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Desjardins Annual Report 2003

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Desjardins Annual Report 2003 Powered By Docstoc
					 This
 is not
 a financial
 institution like
 the others




2003 ANNUAL REPORT
  Desjardins.
  The financial
  institution that makes
  money work for
  people. Never the
  other way around.




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
                                                                                                         391,947 MEMBERS
  5,162,662 MEMBERS                                                                                      IN NEW BRUNSWICK,
                                                                                                         ONTARIO AND MANITOBA

                                                                                                         68 CAISSES
  608 CAISSES POPULAIRES AND CAISSES D’ÉCONOMIE                                                          IN NEW BRUNSWICK,
                                                                                                         ONTARIO AND MANITOBA

                                                                                                         3 FEDERATIONS(1)                                DESJARDINS
                                                                                                         IN NEW BRUNSWICK,
                                                                                                                                                         CREDIT UNION
                                                                                                         ONTARIO AND MANITOBA


                                                FONDS
                                                DE SÉCURITÉ                                                                                 FONDATION
                                                DESJARDINS                                                                                  DESJARDINS
  DESJARDINS        CAISSE CENTRALE                                        FÉDÉRATION DES CAISSES
  BANK              DESJARDINS                                             DESJARDINS DU QUÉBEC
                                                                                                                                            SOCIÉTÉ HISTORIQUE
                                                CAPITAL                                                                                     ALPHONSE-
                                                DESJARDINS                                                                                  DESJARDINS

                                                                                                                  DÉVELOPPEMENT
                                                                                                                  INTERNATIONAL
                                                                                                                  DESJARDINS



                                                      SIX DESJARDINS
 DESJARDINS                DESJARDINS                                               DESJARDINS              SOCIÉTÉ
                                                      REGIONAL
 SECURITIES                VENTURE                                                  FINANCIAL               IMMOBILIÈRE
                                                      DEVELOPMENT
                           CAPITAL(2)                                               CORPORATION             PLACE DESJARDINS
                                                      FUNDS
 DISNAT


    DESJARDINS
                                                                                                              PLACE                    DESJARDINS
    SECURITIES
                                                                                                              DESJARDINS               LEASING
    INTERNATIONAL




                     DESJARDINS                                                                                    DESJARDINS
                                                                                    DESJARDINS                                                       DESJARDINS
                     GENERAL                                                                                       SPECIALIZED
                                                                                    FINANCIAL                                                        ASSET
                     INSURANCE                                                                                     FINANCIAL SERVICES
                                                                                    SECURITY                                                         MANAGEMENT
                     GROUP                                                                                         MANAGEMENT



THE PERSONAL    CERTAS DIRECT   DESJARDINS          THE PERSONAL                                                                              DESJARDINS
                                                                            SFL               SIGMA                  DESJARDINS                                  GESTION FIERA
INSURANCE       INSURANCE       GENERAL             GENERAL                                                                                   GLOBAL ASSET
                                                                            MANAGEMENT (*)    ASSISTEL               TRUST                                       CAPITAL (*)
COMPANY (*)     COMPANY (*)     INSURANCE (*)       INSURANCE (*)                                                                             MANAGEMENT




                                                                                      OPTIFUNDS
                                                                    OPTIINSURANCE
                                                                                      INVESTMENTS


                                                                                                                                  December 31, 2003

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

(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 accor-
    dance 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.
BUSINESS SEGMENTS

FINANCIAL INTERMEDIATION

The financial intermediation segment consists of the Desjardins caisse network, its support organization, the Fédération des caisses
Desjardins du Québec, and the Fédération’s business units: Desjardins Card Services, Desjardins Electronic Access and Payment Services,
Desjardins Point-of-Sale Financing Services, and Desjardins Payroll and Human Resources Services. This segment also includes Caisse centrale
Desjardins, Fonds de sécurité Desjardins and, as of January 1, 2004, the Fédération des caisses populaires de l’Ontario ■ The financial inter-
mediation leader in Québec, with market shares at 43.6% of personal savings, 37.7% of residential mortgages, 41.8% of farm loans, and
26.9% of consumer lending ■ Fully integrated service offering for individuals and businesses ■ 1,506 points of service in Québec (608 caisses and
898 service centres) ■ 57 Corporate Financial Centres operating throughout Québec ■ Leader in e-commerce: most visited financial site in
Québec and third most visited in Canada ■ Largest credit card issuer in Québec, with 2.5 million cardholders (VISA Desjardins).

desjardins.com


INSURANCE, TRUST SERVICES AND ASSET MANAGEMENT

Insurance activities, trust services and asset management activities are grouped under the operations of their holding company, Desjardins
Financial Corporation. Desjardins Financial Corporation also oversees the development of these entities and their continued harmonization
with other Desjardins components.

desjardinsfinancialcorporation.com

LIFE AND HEALTH INSURANCE – DESJARDINS FINANCIAL SECURITY (DFS) ■ Top life and health insurer in Québec and fifth in Canada ■ 5 million
clients ■ Extensive range of life and health insurance and retirement-savings products distributed through a variety of networks, includ-
ing Desjardins caisses in Québec and DFS’s affiliates (SFL Management and Sigma Assistel) ■ Head office in Lévis and presence in major
Canadian cities, including St. John’s, Halifax, Québec City, Montréal, Ottawa, Toronto, Winnipeg, Regina, Calgary and Vancouver.

desjardinsfinancialsecurity.com

GENERAL INSURANCE – DESJARDINS GENERAL INSURANCE GROUP         ■ Leading insurer in Québec owing to 37% in direct distribution to individual

consumers, third largest in the groups market in Canada under the banner of The Personal, and seventh largest in Canada owing to
1.6 million in-force policies ■ Centres in Lévis, Montréal, Ottawa, Mississauga and Calgary and agents throughout the Desjardins caisse net-
work in Québec.

desjardinsgeneralinsurance.com thepersonal.com certas.ca

TRUST SERVICES –DESJARDINS SPECIALIZED FINANCIAL SERVICES MANAGEMENT    ■ Largest trust company in Québec (Desjardins Trust) ■ Provides trust

services to individuals and businesses, private management services and group savings plans ■ One of the largest investment fund manufac-
turers in Québec ■ Leader in securities administration and custody with 55% of the Québec market.

fiduciedesjardins.com

ASSET MANAGEMENT – DESJARDINS ASSET MANAGEMENT ■ $2.5 billion in assets under management that primarily comes from Desjardins
Financial Corporation’s equity and that of its subsidiaries and certain Desjardins Group components ■ Equity portfolio management,
real estate and securities investment management, mortgage financing and business financing ■ 30% shareholder in Fiera Capital, a firm
that specializes in institutional fund management ■ Offices in Montréal, Québec City, Toronto and Vancouver.

desjardinsassetmanagement.com


SECURITIES, VENTURE CAPITAL

The third segment consists primarily of securities brokerage activities and venture capital investment.

SECURITIES – DESJARDINS SECURITIES ■ Full-service brokerage services for individuals and discount brokerage services through its Disnat divi-
sion ■ Brokerage services for businesses and institutions ■ 32 full-service branches in Québec and four in Ontario ■ A Vancouver branch tai-
lored to institutional clients ■ More than 1,000 employees, including some 300 investment advisors ■ Approximately $14 billion under
administration.

ds.ca dsia.ca disnat.com disnatdirect.com

VENTURE CAPITAL – DESJARDINS VENTURE CAPITAL    ■ Desjardins Group’s venture capital manager ■ Manages assets for seven Desjardins private

funds (Desjardins Venture Capital, L.P. and six Desjardins Regional Investment Funds) and for Capital régional et coopératif Desjardins, a
public fund created by Desjardins Group in accordance with legislation adopted by Québec’s National Assembly in 2001 and whose author-
ized assets are projected to reach $1.4 billion by 2011 ■ 14 business locations throughout Québec ■ Partner to 156 businesses and cooper-
atives, thereby helping to create or protect nearly 13,000 jobs.

dcrdesjardins.com
HEAD OFFICE

Fédération des caisses Desjardins du Québec
100, avenue des Commandeurs
Lévis (Québec) G6V 7N5
Canada
Telephone: (418) 835-8444

VERSION FRANÇAISE
La version française de ce Rapport annuel
peut être obtenue sur demande.




The Senior Vice-President, Institutional Affairs and Executive Assistant to the President of Desjardins Group (Communications and Public Affairs)
and the Senior Vice-President, Finance and Administration (Financial Information and Analysis) of the Fédération des caisses Desjardins du
Québec are responsible for the production of this Annual Report.


Graphic Design Lg2d   Production La souris masquée   Photoengraving and Printing J.B. Deschamps                              PRINTED IN CANADA
www.desjardins.com
1 800 CAISSES
CONTRIBUTING TO THE PROSPERITY
OF INDIVIDUALS AND COMMUNITIES

Desjardins is unlike other financial institutions. Desjardins is an integrated cooperative financial group
whose mission is to contribute to the economic and social well-being of individuals and communities
by teaching democracy, economics, solidarity and individual and collective responsibility, especially to
its 5,162,662 members, 8,127 elected officers and 38,120 employees.

We are the most accessible financial institution in Québec thanks to our vast distribution network
of caisses and their Corporate Financial Centres (CFCs), the business units of the Fédération des
caisses Desjardins du Québec, our subsidiary branches and our electronic networks. Outside
Québec, we are continuously strengthening the financial services cooperative movement through
the Fédérations des caisses populaires of Ontario, Manitoba and New Brunswick, as well as through
the Desjardins Credit Union, our subsidiaries and our many partners. Also, with the Desjardins Bank
operating in Florida, we are open for business to all our members, individuals and businesses
alike, who vacation or conduct business in this U.S. state. Internationally, through the efforts of
Développement international Desjardins, we have distinguished ourselves by way of our commitment
to international cooperation with 2.5 million people living in approximately 20 countries spanning
four continents.

Our members and clients, individuals and businesses alike, place their trust in our integrated service
offering, which is tailored to meet all their wealth management needs and gives shape to their
dreams and projects, whatever they may be; furthermore, they can count on building lasting
business relationships of trust with our expert advisors. Having pioneered the cross-pillar integration
approach in Canada, Desjardins has over 1,000 financial planners, 1,200 account managers,
including 967 working in the CFCs and many advisors in its subsidiaries and business units. Our
advisory force is the largest in Québec's financial services industry.

By remaining focused on delivering consistent performance and by satisfying the highest industry
standards in terms of management and corporate governance, we plan on earning a reputation as
the world’s best cooperative financial institution, both in terms of satisfying client and member
needs and developing new business.

To achieve this, we continuously work in line with our strategic orientations: strengthening our
cooperative difference; becoming a leader in customer consideration and in the quality of our business
relationship with members; maximizing performance and synergies among our distribution networks;
becoming the preferred partner of SMBs and the preferred wealth management institution for
Quebecers; ensuring profitable business development in new markets; and maintaining healthy
profitability, maximizing productivity and optimizing our development capital.

Our dominant position in Québec, our continued growth throughout Canada, our excellent financial
results, our credit ratings that rank among the best in our sector, and our international reputation as
a top financial services cooperative: all of these are not only keys to – but the rewards of – our success.
HIGHLIGHTS

FINANCIAL POSITION – BALANCE SHEET AND OFF-BALANCE SHEET(1)

As at December 31
(in millions of $ and as %)

                                                                 % change
                                                                 2003-2002               2003          2002               2001
      Total assets                                                       10.9 %      $ 94,652      $ 85,343          $ 80,493
      Average assets                                                      7.5          89,708        83,449            78,770
      Liquid assets                                                      14.5          20,747        18,122            17,357
      Loans                                                              10.0          67,502        61,369            57,477
      Deposits and subordinated debentures                               11.5          71,498        64,109            61,009
      Equity                                                              9.2           6,198         5,676             5,205
      Assets under administration                                        18.3         172,362       145,717           147,609
      Assets under management                                           (30.5)          9,547        13,737            14,484
      Tier 1 capital ratio (as per BIS standards)                           –           13.01 %       12.78 %           12.95 %

(1) Excluding caisses and federations in Ontario, Manitoba and New Brunswick.




OPERATING RESULTS(1)

For the year ended December 31
(in millions of $ and as a percentage)

                                                                 % change
                                                                 2003-2002               2003          2002               2001
      Total revenues                                                     12.0 %      $   7,712     $   6,888         $    6,315
      Provisions for loan losses                                        (33.0)              73           109                237
      Non-interest expenses                                              17.5            6,492         5,523              5,277
      Surplus earnings before patronage
        allocations to members                                           (3.8)            816           848                 588
      Patronage allocations to members                                  (10.2)            440           490                 269
      Surplus earnings before patronage allocations
        to members as a percentage of average assets                            –         0.91 %        1.02 %             0.75 %
      Return on average equity                                                  –         13.8          15.6               12.0

(1) Excluding caisses and federations in Ontario, Manitoba and New Brunswick.




CREDIT RATINGS

Desjardins Group enjoys excellent credit ratings.

                                                                                    Short term         Medium and long term
      Standard & Poor’s                                                                    A-1 +                          AA -
      Moody’s                                                                              P-1                           Aa3
      Dominion Bond Rating Service                                                       R-1M                             AA (low)
                                                                                                                                              page 3
                                                                                                                                              Highlights
SURPLUS EARNINGS BEFORE                                     PATRONAGE ALLOCATIONS                    TOTAL ASSETS OF
PATRONAGE ALLOCATIONS                                       PAID OUT TO MEMBERS                      DESJARDINS GROUP
TO MEMBERS


1,000                                                  20   600                             100      100                                 12




                                                                                                                                  95
                            848




                                                                                     86




                                                                                                                           85
                                                       18
                                         816




                                                                              79




                                                                                                                80
  800                                                  16   500                             80        80                                 10




                                                                                                                                  10.9
                                                                      71
                                                       14




                                                                              490
                            15.6
                12.0 588




                                                            400                                                                          8




                                                                                     440
                                         13.8




  600                                                  12                                   60        60
                                                       10   300                                                                          6




                                                                                                                           6.0
  400                                                  8                                    40        40




                                                                                                                5.7
                                                                      269
                                                       6    200                                                                          4
  200                                                  4    100                             20        20                                 2
                                                       2
      0                                                0      0                             0          0                                 0
                                                                      2001

                                                                              2002

                                                                                     2003
                2001

                            2002

                                         2003




                                                                                                               2001

                                                                                                                           2002

                                                                                                                                  2003
          Millions of $                                           Millions of $                            Billions of $

          Return on average equity (%)                            Percentage of caisses paying out         Growth (%)
                                                                  patronage allocations in Québec




RETURN TO COMMUNITY
(in millions of $)
                           848



                                           816




900
800
700
          588




                                   527




600
                                                   483




500
400
                300




300
200
100
  0
            2001


                            2002


                                                2003




       Surplus earnings before patronage
       allocations to members

       Return to community in patronage allocations,
       sponsorships, donations and scholarships
                                                                                                                                              Desjardins
ACHIEVEMENTS IN LINE WITH OUR
2003-2005 STRATEGIC PLAN

OUR COOPERATIVE DIFFERENCE
We intend to strengthen our cooperative difference through greater member involvement,
our commitment to the community, and our commercial and management practices.
■ During the 18th Congress of caisse officers on Desjardins Cooperative Renewal, we adopted
  a promising youth program as well as strategic orientations regarding caisse objectives,
  caisse commercial practices, and the financial and democratic contributions of members
■ Launched an advertising campaign that clearly distinguishes Desjardins as an integrated
  cooperative financial group and promotes the many advantages of the cooperative approach
■ Paid out nearly half a billion dollars to caisse members and the community ($440 million
  in patronage allocations, $43 million in sponsorships, donations and bursaries)
■ Continued to assert our cooperative difference through community involvement (specific
  achievements are described in the 2003 Community Involvement Report, inserted on
  page 17 of this report)

QUALITY BUSINESS RELATIONSHIPS
We aim to become leaders at building business relationships founded on consideration
and quality.
■ As part of the 2002-2005 Human Resources Plan, made major investments towards
  adjusting salaries, redesigning group insurance plans, and training, recruiting, and
  motivating employees
■ Launched a “motivational offensive”, an initiative in which 32,000 employees and officers
  will revitalize their motivation to deliver quality service
■ Invested $6 million over three years to train officers and managers on Desjardins
  awareness and corporate governance



               EXPANDING INTO NEW MARKETS
               We will rely on profitable business development outside Québec to increase revenues,
               diversify market risk, extend our range of services, and further the financial services
               cooperative movement in Canada.
               ■ Adopted the Desjardins umbrella brand in every Desjardins Group component in order
                 to further establish Canada-wide visibility and eminence
               ■ Renewed the partnership with the Fédération des caisses populaires de l’Ontario and
                 signed a new affiliation protocol, which came into effect on January 1, 2004
               ■ Invested $148 million to enable Desjardins Credit Union Inc. to acquire the Province of
                 Ontario Savings Office (POSO) and subsequently offer Desjardins products and services
                 through POSO’s network of 25 branches and three agencies in Ontario
               ■ Acquired Northwest Mutual Funds Inc. (by way of Desjardins Trust), an established
                 corporation whose eight funds have shown some of the strongest growth in Canada
               ■ Opened a third Desjardins Securities full-service brokerage branch in Ontario and acquired
                 the discount brokerage Internet division of SwiftTrade, which is active in Ontario and
                 British Columbia
               ■ Deployed the Community VISA Retail Financing program across Canada among merchants
                 in the Cantrex and RONA groups
               ■ Continued to enjoy growth in life and health insurance and general insurance activities
                 in the groups market across Canada
               ■ Opened five Laurentian Financial Services centres (Services Financiers SFL) in Ontario,
                 Nova Scotia and British Columbia
               ■ Obtained a commercial charter for the Desjardins Bank in Florida
                                                                                                             page 5
GUIDING MEMBERS AND CLIENTS IN THEIR ASSET MANAGEMENT STRATEGIES
We aim to become Québec’s primary wealth management provider for individuals.
■Launched a service offer that better satisfies the diverse needs of both depositors and
 investors




                                                                                                             Highlights
■Completely overhauled Desjardins Funds’ range of funds in order to give members a
 wider selection of products, management approaches, and national and international
 fund managers
■Achieved even greater cooperation between caisses and Desjardins Securities such that
 markets can be developed using a more concerted approach
■Strategically repositioned Desjardins Financial Corporation’s investment segment in
 order to maximize returns and increase the competitiveness of products offered by its
 subsidiaries, the result of which was the creation of Desjardins Asset Management and
 the conclusion of a partnership agreement with Fiera Capital Management
■Continued attracting future generations of membership by again offering Chrome to
 adolescent members and by launching “D Capital Solutions”, a program tailored to the
 needs of students registered in various university programs



               OUR BUSINESS PARTNERSHIPS
               We aim to become the preferred partner of SMBs and a dynamic partner of large corporations.
               ■In conjunction with Caisse centrale Desjardins and other subsidiaries, we developed
                a service offer better tailored to businesses by setting up corporate financial centres
               ■Opened seven offices (bringing the number of Desjardins Venture Capital places of business
                in Québec to 14) to become more accessible to entrepreneurs throughout Québec and
                to complete the service offerings of caisses and corporate financial centres

               PRODUCT AND SERVICE ACCESSIBILITY
               We intend to remain the most accessible financial institution while continuing to maximize
               the performance and synergy of our distribution networks.
               ■ Continued transforming Québec’s physical caisse network in order to continue adapting
                 to the consumer habits and commuting patterns of members
               ■ Opened the West Island Financial Centre and a Desjardins Securities branch in Montréal’s
                 Westmount Square to attract even more English-speaking and allophone clients
               ■ Revamped www.desjardins.com and its transactional site and achieved a consistent,
                 uniform design among subsidiary and business unit sites

               ENSURING CONSISTENT, RELIABLE PERFORMANCE
               We aim to maintain healthy profitability and strive to maximize productivity and optimize
               growth capital in order to continuously sharpen our competitive edge and ensure Desjardins
               Group’s longevity.
               ■ Enjoyed 10.9% growth in assets and surplus earnings, having exceeded $800 million for
                 a second consecutive year
               ■ Continued efforts to ensure that, by 2006, Desjardins Group has incorporated the
                 integrated risk management best practices prescribed in the new Basel Accord
               ■ Adopted a Group Capitalization Plan that enables us to ensure sound and prudent capital
                 management as well as the leverage needed for development purposes
               ■ Set up a new capital supply program on the Canadian market for an amount of $2 billion
                 (initiative of Caisse centrale Desjardins)
               ■ Concluded a major bond issue for an amount of 500 million euros in European markets
                                                                                                             Desjardins
A financial
institution committed
to accompanying
members and clients
through all the stages
of their financial life.
Desjardins.
                                                                                  page 7
                                                                                  Contents
      CONTENTS



8     MESSAGE FROM THE PRESIDENT AND CEO

12    BOARD OF DIRECTORS

14    REVIEW OF ACTIVITIES

16       A financial institution that takes pride in its cooperative difference

17       2003 Community Involvement Report

19       A financial institution where people make the difference

25       A financial institution and a preferred business partner

30       A financial institution that supports each member in their
         asset management

34       Still the most accessible of all financial institutions

39       A financial institution with a presence across Canada

43       International Cooperation

45    FINANCIAL REVIEW

136   CORPORATE GOVERNANCE



                                                                                  Desjardins
ALBAN D’AMOURS
Desjardins Group President
and Chief Executive Officer




                  DESJARDINS GROUP IS COMMITTED TO DELIVERING CONSISTENT, RELIABLE
                  PERFORMANCE YEAR AFTER YEAR, AND OUR 2003 RETURNS CLEARLY REVEAL OUR
                  DEDICATION TO THIS GOAL. THIS PAST YEAR’S ACHIEVEMENTS, BOTH AS A FINANCIAL
                  INSTITUTION AND AS A COOPERATIVE, ARE TESTAMENT TO THE CONSISTENT EFFORT
                  MADE THROUGHOUT DESJARDINS. THROUGH SUSTAINED EFFORTS, THE CAISSES
                  AND THE GROUP HAVE WORKED TO RETAIN THE FINANCIAL FLEXIBILITY THEY
                  REQUIRE TO ENSURE THEIR CONTINUED DEVELOPMENT AND TO CONTROL THE
                  QUALITY AND DIVERSITY OF THE INITIATIVES THEY TAKE TO SUPPORT THEIR
                  COMMUNITIES. THEIR UNPARALLELED SERVICE OFFER AND THEIR SUBSTANTIAL
                  CONTRIBUTIONS TO THEIR COMMUNITIES MAKE OUR CAISSES A FINANCIAL GROUP
                  UNLIKE ANY OTHER IN QUÉBEC OR ELSEWHERE IN CANADA.
                                                                                                                 page 9
SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS EXCEEDED
$800 MILLION FOR A SECOND CONSECUTIVE YEAR
With surplus earnings before patronage allocations of $816 million, Desjardins Group
maintained its solid financial performance in 2003. The 3.8% decrease from 2002’s $848 million




                                                                                                                 Message from the President and CEO
was mainly attributable to major investments aimed at improving employee remuneration
and to an operating loss experienced by our venture capital subsidiary, which could not
escape the trend seen in its industry.

By contrast, strong growth was seen in deposit and lending activities at caisses, and Desjardins
Financial Corporation’s consolidated net earnings grew to $178 million, up 29% over 2002.
Further testament to Desjardins Group’s financial strength is its capital ratio of 13.3% as at
December 31, 2003, which, once again, stands as one of the best ratios in the industry.

Again in 2003, Desjardins Group’s financial performance proved advantageous to members
as well as to local and regional communities. Given the sharp growth in Desjardins Group’s
asset base, which demands intensified efforts in terms of capitalization and sound
management of the surplus earnings from caisses, the $440 million in patronage allocations
paid out to members compares well with the $490 million paid out in 2002.

As with every year, Desjardins Group used 2003 to actively promote the full extent of the
advantages of the cooperative formula, both for individuals and communities, by paying
out $43 million in sponsorships, donations and bursaries.



                DESJARDINS COOPERATIVE RENEWAL:
                FROM REFLECTION TO ACTION
                One of last year’s highlights was the 18th Congress of caisses Desjardins officers, which
                brought together some 2,200 delegates. Together, they laid out the strategic orientations
                that would give shape to the Desjardins Cooperative Renewal and that would address the
                expectations that emanated from the local sessions held by caisses in fall 2002.

                In accordance with the since-adopted action plan, scheduled for completion in 2006,
                the caisses and the Fédération will work towards modernizing their associative practices,
                their consultation approaches and their democratic mechanisms. They are also tasked
                with encouraging members to become more involved, not only as clients but also as
                contributors, in the life of their financial services cooperative.

                The efforts also address the manner in which individual caisses demonstrate their
                commitment to the community and how they achieve their mission, which is to provide
                education on the cooperative system, savings and financial matters as well as on the
                commercial and management practices unique to caisses. More than ever, the cooperative
                identity enjoyed by caisses will encompass the richness and vitality that members have
                come to expect.

                Our 18th Congress also saw the launching of a large-scale project – “Desjardins Youth
                Focus” – which will translate into a momentous and unprecedented commitment from
                Desjardins Group towards our youth. Extensive resources and programs, each providing
                ample opportunities, will be created to help our youth make their mark within Desjardins
                and in society.

                All of these forward-looking initiatives will draw their success from the spirit of innovation
                of everyone currently working within Desjardins Group.
                                                                                                                 Desjardins
                GREATER SOLIDARITY IN OUR QUEST FOR EXCELLENCE
                Efforts to reorganize the new Fédération in recent years have continued through the
                development of a culture of partnership among the caisses, the organization that supports
                them, and the Group’s subsidiaries. This culture of partnership, based on mutual respect
                and trust, must afford caisses the room to manoeuvre they require to remain centres of
                initiative and creativity.

                The scheduled 2004 start of operations of the new Desjardins Cooperative Institute should
                help caisse, subsidiary and Fédération managers and officers to adhere to a common
                vision of the challenges ahead and to the principles of governance and management
                likely to further Desjardins’ quest for excellence.

                Also, our extensive human resources development plan, which addresses all aspects of
                work life, has helped to create a motivational work environment that encourages every
                employee to achieve their peak performance when serving members. This plan is backed
                by a quality-awareness and quality-motivation program designed to foster continuous
                and profitable business relations with all caisse members.

                By ensuring client and member satisfaction with our services, by keeping employees and
                officers satisfied and motivated, and by continuously striving to enhance productivity, we
                intend on further elevating our consistent, reliable performance.



GREATER OPERATIONAL EFFICIENCY TO ACHIEVE SUSTAINED BUSINESS DEVELOPMENT
Our business development potential is contingent on large-scale projects that have major
growth potential in the years to come. To best tap this potential, the Group has created
an enterprise line of business, enabling it to significantly enhance the tools used by
account managers as well as the expertise on which they rely when offering services to
entrepreneurs and businesses. The Group’s substantial investment to this business line will
strengthen our already dominant market position with respect to business services and
credit and will help us to become, in line with our objective, the preferred financial
institution among small and medium-sized businesses in Québec.

In addition, through the increasingly comprehensive integration of caisse and subsidiary
services, accelerated by the signing of business pacts, the Group can now make daily
strides towards our vision of a caisse for 2005. The expertise of our specialists from all
areas of finance has now been made available to the professional management of our
members’ financial assets. Furthermore, ongoing intensive training and skills upgrades of
our personnel in 2003 as well as a major reorganization of our securities, investment funds
and asset management offers are also significant measures that have helped enhance
Desjardins’ overall performance in wealth management.

2003 was also a year of great activity with respect to Desjardins’ Canada-wide development.
Thanks to a partnership-strengthening initiative, the caisses populaires of Ontario now
have, as of January 1, 2004, a stronger position within the Group in terms of policy,
strategy, and operations, enabling them to provide their members with even better
services in the future.

Furthermore, the Group has continued to pursue its expansion in Ontario. By providing
financial and technical support to Desjardins Credit Union, it is contributing to the growth
of a distribution network in many of that province’s cities, notably Toronto.

These expansion initiatives, which have evolved significantly in 2003, are complementary
to the efforts made by our subsidiaries, which have noticeably established their presence
in Canada in recent years. These subsidiaries are also helping to strengthen the financial
services cooperative movement in Canada by positioning the Group, when compared to
traditional financial institutions, as an increasingly convincing and accessible alternative.
                                                                                                                                         page 11
MANY CONTRIBUTORS TO OUR GREAT AMBITIONS
Our 2003 returns and our ongoing work towards future successes are again testament to the
unwavering commitment shared by caisse officers, employees, managers and all components
of our movement. Such returns also reflect our commitment to serving members and clients




                                                                                                                                         Message from the President and CEO
with the care and consideration they deserve as well as the professionalism required for
effective wealth management. As such, I extend my sincerest appreciation to everyone for their
commitment to our objectives. It is owing to their support and dedication that I commence,
with confidence and determination, a second term as president of Desjardins Group.



                   My appreciation is also extended to our Councils of Representatives and our Board of
                   Directors for their unfailing cooperation during every moment of this year’s ambitious
                   projects and impressive accomplishments. Desjardins’ next generations of members and
                   clients will long benefit from the vision shared and acted upon by today’s officers at a
                   time that requires a proactive approach to change.

                   I must thank Mr. Bruno Riverin, who retired after a brilliant career with Desjardins. There
                   is no doubt that Mr. Luc Chabot, who succeeds him as President and Chief Operating
                   Officer of Desjardins Venture Capital, will be a new driving force in the expansion of our
                   subsidiary and of all the companies in which it is involved.

                   Everyone involved with Desjardins should be proud of their contributions to an organization
                   determined to earn recognition as the best integrated cooperative financial group in the world.




                   ALBAN D’AMOURS
                   Desjardins Group President
                   and Chief Executive Officer




From left to right: Jean-Guy Langelier, President and Chief Operating Officer, Caisse centrale Desjardins; Jean-Pierre De Montigny,
President and Chief Operating Officer, Desjardins Securities; Alban D’Amours, President and Chief Executive Officer, Desjardins Group;
Monique F. Leroux, President of Desjardins Financial Corporation and Chief Executive Officer of the subsidiaries; Bertrand Laferrière,
President and Chief Operating Officer, Fédération des caisses Desjardins du Québec; Luc Chabot, President and Chief Operating Officer,
                                                                                                                                         Desjardins




Desjardins Venture Capital.
01                                    02                                            03




07                                          08                                                                09




13                                   14                                                                  15




19                                                20                                                    21




     BOARD OF DIRECTORS


     01   ALBAN D’AMOURS*                  07   DANIEL MERCIER**                          14   JACQUELINE MONDY**
     Desjardins Group President            President, CORE Centre-du-Québec               President, CORE Kamouraska–
     and Chief Executive Officer,          André Jean : Term completed February 4, 2003   Chaudière-Appalaches
     Chairman of the Board
                                           08   THOMAS BLAIS**                            15   CLÉMENT SAMSON**
     02   RAYMOND GAGNÉ**                  President, CORE Caisses populaires             President, CORE
     President, CORE Bas-Saint-Laurent     de l’Ontario                                   Québec-Ouest–Rive-Sud
     et Gaspésie–Îles-de-la-Madeleine
                                           09   ANDRÉ SHATSKOFF*                          16   RICHARD SARRAZIN
     03   FRANCES CARRIER                  Caisse General Manager,                        Caisse General Manager,
     Caisse General Manager,               CORE Lanaudière                                CORE Québec-Ouest–Rive-Sud
     CORE Richelieu-Yamaska                End of term: March 26, 2004
     End of term: February 7, 2004                                                        17   PAUL-ANDRÉ LAVOIE
                                           10   PIERRE LEBLANC**                          Vice-President and
     04   ANDRÉE LAFORTUNE**               President, CORE Mauricie                       Managing Director,
     President,                                                                           CORE Bas-Saint-Laurent et
     CORE Ouest de Montréal                11   MADELEINE LAPIERRE*/**                    Gaspésie–Îles-de-la-Madeleine
                                           President, CORE Richelieu-Yamaska              End of term: February 7, 2004
     05   ANDRÉ LACHAPELLE**               Vice-Chair of the Board                        New Managing Director: Norman Grant
     President, CORE Lanaudière
                                           12   OLIVIER LAVOIE*/**                        18   PIERRE TARDIF*/**
     06   LOUISE CHARBONNEAU               President, CORE Saguenay–                      President, CORE Rive-Sud de
     Caisse General Manager,               Lac Saint-Jean–Charlevoix–Côte-Nord            Montréal, Board Secretary
     CORE Est de Montréal
                                           13   JEAN-GUY BUREAU**
                                           President, CORE Group Caisses
                                                                                                               page 13
                                               04                                             05               06




                  10                                              11                                           12




                              16                                              17                               18




                                    22                                               23                        24




19   JACQUES BARIL**                 22   SYLVIE ST-PIERRE BABIN*/**   Also sitting as observers:
President, CORE Est de Montréal      President, CORE
                                                                       NORMAND COLLET
                                     Abitibi-Témiscamingue–Nord
20   BENOÎT TURCOTTE                 et Ouest du Québec                Fédération des caisses
Vice-President and                                                     populaires du Manitoba
Managing Director, CORE              23   ANDRÉ GAGNÉ*/**
                                                                       GILLES LEPAGE
Abitibi-Témiscamingue–Nord           President, CORE Québec-Est
et Ouest du Québec                                                     Fédération des caisses
                                     24   DENIS PARÉ**                 populaires acadiennes
21   MARCEL LAUZON**                 President, CORE Estrie            New representative as of April 2004:
President, CORE Laval-Laurentides                                      Camille H. Thériault

                                                                       *  Members of the Executive Committee
                                                                       ** Unrelated directors




CORE stands for Council of Representatives The members of the Board of Directors of the Fédération
                                                    ■


des caisses Desjardins du Québec are also directors of Desjardins Financial Corporation, Caisse centrale
Desjardins and Desjardins Venture Capital. The Board of Directors is made up of 22 members, including
21 who are elected by the Regional General Meeting, Group Caisses General Meeting or Fédération
General Meeting. The following are members of the Board: the 17 CORE Presidents, the four caisse General
Managers elected by the General Meeting and the President and Chief Executive Officer of Desjardins Group.
For the Bas-Saint-Laurent–Gaspésie–Îles-de-la-Madeleine and Abitibi-Témiscamingue–Nord et Ouest du
Québec regions, the CORE Vice-President, who is also a Managing Director, sits on the Board but does not
have the right to vote. Representatives of the New Brunswick and Manitoba federations sit on the Board
as Observers.
                                                                                                               Desjardins
A financial
institution that sees
each person’s wealth
and ambitions as
investments towards
an even richer future.
Desjardins.
                                                              page 15
                                                              Review of Activities
Going beyond the material,
Transcending appearances, grasping what is real.
Because more important than assets are people.
People with aspirations, desires.
People entitled to fulfilment and well-being.

Desjardins exists to serve.
To embrace values.
To make money work for people.
To give shape to their dreams – both now and in the future.




                                                              Desjardins
A FINANCIAL INSTITUTION THAT TAKES
PRIDE IN ITS COOPERATIVE DIFFERENCE


TODAY, MORE THAN EVER BEFORE, DESJARDINS BELIEVES IN THE BENEFITS OF
PROJECTING ITS STRONG COOPERATIVE IDENTITY. BY FOCUSING ON OUR COOPERATIVE
DIFFERENCE, AND ESPECIALLY WHAT IT REPRESENTS TO OUR FIVE MILLION MEMBERS
AND CLIENTS AND THE COMMUNITY AS A WHOLE, OUR NEW FALL 2003 ADVERTISING
CAMPAIGN REAFFIRMS OUR UNIQUE CHARACTER. THIS DESIRE TO RENEW AND
STRENGTHEN OUR DIFFERENCE AND TO EXPRESS THE FULL MEANING OF THE CAISSE
                               ,
MISSION STEMS FROM A DEEP SHARED CONVICTION RESULTING FROM THE
COLLECTIVE REFLECTION OF SOME 25,000 MEMBERS, OFFICERS AND EMPLOYEES OVER
THE LAST TWO YEARS.



                         This reflection culminated in March 2003 with our Congress of caisse officers,
                         where close to 2,200 caisse representatives adopted orientations that will
                         enable us to give shape to our cooperative renewal over the coming years.

                         Since then, each caisse has worked towards implementing an action plan
                         in its community for the benefit of its members, to revitalize the practices
                         that define it as a cooperative, and to carve out a true place for young
                         people as members in their own right.

                         We are all the more driven to strengthen our cooperative difference since
                         we have once again proven in 2003 that performance and cooperation go
                         hand in hand. Our exceptional financial results for a second consecutive year
                         and the initiatives that we have been able to take as a result clearly
                         illustrate that cooperation is a winning formula for each and every caisse
                         member and for the entire community.

                         In 2003, caisse members shared $440 million in patronage allocations, and
                         $43 million was given back to the community in the form of sponsorships,
                         donations, and scholarships, making Desjardins one of the most generous
                         companies in Canada in terms of sponsorships and donations, most
                         evidently in Québec. We are therefore proud to provide you with our
                         “2003 Community Involvement Report”, inserted on page 17 of this annual
                         report. By perusing the brochure you will see that we put money at the
                         service of people. Not the other way around. Ever.
Desjardins   Review of Activities   page 17
                                                                  page 19
                                                                  Review of Activities
A FINANCIAL INSTITUTION WHERE
PEOPLE MAKE THE DIFFERENCE


AS QUÉBEC’S PRIMARY PRIVATE EMPLOYER, WE ARE COMMITTED
TO ATTRACTING AND RETAINING PEOPLE WHO POSSESS THE
SKILLS, MOTIVATION AND DESIRE TO CONSTANTLY GO THAT
EXTRA DISTANCE TO ACHIEVE EXCELLENCE. THE CONSISTENT,
RELIABLE PERFORMANCE TO WHICH WE ASPIRE ESSENTIALLY
RELIES ON THE CONTRIBUTIONS OF HUMAN RESOURCES WHO
CAN CREATE VALUE FOR OUR MEMBERS AND CLIENTS.

To ensure that our employees project Desjardins’ values in all
interactions with members and clients and that they acquire the
top-level skills to which members and clients are entitled, we
continued to carry out our 2002-2005 Human Resources Plan
throughout 2003.




                                                                  Desjardins
DEVELOPING OUR PEOPLE
Given the ever-evolving nature of both the member needs and the financial services that
we offer, the issue of skills development is fundamental. As such, in 2003, we invested
over 5% of our payroll in training. The effectiveness of our training programs, which
contribute to improving our performance, is measured based on the three dimensions of
our quality triangle: member and client satisfaction, employee and officer satisfaction and
motivation, and productivity and performance for member-owners.

With respect to professional development, we rolled out our Quality Train program,
which no fewer than 32,000 of our employees and officers will hop aboard in the future.
As at December 31, 2003, over 12,000 general managers, managers, employees and
officers had completed the first workshop of this extensive project designed to generate
greater motivation for service quality. Participant satisfaction with these training sessions,
which are continuing in 2004, has exceeded 90%.

Our technical training centres attracted over 5,000 participants to training sessions sure
to contribute to the growth of our individual and enterprise business lines. Many of
them took courses on the management practices required for our development. Several
caisses opted for our personalized deployment offer, which enables them to choose the
means of training delivery. Our personalized coaching and training program also greatly
exceeded objectives.



                                We also made major changes to our skills management system, which will
                                enable employees to access distance training courses. In addition to making
                                training management easier throughout the network, the distance training
                                option will significantly lower travel costs. It will also help attain the
                                Group’s future goals with reference to the Kyoto Protocol.

                                Given the scope of the prevailing changes in the financial services industry,
                                we have stepped up efforts to set up the Desjardins Cooperative Institute.
                                By promoting and sharing Desjardins’ values, vision, direction and strategies,
                                the Desjardins Cooperative Institute will serve to bring officers and managers
                                together. Beginning in 2004, the first training and exchange program,
                                “Desjardins, Building the Future”, will promote a shared understanding
                                of the Group’s cooperative difference and major challenges. The Institute’s
                                second program, “Destination Excellence”, will explore the issues of
                                governance and management in our efforts to be recognized as the best
                                cooperative financial institution in the world.
                                                                                                          page 21
SUCCESSION




                                                                                                          Review of Activities
Due to demographic changes, the financial services industry may soon be
faced with major shortages of qualified work force. In response, we are
already taking measures to ensure that we will always be able to count
on the right people at the right time. More specifically, to better support
our future-recruitment and key-employee development programs, we
are relying on our manpower planning system, which now covers all
Fédération professional and managerial positions as well as all caisse
management positions. Our planning tools constitute a concrete means of
ensuring the availability of the sought-after skills with respect to our
growth and future needs in certain key segments. Our internal recruitment
and prequalification programs for financial planner and general manager
positions are already meeting and exceeding our expectations.

In addition, through our increased visibility in Québec universities and
colleges, we are securing a young, dynamic and competent future work
force. Given the success of our recruitment program, we forecast that our
goal of training 288 people will be reached in March 2004, nine months
earlier than originally planned.



                                              We have also continued to refine our recruitment and
                                              hiring processes, mostly thanks to our three recruitment
                                              and evaluation centres created in 2002 for caisses in our
                                              three main regions (Eastern, Central and Western Québec).
                                              Owing to such centres, we are improving the efficiency of
                                              our recruiting initiatives.

                                              Launched in February 2003, our on-line recruitment site,
                                              www.desjardins.com/employment, enabled over 20,000
                                              people to register with our job bank. In 2004, we will
                                              continue to prepare for the future through on-line
                                              postings for the entire Group, an initiative aimed at
                                              ensuring the continued presence of talented people
                                              throughout Desjardins.




