in Canada. It in fact represents Desjardins Group on the
board of directors of the Canadian Payments Association, side by side with the Bank of
Canada and several other major Canadian financial institutions. This role goes hand in
hand with that of being Desjardins’ financial agent. The board of directors of Desjardins
Group recently entrusted Caisse centrale with another assignment which is just as
ambitious: that of overseeing the development of Desjardins Credit Union (DCU).

When the government at Queen’s Park decided to privatize the well-known Province
of Ontario Savings Office in 2002, Desjardins immediately understood the exceptional
business development opportunity being offered in Ontario. It had to act quickly and
think outside the box, while exercising excellent judgment. Caisse centrale and the
Ontario and Quebec federations joined forces to fulfil the mandate. Therefore, in
its oversight role, Caisse centrale supported Ontarians in building their DCU, and it
managed, in record time, to make it possible for DCU to submit an offer to purchase to
the Ontario government. Consequently, on April 1, 2003, DCU took over the 28 locations,
with the continued assistance of Caisse centrale to ensure the related organizational
transition of 200 employees and 75,000 customer accounts, as well as to judiciously
manage the current operations of DCU and its $2 billion in liquidity.



                              Desjardins Credit Union represents a decade of intense business
                              development. The impacts are profitable for the Group, Caisse centrale,
                              the customers and the province of Ontario. Through this network, Caisse
                              centrale has increased its ability to provide support services to businesses
                              in Ontario, and it has broadened its service offering to businesses in this
                              province while sharing financings and back-up services with DCU.

                              This expansion of the Desjardins network will also enable Caisse centrale
                              and Desjardins Group to establish closer ties with credit unions in Ontario
                              and to form new partnerships for the benefit of Ontario’s cooperative
                              sector and communities.
                                                                                                                page 25
UNITED STATES:




                                                                                                                Review of Operations
DREAMS AND REALITY
The American dream has long captivated the hearts and minds of this
world’s visionaries. Whereas, in the past, people left without a dime in
search of a better future, today, our businesses can enter the United States
through the front door. These businesses sometimes have spectacular
achievements to their credit in their home market and are equipped with
a clear and ambitious business plan. What they ask is to be given solid
support by a financial partner that sees as far down the road as they do.

In recent years, Caisse centrale has accompanied a constantly growing
number of business people to increasingly broader and more diversified
markets, as shown by the results of its Florida-based banking subsidiary,
Desjardins Bank. Specifically, profits before taxes have doubled since 2002,
and commercial loans climbed another 44% in 2003. Having acquired a
new charter, Desjardins Bank now has more leeway regarding business
loans throughout a large portion of the United States.



               More than ever, Desjardins Bank is an extension of the Desjardins caisse network. Thus,
               in 2003, attractive new treasury management services, such as lockbox and direct deposit
               services were added to the solutions expressly created for Canadian businesses operating
               in the United States. The Florida-based subsidiary will also be offering its clients an online
               transactional service via Internet in early 2004.

               An interesting point of synergy to be noted is that Desjardins Credit Union quite logically
               entrusted its U.S. dollar liquidity to Desjardins Bank.

               Caisse centrale can certainly be pleased with the gravitational pull that is drawing us
               south of the border, but it must also take the necessary steps to operate freely and keep
               the promises made to the businesses that depend on it in the United States, whether
               they are from Canada or the United States. Consequently, tougher and more narrowly
               focused strategies are needed, such as setting up a Caisse centrale point of service in the
               near future on U.S. territory to be able to offer even more complete financing solutions
               on the spot, among other things.

               EUROPE:
               A CENTER OF SHARED INTERESTS
               In an entirely different core business development area, we should also remember the
               key position that Caisse centrale has always enjoyed with B.P. Invest Consult, alongside
               four Popular European banks. This overseas presence allows it to stay abreast of major
               opportunities, especially in Central and Eastern Europe.                                         Caisse centrale
CAREFULLY
CRAFTED
SYNERGY
■   Business agreements
    with its CFC partners.

■   Formal business
    arrangement with
    Desjardins Securities.

■   Satisfaction rate of 90%
    on the part of the caisse
    network.

                                UNITY OF ACTION
                                AMONG DISTRIBUTION NETWORKS


                                THE DUTY TO PROMOTE SYNERGY IS CRUCIAL TO THE STRATEGIC
                                ORIENTATIONS OF DESJARDINS GROUP. HENCE THE OBVIOUS
                                NEED FOR EACH ENTITY TO MAKE IT A PRIORITY. THIS IS A
                                PARTICULARLY CRITICAL SUCCESS FACTOR IN THE CASE OF
                                CAISSE CENTRALE, WHOSE MANY SOLUTIONS ARE DISTRIBUTED
                                SOLELY THROUGH THE DESJARDINS CAISSE NETWORK AND ITS
                                CORPORATE FINANCIAL CENTRES (CFCS).
                                                                                                             page 27
MEDIUM-SIZED BUSINESS FINANCING




                                                                                                             Review of Operations
In 2003, Caisse centrale team targeted their efforts more than ever to promote synergy in
the medium-sized business market. The previous year, in conjunction with the Fédération
des caisses Desjardins du Québec, it had prepared a new file distribution model with all
the CFCs, based on a fixed financing threshold of $2.5 million. However, since the regions
do not all have the same customer profile or the same development potential, there is a
need to plan and allocate available resources even more precisely and to be more aware
of each area’s geographic, economic and industrial uniqueness.

For many years, Caisse centrale has played a complementary role to that of Desjardins
network in the medium-sized business financing market so that Desjardins could handle
the sharp increase in the funding requirements of very fast-growing business members
such as Lauzon Planchers de bois exclusifs, Cirque du Soleil and Aliments Carrière, to
name a few. The caisse or CFC that sustained these businesses from their inception cannot
alone provide further support to them while complying with the minimum measures
for financial prudence. Given the broad expertise of Caisse centrale on domestic and
international markets and its financing capacity, it is at this point that it intervenes in
order to allow such businesses to pursue their development without having to leave the
large Desjardins family.



                               Result: not only are cooperative ties forged between Caisse centrale
                               and its CFC partners, but these ties lead to customized regional business
                               agreements. Each agreement sets out the method of cooperation and the
                               sharing of responsibilities, as agreed by Caisse centrale and the signatory
                               CFC for the next few years. It also contains, among other things, perceived
                               business opportunities and the financing threshold beyond which the
                               Caisse centrale team will intervene directly in a file. This threshold, now
                               variable according to the geographic sector, will depend on various
                               parameters which considerably facilitate the assessment of regional needs,
                               in terms of both advisors and capital. Such customized management of
                               distribution networks has already allowed the judicious transfer, from
                               Caisse centrale to the CFCs, of some 30 financing files with commitments
                               totalling close to $40 million.

                                              BUSINESS LOANS




                                              ■ 75% large businesses
                                              ■ 25% medium-sized businesses
                                                                                                             Caisse centrale
A business is therefore immediately partnered with the Desjardins entity
that is in the best position to contribute to its success. Another key
benefit is that the aggregate resources of Desjardins Group are calculated,
distributed and utilized even more productively, not to mention more
proactively. Caisse centrale team can then focus even more on large
corporate files in order to improve at the same time the positioning of
Desjardins in this market segment.

A few figures are enough to give an idea of the foreseeable development
potential. In 2003, new business concluded with medium-sized businesses
and realized by Caisse centrale team was up nearly 45% from the previous
year, totalling not less than $151.4 million. Outstanding loans granted in
participation with the Desjardins network stood at $339 million, or almost
25% of the private sector loan portfolio of Caisse centrale.



               WORKING IN CONJUNCTION WITH DESJARDINS SECURITIES
               As shown again in the 2003 surveys, Caisse centrale knows how to build a loyal customer
               base. It also knows that non-negotiable strategic considerations can test even well-
               established customer loyalty. Imagine, for example, that a business decides to obtain
               financing on the capital market rather than by renewing its loan with Caisse centrale.
               This is something that could occur under economic conditions that clearly favour bond
               issuers, as was the case in 2003. Deeply satisfied with its relationship with Desjardins,
               the company in question would prefer to change financing strategy without changing
               financial institutions.

               What is the solution? Carefully crafted synergy between Caisse centrale and Desjardins
               securities. Since 2003, a formal business agreement has set out the cooperative approach
               used by these two affiliated companies in complementary sectors of expertise. Both offer
               their financing services in turn whenever the opportunity arises, depending on the needs
               of clientele. Aéroports de Montréal, Domtar and Rona, for instance, have all tried it and
               were satisfied. There is more very good news as a result of this agreement. Business and
               institutional clients of Desjardins Securities will now be able to access an extensive line of
               derivatives, owing to Caisse centrale’s role as a supplier of funds. Derivatives, recognized
               as tools for balancing risk and for innovative income management, are a valuable
               addition to the Desjardins integrated service offering.
                                                                                                                page 29
LOCAL BUSINESS




                                                                                                                Review of Operations
Through their generally behind-the-scenes work, Caisse centrale teams must support the
business development efforts of their front-line colleagues in the Desjardins network.
They consequently make sure each year that they visit the employees who represent them
to members and customers so that Caisse centrale solutions, in particular for international
services, actually reach all their target markets.

Thus, some 1,850 caisse or CFC employees have already participated in Desjardins
International Service Centre (DISC) customized training sessions. Like their colleagues
targeted in previous years, they learned valuable information and especially the ability
to serve the business people in their community who buy or sell abroad. The DISC team
also met with close to 650 businesses operating almost everywhere in the world. The
team provided participants with information on all the methods available at Desjardins,
of which they may have been unaware, to simplify, insure or accelerate their international
transactions.



               This formula has been very well received. Not only is it bringing people closer together
               but it is also producing measurable results, as shown by the good news below. First of all,
               revenues from import/export letters of credit were up nearly 20% in 2003. In addition,
               each DISC session coincides with a sharp increase in new registrations for the direct access
               service with Caisse centrale’s foreign exchange traders. Throughout the year, businesses
               flocked to Desjardins to make the most of this winning solution. In fact, nearly 350 SMBs
               that are caisse members are currently using this service.

               Caisse centrale also visited more caisses in 2003 to explain its full service offering and its
               contribution to each of them. In a survey of Desjardins caisses and their CFCs that was
               conducted afterwards, over 90% of respondents stated that they were satisfied with the
               Caisse centrale offering, as well as with the services and benefits that the Caisse centrale
               provides. Caisse centrale greatly appreciates such testimonials from the network and
               plans to increase its activities to establish closer ties with caisses and CFCs in order to
               further enhance the unity of action among the distribution networks.




                                                                                                                Caisse centrale
EXPERTISE
AT THE SERVICE
OF DESJARDINS
AND ITS MEMBERS
■   Liquidity portfolios of
    $10 billion.

■   Derivatives totalling
    $65 billion.

■   Supporting Desjardins
    indexed savings
    products.

                              SAVINGS PRODUCT OFFERING


                              ALTHOUGH CAISSE CENTRALE IS NOT VERY WELL KNOWN
                              BY THE GENERAL PUBLIC, IT IS A BENEVOLENT FORUM FOR
                              THOUSANDS OF INDIVIDUAL MEMBERS SEEKING TO GROW THEIR
                              ASSETS. CAISSE CENTRALE, IN FACT, PROVIDES PEOPLE WHO
                              ARE LOOKING FOR SECURE AND EFFICIENT SAVINGS SOLUTIONS
                              FROM THEIR DESJARDINS CAISSES WITH THE EXPERTISE OF
                              SPECIALIZED RESOURCES WHO ARE REGULARLY IN CONTACT
                              WITH LARGE INSTITUTIONAL INVESTORS.
                                                                                                              page 31
Caisse centrale also makes available to caisse members the expertise of its traders, who




                                                                                                              Review of Operations
manage three investment and liquidity portfolios totalling close to $10 billion: the
liquidity maintained by Caisse centrale itself, the regulatory liquidity of the Desjardins
caisse network, and DCU liquidity. The specialists use various strategies and institutional
financial market products including derivatives. Caisse centrale is a major player on the
derivatives market with total outstandings of $65 billion.



               Take, for example, Tactical Rate Management Term Savings, better known by the acronym
               TRMTS. The TRMTS product is both created and administered by a team of leading-
               edge Caisse centrale experts, and is available to investors through the Desjardins caisse
               network. First introduced in the fall of 2002, TRMTS became one of the most important
               products in its class in 2003. Caisse centrale initially thought that its return could be at
               least 30% higher than on traditional savings products issued at the same time. It was
               right because a year after the first TRMTS issue, investors had earned an annual return
               of 3.9% on their 2.5 year-term investment, or almost 40% more than they would have
               earned by opting on the same date for a traditional term savings product with the same
               maturity. The news spread fast and the number of issues grew to five during the year.
               Already up sharply from $61 million at the beginning of 2003, outstandings jumped to
               over $373 million as at December 31, 2003. At the beginning of 2004, $1 million of TRMTS
               were being sold every day in the Desjardins caisse network, and there seems to be every
               indication that the trend will grow even stronger in the months ahead.


                               TRMTS
                               OUTSTANDINGS
                               (in $M)


                               500
                                                373




                               400

                               300

                               200

                               100
                                         61




                                  0
                                         2002

                                                2003




                                                                                                              Caisse centrale
TRMTS is not, however, the only solution that has been created from
the highly sophisticated financial instruments managed by the Caisse
centrale team. The Stock-Market Indexed Term Savings product, for
instance, is offered according to exactly the same principles but its
underlying instruments include other types of derivatives such as options.
Outstandings for this product amounted to over $2 billion at the end of
2003. Caisse centrale continues, however, to be innovative in this field
since its traders are currently testing a very promising savings concept
denominated in U.S. dollars. In addition, in 2003, Caisse centrale took
back the financing of the Alternative Term Savings solution from an
outside partner. The anticipated financial benefits are not only savings
on management costs, but also new financing revenues that will further
enhance Caisse centrale’s contribution to the Desjardins caisse network.



               FLORIDA:
               GREAT NEWS, FAR-REACHING OPPORTUNITIES
               A stronger canadian dollar is a boon to individual members who frequently travel to the
               United States. Many have in fact taken the opportunity to deposit funds at Desjardins
               Bank in Florida. In most cases, they have quite simply done this remotely, via the Internet
               or by telephone, to the extent that AccèsD deposits jumped by almost 50% in 2003.

               In Florida, there was no lack of business at either location of Caisse centrale’s subsidiary.
               Cash in the form of individual deposits was up 42% over 2002 at Desjardins bank. For
               mortgages alone, for instance, year-end figures show an increase of about 30%.

               This simply proves once again how important it is for desjardins to continue to provide
               support to its members during their stays in Florida. It is with this in mind that a number
               of Desjardins entities sponsor CanadaFest, an annual event at Hollywood Beach, Florida.
               For the past few years, the Desjardins booth has always been one of the most popular
               ones, attracting several thousand caisse members. This is a tremendous opportunity to
               inform them of all Desjardins products useful for travellers.
                                                             page 33
                                                             Review of Operations
COOPERATIVE DIFFERENCE


SOLIDARITY FORMS AN INTEGRAL PART OF THE COOPERATIVE
DIFFERENCE EMBODIED BY CAISSE CENTRALE SINCE IT WAS
FORMED. THE OUTSTANDING RESULTS RECORDED IN 2003
THEREFORE BENEFIT MANY MEMBERS OF THE LARGE DESJARDINS
FAMILY, SUCH AS THE $67 MILLION CONTRIBUTION TO THE CAISSE
NETWORK, UP 13% FROM 2002. SINCE THERE IS NO SOLIDARITY
WITHOUT RECIPROCITY, CAISSE CENTRALE ALSO BENEFITED
FROM A MAJOR CAPITAL INFUSION FROM THE NETWORK IN
2003. THE $154 MILLION OBTAINED IS THE SECOND INFUSION
UNDER THE CAPITALIZATION PLAN ADOPTED IN 1998.




                                                             Caisse centrale
Caisse centrale has also demonstrated its support for the Group and
cooperative business development by overseeing the development of
Desjardins Credit Union (DCU) since 2002. Given the special skills and
know-how of its team, Caisse centrale was able to make a major
contribution to this business development initiative in Ontario. In 2003, it
again became involved, in close cooperation with the Fédération and the
subsidiaries, in harmonizing the integration of the DCU network and in
quickly improving its service offering. Note also that Caisse centrale fully
manages DCU’s treasury.

There would be no question of cooperative difference if an active
contribution was not made to the growth of the entire cooperative sector.
That is why Caisse centrale is involved, on a large scale, in the financing of
British Columbia credit unions, for instance. Some of the recipient credit
unions have been able, with its assistance, to complete critical expansion
or strategic repositioning projects.



                Elsewhere in the world, various actions are sustaining a similar process
                of mutual assistance between Caisse centrale and a solid correspondent
                network, which includes numerous cooperative partners. Whether for
                funding purposes, interbank exchanges or cooperation agreements,
                Desjardins is therefore proudly and staunchly represented by Caisse
                centrale in the international arena.

                Finally, there is another aspect of the cooperative difference in which
                Caisse centrale continues to distinguish itself by demonstrating its direct
                support for social, cultural, scientific or educational organizations. Many
                of its employees are active in the United Way/Centraide campaign.
                An annual golf tournament organized by Caisse centrale management
                has generated donations of $300,000 over the previous eight years.
                In addition, from approximately 300 organizations which reaped the
                benefits of such an undertaking in 2003, let us mention, for example, the
                Portage drug rehabilitation centre, La Traversée, a sexual assault centre
                for women and young girls of the South Shore, the Camp des dialysés, the
                foundation of Musée Pointe-à-Callière, the École nationale de cirque and
                the Institut de gériatrie de Montréal.
                                                          page 35
     FINANCIAL REVIEW




                                                         Management’s Discussion andReview
                                                                         Financial Analysis
36   MANAGEMENT’S DISCUSSION AND ANALYSIS


39      Income and expenses
39      Net interest income
40      Other income
40      Provision for credit losses
41      Non-interest expenses
42      Other payments to the Desjardins network
42      Income taxes and other taxes
42      Remuneration of capital stock
43      Comments on assets
45      Risk management review
46      Credit risk
49      Liquidity risk management
52      Market risk management
55      Operational risk management
56      Capital management


62   CONSOLIDATED FINANCIAL STATEMENTS


62      Audit commission’s annual report
63      Management’s report
64      Auditors’ report
65      Consolidated balance sheets
69      Notes to the consolidated financial statements


89   CONSTITUTION, REGULATION AND CONTROL


91   CORPORATE GOVERNANCE


98   BOARD OF DIRECTORS


99   FINANCIAL GLOSSARY
                                                          Caisse centrale
MANAGEMENT’S DISCUSSION
AND ANALYSIS
This Management’s Discussion and Analysis (MD&A) compares the           Quebec did not escape the slowdown in 2003. The impact of the
financial condition and results of operations of Caisse centrale        rising value of the Canadian dollar and the side effects of SARS
for the years ended December 31, 2003 and 2002, prepared                and mad cow disease were instrumental in curtailing GDP growth.
in accordance with Canadian generally accepted accounting               The strength of domestic demand, as evidenced most convincingly
principles. This MD&A is dated February 12, 2004 and unless             by higher retail sales and vigorous spending on housing, did
otherwise indicated, all stated figures are in Canadian dollars. It     however offset corporate losses triggered by deteriorating foreign
also discusses forecasts and risk management. To assist the reader,     sales and the downturn in manufacturing shipments.
we have added a glossary of financial terms at the end of the
document. Additional information on Caisse centrale, notably its        With the recovery of the stock market, the number of merger and
Annual Information Form, is also available on the SEDAR website.        acquisition projects increased over the previous year, although it
                                                                        was still below the levels reached in 2000 and 2001. The volume of
ECONOMIC REVIEW                                                         major transactions was thus low, but the number of bond issues
                                                                        continued to grow.
This section briefly summarizes the economic conditions in 2003 and
includes our forecasts for 2004.                                        But the economic outlook is improving for 2004, although there
                                                                        is no exceptional growth on the horizon. Since the U.S. economy
The global economy seems to have experienced an upswing in 2003.        is in good shape and real GDP is expected to grow by 4.7%, this
According to our most recent forecasts, real GDP in the United          should reflect favourably on our foreign sector, partially offsetting
States climbed by 3.2% during the year, recording an outstanding        the negative impact of the increased value of the loonie. During
second half of the year, with annualized quarterly growth of 8.2%       the first six months, Canada’s real GDP should grow at a rate close
and 5.4% in the third and fourth quarters, respectively. In Japan,      to its potential (estimated at about 3%), and then pick up its pace
economic expansion was fuelled by exports despite a stronger yen        somewhat.
and persisting structural problems. There are still, however, some
soft spots. The Euro zone countries experienced rather sluggish         In this context, the key interest rates and money market rates
economic growth in 2003, and Germany, the major pillar of the           should continue to decline in the early months of 2004. The Bank
zone, suffered a recession.                                             of Canada should, in fact, take advantage of slowly growing
                                                                        inflation to further reduce its key interest rates and bolster the
The Canadian economy encountered a number of obstacles                  economic recovery in Canada. The drop in inflation forecast over
in 2003, thereby creating a climate of uncertainty. The SARS            the next few quarters should also curb any increase in bond rates
epidemic, the discovery of an incidence of mad cow disease, forest      despite brighter economic prospects and advancing stock markets.
fires, flooding, and a major power outage in Ontario specifically       The growth of the S&P/TSX index should, however, be less than
spring to mind, all against the backdrop of a sharply appreciating      in 2003. As for the Canadian dollar, the expected narrowing of
Canadian dollar over the year. Despite accelerating U.S. demand,        the spread between short-term Canadian and U.S. interest rates
our economy should therefore record a somewhat lacklustre               should keep our currency from rising in the first half of 2004.
performance in 2003; namely a 1.6% growth, according to our             Nonetheless, the overall downward trend of the greenback should
most recent projections. This means that there is still a significant   push our dollar up again in the last six months of the year.
lag between actual production and full capacity utilization, which
should push down Canadian inflation.
                                                                                                                                                    page 37
ANALYSIS OF CONSOLIDATED FINANCIAL STATEMENTS AND
CRITICAL ACCOUNTING POLICIES

This section contains the analysis of the financial results of Caisse   FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE Caisse centrale
                                                                        records securities and derivative financial instruments associated




                                                                                                                                                    Management’s Discussion and Analysis
centrale, which focuses on the statement of income and the
balance sheet in the consolidated financial statements starting on      with trading activities at their fair value. Fair value represents
page 62 of the Annual Report. Note 2 to the consolidated financial      the estimated amounts at which these instruments could actually
statements presents a summary of the significant accounting             be exchanged in a current transaction between willing parties.
policies used in preparing the consolidated financial statements        The fair values of a number of financial instruments are based
of Caisse centrale. Some of the accounting policies are considered      on market prices. If market prices are unavailable, fair values are
critical because they are key to understanding the financial            estimated by using various valuation techniques or the prices of
condition and results of operations of Caisse centrale; they require    similar securities. Valuation techniques include the discounted
management to make difficult, subjective and complex estimates          cash flow method and option pricing models. Caisse centrale must
and assumptions since they concern basically uncertain issues. Any      make judgments in selecting the methods to determine fair value
change in these estimates and assumptions could have a material         and the assumptions used in the valuation models. These choices
impact on the consolidated financial statements of Caisse centrale.     can affect fair value and the corresponding gains and losses. Other
Critical accounting policies concern the allowance for credit losses,   information on the methods for determining fair values applied by
financial instruments measured at fair value and income taxes.          Caisse centrale is provided in notes 2 and 12 to the consolidated
                                                                        financial statements.
ALLOWANCE FOR CREDIT LOSSES The allowance for credit losses is an
estimate of probable credit losses related to financial instruments,    INCOME TAXES The income tax provision is established on the basis
whether or not presented in the consolidated balance sheet of           of the tax treatment of transactions recorded in the consolidated
Caisse centrale, including loans, off-balance sheet commitments,        statement of income or the consolidated statement of members’
acceptances and derivative instruments. This allowance comprises        equity. In order to determine the current and future portions of
a general provision for credit losses and specific provisions. A        the income tax provision, assumptions are established concerning
number of factors affect the estimates for the allowance for credit     the tax laws and the dates on which future tax assets and
losses, including risk assessment, default probability, valuation of    liabilities will reverse. If this interpretation differs from that of tax
security, economic conditions and borrowers’ specific situations.       authorities or if the date on which future tax assets and liabilities
Any change in the estimates can lead to modifications of the            will reverse is not the same as estimated, the income tax provision
allowance for credit losses. Note 4 to the consolidated financial       could increase or decrease over subsequent periods.
statements provides more details on the allowance for credit
losses.                                                                 ACCOUNTING POLICIES TO BE ADOPTED Note 2 to the consolidated
                                                                        financial statements also presents a summary of the significant
                                                                        accounting policies to be adopted by Caisse centrale in fiscal 2004
                                                                        and 2005.




                                                                                                                                                    Caisse centrale
TABLE I


NET INTEREST INCOME ON AVERAGE ASSETS AND LIABILITIES
For the years ended December 31 (in thousands of dollars)



                                                   Average                     Average        Average                     Average       Volume         Rate         Income
                                                    volume         Interest        rate       volume 1       Interest 1       rate         gap         Gap             gap
                                                                                 2003                                       2002                              2003 / 2002
     ASSETS
     Cash and securities           $            3,272,461      $ 136,194          4.16 % $   4,230,623   $ 159,849           3.78 % $ (39,877) $ 16,222         $ (23,655)
     Loans
       Securities purchased
          under resale agreements                  19,122                327      1.71         10,198             134        1.31         153           40             193
       Day to day                                 215,550              6,405      2.97        213,847           5,394        2.52          51          960           1,011
       Fédération
       - treasury activities                      402,859           12,310        3.06         191,956         7,280         3.79        6,444       (1,414)         5,030
       - financing activities                   1,870,593           47,438        2.54       1,519,565        39,386         2.59        8,902         (850)         8,052
     Entities under common control                637,836           20,872        3.27         234,690        11,015         4.69       13,192       (3,335)         9,857
     Public and parapublic
       institutions                             1,067,636           39,694        3.72       1,055,007        41,487         3.93          470       (2,263)        (1,793)
     Private sector 2                           1,570,617           72,169        4.59       1,468,639        67,840         4.62        4,686         (357)         4,329
     Loans purchased from
       Desjardins Group                           165,141              9,536      5.77        254,246         14,782         5.88       (5,145)        (101)        (5,246)
                                                5,949,354          208,749        3.51       4,948,148       187,318         3.79       35,130      (13,699)        21,431
     Total interest-earning assets              9,221,815          344,943        3.74       9,178,771       347,167         3.78        1,610       (3,834)        (2,224)
     Other assets                               1,264,506                 —         —        1,543,180              —          —            —            —              —
     TOTAL ASSETS                          $ 10,486,321        $ 344,943          3.29 % $ 10,721,951    $ 347,167           3.24 % $   (7,751) $    5,527      $   (2,224)
     LIABILITIES AND
         MEMBERS’ EQUITY
     Deposits
       Demand deposits                            724,933      $    15,147        2.09 % $     682,281   $    14,364         2.11 % $      891 $       (108) $         783
       Fixed-term deposits                      7,131,934          228,500        3.20       7,158,123       229,797         3.21         (839)        (458)        (1,297)
     Subordinated debenture                       120,361            6,642        5.52         163,921        10,564         6.44       (2,404)      (1,518)        (3,922)
     Total interest-bearing liabilities         7,977,228          250.289        3.14       8,004,325       254,725         3.18       (2,352)      (2,084)        (4,436)
     Other liabilities                          1,897,100                 —         —        2,173,500              —          —            —            —              —
     Members’ equity                              611,993                 —         —          544,126              —          —            —            —              —
     TOTAL LIABILITIES AND
         MEMBERS’ EQUITY                   $ 10,486,321        $ 250,289          2.39 % $ 10,721,951    $ 254,725           2.38 % $   (5,625) $    1,189      $   (4,436)
     NET INTEREST INCOME                   $ 10,486,321        $    94,654        0.90 % $ 10,721,951    $    92,442         0.86 % $   (2,126) $    4,338      $    2,212
     1   Reclassified to conform to the current year’s presentation.
     2   Average impaired loans, net of specific provisions, are included in this caption.
                                                                                                                                               page 39
INCOME AND EXPENSES
In fiscal 2003, Caisse centrale posted gross income of $130.4 million,   compared to $35.3 million in 2002. The following sections provide




                                                                                                                                               Management’s Discussion and Analysis
up $7.0 million or 6% from 2002. Net income was $39.8 million            a detailed analysis of income and expenses.



NET INTEREST INCOME
Net interest income is the difference between the interest income        in the net interest income from Treasury segment activities,
earned on assets such as loans and securities, and the interest          especially the income generated by assets associated with capital
expense paid on liabilities such as deposits and debenture. Net          stock. Net interest income from this segment was down $1.3 million
interest income is affected by interest rate fluctuations, funding       for a total of $50.1 million by year-end. However, certain sales of
strategies and the composition of interest-earning and non-              investments and trading activities allowed the Treasury segment
interest-earning financial instruments.                                  to increase its income and surpass the exceptional performance
                                                                         recorded in 2002.
Table I presents the changes in net interest income by major asset
and liability class. The last three columns in the table show the        Net interest income from the Treasury segment, coupled with
relative contribution of rate and volume changes on assets and           results from trading and investment activities under “Other
liabilities. The impact is broken down into its volume and rate          income,” totalled $45.8 million in 2003, against $43.9 million in
components.                                                              2002. It should be noted that the breakdown of income from
                                                                         Treasury segment activities (interest or gain on disposal) may vary
In 2003, net interest income was up $2.2 million from the prior          significantly based on market opportunities.
year, closing the year at $94.7 million. Net interest margin
therefore rose from 0.86% to 0.90% of average consolidated               Net interest income from “Other” segments remained relatively
assets at the end of fiscal 2003.                                        stable in 2003.

As shown in Table II, growth in the loan portfolio resulted in a         Caisse centrale expects net interest income to grow in 2004.
higher net interest margin. The lower interest rates were reflected


TABLE II


COMPONENTS OF NET INTEREST INCOME BY SEGMENT OF ACTIVITY
For the years ended December 31 (in thousands of dollars)

                                                                                                                                    Change
                                                                                            2003                2002                     $
     Net interest income from Financing segment                                         $ 39,347            $ 35,768            $    3,579
     Net interest income from Treasury segment                                            50,084              51,409                (1,325 )
     Other                                                                                 5,223               5,265                   (42 )
     TOTAL                                                                              $ 94,654            $ 92,442            $    2,212




                                                                                                                                               Caisse centrale
TABLE III


OTHER INCOME
For the years ended December 31 (in thousands of dollars)


                                                                                                                                Change
                                                                                   2003                     2002                       $
     Service charges on chequing and deposit accounts                           $ 10,805               $    9,955              $    850
     Foreign exchange revenue                                                     14,559                   14,556                      3
     Trading and investment activities                                            (4,262)                   (7,497)                3,235
     Commissions on “Desjardins Acceptances”                                      10,164                     9,549                   615
     Credit fees                                                                   2,115                     1,717                   398
     Other                                                                         2,321                     2,668                  (347)
     TOTAL                                                                      $ 35,702               $ 30,948                $ 4,754




OTHER INCOME
Other income includes all income that is not interest.                of investments was sold, resulting in higher net interest income. It
                                                                      should be noted that the performance of Treasury activities must
Other income, which accounted for 27% of Caisse centrale’ gross       be examined overall by taking into account the various sources of
income, against 25% in 2002, amounted to $35.7 million, versus        income. Thus overall investment and trading segment activities
$30.9 million a year earlier, for an increase of $4.8 million or      generated income of $45.8 million, compared to $43.9 million in
15%. The difference stems mostly from the improved results of         2002.
investment and trading activities. It should be borne in mind that
these results are derived mainly from the disposal of investments     Caisse centrale expects to be able to increase its other income in
to capitalize on certain market conditions. In 2002, a large volume   the coming year.



PROVISION FOR CREDIT LOSSES
The provision for credit losses is an amount allocated to the         higher provisions attributable to a loan to a telecommunications
allowance for credit losses to cover credit losses.                   company.

In 2003, the provision for credit losses charged to income amounted   A more detailed analysis of the specific provisions and the general
to $16.4 million, compared to $21.1 million in 2002, a decrease of    provision for credit losses is provided on page 48.
22%. It should be remembered that fiscal 2002 was affected by
                                                                                                                                              page 41
TABLE IV


NON-INTEREST EXPENSES
For the years ended December 31 (in thousands of dollars)




                                                                                                                                              Management’s Discussion and Analysis
                                                                                                                                 Change
                                                                                     2003                   2002                      $
    SALARIES AND BENEFITS                                                         $ 22,354               $ 17,267               $ 5,087
    PREMISES, EQUIPMENT AND FURNITURE, INCLUDING DEPRECIATION
    Rent and taxes                                                                   1,945                  1,893                    52
    Depreciation                                                                     2,848                  3,358                  (510)
    Subcontracting                                                                   5,058                  4,146                   912
    Other                                                                            1,980                  1,174                   806
                                                                                    11,831                 10,571                 1,260
    OTHER FEES
    Communications and external relations                                            4,566                  4,452                   114
    Professional fees                                                                3,791                  3,180                   611
    Other                                                                            4,964                  4,597                   367
                                                                                    13,321                 12,229                 1,092
    TOTAL                                                                         $ 47,506               $ 40,067               $ 7,439




NON-INTEREST EXPENSES
Non-interest expenses include salaries and benefits, premises,          risk management practices required by regulatory authorities will
equipment and furniture and other operating expenses.                   enable Caisse centrale to further mitigate the risks incurred. In
                                                                        2003, Caisse centrale also set up a new Canadian medium-term
Table IV above shows the breakdown of non-interest expenses             deposit note program, which will enable it to further diversify its
by category. Non-interest expenses totalled $47.5 million in 2003,      medium-term funding sources. Legal and accounting fees related
compared to $40.1 million in 2002.                                      to this program as well as professional fees related to the IRMBA
                                                                        project account for the increase under “Professional fees.”
Staff salaries and benefits accounted for almost half of all non-
interest expenses. A highlight of 2003 was the implementation           Higher insurance premiums resulting in particular from recent
of new compensation policies throughout Desjardins Group. The           governance problems on the capital markets are reflected in the
$5.1 million increase in salaries and benefits is mainly attributable   increased expenses under “Other” in “Other fees.”
to this policy restructuring, coupled with the annual indexation of
salaries and the increase in related benefits. As at December 31,       These two factors - namely, a tighter regulatory framework and
2003, the number of employees (on a full-time equivalent basis)         the standardization of remuneration policies within Desjardins
working for Caisse centrale and its U.S. subsidiary was 265,            Group - substantially affected the productivity ratio at Caisse
compared to 254 in 2002.                                                centrale, represented by non-interest expenses as a proportion of
                                                                        gross income. This ratio rose from 32.5% in 2002 to 36.4% at the
For greater operational efficiency, technology investments were         end of 2003.
made to enhance the processing capability of the external
server required for Caisse centrale operating software. These           Also noteworthy is that Caisse centrale undertook a major re-
investments account for most of the increase in subcontracting          engineering project of its management systems and applications
expenses, which totalled $5 million as at December 31, 2003. In         in fiscal 2003. This project aims to design a system solution to
this context, technology upgrades also resulted in higher “Other”       support banking and loan management activities, support services
expenses, which rose by $0.8 million from $1.2 million in 2002 to       for treasury operations, payment functions, accounting functions
$2 million in fiscal 2003.                                              and management information.
As a financial institution present on both domestic and international   The project should be completed by the end of fiscal 2004. As
markets, Caisse centrale must adjust its risk management practices      mentioned in note 15 to the consolidated financial statements,
to comply with the new integrated risk management requirements          as at December 31, 2003, Caisse centrale was committed to pay
to be set out in the New Basel Capital Accord rules and to be           $5.3 million under a service contract related to this project.
adopted by our regulatory authorities. In order to comply with
the new requirements, Caisse centrale has joined forces with the        Caisse centrale intends to continue to rigorously manage its non-
Fédération des caisses Desjardins du Québec in the Integrated           interest expenses throughout 2004, with a view to enhancing its
Risk Management - Basel Accord (IRMBA) project. The review of           financial performance.
                                                                                                                                              Caisse centrale
OTHER PAYMENTS TO THE
DESJARDINS NETWORK
In cooperation with the Desjardins network, Caisse centrale offers        foreign exchange transactions, for an increase of $1.2 million or
a broad spectrum of banking and financing services to Canadian            8% over 2002. This increase is primarily reflected in the patronage
private and public entities. Of the total fees collected, $17.3 million   allocations paid on loans, given the growth in loans. Caisse
was redistributed to the Desjardins network, including patronage          centrale expects that its other payments will continue to grow
allocations paid on interest margins on participating loans and           over the next year.



INCOME TAXES AND OTHER TAXES
In the budget tabled on June 12, 2003, the Quebec Minister of             the recording of future tax liabilities of approximately $2.6 million.
Finance adopted measures to abolish the lower tax rate for savings        It should be noted that Caisse centrale can recover a substantial
and credit unions that had applied to Caisse centrale.                    portion of the income taxes when it declares remuneration of
                                                                          capital stock. Accordingly, a $10.3 million income tax recovery was
The decrease in income taxes charged to the consolidated statement        recorded in the statement of retained earnings as a result of the
of income was primarily due to this rate change, which resulted in        remuneration of capital stock in 2003.




REMUNERATION OF CAPITAL
STOCK
Under An Act respecting the Mouvement Desjardins (the Constituent         available to Caisse centrale when needed. For the year ended
Legislation), the Board of Directors of Caisse centrale may declare       December 31, 2003, interest of $50.1 million was declared on
interest on capital shares; it then determines the terms of payment       subscribed and paid-up capital shares, representing an increase of
thereof. For the past few years, the Board of Directors of Caisse         $6.5 million or 15% compared to the preceding year. An amount
centrale has applied the principle of declaring, as remuneration          of $66.8 million was recorded on the consolidated balance sheet
of capital stock, an amount corresponding to its consolidated             as remuneration of capital stock payable.
net income, including recovery of related income taxes. However,
given the capital requirements for the forthcoming years, the             Overall, amounts paid to the Desjardins network, including other
Board of Directors also applied the principle of suspending the           payments to members, amounted to $67.4 million, up $7.8 million
quarterly payment of the remuneration on capital stock, notably           or 13% from $59.6 million in 2002. This represents a return on
for the purpose of retaining amounts that could be quickly made           capital stock of 11.4% compared to 11.7% in 2002.
                                                                                                                                               page 43
TABLE V


ASSET MIX
As at December 31 (in millions of dollars)




                                                                                                                                               Management’s Discussion and Analysis
                                      2003                  2002                   2001                  2000                    1999
    Cash and securities   $   3,731     28%     $   3,935     37%      $   3,323     33%     $   3,308      33%      $   4,107     36%
    Loans                     8,122     60          5,087     48           5,501     54          5,528      54           6,280     55
    Other                     1,580     12          1,582     15           1,352     13          1,262      13           1,078      9
    TOTAL                 $ 13,433     100%     $ 10,604     100%      $ 10,176     100%     $ 10,098      100%      $ 11,465     100%
    Average assets        $ 10,486              $ 10,722               $ 10,257              $ 10,531                $ 10,560




COMMENTS ON ASSETS
Total assets on the consolidated balance sheet of Caisse centrale      Caisse centrale also concludes a number of financing transactions
amounted to $13.4 billion as at December 31, 2003, or $2.8 billion     in the form of loans and “Desjardins Acceptances” with member
higher than at the end of 2002. Average assets decreased by            businesses or entities under common control. For more information
$236 million or 2% from 2002 to $10.5 billion in 2003.                 about the entities concerned, please refer to the Desjardins Group
                                                                       organization chart. As mentioned in note 16 to the consolidated
Liquidities reached $3.7 billion at the end of 2003, compared to       financial statements, transactions with the Fédération des caisses
$3.9 billion as at December 31, 2002. The ratio of liquidities to      Desjardins du Québec for the benefit of its member caisses are
total assets was 28% at year-end, down from 37% at the close           concluded under more favourable conditions than those granted
of the year in 2002. As projected, funding requirements for the        to unrelated third parties. Moreover, transactions concluded with
Desjardins network grew during the year. In fact, loans granted for    the Fédération for its own financing needs and with entities under
treasury purposes to the caisse network totalled $1.4 billion as at    common control are carried out under similar conditions to those
December 31, 2003, versus $179 million at the close of fiscal 2002.    negotiated with unrelated third parties.
The funding requirements of the caisse network should reach
$2 billion in 2004, and a number of issues are planned during the      Public and parapublic sector loans were up $605 million since
year to meet this demand. It should be remembered that Caisse          December 31, 2002, reflecting the increase in the financing
centrale’ liquidities are intended to ensure adequate funding for      requirements in these sectors and our continued business
the Desjardins network and reflect the Desjardins Group’s resolve      development efforts.
to build a contingency liquidity reserve in order to underpin its
business development.                                                  A major payment at the very end of fiscal 2003 accounts for the
                                                                       relative stability of the private sector loan portfolio. It bears
It also bears mentioning that 90% of securities held were securities   mentioning that throughout 2002, Caisse centrale intentionally
issued or guaranteed by the federal and provincial governments,        curtailed credit in certain industrial sectors. Despite the impact of
municipal, school or public corporations, as well as by Canadian       these repayments, the average volume of private sector loans was
banks. Note 3 to the consolidated financial statements presents a      up $102 million or 7% over 2002.
detailed analysis of the securities portfolio.
                                                                       Also helping to fuel growth was the increase in the “Publi-privilège”
At the end of 2003, the loan portfolio stood at $8.1 billion,          securities and “Desjardins Acceptances” issued, whose combined
up $3 billion or 60% from 2002. As a result of the network’s           average outstandings reached $1.3 billion. These instruments give
increased funding requirements, loans to the Fédération des            public entities access to low-cost money market financing. Note
caisses Desjardins du Québec rose sharply, as shown in Table VI.       that the “Publi-privilège” program does not appear on the balance
Loans for treasury and financing activities increased respectively     sheet of Caisse centrale. This program is guaranteed by Caisse
by $495 million and $1.2 billion. Loans to entities under common       centrale, whose commitment is presented under “Guarantees
control also grew from $291 million at the end of fiscal 2002 to       and standby letters of credit” in the off-balance sheet financial
$1 billion as at December 31, 2003, reflecting the popularity of       instruments section.
Desjardins alternative savings products.
                                                                       Other assets amounted to $1.6 billion in 2003, down $2 million
                                                                       from the preceding year.

                                                                                                                                               Caisse centrale
TABLE VI


LOAN PORTFOLIO
Net of allowance for credit losses

As at December 31 (in millions of dollars)


                                                                            2003         2002         2001         2000         1999
     COMPOSITION
     Securities purchased under resale agreements                       $      15    $      6     $       2    $      38    $       2
     Day, call and short-term loans to investment dealers and brokers         218         159            38           —            —
     Public and parapublic institutions                                     1,523         918         1,188        1,050        1,191
     Members
       Fédération
       - treasury activities                                                1,350          179          413        1,424        2,355
       - financing activities                                               2,370        1,875        1,503          928          894
       Other                                                                   —            —            —            20           50
     Entities under common control                                          1,032          291          223          169           98
     Loans purchased from Desjardins Group                                    134          206          328          430          508
     Private sector                                                         1,570        1,532        1,865        1,515        1,226
     Allowance for credit losses                                              (90)         (79)         (59)         (46)         (44)
     TOTAL                                                              $ 8,122      $ 5,087      $ 5,501      $ 5,528      $ 6,280
     GEOGRAPHIC DISTRIBUTION
     Quebec                                                             $ 7,068      $ 4,676      $ 5,020      $ 5,251      $ 6,070
     Other canadian provinces                                               939          265          377          225          176
     International                                                          115          146          104           52           34
     TOTAL                                                              $ 8,122      $ 5,087      $ 5,501      $ 5,528      $ 6,280
     Average loans                                                      $ 5,949      $ 4,948      $ 5,484      $ 4,763      $ 6,467
                                                                                                                                                                                      page 45
RISK MANAGEMENT REVIEW




                                                                                                                                                                                      Management’s Discussion and Analysis
OVERVIEW                                                                                       applying best practices in the area of risk management. During the
                                                                                               year, it continued to implement its Integrated Risk Management
The risk management objective of Caisse centrale is to optimize                                and Basel Accord program (IRMBA). Such integrated management
the risk/return trade-off by applying integrated management and                                will promote risk identification and measurement as well as
control strategies, policies and processes to all functions of the                             optimal allocation of capital, and will become integrated with
organization.                                                                                  strategic planning and performance evaluation. Extensive work
                                                                                               on credit, liquidity, market and operational risks will be continued
Caisse centrale’ policies and processes aim to proactively identify,                           in 2004 and in coming years in order to finetune our global vision
measure and assess potential risks, and ensure their sound and                                 of risk and its integration into the overall management of the
prudent management, in particular by specifying the controls to                                Group’s activities.
be applied and the reporting responsibility to officers.
                                                                                               In addition to the ongoing risk monitoring performed by the
As already mentioned, the Basel Committee on Banking Supervision                               management and business unit managers of Caisse centrale, the
is currently finalizing a new capital accord intended to emphasize                             integrated risk management framework is the responsibility of the
capital and promote the on-going development of risk assessment                                Board of Directors and the following commissions and boards: the
capabilities in financial institutions by closely associating capital                          Corporate Governance, Human Resources, Credit and Investment
requirements with modern risk management methods. Caisse                                       and Audit Commissions, the Board of Ethics and the management
centrale, in conjunction with Desjardins Group, is committed to                                committees of Caisse centrale.



    COMMITTEES AND COMMISSIONS OF THE BOARD OF                                                 CREDIT AND INVESTMENT COMMISSION   ■ Determines the credits to

    DIRECTORS OF CAISSE CENTRALE 1                                                             be granted by Caisse centrale as well as investments and loans
                                                                                               and other financial commitments, and accordingly exercises the
    BOARD OF DIRECTORS ■ Ensures that Caisse centrale has an adequate                          necessary authorities under the general policies adopted by the
    strategic management process that includes risk assessment.                                Board of Directors.

    CORPORATE GOVERNANCE COMMISSION       ■ Supervises the program to                          AUDIT COMMISSION ■ Ensures that Caisse centrale has a control
    evaluate Board effectiveness ■ Recommends the orientation and                              environment that promotes the appropriate management of its
    professional development program for Board members ■ Examines                              activities and risks ■ Examines all financial information documents
    the roles of the Board of Directors and its committees.                                    and recommends their approval to the Board of Directors.

                                 ■ Ensures that the compensation                               BOARD OF ETHICS  ■ Ensures compliance with rules of professional
    HUMAN RESOURCES COMMISSION
    plan is compatible with the realization of objectives and the                              conduct regarding, among other matters, conflicts of interest
    prudent management of activities and risks.                                                and self-dealings.




    MANAGEMENT COMMITTEES OF CAISSE CENTRALE                                                   INTERNAL CREDIT COMMITTEE ■ Defines parameters for granting
                                                                                               credit and monitors their application ■ Authorizes loans within
    MANAGEMENT       COMMITTEE ■ Determines the mandate and                                    its scope ■ Reviews impaired loans and loans on the watch
    composition of the management committees of Caisse                                         list ■ Reviews loan delinquency and credit losses.
    centrale ■ Specifies the strategic orientations, performance
    objectives and risk limits for Caisse centrale ■ Approves delegation                       ASSETS/LIABILITIES COMMITTEE ■ Ensures compliance with opera-
    powers and limits for the management committees of Caisse                                  tional limits concerning liquidity and investment management,
    centrale.                                                                                  interest rate risk and foreign exchange risk ■ Evaluates hedging
                                                                                               strategies to maintain the level of risk within the limits approved
    RISK MANAGEMENT COMMITTEE        ■ Evaluates and revises risk                              by the Board of Directors ■ Evaluates positioning strategies for
    management policies ■ Ensures that risks are managed in                                    loan, liquidity or derivative portfolios to adapt to market chang-
    accordance with established policies ■ Reviews self-assessment                             es ■ Examines financial management and treasury policies.
    program results ■ Ensures the implementation of and compliance
    with control procedures ■ Examines the impact of succession
    planning and the methods of managing the activities of Caisse
    centrale.


1   Please refer to the Governance section of the Annual Report for a more detailed description of the roles and responsibilities of the committees and commissions of the Board of
    Directors of Caisse centrale.
                                                                                                                                                                                      Caisse centrale
CREDIT RISK
Credit risk is the risk of credit losses that can occur if a counterparty   informs the members of the Credit and Investment Commission
fails to honour its contractual obligations, whether or not                 of the Board of Directors of the portion of credit exposures that
presented in the balance sheet. It also includes concentration risk.        should be written off and the amount of any provision for credit
The term “counterparty” refers to an issuer, a debtor, a borrower,          losses.
a broker and a guarantor.
                                                                            CREDIT POLICIES Throughout the years, Caisse centrale has developed
                                                                            and adopted credit policies and practices to react rapidly and take
CREDIT RISK MANAGEMENT                                                      appropriate measures to mitigate or minimize file exposure. The
                                                                            general credit policy and operational policies are revised annually.
Diversification is a key part of risk management. To improve                During the year, significant effort was made to enhance the
the quality of its credit portfolio, Caisse centrale has made a             quality of the loan portfolio. Whenever required, collection or
commitment to reduce its exposure by diversifying risk among                turnaround of higher risk files is transferred to specialized teams.
categories of borrowers, industries, types of financing and
geographic regions.                                                         The general credit policy sets forth the principles and limits
                                                                            within which financing transactions involving a credit risk must be
Credit losses can occur if a borrower or counterparty does not              conducted and the requisite authorizations. The policy enhances
fully honour its contractual obligations to Caisse centrale. These          control and diversification of the commitments portfolio while
obligations can involve loans, commitments, guarantees and                  favouring orderly business development. It defines borrowers’
derivative contracts with positive replacement values.                      eligibility criteria and establishes the credit risk assessment
                                                                            mechanisms and the types of financing available. It also establishes
Managing credit risk has both quantitative and qualitative                  the monetary, sector-related, geographic, risk and term limits in
aspects. Experienced credit officers evaluate the credit quality            order to ensure the desired level of diversification of the loan
of counterparties and assign internal credit ratings based on               portfolio. Finally, the policy establishes the levels of authorization
this evaluation. These officers, who have direct knowledge                  and delegations of authority required for the approval and
of clients and their industry sectors, are responsible for credit           management of credit commitments.
screening and monitoring credit risks, which are reviewed by an
independent department. Credit concentration limits for various             Borrower limits are based on a customer’s risk rating and the
industries, products and geographic regions are set by the Internal         maximum commitment determined by the Desjardins Group’s
Credit Committee and approved by the Board of Directors. This               credit management framework. Credit commitment limits for each
committee also sets credit limits for clients and counterparties            sector of activity in the private portfolio cannot be more than 15%
which are also approved by the Board of Directors. The members              of the aggregate of the credit commitments in this sector without
of the Credit and Investment Commission of the Board of Directors           the prior authorization of the Credit and Investment Commission.
periodically review the authorized limits and their monitoring.             At year-end, all sectors of activity were in compliance with this
                                                                            limit.
The quantitative aspect of examining credit risk consists of
measuring Caisse centrale’ credit exposure to each counterparty.            Caisse centrale also deals with foreign correspondents. International
The Internal Credit Committee is responsible for monitoring the             transactions involving credit risk are governed by the international
policies and practices to measure such risk. Credit exposure is             services credit policy. More specifically, this policy ensures sound
measured in terms of both current and potential credit exposure.            apportionment of Caisse centrale’ foreign risks by setting out
Current credit exposure is generally represented by the notional            eligibility criteria for countries and correspondents, monetary
or principal value for on-balance sheet financial instruments               limits by country and correspondent, and term limits. This policy is
and by the replacement value for derivative instruments. Caisse             also updated annually.
centrale also estimates potential credit exposure by considering its
sensitivity to market changes.                                              The loan portfolio of Caisse centrale is very diversified. Business
                                                                            sector loans from all sectors of the economy account for
These elements are subject to review, as are products and credit            approximately 19% of outstanding loans (Table VII). Caisse
risks requiring strict follow-up. These risks are examined regularly        centrale monitors the economic sectors in which it is involved on
by the Internal Credit Committee. This group of senior officers             an ongoing basis.
evaluates the adequacy of the provisions for credit losses and
                                                                                                                                                        page 47
TABLE VII


PRIVATE SECTOR
Outstandings as at December 31 (in millions of dollars)




                                                                                                                                                        Management’s Discussion and Analysis
                                                                                            2003                                         2002 1
     Primary industries                                                $   36                   2%                 $    46                    3%
     Manufacturing industries
       Food and tobacco                                                    193                 12                      145                    9
       Textiles, rubber and plastics                                        41                  3                       52                    3
       Wood and furniture                                                  123                  8                      121                    8
       Pulp and paper                                                       96                  6                       88                    6
       Metal products                                                       40                  2                       45                    3
       Other                                                                65                  4                       75                    5
     Construction                                                            2                 —                        —                    —
     Real estate                                                            46                  3                      226                   15
     Transportation and warehousing                                         97                  6                       93                    6
     Telecommunications                                                     69                  4                      122                    8
     Publics services                                                       27                  2                       28                    2
     Wholesale and retail trade                                            154                 10                       95                    6
     Financial intermediaries                                              166                 11                      123                    8
     Other service corporations                                            216                 14                      197                   13
     Other                                                                 199                 13                       76                    5
     TOTAL                                                             $ 1,570               100%                  $ 1,532                 100%
     1   Reclassified to conform to the current year’s presentation.