                                                                                                          Desjardins
WOMEN IN THE WORKPLACE
Women form a major part of the caisse network’s work force, and we
intend on increasing the number of women in management positions
throughout our organization. Our various initiatives have not resulted in
all of our objectives being achieved. As a result, we are now intensifying
our efforts through, among other initiatives, continuous identification of
future prospects. As at December 31, 2003, 18% of our general manager
positions were held by women, while 24% of the pre-qualified applicants
for this position were women. We will therefore continue to use and
update our existing programs and, whenever necessary, incorporate
additional mechanisms to achieve our goals of female representation in
management positions in caisses, subsidiaries and the Fédération. With this
agenda, a discussion group was formed to devise concrete, attainable and
quantifiable methods of improving the work-life balance of women in
management positions, with the proposed solutions to be acted upon. In
2004, we will conduct a survey among women service managers in the
caisse network to determine their interest level in holding higher
management positions and to provide insight on the associated constraints.
The results of this survey will enable us to find additional means by which
to realize our objectives.



                                     MENTORSHIP PROGRAM
                                     The mentorship program launched by the Women’s Advisory
                                     Commission is but one of the initiatives we are taking to increase the
                                     number of women caisse officers. Although women hold 50% of
                                     membership in caisses, they only account for 29% of the total officers.
                                     Through this program, new women officers may choose to obtain
                                     assistance from an experienced peer, someone who will guide them
                                     and help them to become more quickly familiar with Desjardins’ values
                                     and operating procedures and with the roles and responsibilities of
                                     officers. Pilot projects for new women officers began in September
                                     2003 in Montréal East and in the Richelieu-Yamaska and Québec
                                     West-South Shore regions. Beginning June 2004, the mentorship
                                     program will be offered to all the new officers.
                                                                                             page 23
                                                                                             Review of Activities
              DESJARDINS, A PREFERRED EMPLOYER
              Through our culture characterized by communication and openness, we
              want to continue to be recognized as an employer of choice. By conducting
              employee surveys, we have intensified our efforts at instilling constructive
              dialogue. To deepen our understanding of the factors that influence
              employee satisfaction and motivation, we have set up a system, which
              monitors and evaluates reasons for employee departures, in the Fédération
              and in some 50 caisses in all regions. Also, to motivate our employees and
              drive their interest in growing with Desjardins, we have also invested
              in their health. Our new Health and Well-Being program, boasting a
              satisfaction level of over 90%, has made entirely confidential checkups
              accessible to employees in 2003. In addition, by providing a rewarding
              career path and a work-life balance, we aim to realize the full potential of
              our people, all while addressing the needs they communicate to us. Finally,
              we have improved our group insurance plans and those plans designed to
              distribute earnings to all caisse and Fédération employees in 2003 and have
              initiated the salary adjustment process, which will continue in 2004.



Through our Human Resources Plan, we are defining ourselves as an
organization that recognizes that we owe our success to our employees
and managers and that we are committed to treating them in an equitable
manner by providing them with a stimulating work environment and with
competitive remuneration and working conditions.

                                                                                             Desjardins
MOTIVATED AND COMPETENT
HUMAN RESOURCES IN THE SUBSIDIARIES
Since 2001, Desjardins Securities has been hiring experienced human
resources known in their respective fields in order to quickly grow their
securities expertise and strengthen Desjardins’ market position in the securities
segment. At year-end 2003, our Desjardins Securities teams were practically
completed, from brokerage services for individuals to those designed for
businesses, and also in terms of research and institutional sales.

Anticipating profound transformations in the employment market, Desjardins
Financial Corporation and its subsidiaries have devised approaches focused
on managing human resources and our future work force. Desjardins
Financial Security, which has adhered to a continuous training policy for years,
received an award of excellence from the Life Office Management
Association for the fifth consecutive year. The success rates of its
employees on the exams administered by this international organization
rank among the best of 84 life and health insurance companies that
operate world-wide.


                Desjardins General Insurance Group (DGIG), which already offers a continuous training
                program to its property insurance agents and adjusters, launched a Canada-wide program
                in 2003 designed to align management practices. In addition, following the example set
                by their Québec colleagues, managers from the other Canadian provinces were invited to
                take a leadership training program. In 2003, DGIG also implemented the Health and Well-
                Being program, which will be offered to all employees across Canada in 2004. The
                management philosophy adopted by Desjardins General Insurance Group had a significant
                impact on lowering the turnover rate at The Personal call centres in Mississauga. In fact,
                when The Personal was acquired by Desjardins in 2000, the employee turnover rate was
                40%; by the end of 2003, it had dropped to 11%, a remarkable result in light of the
                booming job market in the Greater Toronto Area.

                Finally, in 2003, Desjardins Trust celebrated its 40th anniversary by implementing a motivation
                program designed to inspire employees with a sense of belonging, commitment and pride
                towards their company.



                By balancing assets and values, we are confident that we are becoming the leader
                in member consideration and in the quality of our business relationship with members
                and clients.
                                                                          page 25
                                                                          Review of Activities
A FINANCIAL INSTITUTION AND
A PREFERRED BUSINESS PARTNER


BEHIND EACH BUSINESS STANDS AN ENTREPRENEUR, AN
ENTREPRENEUR SEEKING THE SUPPORT OF A FINANCIAL
INSTITUTION CAPABLE OF SEEING THE BUSINESS THROUGH
EVERY PHASE OF DEVELOPMENT.

By guaranteeing a lasting business relationship and the most
integrated service offer that exists, Desjardins’ goal is to become the
preferred partner of SMBs and a dynamic partner of large businesses.




                                                                          Desjardins
SUBSTANTIAL GROWTH IN 2003
In 2003, we made great strides towards our 2003-2005 objectives. Our market shares in
commercial and industrial credit and farm loans reached 23.5% and 41.8% respectively, a
dramatic increase for the fourth consecutive year. Remarkably, this growth results from
the 90% of borrowers seeking credit greater than $500,000. This is testament to our
expertise, our progress and the quality of our service offer to SMBs. Aided by a dynamic
market, growth in our rental credit for residences of five or more units was 12%,
compared to 10.4% growth for the residential market in general.

Our success with SMBs did not however detract from our interest in microbusinesses and
self-employed workers. In fact, their needs are now being addressed by our corporate
financial centres (CFCs) and caisses, whose adapted service offer includes a credit line and
accord D FINANCING offered through the VISA Desjardins Business Freedom Solutions.



               SERVICE OFFERING FOR SMBs
               As at December 31, 87% of caisses providing services to businesses were working under
               one of 57 CFCs set up across Québec to better reach our SMB clientele. By creating CFCs,
               it has been easier to integrate the Desjardins service offer such that it encompasses all of
               the Group’s products and services. CFCs, which manage close to 92% of all caisse business
               portfolios, also encourage greater sharing of expertise and risk for the entire network.

               Now that the CFC network is essentially in place, we must optimize the organizational
               performance of each CFC and focus on business development in order to realize our
               strategic planning objectives. To do this, the reorganization process carried out in the
               business segment of the Fédération des caisses Desjardins du Québec in 2003 became
               necessary and involved three phases.

               First of all, a review of the Fédération’s service offer to caisses was intended to adapt our
               offer to the new reality of the CFC network. The review resulted in the implementation of
               specialized teams in the Fédération’s business segment, providing direct support to CFCs
               in the areas of management, work organization, marketing, and human resource
               management. These teams are also tasked with advising and supporting caisse general
               managers with respect to CFC managing strategies, developing business, and improving
               customer service methods.

               Secondly, some of the Fédération’s functions focus specifically on business development.
               Such is the case of market specialists who will support CFC account managers in soliciting,
               negotiating, and preparing complex financing files. They will also support our skills
               development strategy.

               Finally, the third area deals with various projects initiated in 2003 that will continue
               throughout 2004. These projects will enable CFCs to rely on the processes, tools and systems
               used for financing, managing client relationships, and managing offers. Our transformation
               plan will continue until 2006, and once complete, our CFC network will be fully equipped
               to meet all the needs of entrepreneurs and become their preferred partner.
                                                                                                                page 27
PRODUCT LINES




                                                                                                                Review of Activities
In 2003, our SMB product line grew through the addition of our leasing product, offered
in partnership with an industry specialist. Our farm clientele, for their part, will benefit
from a package designed for new farmers and for business transfers, and a preapproved
funding envelope for the purchase of machinery and equipment.

Desjardins Financial Security, for its part, began assigning specialists to CFCs to respond to
the specific insurance needs facing farm clients. It also adjusted the pricing structure of its
insurance product on commercial loans of $200,000 or more.

To improve service quality to businesses, the Fédération set up a new call centre, AccèsD
Affaires, which functions as a specialized help line for clients of our e-commerce solutions.

VENTURE CAPITAL
To become more accessible to entrepreneurs and make it easier for them to acquire the
necessary capital to grow their businesses, Desjardins Venture Capital expanded its regional
presence in 2003. Once operating seven regional offices, the company has grown
to 14 offices, half of which are currently located on CFC premises. This heightened
presence has made us, by far, the most accessible venture capital company in all of
Québec. Through its eight funds under management, it has invested a total of $86 million
in 85 Québec-based businesses and cooperatives in 2003, up 11.7% over 2002.



                SERVICE OFFERING TO LARGE BUSINESSES
                For its part, Caisse centrale Desjardins (CCD), after its financing involvement in RONA’s two
                previous acquisitions, acted as coagent in financing the acquisition of Réno-Dépôt. CCD is
                also very active on this market, as it is involved with close to 80% of the 50 largest
                employers whose head offices are located in Québec. Business loans outstanding grew by
                over 7% in 2003. It is worth emphasizing that among large corporations, new authorized
                business reached $650 million, a 35% leap over 2002. Half of this volume was gained
                through agent or coagent roles, a business development angle that Caisse centrale
                Desjardins has been favouring in recent years.

                INTERNATIONAL SERVICES
                CCD works alongside CFCs to better serve SMBs, especially through its international
                services, which were solicited 30% more in 2003. Through an alliance reached with the
                Northstar network, CFCs and CCD are now in a position to provide exporting businesses
                with medium-term financing solutions for their foreign clients. Finally, by obtaining a
                commercial bank charter for the Desjardins Bank in Florida and by setting up a lock-box
                and direct-deposit service for Canadian businesses with activities in the United States, we
                have made substantial efforts to address the needs of Canadian businesses.
                                                                                                                Desjardins
CORPORATE FINANCING
To better serve medium-sized businesses, Desjardins Securities set up the Strategic Capital
Group, which provides complementary services to the financing vehicles offered at
Desjardins. The Corporate Financing division, which primarily services large businesses,
participated in 103 issues in 2003, twice as many as last year. This translated into a sharp
increase in business volumes and greater visibility among institutional investors. Having
certified analysts in the Research department, their growing visibility in the media, and
the quality of their publications also contributed to the solid performance in these segments.
Finally, the Debt Capital Markets Group expanded its presence among Canadian government
issuers while maintaining its leadership in the Québec municipal financing segment.

GROUP INSURANCE
The collective network of Desjardins Financial Security continued to grow through the
enrolment of major employers, both in Québec and the rest of Canada. At year-end, DFS
reached total group insurance premiums of $1.3 billion, up 12% over 2002.



                GROUP SAVINGS
                Desjardins Financial Corporation and two of its subsidiaries, Desjardins Trust and Desjardins
                Financial Security, revamped their group savings offer intended for businesses, a segment
                traditionally dominated by insurance companies and in which we want to strengthen our
                presence. Our new approach, which will be deployed in 2004, is designed to support the
                offer of the CFCs, while more effectively serving the business market outside the network
                of caisses in Québec and elsewhere in Canada. The Trust already administers approximately
                3,000 group RRSPs, totalling 70,000 members. For its part, Desjardins Financial Security
                manages a total of 2,100 plans nationally, including that of Desjardins Group.

                GROUP P&C INSURANCE
                Several important steps were made in 2003 to harmonize our group P&C insurance
                activities throughout Canada. The company essentially created a national committee and
                standardized its marketing practices, its methods of payment, and its presentation
                material. These steps led to the signing and renewal of several group agreements and to
                an increase in business volume of The Personal, which is Desjardins General Insurance
                Group’s commercial banner for group insurance in Canada.
                                                                                                  page 29
TRUST SERVICES




                                                                                                  Review of Activities
Desjardins Trust acquired several new clients in securities custodial services,
in which it holds 55% of the Québec market.

PAYROLL AND HUMAN RESOURCES
Belonging to a financial institution enables our Desjardins Payroll and Human
Resources business unit to guarantee that the amounts it manages are
secure. Already, over 14,000 Canadian businesses and 345,000 employees
enjoy this unique benefit. In 2003, several new agreements were signed
in this segment, including one with Canadel, for which we have drafted a
specific module to process the group insurance policies of its 1,200 employees.
Our market share in this segment has now reached 36.7% in Québec, that
is, 7% over 2002.



                Our enterprise line of business, our growing market shares in financing
                segments, our CFC network and our extensive product line designed for
                businesses in the areas of financing, electronic payroll, venture capital,
                securities, group insurance, group savings and trust services: all of these
                factors are positioning us strongly as a business partner. Over the coming
                years, we will build on these accomplishments to become recognized as
                the preferred partner of SMBs and a dynamic partner of large businesses
                in Québec. We intend to distinguish ourselves by providing unparalleled
                accessibility and a comprehensive, fully integrated service offer, by fostering
                lasting relationships with business managers, and, just like we do for
                individuals, by committing to stand by them in difficult times.




                                                                                                  Desjardins
A FINANCIAL INSTITUTION
THAT SUPPORTS MEMBERS
IN THEIR ASSET MANAGEMENT


BEHIND EACH MEMBER IS A PERSON. A PERSON WITH UNIQUE
GOALS, RESPONSIBILITIES AND FINANCIAL NEEDS, BOTH BIG
AND SMALL.

At Desjardins, we are committed to supporting each person throughout
their financial life, from the first steps towards creating, accumulating
and managing their assets, to the transfer of these assets from one
generation to the next. Through the excellence of our service offer
and a comprehensive, integrated offer unmatched elsewhere on the
market, we intend to become the primary wealth management
institution for individuals.
                                                                                                                   page 31
AN EXPERT GROUP THAT DELIVERS




                                                                                                                   Review of Activities
AN INTEGRATED SERVICE OFFER
“Your Professional Asset Manager”. That is the title of the professional service offer that
our expert group proposes to our most discerning members. The service is offered by
caisse financial planners in partnership with our subsidiaries, Desjardins Trust, Desjardins
Securities, Desjardins Financial Security, and Desjardins General Insurance Group and
combines all facets of wealth management, from financial planning and investment
services, including portfolio diversification, discount or full-service securities brokerage,
and discretionary portfolio management, protection for persons, income and assets, and
all services related to estate planning.

Desjardins is already a leader in the financial institutions industry at providing integrated
service offers. We are, however, committed to further improving this approach to continu-
ously raise member satisfaction and to grab a more prominent role in the wealth management
market. Currently, the caisse network has over 800 financial planners, and some 3,200
personal finance advisors who can rely on the expertise of 6,250 group savings
representatives, close to 300 financial security advisors exclusively serving caisse members,
425 general insurance agents, and 289 investment advisors at Desjardins Securities. And
for several years, we have been working towards leveraging the synergy among caisses
and subsidiaries to promote a more collaborative approach, better tailored to the specific
needs of our members. These efforts have been rewarded again this year by a 27%
increase in life and health insurance sales in the caisses and by caisse referrals, contributing
significantly to total general insurance sales.



                SECURITIES
                In 2003, a major step towards reaching a more solid collaboration with investment
                advisors at Desjardins Securities was the transfer of ownership of this subsidiary to the
                Fédération des caisses Desjardins du Québec. In doing so, a more direct partnership with
                the caisse network has started to emerge, enabling us to better serve major depositors
                and repatriate to Desjardins a major share of assets that they entrust to competitors.
                Desjardins Securities also devoted much effort to refining their methods for directing
                clients, based on their specific needs, to either full-service brokerage with advisory services,
                Disnat self-serve online brokerage, or the integrated caisse.

                Furthermore, several new, seasoned, and reputable investment advisors joined the Desjardins
                Securities team in 2003. As a result, Desjardins Securities has strengthened its market
                presence in Québec, becoming one of the largest brokers in some regions.

                The partnership styles that were tried in 2003, including the “Caisse-Subsidiary Business
                Agreements” and “Tandem” meetings, which enable financial planners at caisses and
                investment advisors to develop and carry out a joint action plan, will be gradually phased
                into the network in 2004. We are especially counting on these promising initiatives to
                grow our market share in the securities segment.
                                                                                                                   Desjardins
A COMPETITIVE LINE OF PRODUCTS ENSURING PORTFOLIO
DIVERSIFICATION FOR OUR MEMBERS
To adapt our savings-investment products to the ever-evolving and varied needs of our
members, we launched five new index-linked term savings issues in 2003. Many of our
members and clients were also able to benefit from a significant tax credit, while investing
in SMBs and cooperatives, through Capital régional et coopératif Desjardins. Testament to
this product’s popularity, the 2003 issue was quickly absorbed throughout the caisse network.

To maximize returns on investments and the competitiveness of the investment products
offered by its subsidiaries, Desjardins Financial Corporation consolidated its key asset
management activities that were, until then, shared between Opvest and Elantis
Investment Management, to form a new entity under the name Desjardins Asset
Management. Desjardins Financial Corporation also adopted a multi-management
approach by teaming up with some of the largest fund managers in Canada and
transferring part of the assets, team and infrastructure of Elantis Investment Management
to Fiera Capital, a new investment manager in which Desjardins Asset Management holds
a 30% interest. At the end of 2003, the positioning of Desjardins Funds families had
already significantly improved with respect to the entire market.

Furthermore, Desjardins Funds underwent a significant reorganization following consul-
tations with members and their advisors. Since January 2004, an updated and enhanced
line of new funds has made it easier to create new portfolios adapted to specific investor
profiles by offering a wider selection of products, management styles, and managers of
national and international scope. As part of this reorganization, the Trust entered into
collaborative arrangements with two prestigious corporations, Fidelity and CI, to market
some of their best products under the Desjardins Funds banner, without front or back loads.



               Several new personal insurance products also emerged during the year. Desjardins
               Financial Security (DFS) launched Critical Illness Coverage with Homecare, a product
               exclusive to the Desjardins caisse network that stands apart from other products by
               enabling policyholders to be reimbursed for services they receive at home. DFS also
               improved its travel insurance product designed for “snowbirds” by expanding the number
               of eligible medical clinics and hospitals in Florida and by introducing new emergency
               return-trip coverage. DFS also broke new ground when it launched the Desjardins
               Financial Security Planned Donation program, which meets the growing financing needs
               of charitable organizations. This product is unique in that it includes a cash surrender
               value for the charitable organization, while procuring income tax credits for charitable
               donations on the policyholder’s premium, payable over a maximum period of 10 years.

               Desjardins’ Home Vision and Home Vista, products provided by the Desjardins General
               Insurance Group subsidiaries, enjoyed great success again this year. In 2003, over 95% of
               Desjardins General Insurance Group policyholders had this type of “all risk” insurance,
               compared to 25% in the industry in general. Also positioned among the most competitive
               complementary products in the general insurance industry were the Desjardins
               Teleprevention package and Free Legal Assistance for clients holding home and automobile
               insurance policies.
                                                                                                                 page 33
LEADER IN MORTGAGES AND CONSUMER CREDIT




                                                                                                                 Review of Activities
In terms of financing activities, 2003 saw us post one of our best performances
in 10 years. Residential mortgages grew by 9.7%, totalling $36.5 billion as
at December 31. We also performed strongly in personal loans, in which
loans outstanding increased by 10.5%, reaching $12.2 billion at year-end.
We certainly enjoyed the benefits of the booming housing market and
sustained growth in consumer spending, but our efforts to outperform
the competition were also fruitful. As part of our “Your Home Free”
contest, offered jointly by the caisses and Desjardins Financial Security,
six lucky members won an amount equivalent to the municipal valuation
of their homes.



                ENSURING FUTURE GENERATIONS OF MEMBERSHIP
                We aim to become the preferred financial institution of young people and students, as their
                loyalty is key to our future. We have also continued to rely on the success of our youth
                Internet portals and Chrome Program, where young people can benefit from a number of
                advantages and develop healthy savings and consumer habits. By developing sound
                habits early on, young people and students can build confidence in preparation for their
                future business relationship with their caisse. To continue in this winning direction in 2003,
                we launched “D Capital Solutions”, which introduces university students to strategies
                adapted to their field of study. DFS made further inroads among youth by offering a
                brand new product that brings together life insurance, travel insurance and accident
                insurance for young people under 25 years of age, namely, members of educational
                cooperatives under the COOPSCO banner.

                To strengthen our leadership in student loans, in which we hold 62% of the market, we
                opened the new facilities of our Desjardins Student Loan Management Service in Gaspé.
                With its advanced technology infrastructure, this centre, which helped create approximately
                100 new jobs for the region, manages the administrative and operational activities of
                approximately 270,000 student files, representing an outstanding amount of $1.8 billion.



                Our dominant position in mortgage financing and consumer credit, our commitment to
                offering the most integrated services in Québec’s financial services industry, and our
                additional effort at securing future generations of members, allow us to aspire to great
                ambitions in the consumer market group. In 2004, we will continue pursuing our efforts
                in these three areas such that we may assume a position suitable to our potential in
                wealth management and financial security.

                                                                                                                 Desjardins
STILL THE MOST ACCESSIBLE
OF ALL FINANCIAL INSTITUTIONS


DESJARDINS ENJOYS, BY FAR, THE STRONGEST MARKET PRESENCE
AMONG ALL FINANCIAL INSTITUTIONS IN QUÉBEC. WHEREVER
INDIVIDUALS OR BUSINESSES REQUIRE DESJARDINS SERVICES,
A DESJARDINS LOCATION IS NOT FAR AWAY. DESJARDINS IS PART
OF THE QUÉBEC LANDSCAPE, READY TO GREET CLIENTS AT ITS
1,506 POINTS OF SERVICE, ITS 57 CORPORATE FINANCIAL CENTRES
(CFCs), AND IN AN EVER-GROWING NUMBER OF MERCHANT
LOCATIONS. IT ALSO DELIVERS A FULL RANGE OF TECHNOLOGICALLY-
CONVENIENT SERVICES, FROM AUTOMATED TELLER MACHINES,
TELEPHONE SERVICES, TO ON-LINE COMPUTER ACCESS.

Outside Québec, Desjardins’ market presence continues to rise; the
Group is continuing its expansion initiatives through its physical and
electronic networks, which include the www.desjardins.com Web
site, point-of-sale terminals, the offices of its subsidiaries, Desjardins
Bank in Florida, and its numerous partners. To these are now added
the Ontario caisses populaires’ very own network, as well as the
28 branches of Desjardins Credit Union. Through this continued
expansion, Desjardins’ products and services are increasingly more
accessible, not only to members and clients who conduct business or
travel outside of Québec, but to all Canadians.

In 2003, our 2003-2005 strategic network transformation plan
continued to take shape; by redesigning our network, we will be
even better equipped to satisfy the expectations of members and
clients, who require, on the one hand, efficient and fully accessible
automated services, and on the other hand, a personalized approach
to wealth management and financial security.
                                                                                                                   page 35
OUR PHYSICAL CAISSE NETWORK IN QUÉBEC




                                                                                                                   Review of Activities
In Québec, our cooperative network has been continuing its efforts to
transform every caisse into a veritable financial centre of expertise by 2005.
In doing so, each caisse will be better poised to deliver, with the same
degree of professionalism, the Group’s full range of products and services
to our members in every region. In 2003 alone, 63 caisse amalgamations
were completed, granting many of them the means necessary to realize the
potential of their business vision of being able to provide comprehensive
and integrated services by way of financial planners, assisted by subsidiary
experts, and to manage the related costs. Despite amalgamations, the
number of physical access points, including head offices and service centres,
was 1,506 as at December 31, 2003, which is significantly more than the
1,141 branches of all our banking competitors combined.



                By transforming our network, we are first and foremost better positioned to adapt to the
                consumption and commuting patterns of our members. Accordingly, certain service centres
                were relocated and others adapted their service offer. Of special note this year, we opened
                six new access sites in IGA and METRO grocery stores. To attract more English-speaking
                and allophone members, we opened the Desjardins West Island Financial Centre, and we
                began efforts designed to more effectively reach newly arrived immigrants and members
                of culturally diverse communities. Finally, our initiative to create corporate financial centres
                (CFCs) by unifying expert business teams from individual caisses, which began in 1997, has
                progressed significantly. We now have 57 CFCs located throughout Québec’s many
                regions, making Desjardins the most accessible financial institution purposely designed to
                satisfy the specific needs of businesses.

                Our products and services should also be even more accessible to individuals in 2004, as
                several points of service have adjusted their service hours to better coincide with peak
                client traffic hours.

                In keeping with caisse values of democracy and community representation, the
                redesigning of the physical caisse network enables us to ensure the financial viability of
                each caisse. In return, our members benefit from an enhanced service offer and an even
                more substantial contribution to the community.




                                                                                                                   Desjardins
DESJARDINS’ SUBSIDIARIES PHYSICAL NETWORK
Beyond finding synergies with caisses in order to offer more integrated
services and expert advice tailored to member profiles, our subsidiaries are
working towards optimizing their other physical distribution networks in all
Canadian provinces. Desjardins Securities opened new service centres in
Ontario and in the Montréal borough of Westmount, bringing the number
of branches and sub-branches to 37, whereas Desjardins Financial Security,
for its part, has continued to expand its network named Services Financiers
SFL/Laurentian Financial Services, which now consists of 50 service centres
from coast to coast. Similarly, through the recent acquisition of Northwest
Mutual Funds Inc., Desjardins Trust plans on increasing the distribution of
Northwest funds from its offices in Montréal, Toronto and Vancouver.

To raise its market presence among businesses in all regions of Québec,
Desjardins Venture Capital has increased its places of business to 14, half of
which share the same premises as CFCs.



                ELECTRONIC NETWORKS
                Desjardins is a market leader at devising electronic distribution networks for financial
                products and services. To maintain this leadership position, we continued to innovate our
                electronic networks in order to maximize efficiency and anticipate the ever-evolving
                expectations of our members and clients. With 3.5 million debit cards, 2.5 million credit
                cards, 2,939 automated teller machines, 43,000 point-of-sale terminals and the most
                competitive Internet and telephone services in the market, the popularity of Desjardins’
                electronic services is on the rise. In 2003, our members performed 1.3 billion electronic
                transactions, which constitutes 400 million more than in 2000 and represents more
                than 88% of all member transactions.

                More specifically, Desjardins members (1 million in total) performed more than 270 million
                transactions using AccèsD Internet and Telephone in 2003. Total amounts transacted at
                Desjardins POS terminals and automated tellers amounted to, respectively, $293 million
                and $320 million in 2003, up 5% over 2002. With respect to credit cards, we experienced
                an approximate 20% increase in 2003 and concluded new agreements with RONA,
                Cantrex, Brault & Martineau, Ameublements Tanguay, and many other merchants in both
                Québec and Canada.

                In 2003, to counter the rising instances of cloned debit card fraud, Desjardins was the first
                and only financial institution in Canada to implement a fast and simple procedure designed
                to provide greater security over transactions made at its automated tellers.
                                                                                                              page 37
REVAMPING www.desjardins.com




                                                                                                              Review of Activities
AND AccèsD INTERNET
With a monthly average of 2.4 million visits, www.desjardins.com is the most visited
financial site in Québec and the third most visited financial site in Canada. It was also
recognized by SECOR Consulting as the best Web site – all industries combined – in Québec
in 2003. Our leadership in Internet services remains unchallenged.

To maintain this leadership position, we revamped www.desjardins.com and our transactional
site, AccèsD, so that users could gain full access to every product they hold with Desjardins.
The initiative saw us rework some 5,000 site pages and unveil many new functionalities,
links, tools, and an updated navigation system. Following a gradual transformation of the
AccèsD transactional site, our members now benefit from a more integrated, user-friendly
site from which they can access all of their Desjardins products.

In addition to this overhaul of www.desjardins.com, many of our subsidiaries and business
units created new sites and integrated them into our main site or redesigned their existing
sites to conform to our new brand image. Of special merit, our Disnat discount brokerage
division launched DisnatDirect, the first direct access on-line brokerage service offered
by a Canadian financial institution. Also, to keep our members informed of the many
improvements constantly being made to our sites, we launched Desjardins.com News, an
on-line newsletter that already has 65,000 subscribers.



                POINT-OF-SALE FINANCING
                Our point-of-sale financing activities reached $3.2 billion in the housing, automobile, and
                durable goods industries, a $600 million increase over 2002. In addition, we realized a
                total of $1.1 billion on card financing throughout the network of caisses and merchants.
                Furthermore, by concluding agreements with RONA and Cantrex, which is the largest
                purchasing collective in Canada’s furniture industry, we have substantially heightened
                accessibility to accord D FINANCING from one end of the country to the next.

                We also introduced RRSP accord D FINANCING, which enables VISA Desjardins cardholders
                to obtain, in a mere 15 minutes, financing for their RRSP investments.



                The coming years will see continued transformation and optimization of our networks
                throughout Québec and Canada; in doing so, we intend on becoming even more
                accessible to members and clients, both individuals and businesses, wherever their
                consumption patterns lead them and during the hours that suit them best. Thanks to
                our existing physical distribution network of caisses and subsidiaries and our various
                electronic channels, we are already the most accessible financial institution in Québec.
                Furthermore, drawing from our recent successes in Ontario, we are even more optimistic
                about the Canada-wide potential of these same networks.
                                                                                                              Desjardins
A NEW VISUAL IDENTITY
FOR THE DESJARDINS BRAND
Along with the optimization of our physical and electronic distribution
networks and the integration of our service offer, adopting a new
Desjardins brand architecture and a new visual identity for all caisses and
components contributes to our Canada-wide positioning as an integrated
cooperative financial group capable of satisfying every financial need of
our members and clients. This new visual identity, which will increase
the eminence of our umbrella brand and call attention to the various
specializations of our subsidiaries, was launched in March 2003 and
continues to build momentum in 2004.



               Currently, a high proportion of our entities are using Desjardins’ new
               visual identity, and our electronic services are now grouped under one
               name, Desjardins Online Solutions. Also, to coincide with this new visual
               identity and our wider presence across Canada, some of our subsidiaries
               have adopted new names, thereby placing more emphasis on their
               affiliation with Desjardins and gaining broader recognition outside
               Québec. The reference to Desjardins Group is now front and centre in
               both French and English names. Examples of such new names include
               Desjardins Venture Capital (Desjardins Capital de risque), formerly
               Investissement Desjardins, Desjardins Asset Management (Desjardins
               Gestion d’actifs), a combination of the former Opvest and Elantis
               Investment Management subsidiaries, and Desjardins General Insurance
               Group (Desjardins Groupe d’assurances générales).
                                                                        page 39
                                                                        Review of Activities
A FINANCIAL INSTITUTION WITH
A PRESENCE ACROSS CANADA


DESJARDINS’ COOPERATIVE APPROACH IS NOT JUST FOR
QUEBECERS. OUTSIDE QUÉBEC, THERE ARE ALSO PEOPLE
FOR WHOM BELONGING TO AN INTEGRATED COOPERATIVE
FINANCIAL GROUP SUCH AS DESJARDINS CARRIES STRONG
APPEAL AND REPRESENTS A REAL CHOICE OVER TRADITIONAL
BANKING INSTITUTIONS.

For more than a decade, the caisses populaires in New Brunswick,
Manitoba and Ontario have been a proud part of Desjardins Group’s
extensive family. In 2003, the Fédération des caisses populaires de
l’Ontario and the Fédération des caisses Desjardins du Québec
agreed to bring their relationship to even greater heights by signing
a renewed, more robust, partnership agreement. Armed with this
new partnership agreement, which became effective January 1, 2004,
and thanks to the creation of Desjardins Credit Union for the purpose
of acquiring the Province of Ontario Savings Office network, and the
current presence of our subsidiaries in Ontario, we now have several
promising avenues by which to grow visibility, membership and
business development in Ontario.




                                                                        Desjardins
ONTARIO CAISSES POPULAIRES:
A NETWORK OF 65 POINTS OF SERVICE
Thanks to a new partnership agreement, the Fédération des caisses populaires de
l’Ontario (FCPO) has become a voting auxiliary member of the Fédération des caisses
Desjardins du Québec. Having committed to meeting the same obligations as caisses in
Québec, Ontario caisses populaires now enjoy the same democratic rights. Thanks to this
alignment, the 26 Ontario caisses, which total $2.2 billion in assets, can now anchor their
development on the strength of our financial group, better face competitors by providing
their members with access to Desjardins’ integrated service offer, and better pursue their
mission among Ontario’s French-speaking community. As of January 1, 2004, Ontario
caisses have also decided to align their regulations, standards and policies with those of
the Fédération des caisses Desjardins du Québec and to entrust the Fédération with the
caisse operations’ support activities. As a result, the majority of FCPO employees have
been transferred to a new regional executive division, and a council of representatives
(CORE) for the caisses populaires de l’Ontario has been assembled to address all
representation and democracy aspects related to their affiliation to the Group.



               DESJARDINS CREDIT UNION INC.
               With our financial support of $148 million, through the Fédération des caisses Desjardins
               du Québec and Caisse centrale Desjardins, Desjardins Credit Union Inc. (DCU) was able to
               acquire the Province of Ontario Savings Office from the Ontario government on April 1,
               2003. With over $2.1 billion in assets and close to 70,000 accounts, DCU is now Ontario’s
               largest credit union. At the end of 2003, it had 207 employees and 28 points of service
               across the province, including six in the Greater Toronto Area.

               Since the beginning of this initiative, a Desjardins team has been working with DCU on
               implementing a change management program, instilling systems bilingualism, and setting
               up the procedures and computer systems needed to deploy Desjardins products and
               services to the network. The VISA Desjardins credit card has already been featured
               in a promotional campaign. Upon receiving approval as a registered loan provider, DCU
               completed the implementation of its centralized credit team. Beginning in spring 2004, a
               wide range of services will be offered to the members of DCU, which will work in concert
               with various entities of Desjardins Group to ensure that members receive an integrated
               service offer. Under an agreement with our subsidiary, Desjardins Financial Security, DCU
               will offer its members Loan Insurance, Line of Credit Insurance and Travel Insurance.
               Desjardins Trust, for its part, has worked to develop a service offer to support sales of
               Desjardins Funds and private management services.
                                                                                                                page 41
OUR SUBSIDIARIES AND BUSINESS UNITS




                                                                                                                Review of Activities
HAVE ALSO PURSUED THEIR CANADA-WIDE
DEVELOPMENT STRATEGIES

DESJARDINS SECURITIES
Encouraged by the exceptional performance of the Toronto branch,
Desjardins Securities opened a third full-service branch in North York
located on the outskirts of Toronto. With respect to discount brokerage,
DisnatDirect, the first direct access brokerage service offered by a
Canadian financial institution, acquired the Internet division of SwiftTrade
whose highly active investor clientele is concentrated in Ontario and
British Columbia. Furthermore, Desjardins Securities increased their presence
by issuing and selling government bonds from all provinces, primarily
Manitoba, Ontario and Nova Scotia.



                                DESJARDINS CARD SERVICES
                                We have also made major inroads in the Canadian market by becoming
                                associated with RONA, a major distributor and retailer of hardware,
                                renovation and gardening equipment in Canada, as well as with Cantrex
                                Group, the largest purchasing collective in Canada’s furniture industry,
                                through our Community VISA Retail Financing offer. The only program of
                                its kind offered outside Québec, this unique concept of financing
                                consumer durable goods has been offered since 1997 by VISA Desjardins
                                under the name accord D FINANCING in Québec, where it has been
                                adopted by close to one million consumers. To better meet the needs of
                                the credit unions and our growing merchant clientele, we have also
                                opened a Desjardins Card Services business centre in Vancouver.

                                CAISSE CENTRALE DESJARDINS
                                In addition to its role in financing and managing the liquidity of Desjardins
                                Credit Union, Caisse centrale Desjardins acted as the financing agent for
                                the Envision Credit Union in British Columbia for total financing of over
                                $300 million to credit unions in that province. It also played a role in
                                various bank syndicates of Canada-wide businesses such as Sun Media,
                                Dorel Industries, Irving Oil and Nav Canada. Over 90% of Caisse centrale
                                Desjardins’ new business investments went toward companies with
                                national or international scope.



                                                                                                                Desjardins
DESJARDINS FINANCIAL CORPORATION AND ITS SUBSIDIARIES
Desjardins Financial Corporation and its subsidiaries made great strides in 2003 to affirm
their presence in Canada. Desjardins Financial Security’s insurance segment for groups and
businesses continued to grow. Thanks to the finalization of contracts with major clients,
both in Québec and the rest of Canada, DFS amassed $1.3 billion in premiums volume, up
12% over 2002. DFS also made major inroads in Western Canada by concluding an
agreement with its first large group in British Columbia. Laurentian Financial Services
(Services financiers SFL in Québec) continued its expansion by opening new financial centres
in Halifax, London, Don Valley, York Mills and Surrey. At the end of 2003, this network
consisted of 50 financial centres and over 1,000 representatives across Canada. Finally, DFS
accepted an offer to buy its Bahamas-based life and health insurance division, Imperial
Life Financial, such that efforts could be more concentrated on the Canadian market.

Desjardins General Insurance Group also experienced strong growth throughout the
Canadian provinces where it now has some 900 employees. By combining the activities
of its subsidiaries, The Personal (which is present across Canada) and Certas Direct (which
serves Ontario and Alberta), the number of in-force policies outside Québec grew to
388,977 as at December 31, 2003, and the gross premiums written were at $463.8 million.
DGIG generated 36.5% of its 2003 sales outside Québec.

Desjardins Trust acquired Northwest Mutual Funds Inc., a company that has established a
solid reputation in Canada. From this transaction, the Trust intends to expand its presence
in the market of funds aimed at the intermediary networks and to distribute its Northwest
and Maestral funds across Canada from its Montréal, Toronto and Vancouver offices.



                               Our Canadian expansion is a key element in our strategy to diversify our
                               market risk, pursue growth in our business and revenues, and develop
                               our product and service lines, all to better meet the needs of our members
                               and clients. We are determined to persist down this road over the
                               years to come, thereby strengthening the financial services cooperative
                               movement in Canada.
                                                                                                           page 43
INTERNATIONAL COOPERATION




                                                                                                           Review of Activities
Desjardins is unlike other financial institutions. Testament to our uniqueness is our
commitment to international cooperation with over 2.5 million people in 20 countries
spanning four continents. Driven by our values of mutual assistance and solidarity, our
subsidiary, Développement international Desjardins (DID) provides technical and financial
support to collectively-owned financial institutions operating in developing countries,
thus enabling the populations of these countries to assume control and develop their
entrepreneurship. With 30 years of experience, this world leader in community financing
has earned a solid reputation with partners such as the Canadian International
Development Agency (CIDA) and the World Bank.

CFCs IN AFRICA AND MARKET PENETRATION IN ALGERIA
Entrepreneurs in Rwanda and Burkina Faso can now obtain support from Corporate
Financial Centres set up with the help of DID, which intends to extend its activities
to other African countries. For the first time in Algeria, DID also embarked on a technical
assistance project in mortgage loan development, in partnership with the Canada
Mortgage and Housing Corporation and CRC Sogema, and with the participation of the
Centre de formation Desjardins, eastern region of the Fédération des caisses Desjardins
du Québec.



               TWO NEW PROJECTS IN MEXICO
               Already present in the Chiapas and Huasteca regions and as a support for supervisory
               committees working nationally, DID obtained two new mandates in Mexico in 2003. The
               Banco del Ahorro Nacional y Servicios Financieros entrusted DID with the responsibility
               of helping five savings and credit cooperative federations to implement measures that
               comply with new regulatory requirements. DID also obtained a mandate to improve access
               to financial services for marginalized populations living in the Puebla-Tlaxcala region.

               NICARAGUA
               Through FONIDI (Investment Fund for International Development), DID signed an agreement
               with the Inter-American Development Bank and the Hivos-Triodos Fund Foundation in the
               Netherlands to make a joint investment of approximately US$1.1 million in Financiera
               Nicaragüense de Desarrollo. This is a first investment by FONIDI, a fund sponsored by
               Desjardins Financial Security, Desjardins General Insurance Group, the Desjardins Group
               Pension Plan and DID. Thanks to this investment of capital, the institution will be able
               to develop new financial services, namely savings services, for microbusinesses and small
               businesses in many regions of Nicaragua.
                                                                                                           Desjardins
UZBEKISTAN
Finally, as part of an initial mandate from the Asian Development Bank,
DID will provide support to the Central Bank of Uzbekistan with respect to
strengthening the country’s regulations and supervisions governing new
savings and credit cooperatives.

NORTH-SOUTH PARTNERSHIP
DID launched the North-South Partnership, a new initiative that encourages
Desjardins caisses to help finance the purchase of computer equipment
required to modernize some 300 African caisses over the next four years.
By the end of 2003, over 200 Desjardins caisses in Québec had confirmed
their commitment to this project that is vital to the survival of African
networks. Because this act of solidarity by caisses strengthens the support
that the Group brings to DID’s development values, their commitment to
the North-South Partnership will remain a priority for DID this year.



               As development assistance approaches are constantly changing, DID is committed to
               continually adapting and meeting its partners’ increasingly specific and specialized needs.