IMPAIRED LOANS                                                                   $86.2 million at year-end, compared to $46.2 million in 2002, and
                                                                                 their coverage by specific provisions reached 54%. This increase
A loan is considered to be impaired and the interest thereon                     is attributable, among other things, to the problems experienced
ceases to be recorded when (a) there is reason to believe that                   by the steel and forest products sectors and the strong Canadian
a portion of the principal or interest cannot be collected or (b)                dollar, which has affected certain exporting manufacturers.
the interest or principal is contractually 90 days in arrears, except            Overall, the total allowance (specific and general provisions) for
where the loan is fully guaranteed or is in collection, or (c) the               credit losses exceeded gross impaired loans by $4.1 million. It is
loan has been in arrears for more than 180 days. Further details on              worth noting that these loans represent only 1% of total loans in
our accounting policies are provided in note 2 to the consolidated               a $8.2 billion portfolio.
financial statements.
                                                                                 Caisse centrale management intends to continue to closely monitor
Despite a difficult environment, the quality of the loan portfolio               its loan portfolio as part of a cautious approach toward credit risk
continues to be excellent. Gross impaired loans amounted to                      management in order to maintain asset quality.




                                                                                                                                                        Caisse centrale
ALLOWANCE FOR CREDIT LOSSES                                             It is determined by the credit rating, maturity dates, default
                                                                        probabilities, volatility, the type of security, and the expected
As demonstrated by the foregoing sections, Caisse centrale              collection. It also takes into account the diversification of the
will continue to rigorously manage its loan portfolio. Despite          counterparties and the economic and geographic sectors of
the economy’s modest growth in 2003, the quality of the loan            activity of the credit portfolio. This assessment is reviewed where
portfolio continues to be excellent, as evidenced by the low            conditions indicate that initial assumptions will differ from actual
proportion of impaired loans.                                           results. Further details on our accounting policies are provided in
                                                                        note 2 to the consolidated financial statements.
The provisions specifically related to particular elements of the
loan portfolio were up in comparison to 2002. Consequently, these       Consequently, at the close of 2003, the specific and general
provisions amounted to $46.5 million, compared to $36.4 million         provisions amounted overall to $90.4 million. This amount
at the same date in 2002. Table VIII provides the breakdown             represented 5.8% of the private sector loan portfolio and 1% of
of specific provisions by industry. The general provision for           the total portfolio.
credit losses totalled $43.8 million as at December 31, 2003.


TABLE VIII


BREAKDOWN OF SPECIFIC PROVISIONS
As at December 31 (in thousands of dollars)


                                                  2003                   2002               2001                2000               1999
     Manufacturing industries - Other         $ 11,800              $    1,650           $ 2,600              $ 700              $ 1,400
     Transportation and warehousing                 250                    250              2,000              2,000               2,000
     Other service corporations                      —                      —               2,016                325                  —
     Telecommunication                           34,500                 34,500                 —                  —                   —
     Other                                            5                     —                  —                  —                   —
     TOTAL                                    $ 46,555              $ 36,400             $ 6,616              $3,025             $ 3,400
                                                                                                                                             page 49
LIQUIDITY RISK MANAGEMENT
Liquidity risk is part and parcel of asset and liability management    maturities of assets and liabilities, the settlement of off-balance




                                                                                                                                             Management’s Discussion and Analysis
and, as such, is incorporated into treasury strategies. It refers      sheet financial instruments as well as future requirements, by
to the possibility that Caisse centrale may be unable to fulfil its    developing, if need be, multiple scenarios, including worst case
obligations in a timely manner without offering excessive rates        scenarios.
on deposits or liquidating assets at unfavourable prices. Caisse
centrale must manage its liquidities in such a way that, even in       Caisse centrale also maintains an adequate level of securities to
adverse conditions, it will be able to meet its commitments and its    ensure compliance with the liquidity regulatory requirements
customers’ requirements. Caisse centrale therefore ensures that        established by the Autorité des marchés financiers. Liquidities,
diversified sources of funds can be directly accessed at competitive   comprising mainly cash, deposits with Bank of Canada and
prices.                                                                securities, totalled $3.7 billion as at December 31, 2003, or 28%
                                                                       of assets, versus 37% the previous year. The decline is due to a
As a direct clearer of the Canadian Payments Association, Caisse       stronger demand for funds from the Desjardins caisse network.
centrale can, if necessary, borrow from the Bank of Canada.
                                                                       Securities issued or guaranteed by the federal and provincial
Management practices are developed to ensure that liquidities          governments, municipal, school or public corporations and by
are available in sufficient quantity. Caisse centrale must maintain    Canadian banks account for 90% of the securities portfolio. More
sufficient liquid assets at all times to achieve its business plan.    than 46% of these high-quality securities will mature within one
In addition, it must factor in differences between the expected        year.


TABLE IX


LIQUIDITY
As at December 31 (in millions of dollars)


                                                          2003             2002               2001              2000               1999
    Cash and deposits with Bank of Canada             $    112         $     67           $    191          $    105           $    108
    Securities                                            3,619            3,868              3,132             3,203              3,999
    TOTAL                                             $ 3,731          $ 3,935            $ 3,323           $ 3,308            $ 4,107
    Average liquidity                                 $ 3,272          $ 4,231            $ 3,616           $ 4,787            $ 3,248




                                                                                                                                             Caisse centrale
TABLEAU X


BREAKDOWN OF THE SECURITIES PORTFOLIO
As at December 31 (in millions of dollars)


                                                                 2003            2002             2001                   2000        1999
    Canada                                                   $    681        $    531         $       309            $    390    $    301
    Provinces and municipal corporations in Canada               1,375           1,431            1,524                    862         868
    School and public corporations in Canada                        30              80              116                    142         110
    Entities under common control                                  118              84               56                     —           25
    Other Canadian issuers                                       1,357           1,616              931                  1,601       2,618
    Foreign issuers                                                 58             126              196                    208          77
    TOTAL                                                    $ 3,619         $ 3,868          $ 3,132                $ 3,203     $ 3,999
    Average securities                                       $ 3,230         $ 4,028          $ 3,541                $ 4,708     $ 3,174




SOURCES OF FUNDS                                                                                    ■ A short-term European commercial
                                                                         ON THE INTERNATIONAL MARKET:
                                                                         paper program of US$600 million ■ A short-term American
One component of Caisse centrale’ mission is to assume the               commercial paper program of US$600 million ■ A European multi-
strategic role of supplier of funds to the Desjardins network. Over      currency medium-term deposit note program of US$5 billion.
the years, Caisse centrale has built national- and international-scale
funding sources by varying the markets, financial instruments,                             Chart II
maturity dates and currencies of its deposits. Table XI and Chart                          DEPOSITS AND DEBENTURE BY
I present deposits as at December 31, 2003 by counterparty type                            CURRENCY
                                                                                           As at December 31, 2003
and maturity.

                    Chart I
                    DEPOSITS AND DEBENTURE BY
                    COUNTERPARTY TYPE
                    As at December 31, 2003




                                                                                           ■ 58% Canadian dollars
                                                                                           ■ 21% U.S. dollars
                                                                                           ■ 21% Other currencies

                                                                         In the second half of the year, Caisse centrale made several
                    ■     1%   Public issues Canada                      medium-term deposit issues, of which the first two public issues
                    ■     4%   Canada and provinces                      were in Canada, in order to meet the strong demand for funds
                    ■    19%   Desjardins Group                          from the Desjardins caisse network. While extending the term
                    ■    25%   Commercial paper                          of institutional borrowing, the issues have raised the profile of
                    ■    36%   Banks and others                          Desjardins Group and allowed it to firmly establish the value of
                    ■     7%   Public issues Europe                      its credit against rival banking institutions in both Canada and
                    ■     8%   MTN Europe                                Europe. Desjardins Group is thus well positioned to raise funds on
                                                                         the capital markets on other occasions.
Once again in 2003, as has been the case for many years, Caisse
centrale was assigned high credit ratings by agencies, thus giving
it access to attractive funding sources. Caisse centrale intervenes
on financial markets using the following instruments:

ON THE CANADIAN MARKET:        ■ A   short-term commercial paper
program with no pre-set limit ■ A medium-term commercial paper
program of $2 billion ■ A new medium-term deposit note program
of $2 billion, allowing public distribution of the deposits issued.
                                                                                                                                                                          page 51
TABLEAU XI


 DEPOSITS BY MATURITY
As at December 31 (in millions of dollars)




                                                                                                                                                                          Management’s Discussion and Analysis
                                                                                                       Payable on a fixed date

                                            Payable
                                                on                 Within         3 to 12                 1 to 5             Over
                                            demand               3 months         months                  years            5 years               Total            Total

                                                                                                                                                 2003             2002
     Canada                                     $    —           $    101         $        —          $      —             $    —            $      101       $     15
     Provinces                                      123               178                  —                 —                 —                    301            344
     Banks and financial institutions                64               511                 256                31                70                   932            166
     Members
       Fédération                                   140                265                202               418                  8               1,033            1,951
       Other                                         36                126                 24                20                 —                  206              274
     Entities under common control                   60                282                269                96                 —                  707              507
     Other                                          365              2,491                923             2,792                271               6,842            4,531
     TOTAL                                      $ 788            $ 3,954          $ 1,674             $ 3,357              $ 349             $ 10,122         $ 7,788



As at December 31, 2003, outstanding deposits and subordinated                        Funds raised on the Canadian market totalled $6.5 billion as at
debenture (Table XII) totalled $10.2 billion, up $2.3 billion or 29%                  December 31, 2003, up $1.9 billion, or 63% of the aggregate of the
from the $7.9 billion posted the previous year.                                       deposits and subordinated debenture, versus 57% in 2002.

As at December 31, 2003, 42% of the deposits and subordinated                         In 2004, interest rate conditions should not change considerably
debenture were denominated in foreign currencies and hedged in                        and the demand for residential mortgages should therefore
order to eliminate foreign exchange risk; moreover, 37% were for                      remain high. Caisse centrale anticipates borrowing requirements
a term of more than one year versus 31% the previous year.                            similar to those in 2003, including an issue of subordinated debt
                                                                                      for the account of Capital Desjardins.


TABLE XII


DEPOSITS AND SUBORDINATED DEBENTURE
As at December 31 (in millions of dollars)


                                                                    2003                  2002                     2001                     2000                  1999
     Canada                                                  $       101              $         15            $     165                 $    169              $    547
     Provinces                                                       301                    344                     347                      132                   108
     Banks and financial institutions                                932                    166                     207                      269                   210
     Members
       Fédération                                                 1,033                   1,951                    1,553                    1,846                 1,590
       Other                                                        206                     274                      228                      177                   118
     Entities under common control                                  707                     507                      281                      197                   212
     Other                                                        6,842                   4,531                    4,724                    4,884                 6,515
                                                                 10,122                   7,788                    7,505                    7,674                 9,300
     Subordinated debenture                                          124                    126                     160                      159                   163
     TOTAL                                                   $ 10,246                 $ 7,914                 $ 7,665                   $ 7,833               $ 9,463
     Average liabilities                                     $    7,977               $ 8,004                 $ 8,046                   $ 8,536               $ 9,050



GEOGRAPHIC DISTRIBUTION

                                         2003                          2002                          2001                            2000                     1999
     Canada                  $   6,489     63%            $ 4,519          57%        $ 3,628          47%          $ 3,310            42%          $ 3,133       33%
     International               3,757     37               3,395          43             4,037        53             4,523            58             6,330       67
                                                                                                                                                                          Caisse centrale




     TOTAL                   $ 10,246     100%            $ 7,914          100%       $ 7,665         100%          $ 7,833           100%          $ 9,463       100%
MARKET RISK MANAGEMENT
Market risk is the risk that results from changes in the market value      INTEREST RATE RISK MANAGEMENT
of financial instruments due to a fluctuation in the parameters
affecting this value; notably in interest and foreign exchange             Interest rate risk is the sensitivity of Caisse centrale’ financial
rates and their volatility. The risk of losses related to interest rate    condition to movements in interest rates. The magnitude and
and foreign exchange rate volatility is the main component of              direction of the effect depend on the amount of assets and
market risk to which Caisse centrale is exposed. The estimation of         liabilities that reprice in a given period.
potential losses is a key element of managing risk.
                                                                           Caisse centrale can lower or eliminate this risk by changing the
The integrated risk management group, which is independent from            mix of assets and liabilities through pricing initiatives or the use of
the sectors initiating transactions, is responsible for examining          derivative instruments.
market risk exposure on a daily basis. It ensures that risks remain
within the set limits and that only authorized activities are              Exposure to interest rate risk is reviewed on a regular basis by the
undertaken, and develops and implements risk assessment models.            Assets/Liabilities Committee. This committee establishes Caisse
It reports daily to senior management on profits and losses,               centrale’ position in view of anticipated interest rate changes and
value-at-risk (VAR) and compliance with maximum loss limits                recommends hedging any undesired or unexpected interest rate
established as a result of a one-basis point change in interest rates      risk.
on unmatched positions. The independent risk management unit
is responsible for periodically examining models and assessments.          Note 13 to the consolidated financial statements shows Caisse
                                                                           centrale’ position with regard to interest rate sensitivity as
VAR is a generally accepted risk measurement concept that utilizes         at December 31, 2003, in accordance with the provisions of
statistical models and information on historical market prices to          Section 3860 of the Canadian Institute of Chartered Accountants
calculate, according to a given confidence level, the maximum              Handbook, “Financial Instruments – Disclosure and Presentation.”
loss in market value that Caisse centrale would sustain in its asset       Balance sheet and off-balance sheet assets and liabilities are
and liability management portfolios from adverse movements                 presented in the table based on the earlier of the maturity date
in market rates and prices in a single day. Caisse centrale’ VAR           or the contractual repricing date. This is the position at that
is based on a 99% and 95% confidence level and represents an               particular date, but could have subsequently changed, taking
estimate of the maximum loss that Caisse centrale could sustain            into account forecasted interest rates and clients’ preferences for
in its portfolios. Caisse centrale uses a historical simulation of         products and terms.
scenarios from the previous two years to calculate the VAR
of its asset and liability management portfolios. Management               Caisse centrale is very prudent with regard to interest rate
recognizes that VAR is not an absolute measurement of market               sensitivity. Various means are used to monitor and manage interest
risk and that its use is limited, since it is based solely on historical   rate risk. In addition, Caisse centrale has established policies
information. Management therefore uses various measures and                describing principles and procedured regarding risk management,
information to help it assess and control the market risks to which        and periodic reports are reviewed by the Board of Directors.
its products and portfolios will be exposed.

Chart III presents the daily changes in the overall VAR of Caisse
centrale’ asset and liability management portfolios in Canadian
dollars during 2003. Based on a 99% confidence level, the average
VAR amounted to $167,000 in 2003.


                    Chart III

                    2003 VALUE-AT-RISK
                    Millions $

                    0.5

                    0.4

                    0.3

                    0.2

                    0.1

                    0
                                                      December
                                 January
                                  2003




                                           2003




                                                        2003
                                           June
                                                                                                                                                   page 53
TABLE XIII


CREDIT INSTRUMENTS
NOTIONAL AMOUNTS




                                                                                                                                                   Management’s Discussion and Analysis
As at December 31 (in millions of dollars)


                                                      2004         2005             2006       2007        2008         Other            Total
     Guarantees and standby letters of credit    $     115        $   50        $     15       $   6       $   1            $ —     $     187
     Commitments to extend credit
      Firm                                           12,203           246           1,017          78          54            96         13,694
      Conditional                                       517            47              —           —           —             —             564
     Commitments to purchase assets                      34            —               —           —           —             —              34
                                                 $ 12,869         $ 343         $ 1,032        $ 84        $ 55             $ 96    $ 14,479



FOREIGN EXCHANGE RISK MANAGEMENT                                            FINANCIAL INSTRUMENTS WITH CONTRACTUAL AMOUNTS
                                                                            REPRESENTING CREDIT RISK
Caisse centrale has assets and liabilities denominated in a number
of foreign currencies. Foreign exchange risk arises when the                Products in this category, which consist of guarantees, standby
actual or forecasted assets in a foreign currency are either greater        letters of credit, commitments to extend credit and commitments
or lesser than the liabilities in that currency. Caisse centrale has        to purchase assets, are designed to provide clients with funds
established specific foreign exchange risk management policies.             for anticipated needs. Since conditional commitments to extend
                                                                            credit are subject to clients’ compliance with particular credit
                                                                            standards, the risk associated with such commitments is reduced
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS                                     considerably. A firm commitment requires a duly signed offer,
                                                                            including confirmation of acceptance by the customer. In such
As part of the management of interest and foreign exchange rate             cases, Caisse centrale must pay out the amount specified in the
risk, Caisse centrale uses off-balance sheet financial instruments.         commitment when the customer is unable to meet its financial or
To help selected clients meet their liquidity requirements and              contractual obligations. Caisse centrale takes these commitments
protect themselves against fluctuations in interest and foreign             into consideration in its forward-looking management of liquidity
exchange rates, Caisse centrale offers a number of off-balance              needs to be met. Table XIII presents off-balance sheet credit
sheet financial instruments in the normal course of business. These         instruments over the next few years.
off-balance sheet financial instruments can be broadly divided into
two categories (i) financial instruments with contractual amounts
representing credit risk and (ii) derivatives.                              CONTRACTUAL COMMITMENTS AND GUARANTEES

All off-balance sheet financial instruments are subject to Caisse           In the normal course of its business, Caisse centrale, like other
centrale’ usual credit standards, financial controls, risk ceilings and     major Canadian financial institutions, pledges part of its liquid
monitoring procedures. Caisse centrale constantly improves its risk         assets in order to participate in the clearing and payments systems.
management systems and assessment models for these products.                It also enters into long-term leases or service contracts entailing
In the opinion of management, these transactions do not represent           minimum future payments. Table XIV presents the contractual
an unusual risk and no material losses are anticipated as a result          commitments over the next few years. Additional information is
of these transactions. Notes 2 and 11 to the consolidated financial         also provided in note 15 to the consolidated financial statements.
statements provide further details on these instruments and their
accounting.


TABLE XIV


CONTRACTUAL COMMITMENTS
As at December 31 (in thousands of dollars)


                2004                  2005              2006                2007               2008                 Other                Total
             $ 1,217                 $ 910             $ 417                $ 166             $ 163                 $ 316            $ 3,189
                                                                                                                                                   Caisse centrale
TABLE XV


OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
NOTIONAL AMOUNTS
As at December 31 (in millions of dollars)


                                                      Members                                                   Members
                                                           and                                                       and
                                                       entities                                                  entities
                                                        under                                                     under
                                                      common                                                    common
                                                       control               Other           Total               control           Other        Total
                                                                                             2003                                               2002
    CREDIT INSTRUMENTS
    Guarantees and standby letters of credit          $      43         $     144       $     187               $       107   $      74    $     181
    Commitments to extend credit
     Firm                                                  8,877             4,817          13,694                   8,649         4,729       13,378
     Conditional                                              —                564             564                      —            736          736
    Commitments to purchase assets                            —                 34              34                      —             38           38
                                                           8,920             5,559          14,479                   8,756         5,577       14,333
    DERIVATIVES
    Interest rate contracts                               19,980            30,312          50,292                  45,910        23,792       69,702
    Foreign exchange contracts                               659            10,048          10,707                     704         6,435        7,139
    Other contracts                                        2,022             2,046           4,068                   2,651         2,651        5,302
                                                          22,661            42,406          65,067                  49,265        32,878       82,143
    TOTAL                                             $ 31,581          $ 47,965        $ 79,546                $ 58,021      $ 38,455     $ 96,476



DERIVATIVES                                                                   des caisses Desjardins du Québec to reduce the number of
                                                                              derivative transactions in order to simplify the application of CICA
Derivative financial instruments are financial contracts which                Accounting Guideline 14, “Hedging Relationships”, adopted on
derive their value from the underlying price, interest or exchange            January 1, 2004.
rate or index. Derivatives include many financial contracts such
as futures, swaps, forward rate agreements, forward exchange                  Chart IV presents the credit risk equivalent amounts of Caisse
contracts and options. Derivatives are a key risk management                  centrale’ derivative portfolio by credit rating of its partners.
tool, both for Caisse centrale and for its clients. A description of          The chart shows that close to 82% of the real credit exposure is
derivatives and their use by Caisse centrale is provided in note 11           attributable to counterparties whose credit ratings are equal to or
to the consolidated financial statements.                                     above Caisse centrale’ own credit rating (Moody’s Aa3).

Derivatives, like balance sheet financial instruments, are subject to                                Chart IV
market and credit risk. As outlined in the Risk Management section,                                  DERIVATIVE CREDIT RISK
Caisse centrale evaluates the risk associated with derivatives in                                    EQUIVALENT
                                                                                                     By credit rating
much the same way as the risks associated with other financial
instruments. However, unlike balance sheet financial instruments,
where credit exposure is generally represented by the nominal or
principal value, the credit exposure associated with derivatives is
generally a small fraction of the notional amount of the instrument
and is represented by the positive market value of the derivative.
The various derivatives allow for the transfer, modification or
reduction of foreign exchange and interest rate risks stemming
from variations thereof. The vast majority of currency and interest
rate swaps, forward exchange contracts and options are transacted
with banks, members or entities under common control.
                                                                                                     ■ 10% Aaa to Aa1
As illustrated in Table XV, derivative transactions decreased 21%                                    ■ 72% Aa2 to Aa3
or $17.1 billion as at year-end. The most pronounced decline was                                     ■ 18% A1 to Baa2
in interest rate contracts, the value of which decreased by 28%
to $50.3 billion from a year earlier, especially in the transactions          To mitigate risk, Caisse centrale uses risk mitigating techniques
with members and entities under common control category. In                   such as netting, collateralization and setting counterparty limits.
fact, preliminary work has been performed by the Fédération
                                                                                                                                             page 55
Chart V details the notional amounts of derivatives by counterparty    Chart VI shows the maturity profile of the derivative portfolio.
type. Measured by notional amounts, 45% of counterparties were         Generally, the market risk associated with short-term financial
banks. Members and entities under common control accounted             instruments is lower than with long-term ones. As measured by
for 35%. It should be remembered that Caisse centrale acts as an       notional amounts, 71% of these derivatives have remaining terms
intermediary to meet the Desjardins network’s needs in terms of        of less than three years and more than half of these will mature




                                                                                                                                             Management’s Discussion and Analysis
derivative instruments. Additional information on the transactions     within one year. Of note is that close to 75% of the forward
carried out with Desjardins Group is found in note 16 to the           exchange contracts have a remaining term of less than three
consolidated financial statements. Transactions with private sector    months.
entities accounted for only 18% of the portfolio.
                                                                                          Chart VI
                   Chart V                                                                DERIVATIVE NOTIONAL
                   DERIVATIVE NOTIONAL                                                    AMOUNTS
                   AMOUNTS                                                                By maturity
                   By counterparty




                                                                                          ■   41%    Within 1 year
                   ■ 45% Banks                                                            ■   30%    1 to 3 years
                   ■ 35% Members and entities                                             ■   26%    3 to 5 years
                             under common control                                         ■    3%    Over 5 years
                   ■ 18% Private sector
                   ■ 2% Government



OPERATIONAL RISK MANAGEMENT
Operational risk is defined as the risk of losses, of failure to       Aware of the need for a coordinated approach to implement
achieve objectives or of a negative impact on reputation resulting     new methods and manage developments in operational risk,
from inadequate or failed processes, people and systems, or from       Caisse centrale created a unit responsible for operational risk
external events.                                                       management. This unit initiated and completed various tasks
                                                                       throughout 2003, which will be continued over the next few years
Operational risk is the potential risk that Caisse centrale may        to ensure sound and prudent management of operational risk.
incur losses arising from fraud, damage to tangible assets, acts       Among these tasks is our contribution to the joint project with
in violation of legislation, lawsuits, system failures, problems       Desjardins Group intended to further organize the management
in transaction processing or process management as well as             of its information base for operational losses. In addition, other
disruptions due to external factors.                                   work continues to be done with Desjardins Group to set up an on-
                                                                       going self-assessment process for operational risk and integrate it
Operational risk is inherent to all of Caisse centrale’ business       more effectively into our management approaches.
activities and can never be completely eliminated. However,
Caisse centrale endeavours to minimize operational risk through        Through its committees and the completion of specific projects,
its internal control systems which provide for segregation of          Caisse centrale ensures that the assessment of its technology
duties, a disciplined approach to decision-making and delegation       environment is monitored and secure. Consequently, strategic
of authority, the development of appropriate policies, methods         planning with respect to implementations, disaster recovery,
and infrastructures, and duly confirmed recording of transaction-      system robustness, security, management of human resources
related information. Internal controls also involve risk monitoring,   expertise, and proper control of its operations are considerations
financial reporting and insurance coverage measures. In addition,      to which Caisse centrale devotes considerable effort in order to
Caisse centrale possesses back-up capabilities and engages in          counter the specific related operational risks.
business resumption planning to ensure ongoing service delivery
under adverse conditions. Effective management of operational
risk depends as well on the commitment, competence and ability
of Caisse centrale staff. The internal controls and systems in place
are examined from time to time by internal auditors of Desjardins
Group.
                                                                                                                                             Caisse centrale
CAPITAL MANAGEMENT
Capital is an important factor for assessing the security and            Board of Directors agreed to suspend the quarterly payment of
soundness of Caisse centrale in relation to all the risks associated     the remuneration of capital stock.
with its activities. In recent years, regulators and rating agencies
have paid a great deal of attention to financial institutions’ capital   Consequently, as at December 31, 2003, capital, as defined by the
levels.                                                                  standards of the Fédération des caisses Desjardins du Québec,
                                                                         totalled $784 million, up $167 million over fiscal 2002 as a result of
                                                                         the previously mentioned capital stock issue.
REGULATORY CAPITAL

The capital adequacy of Caisse centrale is regulated by the              RISK-WEIGHTED ASSETS AND OFF-BALANCE SHEET FINANCIAL
standards of the Fédération des caisses Desjardins du Québec,            INSTRUMENTS
which were approved by the Autorité des marchés financiers. These
standards are based on the regulatory requirements of the Basel          The standards of the Fédération des caisses Desjardins du Québec
Committee on Banking Supervision of the Bank for International           require that “risk-weighted balances” be calculated for assets and
Settlements (BIS), which oversees the capital adequacy of financial      off-balance sheet financial instruments, and that aggregate values
institutions operating on international markets. In this way, Caisse     be weighted using a common definition of capital.
centrale can determine where it stands relative to other financial
institutions on international markets given its presence on such         Off-balance sheet financial instruments are initially converted
markets.                                                                 to “credit risk equivalents,” as shown in Table XVI. For credit
                                                                         instruments such as guarantees, standby letters of credit and
Total regulatory capital, which constitutes capital, differs from the    commitments to extend credit, the “credit risk equivalent” is
capital disclosed on the balance sheet. It comprises two classes:        determined by multiplying the principal or nominal amount by
Tier I capital and supplementary or Tier II capital. Tier I capital      the appropriate “credit conversion factor,” which can range from
includes more permanent capital items than Tier II capital. It           0% to 100% depending on the nature of the instrument and the
consists of members’ equity (which includes capital stock, retained      original term to maturity. The “credit risk equivalent” for foreign
earnings and the general reserve). Tier II or supplementary              exchange, interest rate and currency contracts takes into account
capital essentially consists of subordinated debentures and the          the replacement cost of contracts with a positive value and the
eligible general provision for credit losses. It should be noted that    potential credit exposure on the contracts, calculated on their
debentures must be amortized on a straight-line basis over the five      residual term to maturity.
years preceding their maturity.
                                                                         The “credit risk equivalent” for off-balance sheet financial
In 1998, the Board of Directors of Caisse centrale approved a            instruments, together with on-balance sheet assets, are then
capitalization plan for Caisse centrale aimed at ensuring the            multiplied by appropriate “risk weights” to determine risk-
development of its operations and providing, in particular, for an       weighted balances. The risk weights depend on the relative
aggregate $200 million injection of capital from the caisses through     credit risk of the counterparty and vary from 0% for claims on or
the Fédération des caisses Desjardins du Québec. A portion of            guaranteed by the Canadian or provincial governments to 100%
$102 million was received in 1999. In fiscal 2003, Caisse centrale       for claims on or guaranteed by the business sector.
issued $154.8 million of capital shares. Members holding capital
shares agreed that an amount equal to the unpaid remuneration            As shown in Table XVI, Caisse centrale’ risk-weighted assets and
of capital stock should be reinvested in the form of capital shares.     off-balance sheet financial instruments totalled $4.8 billion as at
As previously stated, given the needs in forthcoming years, the          December 31, 2003, up slightly over the prior year.
                                                                                                                                              page 57
CAPITAL RATIO                                                           CHANGES TO REGULATORY CAPITAL REQUIREMENTS

Section 46 of the Act respecting the Mouvement Desjardins               As already stated, the BIS proposed a new capital adequacy
stipulates that Caisse centrale must maintain an adequate               framework to replace the 1988 Basel Capital Accord. Amendments
capital base consistent with sound and prudent management,              to the Accord are being finalized, but implementation of “Basel II”




                                                                                                                                              Management’s Discussion and Analysis
in accordance with the standards of the Fédération des caisses          should not be required until fiscal 2007.
Desjardins du Québec (and approved by the Autorité des marchés
financiers).
                                                                                           Chart VII
According to these standards, Caisse centrale must maintain, at all
times, capital in accordance with the following ratios:                                    1999 - 2003
                                                                                           CAPITAL RATIOS
a) its total assets may not be more than 18.2 times its total capital                      %
   (or a minimum of 5.5%);
                                                                                           18
b) its total capital must be more than or equal to 8.5% of its risk-
                                                                                           16
   weighted assets, of which at least one half is Tier I capital.
                                                                                           14
As at December 31, 2003, the asset/capital ratio was 5.9%. Tier I
capital and total capital ratios determined according to risk-
                                                                                           12
weighted assets and off-balance sheet commitments stood at
14.4% and 16.4%, respectively, compared to 11.8% and 13.7%,
                                                                                           10
respectively, one year earlier.
                                                                                            8
It should be noted, however, that both the Tier I capital ratio and
total capital ratio of Caisse centrale determined according to risk-                        6
weighted assets and off-balance sheet commitments exceed the




                                                                                                       1999


                                                                                                              2000


                                                                                                                     2001


                                                                                                                            2002


                                                                                                                                   2003
7% and 10% which the Office of the Superintendent of Financial
Institutions of Canada has determined to be characteristic of a
financial institution with a sound capital structure.                                      — Total Capital
                                                                                           — Tier 1 Capital




                                                                                                                                              Caisse centrale
TABLE XVI


RISK-WEIGHTED ASSETS AND OFF-BALANCE SHEET FINANCIAL
INSTRUMENTS
As at December 31 (in thousands of dollars)


                                                                                                            Balance
                                                                                                              sheet          Risk-                      Risk-weighted balance
                                                                                                            amount         weight                    2003                  2002
    ASSETS
    Cash and deposits with Bank of Canada                                                          $    112,509                 0%          $           —         $           —
    Securities issued or guaranteed by Canada, provinces,
      municipal, school or public corporations in Canada                                               2,085,234            0-20%                  8,503                20,734
    Securities issued or guaranteed by U.S. public administrations                                        28,999              20%                  5,800                25,135
    Securities issued by banks                                                                         1,182,951              20%                236,590               195,518
    Securities issued by members and entities under common control                                        27,728          20-100%                 27,728                34,283
    Other securities                                                                                     293,627             100%                293,627               648,635
    Loans issued or guaranteed by Canada, provinces,
      municipalities, school boards and public agencies                                                1,522,989            0-20%                 301,881               183,584
    Loans to members and entities under common control                                                 4,751,757          20-100%               1,333,950               649,955
    Securities purchased under resale agreements                                                          14,919               0%                      —                     —
    Day, call and short-term loans to investment dealers and brokers, secured                            218,000           0-100%                  13,607                24,467
    Other loans                                                                                        1,614,513           0-100%               1,512,372             1,481,076
    Other assets                                                                                       1,580,053           0-100%                 170,766               402,186
                                                                                                   $ 13,433,279                             $ 3,904,824           $ 3,665,573

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

                                                                                        Credit
                                                                      Notional      conversion              Credit risk        Risk-                    Risk-weighted balance
                                                                       amount           factor              equivalent       weight                   2003                 2002
    FINANCIAL INSTRUMENTS WITH
      CONTRACTUAL AMOUNTS REPRESENTING
      CREDIT RISK
    Guarantees and standby letters of credit                    $     186,337           0-100%          $     186,337        20-100%         $     153,359        $    144,165
    Commitments to extend credit
     Original term to maturity
       Over one year                                                 1,491,115             50%                745,558         0-100%               509,719             486,780
       One year or less and conditional                             12,767,004              0%                     —              0%                    —                   —
    Commitments to purchase assets                                      34,119            100%                 34,119         0-100%                    —                2,781
    DERIVATIVES
    Interest rate contracts                                         50,292,095               (1)              788,824         20-50%               191,055             266,316
    Foreign exchange contracts                                      10,707,359               (1)              543,856         20-50%               140,267             153,379
    Other contracts                                                  4,067,614               (1)              330,574         20-50%               112,962              84,862
                                                                $ 79,545,643                            $ 2,629,268                          $ 1,107,362              1,138,283
    Less impact of master netting agreements                                                                                                      (235,707)       $    (296,601)
                                                                                                                                             $     871,655        $    841,682
    TOTAL RISK-WEIGHTED ASSETS AND OFF-BALANCE SHEET FINANCIAL INSTRUMENTS                                                                   $ 4,776,479          $ 4,507,255
    (1) Derivatives
                are converted to their “credit risk equivalent” by adding the total replacement cost (at market value) of all outstanding contracts with a positive value and an
      amount for potential credit exposure based on the total contract amount broken out by remaining term to maturity, as follows:


    Remaining term to maturity                                Foreign exchange contracts                       Interest rate contracts                        Other contracts

    Within 1 year                                                                        1.0%                                         0%                                     6%
    Over 1 year to 5 years                                                               5.0%                                        0.5%                                    8%
    Over 5 years                                                                         7.5%                                        1.5%                                   10%
                                                                                                                                               page 59
FIVE-YEAR CONSOLIDATED BALANCE SHEETS
As at December 31 (in thousands of dollars)




                                                                                                                                               Management’s Discussion and Analysis
                                                              2003              2002              2001             2000               1999
    ASSETS
    Cash and deposits with Bank of Canada            $      112,509    $      67,202     $     191,142     $     105,437     $     107,743
    Securities                                            3,618,539        3,868,115         3,131,843         3,203,401         3,998,672
    Loans
      Securities purchased under resale agreements          14,919             6,222             2,477            37,598             1,907
      Day, call and short-term loans to investment
        dealers and brokers                                218,000          158,739             37,500                 —                 —
      Members
        Fédération                                        3,719,748        2,054,660         1,916,180         2,352,606         3,250,146
        Other                                                    —                 —                 —             20,000            50,322
      Entities under common control                       1,032,009          291,023           222,606           168,997             97,547
      Public and parapublic sectors                       1,522,989          917,921         1,187,642         1,049,116         1,190,470
      Loans purchased from Desjardins Group                 134,319          205,967           327,965           429,606           507,738
      Private sector                                      1,570,584        1,531,872         1,864,691         1,515,414         1,225,801
      Allowance for credit losses                           (90,390)          (78,922)          (58,518)          (46,146)          (43,528)
                                                          8,122,178        5,087,482         5,500,543         5,527,191         6,280,403
    Assets related to derivatives                         1,049,047        1,151,680          990,190           547,610           396,759
    Customers’ liability under acceptances                 450,300          349,300           280,600           629,736           582,350
    Other                                                   80,706           80,723            81,221            84,396            98,941
    TOTAL ASSETS                                     $ 13,433,279      $ 10,604,502      $ 10,175,539      $ 10,097,771      $ 11,464,868
    LIABILITIES AND MEMBERS’ EQUITY
    Deposits
     Payable on demand                               $      787,512    $     698,940     $     782,253     $     762,069     $     765,880
     Payable on a fixed date                              9,334,350        7,089,162         6,722,971         6,912,015         8,534,354
                                                         10,121,862        7,788,102         7,505,224         7,674,084         9,300,234
    Liabilities related to derivatives                    1,432,974        1,501,163         1,422,033          786,095           675,081
    Acceptances                                            450,300          349,300           280,600           629,736           582,350
    Other                                                  617,181          307,883           274,982           316,177           211,696
    Subordinated debenture                                 123,911          125,806           160,452           159,431           163,259
    Members’ equity
      Capital stock                                        666,206          511,403           511,403           511,403           511,403
      General reserve                                       20,845           20,845            20,845            20,845            20,845
                                                           687,051          532,248           532,248           532,248           532,248
    TOTAL LIABILITIES AND MEMBERS’ EQUITY            $ 13,433,279      $ 10,604,502      $ 10,175,539      $ 10,097,771      $ 11,464,868




                                                                                                                                               Caisse centrale
FIVE-YEAR CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 (in thousands of dollars)


                                                                      2003          2002          2001          2000          1999
    INTEREST INCOME
    Loans                                                       $ 208,749     $ 187,318     $ 323,007     $ 304,826     $ 320,311
    Securities                                                    136,194       159,849       182,778       277,772       238,790
                                                                    344,943       347,167       505,785       582,598       559,101
    INTEREST EXPENSE                                                250,289       254,725       406,127       519,634       493,958
    NET INTEREST INCOME                                              94,654        92,442        99,658        62,964        65,143
    Other income                                                     35,702        30,948        16,726        34,633        20,265
    GROSS INCOME                                                    130,356       123,390       116,384        97,597        85,408
    Provision for credit losses                                      16,425        21,146        12,605         3,124         3,042
                                                                    113,931       102,244       103,779        94,473        82,366
    NON-INTEREST EXPENSES
    Salaries and benefits                                            22,354        17,267        17,669        17,428        17,416
    Premises, equipment and furniture, including depreciation        11,831        10,571         9,072         9,071         8,369
    Other                                                            13,321        12,229        10,397        10,848        10,510
                                                                     47,506        40,067        37,138        37,347        36,295
    NET INCOME BEFORE OTHER PAYMENTS TO THE
      DESJARDINS NETWORK AND INCOME TAXES                            66,425        62,177        66,641        57,126        46,071
    Other payments to the Desjardins network                         17,306        16,059        14,337        12,310        10,091
    NET INCOME BEFORE INCOME TAXES                                   49,119        46,118        52,304        44,816        35,980
    Income taxes                                                      9,313        10,790        11,843         9,530         8,306
    NET INCOME                                                  $    39,806   $    35,328   $    40,461   $    35,286   $    27,674
                                                                                                                                                                                     page 61
QUARTERLY FINANCIAL INFORMATION
(in thousands of dollars)




                                                                                                                                                                                     Management’s Discussion and Analysis
                                                     Q4               Q3               Q2               Q1               Q4                Q3               Q2                Q1
                                                                                                     2003                                                                  2002
    (QUARTER-END)
    BALANCE SHEET
      ASSETS
      Cash and deposits with Bank
        of Canada                          $     112,509    $      85,436    $     133,090    $      58,965    $      67,202     $       2,964    $      67,351     $     146,998
      Securities                               3,618,539        3,161,523        3,833,363        2,660,440        3,868,115         4,332,218        4,142,746         3,819,641
      Loans                                    8,122,178        6,982,975        5,796,878        5,356,344        5,087,482         5,074,881        4,982,054         5,386,558
      Assets related to derivatives            1,049,047          902,479          926,970          634,804        1,151,680         1,213,583          819,572           879,353
      Customers’ liability under
        acceptances                             450,300          316,100          464,300          548,030          349,300           415,500          286,800           421,700
      Other assets                               80,706           68,754           75,935           81,322           80,723            77,607           73,327            86,592
                                           $ 13,433,279     $ 11,517,267     $ 11,230,536     $ 9,339,905      $ 10,604,502      $ 11,116,753     $ 10,371,850      $ 10,740,842
      LIABILITIES AND MEMBERS’
        EQUITY
      Deposits                             $ 10,121,862     $ 8,488,409      $ 7,978,197      $ 6,928,100      $ 7,788,102       $ 8,158,581      $ 7,826,000       $ 7,940,612
      Liabilities related to derivatives      1,432,974       1,338,401        1,440,394          900,504        1,501,163         1,504,369        1,226,475         1,338,519
      Acceptances                               450,300         316,100          464,300          548,030          349,300           415,500          286,800           421,700
      Obligations related to securities
         sold short                              14,919           21,189            8,030            1,698            8,896             8,939           36,692             2,004
      Other                                     602,262          546,738          534,294          307,576          298,987           319,912          294,290           348,765
      Subordinated debenture                    123,911          119,382          118,273          121,749          125,806           177,204          169,345           156,994
      Members’ equity                           687,051          687,048          687,048          532,248          532,248           532,248          532,248           532,248
                                           $ 13,433,279     $ 11,517,267     $ 11,230,536     $ 9,339,905      $ 10,604,502      $ 11,116,753     $ 10,371,850      $ 10,740,842
    (QUARTER)
    STATEMENTS OF INCOME
      Net interest income                  $      19,939    $      26,588    $      23,953    $      24,174    $      22,704     $     23,763     $      22,664     $     23,311
      Other income                                12,191            3,851           11,193            8,467             6,153           8,416              8,099            8,280
      Provision for credit losses                 (6,400)          (3,000)          (3,986)          (3,039)           (7,554)         (4,533)            (4,536)          (4,524)
      Non-interest expenses                      (12,949)         (11,608)         (11,561)         (11,388)         (10,061)          (9,781)          (10,247)           (9,978)
      Net income before other
        payments to the Desjardins
        network and income taxes                 12,781           15,831           19,599           18,214           11,242            17,865           15,980            17,089
      Other payments to the
        Desjardins network                        (5,194)           (719)           (6,352)          (5,041)          (3,723)           (4,229)          (4,418)           (3,689)
      Net income before income taxes              7,587           15,112           13,247           13,173             7,519           13,636           11,562            13,400
      Income taxes                                  450            (3,908)          (2,906)          (2,949)          (2,033)           (3,144)          (2,640)           (2,972)
    NET INCOME                             $      8,037     $     11,204     $     10,341     $     10,224     $       5,486     $     10,492     $       8,922     $     10,428




                                                                                                                                                                                     Caisse centrale
AUDIT COMMISSION’S ANNUAL REPORT
The role of the Audit Commission is to support the Board of Directors in its oversight function. Its mandate consists primarily of analyzing
consolidated financial statements, their presentation and the quality of the accounting principles used, as well as the management of
financial information risks, internal control systems, internal and external audit processes, the procedures applied to such audits and
regulatory compliance management.

To this end, the Audit Commission examines the annual and quarterly financial statements, related press releases, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, the Annual Information Form and the prospectus. It discusses
major issues regarding accounting principles and consolidated financial statements presentation. Furthermore, it reviews various reports,
including reports on regulatory ratios, capitalization and the quarterly valuation of the off-balance sheet derivatives portfolio.

It ensures that management has prepared and implemented an effective internal control system for financial information disclosure,
protection of assets, fraud detection and regulatory compliance.

The Audit Commission further ensures that management has set up management systems for the main risks that could affect the financial
results of the entity.

The external auditor reports directly to the Audit Commission. In order to discharge its responsibilities in this area, the Commission
ensures and maintains the independence of the external auditor by authorizing all non audit-related services, by recommending its
appointment or continuance, by fixing and recommending its remuneration and by conducting an annual review of its performance. In
addition, it supervises the work of the external auditor, examines its proposal, its mandate, its annual audit plan, its reports, its letter to
management and management’s comments. In 2003, the Audit Commission had the Board of Directors adopt a policy on the rules for
awarding contracts for related services regarding (a) services that can or cannot be rendered by the external auditor, (b) the governance
procedure to be followed before granting mandates, and (c) the responsibilities of the main stakeholders. Consequently, it receives a
quarterly report on the contracts awarded to external auditors by Caisse centrale and Desjardins Group.

With regard to relations with the Autorité des marchés financiers, the Audit Commission reviews the inspection report issued by the
agency, as well as the quarterly financial reports submitted to it.

The Audit Commission ensures that the independence of the internal audit function of Desjardins Group is safeguarded. It examines the
annual internal audit plan for Caisse centrale, as well as the responsibilities, return, objectivity and staffing of this team. It reviews the
summary reports of the internal audits performed and, where necessary, ensures their follow-up. For such purpose, it meets with the
Internal Auditor of the Group to examine any major issues submitted to management.

The Audit Commission meets privately with the external auditors, management, the Internal Auditor of the Group and the officials of the
Autorité des marchés financiers. It submits a quarterly report to the Board of Directors and makes recommendations, if necessary.

Finally, in compliance with sound corporate governance practices, it annually assesses the effectiveness and efficiency with which it has
performed the tasks set out in its charter.

The Audit Commission is composed of five directors; namely Andrée Lafortune, FCA, Jacqueline Mondy, Jean-Guy Bureau, Marcel Lauzon
and Pierre Leblanc, FCA. It met eight times during fiscal 2003.




ANDRÉE LAFORTUNE, FCA
Chair of the Audit Commission

Montreal, Quebec
February 24, 2004
                                                                                                                                             page 63
MANAGEMENT’S REPORT
Management is responsible for preparing the consolidated financial statements and related information appearing in the Annual Report




                                                                                                                                             Consolidated Financial Statements
and for ensuring their reliability and accuracy. These consolidated financial statements have been prepared in accordance with Canadian
generally accepted accounting principles. When required to make estimates, management did so to the best of its knowledge.

The accounting system of Caisse centrale and related internal controls and procedures are designed to ensure the reliability of financial
information and, to a reasonable degree, safeguard assets against loss or unauthorized use. These procedures include standards in
hiring and training employees, an organizational structure with clearly defined lines of responsibility, written and updated policies and
procedures, planning and follow-up of projects, budget controls by cost centre and divisional performance accountability. The internal
control systems are supplemented by regular independent reviews of Caisse centrale’ major business segments. In addition, in the course
of his duties, the Internal Auditor may confer at any time with the Board of Directors’ Audit Commission. Composed entirely of directors
who are neither officers nor employees of Caisse centrale, this Commission ensures that management has fulfilled its responsibilities with
respect to financial information and the application of internal controls. During 2003, the Audit Commission met 8 times. In addition, the
Board of Ethics, composed entirely of volunteer officers elected by the general meeting, ensures compliance with rules of professional
conduct regarding, among other matters, conflicts of interest and transactions with related parties. This Board met 4 times.

The Autorité des marchés financiers examines the affairs of Caisse centrale annually to ensure that the provisions of its constituent
legislation, particularly with respect to the protection of depositors, are duly observed and that Caisse centrale is in sound financial
condition.

The independent auditors appointed by the general meeting of members, PricewaterhouseCoopers LLP, have the responsibility of
auditing the consolidated financial statements in accordance with Canadian generally accepted auditing standards and of expressing
their opinion. Their report follows. They may, at any time, confer with the Audit Commission on all matters concerning the nature
and execution of their mandate, particularly with respect to the accuracy of financial information provided by Caisse centrale and the
reliability of its internal control systems.




ALBAN D’AMOURS                                           JEAN-GUY LANGELIER
Chairman of the Board and                                President and Chief Operating Officer
Chief Executive Officer

Montreal, Quebec
February 12, 2004




                                                                                                                                             Caisse centrale
AUDITORS’ REPORT
To the Members of Caisse centrale,

We have audited the consolidated balance sheets of Caisse centrale as at December 31, 2003 and 2002 and the consolidated statements of
income, members’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of Caisse
centrale’ management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Caisse centrale as
at December 31, 2003 and 2002 and the consolidated results of its operations and its cash flows for the years then ended in accordance
with Canadian generally accepted accounting principles.




PRICEWATERHOUSECOOPERS LLP
Chartered Accountants

Montreal, Quebec
February 12, 2004
                                                                                                                                   page 65
CONSOLIDATED BALANCE SHEETS
As at December 31 (in thousands of dollars)




                                                                                                                                   Consolidated Financial Statements
                                                                                                           2003            2002
    ASSETS
    CASH AND DEPOSITS WITH BANK OF CANADA                                                         $     112,509    $     67,202
    SECURITIES (notes 3 and 15)
      Investment account                                                                               3,209,294       3,690,061
      Trading account                                                                                    409,245         178,054
                                                                                                       3,618,539       3,868,115
    LOANS (note 4)                                                                                     8,122,178       5,087,482
    OTHER
      Assets related to derivatives                                                                    1,049,047       1,151,680
      Customers’ liability under acceptances                                                             450,300         349,300
      Other assets (note 5)                                                                               80,706          80,723
                                                                                                       1,580,053       1,581,703
                                                                                                  $ 13,433,279     $ 10,604,502
    LIABILITIES AND MEMBERS’ EQUITY
    DEPOSITS (note 6)
      Payable on demand                                                                           $      787,512   $     698,940
      Payable on a fixed date                                                                          9,334,350       7,089,162
                                                                                                      10,121,862       7,788,102
    OTHER
      Liabilities related to derivatives                                                               1,432,974       1,501,163
      Acceptances                                                                                        450,300         349,300
      Obligations related to securities sold short                                                        14,919           8,896
      Commitment under the repurchase agreements                                                         409,245              —
      Other liabilities (note 7)                                                                         193,017         298,987
                                                                                                       2,500,455       2,158,346
    SUBORDINATED DEBENTURE (note 8)                                                                     123,911         125,806
    MEMBERS’ EQUITY                                                                                     687,051         532,248
                                                                                                  $ 13,433,279     $ 10,604,502
    The accompanying notes are an integral part of the consolidated financial statements.

On behalf of the Board,




ALBAN D’AMOURS                                                          MADELEINE LAPIERRE
Chairman of the Board and                                               Vice-Chair of the Board
Chief Executive Officer



                                                                                                                                   Caisse centrale
CONSOLIDATED STATEMENTS OF INCOME
For the years ended December 31 (in thousands of dollars)


                                                                                                  2003           2002
    INTEREST INCOME
      Loans                                                                                 $ 208,749      $ 187,318
      Securities                                                                              136,194        159,849
                                                                                                344,943        347,167
    INTEREST EXPENSE
      Deposits                                                                                  243,647        244,161
      Subordinated debenture                                                                      6,642         10,564
                                                                                                250,289        254,725
    NET INTEREST INCOME                                                                          94,654         92,442
    OTHER INCOME
      Service charges on chequing and deposit accounts                                           10,805           9,955
      Foreign exchange revenue                                                                   14,559         14,556
      Investment and trading activities                                                          (4,262)         (7,497)
      Fees on acceptances                                                                        10,164           9,549
      Credit fees                                                                                 2,115           1,717
      Other                                                                                       2,321           2,668
                                                                                                 35,702         30,948
    GROSS INCOME                                                                                130,356        123,390
      Provision for credit losses (note 4)                                                       16,425         21,146
                                                                                                113,931        102,244
    NON-INTEREST EXPENSES
      Salaries and benefits                                                                      22,354         17,267
      Premises, equipment and furniture, including depreciation                                  11,831         10,571
      Other                                                                                      13,321         12,229
                                                                                                 47,506         40,067
    NET INCOME BEFORE OTHER PAYMENTS TO THE DESJARDINS NETWORK AND INCOME TAXES                  66,425         62,177
      Other payments to the Desjardins network                                                   17,306         16,059
    NET INCOME BEFORE INCOME TAXES                                                               49,119         46,118
      Income taxes (note 10)                                                                      9,313         10,790
    NET INCOME                                                                              $    39,806    $    35,328

    The accompanying notes are an integral part of the consolidated financial statements.
                                                                                                                          page 67
CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY
For the years ended December 31 (in thousands of dollars)




                                                                                                                          Consolidated Financial Statements
                                                                                                  2003           2002
    CAPITAL STOCK (note 9)
    Balance at beginning of year                                                            $ 511,403      $ 511,403
    Issuance of Class A capital shares                                                        154,800             —
    Issuance of qualifying shares                                                                   3             —
    Balance at end of year                                                                  $ 666,206      $ 511,403
    RETAINED EARNINGS
    Balance at beginning of year                                                            $        —     $        —
    Net income                                                                                   39,806         35,328
    Remuneration of capital stock                                                               (50,146)       (43,595)
    Recovery of income taxes related to the remuneration of capital stock (note 10)              10,340          8,267
    Balance at end of year                                                                  $        —     $        —
    GENERAL RESERVE
    Balance at beginning and end of year                                                    $   20,845     $   20,845
    TOTAL MEMBERS’ EQUITY                                                                   $ 687,051      $ 532,248
    The accompanying notes are an integral part of the consolidated financial statements.