               LEADERSHIP AMONG INTERNATIONAL
               COOPERATIVE ORGANIZATIONS
               Cooperatives play a key role not only in many regions of the world where people must
               literally struggle to survive, but also in many industrialized countries. This is the reason for
               our steadfast involvement in the projects and financing initiatives of international
               cooperatives such as the International Confederation of popular banks, the International
               Co-operative and Mutual Insurance Federation, and the International Co-operative Banking
               Association, which is the banking sector committee of the International Co-operative
               Alliance. At its most recent convention, held in Norway, we learned the extent to which
               Desjardins Group enjoys an excellent reputation among the world’s cooperatives. This
               international credibility, paired with our excellent financial performance and our recent
               accomplishments in Canada and internationally, help make Desjardins serve as a model
               that, in many respects, inspires the development and growth of cooperatives across the
               five continents.
                                                                                                                             page 45
                   DESJARDINS GROUP FINANCIAL REVIEW




                                                                                                                             Financial Review
46                 MANAGEMENT’S DISCUSSION AND ANALYSIS

46                      General overview of Desjardins Group
46                         Overview
49                         Financial results
52                         Critical accounting policies
54                         Business conditions

56                      Review of business segments
56                          Financial intermediation
62                          Insurance, trust services and asset management
68                          Securities, venture capital and other

72                      Review of Combined Financial Statements
72                         Total revenues
77                         Non-interest expenses
80                         Credit quality
82                         Balance sheet
86                         Capital management
89                         Off-balance sheet items
91                         Risk management

95                 COMBINED FINANCIAL STATEMENTS OF DESJARDINS GROUP

130                ADDITIONAL INFORMATION

130                     Five-year statistical review of Desjardins Group in Québec

132                     Principal quarterly information of Desjardins Group in Québec

133                     Principal statistics by business segment

135                     Principal financial results of the caisses and federations
                        of Ontario, Manitoba and New Brunswick

136                CORPORATE GOVERNANCE

145                GLOSSARY OF FINANCIAL TERMS


The President and CEO of Desjardins Group as well as the Senior Vice-President of Finance and Administration of
the Fédération des caisses Desjardins du Québec have signed a declaration attesting to management’s responsibility
for the financial information in this annual report (page 96). It was signed on February 20, 2004 and covers the years
ended December 31, 2003 and 2002.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS This Annual Report may contain forward-looking statements
concerning Desjardins Group’s activities and strategies. By their very nature, such statements involve risks and
uncertainties, and it is therefore possible that the predictions or forecasts made may not materialize because of a number
of factors. Legislative and regulatory developments, changes in the economic environment, technological changes and
the effects of increased competition in a market open to globalization are only some of the important factors which
could cause actual results to differ from the forward-looking statements made in this report.

Additional information about Desjardins Group’s activities in Québec is available on the SEDAR Web site at www.sedar.com.
Also available on this site is the annual information form of Capital Desjardins, the issuer for Desjardins Group.
                                                                                                                             Desjardins Group
page 46




                                       MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Discussion and Analysis




                                       GENERAL OVERVIEW OF
                                       DESJARDINS GROUP

                                       OVERVIEW OF DESJARDINS GROUP                                               The main market trends and characteristics observed by Desjardins
                                                                                                                  Group’s management are as follows:
                                       DESCRIPTION OF DESJARDINS GROUP
                                       Desjardins Group is an integrated cooperative financial group that         ■   Competition has intensified.
                                       belongs to its owner-members. It is the largest financial institution      ■   Technologies will continue to be a major source of fluctuation in
                                       in Québec and the sixth largest in Canada in terms of its assets. It is        the industry.
                                       composed of a network of caisses and corporate financial centres           ■   Preferred clients will by increasingly solicited by competitors.
                                       (CFCs) throughout Québec as well as approximately 20 subsidiaries,         ■   There is a general decline in client satisfaction in the industry.
                                       several of which operate across the country. With over five million        ■   There is increased negotiating power among clients, who can
                                       members and clients, both individuals and businesses, Desjardins               choose the financial institution and the products that they prefer
                                       Group provides a complete line of financial products and services.             from a multitude of options on the market.
                                       It operates primarily in Québec but has recently taken on                  ■   Preferred clients will seek out the best products on the market,
                                       encouraging Canada-wide expansion efforts. On account of its                   even those of competitors.
                                       cooperative nature, Desjardins Group distributes a material share          ■   What sets financial institutions apart from the rest is essentially
                                       of its surplus earnings to members. Overall in Canada and the                  the quality of the personnel.
                                       United States, Desjardins Group has 38,128 employees, 8,127 elected
                                       officers, 676 caisses, 1,077 service centres and 2,939 automated           DESCRIPTION OF THE INDUSTRY
                                       teller machines.                                                           The banking services industry is very concentrated in Canada. It
                                                                                                                  consists primarily of six major Canadian banks and Desjardins
                                                                                                                  Group. The banking industry is evolving amid fierce and escalating
                                                                                                                  competition not only from Canadian financial institutions but also
                                        Desjardins Group combines the following business segments:                internationally. Furthermore, we are witnessing increasing market
                                                                                                                  presence among non-financial players in addition to players who
                                        Financial intermediation                                                  offer single products and can therefore provide highly attractive
                                        Insurance, trust services and asset management                            competitive benefits. Financial institutions set very ambitious
                                        Securities, venture capital and other                                     growth and return objectives in an effort to achieve significant
                                                                                                                  profits and satisfy shareholders. Financial institutions also seek to
                                                                                                                  control costs by using sophisticated management tools with respect
                                       A detailed analysis of business segments is presented on pages 56          to risks and rationalization of operations. They focus their
                                       to 71.                                                                     operations on high-performance clienteles and operations.

                                       The Group has a provincial charter whereas Canadian banks have a           Non-banking financial groups are becoming increasingly
                                       federal charter. The Group is governed by the Act respecting               integrated and specialized in wealth management, and their
                                       Financial Services Cooperatives. In addition to complying with this        activities include life and health insurance, investment funds and
                                       Act, Desjardins also complies with bank regulations to the fullest         asset management. The financial services distribution model is
                                       extent possible, even if its cooperative nature does not legally           undergoing profounded change, and manufacturers are adopting
                                       subject it to such legislation. It has also agreed to comply, on a         multidistribution models.
                                       voluntary basis, with the regulatory requirements set out by the
                                       Basel Committee on Banking Supervision of the Bank for
                                       International Settlements (BIS). Desjardins Group is a reporting issuer
                                       and complies with the regulations set out by the Québec Securities
                                       Commissions and securities commissions of other provinces.



                                        OUR STRENGTHS
                                        ■   Desjardins Group provides members with various benefits resulting from its cooperative structure, including accessibility, service quality
                                            and commitment to community development.
                                        ■   Desjardins has been a leading organization in Québec’s economy for over 100 years, holding significant market shares in savings and
                                            financing activities, and boasting a regional presence throughout Québec.
                                        ■   Relatively low risk profile in terms of credit due to healthy client diversity.
                                        ■   Success among major initiatives taken over the past years, including the restructuring of caisse support organizations, caisse groupings,
                                            the creation of CFCs, and Canada-wide expansion.
                                        ■   Opportunities resulting from the Act respecting the Distribution of Financial Products and Services (Act 188) that allows insurance to be
                                            sold directly in caisses.
                                        ■   The Group is active in the main business segments of the financial services market.
                                        ■   Enormous potential for synergies between caisses and Desjardins Group subsidiaries.
Desjardins Group
                                                                                                                                                                                          page 47
TABLE 1 – DESJARDINS GROUP(1)
Selected data for the year ended December 31
(in millions of $ and as a percentage)

                                                                                                                                      2003                 2002                 2001




                                                                                                                                                                                          Management’s Discussion and Analysis
      OPERATING RESULTS
      Total revenues                                                                                                            $    7,712           $    6,888           $    6,315
      Provisions for credit losses                                                                                                      73                  109                  237
      Non-interest expenses                                                                                                          6,492                5,523                5,277
      SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS TO MEMBERS                                                                         816                  848                  588
      Patronage allocations to members                                                                                               440                  490                  269
      Surplus earnings before patronage allocations as a percentage of average assets                                               0.91 %               1.02 %               0.75 %
      Average assets                                                                                                            $ 89,708             $ 83,449             $ 78,770

      KEY RATIOS
      Productivity ratio                                                                                                             67.90 %              64.80 %              68.30 %
      Return on average assets                                                                                                       13.80                15.60                12.00
      Tier 1 capital ratio – BIS                                                                                                     13.01                12.78                12.95

(1) Excluding the caisses and federations in Ontario, Manitoba and New Brunswisk.


PRESENTATION OF THE FINANCIAL INFORMATION                                                        FINANCIAL INTERMEDIATION
Management mainly uses surplus earnings before patronage                                         This segment is primarily made up of the caisse network, the
allocations and contributions to Desjardins Group’s combined                                     Fédération des caisses Desjardins du Québec, Caisse centrale
surplus earnings to assess its financial performance and that of its                             Desjardins, the Fonds de sécurité Desjardins, and Capital Desjardins Inc.
business segments. Desjardins Group’s financial statements are
prepared in accordance with Canadian generally accepted                                          INSURANCE, TRUST SERVICES AND ASSET MANAGEMENT
accounting principles. There were no exceptional or unusual items                                This segment includes the activities carried out by Desjardins
that had an impact on the 2001, 2002 and 2003 results. All amounts                               Financial Corporation subsidiaries: Desjardins Financial Security for
appearing in the Management’s Discussion and Analysis are                                        life and health insurance, Desjardins General Insurance Group for
expressed in Canadian dollars, unless stated otherwise.                                          general insurance, Desjardins Trust for trust services and investment
                                                                                                 funds, and Desjardins Asset Management for asset management.
The return on equity and productivity ratios for Desjardins are
calculated based solely on the results from the financial                                        SECURITIES, VENTURE CAPITAL AND OTHER
intermediation segment. These ratios are calculated by accounting                                This segment consists primarily of Desjardins Securities, which
for the share of earnings generated by investments made by caisses                               carries out securities brokerage activities and Desjardins Venture
in the subsidiaries. Desjardins Group’s activities fall within three                             Capital, which carries out capital risk investments.
main business segments:


TABLE 2 – CONTRIBUTION TO SURPLUS EARNINGS BY BUSINESS SEGMENT
For the year ended December 31
(in millions of $ and as a percentage)

                                                                                   2003                                       2002                                      2001
      Financial intermediation                          $               695                 85.2 %         $      766                 90.3 %         $      496                  84.4 %
      Insurance, trust services and asset management(1)                 171                 21.0                  131                 15.5                   90                  15.3
      Securities, venture capital and other                             (50)                (6.2)                  (49)               (5.8)                   2                   0.3
      Surplus earnings before patronage allocations
        to members                                               $      816               100.0 %          $      848                100.0 %         $      588                100.0 %

(1) The activities carried out in this business segment are grouped under the banner of the subsidiary Desjardins Financial Corporation, which achieved net earnings of $181 million
    in 2003, after the impact of the transfer of property of Desjardins Securities Inc. to the Fédération des caisses Desjardins du Québec during the year and of the expense related
    to non-controlling interests ($143 million in 2002 and $102 million in 2001).




                                                                                                                                                                                          Desjardins Group
page 48




                                       FACTORS LIKELY TO INFLUENCE FUTURE RESULTS                                 OUTLOOK
                                       Many factors, several of which are beyond our control, could arise         Desjardins Group will maintain healthy profitability by committing
                                       and have a material impact on our financial results and                    to the orientation for 2004-2005 to realize surplus earnings before
                                       subsequently cause Desjardins Group’s actual results to differ from        patronage allocations of over $0.90 per $100 in average assets.
Management’s Discussion and Analysis




                                       those expected. It is therefore important to specify that the
                                       uncertain nature of these factors could result in the predictions          Desjardins Group will further strengthen its cooperative difference
                                       made by these forward-looking statements not to materialize. This          by the determination of the caisses to maintain payments of
                                       is explained in “Caution concerning forward-looking statements“.           patronage allocations to members approximating 35% of surplus
                                                                                                                  earnings after taxes for the years 2004 to 2006.
                                       Certain factors are economic in nature such as interest rates, the
                                       inflation rate, foreign exchange rates, stock indexes, monetary and        Desjardins Group will remain the most accessible financial
                                       tax policies, consumption expenses, credit demand, the                     institution while maximizing the performance and synergy of its
                                       unemployment rate, and commercial exchanges between Québec                 distribution networks. It is with this vision in mind that the
                                       and the United States. There are also risk factors such as credit risk,    transformation of the physical caisse network should include
                                       liquidity risk, market risk, operating risk and insurance risk, which      between 450 and 500 caisses by 2005. These caisses will operate no
                                       are covered in the “Risk management“ section on pages 91 to 94 and         fewer than 1,000 points of service where members will have access
                                       for which Desjardins Group has implemented management strategies.          to services and personnel.

                                       The above-listed factors, likely to influence future results are           Desjardins Group also intends on developing its new enterprise
                                       not exhaustive.                                                            business line in order to increase outstanding portfolios from
                                                                                                                  commercial and industrial segments, grow its market share and
                                       STRATEGY                                                                   generate additional revenues. The goal is to raise this portfolio’s
                                                                                                                  market shares from 23% to 25% by the end of 2006.
                                           Desjardins Group, on the strength of its cooperative difference,
                                           its network of subsidiaries and its financial equilibrium, aims to     Desjardins Group also plans on becoming the main asset manager
                                           be the leading financial institution for satisfying the needs of its   for individuals in Québec by maximizing the synergy between
                                           members and clients and for business development through its           caisses and subsidiaries.
                                           accessible, efficient and comprehensive offer of service.
                                                                                                                  Desjardins Group also intends on expanding into new markets
                                                                                                                  through profitable business development outside Québec in order to
                                                                                                                  grow its revenues, diversify its risk and expand its range of services.
                                       The following 2003-2005 strategic orientations will help us to achieve
                                       our vision:

                                       ■    Realize its cooperative difference through member participation
                                            and commitment to community development as well as to
                                            commercial and management practices;
                                       ■    Become the leader in quality business relationships through a
                                            distinctive, personalized approach, by offering integrated
                                            advisory products and services, and through the sustained
                                            development of a highly qualified advisory team whose key
                                            priority is member and client satisfaction;
                                       ■    Ensure profitable business development outside Québec in order
                                            to grow revenues, diversify market risk and develop the range of
                                            services offered;
                                       ■    Ensure business development and become, in Québec, the main
                                            financial wealth manager for individuals;
                                       ■    Be recognized as the preferred partner of SMBs with the best
                                            integrated service offer and a dynamic partner of large
                                            corporations;
                                       ■    Remain the most accessible financial institution and maximize
                                            performance and synergies between physical and virtual
                                            distribution networks;
                                       ■    Maintain healthy profitability, maximize productivity and
                                            optimize development capital to hone our competitive edge and
                                            ensure Desjardins Group’s long-term stability.
Desjardins Group
                                                                                                                                                  page 49
FINANCIAL RESULTS OF DESJARDINS GROUP                                    As set out in the 2003-2005 strategic plan adopted by all Desjardins
                                                                         Group components, 2003 marked the beginning of the
SOLID PERFORMANCE AMONG DESJARDINS GROUP COMPONENTS                      implementation of the strategic action plan. In 2003, several major
2003 FOURTH-QUARTER RESULTS For the fourth quarter ended                 accomplishments in line with strategic orientations translated into




                                                                                                                                                  Management’s Discussion and Analysis
December 31, 2003, Desjardins Group announced combined surplus           significant investments. In addition, 2003 also saw a major
earnings before patronage allocations of $166 million, compared          repositioning of venture capital in Québec. The stock market
to $281 million in fourth-quarter 2002. This variance is mainly          correction and weak economy pushed down the value of some of
attributable to major investments aimed at improving the overall         our investments.
remuneration of personnel as well as difficulties faced by the
venture capital subsidiary, which could not escape the trend             Given this difficult economic environment, Desjardins Group’s venture
observed in its sector.                                                  capital subsidiary incurred an operating loss of $51 million. Despite
                                                                         these factors, which exerted downward pressure on results,
2003 RESULTS After a record year in 2002, Desjardins Group again         Desjardins Group was able to achieve sound profitability. Return
enjoyed solid financial performance for a second straight year and       on average equity stood at 13.8% in 2003 and was sufficiently high to
achieved surplus earnings before patronage allocations of                achieve the necessary flexibility and capacity to invest in select
$816 million. Owing to this remarkable level of profitability,           development projects aimed at taking advantage of new opportunities.
Desjardins Group showed its commitment to its cooperative roots
by returning $440 million in patronage allocations to member-
owners, an amount approaching the record $490 million paid out                               RETURN ON AVERAGE EQUITY
in 2002.                                                                                     (%)

                                                                                            18




                                                                                                                           15.6
                    SURPLUS EARNINGS BEFORE                                                 16




                                                                                                                                   13.8
                    PATRONAGE ALLOCATIONS
                                                                                            14




                                                                                                                   12.0
                    (Millions of $)




                                                                                                           11.4
                                                                                            12
                                                    848

                                                           816




                   900                                                                      10




                                                                                                   7.8
                   750                                                                       8
                                             588




                                                                                             6
                   600                                                                       4
                                      483




                   450                                                                       2
                              336




                                                                                             0
                   300




                                                                                                                   2001
                                                                                                   1999
                                                                                                           2000


                                                                                                                           2002
                                                                                                                                   2003
                   150

                       0                                                 With respect to capitalization, Desjardins Group recommends that
                                                                         sufficient and adequate capital be maintained in order to ensure a
                                             2001
                              1999
                                      2000


                                                    2002
                                                           2003




                                                                         high degree of security against the risk to which Desjardins Group is
                                                                         exposed in the normal course of operations. Owing to the quality of
                                                                         this capital, which consists of 77.9% in reserves compared to 73.4%
In the past three years, nearly $1.2 billion has been paid out to        in 2002, the Group enjoys a Tier 1 capital ratio of 13.01%, one of
member-owners, testament to our unparalleled and distinct status         the highest in the industry. In 2003, Desjardins Group continued the
as a cooperative. Accounting for tax recovery, this allocation           major initiatives it launched in 2002 to establish an integrated
represents 36.5% of surplus earnings before patronage allocations        risk management approach that adheres to the new Basel Accord,
for this three-year period. Also in 2003, $43 million, $6 million more   which becomes effective in 2006 and whose main objective is to
than last year, was given back to the community in the form of           link a financial group’s capital requirements to the specific risks of
sponsorships, donations and bursaries.                                   that group.


                    PATRONAGE ALLOCATIONS
                    TO MEMBERS                                                               TIER 1 CAPITAL RATIO (BIS)
                    (Millions of $)                                                          (%)

                   600                                                                      16
                                                                                                                                   13.01
                                                                                                                   12.95

                                                                                                                           12.78
                                                    490




                                                                                                           12.26
                                                                                                   11.68
                                                           440




                   450                                                                      12
                                             269




                   300                                                                       8
                                      143
                              122




                   150                                                                       4


                       0                                                                     0
                                                                                                                                                  Desjardins Group
                                             2001




                                                                                                                   2001
                              1999
                                      2000


                                                    2002
                                                           2003




                                                                                                   1999
                                                                                                           2000


                                                                                                                           2002
                                                                                                                                   2003
page 50




                                       Desjardins Group’s total revenues stood at $7,712 million, a 12%       As at December 31, 2003, Desjardins Group’s total assets climbed to
                                       increase over 2002. Specifically, net interest revenues rose           $94.7 billion, up $9.3 billion or 10.9% over 2002. This increase was
                                       $100 million, or 3.1%, as a result of sustained growth in loans        largely attributable to an exceptional rise in business volume,
                                       outstanding of the loan portfolio. For their part, other revenues      especially in financing activities, which benefited from a booming
Management’s Discussion and Analysis




                                       jumped $724 million, or 20.1%, compared to 2002. Nearly 63.4% of       housing industry, increased business investment and sustained
                                       this increase is attributable to the increase in net premiums, which   growth in consumer spending in 2003.
                                       reflects the excellent business growth among insurance subsidiaries
                                       combined with the strong growth in investment revenues also
                                       experienced by insurance subsidiaries.                                                    TOTAL ASSETS OF DESJARDINS GROUP

                                       The sharp $36 million decline in the provisions for credit losses in
                                                                                                                                 100                                         12
                                       2003 arises primarily from the financial intermediation segment and




                                                                                                                                                                      95
                                       is testament to the sustained efforts towards improving the credit
                                       quality of our loan portfolio, despite a year in which financial                                                                      10
                                                                                                                                  90




                                                                                                                                                                      10.9
                                       conditions were marked by uncertainty and instability. This expense,




                                                                                                                                                               85
                                       which amounts to 0.11% of the average gross loan portfolio,                                                                           8




                                                                                                                                                        80
                                       compared to 0.18% in 2002, is the lowest rate experienced by                               80




                                                                                                                                                 76
                                       Desjardins Group in many years.
                                                                                                                                                                             6




                                                                                                                                          73




                                                                                                                                                               6.0
                                       In 2003, non-interest expenses were $6,492 million, up $969 million,




                                                                                                                                                        5.7
                                                                                                                                  70
                                       or 17.5%, $685 million of which was in claims, benefits, annuities                                                                    4




                                                                                                                                          4.5

                                                                                                                                                 4.0
                                       and changes in insurance provisions, a direct result of insurance
                                       business growth and strengthened actuarial reserves in certain                             60                                         2
                                       business lines. The other changes were chiefly caused by major




                                                                                                                                                        2001
                                                                                                                                          1999
                                                                                                                                                 2000


                                                                                                                                                               2002
                                                                                                                                                                      2003
                                       investments approximating $100 million in the areas of payroll and
                                       work conditions, continuous training, and employee motivation and
                                       recruitment, the purpose of which is to ensure the continuous
                                       development of a highly qualified advisory force whose motivation                               Billions of $
                                       stems from member satisfaction.
                                                                                                                                       Growth (%)
                                       These investments, combined with a negative earnings contribution
                                       on the part of our subsidiary growing in the venture capital
                                       segment, explains the slide in our productivity ratio. However, this
                                       ratio, which is calculated using the results from the financial
                                       intermediation segment by accounting for the share of earnings
                                       generated by caisse investments in subsidiary companies, climbed to
                                       67.9% in 2003, up from the previous year.


                                                          PRODUCTIVITY RATIO
                                                          (%)

                                                          80
                                                                76.1

                                                                       74.7




                                                          75
                                                                              68.3



                                                                                            67.9




                                                          70
                                                                                     64.8




                                                          65


                                                          60
                                                                              2001
                                                                1999
                                                                       2000


                                                                                     2002
                                                                                            2003
Desjardins Group
                                                                                                                                                 page 51
CONTRIBUTION TO SURPLUS EARNINGS BY BUSINESS SEGMENT The                The securities, venture capital, and other segment showed a deficit
following paragraphs provide a summary of the financial                 of $50 million, an amount that is $1 million higher than the previous
performance of each business segment. Detailed financial analyses       year. The operating loss incurred by Desjardins Securities Inc.
are provided in the subsequent sections.                                retracted slightly by $0.5 million to finish at $3.9 million. With




                                                                                                                                                 Management’s Discussion and Analysis
                                                                        respect to the subsidiary growing within the venture capital
The financial intermediation segment, in which the caisse network       investment sector, it posted a $51 million loss, a deterioration of
primarily operates, recorded surplus earnings of $695 million,          $25 million over the previous year; this deterioration is explained by
compared to $766 million in 2002. This decrease is mainly due to an     fluctuations in financial markets that particularly affected the
increase in non-interest expenses of $228 million, a large portion of   technologies sector and forced Desjardins Venture Capital to lower
which derives from substantial investments aimed at fostering           the value of certain investments.
quality business relationships and from the implementation of the
enterprise line of business. Business volume growth was                 Moreover, during 2003, Desjardins Group disposed of assets related
experienced in each activity in the financial intermediation            to securities and currency transportation. The net earnings from
segment, enabling total revenues to grow by $134 million. In            discontinued activities rose to $2 million compared to a $13 million
addition, the results for 2003 were further improved by a               deficit in 2002. In fact, the deficit recorded in 2002 was mainly
$32 million decrease in the provisions for credit losses owing to       attributable to the labour dispute at Sécur, which was settled at the
sustained efforts to improve the quality of our loan portfolio.         end of third-quarter 2002.

Excellent performance in the insurance, trust services, and asset       The solid financial results enjoyed in 2003 are the rewards of the
management segment contributed greatly to the rise in Desjardins        ever-strengthening cooperation between the Desjardins caisse
Group’s overall profitability. In fact, this segment, which combines    network and its subsidiaries, the purpose of which is to adopt a
the activities of Desjardins Financial Corporation subsidiaries,        concerted, better targeted approach to fulfilling the specific needs
recorded a remarkable jump in profitability in 2003. During 2003,       of our members. Desjardins Group will continue to offer a wide
its consolidated net earnings from continuing operations climbed        range of financial products, paired with quality service, throughout
to $181 million, which represents $38 million in growth, or a 26.6%     Québec and increasingly in every other region of Canada, all while
increase, over 2002. This segment’s contribution to Desjardins          maximizing returns to the community.
Group’s combined results was 21% in 2003, a marked leap over the
previous year’s contribution of 15.5%. These excellent results are
the rewards of Canada-wide expansion initiatives, strong growth in
insurance business, favourable underwriting experience in most
insurance segments, stock market recovery, as well as enhanced
operational efficiency.




                                                                                                                                                 Desjardins Group
page 52




                                       CRITICAL ACCOUNTING POLICIES                                               FAIR VALUE OF FINANCIAL INSTRUMENTS
                                                                                                                  Desjardins Group records financial instruments at their fair value.
                                       Knowledge of Desjardins Group’s accounting policies is essential to        These financial instruments include trading portfolio items and
                                       understand and interpret the results reported in the Combined              derivative financial instruments. The fair values of financial
Management’s Discussion and Analysis




                                       Financial Statements as at December 31, 2003. The principal                instruments are primarily determined on the basis of quoted
                                       accounting policies are described in Note 1 on pages 102 to 106.           market prices since such prices best reflect the value of securities as
                                       Some of these policies are of particular importance to Desjardins          they derive from transactions carried out by two willing parties in
                                       Group’s financial position and operating results since they require        an open market. Note 19 on page 122 provides information on the
                                       management to make assumptions and estimates that may                      fair value of financial instruments.
                                       involve uncertainties. The following paragraphs summarize the
                                       accounting policies.                                                       When market prices are unavailable, Desjardins Group determines
                                                                                                                  fair values using either the market price of similar financial
                                       CUMULATIVE PROVISION FOR CREDIT LOSSES                                     instruments or discounted cash flows, at market interest rates,
                                       The cumulative provision for credit losses reflects management’s           which are applied to the forecasted amounts until the maturity
                                       best estimate of potential losses related to the loan portfolio and        date. Variances between the assumptions made and the actual
                                       stemming from on-balance sheet and off-balance sheet items, given          results may result in different fair values and financial results.
                                       its assessment of economic conditions. This item is made up of
                                       specific provisions and general provision. As regards the loan             As regards over-the-counter derivative instruments, Desjardins
                                       portfolio, credit risk is assessed regularly and specific provisions are   Group calculates the fair value using pricing models that
                                       determined on a loan-by-loan basis for all loans considered                incorporate current market prices and contractual prices of the
                                       impaired. In addition, a general provision is taken in order to reflect    underlying instruments, the time value of money and yield curves.
                                       management’s best estimate of probable losses within the portion           The methods, models and assumptions used to set prices and to
                                       of the loan portfolio not yet classified as impaired. The general          assess derivative instruments are subjective and may result in
                                       provision is established using a statistical model based on changes in     different fair values and financial results.
                                       loans by category. Furthermore, an additional amount is taken into
                                       account to reflect the impact of economic and other factors.               POLICY AND RELATED LIABILITIES
                                                                                                                  The process of assessing policy liabilities requires the use of many
                                       Certain factors may influence management’s assumptions and                 estimates that have an impact on Desjardins Group’s combined
                                       estimates concerning the cumulative provision for credit losses,           financial results. Management must make assumptions with respect
                                       including the inherent risk of loan portfolios, the amount and             to mortality and morbidity, policy lapse rates, projected income
                                       date of forecasted payments, forecasted loss rates, and economic           from future investments and operating expense forecasts.
                                       conditions. Any significant changes in these factors may modify
                                       the amount currently reported as the cumulative provision for              The process of determining policy liabilities necessarily involves
                                       credit losses.                                                             risks of adverse deviation from best estimates that vary in relation
                                                                                                                  to the length of the estimation period and the potential volatility
                                       For a detailed analysis of the methods used by Desjardins Group to         of each component. Due to these uncertainties, best estimate
                                       manage credit risk, please refer to page 92.                               assumptions are adjusted by margins for adverse deviation, which
                                                                                                                  increase policy liabilities and reduce the amount of gross income
                                                                                                                  that would otherwise be recognized at inception of the policies.

                                                                                                                  The assessment of actuarial amounts is reviewed annually by
                                                                                                                  actuaries who assess the evolution of assumptions made.
Desjardins Group
                                                                                                                                                   page 53
EMPLOYEE FUTURE BENEFIT PLANS                                             INCOME TAXES
Desjardins Group offers its employees a multi-employer defined            The process of calculating income taxes is based on the anticipated
benefit pension plan. It also offers its retired employees the option     tax treatment of transactions recorded in the combined income
of taking out certain forms of insurance coverage, also offered as        statement and in the combined statement of changes in equity. To




                                                                                                                                                   Management’s Discussion and Analysis
part of a multi-employer defined benefit plan. The process of             determine the current and future portions of this item, assumptions
calculating accrued benefit obligations and net expenses with             must be made concerning the tax laws governing Desjardins Group
respect to the various plans requires actuarial calculations and          in addition to the dates on which asset and liability entries related
assumptions. The principal assumptions concern mortality rates, the       to future taxes will be reversed. If Desjardins Group’s interpretation
discount rate, the rate of payroll growth, the long-term yield of the     differs from that of the tax authorities or if the reversal dates do
plans’ assets and rising health care costs. The calculation of the fair   not correspond to the forecasted dates, the provision for income
value of the plans’ assets is based on market-related values.             taxes may increase or decrease in subsequent years.
Variances between the actual future actuarial results and those
contained in the various assumptions may have an impact on the net
liability relating to retirement benefits and other future benefits.

GOODWILL AND INTANGIBLE ASSETS
On January 1, 2002, the entities comprising Desjardins Group
adopted the provisions of the guideline entitled “Goodwill and
Other Intangible Assets“ published by the Canadian Institute of
Chartered Accountants. Under this guideline, intangible assets with
an indefinite useful life as well as goodwill items disclosed in
Desjardins Group’s combined balance sheet are no longer
amortized, and are subject to an annual depreciation test. This test
involves comparing the fair values and book values of these assets
for each operating unit. Fair values are determined by using
discounted cash flows or net realizable values, whichever is
appropriate. These methods require management to make
assumptions that may affect the fair value of the financial results.




                                                                                                                                                   Desjardins Group
page 54




                                       BUSINESS CONDITIONS                                                    The moribund recovery of the U.S. economy at the beginning of
                                                                                                              the year, along with the stunning appreciation of the loonie
                                       The year 2003 was truly characterized by economic uncertainty and      against the U.S. dollar, all took their toll on the strength of the
                                       upheaval. The war in Iraq at the beginning of the year impeded         Canadian economy. This rapid and massive appreciation of our
Management’s Discussion and Analysis




                                       global economic activity. The wait-and-see attitude fostered by this   currency, which rose from 63.8 cents U.S. on January 1, 2003 to
                                       event stymied the vigorous growth of the U.S. economy and its          77.1 cents U.S. on December 31, 2003, clipped the wings of the
                                       trade partners. Though Canada, Europe, and Japan were all              Canadian economy and fundamentally altered the terms of trade.
                                       recovering somewhat, the boost a U.S. economic recovery would          Though imports of U.S. products have benefited, exports to the
                                       have provided failed to materialize. Moreover, the depreciation of     United States have been increasingly hurt.
                                       the U.S. dollar undermined the hope for a rebound in Canadian,
                                       European, and Japanese exports to the United States.                   The year could almost be deemed a “time of waiting“. However, in
                                                                                                              addition to the U.S. stagnation at the beginning of the year and
                                       On the other hand, despite increases in energy prices (oil and gas)    the appreciation of the loonie, a further series of unfortunate
                                       during the spring and then again at the end of the year, this          events sapped the energy of the Canadian and Québec economies.
                                       sluggish economic performance reduced inflationary pressures.          Severe Acute Respiratory Syndrome (SARS), the discovery of a case
                                       Consequently, the major banks’ interest rates remained low, and        of mad cow disease, forest fires in western Canada, and the
                                       many institutions, including the Bank of Canada, had to cut their      blackout that affected much of Ontario, all contributed to
                                       leading rates, which were already skirting all-time lows.              undercutting the recoveries of Canada’s and Québec’s economies.
                                                                                                              2003 was a hard year for both Canada and Québec.


                                                          CANADIAN DOLLAR                                                        PRIME RATE
                                                          ($CAN/$US)                                                             (%)

                                                          0.72                                                                  8
                                                          0.70
                                                          0.68                                                                  6

                                                          0.66
                                                                                                                                4
                                                          0.64
                                                          0.62                                                                  2
                                                          0.60
                                                          0.58                                                                  0




                                                                                                                                       2001
                                                                  2001




                                                                                                                                       2003
                                                                  2003




                                                                                                                                       1998
                                                                                                                                       1999
                                                                                                                                       2000

                                                                                                                                       2002
                                                                  1998
                                                                  1999
                                                                  2000

                                                                  2002
Desjardins Group
                                                                                                                                                   page 55
Fortunately, Québec households, like those in the rest of Canada,          Québec has not escaped the slowdown of 2003. The impact of the
kept the economy afloat. Their confidence levels remained                  appreciation of the dollar and the combined blows of SARS and mad
reasonably high, translating into sustained consumer spending and          cow disease have contributed to curb GDP growth. Conversely, the
a buoyant housing market throughout Canada. In terms of housing,           strength of domestic demand, which is best illustrated by the




                                                                                                                                                   Management’s Discussion and Analysis
particularly, an exceptional conjunction of factors combined to prop       increase in retail sales and expenditures on housing, neutralized the
up this market: a vacancy rate for rental apartments below the             losses posted by businesses. These latter, however, suffered from a
equilibrium threshold, unusually strong job growth in 2003, and            deterioration in the terms of trade and a slowdown in shipments of
highly attractive mortgage rates.                                          manufactured goods in 2003.

Confronted with a slowdown in the Canadian economy during the              OUTLOOK FOR 2004
second quarter and a rising Canadian dollar, the Bank of Canada            The outlook for 2004 is more promising, though an exceptional
was forced to revise its monetary policy in July: it lowered rates after   performance is not expected. Households will hold the course, and
having raised them twice, in March and in April. The somewhat              firms will participate more in economic growth as manufacturing
disappointing economic performance, in conjunction with                    picks up south of the border. In all likelihood, GDP growth in
deteriorating exports, led monetary authorities to lower the leading       Canada and Québec will be running at near full potential. This
rates twice during the second half of the year. Cumulatively, the July     means that inflationary pressures will be contained, that
and December reductions amounted to 50 points, completely                  overheating is not to be expected, and that interest rates will
offsetting the increases of the first half of 2003.                        remain low in the foreseeable future.



                    UNEMPLOYMENT RATE                                                         GDP GROWTH
                    (%)                                                                       (%)

                    12                                                                        7

                    10                                                                        6
                                                                                              5
                     8
                                                                                              4
                     6
                                                                                              3
                     4
                                                                                              2
                     2                                                                        1
                     0                                                                        0
                           2001




                                                                                                     2001
                           2002




                                                                                                     2002
                           1998
                           1999
                           2000



                           2003




                                                                                                     1998
                                                                                                     1999
                                                                                                     2000



                                                                                                     2003
                          Canada                                                                    Canada

                          Québec                                                                    Québec




                                                                                                                                                   Desjardins Group
page 56




                                       REVIEW OF BUSINESS SEGMENTS

                                       BUSINESS SEGMENT – FINANCIAL INTERMEDIATION                                  regulations specific to the jurisdiction in which they operate. As the
Management’s Discussion and Analysis




                                                                                                                    financial agent for Desjardins Group, Caisse centrale Desjardins
                                       DESCRIPTION OF THE SEGMENT                                                   conducts transactions on national and international levels.
                                       The financial intermediation segment is generally referred to as
                                       Desjardins Group’s financial intermediation network. Its activities          The synergy that is developing between the various components
                                       include financing, recruitment of savings, credit cards, and                 of Desjardins Group also creates the potential for increasing sales
                                       functioning as the financial arm. Both retail and wholesale services         of professional asset management, financial planning and
                                       are provided by the financial intermediation segment. A broad                investment services, especially portfolio diversification and securities
                                       range of financial services is offered to members and clients.               brokerage services, and discretionary portfolio management, life
                                                                                                                    and health, income, and property insurance, and all services linked
                                       This segment primarily serves the Québec market, with a                      to estate management.
                                       decentralized network of 608 caisses and 57 corporate financial
                                       centres covering all regions of the province. It is supported by a           DESCRIPTION OF THE INDUSTRY
                                       federation that dispenses specialized services and rounds out the            The high level of concentration of the banking services industry in
                                       services provided to members and clients. This segment also has              Canada has resulted in market saturation, so that any one player’s
                                       links to activities that extend beyond the province, in particular the       increase in market share must reflect another’s loss. Our
                                       68 caisses and federations of Ontario, Manitoba, and New                     competitors expend a great deal of energy cornering those
                                       Brunswick, which are auxiliary members of the Fédération des                 business segments that they deem the most lucrative, in particular
                                       caisses Desjardins du Québec, but are governed by laws and                   wealth management, in their quest to maximize profits and satisfy
                                                                                                                    their shareholders.



                                        2003 ACHIEVEMENTS
                                        ■   The financial intermediation sector has $79.4 billion in assets, a rise of 11.1% aided by the strongest growth in financing activities of the
                                            past 10 years.
                                        ■   A market leader in Québec, this segment has a 37.7% market share in the residential mortgage sector, 41.8% in the agricultural loans
                                            sector, and 43.6% in personal savings recruitment.
                                        ■   Solid financial performance over several years: surplus earnings before patronage allocations rose from $496 million in 2001 to
                                            $695 million in 2003.
                                        ■   Participation in the development of all regions of Québec with the creation of corporate financial centres throughout the province
                                            to meet the unique requirements of the enterprise line of business.
                                        ■   A Canada-wide orientation: notably a renewed partnership with the Fédération de l’Ontario with the signing of a new protocol
                                            of affiliation on January 1, 2004, and a $148 million investment in Desjardins Credit Union Inc. for the acquisition of the Province of
                                            Ontario Savings Office.
                                        ■   Business agreements signed between the caisses and the subsidiaries will enable us to provide our members with the most highly
                                            integrated service in Québec’s financial services industry.
                                        ■   Substantial investments to implement the 2002–2005 Human Resources Plan.
                                        ■   Establishment of the enterprise line of business.
Desjardins Group
                                                                                                                                               page 57
STRATEGY                                                                OUTLOOK
                                                                        Our cooperative difference will be entrenched through the caisses’
    In 2005, the financial intermediation segment will be a dynamic     determination to sustain payments of patronage allocations to
    financial services cooperative renowned for its unique              members on the order of 35% of surplus earnings after taxes for




                                                                                                                                               Management’s Discussion and Analysis
    relationship with its members and community, for products that      the years 2004 to 2006.
    are adapted to their needs, and for its integrated network. This
    segment is a financial centre of excellence providing its members   Desjardins Group seeks to remain the most accessible financial
    with access to the whole spectrum of products offered by            institution, while maximizing the performance and synergy of its
    Desjardins Group.                                                   distribution networks. This is the rationale for transformation of
                                                                        the caisses’ physical network, which should number between 450
                                                                        and 500 by the year 2005. These caisses will then operate no less
The following strategies, reflecting our 2003–2005 strategic plan,      than 1,000 points of service in which members will have access to
will help bring our vision to fruition:                                 services and personnel.

■    Strategy for businesses: Desjardins Group will take steps to       The financial intermediation segment anticipates expanding its
     assume a position commensurate with its economic weight on         new enterprise line of business in order to increase the size of its
     Québec’s corporate market, and move toward a leadership            outstanding industrial and commercial portfolio, enlarge its market
     position in terms of market share.                                 share, and generate additional revenues. In this respect, the costs
■    Strategy for individuals: Desjardins Group seeks to become         associated with implementing this new business line are
     Québec’s leader in wealth management, while continuing to          substantial. Desjardins Group undertakes to invest sizeable
     serve all market segments with quality personnel and               amounts in the systems and to improve the processes and the
     competitive products. During this period, the challenge to the     supply of services. The goal is to increase this portfolio’s market
     caisses will be to recruit more savings while maintaining their    share from 23% to 25% by the end of 2006.
     position in credit.
■    Financial strategy: maintain a strong capitalization to allow      The financial intermediation segment seeks to continue to hone its
     Desjardins Group to ensure its development and obtain a            approach as a group of experts in order to increase the satisfaction
     reasonable yield on capital, and thus to protect its position on   of its members and occupy a greater space in the asset
     financial markets and provide a high return to the community.      management market.

                                                                        The goal of the financial intermediation segment is to maintain
                                                                        healthy profitability by investing in the development of profitable
                                                                        business inside and outside Québec, so as to increase revenues and
                                                                        diversify market risk.