                                                                                                                          Caisse centrale
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31 (in thousands of dollars)


                                                                                                     2003            2002
    CASH FLOWS FROM OPERATING ACTIVITIES
    Net income                                                                              $      39,806     $    35,328
    Adjustments to determine cash flows provided by operating activities:
     Depreciation of fixed and intangible assets                                                    2,848             3,358
     Provision for credit losses                                                                   16,425           21,146
     Gain on sale of investment account securities                                                 (1,672)           (4,147)
     (Increase) decrease in future income taxes                                                    (6,412)            1,778
     Net increase in trading account securities                                                  (231,191)        (140,229)
     Decrease in accrued interest receivable                                                        4,512               701
     Decrease in accrued interest payable                                                         (22,491)           (4,349)
     Increase (decrease) in income taxes payable                                                    6,304            (7,024)
     Decrease (increase) in unrealized gains and amounts receivable on derivatives                102,633         (161,490)
     (Decrease) increase in unrealized losses and amounts payable on derivatives                  (68,189)          79,130
     Other items, net amount                                                                       24,177           16,547
                                                                                                 (133,250)        (159,251)
    CASH FLOWS FROM FINANCING ACTIVITIES
    Net increase in deposits                                                                    2,333,760         282,878
    Net decrease in the debenture                                                                      —           (52,745)
    Net increase in obligations related to securities sold short                                    6,023            2,870
    Net increase in obligations under repurchase agreements                                       409,245                —
    Issuance of capital shares                                                                    154,800                —
    Remuneration of capital stock paid                                                           (154,816)             (19)
                                                                                                2,749,012         232,984
    CASH FLOWS FROM INVESTING ACTIVITIES
    Net decrease (increase) in investment account securities                                       482,439        (591,896)
    Net (increase) decrease in loans                                                            (3,042,424)        395,660
    Net increase in securities purchased under resale agreements                                    (8,697)          (3,745)
    Acquisition of fixed and intangible assets                                                      (4,909)          (4,889)
                                                                                                (2,573,591)       (204,870)
    NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                           42,171         (131,137)
    Cash and cash equivalents at beginning of year                                                 49,511         180,648
    CASH AND CASH EQUIVALENTS AT END OF YEAR                                                $      91,682     $    49,511
    REPRESENTED BY:
    Cash and deposits with Bank of Canada                                                   $     112,509     $     67,202
    Cheques and other items in transit, net                                                       (20,827)         (17,691)
                                                                                            $      91,682     $    49,511
    ADDITIONAL INFORMATION
    Interest paid during the year                                                           $     266,138     $ 259,074
    Income taxes (received) paid during the year                                                     (919)           8,771

    The accompanying notes are an integral part of the consolidated financial statements.
                                                                                                                                                  page 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003 and 2002 (All tabular figures are in thousands of dollars, unless otherwise indicated)




                                                                                                                                                  Consolidated Financial Statements
 1.   INCORPORATION AND MANDATE

La Caisse centrale Desjardins du Québec, created on June 22, 1979, is a financial services cooperative governed by An Act respecting
the Mouvement Desjardins [2000, S.Q., c. 77] (the “Constituent Legislation”) and by An Act respecting financial services cooperatives
(Quebec).

Caisse centrale is a cooperative institution which offers financial services to the Mouvement des caisses Desjardins, governments, public and
parapublic sector institutions, and medium-sized and large businesses. It serves the needs of the Fédération des caisses Desjardins du
Québec (the “Fédération”), its Desjardins caisses (the “member caisses”), and the other entities of the Mouvement des caisses Desjardins.
Caisse centrale’ mandate is to provide institutional funding for the Desjardins network and to act as financial agent, notably by supplying
interbank exchange services, including clearing house settlements. Caisse centrale’ activities on the Canadian and international markets
complement those of the other entities of the Mouvement des caisses Desjardins.


 2.   SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of Caisse centrale are prepared in accordance to section 163 under An Act respecting financial
services cooperatives which requires that, unless otherwise specified by the Autorité des marchés financiers, consolidated financial
statements be prepared under Canadian generally accepted accounting principles. There is no significant difference between Canadian
generally accepted accounting principles and the accounting rules prescribed by the Autorité des marchés financiers. The preparation
of consolidated financial statements in conformity with these principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the consolidated balance
sheet date as well as the recorded amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates. The significant accounting policies are summarized below.

CONSOLIDATION
The consolidated financial statements include the assets and liabilities and results of operations of Caisse centrale and those of its
wholly owned self-sustaining American subsidiary, Desjardins Federal Savings Bank, after elimination of intercompany transactions and
balances.

LIQUIDITIES
Liquidities consist of cash and cash equivalents including cash, deposits with Bank of Canada and checks and other items in transit.

SECURITIES
Securities include investment account and trading account securities. Investment account securities are purchased with the primary intent
of holding them until maturity or until market conditions are more favourable for other types of securities. Equity securities are stated at
cost and debt securities at unamortized cost. Premiums and discounts are amortized over the terms of the related securities on a straight-
line basis. Trading account securities, which are purchased for resale over a short period of time, are stated at their fair value, which is
determined based on quoted market prices. When the price of a security is not available, the fair value is estimated based on the quoted
market price of similar securities.

Realized gains and losses on investment account securities and realized and unrealized gains and losses on trading account securities,
which are calculated using average cost, as well as write-downs to reflect a permanent impairment in value are recorded in consolidated
income under “Investment and trading activities” in “Other income.” Dividend and interest income, including amortization of premiums
and discounts on investment account securities, are recorded in consolidated income under “Interest income.”

LOANS
Loans are stated net of the allowance for credit losses, unamortized discounts and loan fees. Where deemed appropriate, Caisse centrale
obtains security in the form of cash, securities, immovable property, accounts receivable, surety, inventories or other assets.

As intermediary for the Desjardins Group entities, Caisse centrale buys and sells mortgage, farm and other loans. These loans are
accounted for at fair value and are included in “Loans purchased from Desjardins Group.”

Interest income is recorded on the accrual basis, except when the loan is considered impaired. A loan is considered impaired when:
a) there is reason to believe that a portion of the principal or interest cannot be collected, or b) the interest or principal is contractually
90 days in arrears, except when there is reasonable assurance of collecting the principal or interest. The loan is then classified as impaired
and the interest, previously accrued but not received on such a loan, is reversed to interest income from loans in the current year. No
portion of cash received on a loan subsequent to its classification as impaired is recorded as income before any prior write-off has been
recovered or any specific provision has been reversed and it is deemed that the loan principal is fully collectible.
                                                                                                                                                  Caisse centrale
An impaired loan is recorded at its estimated realizable value, measured by discounting the expected future cash flows at the interest
rate inherent in the loan. When the amount or timing of future cash flows cannot be estimated with reasonable reliability, the loan is
recorded at either the fair value of the underlying security or the market price for the loan. Any change in the estimated realizable amount
is presented as a charge or credit for loan impairment through the allowance for credit losses. An impaired loan is once again recorded
under the accrual method when the principal and interest payments are current and there is no longer any reasonable doubt that the
impaired loan will be recovered.

Fees related to loan origination and loan restructuring or renegotiating are considered as adjustments to loan yield and are deferred
and amortized to “Interest income” for the estimated term of such loans. In the likelihood that a loan will result, commitment and
standby fees are also included in “Interest income” over the expected term. Otherwise, fees are recorded as “Other income” during the
commitment or standby period. Loan syndication fees are presented under “Other income” when the syndication agreement is signed,
unless the yield of any loan retained by Caisse centrale is less than that of other comparable lenders involved in the financing. In such
cases, an appropriate portion of the fees is deferred and amortized to interest income over the term of the loan.

According to the changes to Section 3025 “Impaired Loan” of the Canadian Institute of Chartered Accountants (CICA) handbook, since
May 1, 2003, foreclosed assets held for sale in settlement of an impaired loan are recorded at fair value less selling costs at the date of
foreclosure. Foreclosed assets held for use in settlement of an impaired loan, to be held or applied, are measured at fair value at the date
of foreclosure. Any excess of carrying value of the loan over the original estimated realizable value of the acquired assets is recorded as
a debit in the cumulative allowance for credit losses.

ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is maintained at an amount considered sufficient to absorb the estimated losses related to the loan
portfolio, off-balance sheet commitments, acceptances and derivative instruments. This allowance is increased by the provision for
credit losses charged to consolidated income and reduced by write-offs net of recoveries. This allowance comprises specific provisions
and a general provision for credit losses. Management conducts ongoing credit risk assessments and establishes specific provisions when
impaired loans are identified.

Specific provisions are established on an individual basis for all identified impaired loans, reducing their carrying value to their estimated
realizable value.

The general provision for credit losses reflects management’s estimate of probable portfolio losses that are not covered by specific
provisions. The general provision for credit losses does not represent future losses nor replace specific provisions. It takes into account
economic and market conditions, regulatory requirements that affect the main lending activities, recent credit loss experience, and
trends in credit quality and concentration. This provision also reflects model and estimation risks, which are reviewed and revised where
conditions indicate the initial assumptions differ from actual results.

ACCEPTANCES AND CUSTOMERS’ LIABILITY UNDER ACCEPTANCES
Caisse centrale’ potential liability under acceptances is reported as a liability in the consolidated balance sheets. The recourse of Caisse
centrale against the customer in the case of a call on commitments of this nature is reported as an offsetting asset of the same amount.
Fees paid to Caisse centrale are recognized in consolidated income under “Other” in “Other income.”

OBLIGATIONS RELATED TO SECURITIES SOLD SHORT
Securities sold short as part of trading activities, which represent Caisse centrale’ obligation to deliver securities sold which were not
owned at the time of sale, are recorded as liabilities and are carried at fair value. Realized and unrealized gains and losses thereon are
recorded in consolidated income under “Investment and trading activities” in “Other income.”

ASSETS UNDER ADMINISTRATION
Caisse centrale manages liquidities on behalf of third parties. These assets under administration are not the property of Caisse centrale
and therefore are not reflected on the consolidated balance sheets. Management fees earned with respect to liquidity management
services are recorded in “ Other Income ” in the consolidated statement of income.

DERIVATIVES
Caisse centrale uses derivatives primarily for asset/liability management and as intermediary for the Desjardins network. The derivatives
most frequently used are forward exchange contracts, cross-currency and interest rate swaps, forward rate agreements and foreign
currency, interest rate and stock index options.

Derivatives designated for asset/liability management are used to manage the interest rate and foreign exchange risk exposure of
consolidated balance sheet assets and liabilities, firm commitments and anticipated transactions. Certain derivatives can qualify as hedges
of these financial risks. To qualify as a hedging item, the derivative must be designated as “other than trading” and must offset with a
high degree of correlation the effect of Caisse centrale’ exposure to price and interest rate or foreign exchange risk. This high degree of
correlation with Caisse centrale’ risk must exist at inception and during the hedging period.
                                                                                                                                                  page 71
Derivatives designated for asset/liability management are recorded at cost. Gains or losses on these derivative instruments are
recognized in consolidated income at the same time as the gains, losses, revenues and expenses associated with the managed risk
items. In particular, interest rate and cross-currency swaps used to manage Caisse centrale’ financial risks are accounted for under the
accrual method, whereby interest income or expense recognized on these financial instruments is included in consolidated income as an
adjustment to the underlying instrument’s interest income or expense. Interest payable to or receivable from counterparties is recorded




                                                                                                                                                  Consolidated Financial Statements
on the consolidated balance sheets under “Other liabilities” or “Other assets.” Exchange gains and losses on cross-currency swaps are
also recorded under “Other liabilities” or “Other assets” and offset exchange gains and losses on the corresponding foreign currency
denominated instrument.

Derivatives cease to be designated as a hedge in the following cases: when the hedging item is sold or matures, the hedge ceases to be
effective, Caisse centrale terminates its designation of the hedge or when it is no longer probable that the anticipated transaction will
occur substantially as and when identified on inception of the hedging relationship. Realized and unrealized gains or losses associated with
derivatives that ceased to exist or to be effective prior to maturity are deferred on the consolidated balance sheets under “Assets related
to derivatives” or “Liabilities related to derivatives” and recognized in the consolidated statement of income in the same period as the
underlying hedged transaction. When a designated hedged item is sold, expires or matures before the related derivative ceases to exist,
any realized or unrealized gain or loss associated with this derivative is recognized in the statements of income.

Derivatives designated for trading purposes are recorded at their estimated fair value and the corresponding realized and unrealized gains
and losses are included in “Investment and trading activities” under “Other income.” Estimated fair value is determined using pricing
models which incorporate current market prices and the contractual prices of the underlying instruments, the time value of money, and
yield curves. In the consolidated balance sheets, derivatives designated for trading purposes having a positive fair value are presented as
assets, whereas those that have a negative fair value are presented as liabilities, under the captions “Assets related to derivatives” and
“Liabilities related to derivatives,” respectively, under “Other.”

SECURITIES PURCHASED UNDER RESALE AGREEMENTS AND SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
Caisse centrale enters into short-term purchases and sales of securities with simultaneous agreements to sell and buy them back at a
specified price and on a specified date. These agreements are accounted for as collateralized lending and borrowing transactions and are
recorded on the consolidated balance sheets at the selling or repurchase price specified under the agreement. The difference between
the specified selling price and the purchase price is recorded using the accrual method under “Interest income.” Conversely, the difference
between the selling price and the specified repurchase price is recorded under “Interest expense.”

FOREIGN CURRENCY TRANSLATION
Monetary items denominated in foreign currencies are translated at rates prevailing on the balance sheet date; income and expenses are
translated at the average rates prevailing during the year. Foreign exchange gains or losses arising from the translation or the settlement
of a monetary item denominated in a foreign currency are recorded in income. Foreign exchange trading positions, including spot and
forward contracts, are valued at prevailing market rates and the resulting gains and losses are included in “Other income.”

FIXED ASSETS
Fixed assets are recorded at cost, less accumulated depreciation and are depreciated over their estimated useful lives in accordance with
the following methods and annual rates:

    Classes                                                                            Depreciation methods                              Rates

    Office furniture and equipment                                                      Diminishing balance                               20%
    Computer equipment                                                                  Diminishing balance                               30%
    Leasehold improvements                                                                      Straight-line                Term of the leases


INTANGIBLE ASSETS WITH FINITE USEFUL LIFE
Computer softwares are recorded at cost, less accumulated depreciation, and are depreciated over their probable useful life on a straight-
line basis at a rate of 20%.

EMPLOYEE FUTURE BENEFITS
The employees of Caisse centrale participate in the Desjardins Group pension plans as part of a defined benefit multi-employer pension
plan. Caisse centrale also provides life insurance coverage and health and dental care benefits to its eligible retired employees through
the Desjardins Group multi-employer group insurance plan. Caisse centrale applies the recommendations regarding defined contribution
plans since plan costs and funding of these plans are not allocated among the member entities of the Desjardins Group.

INCOME TAXES
Caisse centrale accounts for income taxes under the tax liability method. Under this method, future tax assets and liabilities are calculated
based on existing differences between the carrying amount and the tax basis of assets and liabilities using enacted or substantially
enacted tax laws and rates expected to apply at the date such differences reverse. Future tax assets and liabilities are included under
“Other assets” or “Other liabilities,” as applicable.

The recovery of income taxes appearing in the consolidated statements of members’ equity under “Retained earnings” is related to the
remuneration of capital stock, which is deductible for income tax purposes.
                                                                                                                                                  Caisse centrale
FUTURE EFFECT OF RECENT ACCOUNTING STANDARDS
HEDGING RELATIONSHIPS In December 2001, the CICA issued Accounting Guideline 13, “Hedging relationships”, (AcG-13) which applies
to hedging relationships in effect in fiscal years beginning on or after July 1, 2003. AcG-13 establishes the required conditions under
which derivative financial instruments qualify for hedge accounting. It also addresses the identification, designation, documentation
and efficiency of hedging relationships and deals with the circumstances leading to discontinuance of hedge accounting. Under this
accounting guideline, each hedging relationship has to be documented and tested for efficiency, individually and on a regular basis, in
order to determine whether it has remained and will continue to be efficient. Any derivative instrument that does not qualify for hedge
accounting will be recorded at fair value as an asset or a liability on the balance sheet, with changes in fair value recognized in income.

On January 1, 2004, Caisse centrale has adopted this new accounting guideline. As of that date, Caisse centrale assessed its existing hedging
relationships and discontinued hedge accounting with respect to those that did not satisfy the conditions for hedge accounting. Caisse
centrale has elected to account for all these derivative financial instruments at fair value on the balance sheet. Gains and losses arising
on qualifying hedging relationships will be deferred and recognized concurrently with gains and losses on hedged items. Consequently,
assets will increase by $47.4 million and liabilities, by $90.9 million. The resulting loss of $43.5 million will be deferred and amortized to
income over the remaining term of the derivative instruments recognized on the balance sheet.

COMPARATIVE FIGURES
Certain 2002 financial information has been reclassified to conform with the presentation adopted in 2003.
                                                                                                                                                              page 73
 3.   SECURITIES

                                                                                                                 Maturity

                                                     Less than          1 to 3       Over 3 to       Over 5 to   Over 10




                                                                                                                                                              Consolidated Financial Statements
                                                        1 year          years         5 years         10 years     years             Total           Total
                                                                                                                                     2003            2002
      INVESTMENT ACCOUNT SECURITIES
      ISSUED OR GUARANTEED BY
      Canada                                     $    159,240 $        51,242 $ 60,911 $      — $                      —      $     271,393 $ 352,411
          Yield                                          4.63%           4.69%     4.68%                                               4.66%      4.67%
      Provinces and municipalities in Canada          152,363         483,526   484,830  253,848                       —          1,374,567  1,430,982
          Yield                                          5.33%           5.60%     4.04%    6.25%                                      5.14%      6.41%
      School boards or other government
        entities in Canada                             30,029              —               —               —           —            30,029          80,456
          Yield                                          6.06%                                                                        6.06%           5.43%
      U.S. public administrations                       6,585              20         11,784            2,136        8,474          28,999          81,728
        Yield                                            0.85%           7.35%          1.83%            2.79%        4.87%           2.57%           2.81%
      OTHER SECURITIES
      Debt securities of Canadian issuers
        Banks and financial institutions             1,154,040             —               —               —           —          1,154,040        977,588
        Entities under common control                       —         118,009              —               —           —            118,009         84,324
        Financial asset-backed debt securities         193,907             —               —               —           —            193,907        480,429
        Other                                               —              —               —            9,318         121             9,439        158,198
          Yield                                           2.79%          2.04%                           6.35%                         2.76%          2.94%
      Foreign banks                                     28,911             —               —               —           —             28,911         43,945
          Yield                                           2.65%                                                                        2.65%          2.01%
      TOTAL INVESTMENT ACCOUNT SECURITIES        $ 1,725,075      $   652,797    $ 557,525       $ 265,302       $ 8,595      $ 3,209,294      $ 3,690,061
      TRADING ACCOUNT SECURITIES
      ISSUED OR GUARANTEED BY
      Canada                                     $         —      $   409,245    $         —     $         —     $     —      $    409,245     $   178,054
      TOTAL TRADING ACCOUNT SECURITIES           $         —      $   409,245    $         —     $         —     $     —      $    409,245     $   178,054
      TOTAL SECURITIES                           $ 1,725,075      $ 1,062,042    $ 557,525       $ 265,302       $ 8,595      $ 3,618,539      $ 3,868,115


Yields are calculated on year-end carrying values, adjusted for amortization of premiums and discounts.

Term-to-maturity classifications are based on the contractual maturity of the security. Securities with no maturity date are classified in
the “Over 10 years” category.

Total investment account securities includes amounts denominated in foreign currencies of C$426,023,327 (2002: C$673,871,608), of which
C$275,239,235 is denominated in U.S. dollars (2002: C$517,739,152).




                                                                                                                                                              Caisse centrale
The following table shows unrealized gains and losses on securities.

                                                                    Gross      Gross                                           Gross      Gross
                                                                   unreal-   unreal-         Estimated                        unreal-   unreal-          Estimated
                                                    Carrying          ized      ized            market         Carrying          ized      ized             market
                                                       value        gains     losses              value           value         gain     losses               value
                                                                                                 2003                                                        2002
    INVESTMENT ACCOUNT SECURITIES
    ISSUED OR GUARANTEED BY
    Canada                                     $     271,393   $    4,898    $     —     $     276,291    $     352,411   $    7,607    $     —      $     360,018
    Provinces and municipalities in Canada         1,374,567       58,258        (606)       1,432,219        1,430,982       71,811          (5)        1,502,788
    School boards or other government
      entities in Canada                             30,029           418          —           30,447           80,456         1,407          —            81,863
    U.S. public administrations                      28,999           123         (15)         29,107           81,728           283        (230)          81,781
    OTHER SECURITIES
    Debt securities of Canadian issuers
      Banks and financial institutions             1,154,040          131         (35)       1,154,136         977,588            —           (42)        977,546
      Entities under common control                  118,009        1,199          —           119,208          84,324         2,407           —           86,731
      Financial asset-backed debt securities         193,907          289          (5)         194,191         480,429             8          (45)        480,392
      Other                                            9,439          979          —            10,418         158,198           890        (410)         158,678
    Foreign banks                                     28,911           —           (1)          28,910          43,945            —            —           43,945
    TOTAL INVESTMENT ACCOUNT
      SECURITIES                               $ 3,209,294     $ 66,295      $ (662)     $ 3,274,927      $ 3,690,061     $ 84,413      $ (732)      $ 3,773,742
    TRADING ACCOUNT SECURITIES
    ISSUED OR GUARANTEED BY
    Canada                                     $    409,245    $       —     $     —     $    409,245     $    178,054    $       —     $     —      $    178,054
    TOTAL TRADING ACCOUNT SECURITIES $              409,245    $       —     $     —     $    409,245     $    178,054    $       —     $     —      $    178,054
    TOTAL SECURITIES                           $ 3,618,539     $ 66,295      $ (662)     $ 3,684,172      $ 3,868,115     $ 84,413      $ (732)      $ 3,951,796


The estimated market value of securities is based on the quoted market price, which may not necessarily be realized on sale. Where a
quoted price is not readily available, the estimated fair value is determined using market prices of similar securities.

Interest rate sensitivity is the main cause of changes in the estimated market value of the investment account securities. The carrying
value of securities is not adjusted to reflect current increases or decreases in the estimated market value due to interest rate changes, as
Caisse centrale’ initial intention is to hold these securities to maturity or until market conditions are more favourable for other types of
securities.
                                                                                                                                                                    page 75
 4.   LOANS

                                                                                                                                       2003                2002
      Securities purchased under resale agreements                                                                             $     14,919        $      6,222




                                                                                                                                                                    Consolidated Financial Statements
      Day, call and short-term loans to investment dealers and brokers                                                               218,000             158,739
      Public and parapublic institutions                                                                                           1,522,989             917,921
      Fédération                                                                                                                   3,719,748           2,054,660
      Entities under common control                                                                                                1,032,009             291,023
      Loans purchased from Desjardins Group                                                                                          134,319             205,967
      Private sector                                                                                                               1,570,584           1,531,872
                                                                                                                               $ 8,212,568         $ 5,166,404
      Allowance for credit losses                                                                                                  (90,390)             (78,922)
      TOTAL                                                                                                                    $ 8,122,178         $ 5,087,482
      Gross impaired loans                                                                                                     $     86,244        $     46,244
      Specific provisions                                                                                                            (46,555)            (36,400)
      IMPAIRED LOANS NET OF SPECIFIC PROVISIONS                                                                                $     39,689        $      9,844


Total loans before the allowance for credit losses include loans for an amount of C$658,536,785 (2002: C$237,570,071) denominated in
U.S. dollars.

The cumulative allowance for credit losses relates entirely to loans classified in the “Private sector” category.

The following table shows an analysis of the allowance for credit losses.

      ALLOWANCE FOR CREDIT LOSSES                                                                                                      2003                2002
      Balance at beginning of year                                                                                                 $ 78,922            $ 58,518
      Provision for credit losses                                                                                                    16,425              21,146
      Write-offs                                                                                                                     (7,712)              (2,729)
      Recoveries                                                                                                                      2,755                1,987
      BALANCE AT END OF YEAR                                                                                                       $ 90,390            $ 78,922
      CONSISTING OF:
      Specific provisions 1                                                                                                        $ 46,555            $ 36,400
      General provision for credit losses                                                                                            43,835              42,522
      TOTAL                                                                                                                        $ 90,390            $ 78,922
      1   As at December 31, 2003 and 2002, the specific provisions included an amount of $0.3 million related to off-balance sheet commitments.



 5.   OTHER ASSETS

                                                                                                                                       2003                2002
      Interest receivable                                                                                                          $ 44,345            $ 48,857
      Future tax assets (note 10)                                                                                                    16,665              10,253
      Fixed assets, net of cumulative depreciation of $6,021 (2002: $6,662)                                                           5,675               6,773
      Intangible assets with finite useful life, net of accumulated depreciation of $2,364 (2002: $2,373)                             4,397               1,238
      Income taxes recoverable                                                                                                           —                3,527
      Other                                                                                                                           9,624              10,075
      TOTAL                                                                                                                        $ 80,706            $ 80,723

                                                                                                                                                                    Caisse centrale
 6.     DEPOSITS

                                                           Payable on                Payable on a
                                                             demand                    fixed date                        Total             Total
                                                                                                                         2003              2002
       Canada                                              $      641                $    100,000               $     100,641    $        15,462
       Provinces                                               123,032                    177,598                     300,630            343,622
       Banks and financial institutions                         65,345                    866,819                     932,164            165,618
       Member
         Fédération                                            139,949                     893,153                   1,033,102       1,951,513
         Other                                                  34,113                     172,048                     206,161         273,599
       Entities under common control                            59,614                     647,139                     706,753         507,589
       Other                                                   364,818                   6,477,593                   6,842,411       4,530,699
       TOTAL                                               $ 787,512                 $ 9,334,350                $ 10,121,862     $ 7,788,102


Total deposits include deposits in foreign currencies in the amount of C$4,200,218,000 (2002: C$3,758,100,000), of which C$2,123,068,000
(2002: C$2,631,035,000) is denominated in U.S. dollars.