                                                                                                                                               Desjardins Group
page 58




                                       TABLE 3 – FINANCIAL INTERMEDIATION: SEGMENTED RESULTS
                                       Selected data for the year ended December 31
                                       (in millions of $ and as a percentage)

                                                                                                                                                                                 2003                        2002           2001
Management’s Discussion and Analysis




                                             Total revenues(1)                                                                                                            $     3,602             $          3,468     $    3,064
                                             Provisions for credit losses                                                                                                          80                          112            247
                                             Non-interest expenses                                                                                                              2,528                        2,300          2,155
                                             SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS TO MEMBERS(1)                                                                           695                        766            496
                                             Contributions to combined surplus earnings                                                                                           85.2 %                      90.3 %         84.4 %
                                             Patronage allocations to members                                                                                             $       440             $           490      $     269

                                             Average assets(2)                                                                                                                 75,592                   69,952             66,210
                                             Average loans                                                                                                                     62,220                   57,006             53,649
                                             Average deposits                                                                                                                  65,146                   61,189             58,428

                                             KEY RATIOS
                                             Productivity ratio(3)                                                                                                                67.9 %                      64.8 %         68.3 %
                                             Return on average equity(3)                                                                                                          13.8                        15.6           12.0

                                       (1) These items for the financial intermediation segment exclude the share of earnings resulting from the caisses’ investments in
                                           subsidiaries, which amounted to $121 million in 2003 ($82 million in 2002 and $105 million in 2001).
                                       (2) Average assets for the financial intermediation segment exclude the value of the investment carried at equity resulting from
                                           the caisses’ investments in subsidiaries, which amounted to $1.5 billion in 2003 ($1.3 billion in 2002 and $1.1 billion in 2001).
                                       (3) The productivity and return on average equity ratios include the share of earnings from the caisses’ investments in the subsidiaries.


                                       ANALYSIS OF THE FINANCIAL RESULTS                                                                                            FINANCIAL INTERMEDIATION CONTRIBUTION
                                       For a second consecutive year, the financial intermediation                                                                  TO COMBINED SURPLUS EARNINGS
                                       segment has posted outstanding financial results, with $695 million
                                       in surplus earnings before patronage allocations. The year 2003




                                                                                                                                                                                           90.3
                                       was marked by significant advances in the implementation of our                                                              800                                        100




                                                                                                                                                                                                      85.2
                                                                                                                                                                                   84.4
                                       2003–2005 strategic orientation plan, in terms of solidifying our
                                       business relationships with individual members and our partnership                                                           700                                        80




                                                                                                                                                                                           766
                                       with business. Thus, in the framework of our 2002–2005 Human




                                                                                                                                                                                                      695
                                       Resources Plan and the establishment of our enterprise line of                                                               600                                        60
                                       business, substantial investments amounting to about $100 million
                                       have been made to give effect to these orientations. Despite these
                                       sizable outlays, the financial intermediation segment was able to                                                            500                                        40
                                                                                                                                                                                   496
                                       show a solid performance, allowing it to disburse $440 million in
                                       patronage allocations to its member-owners, approaching the                                                                  400                                        20
                                       record of $490 million reached in 2002. Against a backdrop of
                                       peerless service and competitive interest rates and service fees, the                                                        300                                        0
                                       $930 million return to members realized over the past two years
                                                                                                                                                                                  2001

                                                                                                                                                                                           2002

                                                                                                                                                                                                  2003
                                       translates the ongoing desire of the caisse network, and all other
                                       components of the financial intermediation segment, to post a
                                       financial performance that maximizes the yield to member-owner-
                                       users while ensuring the long-term stability of their cooperative
                                                                                                                                                                              Millions of $
                                       financial institution.
                                                                                                                                                                              Growth (%)


                                                                                                                                          These strong financial results thus allow us to show an average
                                                                                                                                          return to assets of 13.8%, which is sufficiently high to provide some
                                                                                                                                          leeway for mitigating the impact of adverse events arising from
                                                                                                                                          exceptional circumstances, if required, and to provide for
                                                                                                                                          investments in development projects selected to take advantage of
                                                                                                                                          opportunities as they arise. As to the productivity ratio, each
                                                                                                                                          segment has devoted considerable efforts to reducing costs, thus
                                                                                                                                          seeking to improve efficiency and performance so as to better
                                                                                                                                          confront the competition. The desire to excel and continually
                                                                                                                                          improve the service to its member-owners has prompted Desjardins
                                                                                                                                          to make substantial investments in training its personnel and
                                                                                                                                          improving their working conditions and remuneration, among
                                                                                                                                          others, so as to create a pressure on the productivity ratio of about
                                                                                                                                          67.9% in 2003.
Desjardins Group
                                                                                                                                                    page 59
Total revenues, comprised of net interest income and other                The business volume of the caisses and Caisse centrale Desjardins
revenues, reached $3,602 million, representing a growth of                has shown exceptional growth in the past two years,
$134 million, or 3.9%, over last year. Despite a fall in the net          demonstrating that Desjardins Group is an uncontested leader in
interest margin, from 3.89% in 2002 to 3.70 per cent in the fiscal        financing economic activity in the province. It has especially stood




                                                                                                                                                    Management’s Discussion and Analysis
year 2003, net interest revenue increased by $73 million owing to         out in the areas of housing, consumer expenditures, and corporate
buoyant growth in business volumes this year.                             investments, all segments that present a potential for business
                                                                          development that is of great interest to financial institutions
As to other revenues, they rose by $61 million, or 8.2%, over 2002        despite the highly competitive nature of this niche and the
levels, to $806 million. This increase is largely from commissions on     economic downturn that hit Québec in 2003.
loans and credit cards, up $26 million driven by strong growth in
VISA business and service fees on deposits and payments, which            As can be seen from the impressive growth of its financing
increased $22 million. Notice also that most of the additional            activities, rivalling the best of the past ten years, Desjardins Group
revenue from service fees is attributable to a new fee schedule on        has proven its ability to hold its own. Indeed, the gross loans
automatic transactions for non-members.                                   outstanding portfolio, which rose from $59.9 billion as at
                                                                          December 31, 2002, to $66.2 billion at the end of that year,
                                                                          represents growth of $6.3 billion, or 10.6%. Over half of this
                    FINANCIAL INTERMEDIATION                              increase comes from growth in residential mortgage loans, which
                    BREAKDOWN OF TOTAL                                    rose by $3.3 billion, or 10.2%, in 2003, reaching $35.3 billion by the
                    REVENUES IN 2003                                      end of the year. Other categories of credit also registered
                                                                          impressive gains: loans for consumer goods, loans on credit cards,
                    77.6%                         10.5%                   and other loans to individuals rose 10.7%, while loans to firms and
                                                                          government bodies jumped 11.2%.
                                                      5.3%
                                                                          In addition, throughout the year considerable efforts were
                                                                          channelled into maximizing the performance and synergy of our
                                                      6.6%
                                                                          distribution networks. Thus, in 2003, we continued the
                                                                          transformation of the physical network so that, by the end of the
                                                                          year, we had 608 caisses, compared with 671 at the end of 2002 and
                                                                          814 at the end of 2001. By 2005 we expect to have between 450
                                                                          and 500. These caisses will then operate no less than 1,000 points
                            Net interest income                           of service, in which members will have access to services and staff.
                                                                          Recall that the purpose of these consolidations of caisses is to attain
                            Deposit and payment service                   a critical mass so as to become a centre of financial expertise that
                            charges
                                                                          can ensure that members are attended to by a group of experts for
                            Lending fees and card service                 the professional management of their financial assets. In
                            revenues                                      conjunction with these developments, some caisses are being
                            Other
                                                                          relocated to more geographically strategic sites that are better
                                                                          suited to the members’ consumption and commuting habits.

In 2003, expenditure on provisions for credit losses was $80 million,     Moreover, throughout the year, the financial intermediation
down $32 million from 2002, reflecting the excellent quality of the       segment played a central role in implementing the Canda-wide
financial intermediation segment’s loan portfolio. As at December         orientation that Desjardins Group has adopted. Indeed, January
31, 2003, the segment’s gross impaired loans outstanding                  2003, saw the announcement of Desjardins Group’s participation in
amounted to less than $54 million, or 10.4% below the previous            the acquisition of the Province of Ontario Savings Office by
year’s level. This is a testimony to the improved quality of the credit   Desjardins Credit Union (DCU), a new Ontario financial cooperative
in our loans portfolio, notwithstanding an environment of                 created pursuant to the Ontario Credit Union and Caisses
economic uncertainty and upheaval.                                        Populaires Act. Furthermore, a renewed partnership has been
                                                                          formed between Desjardins Group and the Fédération des caisses
Non-interest expenses amounted to $2,528 million in 2003, up              populaires de l’Ontario (FCPO) and its affiliated caisses, under
$228 million, or 9.9%, from the 2002 level. This growth was mostly        which they become full members as of January 1, 2004. These are
attributable to substantial investments of over $80 million in            only two examples of steps taken that fit into the vision spelled out
repositioning salaries, training, motivation, and recruitment.            in the 2003–2005 strategic plan to ensure profitable business
Furthermore, in 2003 nearly $20 million was invested in developing        development outside Québec in order to increase revenues,
and supporting the enterprise line of business, to which should be        diversify market risk, and expand the menu of services offered.
added fees associated with technological developments required to
maintain our leadership position in the various development               The extensive reflection on Desjardin’s corporate renewal, in which
projects deemed priority in the 2003–2005 strategic plan.                 nearly 25,000 members, managers, and employees partook over the
                                                                          course of the past two years; the solid financial results obtained in
                                                                          2003 that allowed considerable returns to be paid out while ensuring
                                                                          the stability of the network; and the substantial investments made
                                                                          this year to support development initiatives in line with our
                                                                          2003–2005 strategic orientation, are all among the accomplishments
                                                                          of 2003 that allowed Desjardins Group to remain the most accessible
                                                                          financial institution, where people make a difference.
                                                                                                                                                    Desjardins Group
page 60




                                       FINANCIAL INTERMEDIATION – MAIN ACTIVITIES                                SAVINGS RECRUITMENT OPERATIONS
                                                                                                                 DESCRIPTION The main savings recruitment operations deal with on-
                                       FINANCING OPERATIONS                                                      balance sheet savings, in particular so-called traditional deposits, and
                                       DESCRIPTION The primary financing operations are residential              off-balance sheet savings comprised of Desjardins funds and
Management’s Discussion and Analysis




                                       mortgage credit, consumer credit, commercial and industrial credit,       securities. These activities, which are among the most important
                                       farm loan, and institutional credit.                                      sources of funds for Desjardins Group, are aimed at both individuals
                                                                                                                 and businesses.
                                       Desjardins Group has always been deeply involved in financing
                                       Québec’s economic activity. The full slate of credit products and         In order to more effectively meet its members’ and clients’ growing
                                       services it makes available to its clients, be they individuals or        needs in terms of diversification of financial assets, Desjardins Group
                                       businesses, has allowed it to become a market leader in every area        is making every effort to become Québec’s principal wealth manager.
                                       of lending in which it is active in Québec.
                                                                                                                 2003 ACHIEVEMENTS
                                       2003 ACHIEVEMENTS                                                         ■   Acceleration of the deployment of its integrated supply of
                                       ■   A greater presence with durable goods retailers using the                 securities brokerage services within caisses.
                                           accord D program and providing financing at car dealerships.          ■   In-depth transformation of its menu of investment funds and the
                                       ■   Continued promotion of mortgage products, which are already               acquisition of Northwest Mutual Funds.
                                           highly competitive on the market because of their wide variety        ■   Continued development of its network of seasoned advisors,
                                           and flexibility.                                                          known for their expertise and present throughout the province.
                                       ■   Considerable progress on ambitious goals related to the               ■   Innovative developments in savings products that foster
                                           enterprise line of business, especially developing the                    adaptation to the shifts in trends that are characteristic of the
                                           organisational structure around the Corporate Market Group in             financial industry.
                                           conjunction with the continued expansion of relationships with        ■   Enhancement of its relative weight in Québec in:
                                           individuals.                                                              •  The area of on-balance sheet savings, including products such
                                       ■   Enhancement of its relative weight in Québec in:                             as chequing accounts, regular savings, and term deposits, in
                                           • The field of consumer credit, where it made a substantial 0.6%             which it posted substantial growth of 0.3%, reaching 43.6%.
                                             gain, reaching 26.9%.                                                   •  The fields of securities brokerage and the sale of investment
                                           • The highly competitive area of residential mortgage credit,                funds and corporate venture capital funds (Capital régional et
                                             where its rate of penetration was 37.7%, representing a                    coopératif Desjardins), which also contributed to Desjardins
                                             respectable 0.2% increase.                                                 Group’s growth with penetration rates of 10.6%, 7.2%, and
                                           • Commercial and industrial credit, as well as agricultural credit,          7.2%, respectively.
                                             in which its market shares grew by 0.3% and 0.2%,
                                             respectively, reaching 23.5% and 41.8%.                             STRATEGY Desjardins Group seeks to make a full slate of diversified
                                                                                                                 savings products, that are both personalized and competitive,
                                       STRATEGY Desjardins Group’s goal is to continue supplying                 available to both individual and corporate clients.
                                       competitive credit products that are tailored to the needs of its
                                       members and clients. Among other things, this will allow it to play       The following strategies will contribute to achieving this goal:
                                       a key role in their accession to individuals’ property and attending
                                       to agricultural and commercial firms as they pursue their                 ■   An increased accessibility to its products and services, which are
                                       investment projects.                                                          already highly visible in Québec, both physically and electronically;
                                                                                                                 ■   Ongoing research and development into the design of its savings
                                       The following strategies will contribute to achieving this goal:              products;
                                                                                                                 ■   Fostering staff training by creating an ongoing competency
                                       ■   A stronger emphasis on integrating the supply of financing                enhancement program.
                                           products and services;
                                       ■   Optimization of the siting of Corporate Financial Centres (CFCs)      OUTLOOK Consolidate its presence in the segment of on-balance
                                           while pursuing the harmonization of their business practices;         sheet savings products and improve its relative position in the field
                                       ■   Fostering personnel training by creating an ongoing competency        of investment funds and securities brokerage.
                                           enhancement program.

                                       OUTLOOK Continue developing the line of business targeted at
                                       individuals while increasing its presence with businesses, so as to
                                       raise its market share in that area to 25% by the end of 2006.
Desjardins Group
                                                                                                                                                      page 61
CREDIT CARD OPERATIONS                                                     OPERATIONS OF CAISSE CENTRALE DESJARDINS
DESCRIPTION Credit card operations are conducted by Desjardins             DESCRIPTION The operations of the financial arm are conducted by
Card Services (DCS), or VISA Desjardins, a business unit of the            Caisse centrale Desjardins (CCD), a cooperative institution owned
Fédération des caisses Desjardins du Québec. With 2.5 million              by Desjardins caisses. The CCD operates on Canadian and




                                                                                                                                                      Management’s Discussion and Analysis
cardholders, Desjardins Card Services is the biggest issuer of credit      international markets, collaborating with and complementing the
cards in Québec, providing its varied clientele with an array of           activities of other divisions of Desjardins Group.
products, such as payment solutions for cards held by individuals
and businesses, consumer loyalty development strategies with the           CCD’s operations include, in particular:
BONUSDOLLARS reward program, and payment mechanisms for
some 55,000 merchants.                                                     ■   Financial settlement of transfers effected on the caisses’ national
                                                                               and international network;
DCS offers financing solutions to individuals, such as accord D            ■   Supplying funds to meet Desjardins Group’s liquidity
FINANCING (a separate, second limit on VISA Desjardins credit                  requirements;
cards) that is available in more than 3,000 stores across Canada. This     ■   Acting as a representative for communications with rating
financing is also available through the network of caisses                     agencies;
Desjardins for amounts less than $10,000. Financing solutions are          ■   Managing the required reserves of liquidities;
also offered to firms: these include Business Freedom Solutions,           ■   Derivatives and other cash income products;
Line of Credit accord D Business FINANCING, Business Card, and             ■   Financing banking services to the private sector (medium- and
Purchasing Card.                                                               large-sized firms) and the public sector.

2003 ACHIEVEMENTS                                                          2003 ACHIEVEMENTS
■   Desjardins Card Services’ volume of business, in terms of issues,      ■   Contributed $67.4 million to the network of caisses, up 13%
    reached $8.1 billion in 2003, an increase of 21% over 2002.                from 2002.
■   Desjardins Card Services raised its market share in Québec             ■   Established a new Canadian borrowing program for medium-
    to 40%.                                                                    term notes ($2 billion) that further diversifies our supply sources.
■   Signed a major agreement with RONA to offer the co-branded             ■   Carried out the all-time largest issue (500 million euros on
    card RONA VISA Desjardins, the proprietary RONA card, and                  European markets), reflecting CCD’s presence and reputation on
    payment solutions.                                                         international financial markets.
■   Renewed our partnership agreements with Brault et Martineau            ■   Successfully developed index-based savings products. With
    and Ameublements Tanguay.                                                  nearly $400 million outstanding, Tactical Rate Management Term
■   Deployed the accord D solution within the caisse and integrated            Savings is a tremendous success with our members.
    applications for cards and financing at Desjardins’ intranet portal.   ■   Achieved loan portfolio growth of 35%.
                                                                           ■   Obtained a commercial charter for Desjardins Bank, enhancing
STRATEGY Desjardins Card Services strives to become Canada’s best              its ability to serve the U.S. business market.
credit card issuer by drawing on the full potential of its staff in
order to provide an exceptional quality of service and be                  STRATEGY CCD’s mission derives from its four basic functions: acting
recognized as an employer of choice.                                       as a financial agent, designing and promoting treasury services,
                                                                           managing international services, supplying customized financing
The following strategies will contribute to achieving this goal:           and services.

■   Propose new online business solutions to the network of caisses,       The following strategies will help us pursue our mission:
    offering value added to the members and economies of scale to
    Desjardins Group;                                                      ■   Maintain close links with large firms and institutions so as to
■   Promote accord D FINANCING in order to develop the Canadian                better attend to their needs and maximize benefits to Desjardins
    market, especially with merchants and credit unions;                       Group;
■   Use online solutions to foster the network’s business                  ■   Continue to serve companies on the Canadian, U.S., and
    development efforts, particularly the youth clientele, major               international markets;
    cardholders, and the Canadian market.                                  ■   Pursue supply source diversification on financial markets so as to
                                                                               always be in a position to meet Desjardins Group’s funding
OUTLOOK                                                                        requirements.
■   The launch of a new line-up of prestige cards to assert our
    leadership in the consumer loyalty development niche.                  OUTLOOK
■   A major partnership agreement with Coast Capital Savings Credit        ■   Geographical diversification of our loans portfolio by expanding
    Union, the biggest in Canada in terms of membership and                    into new markets.
    second in assets.                                                      ■   Opening a point of service in the United States so as to better
■   Signing a Canada-wide retailer to the accord D product.                    serve our corporate clientele.
                                                                           ■   Expanding the slate of products we offer to our corporate and
                                                                               institutional clientele: exchange rate options and derivatives.
                                                                           ■   Ongoing development of new concepts in index-based savings.            Desjardins Group
page 62




                                       BUSINESS SEGMENT – INSURANCE,                                                  DESCRIPTION OF THE INDUSTRY
                                       TRUST SERVICES AND ASSET MANAGEMENT                                            Consolidation in the financial services industry continued
                                                                                                                      throughout 2003 and saw numerous transactions involving
                                       DESCRIPTION OF THE SEGMENT                                                     manufacturers and distributors.
Management’s Discussion and Analysis




                                       A component of Desjardins Group, Desjardins Financial
                                       Corporation (the Financial Corporation) is responsible for ensuring            Non-bank financial groups have become increasingly integrated
                                       growth and dynamic management in its investments and                           and specialized in wealth management. Their activities combine
                                       subsidiaries, the main ones of which are Desjardins Financial                  various specializations, notably life and health insurance,
                                       Security (DFS), Desjardins General Insurance Group (DGIG),                     investment funds and asset management. In addition, distribution
                                       Desjardins Specialized Financial Services Management (DSFMS) and               models for financial services are changing rapidly and significantly,
                                       Desjardins Asset Management.                                                   and manufacturers are adopting multidistribution models.

                                       Its subsidiaries carry out operations primarily in Canada in four              The Financial Corporation’s consolidated results are influenced by
                                       business segments. The life and health insurance segment offers                factors inherent to each industry in which it operates. A summary
                                       life and health insurance coverage in the form of group and                    of these factors is provided in the review of each business segment.
                                       individual insurance as well as savings products and services. The
                                       general insurance segment provides individuals, either directly or
                                       through groups, such products as automobile insurance and
                                       property insurance, and provides commercial products to
                                       businesses. The trust services segment designs and markets wealth
                                       management and administration products and services, such as
                                       investment funds, for both individuals and businesses. The segment
                                       described as “other“ includes the holding company’s activities as
                                       well as asset management activities, whose purpose is to optimize
                                       the investment income of the subsidiaries and other Desjardins
                                       Group components.



                                           2003 ACHIEVEMENTS
                                           ■    15.8% increase in operating revenues.
                                           ■    Strong Canada-wide growth in the groups segment.
                                           ■    26.6% growth in net earnings from continuing operations, which have attained $181 million.
                                           ■    Return on equity of 15.4% in 2003, compared to 13.7% in 2002.
                                           ■    The third consecutive year of improvement for the productivity ratio.
                                           ■    Major improvements in investment performance.
                                           ■    Strengthened subsidiary balance sheets.
                                           ■    Reorganized asset management activities and a partnership established with Fiera Capital Management.
                                           ■    Acquired Northwest Mutual Funds.
                                           ■    Completely overhauled the Desjardins Funds family of funds.



                                       STRATEGY                                                                       OUTLOOK
                                                                                                                      The Financial Corporation will continue developing its
                                           Through its subsidiaries and an enviable relationship with the             management framework in terms of financial monitoring,
                                           other Desjardins Group components, the Financial Corporation               integrated risk management, investment monitoring, business
                                           holds a leadership role and focuses its energies on developing             development, and strategic support provided to subsidiaries.
                                           effective, integrated products in the areas of wealth                      Furthermore, it will institute several new initiatives: an overhaul of
                                           management, financial security, and investment products, all for           business and management processes aimed at enhancing
                                           the benefit of Desjardins Group members and clients in Canada.             operational efficiency; further clarification of strategic choices per
                                                                                                                      segment; and heightened discipline in terms of the operational
                                                                                                                      excellence of its components.

                                       To give shape to our vision, the Financial Corporation has adopted
                                       the following strategies:

                                       ■       Maximize business development and product/service distribution
                                               with the Desjardins caisse network to establish our dominant
                                               position in Québec;
                                       ■       Ensure product competitiveness and a quality service offering
                                               to further strengthen the Financial Corporation’s position in
                                               the Québec market and to penetrate markets in other Canadian
                                               provinces;
                                       ■       Ensure that the Financial Corporation and its subsidiaries
                                               continue to develop and grow in the Canadian marketplace and
                                               support the subsidiaries in their roles as leaders in select niches;
                                       ■       Act as a natural partner in the financial intermediation segment
                                               by relying on employee commitment and ensuring member and
Desjardins Group




                                               client satisfaction, all in an effort to further strengthen the
                                               Group’s position as an integrated cooperative financial group;
                                       ■       Increase profitability and returns on capital by leveraging
                                               synergies in order to enhance operational efficiency.
                                                                                                                                                                             page 63
TABLE 4 – FINANCIAL RETROSPECTIVE
Selected data for the year ended December 31
(in millions of $ and as a percentage)

                                                                                                                                2003            2002            2001




                                                                                                                                                                             Management’s Discussion and Analysis
      CONSOLIDATED EARNINGS OF DESJARDINS FINANCIAL CORPORATION
      Operating revenues                                                                                                    $   3,421       $   2,953       $   2,723
      Net interest and investment revenues                                                                                        761             555             592
      Claims, benefits and change in actuarial and related liabilities                                                          2,993           2,349           2,245
      Operating expenses                                                                                                          930             911             913
      NET EARNINGS FROM CONTINUING OPERATIONS                                                                                    181              143             102
      Return on equity                                                                                                           15.4 %          13.7 %          10.0 %

      Total assets(1)                                                                                                       $ 13,212        $ 12,163 (1)    $ 11,898 (1)
      Assets under management                                                                                                  9,547          13,737          14,435
      Assets under administration(1)                                                                                         158,535         135,896 (1)     139,365 (1)

      CONTRIBUTION TO NET EARNINGS(2)
      Life and health insurance                                                                                                  101               71              62
      General insurance                                                                                                           46               32              25
      Trust services                                                                                                              11               17              16
      Other segments                                                                                                              23               23               (1)
      Net earnings from continuing operations                                                                               $    181        $     143       $     102

(1) 2001 and 2002 data was restated to exclude discontinued operations.
(2) This contribution may differ from the specific results of each subsidiary, as it includes earnings attributable
    to non-controlling interests as well as goodwill charges for the 2001 fiscal year.


ANALYSIS OF FINANCIAL RESULTS                                                                        The expense related to claims, benefits and change in actuarial and
In 2003, the Financial Corporation’s net earnings totalled $178 million,                             related liabilities rose to $2,993 million, up $644 million over the
an emphatic 29% increase over the $138 million attained in 2002.                                     previous year. The increase is a result of business growth as well as
Net earnings from continuing operations stood at $181 million                                        the strengthening of reserves of certain insurance business lines. It
compared to $143 million in 2002, for a return on equity of 15.4%                                    also results from an increase in investment revenues in the life and
in 2003. These excellent results were achieved during a period that                                  health insurance segment generated from products that include a
saw strengthening of the balance sheet and are the rewards of                                        total transfer of investment risk to policyholders.
Canada-wide expansion efforts, major growth in insurance business,
favourable underwriting experience in most insurance segments,                                       The consolidated operating expenses of $930 million in 2003 were
investment performance and enhanced operational efficiency.                                          up $19 million, or 2%, over 2002. This increase is mainly due to
                                                                                                     growth in insurance business and is offset through stringent cost
The Financial Corporation’s consolidated revenues for the year                                       management and government assistance received in 2003.
ended December 31, 2003 totalled $4,182 million, having grown by
$674 million (or 19.2%) over the previous year. Consolidated operating                               Total consolidated assets climbed to $13.2 billion as at December 31,
revenues posted robust 15.8% growth over the previous year. This                                     2003, a 8.6% increase that reflects the robust growth in
growth is due to a $478 million increase in net premiums over 2002,                                  insurance business.
which itself was generated by a 12% increase in group insurance
products, an 82% increase in savings products premiums, as well as
an overall 17% rise in net general insurance premiums (the result of
15% growth in Québec and 22% growth outside Québec).

The $206 million increase over 2002 in net interest and investment
revenues originates primarily from an improvement in financial
markets and the quality of the investment portfolio. A large part of
this increase, however, is due to products that include a total
transfer of investment risk to policyholders. In 2002, net interest and
investment revenues of the insurance subsidiaries were affected by
provisions put in place regarding the permanent devaluation of
certain securities that reflected struggling financial markets.
                                                                                                                                                                             Desjardins Group
page 64




                                       INSURANCE, TRUST SERVICES AND                                           STRATEGY
                                       ASSET MANAGEMENT – MAIN ACTIVITIES                                      DFS has adopted the following strategies:

                                       LIFE AND HEALTH INSURANCE ACTIVITIES                                    ■   Achieve a minimum 12% return on capital for each business
Management’s Discussion and Analysis




                                       DESCRIPTION Ranking first and fifth among life and health insurance         segment, by the end of its three-year plan, in 2005;
                                       companies in Québec and Canada respectively, in terms of direct         ■   Grow its market share through sustained internal growth,
                                       written premiums, Desjardins Financial Security (DFS) offers life and       supported in Québec through insurance offerings to caisse
                                       health insurance coverage as well as savings products and services          members and supported in Canada through individual and group
                                       through a diverse distribution network. It also owns two                    insurance offerings;
                                       subsidiaries: Sigma Assistel, which offers assistance services          ■   Consolidate the company’s leadership position in the Québec
                                       throughout the world, and SFL Management, which distributes its             market and position itself among the top five Canadian insurers
                                       products through 1,000 partner-representatives of the SFL-LFS               nationwide;
                                       Financial Services.                                                     ■   In terms of productivity, increase efficiencies and cut operating
                                                                                                                   costs by reviewing existing methodologies and optimizing
                                       INDUSTRY The Canadian life and health insurance industry comprises          business processes, technology and e-commerce;
                                       some 110 companies, with the top five companies sharing nearly          ■   In terms of organizational development, intensify efforts at
                                       75% of the total market, a percentage that reflects the most recent         managing future recruitment and innovation and become known
                                       industry transactions. The top three life and health insurers in            throughout Canada as a considerate, reliable, and progressive
                                       Canada have become diversified financial enterprises whose activities       company that knows how to create value.
                                       go beyond the scope of traditional life and health insurers and that
                                       are also actively growing in the area of wealth management.             OUTLOOK Because industry consolidation has reduced the number
                                                                                                               of major players with national reach, DFS now stands as a choice
                                       Owing to federal and provincial legislation, cross-pillar integration   option as a supplier of group insurance plans. It intends on taking
                                       should also continue, thereby increasing competitive pressures and      full advantage of this position and, as stated in its strategic
                                       paving the way for life and health insurance companies to offer         orientations, become a leader in group insurance in Canada.
                                       banking services. In Québec, where legislation already permits the
                                       distribution of life and health insurance in provincial deposit-        In the individual insurance sector, the network of Laurentian
                                       taking financial institutions, life and health insurance companies      Financial Services financial centres has continued expansion
                                       can now, under certain conditions, expand their line of services by     primarily outside Québec. With respect to the service offering, DFS
                                       offering banking products and general insurance and by practicing,      has already distinguished itself by integrating health coverage with
                                       subject to the adoption of a government regulation, certain trust       life insurance offerings and by designing innovative and
                                       company activities.                                                     competitive products.

                                       With respect to demographics, the aging Canadian population will        Major initiatives launched in 2003, such as the administrative
                                       considerably affect DFS’s operations within the next 10 years. It is    reorganization and the overhaul of business processes, will help
                                       expected that many more health insurance products will be opened        reduce operating expenses, increase the profitability of activities,
                                       and that markets for individual and group retirement savings will       and increase returns on capital invested. Finally, DFS will rely on the
                                       grow dramatically.                                                      Financial Corporation’s Canada-wide expansion strategy to grow
                                                                                                               market presence and strengthen its networks throughout the
                                       2003 ACHIEVEMENTS                                                       Canadian market.
                                       ■   Net earnings of $110 million, a 39.2% increase.
                                       ■   At 14.1%, strong growth in return on equity.
                                       ■   Net premiums of $2.1 billion, an 17.9% increase.
                                       ■   12% increase in group insurance premiums.
                                       ■   134% jump in sales of group savings and strong growth in sales
                                           of individual annuities.
                                       ■   Favourable underwriting experience across most business lines.
                                       ■   Controlled operating expenses during a period of strong
                                           business growth.
                                       ■   Major improvement in the investment portfolio return.
                                       ■   Strengthened reserves on the balance sheet offset by items that
                                           had a favourable impact on profitability.


                                       SELECTED FINANCIAL DATA
                                       (in millions of $ and as a %)

                                                                                                                                           2003             2002            2001
                                             Insurance and annuity premiums                                                            $   2,079       $   1,764        $   1,612
                                             Net investment income                                                                           649             453              522
                                             Payments and credits paid to policyholders                                                    2,122           1,644            1,632
                                             Operating expenses                                                                              570             548              547
                                             Net earnings                                                                                    110              79               72
                                             Return on equity                                                                               14.1 %          10.8 %           10.5 %
Desjardins Group
                                                                                                                                                 page 65
GENERAL INSURANCE ACTIVITIES                                           STRATEGY
DESCRIPTION Desjardins General Insurance Group (DGIG) is present       DGIG has adopted the following strategies:
in the Canadian marketplace by way of four subsidiaries and
provides a wide range of clients with all the coverage they need to    ■   Continue to gain a competitive edge in order to maintain superior




                                                                                                                                                 Management’s Discussion and Analysis
protect their physical assets and receive financial compensation for       profitability while remaining disciplined in terms of operational
bodily injuries sustained in automobile accidents. Desjardins              excellence;
General Insurance operates in the individuals market in Québec         ■   Achieve dynamic and profitable growth outside Québec through
through the Desjardins caisse network as well as a call centre. The        the individuals segment of the groups market;
Personal General Insurance distributes its automobile and property     ■   Maintain profitable growth in Québec through the individuals
insurance products in Québec by relying on the support of groups           segment of the “major market“ and in partnership with the caisse
(professional associations, employers, unions) that act as partners.       network and the individuals segment of the “groups market“;
The Personal Insurance Company operates in a similar fashion but       ■   Ensure a positive contribution to the performance of the businesses
outside Québec. Essentially, both The Personal entities conduct            segment in Québec with respect to investment management;
business by way of call centres. Finally, Certas Direct Insurance      ■   Foster the development of expertise and the future of the
Company serves individuals in the “major markets“ segment                  insurance field.
primarily in Ontario and Alberta.
                                                                       OUTLOOK In 2004, DGIG plans on continuing its growth primarily in
INDUSTRY In Québec, strong profitability in recent years and a         the group insurance segment. In the “major market“ segment, it
marketplace characterized by intense competition have exerted          envisions sustained collaboration with the caisse network in order
downward pressure on automobile insurance rates. Outside               to ensure continued and consistent growth in its business volume.
Québec, general conditions in the automobile insurance market are
strenuous due to the regulatory environment and compensation           The claims experiences in the automobile insurance segment
policies that favour a staggering rise in claims experience. In        should improve following interventions by regulatory authorities
addition, towards the end of 2003, certain maritime provinces          to limit the increase in claims. In addition, DGIG itself intends on
enacted laws that will impose lower rates that will have a direct      employing tools that will improve management of claims and
impact on profitability.                                               bodily injuries.

The property insurance market is also facing major challenges          The profitability level that DGIG is aiming for in 2004 is close to the
primarily owing to the increase in claims resulting from theft and     first quartile in the industry. The achievement of this objective will
natural disasters, which exert upward pressure on premiums.            rely on a new allocation of assets invested as investments, which
                                                                       was entirely reviewed in 2003.
In the Canadian business segment, claims experience has
significantly improved, but DGIG holds only a small share of the
market in Québec.

2003 ACHIEVEMENTS
■   43.8% growth in net earnings.
■   Underwriting profits for an eleventh consecutive year.
■   18.9% growth of gross premiums, 40% of which occurred in the
    groups market outside Québec.
■   Operating expense ratio for subsidiaries outside Québec is
    declining and stabilizing at a level approaching that of
    subsidiaries in Québec.
■   Considerable improvement in investment portfolio performance.


SELECTED FINANCIAL DATA
(in millions of $ and as a %)

                                                                                                    2003            2002            2001
      Gross premiums written                                                                    $   1,270       $   1,068       $     936
      Net premiums earned                                                                           1,137             971            883
      Combined ratio                                                                                 97.9 %          96.8 %          98.2 %
      Underwriting profit                                                                       $      24       $      31       $      16
      Net investment revenues                                                                          60              30              46
      Net earnings                                                                                     46              32              25
      Return on equity                                                                               13.4 %          10.5 %           8.7 %


                                                                                                                                                 Desjardins Group
page 66




                                       INSURANCE, TRUST SERVICES AND                                          STRATEGY
                                       ASSET MANAGEMENT – MAIN ACTIVITIES                                     The Trust has adopted the following strategies:

                                       TRUST SERVICE ACTIVITIES (INCLUDING INVESTMENT FUNDS)                  ■   Work closely with the caisse network to substantially increase
Management’s Discussion and Analysis




                                       DESCRIPTION The main subsidiary of Desjardins Specialized Financial        sales of funds and private management services;
                                       Services Management (DSFSM), Desjardins Trust (the Trust), designs     ■   Deliver a competitive product offer by maintaining sound
                                       and markets products and services in the areas of wealth                   returns that satisfy client expectations;
                                       management and administration. Specifically, the Trust specializes     ■   Fully develop its activities with other Desjardins Group networks
                                       in investment funds, private management services, group savings            and diversify distribution channels on the basis of clear and
                                       plans, as well as securities administration custody.                       distinct benefits;
                                                                                                              ■   Establish a position appropriate to its business lines in Canada-
                                       INDUSTRY Given the continued consolidation in the Canadian                 wide markets;
                                       investment funds sector, the ten largest fund manufacturers in the     ■   Continue to advance the organization and foster key
                                       country control nearly 75% of the market. According to data issued         competencies required to achieve its vision.
                                       by the Investment Funds Institute of Canada (IFIC), investment
                                       funds outstanding grew by $47.5 billion in 2003 to reach               OUTLOOK During the year, the Trust acquired Northwest Mutual
                                       $439 billion as at December 31. This represents a hike of 12.1%, the   Funds, a company whose funds have enjoyed much success in
                                       largest annual growth since 1999. Cumulative net sales for 2003        Canada and boast reputable track records in terms of returns.
                                       were negative due to withdrawals of $607 million (excluding            Through this acquisition, the Trust intends on heightening its
                                       distributed income), compared to positive net sales of $3.4 billion    presence in the funds market aimed at network intermediaries and
                                       in 2002. The sharp decline in funds outstanding in 2002, which         thereby expand fund distribution throughout Canada.
                                       continued at the start of 2003, triggered intensive restructuring in
                                       this segment. Specifically, a major rationalization effort with        In addition, the Trust also used 2003 to update and restructure the
                                       respect to funds and families of funds led to a record number of       Desjardins Funds line of funds, the main purpose of which is to
                                       fund mergers in 2003.                                                  deliver effective products that satisfy the ever-changing needs of
                                                                                                              investors by offering a wider range of products, management
                                       Evolving in this rapidly consolidating industry, but one that holds    approaches, and international and national portfolio managers.
                                       opportunities for established companies, the Trust remains
                                       committed to maintaining and strengthening its competitive             Furthermore, through its Desjardins Investment Management
                                       position such that it can continuously better satisfy the ever-        subsidiary, the Trust continued to develop in the area of private
                                       changing needs of investors.                                           management for individuals. It also contributed to repositioning its
                                                                                                              group savings plans and expects to realize their full potential in
                                       2003 ACHIEVEMENTS                                                      2004 in order to speed up growth in this area.
                                       ■   Continued to expand outside Québec through the acquisition of
                                           Northwest Mutual Funds.                                            Finally, the Trust, which stands as Québec’s leader in securities
                                       ■   Cracked the $1 billion threshold for combined Maestral and         administration and custody, is putting forth the efforts needed to
                                           Northwest funds outstanding.                                       maintain its competitive edge in a highly competitive industry. An
                                       ■   31% growth in investment funds outstanding.                        example of such efforts is the major investment made towards an
                                       ■   16.8% growth in assets under administration.                       all-new informatics system.
                                       ■   Desjardins Funds rate of net sales surpasses the industry rate.


                                       SELECTED FINANCIAL DATA
                                       (in millions of $ and as a %)

                                                                                                                                          2003            2002            2001
                                             Net fee income                                                                           $      90       $      91       $      89
                                             Net investment revenues                                                                         32              33              32
                                             Operating expenses                                                                             103              96              95
                                             Net earnings                                                                                    12              18              15
                                             Return on equity                                                                              13.5 %          22.6 %          23.9 %
                                             Investment funds outstanding                                                             $   6,382       $   4,870       $   5,056
                                             Assets under administration (in billions of $)                                                 167             143             146
Desjardins Group
                                                                                                                                                  page 67
OTHER BUSINESS SEGMENTS                                                   OUTLOOK In 2004, Desjardins Asset Management will continue the
DESCRIPTION The Financial Corporation’s other segments include            process of integrating its new activities and of building a team that
asset management as well as activities carried out by the holding         offers specialization in response to client needs. As an investment
company itself.                                                           manager, it plans on becoming a supplier of choice in its areas of




                                                                                                                                                  Management’s Discussion and Analysis
                                                                          expertise and on continuing to develop and manage alternative
In 2003, asset management activities (Opvest) and investment              investment products.
management activities (Elantis Investment Management) were
combined to form a new investment segment named Desjardins Asset
Management. Also, a new company was created, and certain assets
under management (previously managed by Elantis Investment
Management), certain employees and certain infrastructures were
transferred into this company. Subsequently, 70% of the shares of the
company, now named Fiera Capital Management (FCM), were sold to
an external partner. This reorganization initiative ended in a net gain
of $5 million before taxes.

STRATEGY As a holding company, the Financial Corporation’s role is
to ensure strategic planning as well as the financial health of the
group it oversees, direct the orientation of its subsidiaries, and
maximize synergies among these subsidiaries with Desjardins
Group’s extensive network, thereby creating value for
shareholders, members, clients, and partners of Desjardins Group.

Desjardins Asset Management key mandate is to optimize the
risk-return ratio of all assets held by the Financial Corporation and
its subsidiaries. To do so, it has adopted a portfolio management
approach centered on optimizing returns based on a
predetermined level of risk. Furthermore, as part of the Financial
Corporation’s new multi-management approach, it was also
charged with outsourcing mandates to external managers selected
for their management approach and specialization.




                                                                                                                                                  Desjardins Group
page 68




                                       BUSINESS SEGMENT – SECURITIES                                                 As a result of this concentration, the group of nine firms owned by
                                                                                                                     the largest Canadian banks (full-service and on-line brokerages)
                                       DESCRIPTION OF THE SEGMENT                                                    posted the following statistics:
                                       Desjardins Securities is Desjardins Group’s brokerage firm. It
Management’s Discussion and Analysis




                                       provides individuals, institutional investors, businesses and                 ■   4.4% of the total number of firms
                                       governments with the complete range of products and services                  ■   68.6% of total industry income
                                       associated with a fully integrated brokerage firm. Individual clients         ■   76.7% of total profits earned
                                       are served by Desjardins Securities’ full-service brokerage divisions,
                                       its on-line brokerage (Disnat) service and the Desjardins service             2003 was marked by variable market situations. International
                                       network. Business and governmental needs are met by Desjardins                events (war in Iraq, SARS, etc.) caused uncertainty among investors.
                                       Securities’ Corporate Finance, Debt Capital Markets and Equity                As they were in 2002, investors remained cautious and reserved
                                       Capital Markets divisions. With a presence in all regions of Québec,          investment managers, most notably during the first quarter of
                                       Desjardins Securities also has branches in Toronto, North York,               2003. An upswing in activity was noted at the beginning of the
                                       Ottawa and Thunder Bay, in addition to institutional investment               second quarter and has subsequently continued; the aggregate
                                       advisors in Vancouver.                                                        value of industry revenue and earnings is still increasing. However,
                                                                                                                     despite this turnaround, nearly one-third of the firms posted
                                       DESCRIPTION OF THE INDUSTRY                                                   operating losses at the end of 2003 due to the difficulties
                                       The securities industry did not undergo any significant changes               encountered in the first quarter. At the end of the first quarter,
                                       over the past year. The number of firms remained unchanged while              more than half of the firms were posting losses.
                                       the employment level decreased by 2.3%. As at November 30, 2003,
                                       the Canadian securities industry comprised 206 brokerage houses
                                       and 37,196 employees. Despite the large number of industry
                                       participants, the industry is quite concentrated.


                                           2003 ACHIEVEMENTS
                                           ■    Major investments were made to further develop resources and skills and improve infrastructure.
                                           ■    Total revenues increased by 46.6%, compared with 7.5% for the industry.
                                           ■    Operating revenues (transactional) outside Québec increased, representing 17% of revenues in 2003 (25% in the last quarter).
                                           ■    Overall Québec market share increased from 8.2% to 9.7%.
                                           ■    Assets under administration grew by 40.8%, rising from $9.8 billion to $13.8 billion.
                                           ■    Disnat Direct, the very first direct-access on-line brokerage service offered by a Canadian financial institution, was launched.
                                           ■    The strategic capital group was set up to complement the other Desjardins financing methods and to offer better service to
                                                average businesses.
                                           ■    Finalization of the Desjardins Securities-caisse phase of the network efficiency management project (TANDEM).



                                       STRATEGY                                                                      OUTLOOK
                                                                                                                     To pursue the efforts begun in 2003 in conjunction with the caisse
                                           To help Desjardins Group achieve its objective of becoming the            network to achieve business growth as part of the network
                                           largest wealth manager in Québec by offering its individual and           efficiency management project.
                                           institutional clients across Canada a complete range of high-
                                           quality financial products and services. Desjardins Securities also       To raise our profile and increase our business volume in the full-
                                           seeks to support the growth of businesses and entrepreneurs by            service brokerage sector, particularly in Québec.
                                           contributing to the services offered by Desjardins Group and by
                                           taking on a leadership role in selected business segments.                To enhance our on-line brokerage products and improve their
                                                                                                                     competitive edge.

                                       The following strategies will help us to make our vision a reality            To capitalize on the investments made over the past two years with
                                       and to pursue growth most notably by:                                         respect to expertise in the Equity Capital Markets, Research, and
                                                                                                                     Corporate Finance divisions.
                                       ■       realizing the firm’s potential, ensuring that Desjardins Group
                                               takes its rightful place in the securities brokerage sector;
                                       ■       developing our skills, team quality and products, while raising
                                               Desjardins Group’s profile among target clienteles;
                                       ■       strengthening human, technological and organizational
                                               infrastructure, while fostering growth in these areas and
                                               maximizing profitability;
                                       ■       providing a stimulating and respectful workplace for all employees,
                                               thus making Desjardins Securities an employer of choice.
Desjardins Group
                                                                                                                                              page 69
TABLE 5 – DESJARDINS SECURITIES
Selected data for the year ended December 31
(in millions of $ and in numbers)

                                                                                                  2003            2002            2001




                                                                                                                                              Management’s Discussion and Analysis
      Assets under administration                                                             $ 13,827        $   9,822       $   8,244
      Total revenues                                                                               170              116             104
      NET EARNINGS (NET LOSS)                                                                 $    (3.9)      $    (4.4)      $     5.0

      Service points                                                                                 38             31              30
      Total number of employees                                                                   1,070            933             696
        In Québec                                                                                   917            828             651
        Outside Québec                                                                              153             95              45


ANALYSIS OF FINANCIAL RESULTS                                          The net loss for the year ($3.9 million) was $0.5 million lower than
Total revenues amounted to $170 million for the year ended             that posted in the previous year. The payroll for the Desjardins
December 31, 2003, compared to $116 million for 2002. This             caisse network totalled $12 million.
represents a 46.6% increase over last year. Commission revenues
were up 39% for the same period, while underwriting revenues           As at December 31, 2003, Desjardins Securities’ assets totalled
almost tripled. The other revenue categories posted a 28%              $1.7 billion, an increase of $321.6 million over the previous year.
increase. On its own behalf and that of its clients, Desjardins        Shareholders’ equity totalled $53.2 million. Assets under
Securities carried out more than 1,117,000 transactions during the     management totalled $13.8 billion, a 40.8% increase over 2002.
year, 21% more than in 2002. For a second consecutive year,            Desjardins Securities complies with all capital-related regulations
Desjardins Securities made significant investments aimed at            imposed by self-regulatory organizations.
developing new markets.


                          REVENUE GROWTH
                          (%)

                          80

                          60

                          40

                          20

                            0

                         -20

                         -40
                                                  2001
                                    1999
                                           2000


                                                         2002
                                                                2003




                                Industry

                                Desjardins Securities




                                                                                                                                              Desjardins Group
page 70




                                       BUSINESS SEGMENT – VENTURE CAPITAL                                          The stock market correction of the past years, the weakened
                                                                                                                   economy and slowdown in IPOs and mergers and acquisitions
                                       DESCRIPTION OF THE SEGMENT                                                  delayed outflows and negatively affected portfolio valuation. We
                                       Desjardins Venture Capital is the venture capital fund manager of           therefore need to get back to basics, that is, better select
Management’s Discussion and Analysis




                                       Desjardins Group. It manages the assets of seven private Desjardins         companies, adhere to more stringent standards in the investing
                                       funds (Desjardins Limited Partnership and six Desjardins regional           process including the initial valuation, maximize the use of factors
                                       investment funds) and Capital régional et coopératif Desjardins, a          contributing to value creation and work on outflows. The forecasts
                                       publicly-traded company founded in 2001 on the initiative of                for the coming years are nevertheless more promising; as the
                                       Desjardins Group, and whose authorized capitalization will reach            market calmed down, business valuations return to more
                                       $1.4 billion by 2011.                                                       reasonable levels.

                                       To meet the needs of its eight funds under management and to                In terms of financial performance, Québec venture capital
                                       provide companies and cooperatives across Québec with access to             companies currently slate weaker returns compared to the
                                       venture capital close to their place of business, Desjardins Venture        Canadian industry. This performance is certainly related in large
                                       Capital operates 14 offices (soon 16) across Québec. These offices          part to the young status of the Québec industry, but also to the
                                       are primarily located in Desjardins corporate financial centres. This       goals of various players.
                                       strategy is complemented by a structure of specialized business
                                       segments (industry skills). The offices work in concert with the            In Québec, we are currently faced with an intense concentration of
                                       regional teams in order to provide entrepreneurs with relevant              government funds, a shortage of specialized, high value-added
                                       expertise tailored to their needs.                                          players, a weak contribution by foreign investors, as well as an
                                                                                                                   excessively restricted number of true angel investors. A committee
                                       DESCRIPTION OF THE INDUSTRY                                                 examined the subject during the year and subsequently submitted
                                       2003 was marked by significant repositioning in the venture capital         recommendations to the minister responsible for Québec economic
                                       industry in Québec. After a decade of strong growth, investments            and regional development to review the role of the Québec state
                                       declined significantly in 2003. In fact, a total of $575 million was        in venture capital. 2004 will therefore bring many changes and
                                       invested in Québec, down from $720 million in 2002, representing            Desjardins Group must quickly take a position that reflects its
                                       a 20.1% drop. For a second consecutive year, Québec has shown               economic importance and the quality of its offer.
                                       intensified reinvestment activity as well as a decline in the amounts
                                       invested as a result of a greater number of rounds of financing and
                                       the impact of reduced valuations.



                                           2003 ACHIEVEMENTS
                                           ■    Obtain greater Québec-wide presence by opening seven new offices, in addition to the seven existing offices.
                                           ■    New commitments totalling $86 million in 85 companies.
                                           ■    $0.13 increase in the share value of Capital régional et coopératif Desjardins, bringing it to $10.25.
                                           ■    46% growth in share ownership of Capital régional et coopératif Desjardins, totalling approximately 105,000 shareholders.
                                           ■    29.2% growth in assets under management, rising from $438 million to $566 million.
                                           ■    Desjardins Venture Capital is a partner to 165 Québec companies and cooperatives, enabling close to 13,000 jobs to be created
                                                or maintained.



                                       STRATEGY                                                                    OUTLOOK
                                                                                                                   Focus on business development in concert with corporate financial
                                           Support Desjardins Group in achieving its goal of being                 centres.
                                           recognized as the preferred partner of SMBs and as having the
                                           best integrated service offer. Desjardins Venture Capital also          Continue opening offices in order to cover all areas of Québec.
                                           aims to become the best venture capital fund manager in
                                           Québec in terms of partnerships with SMBs and cooperatives and          Adapt our offer to satisfy the needs of cooperatives and businesses
                                           in terms of contributing to Québec’s economic development.              located in resource regions.

                                                                                                                   Benefit from the repositioning of the industry in order to grab a
                                       The following strategies will contribute to the achievement of              position appropriate to our economic performance and the quality
                                       our vision:                                                                 of our offer.

                                       ■       Gain recognition among SMBs and cooperatives as the leading
                                               venture capital partner with respect to personalized business
                                               relationships, extensive networks, and access to expertise and
                                               sound advisory services focused on enhancing business valuation;
                                       ■       Complete the service offer provided by caisses and corporate
                                               financial centres and optimize synergies within Desjardins Group;
                                       ■       Benefit from the repositioning of the venture capital industry in
                                               order to grab a position appropriate to our economic strength
                                               and the quality offer, and to set us on a leadership path with
                                               respect to investment transactions in Québec;
                                       ■       Ensure healthy profitability and maximize productivity;
                                       ■       Contribute to economic development in Québec.
Desjardins Group
                                                                                                                                                 page 71
TABLE 6 – DESJARDINS VENTURE CAPITAL
Selected data for the year ended December 31
(in millions of $ and in numbers)

                                                                                                   2003             2002            2001




                                                                                                                                                 Management’s Discussion and Analysis
      Assets under management                                                                  $    566        $     438        $    254
      Investments, on the books                                                                     144              176             170
      NET EARNINGS (NET LOSS)                                                                  $     (51)      $     (26)       $       4
      Business partners                                                                             165              152             123


ANALYSIS OF FINANCIAL RESULTS                                          In 2003, Desjardins Venture Capital prospectively applied in
Development capital investment and reinvestment activities             advance the new CICA accounting standard with respect to
translated into commitments totalling $86 million in 85 Québec         investment companies. This change in accounting method partially
businesses and cooperatives. Of this amount, $69 million was paid      explains the losses recorded in 2003, i.e., $18 million over a total of
out in 2003. Despite the lingering unfavourable economic climate,      $51 million. The difficulties experienced in 2003 by holding
the disinvestments associated with all funds under management          companies, chiefly in new technologies, accounts for $30 million in
resulted in cash inflows of approximately $9 million in 2003,          additional losses.
compared to $18 million in 2002.
                                                                       Beyond return-on-investment objectives, Québec’s economic
As at December 31, 2003, assets of the eight funds under               development remains a priority for shareholders of funds under
management of Desjardins Venture Capital Inc. totalled $566 million,   management. Desjardins Group contributes to economic
compared to $438 million the previous year, up 29.2%. Assets under     development through its six regional funds, Desjardins Venture
management more than doubled over the last two years, primarily        Capital Limited Partnership, and through its commitment to Capital
on account of the fundraising campaign carried out by Capital          régional et coopératif Desjardins.
régional et coopératif Desjardins.




                                                                                                                                                 Desjardins Group
page 72




                                       REVIEW OF COMBINED FINANCIAL STATEMENTS

                                       TOTAL REVENUES
Management’s Discussion and Analysis




                                        HIGHLIGHTS
                                        ■   Total revenues rose by 12%
                                        ■   Other income jumped 20.1% to $4,334 million
                                        ■   Net interest income totalled $3,378 million, a $100 million increase



                                       TABLE 7 – TOTAL REVENUES
                                       For the year ended December 31
                                       (in millions of $ and as a percentage)

                                                                                                     2003                              2002                                                       2001
                                             Net interest income                        $   3,378               43.8 %    $   3,278               47.6 %                    $           2,910             46.1 %
                                             Other income                                   4,334               56.2          3,610               52.4                                  3,405             53.9
                                                                                        $   7,712              100.0 %    $   6,888              100.0 %                    $           6,315            100.0 %


                                       Desjardins Group’s total revenues rose by $824 million or 12%. Nearly       Overall, the significant rise in the average volume of interest-bearing
                                       88% of this increase was attributable to “other income“ category,           assets generated an additional $371 million of interest income.
                                       which grew by $724 million or 20.1%. This was primarily due to
                                       increased income from life and health and general insurance                 At the same time, the average yield on interest-bearing assets now
                                       premiums, in addition to higher business volume and sharply higher          stands at 6.02%, a slight drop of 0.29 points that reduced interest
                                       investment income. The increase in net interest income, up by               income by $229 million. In fact, this decrease resulted from the
                                       $100 million or 3.1%, is attributable to sustained growth in the            replacement of last year’s assets with assets bearing lower interest.
                                       outstanding loan portfolio.                                                 For example, the average annual rate for one-year and five-year
                                                                                                                   mortgages was 4.84% and 6.39% in 2003, compared to 5.17% et
                                       NET INTEREST INCOME                                                         7.02% in 2002.
                                       Net interest income is the difference between interest income
                                       earned on assets such as loans and securities, and interest expense         Interest expense rose $42 million or 2.6%, totalling $1,651 million.
                                       related to liabilities such as deposits, notes, borrowings and              This was primarily due to increased deposits, which jumped almost
                                       subordinated debentures.                                                    $4.1 billion or 6.6% in 2003. Individual deposits represented nearly
                                                                                                                   59% of the total.
                                       Desjardins Group’s net interest income rose to $3,378 million in
                                       2003. Several factors had an influence on this increase, including
                                       continued growth in business volume due to shrewd management                                    TOTAL REVENUES
                                       of the members’ financial assets, sound and prudent management                                  (Millions of $)
                                       of interest rate risk, funding strategies and the judicious                                     8,000
                                       composition of financial instruments.
                                                                                                                                                                                         4, 334
                                                                                                                                                                                3,610



                                       Table 8 explains changes in net interest margin for the main asset                              6,000
                                                                                                                                                                    3,405




                                       and liability classes, while Table 9 presents a breakdown of the
                                                                                                                                                            3,122
                                                                                                                                                    2,923




                                       impacts on net interest income of changes in volumes and rates for
                                       the different assets and liabilities.                                                           4,000
                                                                                                                                                                                         3,378




                                       Once again, the financial intermediation segment was a major
                                                                                                                                                                                3,278
                                                                                                                                                                    2,910
                                                                                                                                                            2,718




                                       component of this impressive performance, generating 82.8% of
                                                                                                                                                    2,579




                                                                                                                                       2,000
                                       net interest income for Desjardins Group as a whole, which is
                                       comparable to last year’s results.
                                                                                                                                             0
                                       As shown in Table 9, interest income was up $142 million or 2.9% due
                                                                                                                                                                    2001
                                                                                                                                                   1999
                                                                                                                                                            2000


                                                                                                                                                                            2002
                                                                                                                                                                                         2003




                                       to increases in interest-bearing assets. This stems mainly from
                                       sustained growth in the average volume of loan activities, which
                                       jumped almost $4.9 billion. This increase was attributable to solid
                                       growth in the demand for credit in 2003, driven by the domestic                                      Net interest income
                                       economy, which continued to show signs of strength, particularly in
                                       the housing, consumer spending and corporate investment segments.                                    Other income
Desjardins Group
                                                                                                                                                                       page 73
Overall, the average cost of assets financed by liabilities and equity                     All in all, the increase in net interest income resulted from
dipped 9 basis points to 1.84%, representing a $65 million                                 sustained growth in business volume due to a more favourable
reduction in interest expense.                                                             interest rate environment, efficient management of interest rate
                                                                                           risks, combined with a significant $61 million reduction in impaired




                                                                                                                                                                       Management’s Discussion and Analysis
                                                                                           loans. As a result, net interest income as a percentage of average
                                                                                           assets was 3.77%, compared to 3.93% in 2002.


TABLE 8 – NET INTEREST INCOME ON AVERAGE ASSETS AND LIABILITIES
For the year ended December 31
(in millions of $ and as a percentage)

                                                                                   2003                                                 2002
                                                           Average                                Average         Average
                                                           balance              Interest              rate        balance             Interest      Average rate
      ASSETS
      Interest-bearing assets
        Securities, cash and deposits
           with financial institutions                     $ 19,121         $       840               4.39 %      $ 17,980        $       852                 4.74 %
        Loans                                                64,425               4,189               6.50          59,483              4,035                 6.78
      Total interest-bearing assets                          83,546               5,029               6.02             77,463           4,887                 6.31
      Other assets                                            6,162                   –                  –              5,986               –                    –
      Total assets                                         $ 89,708         $     5,029               5.61 %      $ 83,449        $     4,887                 5.86 %
      LIABILITIES AND EQUITY
      Interest-bearing liabilities
        Deposits                                           $ 66,301         $     1,567               2.36 %      $ 62,219        $     1,531                 2.46 %
        Borrowings and subordinated debentures                1,341                  84               6.26           1,166                 78                 6.69
      Total interest-bearing liabilities                     67,642               1,651               2.44             63,385           1,609                 2.54
      Other liabilities                                      16,123                   –                  –             14,610               –                    –
      Equity                                                  5,943                   –                  –              5,454               –                    –
      Total liabilities and equity                         $ 89,708         $     1,651               1.84 %      $ 83,449        $     1,609                 1.93 %
      NET INTEREST INCOME                                                   $     3,378                                           $     3,278
      AS A PERCENTAGE OF AVERAGE ASSETS                                                               3.77 %                                                  3.93 %


TABLE 9 – IMPACT ON NET INTEREST INCOME OF CHANGES IN BALANCES AND RATES
For the year ended December 31
(in millions of $ and as a percentage)

                                                                                               2003-2002                                          Increase
                                                                                                                                                 (decrease)
                                                                           Change in            Change in                         Average               Average
                                                                      average volume          average rate            Interest     volume                   rate
      ASSETS
      Securities, cash and deposits with financial institutions             $     1,141               (0.35)%     $       (12)    $        50           $      (62)
      Loans                                                                       4,942               (0.28)              154             321                 (167)
      CHANGE IN INTEREST INCOME                                                                                   $       142     $       371           $     (229)
      LIABILITIES
      Deposits                                                              $     4,082               (0.10)%     $        36     $        96           $      (60)
      Borrowings and subordinated debentures                                        175               (0.43)                6              11                   (5)
      CHANGE IN INTEREST EXPENSE                                                                                  $        42     $       107           $      (65)
      CHANGE IN NET INTEREST INCOME                                                                               $       100     $       264           $     (164)



                                                                                                                                                                       Desjardins Group
page 74




                                       OTHER INCOME                                                             Individuals insurance premiums increased 2% to reach
                                       Other income is all income not classified as interest income. It         $379.8 million in 2003. Sales totalled $37.9 million in 2003, a
                                       increased by $724 million, or 20.1%, in 2003 as compared to 2002.        slightly higher result over 2002. The number of contracts sold in
                                       Other income accounts for 56.2% of total revenues in 2003,               2003 rose to 21,161, a 12% increase over the previous year. Market
Management’s Discussion and Analysis




                                       compared to 52.4% in 2002.                                               fluctuations primarily favoured sales of both guaranteed and
                                                                                                                index-linked savings products. Overall, including the sales of
                                       The growth in other income is largely attributable to a major increase   Millenia III Segregated Funds, sales rose 16% over 2002.
                                       in net premium income, i.e., insurance and annuity premiums,
                                       relating to the life and health insurance and general insurance          Sales of individual annuities experienced strong growth over the
                                       segments. In fact, this category of other income recorded an increase    previous year, going from $142.2 million to $189.5 million in 2003.
                                       of $459 million, or 17.5%, compared to the previous year. This item      This increase is chiefly due to the performance of affiliated and
                                       alone represents 71.1% of the total amount of other income and           external distribution networks and to a trend that is seeing
                                       therefore constitutes the largest portion of other income.               consumers prefer products that guarantee capital security or that
                                                                                                                offer less volatile returns.
                                       Insurance and annuity premium income from life and health
                                       insurance activities amounted to $2,079 million, up 18% over 2002.
                                       It has reached $2 billion for the first time. Premium growth was
                                       particularly pronounced in the group insurance segment, with an
                                       increase of 12% over 2002. This increase results from enrolments of
                                       major clients across Canada and inclusions of guarantees in major
                                       client contracts. Group and business insurance sales amounted to
                                       $109.5 million but were nevertheless lower than 2002 sales, which
                                       were exceptional due to enrolments of two major groups. Credit
                                       insurance provided by financial institutions, particularly in
                                       Desjardins caisses, recorded an increased balance in insured loans
                                       of 6% for 2003.


                                       TABLE 10 – OTHER INCOME
                                       For the year ended December 31
                                       (in millions of $ and as a percentage)

                                                                                                                                          2003            2002            2001
                                             Net premiums                                                                             $   3,082       $   2,623       $   2,381
                                             Deposit and payment service charges                                                            381             359             363
                                             Lending fees and card service revenues                                                         190             161             141
                                             Trust services and securities dealing                                                          222             188             180
                                             Other                                                                                          459             279             340
                                                                                                                                      $   4,334       $   3,610       $   3,405
                                             Growth in other income                                                                        20.1 %           6.0 %           9.1 %
                                             Other income as a % of total revenues                                                         56.2 %          52.4 %          53.9 %
Desjardins Group
                                                                                                                                                          page 75
                   DIVERSIFIED SOURCES OF OTHER INCOME                 LIFE AND HEALTH INSURANCE
                   For the year ended December 31, 2003                Net premiums
                                                                       (Millions of $)




                                                                                                                                        1,343.1




                                                                                                                                                          Management’s Discussion and Analysis
                                                8.8%                   1,500




                                                                                                        1,194.6
                   71.1%




                                                                                  1,037.5
                                                   4.4%                1,250
                                                       5.1%
                                                                       1,000

                                                   10.6%                750




                                                                                                                                                  379.8
                                                                                                                      373.8
                                                                                                372.6




                                                                                                                                                  355.9
                                                                        500




                                                                                            202.1



                                                                                                                  196.0
                                                                        250
                           Net premiums

                           Deposit and payment
                                                                            0




                                                                                            2001


                                                                                                                  2002


                                                                                                                                                  2003
                           service charges

                           Lending fees and card
                           service revenues

                           Trust services and                               Group insurance
                           securities dealing
                                                                            Individual insurance
                           Other
                                                                            Savings



Gross premiums written in the general insurance segment, an area
of expertise of Desjardins General Insurance Group (DGIG), totalled
$1.3 billion, up 18.9% over 2002. In Québec, gross premiums            LIFE AND HEALTH INSURANCE
totalled $806.5 million, a 13% increase and, outside Québec, they      Group insurance premiums
                                                                       per distribution network
rose 30% to reach $463.8 million. Growth was particularly strong for
                                                                       (Millions of $)
The Personal Insurance Company, whose premiums increased 40%
and for which the number of insurance policies issued increased




                                                                                                                              1,343.1
11%. Over 70% of DGIG’s activities in Québec originate out of the      1,500




                                                                                                        1,194.6
individuals market, while outside Québec, close to 70% of business




                                                                                            1,037.5
relates to groups. In 2003, premiums written in provinces other than   1,250
Québec accounted for 37% of DGIG’s total business, compared to
33% in 2002. The distribution of gross premiums written in Québec      1,000
and outside Québec among client bases in 2003 is illustrated in the
charts on page 76. In Québec, Desjardins General Insurance               750
premiums were written primarily by Desjardins Group members and
represented approximately 40% of DGIG’s total premiums. The net          500
premiums earned by the general insurance segment totalled
$1,137 million, a 17.1% increase over 2002.                              250

Deposit and payment service charges totalled $381 million, up               0
$22 million over 2002. This increase is largely attributable to the
                                                                                            2001

                                                                                                        2002

                                                                                                                          2003


end of a freeze on service charges for individual clients (in effect
from April 2001 to March 2003). However, it is mostly non-members
who use Desjardins automated teller machines to do their
transactions who were affected by the rate increase.                         Other clientele

                                                                             Members of Desjardins Group




                                                                                                                                                          Desjardins Group
page 76




                                       Revenues from lending fees and credit cards, composed mainly of              The Other category of other income, which includes investment
                                       card service revenues, totalled $190 million, an 18% increase over           income and gains on derivatives, increased by $180 million
                                       2002. This growth reflects members’ reliance on credit cards and             compared to 2002 to total $459 million. This increase is mainly
                                       the accord D financing service. VISA Desjardins business volumes             attributable to the investment income of insurance subisidiaries
Management’s Discussion and Analysis




                                       reached $8.1 billion , up 21% over 2002, and the cardholder base             due to improved financial markets and the quality of the
                                       totalled 2.5 million, or 14% more than in 2002.                              investment portfolio. However, a large part of this increase is due
                                                                                                                    to products that include a total transfer of investment risk to
                                       Income from trust services and securities dealing was $222 million           policyholders. In 2002, the investment income of the insurance
                                       in 2003, up 18.1%. This class of other income is composed mainly of          subsidiaries was affected by provisions put in place regarding the
                                       fee income from trust activities, commission income and securities           permanent devaluation of certain securities that reflected
                                       brokerage underwriting commissions.                                          struggling financial markets. The venture capital subisidiary’s
                                                                                                                    investment income was down in 2003, due to the recording of a
                                       Fee income from trust activities, carried out by Desjardins                  decline in value of its investments, which are accounted for at fair
                                       Specialized Financial Services Management (DSFSM), totalled                  market value.
                                       $90 million, which is similar to the amount recorded last year.
                                       Market volatility in 2002 and during first-quarter 2003 had a
                                       negative impact on investment funds outstanding. However, the                                   GENERAL INSURANCE
                                                                                                                                       Gross premiums written in Québec
                                       market recovery after first-quarter 2003 helped stabilize fee
                                       income. Net fee income generated from investment fund and                                                                 7%
                                       discretionary management activities accounted for 50% of DSFSM’s                                72%
                                       total fee income. These products were affected by market volatility
                                       in financial markets, which caused a 3% drop in income generated
                                       from these activities. As at December 31, 2003, DSFSM’s investment
                                       funds outstanding amounted to $6.4 billion, compared to                                                                            21%
                                       $4.9 billion on the same day the previous year. This increase is due
                                       to the acquisition of Northwest Mutual Funds, positive net sales,
                                       and favourable market conditions.

                                       Securities brokerage underwriting commissions increased by 39%
                                       while underwriting income almost tripled over last year due to,                                       Individuals
                                       among other factors, an increase in the volume of stock                                               Businesses
                                       transactions. Desjardins Securities carried out over 1,117,000 stock
                                       transactions in 2003, either for itself or on behalf of clients, an                                   Groups
                                       increase of 21% compared to 2002.



                                                          GENERAL INSURANCE                                                            GENERAL INSURANCE
                                                          Gross premiums written                                                       Gross premiums written outside Québec
                                                          (Millions of $)

                                                          1,000
                                                                                                    806.5




                                                                                                                                       32%
                                                                                    711.6
                                                                    624.8




                                                            750
                                                                                                            463.8




                                                            500
                                                                                            356.6
                                                                            311.4




                                                                                                                                                                      68%

                                                            250
                                                                                                                                              Individuals

                                                                                                                                              Groups
                                                              0
                                                                       2001


                                                                                       2002


                                                                                                       2003




                                                                  Québec

                                                                  Outside Québec
Desjardins Group
                                                                                                                                                      page 77
NON-INTEREST EXPENSES

 HIGHLIGHTS
 ■   Non-interest expenses totalled $6,492 million, a 17.5% increase




                                                                                                                                                      Management’s Discussion and Analysis
 ■   70.7% of the increase is related to “Claims, benefits, annuities and changes in insurance provisions“
 ■   Productivity ratio of 67.9%, compared to 64.8% in 2002



Non-interest expenses totalled $6,492 million in 2003, up                    CLAIMS, BENEFITS, ANNUITIES AND CHANGES IN INSURANCE PROVISIONS
$969 million or 17.5% over 2002. This rise is mainly attributable to         Expenses related to claims, benefits, annuities and changes in
a $685 million increase in expenses related to claims, benefits,             insurance provisions, which represent 46.7% of all non-interest
annuities and changes in insurance provisions, a $158 million                expenses, total $3,034 million, up $685 million over last year. This
increase in salaries and fringe benefits and a $120 million increase         increase accounts for almost 70.7% of the increase in all Desjardins
in other expenses.                                                           Group’s non-interest expenses.

Desjardins Group’s productivity ratio is calculated based on the             In actual fact, the increase is a result of business growth as well as
results of the financial intermediation segment only. This ratio             an initiative to strengthen the reserves of certain insurance
takes into account the share of earnings generated by caisse                 business lines. It also results from an increase in investment income
investments in subsidiaries. Thus, the productivity ratio achieved           in the life and health insurance segment, which resulted from the
in 2003 was 67.9%, down from the 64.8% achieved last year. In                recovery of financial markets in the case of products for which all
spite of a 4.9% increase in total revenues for this segment this year,       investment risks were transferred to policyholders.
the decline is mainly attributable to higher expenses related
to investments in salaries, as described in detail under “Salaries
and fringe benefits“ and professional fees relating to various
strategic projects.


TABLE 11 – NON-INTEREST EXPENSES
For the year ended December 31
(in millions of $ and as a percentage)

                                                                                                         2003             2002           2001
      Claims, benefits, annuities and changes in insurance provisions                                $   3,034        $   2,349      $   2,245
      Salaries and fringe benefits
      Salaries                                                                                           1,453            1,290          1,224
      Fringe benefits                                                                                      292              297            237
                                                                                                         1,745            1,587          1,461
      Premises, equipment and furniture, including depreciation
      Technology                                                                                              81            79              61
      Depreciation                                                                                           131           134             137
      Other                                                                                                  129           124             142
                                                                                                             341           337             340
      Communications                                                                                         172           170             178
      Other
      Business and capital tax and deposit insurance premiums                                                 91            94              80
      Sponsorships                                                                                            43            37              31
      Employee training                                                                                       28            23              21
      Deposit-related expenses                                                                                55            52              56
      Commissions                                                                                            198           181             180
      Other personnel-related expenses                                                                        41            45              47
      Other                                                                                                  744           648             638
                                                                                                         1,200            1,080          1,053
                                                                                                     $   6,492        $   5,523      $   5,277
      Productivity                                                                                           67.9 %        64.8 %         68.3 %

                                                                                                                                                      Desjardins Group
page 78




                                       SALARIES AND FRINGE BENEFITS                                                     OTHER EXPENSES
                                       Expenses relating to salaries and fringe benefits rose by $158 million,          In 2003, costs relating to premises, equipment and furniture,
                                       or 10%, totalling $1,745 million. Salaries and fringe benefits                   including depreciation, totalled $341 million, up slightly by $4 million
                                       account for 26.9% of all non-interest expenses, compared to 28.7%                over last year. This evolution in costs was incurred as part of the
Management’s Discussion and Analysis




                                       in 2002.                                                                         transformation of the physical distribution network in Québec, which
                                                                                                                        now has 1,506 points of service and 57 corporate financial centres.
                                       Aside from the statutory salary increase at the beginning of the year,
                                       total payroll rose by $163 million, or 12.6%, largely as the result of           Communications costs, which include telephony, advertising,
                                       substantial investments made to reposition salaries and with respect             messenger services and stationery, totalled $172 million, up slightly
                                       to training, motivating, and recruiting caisse and Fédération                    by $2 million, or 1.2%.
                                       employees. These investments were called for in our 2002-2005
                                       Human Resources Plan, which represents $80 million this year. In                 Other expenses amounted to $1,200 million, an increase of
                                       addition, in 2003, close to $20 million was earmarked for                        $120 million, or 11.1%, compared to last year. This increase is the
                                       development and support required by the enterprise line of business.             result of a combination of factors, including a $17 million increase
                                                                                                                        in commissions paid to augment business volume, costs up by
                                       Compared to 2002, the fringe benefits expense decreased by                       $14 million for partnership agreements owing to an increase in
                                       $5 million, or 1.7%, to stand at $292 million. Note 16 to the                    processing and telecommunications volume and costs that are
                                       Combined Financial Statements gives details on the pension plans                 $38 million higher for professional fees relating to various strategic
                                       and other post-retirement benefit plans and shows a net plan                     projects aimed at ensuring the quality of member services. Finally,
                                       expense of $160 million, down $6 million compared to 2002.                       sustained business volume growth in each business segment also
                                                                                                                        contributed to the hike in other expenses.
                                       In accordance with the Act Respecting the Disclosure of the
                                       Compensation Received by the Executive Officers of Certain Legal                 In addition, Desjardins Group continued to focus special attention
                                       Persons, Desjardins Group publishes the compensation earned by                   on its training programs during the year in order to offer its
                                       its five most highly-paid officers.                                              member-owners a level of service quality that will make Desjardins
                                                                                                                        Group stand out from the competition and ensure its growth.
                                       They are the President and Chief Executive Officer of Desjardins                 A total of $28 million was invested in this area in 2003, an increase
                                       Group, the President of Desjardins Financial Corporation and                     of $5 million.
                                       Chief Executive Officer of the subsidiaries, the President and Chief
                                       Operating Officer of the Fédération des caisses Desjardins du
                                       Québec, the President and Chief Operating Officer of Desjardins
                                       Securities and the President and Chief Operating Officer of Caisse
                                       centrale Desjardins.

                                       Table 12 on page 79 provides detailed information on the
                                       individual remuneration paid to these executives for the year
                                       ended December 31, 2003.


                                                           NON-INTEREST EXPENSES                                                            GROWTH IN NON-INTEREST
                                                           (Millions of $)                                                                  EXPENSES


                                                                                                                                            20
                                                                                                                3,458




                                                           4,000
                                                                                                3,174

                                                                                                        3,034
                                                                                3,032




                                                           3,000                                                                            15
                                                                                        2,349
                                                                        2,245




                                                           2,000                                                                            10


                                                           1,000                                                                             5


                                                                0                                                                            0
                                                                                                                                                     2001

                                                                                                                                                             2002

                                                                                                                                                                      2003
                                                                           2001


                                                                                           2002


                                                                                                           2003




                                                                    Claims, benefits, annuities and                                              Total growth (%)
                                                                    changes in insurance provisions
                                                                                                                                                 Growth (%)*
                                                                    Other expense categories

                                                                                                                                            * Excluding claims, benefits, annuities
                                                                                                                                              and changes in insurance provisions
Desjardins Group
                                                                                                                                                                            page 79
TABLE 12 – REMUNERATION OF KEY EXECUTIVE OFFICERS IN 2003


                                                                                                                                                                 Other
                                                                                                                              Incentive            Other        annual




                                                                                                                                                                            Management’s Discussion and Analysis
                                                                                                             Salary                plan          benefits      benefits
      Name and main responsibilities                                                                              $                   $                 $             $
      Mr. ALBAN D’AMOURS
        President and Chief Executive Officer
        Desjardins Group                                                                                   839,988              369,661 (1)(2)      N.A.              (4)


      Ms. MONIQUE F. LEROUX
        President of Desjardins Financial Corporation and
        Chief Executive Officer of the subsidiaries                                                        519,777              353,451 (1)(3)      N.A.              (4)


      Mr. BERTRAND LAFERRIÈRE
        President and Chief Operating Officer
        Fédération des caisses Desjardins du Québec                                                        519,777              222,672 (1)(3)      N.A.              (4)


      Mr. JEAN-PIERRE DEMONTIGNY
        President and Chief Operating Officer
        Desjardins Securities                                                                              377,393              199,464 (1)(3)      N.A.              (4)


      Mr. JEAN-GUY LANGELIER
        President and Chief Operating Officer
        Caisse centrale Desjardins                                                                         354,957              149,970 (1)(3)    60,000 (5)          (4)




(1) Bonuses are paid in cash in the year following the year in which they are earned.
(2) As he is President of Desjardins Group, Mr. D’Amours asked to be excluded from the long-term bonus plan.
(3) Participant in the integrated management incentive bonus plan, which combines short- and long-term bonuses. The bonus available
    under the plan is determined at the end of each year based on the extent to which the objectives set at the beginning of the year have
    been met and on Desjardins Group’s overall performance. For a given year, 40% or 50% of the available bonus is payable in cash, and
    the balance (long term) is not vested and remains at risk based on the results of the Group.The bonus portion thus accrued but not
    earned is generally not paid out until death, retirement or disability.
(4) The personal benefits awarded to these senior executives over the course of the year did not exceed the lesser of 10% of their annual
    salary plus bonus, or $50,000.
(5) Related to chairing the Board of Directors of Desjardins Credit Union.


INCOME AND OTHER TAXES                                                                          With respect to the payroll tax, commodity taxes and property
Desjardins Group is a decentralized cooperative financial group in                              taxes, the caisses also pay their fair share, given that Desjardins
which each individual caisse is a private and independent company,                              Group has the largest number of employees and points of service in
unlike most other financial institutions, which are large public                                Québec. The caisses pay a tax on capital as well, based on a formula
corporations. Each caisse is therefore subject to the tax regulations                           adapted to cooperative organizations. As for Desjardins Group
applicable to private companies, and the legislature has made                                   companies that are not financial services cooperatives, most of
these regulations adaptable so that the caisses can accumulate a                                them have public corporation status and, as such, are subject to the
large enough general reserve to serve as a capital base for the                                 tax regulations that apply to public corporations.
protection of member deposits.
                                                                                                Desjardins Group therefore paid its fair share into the public coffers
However, unlike the retained earnings of financial institutions,                                in 2003. Including its employer contributions, it paid close to
categorized as large public corporations, the caisses’ general                                  $529 million in direct and indirect taxes.
reserves cannot be distributed to members.

Each caisse pays its fair share of income taxes as a private company,
while large financial institutions are subject to the tax regulations
that govern public corporations.




                                                                                                                                                                            Desjardins Group
page 80




                                       CREDIT QUALITY

                                        HIGHLIGHTS
                                        ■   At 0.11%, the provisions for credit losses is at its lowest level in several years
Management’s Discussion and Analysis




                                        ■   Gross impaired loans outstanding are down $61 million, or 9.6%
                                        ■   Net impaired loans ratio of (0.38)%
                                        ■   Coverage ratio of 144.8%


                                       IMPAIRED LOANS                                                                In contrast, reductions posted in the other categories were largely
                                       In management’s opinion, loans are considered impaired when                   attributable to favourable economic conditions, very low interest
                                       there is reasonable doubt as to the collectibility of the principal or        rates, a dynamic housing market and high levels of consumer activity.
                                       interest. All loans 90 or more days past due fall into this category,
                                       unless the loan is fully secured or in the process of collection.             Desjardins Group continues to seek improvements to its tools and
                                       Finally, a loan is considered impaired when it is contractually more          policies to ensure sound and prudent credit management. Please
                                       than 180 days in arrears.                                                     refer to the section entitled “Risk Management“ on page 91 for
                                                                                                                     more details on these tools and policies.
                                       Desjardins Group has adopted the new recommendations
                                       contained in the guideline entitled “Impaired Loans“ with respect             The net balance of impaired loans, i.e., the gross amount of these
                                       to foreclosed assets (Section 3025 of the Canadian Institute of               loans less the cumulative provision for credit losses, showed
                                       Chartered Accountants’ Handbook). Please see Note 1 to the                    improvement, falling by $3 million to a negative amount of
                                       Combined Financial Statements on page 103.                                    ($258 million) at the end of 2003, compared to a negative amount
                                                                                                                     of ($255 million) at the end of 2002. As Table 13 on page 81 shows,
                                       As at December 31, 2003, gross impaired loans outstanding dropped             net impaired loans outstanding now represents (0.38)% of the total
                                       $61 million or 9.6% over the previous year. Of this amount, 3.7%              gross loan portfolio.
                                       was attributable to fewer foreclosed properties. All categories of
                                       gross impaired loans were down except for the agricultural                    PROVISIONS FOR CREDIT LOSSES
                                       category. Difficulties were particularly acute in the pork and beef           When a loan becomes impaired, the reduction in carrying amount
                                       sectors, due primarily to falling or stagnant market prices caused by         should be recognized as a charge in the period in which
                                       the mad cow crisis and higher production costs stemming from the              impairment is identified.
                                       implementation of new environmental standards.
                                                                                                                     In 2003, Desjardins Group made a $73 million charge for provisions
                                                                                                                     for credit losses, compared to $109 million in 2002. This represented
                                                                                                                     0.11% of the average gross loans, compared to 0.18% a year
                                                                                                                     earlier. This was the lowest level in several years.