 7.     OTHER LIABILITIES

                                                                                                                       2003                2002
       Interest payable                                                                                          $    49,344         $    71,835
       Remuneration of capital stock payable                                                                          66,822             171,492
       Cheques and other items in transit, net                                                                        20,827              17,691
       Income taxes payable                                                                                            2,777                  —
       Other                                                                                                          53,247              37,969
       TOTAL                                                                                                     $ 193,017           $ 298,987



 8.     SUBORDINATED DEBENTURE

The debenture, subordinated to the claims of depositors and certain other creditors:

            Maturity          Interest rate                                Terms                                       2003                2002
      March 18, 2013                      5.5%   Nominal value of €76,224,509; 5.5% interest payable annually    $ 123,911           $ 125,806
                                                 in euros until March 18, 2008; thereafter, interest payable
                                                 quarterly at the rate of Euribor plus 1.40%.


Caisse centrale may, with the prior approval of the Autorité des marchés financiers, redeem the subordinated debenture on March 18,
2008 or at any time in the event of an applicable tax amendment. Further, Caisse centrale entered into hedging transactions to eliminate
foreign exchange exposure.
                                                                                                                                                page 77
 9.   CAPITAL STOCK

The capital stock of Caisse centrale is composed of an unlimited number of Class A capital shares, Class B capital shares and qualifying
shares.




                                                                                                                                                Consolidated Financial Statements
CLASS A CAPITAL SHARES
The following table presents changes in the number of outstanding shares and their total ascribed value during the year.

                                                                     Number               Amount              Number              Amount
                                                                                            2003                                    2002
      Capital shares at beginning of year                            511,403           $ 511,403             511,403           $ 511,403
      Capital shares issued                                          154,800             154,800                   —                   —
      CAPITAL SHARES AT END OF YEAR                                  666,203           $ 666,203             511,403           $ 511,403


Class A capital shares can only be issued to members and each have a par value of $1,000. The Board of Directors has the discretionary
power to determine the remuneration to be paid and the payment terms for these shares. They are transferable between members, with
the approval of the Board of Directors, and their reimbursement, only possible in the event of the winding-up, insolvency or dissolution
of Caisse centrale, is subordinated to the deposits and other debts of Caisse centrale. They are redeemable by Caisse centrale, in whole or
in part, with the authorization of the Autorité des marchés financiers. They are convertible by Caisse centrale, with the approval of the
Board of Directors, into shares of other classes issued for this purpose.

CLASS B CAPITAL SHARES
As at December 31, 2003 and 2002, no Class B capital shares had been issued or were outstanding.

Class B capital shares can only be issued to members. The Board of Directors has the discretionary power to determine the remuneration
to be paid and the payment terms for these shares. The remuneration and payment terms may differ from those for Class A capital shares.
They are transferable between members, with the approval of the Board of Directors, and their reimbursement, only possible in the event
of the winding-up, insolvency or dissolution of Caisse centrale, is subordinated to the deposits and other debts of Caisse centrale. They are
redeemable by Caisse centrale, in whole or in part, with the authorization of the Autorité des marchés financiers. They are convertible by
Caisse centrale, with the approval of the Board of Directors, into shares of other classes issued for this purpose.

QUALIFYING SHARES
The following table presents changes in the number of outstanding qualifying shares and their total ascribed value during the year.

                                                                     Number               Amount              Number              Amount
                                                                                            2003                                    2002
      Qualifying shares at beginning of year                              —                 $ —                    —                $ —
      Qualifying shares issued and unpaid                                600                    3                  —                   —
      QUALIFYING SHARES AT END OF YEAR                                   600                $   3                  —                $ —


Qualifying shares can only be issued to members according to the conditions, terms and criteria provided for in the internal management
by-laws of Caisse centrale. Their issue price is set at $5.00 each and they are non- interest-bearing. They are redeemable by Caisse centrale
only in the event of the withdrawal, exclusion, winding-up, insolvency or dissolution of a member. They are not transferable and their
reimbursement, only possible in the event of the winding-up, insolvency or dissolution of Caisse centrale, is subordinated to the deposits
and other debts of Caisse centrale and to the holders of the other classes of shares.




                                                                                                                                                Caisse centrale
10.   INCOME TAXES

The income taxes as shown in the consolidated financial statements are detailed as follows:

                                                                                                         2003                    2002
      CONSOLIDATED STATEMENTS OF INCOME
        Current income taxes                                                                      $ 15,725                   $   9,012
        Future income taxes                                                                         (6,412)                      1,778
                                                                                                  $     9,313                $ 10,790
      CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY
        Recovery of income taxes related to the remuneration of capital stock                     $ (10,340)                 $ (8,267)
                                                                                                  $     (1,027)              $   2,523


The principal components of the future tax assets and liabilities are as follows:

                                                                                                         2003                    2002
      FUTURE TAX ASSETS
      Allowance for credit losses                                                                  $ 14,269                  $   8,666
      Deferred income                                                                                   900                        374
      Fees on loans                                                                                   1,038                        630
      Securities                                                                                         —                         603
      Fixed and intangible assets                                                                       420                        218
      Other                                                                                             401                        281
                                                                                                   $ 17,028                  $ 10,772
      FUTURE TAX LIABILITIES
      Subordinated debenture issue expenses                                                        $      (355)              $      (513)
      Other                                                                                                 (8)                        (6)
                                                                                                   $      (363)              $      (519)
      FUTURE TAX ASSETS (NET)                                                                      $ 16,665                  $ 10,253


The difference between the statutory income tax rate applicable to credit unions and the effective income tax rate is as follows:

                                                                                         $               %             $              %
                                                                                                      2003                       2002
      Income taxes applicable to credit unions                                      10,128         20.62           8,746         18.96
      Increase from:
      ■ Large corporations tax                                                       1,792             3.65        1,472            3.65
      ■ Other                                                                           30             0.06          572            0.79
      Future taxes from changes to income tax rates                                 (2,637)           (5.37)          —               —
      Income taxes, as presented in the consolidated statement of income,
        and effective tax rate                                                       9,313         18.96          10,790         23.40
                                                                                                                                               page 79
11.   OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

In the normal course of business, Caisse centrale offers its customers various off-balance sheet instruments to meet their needs for
liquidity and protection against different risks, such as fluctuations in foreign exchange and interest rates. Caisse centrale uses some of
these instruments to hedge its own exposure to foreign exchange and interest rate risks.




                                                                                                                                               Consolidated Financial Statements
All off-balance sheet financial instruments are subject to regular credit standards, financial controls and other usual monitoring
procedures that are normally applied. In the opinion of management, these transactions do not represent an unusual risk.

FINANCIAL INSTRUMENTS EXCLUDING DERIVATIVES WITH CONTRACTUAL AMOUNTS REPRESENTING CREDIT RISK
The primary purpose of these instruments is to ensure that funds are available to a customer as required. Caisse centrale’ policy with
respect to collateral security for these instruments is generally the same as for loans.

Guarantees and standby letters of credit, which represent irrevocable commitments that Caisse centrale will make payments in the event
that a customer cannot meet its obligations to third parties, carry the same credit risk as loans. Cash requirements under guarantees and
standby letters of credit are considerably less than the amount of the commitment because Caisse centrale does not generally expect the
third party to draw funds under the agreement.

Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, guarantees or letters
of credit. Caisse centrale is exposed to a potential credit risk in an amount equal to the total unused commitments. However, most
commitments to extend credit are contingent upon customers maintaining specific credit standards.

The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since
many of these commitments will expire or terminate without being funded.

The following table discloses the contractual amount and the risk-weighted balance, which is based on the rules of capital adequacy as
prescribed by the Bank for International Settlements (BIS).

                                                                                        Risk-                                       Risk-
                                                                     Contractual    weighted              Contractual           weighted
                                                                        amount       balance                 amount              balance
                                                                                       2003                                        2002
      Guarantees and standby letters of credit                   $     186,337     $ 153,359          $     181,567           $ 144,165
      Commitments to extend credit (original term to maturity)
       Over one year                                                  1,491,115      509,719               1,391,145             486,780
       One year or less and conditionals                             12,767,003           —               12,722,475                  —
      Commitment to purchase assets                                      34,119           —                   37,893               2,781
      TOTAL                                                      $ 14,478,574      $ 663,078          $ 14,333,080            $ 633,726


DERIVATIVES
Caisse centrale uses derivatives primarily for asset/liability management and as intermediary to meet the needs of the Desjardins network
and its customers.

Interest rate contracts include interest rate swaps, forward rate agreements and futures contracts. Interest rate swaps are transactions in
which two parties exchange interest flows on a specified notional principal amount for a predetermined period based on agreed-upon
fixed and floating rates. Principal amounts are not exchanged. Forward rate agreements are forward transactions on interest rate, based
on a notional principal amount, which call for a cash settlement at a future date for the difference between a contractual rate of interest
and the market rate. Futures contracts represent a future commitment to purchase or deliver commodities or financial instruments on a
future date at a specified price. Futures contracts are traded in predetermined amounts on regulated stock exchanges and are subject to
daily cash margins.

Foreign exchange contracts include forward contracts and currency swaps. Foreign exchange forward contracts represent commitments
to exchange two currencies at a specified future date based on a rate agreed upon by both parties at the inception of the contract.

Options are contractual agreements under which the seller grants the buyer the right, but not the obligation, to buy (call option) or
sell (put option) by or at a set date a specified amount of a financial instrument at a predetermined price. The seller receives a premium
from the buyer for this right. Caisse centrale enters into these contracts primarily to serve the needs of customers and to manage its own
asset/liability exposure.

Currency swaps are transactions in which fixed interest payments on notional amounts denominated in different currencies are exchanged.
For cross-currency interest rate swaps, fixed and floating interest payments on notional amounts denominated in different currencies are
exchanged. Caisse centrale uses currency swaps and cross-currency interest rate swaps to manage its own asset/liability exposure.

The credit risk exposure of derivatives corresponds to the risk of credit losses that can occur if a borrower or counterparty does not fully
honour its contractual obligations to Caisse centrale. Credit risk is managed within the authorization limits granted to customers.
                                                                                                                                               Caisse centrale
The following table summarizes the derivatives portfolio and related credit exposure of Caisse centrale.

■   NOTIONAL AMOUNT The amount to which a rate or price is applied in order to calculate the exchange of cash flows.

■   REPLACEMENT COST The cost of replacing, at estimated fair value, all contracts which have a positive market value. The amounts do not
    take into consideration contracts which permit offsetting of positions or any collateral which may be obtained.

■   FUTURE CREDIT EXPOSURE The potential for future changes in value based upon a formula prescribed by the BIS.

■   CREDIT RISK EQUIVALENT The total of replacement cost and future credit exposure excluding items prescribed by the BIS, namely the
    replacement cost of foreign exchange forward contracts with an original maturity of less than 14 days and derivative instruments
    negotiated through exchanges when they are subject to daily margin requirements.

■   RISK-WEIGHTED BALANCE The credit risk equivalent weighted according to the creditworthiness of the counterparty, as prescribed by the
    BIS.

                                                                                                    Future            Credit         Risk-                       Risk-
                                                                    Notional      Replacement        credit              risk    weighted    Replacement     weighted
                                                                     amount               cost    exposure        equivalent      balance            cost     balance
                                                                                                                                    2003                        2002
       INTEREST RATE CONTRACTS
       Interest rate swap contracts                          $ 43,002,878         $    607,982   $ 175,349    $     783,332     $ 189,957    $   853,333    $ 265,229
       Forward rate agreements                                  3,169,000                1,004       3,005            4,009           801          4,173        1,087
       Futures contracts                                        3,486,217                  583          —                —             —           1,326           —
       Options purchased                                          317,000                1,483          —             1,483           297             —            —
       Options written                                            317,000                   —           —                —             —              —            —
       TOTAL INTEREST RATE CONTRACTS                            50,292,095             611,052     178,354          788,824       191,055        858,832      266,316
       FOREIGN EXCHANGE CONTRACTS
       Forward contracts                                          6,537,311            109,174      64,473          173,548        39,134         17,107       16,099
       Currency swap contracts                                    4,170,048            185,108     185,200          370,308       101,133        265,681      137,280
       Options purchased                                                 —                  —           —                —             —              —            —
       Options written                                                   —                  —           —                —             —              —            —
       TOTAL FOREIGN EXCHANGE CONTRACTS                         10,707,359             294,282     249,673          543,856       140,267        282,788      153,379
       OTHER CONTRACTS
       Stock index options - purchased                            2,033,807            174,751     155,823          330,574       112,962         94,332       84,862
       Stock index options - written                              2,033,807                 —           —                —             —              —            —
       TOTAL OTHER CONTRACTS                                      4,067,614            174,751     155,823          330,574       112,962         94,332       84,862
       TOTAL                                                 $ 65,067,068         $ 1,080,085    $ 583,850    $ 1,663,254       $ 444,284    $ 1,235,952    $ 504,557
       Less impact of master netting agreements 1                                      587,930                                    235,707        750,609      296,601
       TOTAL DERIVATIVES                                                          $    492,155                                  $ 208,577    $   485,343    $ 207,956
       1   Without the intent of settling the contracts on a net basis or simultaneously.
                                                                                                                                                   page 81
The following table presents the term to maturity of the notional amounts of the derivatives.

                                                                                                   Maturity

                                                    1 year        Over 1 to        Over 3 to          Over        Notional          Notional




                                                                                                                                                   Consolidated Financial Statements
                                                  and less         3 years          5 years         5 years        amount            amount
                                                                                                                      2003             2002
      INTEREST RATE CONTRACTS
      Interest rate swap contracts          $ 12,411,007     $ 14,579,187     $ 14,315,431     $ 1,697,253    $ 43,002,878     $ 61,202,780
      Forward rate agreements                  2,643,000          526,000               —               —        3,169,000        5,673,000
      Futures contracts                        2,639,220          846,997               —               —        3,486,217        2,826,000
      Options purchased                          317,000               —                —               —          317,000               —
      Options written                            317,000               —                —               —          317,000               —
      TOTAL INTEREST RATE CONTRACTS            18,327,227      15,952,184       14,315,431       1,697,253       50,292,095       69,701,780
      FOREIGN EXCHANGE CONTRACTS
      Forward contracts                         6,456,999          80,312               —               —         6,537,311        3,287,654
      Currency swap contracts                   1,268,142         939,171        1,486,770         475,965        4,170,048        3,851,273
      Options purchased                                —               —                —               —                —                —
      Options written                                  —               —                —               —                —                —
      TOTAL FOREIGN EXCHANGE CONTRACTS          7,725,141        1,019,483       1,486,770         475,965       10,707,359        7,138,927
      OTHER CONTRACTS
      Stock index options - purchased             358,510        1,100,472         560,425          14,400        2,033,807        2,651,281
      Stock index options - written               358,510        1,100,472         560,425          14,400        2,033,807        2,651,281
      TOTAL OTHER CONTRACTS                       717,020        2,200,944       1,120,850          28,800        4,067,614        5,302,562
      TOTAL DERIVATIVES                     $ 26,769,388     $ 19,172,611     $ 16,923,051     $ 2,202,018    $ 65,067,068     $ 82,143,269



12.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values are intended to approximate amounts at which these financial instruments could be exchanged in a current
transaction between willing parties; however, many of the financial instruments lack an available trading market. Therefore, fair values
are based on estimates using present value and other valuation techniques which are significantly affected by the assumptions used
concerning the amount and timing of estimated future cash flows and discount rates which reflect varying degrees of risk. In addition,
the estimated fair values disclosed do not reflect the value of assets and liabilities that are not considered financial instruments, such as
“fixed assets and and intangible assets with finite useful life.” Also, the values of other non-financial intangible assets and liabilities have
been excluded. Given the use of subjective judgment in applying a large number of acceptable valuation and estimation techniques to
calculate fair values, the fair value estimates cannot necessarily be compared to those of other financial institutions. The estimated fair
values reflect market conditions at a specific date and, as such, may not be representative of future fair values. They should also not be
interpreted as being realizable in an immediate settlement of the instruments. Detailed information on the estimated fair value of on-
balance sheet financial instruments and of the derivatives which are excluded from the table of on-balance sheet financial instruments
is presented on the following page.




                                                                                                                                                   Caisse centrale
ON-BALANCE SHEET FINANCIAL INSTRUMENTS (excluding derivatives)
                                                                    Fair                Carrying                               Fair         Carrying
                                                                  value                    value     Difference              value             value    Difference
                                                                                                            2003                                               2002
  ASSETS
  Cash and deposits with Bank of Canada                $       112,509         $      112,509        $        —      $      67,202     $      67,202    $        —
  Securities                                                 3,684,172              3,618,539             65,633         3,951,796         3,868,115         83,681
  Loans                                                      8,171,930              8,122,178             49,752         5,115,476         5,087,482         27,994
  Customers’ liability under acceptances                       450,300                450,300                 —            349,300           349,300             —
  Other                                                         44,345                 44,345                 —             48,857            48,857             —
  LIABILITIES
  Deposits                                                  10,184,177             10,121,862            (62,315)        7,874,071         7,788,102         (85,969)
  Acceptances                                                  450,300                450,300                 —            349,300           349,300              —
  Obligations related to securities sold short                  14,919                 14,919                 —              8,896             8,896              —
  Subordinated debenture                                       135,707                123,911            (11,796)          135,407           125,806          (9,601)
  Other                                                        549,015                549,015                 —            261,018           261,018              —




DERIVATIVE FINANCIAL INSTRUMENTS
                                                              Positive             Negative              Net fair         Positive         Negative          Net fair
                                                                value                 value                value            value             value            value
                                                                                                           2003                                                2002
  INTEREST RATE CONTRACTS
  Interest rate swap contracts                          $    607,982          $    735,504         $ (127,522)      $    853,333      $ 1,112,195      $ (258,862)
  Forward rate agreements                                      1,004                 1,792               (788)             4,173            3,164           1,009
  Futures contracts                                              583                    —                 583              1,326               —            1,326
  Options purchased                                            1,483                    —               1,483                 —                —               —
  Options written                                                 —                    154               (154)                —                —               —
  TOTAL INTEREST RATE CONTRACTS                              611,052               737,450           (126,398)           858,832          1,115,359         (256,527)
  FOREIGN EXCHANGE CONTRACTS
  Forward contracts                                          109,174               128,850            (19,676)            17,107            12,305             4,802
  Currency swap contracts                                    185,108               445,940           (260,832)           265,681           389,354          (123,673)
  Options purchased                                               —                     —                  —                  —                 —                 —
  Options written                                                 —                     —                  —                  —                 —                 —
  TOTAL FOREIGN EXCHANGE CONTRACTS                           294,282               574,790           (280,508)           282,788           401,659          (118,871)
  OTHER CONTRACTS
  Stock index options - purchased                            174,751                    —             174,751             94,332                —             94,332
  Stock index options - written                                   —                174,751           (174,751)                —             94,332           (94,332)
  TOTAL OTHER CONTRACTS                                      174,751               174,751                    —           94,332            94,332                —
  TOTAL                                                 $ 1,080,085           $ 1,486,991          $ (406,906)      $ 1,235,952       $ 1,611,350      $ (375,398)
  Less impact of master netting agreements 1                 587,930               587,930                    —          750,609           750,609                —
  TOTAL DERIVATIVE
       FINANCIAL INSTRUMENTS                            $    492,155          $    899,061         $ (406,906)      $    485,343      $    860,741     $ (375,398)
  1   Without the intent of settling the contracts on a net basis or simultaneously .
                                                                                                                                              page 83
THE FOLLOWING METHODS AND ASSUMPTIONS WERE USED TO ESTIMATE THE FAIR VALUE OF THE ON-BALANCE SHEET FINANCIAL
INSTRUMENTS:

■   FINANCIAL INSTRUMENTS VALUED AT CARRYING VALUE Due to their short-term maturity, the carrying values of certain consolidated on-




                                                                                                                                              Consolidated Financial Statements
    balance sheet financial instruments were assumed to approximate their fair values. These financial instruments include “Cash and
    deposits with Bank of Canada,” “Securities purchased under resale agreements, “Commitment under the repurchase agreements”,
    “Obligations related to securities sold short,” “Customers’ liability under acceptances,” “Acceptances” and “Accrued interest.”

■   SECURITIES The estimated market value of securities are presented in note 3 to the consolidated financial statements. It is determined
    based on their quoted market price and may not be realized upon sale. When the quoted price of a security is not available, the market
    value is estimated using quoted market prices of similar securities.

■   LOANS The fair values of loans are estimated using a discounted cash flow calculation that uses market interest currently charged for
    similar new loans as at December 31 and expected amounts at maturity. For certain floating rate loans that revise frequently, estimated
    fair values are assumed to be equal to the carrying values.

■   DEPOSITS The fair values of deposits at floating rates or with no stated maturity are assumed to be equal to their carrying values. The
    estimated fair values of fixed rate deposits are determined by discounting the contractual cash flows, using market interest rates
    currently offered for deposits of similar remaining maturities.

■   SUBORDINATED DEBENTURE The fair value of the debenture is based on current rates offered to Caisse centrale for debt of the same
    remaining maturity.

THE FOLLOWING METHODS AND ASSUMPTIONS WERE USED TO ESTIMATE THE FAIR VALUE OF THE DERIVATIVES:

■   OFF-BALANCE SHEET FINANCIAL INSTRUMENTS WITH CONTRACTUAL AMOUNTS REPRESENTING CREDIT RISK The commitments to extend credit are
    primarily floating rate and therefore do not expose Caisse centrale to interest rate risk.

■   DERIVATIVES The fair values of exchange-traded derivatives are based on quoted market prices or dealer quotes. Fair values of non-
    exchange-traded or over-the-counter derivatives are generally calculated as a net present value, net of contractual cash flows, using
    prevailing market rates for instruments with similar characteristics and maturities.




                                                                                                                                              Caisse centrale
13.    INTEREST RATE SENSITIVITY

The following table shows Caisse centrale’ position with regard to interest rate sensitivity as at December 31, 2003. This is the position at
that particular date and could have subsequently changed, taking into account forecasted interest rates and customers’ preferences for
products and maturities.

Assets and liabilities recorded on the consolidated balance sheet and derivatives presented in the following table are reported in time
frames based on the earlier of their contractual repricing date or maturity date. Certain on-balance sheet items, such as investments in
equity securities and members’ equity, do not create an interest rate exposure to Caisse centrale. These items are reported in the non-
interest sensitive column of the table.

                                                                                                   Over            Over            Over                           Non-
                                                                Floating         0 to 3           3 to 6         6 to 12          1 to 5         Over 5        interest
      (in millions of dollars)                                      rate        months           months          months           years           years       sensitive         Total

      ASSETS
      Cash and deposits with Bank of Canada                    $      —     $       —        $       —       $       —        $      —       $      —        $     113     $     113
      Securities
      - Investment account                                           315         1,345             286               52            846            274               91         3,209
        Effective interest rate 1                                                 2.81%            4.78%           6.16%           5.43%          6.19%
      - Trading account                                               —             —                —               —             409              —                —           409
        Effective interest rate 1                                                                                                  2.97%
      Loans                                                          914         5,775               94            438             716            188                (3)       8,122
        Effective interest rate 1                                                 3.10%            4.62%           3.88%           5.83%          7.28%
      Other                                                           —           (476)            427                4               5           203            1,417         1,580
      TOTAL ASSETS                                             $ 1,229      $ 6,644          $      807      $      494       $ 1,976        $     665       $ 1,618       $ 13,433
      LIABILITIES AND MEMBERS’ EQUITY
      Deposits                                                 $ 3,966      $ 3,396          $     732       $     279        $ 1,450        $    299        $       —     $ 10,122
        Effective interest rate 1                                              2.54%               3.03%           2.22%         4.62%            5.19%
      Obligations related to securities
        sold short                                                    —             —                —               —               15             —                —             15
        Effective interest rate 1                                                                                                  3.02%
      Subordinated debenture                                          —             —                —               —               —            124                —           124
        Effective interest rate 1                                                                                                                 5.50%
      Other                                                           —            778              (44)             —             (258)           (24)          2,033         2,485
      Members’ equity                                                 —             —                —               —               —              —              687           687
      TOTAL LIABILITIES AND MEMBERS’ EQUITY                    $ 3,966      $ 4,174          $      688      $      279       $ 1,207        $     399       $ 2,720       $ 13,433
      Balance sheet gap                                        $ (2,737) $ 2,470             $      119      $      215       $    769       $     266       $ (1,102) $           —
      Derivatives 2                                                  —     1,238                   (948)           (156)            44            (178)            —               —
      Total interest rate sensitivity gap                      $ (2,737) $ 3,708             $     (829)     $       59       $    813       $      88       $ (1,102) $           —
      CUMULATIVE INTEREST RATE
          SENSITIVITY GAP 2003                                 $ (2,737) $         971       $      142      $      201       $ 1,014        $ 1,102         $       —     $       —

      2002
      Balance sheet gap                                        $ (1,406) $    600            $      265      $      (15)      $     895      $     527       $    (866) $          —
      Derivatives 2                                                  —     (3,011)                2,307          (1,273)          2,248           (271)             —              —
      Total interest rate sensitivity gap                      $ (1,406) $ (2,411)           $ 2,572         $ (1,288)        $ 3,143        $     256       $    (866) $          —
      CUMULATIVE INTEREST RATE
          SENSITIVITY GAP 2002                                 $ (1,406) $ (3,817)           $ (1,245)       $ (2,533)        $    610       $     866       $       —     $       —
      1   The effective interest rates shown express the historical rates of the fixed rate instruments stated at unamortized cost and the current market rates of the instruments stated
          at fair value.
      2   Derivatives represent the net notional amounts of derivative financial instruments such as forward rate agreements and interest rate swaps, which are used to manage
          interest rate risk.
                                                                                                                                             page 85
14.   CONCENTRATIONS OF CREDIT RISK

Concentrations of credit risk exist when a certain number of borrowers or counterparties involved in similar activities are located in the
same geographic area or present comparable economic characteristics. Their ability to meet contractual obligations can also be affected
by changes in economic, political or other conditions. Management considers that the following concentrations are within acceptable




                                                                                                                                             Consolidated Financial Statements
limits.