                                                            GROSS IMPAIRED LOANS                                                        PROVISIONS FOR CREDIT LOSSES

                                                                                                                                                              237
                                                                      1.88




                                                            1,200                                         2.0                           250                                        0.5
                                                                              1.58




                                                                                                                                                 179




                                                                                                                                        200                                        0.4
                                                                                     1.28
                                                                      1,024




                                                                                                          1.5
                                                              800
                                                                              882




                                                                                                                                                              0.42
                                                                                            1.02




                                                                                                                                                       127




                                                                                                                                        150                                        0.3
                                                                                                   0.84




                                                                                                                                                0.33
                                                                                     750




                                                                                                                                                                     109




                                                                                                          1.0
                                                                                                                                        100                                        0.2
                                                                                            637




                                                                                                                                                       0.23




                                                                                                                                                                            73




                                                              400
                                                                                                   576




                                                                                                                                                                     0.18




                                                                                                          0.5
                                                                                                                                         50                                        0.1
                                                                                                                                                                            0.11




                                                                0                                         0.0                              0                                       0.0
                                                                                                                                                              2001
                                                                                     2001




                                                                                                                                                1999
                                                                                                                                                       2000


                                                                                                                                                                     2002
                                                                                                                                                                            2003
                                                                      1999
                                                                              2000


                                                                                            2002
                                                                                                   2003




                                                                Millions of $                                                               Millions of $

                                                                As a % of gross loans                                                       As a % of average gross loans
Desjardins Group
                                                                                                                                                                     page 81
TABLE 13 – IMPAIRED LOANS BY CATEGORY OF BORROWER
As at December 31
(in millions of $ and as a percentage)

                                                                                                2003                                         2002          2001




                                                                                                                                                                     Management’s Discussion and Analysis
                                                                                                Specific
                                                                             Gross           provisions
                                                         Gross             impaired           for credit             Carrying            Carrying      Carrying
                                                         loans               loans                losses              value                 value         value
                                                                                       (1)                                         (1)


      Residential mortgages                       $ 36,457       $   107          0.29 % $         30      $    77              0.21 % $         108   $    158
      Consumer, credit card and
        other personal loans                        12,203            71          0.58            39            32              0.26              25         30
      Farm loans                                     4,328            22          0.51             7            15              0.34              10          9
      Commercial mortgages                           5,059           136          2.70            52            84              1.68              91        123
      Other loans                                   10,289           240          2.33           114           126              1.23             103        102
      Total impaired loans excluding
        general provision                           68,336           576          0.84           242           334              0.49             337        422
      General provision                                                                          592                                         (592)          (601)
      Total impaired loans including
        general provision                         $ 68,336       $   576          0.84 % $       834       $   (258)            (0.38)% $    (255)     $    (179)

(1) As a percentage of gross loans.


TABLE 14 – COVERAGE RATIO
As at December 31
(as a percentage)

                                                                                                                     2003                2002              2001
      Residential mortgages                                                                                            27.9 %             32.1 %            31.0 %
      Consumer, credit card and other personal loans                                                                   54.8               65.8              63.0
      Farm loans                                                                                                       31.8               44.4              43.8
      Commercial mortgages                                                                                             38.2               39.7              46.3
      Other loans                                                                                                      47.5               56.4              47.7
      Total coverage ratio excluding general provision                                                                 42.0               47.1              43.7
      Total coverage ratio including general provision                                                             144.8 %               140.0 %           123.9 %


CUMULATIVE PROVISION FOR CREDIT LOSSES                                                GENERAL PROVISION The general provision for credit risk is
The cumulative provision for credit losses in the combined balance                    maintained at a level high enough to reflect management’s best
sheets is maintained at a level high enough to absorb                                 estimate of provisions for credit losses with regard to loans not yet
management’s best estimate of potential losses related to the loan                    identified as impaired in the loan portfolio.
portfolio, given its assessment of economic conditions. It is
decreased by actual write-offs, net of recoveries, and increased by                   To determine the required level of the general provision, Desjardins
provisions for credit losses charged to the combined statements of                    Group uses an internal model to estimate the potential losses in the
income. In the combined balance sheets, it is deducted from the                       loan portfolio, excluding impaired loans. It also provides a risk
appropriate assets and is made up of two components, specific                         estimate for each loan category, taking into account portfolio
provisions and a general provision.                                                   changes over time and the impact of credit risk relating to the
                                                                                      business cycle.
In 2003, the total coverage ratio for impaired loans was 144.8%,
compared to 140.0% in the previous year. This ratio is obtained                       According to the guidelines issued by the Office of the
by dividing the cumulative provision for credit losses by the                         Superintendent of Financial Institutions Canada, the general
gross impaired loans outstanding. The 2003 coverage ratio is                          provision qualifies as eligible Tier 2 capital, to an amount equal to
considered satisfactory.                                                              87.5 basis points of risk-weighted assets. As at December 31, 2003,
                                                                                      the general provision for credit risk totalled $592 million, or the
SPECIFIC PROVISIONS When management identifies a loan as                              same amount as last year.
impaired, the loan’s carrying value is adjusted to reflect its
estimated realizable value and to determine if a specific provision
should be taken on the loan. No specific provision is taken on credit
card balances; they are written off completely when no payment
has been received for a period of 180 days.

Specific provisions stood at $242 million as at December 31, 2003,
down $58 million from a total of $300 million a year earlier. This
balance represented 42% of the gross impaired loan portfolio, as
against 47.1% on the year-earlier date.
                                                                                                                                                                     Desjardins Group
page 82




                                       BALANCE SHEET                                                                                As a solid presence across Québec, Desjardins Group has been an
                                                                                                                                    innate force for economic growth for many years, capitalizing on
                                       TOTAL ASSETS                                                                                 growing domestic demand.
                                       Desjardins Group underwent a truly remarkable expansion in 2003,
Management’s Discussion and Analysis




                                       posting total assets of $94.7 billion as at December 31, 2003, up by                         Desjardins Group has helped many of its members and clients to
                                       $9.3 billion, or 10.9%. This compares favourably with the                                    bring their plans to fruition, including wealth management,
                                       $4.9 billion increase, or 6%, recorded at the end of 2002.                                   financing and insurance projects. Indeed, Desjardins Group was
                                                                                                                                    able to reap the benefits associated with its prominent economic
                                       This remarkable growth is reflective of Desjardins Group’s dynamic                           position in 2003, not only in terms of growth – one of Desjardins
                                       credit offer and its recruitment of savings since the Québec and                             Group’s highest rates in more than ten years – but also in terms of
                                       Canadian economies deteriorated considerably in 2003. For the                                market share, which increased in almost all segments in which
                                       most part, this deterioration is due to a series of unfortunate                              Desjardins Group is active.
                                       events, including the SARS outbreak, the mad cow crisis, forest fires
                                       in British Columbia and the blackout in Ontario, in conjunction                              Liquidity up 14.5%
                                       with the lacklustre performance of the U.S. economy and the
                                       significantly higher Canadian dollar. Indeed, the combination of                             As at December 31, 2003, cash and securities at Desjardins Group
                                       surging consumer spending, an ebullient housing market and                                   totalled $20.7 billion, for a year-over-year increase of $2.6 billion or
                                       increased business spending helped to drive domestic demand                                  14.5%, versus a $765 million or 4.4% advance in 2002. This
                                       while partially offsetting the economic downturn.                                            represented a significant improvement in cash and securities
                                                                                                                                    growth that had a favourable effect on the ratio of liquid assets to
                                                                                                                                    total assets at Desjardins Group. Liquid assets represented 21.9% of
                                                                                                                                    total assets in 2003, up from 21.2% a year earlier. Desjardins
                                                                                                                                    Group’s liquidity management standards are discussed in greater
                                                                                                                                    detail under “Liquidity Risk Management“ on page 93.


                                       TABLE 15 – CONDENSED BALANCE SHEET
                                       As at December 31
                                       (in millions of $ and as a percentage)

                                                                                                                         2003                            2002                                         2001
                                             ASSETS
                                             Cash and deposits with financial institutions                  $    1,357            1.4 %    $    1,355                   1.6 %            $    1,316            1.6 %
                                             Securities                                                         19,390           20.5          16,767                  19.6                  16,041           19.9
                                             Loans                                                              67,502           71.3          61,369                  71.9                  57,477           71.5
                                             Other assets                                                        6,403            6.8           5,852                   6.9                   5,659            7.0
                                                                                                            $ 94,652            100.0 %    $ 85,343               100.0 %                $ 80,493            100.0 %
                                             LIABILITIES AND EQUITY
                                             Deposits                                                       $ 70,344             74.3 %    $ 62,901                    73.7 %            $ 60,565             75.2 %
                                             Other liabilities                                                16,709             17.7        15,153                    17.8                13,880             17.2
                                             Subordinated debentures                                           1,154              1.2         1,208                     1.4                   444              0.6
                                             Non-controlling interests                                           247              0.3           405                     0.5                   399              0.5
                                             Equity                                                            6,198              6.5         5,676                     6.6                 5,205              6.5
                                                                                                            $ 94,652            100.0 %    $ 85,343               100.0 %                $ 80,493            100.0 %


                                                                 ASSET GROWTH                                                                            LIQUID ASSETS AS A %
                                                                 (%)                                                                                     OF TOTAL ASSETS
                                                                                                                                                         (%)
                                                                                                     10.9




                                                                 12                                                                                      30
                                                                                                                                                                                             21.9




                                                                 10                                                                                      25
                                                                                                                                                                21.6



                                                                                                                                                                               21.5
                                                                                                                                                                        21.3



                                                                                                                                                                                      21.2




                                                                   8                                                                                     20
                                                                                              6.0
                                                                                       5.7




                                                                   6                                                                                     15
                                                                         4.5

                                                                                4.0




                                                                   4                                                                                     10

                                                                   2                                                                                      5

                                                                   0                                                                                      0
                                                                                                                                                                               2001
                                                                                       2001




                                                                                                                                                                1999
                                                                                                                                                                        2000


                                                                                                                                                                                      2002
                                                                                                                                                                                             2003
                                                                         1999
                                                                                2000


                                                                                              2002
                                                                                                     2003
Desjardins Group
                                                                                                                                                                           page 83
GROWTH OF DEPOSITS                                                          Accelerated deployment of brokerage activities

11.8% growth in deposits                                                    Desjardins Group continued to expand its investment fund and
                                                                            brokerage services in 2003. In conjunction with the improvements




                                                                                                                                                                           Management’s Discussion and Analysis
Combined deposits at Desjardins Group totalled $70.3 billion as at          seen in most world stock markets last year, creating a much more
December 31, 2003, showing a strong year-over-year advance of               inviting financial climate for investors, the Desjardins Group
$7.4 billion or 11.8%, as against an increase of $2.3 billion or 3.9%       stepped up its efforts to raise its already prominent profile in both
in 2002. This increase derives largely from amounts deposited with          of these sectors.
Desjardins Group by its members and clients, individuals, businesses
and government institutions alike. Other sources of funds included
securities issues on financial markets. Indeed, deposits made by                                DISTRIBUTION OF
individuals, businesses and government institutions contributed                                 DEPOSIT PORTFOLIO
greatly to the impressive results achieved in 2003. These deposits,                             As at December 31, 2003
which made up 91.3% of the Desjardins Group’s deposit liability,
grew by $5.2 billion or 8.7%, to reach $64.2 billion as at December 31,                         71.1%                                     20.2%
2003, as against an increase of $2.9 billion or 5.1% one year earlier.
Other sources of funds, used only as a complement to deposits,
accounted for only 8.7% of Desjardins Group’s deposit liability at
year-end. Comments on the liquidity risk management policies of
Desjardins Group are presented on page 93.
                                                                                                                                               8.7%
Individual savings represent 71.1% of deposits

INDIVIDUAL SAVINGS If there is one field in which financial
institutions are fiercely competitive, it is that of personal savings.                                    Individuals
Most financial institutions have a marked preference for personal
                                                                                                          Businesses
savings because they are more stable and more accessible, and
usually have lower costs associated with them. Consequently, they                                         Other
represent a significant proportion of the deposits of Desjardins as
at December 31, 2003, namely 71.1% of its deposit liability, for a
volume of $50 billion, an increase of $3.4 billion or 7.4% in one
year, versus an advance of $1.7 billion or 3.8% at the end of 2002.
Despite the convincing stock market turnaround and the relatively                               QUÉBEC MARKET SHARE
low cost of money, Desjardins Group’s wide variety of savings                                   PERSONAL SAVINGS RECRUITMENT ACTIVITIES
products, particularly fixed-term deposits, were very well received                             (%)
by individual clients in 2003. Thanks to the popularity of the savings
                                                                                                   50
products that make up its deposit liability, Desjardins Group was
able to increase its relative position in the Québec market by 0.3%,
reaching 43.6% in December 2003.                                                                   40

These products can be grouped into three main categories: demand                                   30
deposits, notice deposits and fixed-term deposits. Table 16 shows
that as at December 31, 2003, fixed-term deposits totalled
$35.6 billion and represented 71.1% of the total volume of
                                                                                                   20
personal savings at Desjardins Group. This figure rose by $2.6 billion
or 7.7% during the past year compared to an increase of $657 million                               10
or 2% one year earlier.
                                                                                                    0
                                                                                                                          2001
                                                                                                          1999
                                                                                                                   2000


                                                                                                                                 2002
                                                                                                                                        2003




                                                                                                      Traditional deposits

                                                                                                      Securities

                                                                                                      Mutual funds


TABLE 16 – DEPOSITS
As at December 31
(in millions of $ and as a percentage)

                                                                                         2003                                                             2002
                                                                             Payable    Payable
                                                                  Payable       after on a fixed
                                                               on demand      notice        date                     Total                            Total
      Individuals                                                $ 11,666   $   2,791   $ 35,567    $ 50,024                 71.1 %            $ 46,581           74.0 %
      Businesses and governments                                    7,116         194      6,915      14,225                 20.2                12,509           19.9
                                                                                                                                                                           Desjardins Group




      Deposit-taking institutions and other                            53           –      6,042       6,095                  8.7                 3,811            6.1
                                                                 $ 18,835   $   2,985   $ 48,524    $ 70,344               100.0 %             $ 62,901          100.0 %
page 84




                                       In its concern to respond efficiently to the changing needs of its           The financing activities of Desjardins Group are governed by strict
                                       members and clients, Desjardins Group overhauled its range of                credit risk management practices. The credit risk management
                                       investment funds, acquired Northwest Mutual Funds and stepped                section on page 92 describes these practices in detail.
                                       up the deployment of its brokerage activities throughout the
Management’s Discussion and Analysis




                                       financial intermediation network. As at December 31, 2003, assets            Housing market boom in 2003
                                       under management for investment funds and securities sold
                                       totalled $20.8 billion, a year-over-year rise of $4.7 billion or 29%,        RESIDENTIAL MORTGAGES Had it not been for the overheated housing
                                       compared to growth of $1.1 billion or 7.2% in 2002.                          market and its positive effects on consumer spending, the Québec
                                                                                                                    economy would have experienced a much stronger downturn in
                                       LOAN GROWTH                                                                  2003. Indeed, the housing market took off like a rocket in a scaled-
                                                                                                                    back version of the late 1980s real estate boom. Housing starts rose
                                       A spectacular year                                                           by 18.5% to reach 50,289 units, while sales of existing homes set a
                                                                                                                    new record, with 71,880 transactions. The frenetic pace of activity
                                       For credit activities, 2003 will go down in the annals of Desjardins         was also accompanied by a significant rise in the average price of
                                       Group as a period of spectacular growth, one of the best years in            residential sales, that is, a 15.8% increase for the province of Québec.
                                       over a decade. Desjardins Group’s ongoing commitment to Québec’s
                                       economic development and dynamic credit offer made it possible for
                                       it to do well with both individual and business clients. It excelled in                           QUÉBEC MARKET SHARE
                                       financing activities in a number of markets, including housing,                                   CREDIT ACTIVITIES
                                       durable household goods as well as commercial and industrial                                      (%)
                                       investment projects. The detailed analysis of Desjardins Group’s                                   45
                                       results in the principal credit markets, is an eloquent testimony to
                                       Desjardins Group’s commitment to the Québec economy.
                                                                                                                                          40
                                       As at December 31, 2003, Desjardins Group’s loan portfolio, net of
                                       the cumulative provision for credit losses, amounted to $67.5 billion,                             35
                                       for growth of $6.1 billion or 10% over the year, versus an increase of
                                       $3.9 billion or 6.8% at the end of 2002. Loans to individuals were the
                                                                                                                                          30
                                       driving force behind much of this growth, representing 71.2% of
                                       Desjardins Group’s loan portfolio at the end of 2003. They amounted
                                       to $48.7 billion as at December 31, 2003, for an increase of $4.4 billion                          25
                                       or 9.9% over the year, versus an increase of $3.4 billion or 8.4% in 2002.
                                                                                                                                          20
                                       Other financing activities, such as loans to businesses and




                                                                                                                                                                 2001
                                                                                                                                                   1999
                                                                                                                                                          2000


                                                                                                                                                                        2002
                                                                                                                                                                               2003
                                       governments, also contributed to Desjardins Group’s soaring results.
                                       As at December 31, 2003, they represented 28.8% of total
                                       outstanding loans, for a volume of $19.7 billion. They were up
                                       $1.7 billion or 9.4% over the year.                                                                     Farm loans

                                                                                                                                               Residential mortgages

                                                                                                                                               Consumer, credit card and
                                                                                                                                               other personal loans

                                                                                                                                               Commercial mortgages and
                                                                                                                                               other loans


                                       TABLE 17 – LOANS BY BORROWER CATEGORY
                                       As at December 31
                                       (in millions of $ and as a percentage)

                                                                                                                                         2003                                             2002
                                             Residential mortgages                                                         $ 36,457                  53.3 %              $ 33,230                 53.4 %
                                             Credit card loans                                                                2,749                   4.0                   2,196                  3.5
                                             Other personal loans                                                             9,454                  13.9                   8,843                 14.2
                                             Farm loans                                                                       4,328                   6.3                   4,056                  6.5
                                             Governments and other public and parapublic institutions                         2,608                   3.8                   2,110                  3.4
                                             Commercial mortgages                                                             5,059                   7.4                   4,920                  7.9
                                             Other loans                                                                      7,681                  11.3                   6,906                 11.1
                                                                                                                              68,336               100.0 %                     62,261            100.0 %
                                             Cumulative provision for credit losses                                             (834)                  –                         (892)               –
                                                                                                                           $ 67,502                       –              $ 61,369                   –
                                             Loans guaranteed by governments and other public and parapublic
                                               institutions included above                                                 $ 17,197                       –              $ 15,813                   –
                                             Loans guaranteed by governments and other public and parapublic
                                               institutions as a percentage of total gross loans                                25.2 %                    –                      25.4 %             –
                                             Loans to individuals as a percentage of total gross loans                          71.2 %                    –                      71.1 %             –
Desjardins Group
                                                                                                                                                               page 85
This boom helped to create very favourable conditions for business     FARM AND OTHER LOANS Desjardins Group’s presence in all regions of
development. Desjardins Group was able to capitalize on these          Québec and its historical involvement in the agricultural sector
conditions in 2003 despite the fiercely competitive housing market.    have made it the most important financial institution in this
Québec’s housing industry has always been able to count on the full    segment. As at December 31, 2003, outstanding farm loans totalled




                                                                                                                                                               Management’s Discussion and Analysis
participation of Desjardins Group, and Desjardins Group continues      $4.3 billion, compared to $4.1 billion at the end of 2002, an
to play a decisive role in its members’ home ownership plans. Other    increase of $272 million or 6.7%. Since this increase is greater than
considerations also motivated Desjardins Group to maintain its         that observed in the segment in Québec, Desjardins Group’s market
dominant position in this area, including greater loyalty among        share rose by 0.2% over the previous year, reaching 41.8% in 2003.
borrowers and a generally lower loss experience. As at December
31, 2003, Desjardins Group’s residential mortgage loan portfolio       And lastly, Desjardins Group was very active in financing for
stood at $36.5 billion, up $3.2 billion or 9.7%, compared to an        governments and public and parapublic institutions in Québec. As
increase of $2.6 billion or 8.5% at the same date in 2002. These       at December 31, 2003, its loan portfolio in this segment amounted
excellent results enabled Desjardins Group to expand its market        to $2.6 billion, compared to outstanding loans of $2.1 billion one
penetration rate in Québec to close to 38% at the end of 2003.         year earlier – a significant increase of $498 million or 23.6%.

accord D program and car loans highly coveted
                                                                                                RESIDENTIAL MORTGAGE
CONSUMER CREDIT Fervent consumer demand for durable goods,                                      LOANS IN QUÉBEC
particularly home furnishings, appliances and automobiles, clearly                              (%)
helped to boost demand for consumer credit in Québec in 2003. For
                                                                                                10                                         40
that reason, Desjardins Group was in great demand. Its consumer
loans, including credit card advances, rose by $1.2 billion or 10.5%
over the year, reaching $12.2 billion as at December 31, 2003,                                   8                                         39
compared to an increase of $836 million or 8.2% at the end of




                                                                                                                                                Market Share
2002. The increasing popularity of the accord D program, offered                                 6                                         38




                                                                                       Growth
by its subsidiary VISA Desjardins, and of Desjardins Group’s car
loans offered at automobile dealerships accounted for much of this
                                                                                                 4                                         37
upswing, enabling the Group to increase its market share by 0.6%,
reaching 26.9% in Québec at the end of 2003.
                                                                                                 2                                         36
A business line created exclusively for businesses
                                                                                                 0                                         35
COMMERCIAL AND INDUSTRIAL CREDIT Due to the upswing in Québec’s




                                                                                                                      2001
                                                                                                        1999
                                                                                                               2000


                                                                                                                             2002
                                                                                                                                    2003
economy and the completion of several major public and private
investment projects, business spending turned the corner in 2003.
Despite a more difficult economic climate, most notably in the area
of foreign trade, investment spending rose by 3.7% during the                                         Growth in volume -
year, in contrast with contractions of 6.7% and 4.7% in 2001 and                                      Desjardins Group
2002. Lower financing costs and the positive impact of the higher
Canadian dollar on purchases of machinery and equipment in the                                        Growth in volume - market
U.S. clearly encouraged a number of companies to increase their                                       Québec market share
investment spending. In particular, investments in fixed assets
increased by 6%, while purchases of machinery and equipment rose
at a somewhat slower rate of 2.9%.

As a leading partner for small and medium-sized businesses (SMBs),                              CONSUMER LOANS IN QUÉBEC
Desjardins Group clearly benefited from the more propitious                                     (%)
climate in 2003. It also reaped the benefits of numerous
commercial and industrial initiatives undertaken over the past few                              12                                         34
years. As at December 31, 2003, Desjardins Group’s outstanding
commercial and industrial loan portfolio totalled $12.7 billion, up                             10                                         32
                                                                                                                                                Market Share



$914 million or 7.7% in 12 months, compared to $24 million or
                                                                                       Growth




0.2% at the end of 2002. To strengthen its relationships with SMBs,                              8
                                                                                                                                           30
Desjardins Group took a number of important steps, including
implementing an enterprise line of business and consolidating its                                6
Corporate Financial Centres (CFCs).                                                                                                        28
                                                                                                 4

                                                                                                 2                                         26

                                                                                                 0                                         24
                                                                                                                      2001
                                                                                                        1999
                                                                                                               2000


                                                                                                                             2002
                                                                                                                                    2003




                                                                                                      Growth in volume -
                                                                                                      Desjardins Group

                                                                                                      Growth in volume - market
                                                                                                                                                               Desjardins Group




                                                                                                      Québec market share
page 86




                                       CAPITAL MANAGEMENT


                                        HIGHLIGHTS
Management’s Discussion and Analysis




                                        ■   $503 million rise in reserves and undistributed surplus earnings
                                        ■   At 13.01%, Desjardins Group’s Tier 1 capital ratio remains one of the highest in the Canadian banking industry
                                        ■   Controlled growth of risk-adjusted assets


                                       EVALUATION OF RESULTS                                                    REGULATORY FRAMEWORK OF THE BANK
                                       Desjardins Group’s capital management objective is to maintain           FOR INTERNATIONAL SETTLEMENTS (BIS)
                                       high levels of quality capital and a beneficial capital structure to     The capital adequacy and composition of Desjardins Group are
                                       enable it to pursue its development. Desjardins Group’s capital          governed by the guideline on capital adequacy issued by
                                       management activities are integrated with its risk management            the Inspector General of Financial Institutions of Québec (IGFI), in
                                       activities with respect to the risk to which the company is exposed      April 2003.
                                       in the normal course of business.
                                                                                                                This guideline, which borrows largely from international equity
                                       As at December 31, 2003, Desjardins Group posted a total capital         standards adopted by the Bank for International Settlements (BIS)
                                       ratio of 13.03% of assets at risk. On the same date, its equity was      in 1998, has been adapted to suit the cooperative nature of
                                       $6.1 billion, up 4.3% from the previous year. The components of          deposit-taking institutions and financial services institutions
                                       equity are presented in Table 18 on page 87.                             governed by the Act respecting financial services cooperatives.

                                       The Tier 1 capital ratio, which is the primary indicator of financial    Since the start of the 1990s, the Group voluntarily accepted to comply
                                       solidity, is 13.01% of assets at risk. For several years already, this   with the regulatory requirements set out by the Basel Committee on
                                       ratio, which stands as one of the highest in the Canadian banking        Banking Supervision. This position was taken to permit comparison
                                       industry, confirms the quality of Desjardins Group’s equity.             with other financial institutions involved on international markets,
                                                                                                                given that Desjardins Group is active in that arena.
                                       Reserves and undistributed surplus earnings grew by $503 million
                                       during the year to reach $5.3 billion, which represents the very         As stipulated in the IGFI guideline and according to rules of
                                       large portion of all equity.                                             conservatism, Desjardins Group’s total equity is reduced by certain
                                                                                                                investments made in subsidiary companies. Investments in
                                       During the year, total risk-weighted assets rose 6.7% to amount to       insurance subsidiaries and securities subsidiaries are entirely
                                       $47.2 billion. Desjardins Group continues to exert controlled growth     deducted from equity. Other investments are treated on a
                                       over risk-adjusted assets and uses appropriate mechanisms to             consolidated basis and, for certain liability and small-scale
                                       reduce risk to the fullest extent possible. Table 19 on page 88 lists    investments, the guideline allows the investment to be treated as
                                       the components that comprise risk-adjusted assets.                       credit risk.

                                       CONTINUED ADVANCEMENT AND A BENEFICIAL CAPITAL STRUCTURE                 Assets at risk in the financial intermediation network are calculated
                                       In 2003, the increase in Desjardins Group’s equity was achieved          according to the risk weighting for each on- and off- balance
                                       through self-generated capital, as it was in previous years.             sheet item.

                                       At December 31, 2003, as in previous years, all Desjardins Group         MINIMUM CAPITAL RATIO
                                       entities were in compliance with the minimum regulatory requirements     The minimum capitalization ratio recommended to meet BIS
                                       for capital adequacy, according to the applicable jurisdiction.          regulatory requirements and to be considered a well-capitalized
                                                                                                                institution is 8%. Moreover, Tier 1 capital must represent at least
                                       Again in 2003, credit rating agencies recognized the level and           half of the total ratio.
                                       particularly high quality of our capital structure and maintained
                                       our favourable credit rating, which stands as one of the best            The Office of the Superintendent of Financial Institutions Canada
                                       among major Canadian banks.                                              has set targets of 7% and 10% respectively for the Tier 1 and total
                                                                                                                capital ratios. Desjardins Group significantly surpasses these
                                                                                                                minimum limits.

                                                                                                                OUTLOOK
                                                                                                                In 1999, the BIS launched a major review of its capital adequacy
                                                                                                                requirements in order to keep pace with the many changes that
                                                                                                                have occurred in financial markets in recent years. They are
                                                                                                                expected to be adopted in 2004 and implemented in 2006. Their
                                                                                                                objective is to link a financial group’s capital requirements to
                                                                                                                specific, foreseeable risks according to the financial institution’s
                                                                                                                individual experience. Desjardins Group has already begun work in
                                                                                                                this regard.
Desjardins Group
                                                                                                                                                                      page 87
TABLE 18 – CAPITAL AND CAPITAL RATIO(1)
As at December 31
(in millions of $ and as a percentage)

                                                                                                                                               2003          2002




                                                                                                                                                                      Management’s Discussion and Analysis
      TIER 1 CAPITAL
      Shares                                                                                                                              $     795     $     819
      Reserves                                                                                                                                4,790         4,332
      Undistributed surplus earnings                                                                                                            518           473
      Non-controlling interests                                                                                                                  42            32
                                                                                                                                              6,145         5,656
      TIER 2 CAPITAL
      Subordinated debentures                                                                                                                   976         1,042
      Shares                                                                                                                                     43             –
      General provision                                                                                                                         397           361
                                                                                                                                              1,416         1,403
      INVESTMENTS(2)                                                                                                                          (1,410)       (1,159)
      TOTAL CAPITAL                                                                                                                       $   6,151     $   5,900
      RISK-WEIGHTED ASSETS
      On-balance sheet assets                                                                                                             $ 45,754      $ 40,096
      Off-balance sheet financial instruments                                                                                                1,470         4,148
                                                                                                                                          $ 47,224      $ 44,244
      CAPITAL RATIOS
      Tier 1 capital                                                                                                                          13.01 %       12.78 %
      Tier 2 capital                                                                                                                           3.00           3.17
      Investments                                                                                                                             (2.98)         (2.61)
      TOTAL CAPITAL RATIO                                                                                                                     13.03 %       13.34 %

(1) On-balance sheet and off-balance sheet financial instruments are those of the financial intermediation network only.
(2) These amounts correspond to the consolidated value of the investment in the subsidiary companies, and the surplus of the value
    of the investment in Desjardins Venture Capital Inc. and Desjardins Venture Capital, a limited partnership in relation to the cost.




                                                                                                                                                                      Desjardins Group
page 88




                                       TABLE 19 – RISK-WEIGHTED ASSETS(1)
                                       As at December 31
                                       (in millions of $ and as a percentage)

                                                                                                                                                                             2003                                  2002
Management’s Discussion and Analysis




                                                                                                                                                Amount on           Principal risk
                                                                                                                                                  balance              weighting        Risk-weighted     Risk-weighted
                                             On-balance sheet assets                                                                                sheet                 factors             balance           balance
                                             Cash and deposits with financial institutions                                                         $    1,363               0-100 %         $      168        $        –
                                             Securities issued or guaranteed by Canada, the provinces and municipalities                                6,163                0-20                   15                26
                                             Other securities                                                                                           5,045               0-100                2,416             2,070
                                             Loans issued or guaranteed by Canada, the provinces and municipalities                                     7,934                0-20                  749               634
                                             Mortgages insured by the government                                                                        8,918                   0                    –                 –
                                             Other mortgages                                                                                           27,949               0-100               19,784            18,312
                                             Other loans                                                                                               20,631               0-100               19,751            16,557
                                             Other assets                                                                                               3,921               0-100                2,871             2,497
                                                                                                                                                   $ 81,924                                 $ 45,754          $ 40,096



                                                                                                                                                        2003                                                       2002
                                                                                                                                                                       Principal
                                                                                                                               Credit                                       risk
                                                                                                        Notional           conversion           Credit risk           weighting         Risk-weighted     Risk-weighted
                                             Off-balance sheet financial instruments                     amount                factor           equivalent               factors              balance           balance
                                             CREDIT INSTRUMENTS
                                             Guarantees and standby letters of credit                   $      356                0-100 %          $     347               20-100 %         $     332         $      250
                                             Credit substitutes                                                                     100                                       100                                  2,800
                                             Credit commitments
                                             Original term of one year or less                              23,928                    0                     –                   0                   –                 –
                                             Original term of over one year                                  2,369                 0-50                 1,202               0-100                 880               858
                                                                                                                                                                                                 1,212             3,908
                                             DERIVATIVE FINANCIAL INSTRUMENTS
                                             Interest rate contracts                                        32,477                     (2)
                                                                                                                                                         681                 0-50                 170               187
                                             Foreign exchange contracts                                     10,570                     (2)
                                                                                                                                                         535                20-50                 138               150
                                             Other contracts                                                 6,689                     (2)
                                                                                                                                                         561                 0-50                 159               121
                                                                                                                                                                                                   467               458
                                             Impact of master netting agreements                                                                                                                  (209)             (218)
                                                                                                                                                                                                  258               240
                                             TOTAL OFF-BALANCE SHEET FINANCIAL INSTRUMENTS                                                                                                       1,470             4,148
                                             TOTAL RISK-WEIGHTED ASSETS                                                                                                                     $ 47,224          $ 44,244

                                       (1) On-balance sheet and off-balance sheet financial instruments are those of the financial intermediation network.
                                       (2) Interest rate, foreign exchange and other contracts are converted into their “credit risk equivalent“ by adding the total replacement cost
                                           (obtained by market valuation) of all outstanding contracts that have a positive value and an amount of potential risk exposure based on
                                           the total contract amount, distributed according to the remaining term as shown in the above table.
Desjardins Group
                                                                                                                                                                           page 89
OFF-BALANCE SHEET ITEMS

 HIGHLIGHTS
 ■   Assets under administration of $172.4 billion, an increase of 18.3% over 2002




                                                                                                                                                                           Management’s Discussion and Analysis
 ■   Credit instruments of $30 billion made available to members and clients in 2003
 ■   In 97% of cases, the counterparties to derivative financial instruments have high credit ratings



In the normal course of its operations, Desjardins Group makes                                      CREDIT INSTRUMENTS AND DERIVATIVES
various off-balance sheet commitments. These include assets under                                   These off-balance sheet items are managed using the same
administration and management for members and clients, credit                                       rigorous rules as those applied to on-balance sheet items.
instruments, derivative financial instruments, and contractual
obligations.                                                                                        The risks associated with these types of commitments are assessed
                                                                                                    in accordance with the regulatory requirements established by the
ASSETS UNDER ADMINISTRATION AND MANAGEMENT                                                          Bank for International Settlements (BIS).
As at December 31, 2003, Desjardins Group acted as a trustee or
manager of $172.4 billion, an increase of $26.6 billion, or 18.3%,                                  The accounting standard for derivatives used in Notes 1, 17 and 20
over the previous year, compared to a decrease of $1.9 billion, or                                  of the Combined Financial Statements of Desjardins Group
1.3%, recorded at the end of 2002. This represents a substantial                                    respectively reflect the accounting method for derivatives and the
jump in the financial assets that members and clients have                                          portrait of our commitments effective December 31, 2003. The
entrusted to Desjardins Group. Possible explanations for this                                       Management believes that no losses were posted with regard to
include our dynamism in this area and, of course, the rebound of                                    these commitments, and no unusual risks were incurred.
the stock markets.
                                                                                                    CREDIT INSTRUMENTS In order to meet its members’ and clients’
Assets under management totalled $9.5 billion as at December 31, 2003,                              financing needs, Desjardins Group makes credit instruments
compared to $13.7 billion one year earlier, a $4.2 billion, or 30.5%,                               available to them. The policy for managing these instruments is the
decline. This fall is mostly attributable to the sale of assets under                               same as for the granting of loans, which reduces the risk associated
management amounting to approximately $5 billion, as part of the                                    with such instruments.
reorganization of our asset management activities. This sale was
partly offset by a positive market effect.                                                          Credit instruments include guarantees, standby letters of credit,
                                                                                                    securities lending, loan substitutes and credit commitments
Assets under administration and management, it should be                                            representing amounts authorized but not used by members or
remembered, are comprised chiefly of financial assets in the form                                   clients. Since many of these commitments expire or terminate
of investment funds, securities held in custody and accrued pension                                 without being funded, the contractual obligations reflected
fund assets, which do not belong directly to Desjardins Group, but                                  in Table 19 on page 88 do not necessarily represent actual future
to its members and clients. For this reason, they are not recorded                                  cash requirements.
on its balance sheet.
                                                                                                    Table 21 on page 90 provides a snapshot of credit instruments used
                                                                                                    by Desjardins Group, by term to maturity.


TABLE 20 – ASSETS UNDER ADMINISTRATION AND MANAGEMENT
As at December 31
(in millions of $ and as a percentage)

                                                                                                                        2003                           2002
                                                                                                                          % change                        % change
      ASSETS UNDER ADMINISTRATION
      Individual and institutional trust and custodial services                                             $165,349           17.9 %      $140,237             (1.1)%
      Investment funds(1)                                                                                      7,013           28.0           5,480             (5.6)
                                                                                                            $172,362           18.3 %      $145,717             (1.3)%
      ASSETS UNDER MANAGEMENT
      Institutions and individuals                                                                          $   2,534          (69.3)%     $   8,257            (4.8)%
      Investment funds(1)                                                                                       7,013           28.0           5,480            (5.6)
                                                                                                            $   9,547          (30.5)%     $ 13,737             (5.2)%

(1) Includes $5.4 billion of Desjardins Funds and $1.7 billion of other funds issued by the subsidiaries.
                                                                                                                                                                           Desjardins Group
page 90




                                       TABLE 21 – CREDIT INSTRUMENTS BY TERM TO MATURITY
                                       As at December 31
                                       (in millions of $)

                                                                                                                               2003                                               2002
Management’s Discussion and Analysis




                                                                                         Less than       From 1 to        From 3 to       More than
                                                                                          one year          3 years          5 years        5 years              Total            Total
                                              Guarantees and standby letters of credit   $      239      $        89       $       9        $       2       $      339       $      246
                                              Securities lending                              4,149                                                              4,149            3,272
                                              Loan substitutes                                                                                                       –            2,800
                                              Credit commitments                             23,667             1,038            166             736            25,607           20,633
                                              Total credit instruments                   $ 28,055        $      1,127      $     175        $    738        $ 30,095         $ 26,951


                                       DERIVATIVE FINANCIAL INSTRUMENTS Desjardins Group uses derivative            The risk associated with future receipts and disbursements related
                                       financial instruments to manage its assets and liabilities and to meet       to commitments made by Desjardins Group through derivative
                                       the needs of its members and clients. Derivates represent strategic          financial instruments is called liquidity risk. This risk is managed
                                       tools for Desjardins Group, and include futures contracts, swaps, and        overall by Desjardins Group as part of the management of its asset
                                       options. These tools are used to mitigate risks associated with              and liability matching.
                                       interest rates, exchange rates, and other financial indices.
                                                                                                                    Market risk represents the risk related to changes in the benchmark
                                       To ensure compliance with the rules and policies established for             indexes for derivative financial instruments, such as interest rates,
                                       managing the risks inherent in these instruments, such as credit,            exchange rates or other financial indexes. As in past years, Desjardins
                                       liquidity, and market risks, the management of the Fédération des            Group manages this risk by negotiating short-term agreements
                                       caisses Desjardins du Québec and its subsidiaries exercise oversight         aimed at limiting fluctuations in these indexes.
                                       with regard to off-balance sheet derivatives. This also applies to on-
                                       balance sheet financial instruments.                                         Note 17 to the Combined Financial Statements shows that over
                                                                                                                    70% of derivative financial instruments had a remaining term to
                                       The risk that a counterparty will fail to honour its commitments to          maturity of less than three years, with more than half of these
                                       Desjardins Group represents credit risk. The credit risk equivalent          instruments maturing within one year. In 2002, 76% of the total
                                       equals the (positive) replacement value plus an amount capturing             notional principal for these contracts had a term to maturity of less
                                       future risk associated with variations in the replacement value as a         than three years.
                                       function of a given instrument’s maturity.
                                                                                                                    The risk-weighted balance for Desjardins Group’s derivatives
                                       In Note 17 to the Combined Financial Statements, the table                   amounted to $290 million when all master netting agreements
                                       presenting derivatives by their credit risk rating and type                  were accounted for.
                                       of counterparty indicates that 97% of counterparties, of which
                                       75% are financial institutions, have credit ratings ranging from             CONTRACTUAL OBLIGATIONS
                                       AAA to A. Furthermore, Desjardins Group has master netting                   Desjardins Group has contractual obligations to make future
                                       agreements with certain counterparties, which reduce their                   payments on borrowings, subordinated debentures and leases.
                                       insolvency risk by allowing net settlement of all positions covered          Borrowings and subordinated debentures are presented in
                                       by master agreements.                                                        Desjardins Group’s Combined Financial Statements, but leases are
                                                                                                                    not. Notes 9, 11, and 20 of the Combined Financial Statements
                                                                                                                    contain information on the contractual obligations.
Desjardins Group
                                                                                                                                                     page 91
RISK MANAGEMENT                                                         The Integrated Risk Management Group develops strategies,
                                                                        orientations, standards and general policies that apply to the entire
Desjardins Group, in the normal course of its operations, is exposed    Desjardins Group and ensure that risks are managed in a sound and
to the following risks:                                                 prudent manner by all components. In addition, this unit develops




                                                                                                                                                     Management’s Discussion and Analysis
                                                                        practices and procedures applied throughout the caisse network.
■   credit risk                                                         Each component’s risk management team defines or reviews the
■   liquidity risk                                                      policies and processes specifically adapted to their operations.
■   market risk                                                         Competent and well-trained parties from all levels of the
■   operational risk                                                    organization ensure that defined rules are methodically applied.
■   insurance risk
                                                                        Desjardins Group’s policies and processes are designed to proactively
Desjardins Group’s goal in terms of risk management is to optimize      identify potential risks and to measure, assess and manage them
its risk/return ratio by applying sound and prudent risk-related        soundly and prudently, notably by specifying the controls that must
strategies, policies, and management and control processes that         be applied and the reports that officers must produce.
are integrated throughout the organization’s functions.
                                                                        Desjardins Group’s internal audit team carries out independent
The Fédération’s Board of Directors assumes the responsibilities of     examinations of Fédération and subsidiary operations to provide
guiding, planning, coordinating and overseeing all of the Group’s       further assurance as to the degree of risk control within the
operations. A single Board of Directors and Chief Executive Officer     organization.
used by the Fédération, Caisse centrale Desjardins and Desjardins
Financial Corporation ensure a unified vision and synergy among         The caisse network is monitored by the Desjardins Bureau for
Desjardins Group’s risk management components. The Strategic            Financial Monitoring and Enforcement (the Bureau), as required by
Planning and Development Committee supports the Fédération’s            the Québec Act Respecting Financial Services Cooperatives. The
Board of Directors and the Chief Executive Officer at integrating       purpose of such monitoring, which is done by applying best
the strategic orientations within business segments and at              practices, is to evaluate the network’s policies, processes, and
developing business strategies. The Strategic Planning and              controls as well as the manner in which they are applied in order to
Development Committee is made up of members of senior                   ensure sound and prudent risk management. Furthermore, the
management from Desjardins’ major components.                           Bureau examines activities performed for caisses by the Fédération,
                                                                        including liquidity management. The Bureau’s reports to the Board
The risk management approach is founded on principles that place        of Directors of the caisses and the Fédération are subject to
primary accountability regarding results and risk management on         thorough follow-up.
entities and units and that grant the Board of Directors of all
Desjardins entities a top-level role in monitoring the risks and        INTEGRATED RISK MANAGEMENT AND THE NEW BASEL CAPITAL ACCORD
results of these units and entities.                                    The Basel Committee on Banking Supervision is currently finalizing
                                                                        a new capital accord that mainly focuses on risk management and
A number of committees support the Board of Directors and               encourages the continuous progress of risk assessment capacities
management teams of each component at carrying out their                among financial institutions by accurately teaming up capital
primary risk management responsibilities.                               requirements with modern methods of risk management.
                                                                        Desjardins Group, in its efforts to apply best risk management
As part of continuous improvement initiatives, the Fédération’s         practices, continued to implement its Integrated Risk Management
Board of Directors adopted, in fall 2003, several recommendations       and Basel Accord program throughout the year. This integrated
designed to update its overall risk management framework.               management approach will facilitate risk identification and
Essentially, these recommendations identified the Fédération’s          measurement as well as optimal capital allocation and will become
specific responsibilities and those of the Strategic Planning and       integrated in strategic planning and performance evaluation.
Development Committee with respect to Desjardins Group’s global         Major initiatives in the areas of credit risk, liquidity risk, market risk
risk management approach and defined the guiding principles that        and operational risk will continue throughout 2004 and the coming
will apply to all business segments and to all risks. In 2004, a Risk   years in order to further elucidate our global vision of risk and how
Management Commission and a Risk and Capital Committee will be          it can be incorporated into all of Desjardins Group’s activities.
set up to support, respectively, the Fédération’s Board of Directors
and the Strategic Planning and Development Committee in their
risk management responsibilities.

Several independent functional units complete the governance
infrastructure of Desjardins Group’s risk management framework.




                                                                                                                                                     Desjardins Group
page 92




                                       CREDIT RISK                                                                  The many categories of borrowers, from individuals to small and
                                                                                                                    medium-sized enterprises in every sphere of the economy,
                                        Credit risk is the risk of losses resulting from a counterparty’s failure   contribute to healthy diversification. The pie chart below depicts
                                        to meet its contractual obligations, whether or not they appear on          how loans are distributed according to borrower category. Over
Management’s Discussion and Analysis




                                        the balance sheet. It also includes concentration risk. The term            half of the portfolio is made up of residential mortgages for which
                                        “counterparty“ includes issuers, debtors, borrowers, brokers,               the loss experience has always been low. Additional information
                                        underwriters, reinsurers and guarantors.                                    on changes in the loan portfolio can be found on pages 82 to 85 of
                                                                                                                    “Balance sheet“. When required, Desjardins Group uses
                                                                                                                    mechanisms to share risk with other financial institutions.
                                       Desjardins Group is exposed to this risk primarily as a result of its
                                       credit granting activities that constitute a key element of its                                  LOAN DISTRIBUTION BASED ON
                                       activities. At December 31, 2003, loans accounted for 71.3% (71.9%                               BORROWER CATEGORY
                                       in 2002) of assets on the balance sheet.                                                         As at December 31, 2003

                                       CREDIT RISK MANAGEMENT The above-described risk management                                                         4.0%
                                       framework allows for a more sound, prudent, efficient and                                                                   13.9%
                                                                                                                                        53.3%
                                       profitable management of credit risk.
                                                                                                                                                                        6.3%
                                       A single, general standard provides a framework for all of
                                       Desjardins Group’s credit risk management activities. This standard                                                               3.8%
                                       is complemented by the necessary policies and practices aimed at
                                       outlining the duties of the parties involved, specifying the degree                                                              7.4%
                                       of risk that Desjardins Group is willing to assume, defining
                                       concentration limits and determining risk management and                                                                    11.3%
                                       monitoring guidelines.
                                                                                                                                                Residential mortgages
                                       Credit is subject to analysis and authorization by specialists and
                                       committees according to the level of the delegation limits assigned.                                     Credit cards
                                       To that end, Desjardins Group relies on the necessary segment                                            Other personal loans
                                       specialists and provides continuous training in order to hone their
                                       skills. Follow-up procedures are devised to ensure early detection of                                    Farm loans
                                       deterioration of the risk on loans and, if applicable, their                                             Governments and other public
                                       immediate classification as an impaired loan as well as the amount                                       and parapublic institutions
                                       of a specific provision on these loans. This provision is reassessed on
                                                                                                                                                Commercial mortgages
                                       a quarterly basis. When required, the recovery of major files or the
                                       recovery of riskier files is transferred to specialized teams.                                           Other loans

                                       The primary measurements for assessing credit risk are the
                                       following: the ratio of gross impaired loans as a percentage of              Desjardins Group is continuing its objective of efficiently serving all
                                       gross loans, the coverage ratio and the ratio of provisions for credit       members. To that end, it has equipped itself with highly efficient
                                       losses expressed as a percentage of the average of gross loans. Data         distribution systems and networks tailored to the scope and nature
                                       on these measurements and additional information on impaired                 of member needs. Out of this initiative came the creation of centres
                                       loans, the cumulative provision for credit losses, and the provisions        that specialize in commercial credit. The experts working out of
                                       for credit losses expense are provided in the section entitled               these centres make it easier for Desjardins Group to reach its
                                       “Credit Quality“ on pages 80 and 81.                                         member satisfaction and risk management objectives. Desjardins
                                                                                                                    Group has also equipped itself with the systems required to support
                                       All large loans in the caisse network are submitted for prior                all financing and risk management activities, including systems used
                                       approval to the Fédération, which also monitors changes in risk for          to analyze and rate risk and to review commitments. These systems
                                       these loans. In addition to caisse and Fédération controls, the              and tools are reviewed and fine-tuned on a continuous basis.
                                       Bureau ensures compliance with the standards and policies that
                                       have been established to provide sound and prudent management
                                       of caisse loans.
Desjardins Group
                                                                                                                                                 page 93
LIQUIDITY RISK                                                          MARKET RISK

 Liquidity risk refers to Desjardins Group’s capacity to raise the
                                                                         Market risk is the risk of changes in the market value of financial
 necessary funds (through increasing liabilities or converting
                                                                         instruments resulting from fluctuations in parameters affecting




                                                                                                                                                 Management’s Discussion and Analysis
 assets) to meet a financial obligation, whether or not it appears
                                                                         this value, namely, interest rate and exchange rate volatility.
 on the balance sheet, on the date due.



Liquidity risk can emanate from the balance sheet structure due         Desjardins Group is exposed to market risk primarily due to its
to discrepancies between the actual maturity dates of assets            traditional financial intermediation operations. Desjardins Group is
and liabilities, financing needs for future operations, member and      also exposed to market risk through its trading activities.
client behavior, or general disturbances in the markets or economic
conditions.                                                             MARKET RISK MANAGEMENT Market risk is primarily the risk of loss
                                                                        related to interest rate and exchange rate volatility. The various
LIQUIDITY RISK MANAGEMENT The purpose of liquidity risk                 business segments have established stop-loss mechanisms for
management is to ensure that Desjardins Group has access, at all        changes in financial market positions.
times and in a profitable manner, to the funds it requires to meet
its financial commitments as they become due. Management of this        INTEREST RATE RISK MANAGEMENT Financial intermediation activities
risk involves maintaining a minimum level of liquid securities,         that involve taking deposits and granting loans expose Desjardins
stable and diversified sources of funding as well as an action plan     Group to market risk, mainly in the form of interest rate risk. The
in the event of unusual circumstances. Moreover, liquidity risk         interest rate risk of activities other than trading corresponds to the
management is a key component of the overall risk strategy,             potential impact of interest rate fluctuations on net interest
because it is essential in order to maintain market and depositor       income and economic value. The extent of this risk is a function of
confidence. In line with the separate nature of their operations, the   gaps in the amounts of assets, liabilities and off-balance sheet
various business segments manage their liquidity risk prudently.        instruments that reprice during a given period.

The caisses, the Fédération and Caisse centrale Desjardins must         Dynamic and prudent management is applied in order to reach the
maintain a minimum level of liquid securities which is defined by a     goal of optimizing net interest income while minimizing the
specific framework. Liquidity management is centralized at Caisse       negative impact of rate movements. Desjardins Group’s policies
centrale Desjardins and monitored on a daily basis. Eligible            describe the applicable principles and mechanisms used to manage
securities must meet high security and negotiability standards. At      this type of risk. The main methods used are gap position and
the same time, Caisse centrale Desjardins ensures an optimal            economic value analysis. Simulations are used to measure the
matching of cash flows arising from its financial transactions.         impact of different variables on changes in net interest income and
Additional information on changes in assets and liabilities can be      economic value for several years.
found in the “Balance sheet“ section on pages 82 to 85.
                                                                        These scenarios reflect different assumptions involving strategies,
As for the subsidiaries, specific policies and requirements have        rate movements, members’ behavior and other underlying
also been established and implemented with respect to their             variables. Strategies are applied chiefly through interest rate
respective operations.                                                  swaps. The effect of being inside the security corridor at December
                                                                        31, 2003 minimized the impact of rate movements on results.
Desjardins Group, through its extensive distribution network in
Québec and elsewhere in Canada, ensures stable and diversified          Periodic reports are submitted to senior management to evaluate
funding according to type, source and maturity by way of a              this risk on a regular basis. The Asset and Liability Management
competitive range of savings products. In addition to offering retail   (ALM) Committee meets regularly to adapt the strategies and
savings products, Desjardins Group can issue securities and borrow      resulting positions to the various rate contexts related to changing
on national and international markets to complete and diversify its     economic conditions.
funding. Access to these markets is facilitated by Desjardins Group’s
high level of capitalization and the excellent credit ratings it has    Note 18 to the Combined Financial Statements on page 120 shows
received from rating agencies.                                          Desjardins Group’s position with respect to interest rate sensitivity
                                                                        and matching of maturities at December 31, 2003. The situation
Desjardins Group has drawn up an action plan for rapid and              as presented reflects the position on this date only and may
effective intervention to minimize disturbances caused by sudden        vary subsequently according to changes in members’ behavior,
changes in market conditions. With this fallback plan, Desjardins       the interest rate environment and the strategies adopted by the
Group will be able to meet its commitments in the event of              ALM Committee.
disruptions on markets or economic conditions.



                                                                                                                                                 Desjardins Group
page 94




                                       FOREIGN EXCHANGE RISK MANAGEMENT Desjardins Group holds assets             Several projects were carried out in 2003 and will continue in the
                                       and liabilities in several currencies. Foreign exchange risk arises        coming years to ensure sound and prudent management of
                                       when there is an imbalance between the total present value of              operational risk. For example, Desjardins Group is refining the
                                       assets and liabilities denominated in the same currency. This              database it uses to gather information on the nature, frequency
Management’s Discussion and Analysis




                                       situation also applies to off-balance sheet financial instruments          and gravity of its operational losses.
                                       when the maturity profile for foreign exchange contracts
                                       purchased differs from the maturity profile for contracts sold. Risk       In addition, 2003 saw the creation of the “compliance function“
                                       can also arise from a transactional position, i.e., when cash inflows      and the subsequent appointment of a director of Desjardins Group
                                       and outflows in the same currency do not match.                            compliance. The director’s role will involve providing an
                                                                                                                  independent overview of the way Desjardins Group complies with
                                       Since the vast majority of Desjardins’ transactions are performed in       regulations governing its operations.
                                       Canadian dollars, its exposure to exchange risk is minimal. These
                                       risks are managed to optimize returns while maintaining prudent            E-BUSINESS RISK MANAGEMENT E-business involves a number of
                                       management. Caisse centrale Desjardins manages exchange risk               commercial practices and value-added products. Through the
                                       arising from transactional positions within acceptable limits              expertise of e-business specialists, Desjardins Group ensures that e-
                                       established in specific policies.                                          business risk is closely monitored and that the risks inherent to these
                                                                                                                  operations are managed effectively through continuous practices
                                       MANAGEMENT OF MARKET RISK RELATED TO TRADING ACTIVITIES Trading            and controls. Security, confidentiality, reliability and the availability
                                       activities are primarily related to market making and arbitrage            of systems are areas in which Desjardins Group is constantly making
                                       operations, market positioning and financial product sales to meet         substantial efforts in order to counter e-business risks.
                                       member and client needs. The securities portfolio trading account
                                       represents, as at December 31, 2003, less than 2% of total assets on       INSURANCE RISK
                                       the balance sheet. Additional information about this account is
                                       presented in Notes 1 and 3 to the Combined Financial Statements.            Insurance risk includes the risk of designing and pricing insurance
                                       All these operations are governed by very restrictive limits.               products as well as the risk associated with underwriting and
                                                                                                                   claims settlements.
                                       OPERATIONAL RISK

                                        Operational risk is the risk attributable to inadequacy or                The risk associated with designing and pricing products is the risk
                                        breakdown with respect to processes, people, internal systems             that the initial pricing is insufficient or will become so. The risk
                                        or outside events resulting in losses, unattained objectives or           associated with underwriting and claims settlements is the risk
                                        negative impacts on reputation.                                           resulting from the selection of risks, the claims settlement and
                                                                                                                  contractual clause management.

                                       Operational risk is inherent to any commercial operation. Losses can       INSURANCE RISK MANAGEMENT Product design and pricing risk arises
                                       arise primarily from fraud, damage to tangible assets, illegal acts,       from potentially erroneous predictions among the many factors
                                       lawsuits, faulty systems, as well as problems in the processing of         used to set premiums, including the future return on investments,
                                       transactions or in processes management. Operational risk is a result of   technical results with respect to mortality and morbidity, and
                                       internal as well as outsourced operations.                                 administrative expenses. The prices of a certain number of products
                                                                                                                  may be adjusted according to the accuracy of predictions, while
                                       OPERATIONAL RISK MANAGEMENT The primary objective is to keep               other product prices cannot be adjusted. Stringent pricing standards
                                       operational risk at an acceptable level while ensuring quality             and timely checks are carried out by Desjardins Group insurance
                                       service to Desjardins members and clients as well as organizational        subsidiaries in order to compare predictions with actual results.
                                       efficiency. Various administrative units within the Fédération and
                                       the subsidiaries support operational risk management by                    Desjardins Group insurance subsidiaries manage the risk associated
                                       establishing orientations, policies, and procedures designed to            with underwriting and claims settlements by setting appropriate
                                       manage, monitor and follow up on risk exposure. Internal controls          risk selection criteria and by limiting potential losses through
                                       and systems in place are examined periodically by internal auditors        reinsurance agreements. Such agreements do not however release
                                       and, for the caisses, by the Bureau. These systems include risk            them of their obligations towards their clients in the event that the
                                       monitoring, insurance coverage, security equipment as well as              reinsurers encounter difficulties. As a result, the subsidiaries are
                                       recovery plans and back-up facilities designed to continue                 also exposed to a credit risk related to the reinsurers. To minimize
                                       providing service in the event of a disaster. They also include an         this risk, the subsidiaries sign reinsurance treaties with stable, well-
                                       organizational structure that promotes segregation of duties,              established and duly accredited companies.
                                       delegation of decision-making powers, and transaction controls.

                                       As part of the continuous improvement process, and given new
                                       legislation adopted since the events of September 11, 2001 in the
                                       United States, practices have been adjusted in order to increase
                                       efforts to counter certain types of crime and to ensure that
                                       developments in control mechanisms keep pace with technology.
                                       As an anti-fraud measure to decrease instances of cloned debit
                                       cards, Desjardins Group implemented, in 2003, a procedure
                                       affecting major ATM transactions that asks cardholders for their
                                       date of birth as an additional security measure. These adjustments
                                       have proven effective and others are planned for 2004.
Desjardins Group
                                                                                                                                                     page 95
COMBINED FINANCIAL STATEMENTS
OF DESJARDINS GROUP




                                                                                                                                                     Combined Financial Statements
REPORT OF THE AUDIT AND
INSPECTION COMMISSION

The role of the Audit and Inspection Commission (the Commission) is to support the Board of Directors at carrying out its oversight
responsibilities for Desjardins Group (the Group). Its mandate essentially consists of analyzing the financial statements, their presentation and
the quality of the accounting principles used, the risk management of financial reporting, the internal control systems, the internal and external
audit processes, procedures applied to these audits, and management of regulatory compliance.

The Commission reviews Desjardins Group’s quarterly and annual financial statements, related press releases, the annual MD&A, and the Annual
Information Form and also discusses the major issues related to accounting principles and financial statements presentation.

The Commission ensures that Management has developed and implemented an effective internal control system for disclosing financial
information, protecting assets, detecting fraud and ensuring regulatory compliance. It also ensures that Management has implemented
management systems to protect against major risks that could influence the financial results of the caisse network and the Group.

Also examined are files that document the caisse network’s evolution, including the financial position of the caisses, particular situations
detected in the caisses, follow-ups made, bad debt expenses, and how certain accounting policies and practices, such as the management
method of the general provision, are applied. As for the Desjardins Bureau for Financial Monitoring and Enforcement, the Commission ensures
that its action plan on caisse audits and inspections is carried out and also reviews comment letters and inspection reports with adjustments.

The Commission is the direct authority of the External Auditor. To fulfill its responsibilities in this area, the Commission ensures the External
Auditor’s independence by authorizing all non-audit related services, by recommending auditor appointments or renewals, by establishing and
recommending auditor remuneration, and by annually reviewing auditor performance. Furthermore, the Commission supervises the quality of
the work carried out by external auditors, reviews their proposals, their mandate, their annual audit plan, their reports, their letter to
Management and Management’s response. In 2003, the Commission had the Board of Directors adopt a policy that governs the awarding of
contracts for related services. Specifically, this policy addresses the following: a) services that can or cannot be performed by the External
Auditor, b) control procedures that must be followed before mandates may be awarded, and c) responsibilities of the principal parties involved.
The Commission receives a quarterly report on the contracts granted to external auditors by all Desjardins Group entities.

The Commission ensures that Desjardins Group’s internal audit function remains independent. It analyzes the internal audit team’s annual plan
as well as its responsibilities, performance, objectivity and personnel. It also reviews internal audit summary reports and, as needed, ensures
follow-up. To this end, the Commission meets with the Internal Auditor of Desjardins Group to analyze any major issues submitted to
Management. The Commission also reviews the inspection report issued by the Autorité des marchés financiers as well as quarterly financial
reports submitted to the Autorité.

The Audit and Inspection Commission meets privately with the external auditors, Management, the Internal Auditor of Desjardins Group, the
Inspector and Auditor General of Desjardins Group, and representatives of the Autorité des marchés financiers. It reports to the Board of
Directors on a quarterly basis and makes recommendations as needed. Finally, in accordance with sound governance practices, each year the
Commission assesses the effectiveness and efficiency with which it carried out the tasks specified in its charter.

The Commission is composed of five directors: Andrée Lafortune, FCA; Jacqueline Mondy; Jean-Guy Bureau; Marcel Lauzon; and Pierre Leblanc,
FCA. The Commission met 13 times during the 2003 fiscal year.




ANDRÉE LAFORTUNE, FCA
Chair
                                                                                                                                                     Desjardins Group
page 96




                                MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

                                The Combined Financial Statements of Desjardins Group and all the information contained in this Annual Report are the responsibility of the
Combined Financial Statements




                                management of the Fédération des caisses Desjardins du Québec, whose duty is to ensure their integrity and fairness.

                                The Combined Financial Statements were prepared according to Canadian generally accepted accounting principles and according to the
                                accounting requirements of the Inspector General of Financial Institutions of Québec, as applicable. The combined financial statements
                                necessarily contain amounts established by management according to estimates, which it deems fair and reasonable. These estimates include,
                                among other things, the valuations of the actuarial and related liabilities performed by the valuation actuaries of the insurance subsidiaries.
                                All financial information presented in the Annual Report is consistent with the audited combined financial statements.

                                As the management of the Fédération des caisses Desjardins du Québec is responsible for the reliability of the Group’s combined financial
                                statements and related information, and the accounting systems from which they are derived, it maintains appropriate internal controls over
                                operations and related accounting practices. The organizational structure provides for effective segregation of duties, standards in personnel
                                hiring and training, as well as the application of control methods that are regularly updated, thereby ensuring adequate supervision of
                                operations. The effectiveness of the controls and systems is evaluated on a regular basis by the Desjardins Bureau for Financial Monitoring
                                and Enforcement and by the Group’s internal audit team.

                                The Inspector General of Financial Institutions of Québec (as of 2004, the Autorité des marchés financiers) conducts an inspection of the
                                Desjardins Group components under its authority at least once a year.

                                The Board of Directors of the Fédération des caisses Desjardins du Québec ensures that management fulfills its responsibilities with regard to
                                the presentation of financial information, and is responsible for approving the Combined Financial Statements of Desjardins Group. The Board
                                exercises this role chiefly through the Audit and Inspection Commission, consisting exclusively of directors who are neither officers nor
                                employees of any Desjardins Group component.

                                The Combined Financial Statements were examined by the auditors appointed by the Board of Directors; namely, Samson Bélair / Deloitte
                                & Touche s.e.n.c.r.l. and the Audit Department of the Desjardins Bureau for Financial Monitoring and Enforcement, whose report follows. The
                                auditors may meet with the Audit and Inspection Commission at any time to discuss their audit and any questions related thereto, notably
                                the integrity of the financial information provided and the quality of internal control systems.




                                ALBAN D’AMOURS                                             ROBERT MARCOTTE
                                President and chief executive officer                      Senior vice-president,
                                Desjardins Group                                           Finance and Administration
                                                                                           Fédération des caisses Desjardins du Québec

                                Lévis, February 20, 2004
Desjardins Group
                                                                                                                                                 page 97
AUDITORS’ REPORT

TO THE MEMBERS OF THE FÉDÉRATION DES CAISSES DESJARDINS DU QUÉBEC




                                                                                                                                                 Combined Financial Statements
We have audited the combined balance sheets of Desjardins Group as at December 31, 2003 and 2002 and the combined statement of
income, the combined statement of changes in equity and the combined statement of cash flows for the year then ended. These financial
statements are the responsibility of the management of the Fédération des caisses Desjardins du Québec. Our responsibility is to express an
opinion on these Combined Financial Statements based on our audit.

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

In our opinion, these Combined Financial Statements present fairly, in all material respects, the financial position of Desjardins Group as at
December 31, 2003 and 2002 and the results of its operations and its cash flows for the year then ended in accordance with Canadian
generally accepted accounting principles.

The Combined Financial Statements for the year ended December 31, 2001 were audited by Raymond Chabot Grant Thornton, General
Partnership and the Audit Department of the Desjardins Bureau for Financial Monitoring and Enforcement, which expressed an opinion
without reservations in their report dated March 1, 2002.




Samson Bélair / Deloitte & Touche, s.e.n.c.r.l.                     Audit Department
Chartered Accountants                                               Desjardins Bureau for Financial
                                                                    Monitoring and Enforcement

Québec City, February 20, 2004                                      Lévis, February 20, 2004




                                                                                                                                                 Desjardins Group
page 98




                                COMBINED BALANCE SHEET
                                As at December 31
                                (in millions of dollars)
Combined Financial Statements




                                                                                                                              2003          2002
                                      ASSETS
                                      Cash and deposits with financial institutions                                      $    1,357    $    1,355
                                      Securities (note 3)
                                      Investment account                                                                     18,357        15,993
                                      Trading account                                                                         1,033           774
                                                                                                                             19,390        16,767
                                      Loans (note 4)
                                      Residential mortgages                                                                  36,457        33,230
                                      Consumer, credit card and other personal loans                                         12,203        11,039
                                      Business and government                                                                19,676        17,992
                                                                                                                             68,336        62,261
                                      Cumulative provision for credit losses (note 4)                                          (834)         (892)
                                                                                                                             67,502        61,369
                                      Other assets
                                      Land, buildings and equipment (note 5)                                                  1,134         1,148
                                      Interest receivable                                                                       345           341
                                      Derivative-related assets                                                               1,066         1,098
                                      Customers’ liability under acceptances                                                    450           349
                                      Other (note 6)                                                                          3,408         2,916
                                                                                                                              6,403         5,852
                                      TOTAL ASSETS                                                                       $ 94,652      $ 85,343
                                      LIABILITIES AND EQUITY
                                      LIABILITIES
                                      Deposits (note 7)
                                      Individuals                                                                        $ 50,024      $ 46,581
                                      Business and government                                                              14,225        12,509
                                      Deposit-taking and other institutions                                                 6,095         3,811
                                                                                                                             70,344        62,901
                                      Other liabilities
                                      Policy and related liabilities (note 8)                                                 9,294         8,370
                                      Borrowings (note 9)                                                                       154           237
                                      Interest payable                                                                          621           614
                                      Derivative-related liabilities                                                          1,363         1,699
                                      Acceptances                                                                               450           349
                                      Other (note 10)                                                                         4,827         3,884
                                                                                                                             16,709        15,153
                                      Subordinated debentures (note 11)                                                       1,154         1,208
                                      Non-controlling interests (note 12)                                                      247           405
                                      EQUITY
                                      Capital stock (note 13)                                                                   869           851
                                      Undistributed surplus earnings                                                            516           475
                                      Reserves                                                                                4,813         4,350
                                                                                                                              6,198         5,676
                                      TOTAL LIABILITIES AND EQUITY                                                       $ 94,652      $ 85,343

                                The accompanying notes are an integral part of the Combined Financial Statements.

                                On behalf of the Board of Directors of the Fédération des caisses Desjardins du Québec
Desjardins Group




                                ALBAN D’AMOURS                                          MADELEINE LAPIERRE
                                Chairman of the Board                                   Vice-Chair of the Board
                                                                                                                          page 99
COMBINED STATEMENT OF INCOME
For the year ended December 31
(in millions of dollars)




                                                                                                                          Combined Financial Statements
                                                                                        2003         2002         2001
       INTEREST INCOME
       Loans                                                                        $   4,189    $   4,035    $   4,296
       Securities                                                                         840          852          871
                                                                                        5,029        4,887        5,167
       INTEREST EXPENSE
       Deposits                                                                         1,567        1,531        2,204
       Subordinated debentures and borrowings                                              84           78           53
                                                                                        1,651        1,609        2,257
       NET INTEREST INCOME                                                              3,378        3,278        2,910
       OTHER INCOME
       Net premiums                                                                     3,082        2,623        2,381
       Deposit and payment service charges                                                381          359          363
       Lending fees and credit card service revenues                                      190          161          141
       Trust services and securities dealing                                              222          188          180
       Other                                                                              459          279          340
                                                                                        4,334        3,610        3,405
       TOTAL INCOME                                                                     7,712        6,888        6,315
       PROVISIONS FOR CREDIT LOSSES                                                       73          109          237
       NON-INTEREST EXPENSES
       Claims, benefits, annuities and changes in insurance provisions                  3,034        2,349        2,245
       Salaries and fringe benefits                                                     1,745        1,587        1,461
       Premises, equipment and furniture, including depreciation                          341          337          340
       Communications                                                                     172          170          178
       Other                                                                            1,200        1,080        1,053
                                                                                        6,492        5,523        5,277
       OPERATING SURPLUS EARNINGS FROM CONTINUING OPERATIONS                            1,147        1,256         801
       Income taxes on surplus earnings (note 14)                                         308          371         179
       SURPLUS EARNINGS FROM CONTINUING OPERATIONS BEFORE
          NON-CONTROLLING INTERESTS AND PATRONAGE ALLOCATIONS                            839          885          622
       Non-controlling interests (note 12)                                                25           24           23
       SURPLUS EARNINGS FROM CONTINUING OPERATIONS BEFORE PATRONAGE ALLOCATIONS          814          861          599
       Discontinued operations (note 24)                                                   2           (13)        (11)
       SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS                                      816          848         588
       Patronage allocations to members (note 15)                                         440          490         269
       Tax recovery on patronage allocations (note 14)                                   (142)        (157)        (78)
       SURPLUS EARNINGS FOR THE YEAR AFTER PATRONAGE ALLOCATIONS                    $    518     $    515     $    397



The accompanying notes are an integral part of the Combined Financial Statements.

                                                                                                                          Desjardins Group
page 100




                                COMBINED STATEMENT OF CHANGES IN EQUITY
                                For the year ended December 31
                                (in millions of dollars)
Combined Financial Statements




                                                                                                                                                            2003                      2002                      2001
                                       CAPITAL STOCK
                                       Balance at beginning of year                                                                                   $      851                $      844                 $     819
                                       Net change during the year                                                                                             18                         7                        25
                                       Balance at end of year                                                                                         $      869                $      851                 $     844
                                       UNDISTRIBUTED SURPLUS EARNINGS
                                       Balance at beginning of year                                                                                   $      475                $       321                $      279
                                       Surplus earnings for the year after patronage allocation                                                              518                        515                       397
                                       Remuneration on permanent shares (net of income taxes recovered)                                                      (14)                        (20)                      (27)
                                       Transfer to stabilization reserve                                                                                      (8)                        (12)                      (18)
                                       Transfer to general reserve                                                                                          (455)                      (329)                     (310)
                                       Balance at end of year                                                                                         $      516                $      475                 $     321
                                       RESERVES
                                       STABILIZATION RESERVE
                                       Balance at beginning of year                                                                                   $      260                $      248                 $     230
                                       Transfer from undistributed surplus earnings                                                                            8                        12                        18
                                       Balance at end of year                                                                                         $      268                $      260                 $     248
                                       GENERAL RESERVE
                                       Balance at beginning of year                                                                                   $    4,090                $    3,792                 $   3,482
                                       Cumulative effect of changes in accounting policies(1)                                                                  –                        (31)                       –
                                       Transfer from undistributed surplus earnings                                                                          455                       329                       310
                                       Balance at end of year                                                                                         $    4,545                $    4,090                 $   3,792
                                       TOTAL RESERVES                                                                                                 $    4,813                $    4,350                 $   4,040

                                (1) Represents the effect of applying Section 3062 of the Handbook of the Canadian Institute of Chartered Accountants (CICA), “Goodwill and Other Intangible Assets“ ($65M loss in
                                    value after taxes) and the adoption of the fair value based method for the investments of certain subsidiaries, rather than the acquisition or equity method, to conform with industry
                                    practice ($34M increase in the securities balance) in 2002.



                                The accompanying notes are an integral part of the Combined Financial Statements.
Desjardins Group
                                                                                                                                           page 101
COMBINED STATEMENT OF CASH FLOWS
For the year ended December 31
(in millions of dollars)




                                                                                                                                           Combined Financial Statements
                                                                                                    2003          2002           2001
       CASH FLOWS FROM OPERATING ACTIVITIES
       Surplus earnings for the year after patronage allocations                               $     518     $     515      $     397
       Adjustments for:
         Depreciation                                                                                131           134            137
         Amortization of goodwill                                                                      –               –           13
         Amortization of realized and unrealized deferred net gains on investment securities        (101)             (2)           (7)
         Net change in policy and related liabilities                                                924           305            246
         Future income taxes                                                                         (83)              8          (10)
         Provisions for credit losses                                                                 73           109            237
         Non-controlling interests                                                                    25             24            23
         Net gain on disposal of investment securities                                              (122)           (48)          (49)
         Allowance, capital risk investment                                                           45               3             –
         Changes in operating assets and liabilities
           Interest receivable                                                                        (4)             1             51
           Interest payable                                                                            7           (131)          (186)
           Trading accounts securities                                                              (259)          (391)          (183)
           Derivative-related assets                                                                  32            130           (714)
           Derivative-related liabilities                                                           (336)           530            582
           Other                                                                                     295            156             98
                                                                                                   1,145         1,343            635
       CASH FLOWS FROM FINANCING ACTIVITIES
       Net change in deposits                                                                      7,443         2,336          3,058
       Issue of debt securities and debentures                                                        34           850             39
       Repayment of debt securities and debentures                                                  (117)         (119)           (63)
       Net change in capital stock                                                                    18              7            25
       Remuneration on permanent shares (net of income taxes recovered)                              (14)           (20)          (27)
                                                                                                   7,364         3,054          3,032
       CASH FLOWS FROM INVESTING ACTIVITIES
       Net change in loans                                                                         (6,206)       (4,001)        (2,775)
       Net change in securities in the investment account                                          (2,186)         (288)          (629)
       Net change in land, buildings and equipment                                                   (117)           (69)           (11)
       Net proceeds on disposal related to restructuring of asset
         management and discontinued operations                                                        22             –               –
       Business acquisitions, net of cash                                                             (20)            –              (1)
                                                                                                   (8,507)       (4,358)        (3,416)
       NET INCREASE IN CASH                                                                            2            39            251
       Cash and deposits with financial institutions at beginning of year                          1,355         1,316          1,065
       CASH AND DEPOSITS WITH FINANCIAL INSTITUTIONS AT END OF YEAR                            $   1,357     $   1,355      $   1,316
       SUPPLEMENTAL CASH FLOW INFORMATION
       Interest paid during the year                                                           $   1,644     $   1,740      $   2,443
       Income taxes on surplus earnings paid during the year                                         200           118            178



The accompanying notes are an integral part of the Combined Financial Statements.
                                                                                                                                           Desjardins Group
page 102




                                NOTES TO THE COMBINED FINANCIAL STATEMENTS
                                Amounts presented in the notes to the Combined Financial Statements are in millions (M) of dollars, unless otherwise stated.
Combined Financial Statements




                                Desjardins Group is made up of the caisses, le Fonds de sécurité Desjardins and the Fédération des caisses Desjardins du Québec and
                                its subsidiaries, which contribute to the development of activities at the caisses. Desjardins Group, a cooperative financial movement,
                                is a leading player in the economic and social development of the communities it serves.



                                Note 1      SIGNIFICANT ACCOUNTING POLICIES

                                Pursuant to the Act respecting financial services cooperatives, the Combined Financial Statements of Desjardins Group have been prepared
                                by management in accordance with Canadian generally accepted accounting principles and the accounting requirements of the Inspector
                                General of Financial Institutions of Québec, as applicable. In preparing the financial statements, management is required to make certain
                                estimates and assumptions that affect assets and liabilities and the reporting of contingent assets and liabilities in the financial statements,
                                as well as income and expenses for the periods covered. The main items for which Management must have passed careful judgment notably
                                include cumulative provision on credit losses, valuation of financial instruments at fair value, policy and related liabilities, patronage allocations,
                                net charge related to employee future benefit plans and income tax assets and liabilities. Actual results may differ from these estimates.

                                COMBINED FINANCIAL STATEMENTS
                                These financial statements include the accounts of the components of Desjardins Group. The principles used in the preparation of the
                                combined financial statements are similar to those used in the preparation of the consolidated financial statements. The Combined Financial
                                Statements include the assets, liabilities, equity and the operating results of the Desjardins Group entities, following the elimination of
                                intercompany transactions and balances.

                                SECURITIES
                                Securities include investment and trading account securities.

                                INVESTMENT ACCOUNT SECURITIES Investment account securities are held until maturity or until the market offers more attractive investment
                                opportunities.

                                Securities are carried at unamortized cost. Premiums and discounts are amortized using the effective yield method over the terms of the
                                related securities and are recorded in “Interest income“. Gains and losses realized on the disposal of these securities, as well as any write-
                                downs necessary to reflect other-than-temporary impairments in value, are recognized immediately in “Other income – Other“. Only gains
                                and losses realized on the disposal of securities held by the life and health insurance subsidiary are deferred and included in income using
                                the straight-line method until maturity, for a maximum of 20 years.

                                Equity securities held in companies subject to significant influence are carried at equity while other equity securities are carried at cost and
                                preferred shares are carried at cost, net of premiums and discounts, except those held by the life and health insurance subsidiary, which are
                                accounted for using the moving average market value method. Gains and losses realized on the disposal of equity securities, as well as any
                                write-downs necessary to reflect other-than-temporary impairments in value, are recognized immediately in “Other income – Other“.
                                However, realized and unrealized gains and losses on equity securities of the life and health insurance subsidiary are deferred and included
                                in income using the declining balance method at a rate of 15.0% per annum.

                                The venture capital investments of subsidiaries in the development capital investment segment, including investments in companies subject
                                to significant influence, are carried at their fair value. In 2003, these subsidiaries opted for a prospectively early adoption of a new
                                accounting policy on evaluating the aggregate of their investments following the publication of the Accounting Guideline (AcG-18)
                                “Investment Companies“. Investments in companies subject to significant influence were previously accounted for using the equity method.
                                This change has resulted in decreasing securities by $8M and “Other income – Other“ by the same amount.

                                TRADING ACCOUNT SECURITIES Trading account securities, which are acquired for resale in the short term, are carried at their fair value. Interest
                                income from trading account securities is recorded with income from securities. Securities sold short are recorded as liabilities and carried
                                at their fair value. Gains and losses, either realized or unrealized, are recognized immediately in “Other income – Other“.
Desjardins Group
                                                                                                                                                      page 103
Note 1    SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOANS
Loans, including advances to policyholders, are stated at cost, net of the cumulative provision for credit losses.




                                                                                                                                                      Combined Financial Statements
A loan is considered impaired and interest is no longer calculated when: a) there is reasonable doubt as to the collectibility of a portion of
the principal or the interest or b) the interest or principal repayment is contractually 90 days or more past due, unless the loan is fully secured
or in the process of collection, or c) the loan is more than 180 days in arrears. As soon as a loan is considered impaired, interest accrued but
not collected is capitalized to the loan, and no interest is recorded thereafter. Subsequent payments received are accounted for as a credit to
the principal. A loan ceases to be considered impaired and interest is once again accounted for under the accrual method when principal and
interest payments are up to date and the collectibility of the loan is not longer in doubt.

Collateral is obtained if deemed necessary for a member’s or client’s loan facility following an assessment of their creditworthiness. Collateral
normally takes the form of an asset such as cash, government securities, shares, receivables, inventory or fixed assets.

Assets acquired to settle an impaired loan before May 1, 2003 are recorded at the loan’s carrying value on the date of transfer. A provision is
taken for any portion of the loan’s carrying value beyond the fair value of the assets. Operating income along with any gains or losses on the
disposal of these assets are treated as provisions for credit losses.

Desjardins Group adopted the new accounting standard entitled “Impaired Loans“, presented in Section 3025 of the CICA Handbook, with
respect to assets foreclosed effective May 1, 2003. A long-lived asset foreclosed after May 1, 2003 is no longer classified as an impaired loan
but is now classified as an asset held for sale if it meets the criteria in the standard entitled “Disposal of Long-Lived Assets and Discontinued
Operations“, presented in Section 3475 of the CICA Handbook. A foreclosed long-lived asset classified as held for sale is measured at fair
value less cost to sell at the date of foreclosure. Foreclosed assets held and used in the normal course of business are measured at fair value
and classified as land, building and equipment. When the value at which the foreclosed assets are initially measured differs from the carrying
value of the loan, the difference is charged to earnings. Thereafter, estimated operating losses during the holding period are included in
earnings for the year as non-interest expenses.

CUMULATIVE PROVISION FOR CREDIT LOSSES
The cumulative provision for credit losses reflects management’s best estimate of potential losses related to a portfolio of items which are
both on and off the balance sheet and its assessment of economic conditions. Any material change could result in a change to cumulative
provision for credit losses currently recognized.

The cumulative provision is increased by provisions for credit losses charged to the statement of income and decreased by write-offs and
recoveries on loans for which provisions have already been taken. The cumulative provision for credit losses is made up of specific and
general provisions. Credit risk is assessed regularly and specific provisions are determined, on a loan by loan basis, for all loans considered
impaired. Credit card balances are written off completely when no payment has been received for a period of 180 days. In addition, a
general provision is taken in order to reflect management’s best estimate of probable losses within the portion of the loan portfolio not yet
classified as impaired. The general provision is determined in advance using a statistical model based on changes in loans by category.
Moreover, an additional amount is considered in order to reflect the impact of economic and other factors. The general provision does not
represent future losses or serve as a substitute for the specific provisions.

Loans are written off when all attempts at restructuring and collection have been made and the prospect of further recovery is remote.

The carrying value of impaired loans is adjusted by discounting expected future cash flows at the rate of interest inherent in the original
loan. The provision is equal to the difference between this valuation and the balance of the loan. Any variation in the cumulative provision
for credit losses due either to the passage of time or a revision of expected payments is recorded under “Provisions for credit losses“ in the
combined statement of income.

LAND, BUILDINGS AND EQUIPMENT
Land is recorded at cost. Buildings, equipment, furniture and leasehold improvements are recorded at cost less accumulated depreciation
and are depreciated over their estimated useful lives using the declining balance or straight-line method. Gains and losses on disposal of
fixed assets are recognized in “Other income – Other“ in the year in which they are realized.