BALANCE SHEETS ASSET
Of total loans as at December 31, 2003 and 2002, 98.6% and 97.2% respectively were made to borrowers from Canada, with the largest
concentration in Quebec (2003: 86.8%; 2002: 89.1%), and 8.6% to borrowers from Ontario (2002: 3.3%).

DERIVATIVES
The following table shows credit risk by geographic area, on the basis of the country of domicile of the counterparties, based on notional
amounts as at December 31.

                                                                       2003               %                      2002                %

      Canada                                                    $ 48,896,934             75               $ 66,775,269              81
      International                                               16,170,134             25                 15,368,000              19
      TOTAL                                                     $ 65,067,068            100               $ 82,143,269             100


The following table shows credit risk by industry segment based on notional amounts as at December 31.

                                           Interest                 Foreign
                                               rate               exchange                 Other
                                          contracts    %           contract     %       contracts    %             Total          Total
                                                                                                                   2003           2002
      Banks                           $ 21,187,829    42    $     6,994,414    65    $ 1,107,302    27     $ 29,289,545    $ 23,035,194
      Members
        Fédération                      19,580,479    39            359,159     3      1,939,187    48       21,878,825      48,632,066
        Other                              308,900     1                 —     —          82,820     2          391,720         312,924
      Entities under common control         90,281    —             300,125     3             —     —           390,406         320,859
      Government                            50,000    —           1,164,330    11             —     —         1,214,330          50,000
      Private sector                     9,074,606    18          1,889,331    18        938,305    23       11,902,242       9,792,226
      TOTAL                           $ 50,292,095    100   $ 10,707,359       100   $ 4,067,614    100    $ 65,067,068    $ 82,143,269




                                                                                                                                             Caisse centrale
15.   CONTRACTUAL COMMITMENTS AND GUARANTEES

A) CONTRACTUAL COMMITMENTS As at December 31, 2003, future minimum commitments under long-term leases and service contracts are
as follows:


                 2004                  2005           2006                2007               2008               Other                   Total
              $ 1,217                 $ 910          $ 417               $ 166              $ 163               $ 316               $ 3,189

Caisse centrale is also committed to pay an amount of $5,329,000 pursuant to a service contract in 2004.

B) PLEDGING OF ASSETS In the normal course of business, Caisse centrale pledges assets as security for liabilities incurred. As at December 31,
2003, Caisse centrale deposited assets, principally in the form of securities, in the amount of $249,000,000 (2002: $259,500,000) for the
purposes of participating in clearing and payment systems and as security for contract settlements with derivative exchanges or other
derivative counterparties.

C) TACTICAL INTEREST RATE TERM DEPOSIT In connection with the various sales campaigns for “Tactical interest rate term deposit” carried
out by the caisses Desjardins, Fédération des caisses Desjardins du Québec has deposited a portion of the amounts raised during each of
the campaigns with Caisse centrale. In order to earn a return on the amounts under management, Caisse centrale invests in fixed income
financial instruments (including Government of Canada bonds, derivative financial instrument contracts and other investment vehicles).
The face value of these investments of Caisse centrale exceeds the amounts deposited by the Fédération. Caisse centrale deposits an
amount equal to the positive returns it earns on these investments in the Fédération’s account and recovers from the latter negative
returns. However, the cumulative balance of a campaign account cannot become negative as a result of recoveries by Caisse centrale. As
at December 31, 2003, the face value of Caisse centrale investments is $394,790,000 (2002: $78,400,000)and the balance of the amounts
deposited by the Fédération amounts to $21,417,000 (2002: $3,700,000).
D) GUARANTEES In February 2003, the CICA published Accounting Guideline 14 (AcG-14) concerning financial statement disclosures to be
made by an entity about guarantees it has issued. AcG-14 took effect on January 1, 2003.

Under this accounting guideline, a guarantee is a contract or indemnification agreement that contingently requires Caisse centrale to
make payments to the guaranteed party; as for instance, (i) based on changes in an interest rate, a foreign currency exchange rate, a
security or commodity price, or a price or rate index, or the occurrence or non-occurrence of a specified event that is related to an asset,
a liability or an equity security of the guaranteed party; (ii) based on another entity’s failure to perform under an obligating agreement
or (iii) another entity’s failure to repay its debt when it becomes due and payable.

Caisse centrale has issued the following guarantees to third parties:

GUARANTEES AND STANDBY LETTERS OF CREDIT
Guarantees and standby letters of credit (including Publi-privilège securities) represent an irrevocable commitment by Caisse centrale to
make payments in the event that a customer cannot meet its obligations to third parties.

These instruments are generally collateralized in accordance with the same policy as the one that Caisse centrale has with respect to loans.
The term of these products is not more than five years.

The general provision for credit losses covers all credit risks, including those related to guarantees and standby letters of credit.

OTHER INDEMNIFICATION AGREEMENTS
In the normal course of its operations, Caisse centrale enters into a number of agreements containing indemnification provisions such
as those normally related to purchase agreements, service delivery agreements and lease agreements. Under these agreements, Caisse
centrale may be liable for indemnifying the counterparty pursuant to amendments to statutes and regulations (including tax rules) or
as a result of litigation. The term of the agreements varies from one contract to the next. Caisse centrale is not in a position to make
a reasonable estimate of the maximum amount that it could be required to pay counterparties. Historically, payments made under
these agreements have been negligible. No amounts have been recognized in the consolidated balance sheet with respect to these
agreements.

OTHER GUARANTEES
Caisse centrale irrevocably guarantees, jointly and severally, the obligations of Desjardins Credit Union Inc. (DCU) until April 1, 2006
pursuant to an agreement between the Government of Ontario and DCU regarding the acquisition by the latter of certain assets of
the Province of Ontario Savings Office. The agreement contains several conditions, including minimum standards regarding personnel
and branch operations. Caisse centrale cannot reasonably estimate the maximum amount it may have to pay under this agreement. No
amounts have been recognized in the consolidated balance sheet with respect to this agreement.
MAXIMUM POTENTIAL AMOUNT OF FUTURE PAYMENTS AS GUARANTEES
(in thousands of dollars)

      Guarantees and standby letters of credit                                                                                   $ 186,337
                                                                                                                                                    page 87
16.   OTHER TRANSACTIONS WITH DESJARDINS GROUP

These transactions with members and entities under common control represent those not disclosed elsewhere in the consolidated financial
statements. Pursuant to its Constituent Legislation, the Fédération and its member caisses are members of Caisse centrale. Consequently,
transactions with the Fédération for the benefit of its member caisses are concluded under more favourable conditions for the member




                                                                                                                                                    Consolidated Financial Statements
caisses than those granted to unrelated third parties. These transactions are measured at the exchange amount, which is the amount
of consideration established and agreed to by the related parties. Transactions concluded for the Fédération’s own financing needs and
with the entities under common control of Caisse centrale are carried out under similar conditions to those negotiated with unrelated
third parties. These transactions are in the normal course of business of Caisse centrale and are measured at the exchange amount, which
approximates fair market value and is the amount of consideration established and agreed to by the related parties.

                                                                                         Entities                                        Entities
                                                                                          under                                           under
                                                            Members                                          Members
                                                                                        common                                          common
                                                   Fédération               Other        control    Fédération              Other        control
                                                                                           2003                                            2002
      ASSETS
      Assets related to derivatives            $      41,997          $    54,292   $       477     $ 214,655          $     748    $       298
      Customers’ liability under acceptances         164,800                   —             —        190,000                 —              —
      Other assets                                    10,584                2,863         4,274         1,050                 —           2,779
      LIABILITIES
      Liabilities related to derivatives             607,311              106,498         1,402       804,564              10,329           117
      Acceptances                                         —                    —        450,300            —                   —        349,300
      Other liabilities                               70,423                6,649         1,348       175,998              15,192           668
      INCOME
      Interest income                                 67,175               17,179        24,621        47,037                  64        17,838
      Interest expense                                42,716                5,561        14,702        85,005               8,245         6,013
      Other income                                  (136,206)              45,720         1,050         8,779              10,079           856
      Non-interest expenses                            9,657                   12         2,152         7,521                  30         1,691



17.   EMPLOYEE FUTURE BENEFITS

Caisse centrale enrols all its employees 25 years of age or older in the multi-employer pension plan of the Desjardins Group. An actuarial
valuation of the plan is performed at least once every three years. As at January 1, 2002, the most recent valuation date, this defined
benefit pension plan was fully funded.

The Board of Directors of the Fédération agreed, in accordance with the pension plan by-laws, to allow a portion of the stated surplus
as at January 1, 2000, amounting to $259 million, to be used in the form of a partial contribution holiday for participants registered as
at December 31, 2000 and for employers for the 130-week period from July 1, 2001 to December 27, 2003. Full contribution has been
reinstated since December 28, 2003.

The amount expensed as employer contributions with respect to the pension plan was $889,000 in 2003 (2002: $741,000).

Caisse centrale also provides life insurance coverage and health and dental care benefits to its eligible retired employees through the
Desjardins Group multi-employer group insurance plan. This group plan is not funded.




                                                                                                                                                    Caisse centrale
18.    SEGMENTED INFORMATION

Caisse centrale conducts its activities in three segments. Each segment offers different services, uses separate strategies and is managed
by a senior vice-president.

The accounting policies used by the segments are the same as those described in the significant accounting policies. Caisse centrale
measures the performance of these segments based on the gross income generated by each segment. Non-interest expenses are managed
on a consolidated basis and are not allocated by segment.

The following table summarizes the consolidated financial results of Caisse centrale by business segment:

                                                    Financing                        Treasury                     Other              Adjustments                                 Total
                                     2003              2002           2003             2002          2003         2002           2003          2002            2003              2002
      Net interest income       $    39,347     $      35,768    $    45,823     $     43,912    $    5,223     $ 5,265      $ ,4,261      $ 7,497       $    94,654    $        92,442
      Other income                   20,044            18,496         15,309           14,493         4,610        5,456         (4,261)       (7,497)        35,702             30,948
      Gross income              $    59,391     $      54,264    $    61,132     $     58,405    $    9,833     $ 10,721     $       —     $       —     $   130,356    $       123,390
      Average assets 1          $ 5,121,434     $ 4,341,446      $ 5,256,123     $ 6,286,658     $ 108,764      $ 93,847     $       —     $       —     $ 10,486,321   $ 10,721,951
      1   Assets are disclosed on an average basis, as this basis is the most relevant to a financial institution and is the measure examined by Caisse centrale’ management.

FINANCING SEGMENT This segment offers a range of financial products and services and grants financing in the form of lines of credit and
term loans to members and entities under common control, public and parapublic entities, and Private sector clients.

TREASURY SEGMENT This segment manages Caisse centrale’ assets and liabilities, securities and derivatives portfolios, and the cash of the
entire cooperative network.

OTHER “Other” combines the international sector and the unallocated income from centralized service units. This segment also includes
the operations of the Florida-based subsidiary, Desjardins Federal Savings Bank. This subsidiary’s gross income and average assets totalled
$5.4 million and $85.1 million in 2003 (2002: $6.6 million and $72.2 million).
                                                                                                                                               page 89
CONSTITUTION, REGULATION AND CONTROL




                                                                                                                                               Constitution, Regulation and Control
CONSTITUTION

La Caisse centrale Desjardins du Québec was created on June 22, 1979 by an Act to amend the Act respecting La
Confédération des caisses populaires et d’économie Desjardins du Québec (1979 S.Q., c. 46), replaced on June 22,
1989 by an Act respecting the Mouvement des caisses Desjardins (1989 S.Q., c. 113), which was replaced on July 1,
2001 by the Act respecting the Mouvement Desjardins (2000 S.Q., c. 77). Caisse centrale Desjardins du Québec may
also be identified under the name “Caisse centrale.” Pursuant to its Constituent Legislation, Caisse centrale continues
its existence as a financial services cooperative and is therefore also governed by the Act respecting financial services
cooperatives (Québec) as if it were a federation within the meaning of that Act.

Caisse centrale, through its holding company Desjardins FSB Holdings, Inc., incorporated under the laws of the State
of Delaware, USA, holds the aggregate of the capital stock of Desjardins Federal Savings Bank, a savings and loan
association incorporated under US federal law which has its place of business in Hallandale Beach, Florida, USA.

The capital stock of Caisse centrale is composed of an unlimited number of qualifying shares and an unlimited number
of Class A capital shares and Class B capital shares subscribed for by its members. These shares can be paid in full or in
instalments in accordance with the payment terms and in the cases determined by resolution of the Board of Directors
of Caisse centrale.

The qualifying shares with an issue price of $5.00 each are reimbursed only in the event of the winding-up, insolvency
or dissolution of Caisse centrale and are redeemable only in the event of the withdrawal, exclusion, winding-up,
insolvency or dissolution of the member. The capital shares with a par value of $1,000 each are reimbursed only in the
event of the winding-up, insolvency or dissolution of Caisse centrale and are redeemable with the authorization of the
Autorité des marchés financiers.

                   The shares of the capital stock of Caisse centrale are held primarily by the Fédération des caisses Desjardins du Québec,
                   which, with its member caisses, is a full member of Caisse centrale under its Constituent Legislation, and by the three
                   federations of caisses populaires in Ontario, Manitoba and New Brunswick, which are auxiliary members of Caisse
                   centrale.

                    The general meeting of Caisse centrale comprises the members of the general meeting of the Fédération des caisses
                   Desjardins du Québec, namely the delegates of the caisses and a representative from the Fédération des caisses
                   Desjardins du Québec. Under the provisions of the Constituent Legislation, the Board of Directors of Caisse centrale
                   must be composed of at least three quarters of the Board members of the Fédération des caisses Desjardins du
                   Québec (other than its president), who shall account for over one half of the Board members of Caisse centrale. As
                   at the date of this annual report, the members of the Board of Directors of the Fédération des caisses Desjardins du
                   Québec constitute all of the members of the Board of Directors of Caisse centrale. For the duration of his mandate,
                   the president of the Fédération des caisses Desjardins du Québec is the Chairman of the Board and the Chief Executive
                   Officer of Caisse centrale.




                                                                                                                                               Caisse centrale
REGULATION AND CONTROL

The Autorité des marchés financiers is responsible for the annual inspection and supervision of Caisse centrale. The Act
respecting financial services cooperatives governs the control exercised by the Autorité des marchés financiers with
regard to the management, transactions and solvency of Caisse centrale and to conflicts of interest and self-dealings.

The Autorité des marchés financiers may make any examination and investigation he considers necessary or
expedient into the internal affairs and activities of Caisse centrale, and order any inquiry into any matter within his
jurisdiction.

The Autorité des marchés financiers may request from Caisse centrale statements, statistics, reports and any other
information he deems appropriate to enable him to determine whether Caisse centrale complies with the Constituent
Legislation and the applicable provisions of the Act respecting financial services cooperatives. The Autorité des
marchés financiers may, with respect to the financial statements and when deemed expedient, prescribe accounting
rules that contain specific requirements or different requirements than those under Canadian generally accepted
accounting principles.

Since the Fédération des caisses Desjardins du Québec and its member caisses can elect the majority of its directors,
Caisse centrale is deemed to be controlled by the Fédération des caisses Desjardins du Québec within the meaning of
the Act respecting financial services cooperatives. This Act therefore confers the normative powers applicable to Caisse
centrale, notably with respect to capitalization and investments, on the Fédération des caisses Desjardins du Québec.

                   Caisse centrale is required to maintain, for its operations, an adequate capital base to ensure sound and prudent
                   management in accordance with the standards adopted by the Fédération des caisses Desjardins du Québec and
                   approved by the Autorité des marchés financiers.

                   Caisse centrale appoints annually, as auditor, a firm of chartered accountants to conduct the audit of its accounting
                   records and to report to the Autorité des marchés financiers as prescribed by the Constituent Legislation, the Act
                   respecting financial services cooperatives and government regulations.

                   Caisse centrale establishes, in accordance with its Constituent Legislation, an Audit Commission composed of no less than
                   three members from its Board of Directors, and a Board of Ethics consisting of no less than three members elected
                   at the general meeting among its members. The Audit Commission reviews the consolidated financial statements
                   of Caisse centrale and ensures that its operations are in compliance with the provisions of the applicable legislation
                   and the orders and written instructions of the Autorité des marchés financiers. The Board of Ethics is responsible for
                   adopting and implementing rules to protect Caisse centrale and its members with respect to self-dealings, disclosure
                   requirements, privacy of information and conflicts of interest.

                   Caisse centrale is registered with the Régie de l’assurance-dépôts du Québec.
                                                                                                                                                   page 91
CORPORATE GOVERNANCE




                                                                                                                                                   Corporate Governance
The corporate governance practices of Caisse centrale contribute to enhanced corporate oversight and management
and ensure the effectiveness and integrity of its operations. Caisse centrale deems it appropriate, for reasons of
transparency toward its members, clients and other stakeholders, to provide an overview of its practices in its annual
report.



HIGHLIGHTS

The main improvements made or major initiatives taken in 2003 regarding the Corporate Governance Program
consisted of:

■   adopting a plan to implement the integrated risk management program for Caisse centrale in conjunction with
    the Fédération des caisses Desjardins du Québec, and defining corporate governance as it applies to integrated risk
    management;
■   identifying Desjardins initiatives concerning enacted Bill 198 with respect to financial disclosure and internal controls
    in order to ensure compliance with the rules dictated by the Canadian Securities Administrators;
■   examining new accounting standards and their impact on Desjardins;
■   preparing a draft Charter for the Audit Commission;
■   preparing a draft Code of Ethics and Professional Conduct;
■   implementing a succession plan for executive positions at Caisse centrale.



CORPORATE GOVERNANCE POLICY OF CAISSE CENTRALE

The corporate governance policy of Caisse centrale, which is based on the policy adopted by the Fédération des caisses
Desjardins du Québec, confirms Caisse centrale’ concurrence with the guidelines and other good corporate governance
practices currently applied in the industry 1. It describes what Caisse centrale must do in order to comply with the
spirit of the guidelines. This nuance is important since the guidelines must be adapted to the specific circumstances of
Desjardins Group.



APPLICATION OF CORPORATE GOVERNANCE GUIDELINES

                     MANDATE OF THE BOARD OF DIRECTORS
                     1) MANAGEMENT OF CAISSE CENTRALE The Board of Directors assumes full responsibility for the administration of Caisse
                     centrale. The Board of Directors exercises all the powers of Caisse centrale except for those which it may delegate from
                     time to time to its commissions and committees. The Board discharges the following responsibilities in particular:

                     a.Strategic Planning Process The Board of Directors has implemented an ongoing Strategic Planning Process for Caisse
                     centrale in compliance with the vision and the strategic orientations of Desjardins Group. This process provides for the
                     following steps:

                     ■   annual update of Caisse centrale’ strategic plan and business plan and ensuring their consistency with the
                         Fédération des caisses Desjardins du Québec through the Strategic Integration Group and the Strategic Planning and
                         Development Committee;
                     ■   quarterly reporting to the Board of Directors of Caisse centrale on the progression of work to attain strategic
                         objectives;
                     ■   regular follow-up of the plans by the Management Committee of Caisse centrale to enable the Board of Directors
                         to correct any discrepancies observed.

                     Responsibility for implementing the various components of the ongoing Strategic Planning Process lies with
                     management, and the Board’s role in this respect is one of follow-up, oversight and control.

                     b. Identification and Management of Major Risks The Board of Directors is responsible for identifying the main risks to the
                     business and ensuring that the required controls are in place to provide integrated risk management. In this respect,
                     Caisse centrale can count upon the support of a Senior Vice President, Integrated Risk Management, an Internal Credit
                     Committee, an Assets/Liabilities Committee and a Risk Management Committee.

                     Caisse centrale is in keeping with the ongoing work of the Fédération to implement procedures for securing compliance
                     with the integrated risk management methods advocated by the New Basel Capital Accord.

                     c. Succession Planning Caisse centrale intends to adopt an integrated human resources planning program and a succession
                     plan. This plan is being prepared in conjunction with the Fédération des caisses Desjardins du Québec.
                                                                                                                                                   Caisse centrale




                     1   The Canadian Securities Administrators (CSA) now have the responsibility for issuing corporate governance guidelines.
d. Communication Policy The Board of Directors and the management of Caisse centrale favour open, transparent
communications with the Fédération des caisses Desjardins du Québec, caisses, subsidiaries of Desjardins Group,
regulatory bodies and rating agencies. Caisse centrale ensures the timely dissemination of important information.
Particular attention is paid to quarterly and annual financial information. The content of press releases is submitted
for approval to the Board of Directors upon recommendation of the Audit Commission. Requests for information and
comments received are rapidly forwarded to management for review and response.

Through the Fédération des caisses Desjardins du Québec, Caisse centrale also has access to other channels such as
the Ombudsman, the complaint settlement process in the caisse (Your Satisfaction Is Our Priority), the annual general
meetings, the release of quarterly financial results of Caisse centrale and Desjardins Group, publications, the toll-free
telephone line and the Web site (www.desjardins.com).

Caisse centrale also has contacts at the rating agencies. It also communicates with the various levels of government in
conjunction with the Vice-President, Government Affairs at the Fédération des caisses Desjardins du Québec.

e. Management Information System and Integrity of Control Systems The Board of Directors ensures the implementation of
effective control systems (accounting, administrative and management) to safeguard the integrity of its operations
and requires accountability from its managers. The Board of Directors is supported in this responsibility by the Internal
Auditor of Desjardins Group.

The Board of Directors ensures that the Management Committee of Caisse centrale provides the Board and its
commissions and committees with information that is reliable, timely, and adapted to the particular needs of the Board
members so that they may take advantage of opportunities when they arise and assess the risks involved.

Board members receive a complete report of the financial and operating results of Caisse centrale on a quarterly basis.
The Board of Directors ensures that appropriate policies and procedures are in place to facilitate the production and
presentation of this information.

To effectively carry out its orientation and control duties, the Board of Directors of Caisse centrale meets regularly,
according to a predetermined schedule. In 2003, nine Board meetings were held. Board members received the agenda,
along with any appropriate documentation, in advance to ensure productive discussions and facilitate the decision-
making process.

                   2) COMPOSITION OF THE BOARD OF DIRECTORS The Board of Directors of Caisse centrale is comprised of a majority of
                   unrelated parties. In actual fact, the Directors of Caisse centrale are the same as those of the Fédération des caisses
                   Desjardins du Québec, within the context of a single management structure.

                   3) APPLYING THE DEFINITION OF UNRELATED PARTY There are five related Directors on the Board of Directors; namely the
                   Chairman of the Board and Chief Executive Officer of Desjardins Group and the four General Caisse Managers serving
                   on the Board. The Directors have no business or personal relationships with members of the Management Committee
                   of Caisse centrale, or interests which, in the opinion of the Board, could significantly interfere with their ability to act in
                   the best interests of the Fédération des caisses Desjardins du Québec and Desjardins Group, or the interests of another
                   nature which, again in the opinion of the Board, could reasonably be perceived as such.

                   For guidance in these matters, the Board refers to the Code of Ethics, which governs the actions of its Directors.

                   See the list of Directors, in which they are identified as related or unrelated.

                   4) NOMINATION PROCEDURE Given the cooperative structure of Caisse centrale, its Board of Directors is comprised of
                   persons elected by the delegates of the member caisses of Caisse centrale who hold meetings in each region to directly
                   elect 16 of the 21 members of the Board of Directors. Four other positions are filled by General Managers of the caisses
                   at an election held at a general meeting of Caisse centrale. The remaining position is reserved by law for the President
                   and Chief Executive Officer of Desjardins Group. The Corporate Governance Commission does not have a role in the
                   selection of Caisse centrale’ Directors.

                   5) ASSESSING THE EFFECTIVENESS OF THE VARIOUS BODIES The Board of Directors, its commissions and its committees
                   annually assess their performance based on objectives set by the Board at the beginning of the year. Opportunities for
                   improvement and aspects requiring further examination, as determined by the assessment exercise, are included in
                   an action plan recommended to the Board of Directors by the Corporate Governance Commission, which is in charge
                   of monitoring this plan. The Assessment Program for the various bodies making up Caisse centrale also provides for
                   an individual self-assessment procedure followed by a separate meeting with the Chairman of the Board, who is
                   responsible for the assessment process, while the Corporate Governance Commission ensures its supervision.
                                                                                                                                               page 93
6) ORIENTATION AND PROFESSIONAL DEVELOPMENT PROGRAM FOR NEW DIRECTORS Caisse centrale ensures the Orientation
and Professional Development Program of its Directors and develops training sessions based on their specific needs.
All new Directors are provided with an orientation session, including, in particular, a meeting with certain members
of management and a reference manual containing all the information they need to carry out their duties. Meetings
with specialists from Caisse centrale are also organized, when necessary, to impart to them a more complete picture of




                                                                                                                                               Corporate Governance
certain strategic projects. In 2003, the Directors were requested to voice their needs in this respect.

As a follow-up to the assessment of the Board’s effectiveness in 2002, the members of Caisse centrale’ Credit and
Investment Commission attended a day of training in early 2004 with a view to enhancing their knowledge of
investment operations.

Since 2003, the training program for members of the Board of Directors has been included in the programming of
the activities of Institut coopératif Desjardins, the new cooperative training centre designed for elected Officers and
Managers of Desjardins Group. The mission of this institute will be three-pronged: the Desjardins Culture, Corporate
Governance and Management at Desjardins, and Innovation Desjardins.

7) SIZE OF THE BOARD OF DIRECTORS The Board of Directors is larger than recommended and generally found in the
industry. As at December 31, 2003, the Board of Directors was made up of 21 members.

The total number of Directors serving on the Board of Directors of Caisse centrale is due primarily to the broad
ownership of Desjardins Group and the democratic structure of this group of cooperative financial institutions. The
composition of the Board of Directors ensures representation of all Quebec regions according to the regional mapping
established by Desjardins Group. About 600 member caisses of the Fédération des caisses Desjardins du Québec are
the ultimate owners of Caisse centrale.

Efficient meeting management and sound discipline on the part of the Directors makes up for the rather large number
of Directors. In addition, informal meetings between the Chairman of the Board and Chief Executive Officer and the
Directors on the day before Board meetings increase the efficiency of the actual meetings.

8) COMPENSATION POLICY The Board of Directors adopted a policy regarding the payment of compensation to its
Directors, which takes into account the responsibilities, risks and requirements inherent in their duties. In 2003,
the Corporate Governance Commission examined industry practices and recommended to the Board of Directors
amendments regarding the compensation policy of Directors.

                   9) COMPOSITION OF COMMISSIONS AND COMMITTEES The Board of Directors has created various commissions and
                   committees, which are necessary for it to carry out its oversight and control duties and to streamline its procedure. All
                   or most members of these commissions and committees are unrelated parties. Only the Chairman of the Board and
                   Chief Executive Officer of Caisse centrale is an ex-officio member of these commissions and committees, which meet
                   regularly and whose Chairs report to the Board of Directors.

                   The mandate of these commissions and committees are reviewed annually so that they properly support the Board of
                   Directors in its duties of orientation, planning and oversight.

                   10) RESPONSIBILITY FOR CORPORATE GOVERNANCE The Board of Directors has entrusted the Corporate Governance
                   Commission with the responsibility of ensuring the application and development of the Corporate Governance Program.
                   This Commission must report its observations and make recommendations to the Board of Directors.

                   11) LIMITS TO THE AUTHORITY OF THE MANAGEMENT COMMITTEE The responsibilities of the Chairman of the Board and
                   Chief Executive Officer of Caisse centrale are set out in the Corporate Governance by-law of Caisse centrale. The
                   responsibilities of the President and Chief Operating Officer are also defined in this by-law. The Board of Directors has
                   established a very clear division of responsibilities between the Board and the Management Committee. The annual
                   objectives of the Chairman of the Board and Chief Executive Officer are recommended to the Board of Directors by
                   the Committee on the Overall Compensation of the President of Desjardins Group and Chief Executive Officer. The
                   objectives of the President and Chief Operating Officer are set by the Board of Directors within the parameters of the
                   profit-sharing plan of Caisse centrale.

                   The degree to which these objectives are achieved is measured through an annual review process. With respect to the
                   performance of the Chairman of the Board and Chief Executive Officer, under the supervision of the above-mentioned
                   committee, each Director participates anonymously in the review process, without members of management being
                   present, using a model prepared in advance by this committee.
                                                                                                                                               Caisse centrale
12) THE BOARD’S INDEPENDENCE FROM THE MANAGEMENT COMMITTEE The Board of Directors has created various structures
and procedures to safeguard its independence from the management of Caisse centrale. These include:

a) having only one member of management on the Board of Directors (i.e., the Chairman of the Board and Chief
   Executive Officer of Caisse centrale);

b) having the Directors meet informally the day before each Board meeting;

c) having an unrelated Director chair the Audit Commission and the Credit and Investment Commission; and

d) entrusting to the Corporate Governance Commission (of which only one member is a related party) the responsibility
   for:

  1) managing relations between the Board and the Management Committee of Caisse centrale; and

  2) ensuring that the Board fulfills its duties. In addition, the Chairman of the Board and Chief Executive Officer of
     Caisse centrale is in charge of setting or supervising the agenda for meetings of the Board and its commissions
     and committees.

                  Desjardins does not intend to separate the functions of Chairman of the Board and President and Chief Executive
                  Officer of Caisse centrale in keeping with the corporate governance orientations of Desjardins Group.

                  13) AUDIT COMMISSION – MANDATE AND COMPOSITION The Audit Commission is entirely made up of unrelated parties; two
                  among them, including the Chair of the Commission, have accounting expertise. The roles and responsibilities of the
                  Commission have been defined in such a way as to give its members a very clear understanding of their duties. The
                  Audit Commission has all the powers and information it needs to fulfill its mandate. The role of the Commission is to
                  review all financial information and to supervise the implementation of an effective control process and accountability.
                  The Commission has direct communication channels with the internal and external auditors to discuss and review
                  certain issues, if any. The Commission may, as needed, discuss these issues with them without the Managers responsible
                  being present.

                  14) HIRING OUTSIDE ADVISORS A Director may engage the services of an outside Advisor at the expense of Caisse
                  centrale. However, to ensure that such services are relevant, a request must be submitted to the Corporate Governance
                  Commission in this respect.
                                                                                                                                                     page 95
COMMISSIONS OF THE BOARD OF DIRECTORS AND COMMITTEES OF CAISSE CENTRALE

Note : * means that the director is unrelated




                                                                                                                                                     Corporate Governance
EXECUTIVE COMMITTEE (7 DIRECTORS)
The Executive Committee of Caisse centrale met twice in 2003. It supports the Board of Directors in its duties of
orientation, planning and oversight by making recommendations on:

■   the strategic and financial plan of Caisse centrale. In this respect, it examines the budgetary focus and priorities,
    analyzes the budget and conducts a quarterly follow-up;
■   the proposed major transactions, after review thereof.

It follows up on the main strategic initiatives and high-benefit projects of Caisse centrale. It is also responsible for the
following:

■   approving any financial undertaking in excess of the limits established for management, in compliance with the
    policy;
■   tracking the realization of the benefits of the projects authorized by the Board of Directors;
■   ensuring follow-up of the out-of-court settlements of Caisse centrale;
■   supervising the enforcement of the strategic communication policy.

MEMBERS:
■   Alban D’Amours, Chairman of the Board of Directors
■   Madeleine Lapierre, Vice-Chair of the Board of Directors*
■   Pierre Tardif, Secretary of the Board of Directors*
■   André Gagné*
■   Olivier Lavoie*
■   André Shatskoff
■   Sylvie St-Pierre-Babin*

                         AUDIT COMMISSION (5 DIRECTORS)
                         The Audit Commission met eight times in 2003. It supports the Board of Directors in its duties of orientation, planning
                         and oversight by carrying out the following mandate:

                         ■   it guarantees the protection of the independence of the Internal Audit Department and ensures that the latter
                             fulfills its mandate;
                         ■   it examines the annual program of the activities of the Internal Audit Department of Desjardins Group and, if need
                             be, makes a recommendation to the Board of Directors. It follows the conduct of the Audit Program and may, where
                             necessary, request a special audit;
                         ■   it receives, and follows up upon, the reports on the activities of the Internal Audit Department;
                         ■   it examines the reports drawn up in order to monitor the financial results and the risks to which Caisse centrale is
                             exposed and, when needed, makes recommendations to the Board of Directors;
                         ■   it reviews the press releases with respect to the financial results and makes recommendations to the Board of
                             Directors;
                         ■   it studies the reports of the External Auditors and the letter to management and receives the comments from
                             management; it oversees the quality of their work;
                         ■   it makes a recommendation to the Board of Directors with respect to the selection of the External Auditor, and
                             the External Auditor’s mandate and compensation. It ensures the independence of the External Auditors and
                             reviews the special engagements entrusted to the External Auditors and the fees in connection therewith. Where a
                             proposal is made to change the External Auditors, it reviews any matter connected therewith, including all disclosure
                             requirements which must be observed in the notice of change of auditors, the information circular and the steps to
                             be taken in order to ensure an orderly transition;
                         ■   it examines the reports to be filed with the governmental authorities, including the Autorité des marchés
                             financiers;
                         ■   it monitors the efficiency of the internal control procedures, the integrated risk management systems, the accounting
                             controls, procedures and methods;
                         ■   it ensures regulatory compliance of the transactions performed by Caisse centrale.

                         Upon request, it carries out any other duties entrusted by the Board of Directors and reports thereon.

                         The External Auditors attend the meetings of the Commission. The Senior Vice-President, Finance, Strategic Alliances
                         and International, submits the quarterly financial results of Caisse centrale. The Commission meets annually with the
                         External Auditors without the members of Management being present.

                         MEMBERS:
                         ■   Andrée Lafortune, FCA, Chair*
                         ■   Jean-Guy Bureau*
                         ■   Raymond Gagné*
                                                                                                                                                     Caisse centrale




                         ■   Pierre Leblanc, FCA*
                         ■   Jacqueline Mondy*
CORPORATE GOVERNANCE COMMISSION (5 DIRECTORS)
The Corporate Governance Commission of Caisse centrale held three meetings in 2003. It supports the Board of Directors
in its duties of orientation, planning and oversight by carrying out the following mandate:

■   enforcing, supervising and updating the Corporate Governance Program and, in this respect, receiving the report of
    the Internal Auditor with respect to the implementation of the Corporate Governance Policy;
■   ensuring that a tracking of the development of industry trends and practices is in place;
■   reviewing the wording of the Corporate Governance disclosure in the annual report of Desjardins Group;
■   supervising the Assessment Program with respect to the efficiency of the Board of Directors and proposing goals to
    the Board of Directors for the upcoming year;
■   reviewing annually the role of the Board of Directors and its commissions and committees in light of the annual
    assessment of the performance of these bodies;
■   assessing the overall quality and relevance of the information submitted to the Board of Directors, the commissions
    and the committees;
■   recommending the orientation and professional development program for Board members;
■   ensuring the availability of the Officers’ Reference Manual;
■   following up on the compensation policy in respect of Officers and recommending amendments to the Board of
    Directors, where necessary;
■   recommending to the Board of Directors the appointment of members of the various boards of directors of the
    subsidiaries, other than the Chairs of such boards;
■   reviewing the relationship between Management and the Board of Directors;
■   reporting and, if necessary, making recommendations to the Board of Directors.

MEMBERS:
■   Alban D’Amours, Chairman of the Board of Directors
■   Pierre Tardif, Secretary of the Board of Directors*
■   André Gagné*
■   André Lachapelle*
■   Pierre Leblanc*

                    HUMAN RESOURCES COMMISSION (5 DIRECTORS)
                    The Human Resources Commission of Caisse centrale held three meetings in 2003. It supports the Board of Directors in
                    its duties of orientation, planning and oversight, in particular by making recommendations on:

                    ■   the three-year human resources plan of Caisse centrale, including plans for the development of human resources and
                        succession management;
                    ■   the implementation of the compensation policy of Caisse centrale, in keeping with the compensation policy of
                        Desjardins Group adopted by the Fédération des caisses Desjardins du Québec;
                    ■   the overall compensation of the Executives of Caisse centrale in respect of whom the Commission conducts a follow-
                        up, in keeping with the policies of Desjardins Group adopted by the Fédération des caisses Desjardins du Québec.

                    At the request of the Board of Directors, the Commission studies any matter regarding employer-employee relations
                    and makes recommendations to the Board. It reviews, in particular, the results of the survey on satisfaction and
                    motivation of the staff of Caisse centrale.

                    The Commission ensures that practices in the area of employer-employee relations are in line with management values,
                    policies and guidelines and reflect internal equity and values of Desjardins Group.

                    The Commission also ensures tracking of the major trends in the performance of group insurance plans, of relations
                    with unions, of the implementation of salary recommendations, of the mentoring framework and of the annuity
                    plan.

                    It ensures compliance with Desjardins Group Human Resources policies.

                    It reports to the Board of Directors.

                    MEMBRES :
                    ■   Alban D’Amours, Chairman of the Board of Directors
                    ■   Madeleine Lapierre, Vice-Chair of the Board of Directors*
                    ■   Pierre Tardif, Secretary of the Board of Directors*
                    ■   Raymond Gagné*
                    ■   Denis Paré*
                                                                                                                                            page 97
CREDIT AND INVESTMENT COMMISSION (4 MEMBERS)
The Credit and Investment Commission met 15 times in 2003. It is responsible for determining the loans to be granted
by Caisse centrale as well as its investments and borrowings and other financial commitments and, to this end, operates
within the approval limits set out in the general policies adopted from time to time by the Board of Directors.




                                                                                                                                            Corporate Governance
The President and Chief Operating Officer of Caisse centrale as well as its Senior Executive Vice-President and its Senior
Vice-President, Integrated Risk Management, sit on the Commission as non-voting members.

MEMBERS:
■   Madeleine Lapierre, Chair*
■   Louise Charbonneau
■   Richard Sarrazin
■   André Shatskoff

BOARD OF ETHICS (3 MEMBERS)
The Board of Ethics met six times in 2003. It is responsible for:

■   adopting rules of professional conduct applicable to the officers and employees of Caisse centrale, submitting them
    to the Board of Directors for approval and enforcing them;
■   supporting Caisse centrale in applying the rules of professional conduct;
■   notifying the Board of Directors when the rules of professional conduct have been infringed;
■   dealing with complaints about Caisse centrale from its members;
■   reporting annually on its activities.

MEMBRES :
■   Denis Rousseau, Chairman*
■   Claude Leblond*
■   Jacques Sansoucy*

                    MANAGEMENT COMMITTEE
                    The Management Committee of Caisse centrale is not a committee of the Board of Directors. It is comprised of the
                    Chairman of the Board and Chief Executive Officer of Caisse centrale, the President and Chief Operating Officer
                    of Caisse centrale, the Senior Executive Vice-President, the Senior Vice-President, Capital Markets, the Senior Vice-
                    President, Administration and International, the Senior Vice-President, Integrated Risk Managemen, the Senior
                    Vice-President, Financing and Banking Services, the Vice-President, Institutional Financing and Banking Services, the
                    Vice-President and General Manager, Desjardins International Service Centre, the Vice-President, Legal and Corporate
                    Affairs and Assistant Secretary of the Board of Directors, and the Vice-President, Finance and Control.

                    ASSETS/LIABILITIES COMMITTEE
                    This subcommittee of the Management Committee is composed of the President and Chief Operating Officer of Caisse
                    centrale, the Senior Executive Vice-President and the five Senior Vice-Presidents of Caisse centrale.

                    INTERNAL CREDIT COMMITTEE
                    This subcommittee of the Management Committee is made up of the President and Chief Operating Officer of Caisse
                    centrale, the Senior Executive Vice-President and the five Senior Vice-Presidents of Caisse centrale.

                    RISK MANAGEMENT COMMITTEE
                    This subcommittee of the Management Committee is made up of the President and Chief Operating Officer of Caisse
                    centrale, the Senior Executive Vice-President, the Senior Vice-President, Capital Markets, the Senior Vice-President,
                    Integrated Risk Management, the Vice-President, Legal and Corporate Affairs and Assistant Secretary of the Board of
                    Directors, and the Vice-President, Finance and Control.




                                                                                                                                            Caisse centrale
BOARD OF DIRECTORS       1               DENIS PARÉ                              MICHEL PARADIS*
                                         President                               Senior Vice-President
ALBAN D’AMOURS                             Council of Representatives            Integrated Risk Management
President and Chief Executive Officer      Estrie                                CHRISTIAN ST-ARNAUD*
  Desjardins Group                       CLÉMENT SAMSON                          Senior Vice-President
MADELEINE LAPIERRE                       President                               Financing and Banking Services
Vice-Chair of the Board                    Council of Representatives            PHILIPPE BÉLAND*
President                                  Québec Ouest, Rive-Sud                Vice-President
  Council of Representatives
                                         RICHARD SARRAZIN                        Institutional Financing
  Richelieu-Yamaska
                                         General Caisse Manager                  and Banking Services
PIERRE TARDIF
                                         ANDRÉ SHATSKOFF                         ALAIN FRANCOEUR
Secretary of the Board
President                                General Caisse Manager                  Vice-President
  Council of Representatives                                                     Financing and Banking Services
                                         SYLVIE ST-PIERRE BABIN
  Rive-Sud de Montréal                   President                               SYLVAIN GASCON
JACQUES BARIL                              Council of Representatives            Vice-President
President                                  Abitibi-Témiscamingue, Nord           Financing and Banking Services
  Council of Representatives               et Ouest-du-Québec                    JACQUES LANDRY*
  Est de Montréal                                                                Vice-President and General Manager
JEAN-GUY BUREAU                                                                  Desjardins International Service Centre
President                                MANAGING DIRECTORS                      GILLES LAPIERRE*
  Council of Representatives
                                                                                 Vice-President
  Caisses de groupes                     PAUL-ANDRÉ LAVOIE
                                                                                 Legal and Corporate Affairs
FRANCES CARRIER                          Vice-President
                                           Council of Representatives            PIERRE MASSÉ
General Caisse Manager
                                           Bas Saint-Laurent, Gaspésie et        Vice-President
LOUISE CHARBONNEAU                         Îles-de-la-Madeleine                  Financing and Banking Services
General Caisse Manager
                                         BENOÎT TURCOTTE                         PIERRE PELLETIER
ANDRÉ GAGNÉ                                                                      Vice-President
                                         Vice-President
President                                                                        Financing and Banking Services
                                           Council of Representatives
  Council of Representatives
                                           Abitibi-Témiscamingue,                DIANE ROBERT*
  Québec Est
                                           Nord et Ouest-du-Québec               Vice-President
RAYMOND GAGNÉ
                                                                                 Finance and Control
President
  Council of Representatives                                                     BERNARD VENNE
  Bas St-Laurent, Gaspésie et            OBSERVERS                               Vice-President
  Îles-de-la-Madeleine                                                           Treasury and Investment
                                         THOMAS BLAIS
DANIEL MERCIER
                                         Chairman of the Board
President
                                           Fédération des caisses populaires
  Council of Representatives                                                     MEMBERS
                                           de l’Ontario Inc.
  Centre du Québec
                                         NORMAND COLLET                              Desjardins caisses
ANDRÉ LACHAPELLE                                                                 ■

President                                President                               ■   Fédération des caisses Desjardins du
  Council of Representatives               Fédération des caisses populaires         Québec
  Lanaudière                               du Manitoba Inc.                      ■   Fédération des caisses populaires de
                                         GILLES LEPAGE                               l’Ontario Inc.
ANDRÉE LAFORTUNE
President                                President and Chief Executive Officer   ■   Fédération des caisses populaires du
  Council of Representatives               Fédération des caisses populaires         Manitoba Inc.
  Ouest de Montréal                        acadiennes Ltd                        ■   Fédération des caisses populaires
                                                                                     acadiennes Ltd
MARCEL LAUZON                                                                    ■   Desjardins Financial Security
President                                                                        ■   Desjardins Trust Inc.
  Council of Representatives             OFFICERS     1
                                                                                 ■   Desjardins General Insurance Group
  Laval-Laurentides
OLIVIER LAVOIE                           ALBAN D’AMOURS*
President                                Chairman of the Board and
                                         Chief Executive Officer                 AUDITOR
  Council of Representatives
  Saguenay-Lac Saint-Jean, Charlevoix,   JEAN-GUY LANGELIER*
  Côte Nord                                                                      ■   PricewaterhouseCoopers LLP
                                         President and                               Montreal, Quebec
PIERRE LEBLANC                           Chief Operating Officer
President                                ANDRÉ BELLEFEUILLE*
  Council of Representatives             Executive Senior Vice-President
  Mauricie
                                         JACQUES DESCÔTEAUX*
JACQUELINE MONDY
                                         Senior Vice-President
President                                                                        * Member of the Management Committee
                                         Capital Markets                         1 As at December 31, 2003
  Council of Representatives
  Kamouraska, Chaudière, Appalaches      HUU TRUNG NGUYEN*
                                         Senior Vice-President
                                         Administation and International
                                                                                                          page 99
OTHER INFORMATION                     REGIONAL OFFICES                  DESJARDINS INTERNATIONAL
                                                                        SERVICE CENTERS
HEAD OFFICE                           ESTRIE
1 Complexe Desjardins                 1845 King Street West             MONTREAL
Suite 2822                            Suite 110                         300 Léo Pariseau Street




                                                                                                          Other Information
Montreal, Quebec, Canada              Sherbrooke, Quebec                Suite 1810
H5B 1B3                               J1J 2E4                           Montreal, Quebec
Telephone: (514) 281-7070             Telephone: 1 800 481-3220 [230]   H2X 4B3
Facsimile: (514) 281-7083             Telephone: (819) 821-3220 [230]   Telephone: 1 800 707-2305
Internet address:
http://www.desjardins.com/ccd         OUTAOUAIS                         QUEBEC CITY
                                      880 de la Carrière Blvd           5600 des Galeries Blvd
TORONTO OFFICE                        Suite 100                         Suite 140
365 Bay Street                        Hull, Quebec                      Quebec City, Quebec
Suite 300                             J8Y 6T5                           G2K 2H6
Toronto, Ontario, Canada              Telephone: 1 877 441-1400 [455]   Telephone: 1 866 634-5775
M5H 2V1                               Telephone: (819) 778-1400 [455]
Telephone: (416) 599-0381                                               TROIS-RIVIÈRES
Facsimile: (416) 599-5172             QUEBEC CITY                       2000 des Récollets Blvd
                                      5600 des Galeries Blvd            P.O. Box 1000
BRANCHES OUTSIDE CANADA               Suite 140                         Trois-Rivières, Quebec
                                      Quebec City, Quebec               G9A 5K3
DESJARDINS BANK                       G2K 2H6                           Telephone: (819) 374-3594 [202]
                                      Telephone: 1 866 835-1881
HALLANDALE BEACH BRANCH
1001 East Hallandale Beach Blvd       RICHELIEU-YAMASKA
Hallandale, Florida, USA 33009-4429   2175 Girouard Street West
Telephone: (954) 454-1001             Saint-Hyacinthe, Quebec
Facsimile: (954) 457-7927             J2S 3A9
                                      Telephone: 1 800 363-1003 [302]
POMPANO BEACH BRANCH
2741 East Atlantic Blvd               SAINT-LAMBERT
Pompano Beach, Florida, USA 33062     2051 Victoria Street
Telephone: (954) 785-7110             Saint-Lambert, Quebec
Facsimile: (954) 785-2115             J4S 1H1
                                      Telephone: (450) 672-4116
AFFILIATE
                                      SAGUENAY/LAC ST-JEAN
B.P. INVEST CONSULT GMBH              1700 Talbot Blvd
Peregringasse 3                       Suite 200
A1090 Vienna, Austria                 Chicoutimi, Quebec
Telephone: (131) 340-7201             G7H 7Z4
Facsimile: (131) 340-7209             Telephone: (418) 543-1718 [601]




                                                                                                          Caisse centrale
FINANCIAL GLOSSARY

ACCEPTANCES AND CUSTOMERS’ LIABILITY UNDER ACCEPTANCES                  INTEREST RATE SENSITIVITY
Short-term debt securities traded on the money market which             Earning assets and interest-bearing liabilities which mature or
Caisse centrale Desjardins guarantees on behalf of a borrower           are subject to interest rate adjustments within a specified term
and for which the borrower pays a stamping fee.                         or have an interest rate that floats in reference to a base interest
                                                                        rate.
ASSETS UNDER ADMINISTRATION
Assets owned by certain members federations and managed by              LIQUIDITIES
Caisse centrale Desjardins. These assets are not the property of        Generally, assets in cash or in securities easily convertible to cash,
Caisse centrale Desjardins and therefore are not reported in the        such as Bank of Canada deposits and securities.
consolidated balance sheet.
                                                                        MARK-TO-MARKET
BASIS POINT                                                             Valuation at market rates, as at the balance sheet date, of
Unit of measure equal to one one-hundredth of one percent.              securities, loans, deposits, subordinated debentures and
COMMITMENTS TO EXTEND CREDIT
                                                                        derivatives
Credit facilities available to customers either in the form of loans,   NET INTEREST INCOME
acceptances and other on-balance sheet financing, or through            The difference between interest income earned on assets and
off-balance sheet products such as guarantees and letters of            the interest expense related to liabilities. The ratio of net interest
credit.                                                                 income to average assets is called the “net interest margin.”
CURRENCY AND INTEREST RATE SWAPS                                        NOTIONAL AMOUNT
Transaction where two parties agree to exchange, over a specified       The amount used as a reference point to calculate payments for
period, currencies or interest flows, generally a fixed rate and a      financial instruments such as forward rate agreements or interest
floating rate, based on a notional amount.                              rate swaps. The amount is said to be “notional” since it is not
DERIVATIVE
                                                                        exchanged.
A contract whose value is derived from interest rates, foreign          OBLIGATIONS RELATED TO SECURITIES SOLD SHORT
exchange rates, or equity or commodity prices. Use of derivatives       Transactions in which the seller sells securities it does not own.
allows for the transfer, modification, or reduction of current          The seller borrows the securities in order to deliver them to the
or expected risks, including interest rate, foreign exchange            purchaser. At a later date, the seller buys identical securities in the
and other market risks. The most common types of derivatives            market to replace the borrowed securities.
include foreign exchange forward contracts, foreign currency
and interest rate futures, forward rate agreements, and foreign         OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
currency and interest rate options. Derivatives can be traded           A variety of products offered to customers which fall into two
either on organized exchanges or through over-the-counter               broad categories: (i) credit-related arrangements which provide
agreements.                                                             customers with liquidity protection, and (ii) derivatives, which
                                                                        are defined above.
FOREIGN EXCHANGE FORWARD CONTRACTS
A commitment to buy or sell a specified amount of foreign               RETURN ON AVERAGE ASSETS
currency on or before the maturity date at a set exchange rate.         The ratio of net income to average total assets during a year.

FORWARD RATE AGREEMENTS                                                 RISK WEIGHTING
A type of derivative which obliges two parties to make a cash           The process by which weighting factors are applied to the face
settlement at a future date for the difference between a                value of certain assets in order to reflect a comparable risk level.
contracted rate of interest and the current market rate, based on       Off-balance sheet instruments are also converted by adjusting the
a notional amount. Used as a hedge, a forward rate agreement            notional amounts to balance sheet (or credit) equivalents and by
protects against future movements in market interest rates.             applying appropriate risk weighting factors. Total risk-weighted
                                                                        assets constitute the denominator of the various capital ratios as
GUARANTEES AND STANDBY LETTERS OF CREDIT                                prescribed by the Bank for International Settlements (BIS).
Irrevocable commitment that payments will be made in the event
a customer cannot meet its obligations to third parties.                STOCK INDEX OPTION
                                                                        The right (as opposed to obligation) to sell (put option) or buy
HEDGE                                                                   (call option) on or before a maturity date a specified amount of a
A risk management technique used to insulate financial results          stock index at a set price (exercise price).
from market, interest rate, or foreign currency exchange risk
(exposure) arising from normal banking operations.            The       SUBORDINATED DEBENTURES
elimination or reduction of such exposures is accomplished              Unsecured liabilities issued by Caisse centrale Desjardins whose
by establishing offsetting positions.      For example, assets          repayment, in the event of liquidation, is subordinated to the
denominated in foreign currencies can be offset with liabilities        claims of depositors and certain other creditors.
in the same currencies or through the use of foreign exchange
                                                                        TRADING ACCOUNT
hedging instruments such as futures, options, or foreign exchange
                                                                        Liquidities used for arbitrage transactions on financial markets.
contracts.
                                                                        The account is presented at market value on the balance sheet.
VERSION FRANÇAISE
La version française de ce rapport annuel
peut être obtenue sur demande.




The Senior Vice-President, Finances, Strategic Alliances and International of Caisse centrale Desjardins is responsable for the production
of this Annual Report.




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