     Rates or terms of depreciation:
     Buildings                                                                                                       2.5% to 20%
     Computer equipment                                                                                               20% to 50%
     Furniture, fixtures and other                                                                                     5% to 50%
     Leasehold improvements                                                            Term of the lease plus first renewal option                    Desjardins Group
page 104




                                Note 1   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                                DISPOSAL OF LONG-LIVED ASSETS AND DISCONTINUED OPERATIONS
                                Desjardins Group adopted the new accounting standard entitled “Disposal of Long-Lived Assets and Discontinued Operations“, presented
Combined Financial Statements




                                in Section 3475 of the CICA Handbook, with respect to the disposal of assets after May 1, 2003. Under the standard, long-lived assets
                                classified as held for sale must be measured at the lower of their carrying amount or fair value less cost to sell. These assets are now classified
                                as “Other assets – Other“ in the combined balance sheet.

                                GOODWILL AND OTHER INTANGIBLE ASSETS
                                Acquisitions of subsidiaries are recorded using the acquisition method. Under this method, goodwill is the excess of a subsidiary’s acquisition
                                price over the fair value of net assets acquired. Goodwill and intangible assets with indefinite useful lives are no longer amortized; they are
                                tested annually for impairment. The impairment test consists in a comparison, by operating unit, of the fair value of these assets versus their
                                carrying value. Any excess of the carrying value over fair value is recorded in income during the period in which the impairment is determined.

                                Desjardins Group’s intangible assets with finite lives mainly include software and are presented at cost less accumulated amortization. They
                                are amortized using the straight-line method on their estimated useful lives, which do not exceed a five-year period. Intangible assets are
                                included in “Other assets – Other“ in the combined balance sheet.

                                ACCEPTANCES AND CLIENTS’ LIABILITY UNDER ACCEPTANCES
                                The potential liability of a Desjardins Group entity under acceptances is recorded as a liability in the combined balance sheet. The entity’s
                                recourse against the customer, in the event of a call on any of these commitment, is recorded as an equivalent offsetting assets. Fess earned
                                are reported in income under “Other income – Other“.

                                REVERSE REPURCHASE AGREEMENTS AND REPURCHASE AGREEMENTS
                                The Desjardins Group Corporation enters into short-term purchases of securities under reverse repurchase agreements and, at the same time,
                                into sales of securities under agreements to repurchase. These agreements are treated as collateralized lending transactions and are
                                recorded in the combined balance sheet at the selling and purchase price committed to in the agreement. Interest earned or paid on these
                                agreements is recorded in “Interest income“ or “Interest expense“, respectively.

                                REAL ESTATE INVESTMENTS
                                Real estate investments are carried at cost, and gains and losses on disposal, as well as any write-downs necessary to reflect other-than-temporary
                                impairments in value, are included in income under “Other income – Other“ in the year they are realized.

                                Real estate investments held by the life and health insurance subsidiary are carried according to the moving average market method at a
                                rate of 10% per annum. Their value is appraised based on a three-year cycle by a qualified outside appraiser. Gains and losses on the disposal
                                of these investments are deferred and recorded in income using the declining balance method at a rate of 10% per annum. Any decline in
                                value that is other than temporary and affects the whole real estate investment portfolio is immediately charged to income for the year.

                                POLICY AND RELATED LIABILITIES
                                In life and health insurance, policy and related liabilities include policy liabilities under life insurance and annuity contracts. Policy liabilities
                                represent the amounts that, together with estimated future premiums and investment income, will provide for all the life and health
                                insurance subsidiary’s commitments under policies in force regarding estimated future benefits, policyholder dividends and related
                                expenses. It is the designated actuary’s responsibility to assess the policy liabilities amount to be established each year to cover future
                                commitments. Policy liabilities are determined using the Canadian Asset Liability Method, which is consistent with accepted Canadian
                                actuarial practice.

                                In general insurance, provisions for claims and adjustment expenses are calculated on a discounted basis, with a margin for adverse
                                deviations. Separate estimates of loss are provided for each claim made. In addition, a provision is made for adjustment expenses, for
                                changes in claims made and for claims incurred but not reported on the basis of past experience and in-force policies. These estimates are
                                reviewed and updated regularly, and restatements are included in income.

                                REINSURANCE
                                In life and health insurance, premium income, payments to policyholders, policy liabilities and changes in policy liabilities related to contracts
                                under reinsurance agreements are recorded net of amounts ceded to other insurers.

                                In general insurance, the reinsurer’s share of unearned premiums and claims and adjustment expenses is recorded under “Other assets – Other“.
                                Insurance earnings are recorded net of reinsurance transactions.

                                NET PREMIUMS
                                Net premiums include insurance premiums and annuities of the life and health insurance subsidiary and net premiums acquired from the
                                general insurance subsidiary. Gross premiums for all types of insurance policies and policies with limited mortality or morbidity risk of the
                                life and health insurance subsidiary are recognized as revenue when they become due. When these premiums are recognized, policy
                                liabilities are calculated to ensure that revenues and expenses are matched. The general insurance subsidiary’s premium income is distributed
                                equally over the term of the insurance policies on a monthly expiry basis. The portion of the premium corresponding to the time remaining
                                at the end of the year is included in unearned premiums.
Desjardins Group
                                                                                                                                                       page 105
Note 1   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments (derivatives) are financial contracts, which derive their value from an asset, interest rate, foreign exchange




                                                                                                                                                       Combined Financial Statements
rate or other financial index. By far most derivatives are traded privately between Desjardins Group and the counterparty, and include
forward exchange contracts, interest rate and currency swaps, total return swaps, forward rate agreements, and interest rate and stock
index options. The remaining transactions are carried out on regulated exchanges and consist mainly of futures contracts.

Derivatives are primarily used to manage the assets and liabilities of Desjardins Group and to meet the needs of members and clients.
Derivatives used for asset and liability management purposes are used to manage the interest rate and foreign currency exposure of balance
sheet assets and liabilities, firm commitments and forecasted transactions. Some of these derivatives may qualify for hedge accounting
treatment. To be considered as a hedge, the derivative must be designated for non-trading purposes, and must offset Desjardins Group’s
price, interest rate or exchange rate exposures with a high correlation between the derivative and the exposure both at inception and over
the life of the hedge.

Derivatives used for asset and liability management purposes are carried at cost, with gains or losses recognized in income at the same time
as the gains, losses, income and expenses related to the risks being hedged. In particular, the interest rate and currency swaps used to
manage the financial risks of Desjardins Group are recorded using the accrual method. Under this method, interest income or expense
related to these derivatives is recognized in income as an adjustment to interest income or expense for the underlying instrument. Interest
payable to or receivable from the counterparties is recorded in “Other assets“ or “Other liabilities“ in the combined balance sheet.
Transaction gains and losses on foreign currency swaps offset translation gains and losses on the corresponding foreign-currency
denominated instruments.

Hedge accounting is discontinued in the following cases: the hedged item is sold or matures, the hedge is no longer effective, Desjardins
Group terminates the hedging relationship or it is no longer likely that the forecasted transaction will take place essentially at the time and
in the way indicated at the inception of the hedging relationship. Realized and unrealized gains or losses on derivatives that have
terminated or have ceased to be effective before maturity are recorded in “Derivative-related assets“ or “Derivative-related liabilities“ in
the combined balance sheet and recognized in income for the same period as the underlying transaction being hedged. If a designated
hedged item is sold, is extinguished or matures before the related derivative terminates, any realized and unrealized gains or losses on the
derivative are recognized in income under “Other income – Other“.

Derivative financial instruments used for trading purposes are carried at their estimated fair value, and the corresponding realized and
unrealized gains or losses are recorded under “Other income – Other“. Estimated fair value is calculated using pricing models that
incorporate current market prices and the contractual prices of the underlying instruments, the time value of money, yield curves and
volatility factors. In the combined balance sheet, derivatives used for trading purposes that have a positive fair value appear as assets, and those
with a negative fair value appear as liabilities, under the headings “Derivative-related assets“ and “Derivative-related liabilities“, respectively.

In 2003, the Canadian Institute of Chartered Accountants (CICA) issued Guideline 17 “Equity-linked Deposit Contracts“ (AcG-17). Under this
Guideline, starting January 1, 2003, the Desjardins Group may record at fair value certain deposit obligations for which the obligation varies
according to the return on equities or an equity index and which entitle the investors, after a specified period of time, to receive the higher
of a stated percentage of their principal investment or a variable amount calculated based on the return on equities or an equity index. This
Guideline did not have a significant impact on the combined financial statements on the date of adoption.

FOREIGN CURRENCY TRANSLATION
Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rate prevailing on the balance
sheet date. Income and expenses are translated at the average exchange rate in effect during the year. The resulting gains and losses,
realized or unrealized, are recognized in “Other income – Other“.

When foreign exchange contracts are taken as a hedge against the risk related to foreign currency fluctuations, the resulting gain or loss
from the translation of the hedging contracts is applied against the resulting realized or unrealized gain or loss from the translation of the
hedged item, and is recognized in “Other income – Other“.

INCOME TAXES
Income taxes are accounted for on a tax liability method, whereby income taxes reflect the expected future tax effects of temporary
differences between the value of assets and liabilities for accounting purposes compared with tax purposes. Future income tax assets or
liabilities are calculated based on the tax rates expected to apply when the assets are realized and the liabilities are settled. Future income
tax assets and liabilities are recognized under “Other assets – Other“ and “Other liabilities – Other“.

                                                                                                                                                       Desjardins Group
page 106




                                Note 1   SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                                EMPLOYEE FUTURE BENEFIT PLANS
                                Most employees participate in the Desjardins Group pension plan provided through a multi-employer defined benefit plan. The cost of
Combined Financial Statements




                                benefits is determined through actuarial calculations using the projected benefit method pro rated on years of service and Management’s
                                best estimate assumptions concerning the expected return on plan investments, salary increases and employees’ retirement age. Calculation
                                of the expected return on plan assets is based on the value of pension fund assets measured at market-related values. Pension expense
                                consists of the aggregate of: a) the actuarially computed cost of pension benefits provided in respect of the current year’s service, b) imputed
                                interest on the accrued benefit obligation, c) the expected return on plan assets, and d) the amortization, over the expected average
                                remaining service life of employees, of any net actuarial gains or any actuarial losses exceeding 10% of the higher of the balance of the
                                obligation as part of accrued pension benefits or the related market value of plan assets at beginning of year. The cumulative excess of
                                pension fund contributions over the amounts recorded as pension expense is reported “Other income – Other“.

                                The employees of some subsidiaries benefit from various defined benefit or defined contribution pension plans. To estimate the cost of the
                                defined benefit pension plans, these subsidiaries use the projected benefit method pro rated on years of service and Management’s best
                                estimate assumptions concerning the expected return on plan investments, salary increases, retirement age and expected health care costs
                                and an interest rate established based on market rates. Pension fund assets are marked to market.

                                Desjardins Group also offers its retired employees and their dependants life, medical and dental insurance coverage. The cost of these
                                benefits is accrued over the service life of employees according to accounting policies similar to those used for pension costs. The accrued
                                cost of post-retirement benefits is reported in “Other liabilities – Other“.

                                ASSETS UNDER MANAGEMENT AND SEGREGATED FUNDS
                                Assets under management and segregated funds of the life and health insurance subsidiary are held for the direct beneficial interest of
                                policyholders and clients, and are therefore excluded from the combined balance sheet.

                                COMPARATIVE FIGURES
                                Certain comparative figures have been reclassified to conform to the presentation adopted in the current year.



                                Note 2   FUTURE ACCOUNTING CHANGES

                                HEDGING RELATIONSHIPS
                                In December 2001, the CICA issued an Accounting Guideline entitled “Hedging Relationships“ (AcG-13) applicable to existing hedging
                                relationships for fiscal years beginning on or after July 1, 2003. This Guideline establishes the conditions required for rendering derivative
                                financial instruments eligible for hedge accounting. This Guideline also addresses the identification, designation, documentation and
                                effectiveness of hedging relationships as well as the circumstances under which hedge accounting is appropriate. Under this Accounting
                                Guideline, each hedging relationship must be individually documented and will be subject to an effectiveness test on a regular basis for
                                reasonable assurance that it is and will continue to be effective. Any derivative instrument that does not qualify for hedge accounting must
                                be valued at fair value and recognized on the balance sheet as assets or liabilities, and changes in its fair value must be recognized in earnings.

                                The Desjardins Group adopted AcG-13 effective January 1, 2004. As at that date, the Corporation evaluated its existing hedging relationships
                                and will ceased to apply hedge accounting to relationships that did not meet all the conditions. The adoption of this Guideline does not
                                have a significant impact on Desjardins Group assets, liabilities, revenues and expenses.

                                In accordance with the adoption of AcG-13 as at January 1, 2004, the Desjardins Group reviewed its accounting policies in order to account
                                for all derivative instruments on its balance sheet. Also, positive and negative fair values, as well as resulting deferred gains and losses, will
                                be presented as assets and liabilities. Assets will therefore increase by $16M and liabilities will decrease by $366M, whereas a deferred gain
                                in the amount of $382M will be recognized and amortized on the remaining terms of these derivatives.

                                VARIABLE INTEREST ENTITIES
                                In June 2003, the CICA issued an Accounting Guideline entitled “Consolidated of Variable Interest Entities“ (AcG-15) that will apply to fiscal
                                years and interim periods beginning on or after November 1, 2004. A variable interest entity (VIE) refers to an entity whose equity
                                investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support from a third party,
                                or an entity whose investors, as a group, do not have the power to make decisions about the entity’s activities or are not obliged to absorb
                                the expected losses or the right to receive expected residual returns, if they occur. A VIE must be consolidated by its primary beneficiary, that
                                is the entity that will absorb the expected losses or receive the principal residual returns, or both. Under the provisions of this new Guideline,
                                the Corporation must apply the consolidation principles to entities in which it is the primary beneficiary, not because it holds rights in these
                                entities, but because it holds variable interest rights.

                                In January 2004, the CICA issued a notice confirming that the Accounting Guideline would be subject to amendments during 2004. The
                                Desjardins Group cannot evaluate the impact of these amendments until the final Guideline has been issued.
Desjardins Group
                                                                                                                                                                       page 107
Note 2   FUTURE ACCOUNTING CHANGES (CONTINUED)

IMPAIRMENT OF LONG-LIVED ASSETS
In 2002, the CICA issued a new standard entitled “Impairment of Long-Lived Assets“, which applies to fiscal period beginning on or after




                                                                                                                                                                       Combined Financial Statements
April 1, 2003. This new standard provides guidelines on the recognition, measurement and disclosure of the impairment of long-lived assets
and replaces the dispositions concerning the depreciation methods previously included in Section 3061, “Property, Plant and Equipment“.
In accordance with this new standard, an impairment must be recognized when the carrying amount of a long-lived asset held for use
exceeds the undiscounted cash flows expected to result from its use and disposal. The recognized impairment corresponds to the excess of
the carrying amount over its fair value. The Desjardins Group will adopt this standard for the 2004 year-end and does not expect that this
standard will have a significant impact on its financial statements.



Note 3   SECURITIES

                                                                    Maturity                                              2003                       2002

                                    Under            1 to   Over 3 to    Over 5 to          Over No specific     Carrying            Fair   Carrying            Fair
                                    1 year        3 years    5 years      10 years       10 years maturity          value          value       value          value
    INVESTMENT ACCOUNT
    SECURITIES ISSUED OR
      GUARANTEED BY
    Canada                     $     647 $          198 $         324 $         291 $         432 $          –   $    1,892 $      1,967    $    1,883 $      1,975
      Yield                          3.24 %         4.38 %        4.66 %        5.69 %        5.96 %                   4.60 %                     5.32 %
    Provinces or municipal
      corporations in Canada         402           2,247         2,776         1,396         2,843           –        9,664       10,184         8,053        8,553
      Yield                          4.77 %         4.63 %        4.07 %        5.72 %        6.19 %                   5.09 %                     5.85 %
    School or public corporations
      in Canada                      111              74            62            53          113            –         413           435           373         394
      Yield                          4.47 %         6.90 %        6.71 %        6.31 %        6.48 %                   6.03 %                     6.62 %
    Government institutions
      abroad                           31             13            14            16            52           –         126           129          214          225
      Yield                          4.62 %         5.91 %        2.36 %        5.81 %        6.01 %                   5.23 %                     4.34 %
    OTHER SECURITIES
     IN CANADA
    Financial institutions          1,589           510             61          104             13           –        2,277        2,283         1,741        1,748
      Yield                          2.68 %         3.34 %        4.06 %        5.18 %        5.10 %                   2.99 %                     3.19 %
    Other issuers                   1,481           154           151           258           245           64        2,353        2,415         2,753        2,742
      Yield                          2.88 %         5.38 %        4.90 %        6.54 %        6.66 %                   3.89 %                     3.88 %
    Equity securities                  18           116             12            18             –         570          734          766           648         611
    SECURITIES FROM
      FOREIGN ISSUERS
    Financial institutions             50             19            20            –             –            –           89           92           111         126
      Yield                          3.68 %         2.19 %        8.39 %                                               4.42 %                     4.60 %
    Other issuers                       3              9            72          548              5           –         637           631            92         104
      Yield                         13.57 %         2.11 %        4.19 %        5.23 %       13.16 %                   5.16 %                     4.94 %
    Equity securities                   –              –             –             –             –         172         172           155           125         100
    TOTAL INVESTMENT
      ACCOUNT                       4,332          3,340         3,492         2,684         3,703         806       18,357       19,057        15,993       16,578
    TRADING ACCOUNT
    SECURITIES ISSUED OR
      GUARANTEED BY
    Canada                             10            426           25            15            18            –         494           494          316          316
    Provinces or municipal
      corporations in Canada          112             96           39           111            90            –         448           448          355          355
    School or public corporations
      in Canada                        22             15            5             4             –            –          46            46           36            36
    OTHER SECURITIES
     IN CANADA
    Financial institutions              –              4            –             4             –           –            8             8            1             1
    Other issuers                       2              1            1             4             9           –           17            17           15            15
    Equity securities                   –              –            –             –             –          20           20            20           51            51
    TOTAL TRADING ACCOUNT             146            542           70           138           117           20        1,033        1,033          774          774
                              $     4,478     $    3,882     $   3,562     $   2,822     $   3,820     $   826   $ 19,390       $ 20,090    $ 16,767       $ 17,352



Yields are calculated based on the carrying value of the securities at end of year adjusted to take into account any amortization of premiums
                                                                                                                                                                       Desjardins Group




and discounts.

Total securities held for investment purposes includes an amount of CAD $1,686M (CAD $997M in 2002), of which CAD $1,474M (CAD $799M
in 2002) was denominated in US dollars.
page 108




                                Note 3   SECURITIES (CONTINUED)

                                UNREALIZED GAINS AND LOSSES ON INVESTMENT ACCOUNT SECURITIES
Combined Financial Statements




                                                                                                              2003                                                  2002
                                                                                                   Unrealized Unrealized                            Unrealized Unrealized
                                                                                          Carrying     gross       gross            Fair   Carrying      gross      gross              Fair
                                                                                             value     gains      losses          value       value     gains      losses             value
                                    SECURITIES ISSUED OR GUARANTEED BY
                                    Canada                                                $   1,892   $     75    $      –    $    1,967   $   1,883   $     92     $         –   $   1,975
                                    Provinces or municipal corporations in Canada             9,664        529           9        10,184       8,053        500               –       8,553
                                    School or public corporations in Canada                     413         22           –           435         373         21               –         394
                                    Government institutions abroad                              126          3           –           129         214         11               –         225
                                    OTHER SECURITIES IN CANADA
                                    Financial institutions                                    2,277          7          1          2,283       1,741          7               –       1,748
                                    Other issuers                                             2,353         75         13          2,415       2,753         52              63       2,742
                                    Equity securities                                           734         50         18            766         648         14              51         611
                                    SECURITIES FROM FOREIGN ISSUERS
                                    Financial institutions                                      89           4          1            92         111         15                –        126
                                    Other issuers                                              637           5         11           631          92         14                2        104
                                    Equity securities                                          172           2         19           155         125          –               25        100
                                                                                          $ 18,357    $    772    $    72     $ 19,057     $ 15,993    $    726     $       141   $ 16,578




                                Note 4   LOANS

                                LOANS AND IMPAIRED LOANS

                                                                                              2003                                                         2002
                                                                               Gross                                   Net                    Gross                                    Net
                                                                    Gross   impaired   Specific        General    impaired         Gross   impaired   Specific       General      impaired
                                                                    loans      loans provisions       provision      loans         loans      loans provisions      provision        loans
                                    Residential mortgages     $    36,457   $       107   $     30    $      –    $    77     $ 33,230     $    159    $     51     $         –   $    108
                                    Consumer, credit card
                                      and other personal loans     12,203            71         39           –         32         11,039         73          48               –         25
                                    Business and government        19,676           398        173           –        225         17,992        405         201               –        204
                                    General provision
                                      for credit risk                   –             –           –        592        (592)            –           –            –           592        (592)
                                                             $     68,336   $       576   $    242    $    592    $   (258) $ 62,261       $    637    $    300     $       592   $    (255)



                                As at December 31, 2003 and 2002, net impaired loans included $36M and $49M, respectively, of foreclosed assets held for sale before
                                May 1, 2003. Specific provisions for repossessed property amounted to $30M ($44M in 2002).

                                CUMULATIVE PROVISION FOR CREDIT LOSSES

                                                                                                                                                                    2003              2002
                                    Balance at beginning of year                                                                                            $        892          $     929
                                    Provisions for credit losses                                                                                                      73                109
                                    Write-offs and recoveries                                                                                                       (131)              (146)
                                    Balance at end of year                                                                                                  $        834          $    892
Desjardins Group
                                                                                                                                                   page 109
Note 5   LAND, BUILDINGS AND EQUIPMENT

                                                                                                      2003                                 2002
                                                                                                                        Net                 Net




                                                                                                                                                   Combined Financial Statements
                                                                                            Accumulated            carrying            carrying
                                                                                    Cost    depreciation              value               value
    Land                                                                       $       87        $       –        $       87           $     88
    Buildings                                                                       1,164              419               745                763
    Computer equipment                                                                451              364                87                 90
    Furniture, fixtures and other                                                     534              391               143                135
    Leasehold improvements                                                            157               85                72                 72
                                                                               $    2,393        $   1,259        $     1,134          $   1,148



Depreciation for the year amounted to $131M ($134M in 2002 and $137M in 2001). As at December 31, 2002, cost and accumulated depreciation
were $2,385M and $1,237M.



Note 6   OTHER ASSETS

                                                                                                                        2003               2002
    Real estate investments                                                                                       $       425          $     411
    Goodwill                                                                                                              150                121
    Premiums receivable                                                                                                   556                504
    Future income tax assets (Note 14)                                                                                    517                431
    Accrued benefit assets (Note 16)                                                                                      173                231
    Accounts receivable and other assets                                                                                1,587              1,218
                                                                                                                  $     3,408          $   2,916



The fair value of real estate investments was $448M ($426M in 2002).

Following an impairment test, no amortization of goodwill was recognized during 2003 and 2002 ($13M in amortization recognized in 2001).



Note 7   DEPOSITS

                                                  Payable on demand     Payable after notice Payable on a fixed date               Total
                                                      2003      2002        2003        2002         2003       2002            2003       2002
    Individuals                                   $ 11,666   $ 10,871   $   2,791   $   2,697   $ 35,567     $ 33,013    $ 50,024      $ 46,581
    Businesses and government                        7,116      6,408         194         192      6,915        5,909      14,225        12,509
    Deposit-taking institutions and other               53         42           –           –      6,042        3,769       6,095         3,811
                                                  $ 18,835   $ 17,321   $   2,985   $   2,889   $ 48,524     $ 42,691    $ 70,344      $ 62,901



Deposits payable on demand, interest-bearing or non-interest bearing, are usually deposits held in chequing accounts. Desjardins Group
does not have the right to demand withdrawal notice with respect to these deposits. Deposits payable after notice are interest-bearing
deposits, usually held in savings accounts. Desjardins Group does have the legal right to demand a withdrawal notice with respect to these
deposits. Term deposits are interest-bearing deposits usually held in fixed-term deposit accounts, guaranteed investment certificates or
similar instruments with terms generally varying between one day and seven years, and maturing on a predetermined date.




                                                                                                                                                   Desjardins Group
page 110




                                Note 8    POLICY AND RELATED LIABILITIES

                                Policy and related liabilities are as follows:
Combined Financial Statements




                                                                                                                                                      2003          2002
                                     Policy liabilities                                                                                         $     7,393     $   6,770
                                     Unsettled claims and adjustment expenses                                                                           957           734
                                     Unearned premiums                                                                                                  621           524
                                     Policyholder deposits                                                                                              288           279
                                     Provisions for participating policyholders’ dividends and experience refunds                                        35            63
                                                                                                                                                $     9,294     $   8,370



                                COMPOSITION OF POLICY LIABILITIES
                                As at December 31, policy liabilities and related matched assets included the following amounts:

                                                                                                                                     2003
                                                                                                                     Personal       Group
                                                                                                                    insurance    insurance          Savings         Total
                                     Gross policy liabilities                                                       $   2,754    $   1,448      $     3,587     $   7,789
                                     Amounts transferred under reinsurance agreements                                    (250)        (127)             (19)         (396)
                                     NET POLICY LIABILITIES                                                         $   2,504    $   1,321      $     3,568     $   7,393
                                     COMPOSITION OF ASSETS MATCHED TO POLICY LIABILITIES
                                     Bonds                                                                          $   2,206    $   1,106      $     1,977     $   5,289
                                     Mortgage loans                                                                        98           55            1,434         1,587
                                     Real estate property                                                                  17            1                1            19
                                     Shares                                                                                23           42                6            71
                                     Other                                                                                160          117              150           427
                                                                                                                    $   2,504    $   1,321      $     3,568     $   7,393



                                                                                                                                     2002
                                                                                                                     Personal       Group
                                                                                                                    insurance    insurance          Savings         Total
                                     Gross policy liabilities                                                       $   2,573    $   1,271      $     3,292     $   7,136
                                     Amounts transferred under reinsurance agreements                                    (232)        (114)              (20)        (366)
                                     NET POLICY LIABILITIES                                                         $   2,341    $   1,157      $     3,272     $   6,770
                                     COMPOSITION OF ASSETS MATCHED TO POLICY LIABILITIES
                                     Bonds                                                                          $   2,034    $    964       $     1,779     $   4,777
                                     Mortgage loans                                                                       114          64             1,398         1,576
                                     Real estate property                                                                  19           –                 1            20
                                     Shares                                                                                13          41                (3)           51
                                     Other                                                                                161          88                97           346
                                                                                                                    $   2,341    $   1,157      $     3,272     $   6,770



                                The fair value of assets matched to policy liabilities was $7,833M ($7,154M in 2002). Any change in the value of the assets matched to policy
                                liabilities would be offset by a similar change in these provisions and would not have a significant impact on the Desjardins Group’s income.

                                ACTUARIAL ASSUMPTIONS AND SENSITIVITY OF ASSUMPTIONS TO CHANGES
                                The nature and method of determining the most significant assumptions used in the computation of policy liabilities comply with industry
                                practice. The actuarial assumptions deal with mortality and morbidity, policy lapse rates, investment income, operating expenses and
                                participating policyholders’ dividends.
Desjardins Group
                                                                                                                                                     page 111
Note 8   POLICY AND RELATED LIABILITIES (CONTINUED)

ACTUARIAL ASSUMPTIONS AND SENSITIVITY OF ASSUMPTIONS TO CHANGES (CONTINUED)
The process of determining policy liabilities necessarily involves risks of adverse deviation from best estimates that vary in relation to the




                                                                                                                                                     Combined Financial Statements
length of the estimation period and the potential volatility of each component. Due to these uncertainties, best estimate assumptions are
adjusted by margins for adverse deviation, which increase policy liabilities and reduce the amount of gross income that would otherwise be
recognized at inception of the policies. On participating policies, margins for adverse deviation are reduced, since future adverse experience
would result in a reduction in the amount of policyholders’ dividends paid. With the passage of time and the resulting reduction in
estimation risk, these margins are released to income. If estimates of future conditions change throughout the life of a policy, the present
value of those changes is recognized in income immediately. For the life and health insurance subsidiary, the assumptions that are most likely
to change in the year are related to policy lapse rates on Term-to-100 life insurance policies and future investment yields.

RISK MANAGEMENT
In addition to the risks related to actuarial assumptions, the life and health insurance subsidiary is exposed to the following credit risks:

REINSURANCE RISK To mitigate the risk related to extensive claims, the life and health insurance subsidiary enters into reinsurance agreements for
policies with coverage in excess of certain maximum amounts that vary in relation to business activities, and it maintains catastrophe insurance.

Until December 31, 2003, catastrophe insurance covered claims in excess of $5M per event up to a maximum liability of $60M. The coverage
included protection related to terrorism, but excluded any loss resulting from a nuclear, biological, chemical or radioactive attack (NBCR).
Effective January 1, 2004, the maximum protection related to catastrophes will be $100M and exclusions with respect to NBCR attacks will
only apply to claims costs exceeding $50M.

In order to reduce the risk related to reinsurance, the life and health insurance subsidiary deals with 26 different registered reinsurers that
meet stringent credit standards and are subject to the same regulatory control as the subsidiary. These reinsurance agreements do not
release the life and health insurance subsidiary from its obligations to policyholders.

CREDIT RISK Future net investment revenues are affected by the level of credit losses. In addition to allowances for impairment applied as
reductions to the carrying value of assets, the Corporation’s life and health insurance subsidiary included a provision in its projections of
investment income to cover the risk of underperforming assets.

INTEREST RATE RISK In the normal course of business, the life and health insurance subsidiary is exposed to risks arising from changes in interest
rates. Under more or less favourable economic environments, mismatched asset and liability cash flows must be reinvested or disinvested.
To manage this risk, a matching policy specifying acceptable cash flow gaps has been established for assets and their related liabilities. The
life and health insurance subsidiary regularly examines these duration gaps to ensure they are within specified limits.

MISMATCHING RISK Projected net investment income on assets matched to policy liabilities and projected gains or losses on reinvestments or
financing of mismatched cash flows are taken into account in establishing policy liabilities. To account for uncertainties in projecting interest
rates on reinvested future cash flows, the life and health insurance subsidiary reduced its existing rates.

LIQUIDITY RISK The life and health insurance subsidiary takes the necessary measures to avoid having difficulty meeting its obligations as they
become due. A number of these obligations may be terminated at short notice, thereby increasing liquidity risk. To manage this risk, the life
and health insurance subsidiary has adopted stringent rules governing cash flow matching of assets and liabilities, and established standards
for liquidity.

RISK RELATED TO SEGREGATED FUNDS Policy liabilities also include an amount that is sufficient to pay the minimum segregated fund guarantees.
This amount is calculated using stochastic models as defined by the Canadian Institute of Actuaries. These models are based on the nature
of the guarantees and on investment income, mortality and contract lapse rate assumptions. Deferred acquisition costs, that is, expenses
incurred on the sale of individual segregated fund contracts, are recorded in policy liabilities and amortized over the same period as is
applicable to surrender charges. Policy liabilities recognize the fact that future revenues are available to recover unamortized purchase fees.




                                                                                                                                                     Desjardins Group
page 112




                                Note 8      POLICY AND RELATED LIABILITIES (CONTINUED)

                                ANALYSIS OF CHANGES
                                Changes in policy liabilities during the year were due to business activities and the following changes in actuarial estimates:
Combined Financial Statements




                                                                                                                                                                                        2003               2002
                                      Balance at beginning of year                                                                                                                $    6,770           $   6,698
                                      Normal change due to the update of actuarial assumptions                                                                                            78                    5
                                      Normal change due to the passage of time                                                                                                           531                   85
                                      Increase in policy liabilities due to the recognition of future income tax assets                                                                   40                    –
                                      Other changes                                                                                                                                      (26)                 (18)
                                      Balance at end of year                                                                                                                      $    7,393           $   6,770



                                CLAIMS AND ADJUSTMENT EXPENSES
                                Claims and adjustment expenses consist of a $785M provision for general insurance claims and adjustment expenses as at December 31, 2003
                                ($588M as at December 31, 2002) and a $172M provision for life and health insurance benefits as at December 31, 2003 ($146M as at
                                December 31, 2002).

                                The amounts related to reported claims are uncertain since not all information is available at the reporting date, and, consequently, the
                                claims cost could increase or decrease thereafter. Moreover, since certain claims are not reported immediately, the value of incurred but
                                unreported claims is estimated at the end of the year. In order to set up the provision adequately, the Corporation’s general insurance
                                subsidiary uses assumptions based on characteristics of the lines of business, settlement history and other relevant factors. The methods used
                                produce reasonable results given data currently known.

                                To reduce the risk related to extensive claims, the Corporation’s general insurance subsidiary has a policy of subscribing to and reinsuring
                                insurance policies, which, for the most part, limits its exposure to a maximum amount of $2M per policy. The subsidiary also has a
                                catastrophe reinsurance program in place under which its maximum liability is $20M. These reinsurance agreements do not release the
                                subsidiary from its obligations towards its policyholders.

                                The inability of reinsurers to honour their commitments could result in losses for this subsidiary. It examines the creditworthiness of the
                                companies to which it cedes a portion of the risks. It has no knowledge of any information that could lead it to believe that a reinsurer with
                                which it currently does business is insolvent; consequently, no allowance for doubtful accounts has been made. In addition, the subsidiary
                                does business with several reinsurers.

                                The provision for claims and adjustment expenses for the general insurance subsidiary, by risk category, was as follows:

                                                                                                                                                       2003                                     2002
                                                                                                                                            Gross               Ceded                 Gross             Ceded
                                                                                                                                          amount               amount               amount             amount
                                      Property                                                                                           $      126           $        8          $      113           $       8
                                      Automobile                                                                                                595                   35                 422                  23
                                      Other                                                                                                      64                    –                  53                   –
                                                                                                                                         $      785           $       43          $      588           $      31




                                Note 9      BORROWINGS

                                                                                                                                                                                        2003               2002
                                      Revolving credit facility with a bank consortium, at prime rate plus 0.00% to 0.25% or bankers’ acceptance rate
                                        plus stamping fees varying from 0.45% to 0.95% (3.50% as at December 31, 2002), repaid during the year                                    $         –          $      98
                                      Series B and C bonds with a par value of $105M, $90M of which were sinking fund bonds, redeemable by
                                        the member entity, with a fixed interest rate of 9.18%, payable monthly and at maturity, which is 2013(1)                                          84                100
                                      Mortgage debt bearing interest at rates ranging from 4.46% to 11.00% (average rate of 6.90% as at
                                        December 31, 2003 and 7.09% as at December 31, 2002), maturing on various dates through 2012                                                       70                 39
                                                                                                                                                                                  $      154           $     237

                                (1) These bonds were secured by real estate mortgages on assets of the subsidiary. These assets include fixed assets with a carrying value of $290M ($296M in 2002).
Desjardins Group
                                                                                                                                                page 113
Note 9    BORROWINGS (CONTINUED)

The annual principal repayments on borrowings over the next five years are as follows:




                                                                                                                                                Combined Financial Statements
    2004                                                                                                             $      3
    2005                                                                                                                    4
    2006                                                                                                                    4
    2007                                                                                                                    4
    2008                                                                                                                    4




Note 10    OTHER LIABILITIES

                                                                                                                         2003        2002
    Cooperative shares and preferred shares                                                                          $      46   $      49
    Deferred net gains realized on disposal of investments                                                                 512         486
    Future income tax liabilities (Note 14)                                                                                132         135
    Accrued benefit liabilities (Note 16)                                                                                  512         483
    Commitment under repurchase agreements                                                                                 431          15
    Accounts payable and other liabilities                                                                               3,194       2,716
                                                                                                                     $   4,827   $   3,884




Note 11    SUBORDINATED DEBENTURES

The debentures are unsecured bonds subordinated in right of payment to claims of depositors and certain other creditors, and are included
in regulatory capital. Redemption and cancellation of subordinated debentures are subject to the consent and approval of the various
regulatory authorities.

                                                                                                                         2003        2002
    Debentures, par value of 76,224,509 Euros, bearing interest at the annual rate of 5.50%, payable annually
      until March 18, 2008; thereafter payable quarterly at the rate of 1.40%, plus Euribor, maturing on
      March 18, 2013. With the prior consent of the Inspector General of Financial Institutions of Québec,
      the subsidiary may call the subordinated debentures on March 18, 2008 or at any time in the event
      of changes in the tax system applicable to it                                                                  $    124    $    125
    Senior Series “A“ bonds of US$179M, bearing interest at an annual rate of 7.37%, maturing in 2005                     230         283
    Senior Series “B“ bonds, maturing in June 2012, bearing interest at an annual rate of 5.552% for the first
      five years, and for the following five years, at an annual rate equal to the 90-day bankers’ acceptance rate
      plus 1%, redeemable at the option of Desjardins Group                                                               500         500
    Senior Series “C“ bonds, maturing in June 2017, bearing interest at an annual rate of 6.322% for the first
      ten years, and for the following five years, at an annual rate equal to the 90-day bankers’ acceptance rate
      plus 1%, redeemable at the option of Desjardins Group                                                               300         300
                                                                                                                     $   1,154   $   1,208



The subordinated debentures and bonds issued in foreign currencies totalled $354M ($408M in 2002). For these debentures, Desjardins Group
uses hedging operations to eliminate foreign exchange risks.

For the next five years, the aggregate sinking fund requirements and maturities of the debentures, assuming the earliest maturity dates under
the terms of the contracts, are as follows:

    2004                                                                                                             $      –
    2005                                                                                                                  230
    2006                                                                                                                    –
    2007                                                                                                                    –
    2008                                                                                                                    –                   Desjardins Group
page 114




                                Note 12    NON-CONTROLLING INTERESTS

                                                                                                                                                       2003          2002
                                     NON-CONTROLLING INTERESTS INCLUDE:
Combined Financial Statements




                                     Participating policyholders of the life and health insurance subsidiary                                       $    178      $    169
                                     Preferred shareholders of subsidiaries, including $171M at 6.00%, redeemable in 2003                                23           194
                                     Common shareholders of subsidiaries                                                                                 46            42
                                                                                                                                                   $    247      $    405



                                                                                                                                            2003       2002          2001
                                     EARNINGS ATTRIBUTABLE TO NON-CONTROLLING INTERESTS INCLUDE:
                                     Earnings attributable to participating policyholders of the life and health insurance subsidiary   $     9    $     8       $      3
                                     Dividends to preferred shareholders of subsidiaries                                                     11         13             16
                                     Earnings attributable to common shareholders of subsidiaries                                             5          3              4
                                                                                                                                        $    25    $    24       $     23




                                Note 13    CAPITAL STOCK

                                AUTHORIZED
                                The capital stock is composed of qualifying shares, capital shares and permanent shares.

                                The caisses may issue an unlimited number of qualifying shares with a par value of $5, payable on demand under certain conditions
                                stipulated by law. Members have only one vote each, no matter how many qualifying shares they own.

                                A subsidiary of Desjardins Group may issue an unlimited number of capital shares.

                                Capital shares can only be issued to auxiliary members of the subsidiary and have a par value of $1,000 each. The Board of Directors has the
                                discretionary power to determine the payment of remuneration and the terms of repayment on these shares. These shares may be
                                transferred among the members, with the Board’s authorization, and their repayment, possible only in the event of the subsidiary’s
                                liquidation, insolvency or wind-up, is subordinated to deposits and other debt of the subsidiary. The shares are redeemable by the subsidiary,
                                in part or in whole, with the authorization of the Inspector General of Financial Institutions of Québec. They are convertible by the
                                subsidiary, with the Board’s authorization, into shares of other categories issued for this purpose.

                                The by-laws of the caisses authorize the issue of permanent shares with a par value of $10. The Québec Securities Commission first must
                                approve the prospectus of each caisse issuing permanent shares. These shares do not carry any voting rights and cannot be redeemed, except
                                under certain conditions stipulated by law. Their interest rate is determined annually at the general meeting of each caisse.

                                Issued and fully paid capital stock is as follows:

                                                                                                                                                       2003          2002
                                     Qualifying shares                                                                                             $     31      $     31
                                     Capital shares                                                                                                      42            32
                                     Permanent shares                                                                                                   796           788
                                                                                                                                                   $    869      $    851
Desjardins Group
                                                                                                                                            page 115
Note 14    INCOME TAXES

Income taxes reported in the financial statements are as follows:




                                                                                                                                            Combined Financial Statements
                                                                                                      2003         2002           2001
     COMBINED STATEMENT OF INCOME
     Income taxes on surplus earnings                                                           $      308     $    371     $      179
     Tax recovery on patronage allocations                                                            (142)        (157)           (78)
                                                                                                      166          214             101
     COMBINED STATEMENT OF CHANGES IN EQUITY
     Income taxes recovered following payment of remuneration on permanent shares                        (7)         (9)             (9)
     TOTAL INCOME TAXES                                                                         $      159     $    205     $       92



Income taxes include the following amounts:

                                                                                                      2003         2002           2001
     Current                                                                                    $     242      $   197      $      102
     Future                                                                                           (83)           8             (10)
                                                                                                $      159     $    205     $       92



The provision for income taxes in the combined statement of income differs from the provision obtained by applying the Canadian statutory
rate for the following reasons:

                                                                  2003                         2002                        2001
     Income taxes at the statutory rate               $   225            33.0 %     $   255           35.2 %   $    185           37.0 %
     Deduction for eligible small businesses taken
       by certain Desjardins Group entities                (50)           (7.3)         (39)           (5.3)        (54)          (10.8)
     Non-taxable investment income and other
       non-taxable items                                    (4)           (0.5)           –               –         (17)           (3.3)
     Impact of new tax rates                                 –               –            1             0.2           3             0.6
     Previously unrecognized future income tax assets      (13)           (1.9)           –               –           –               –
     Other                                                   8             1.0           (3)           (0.7)        (16)           (3.2)
                                                     $    166            24.3 %     $   214           29.4 %   $    101           20.3 %



Future income tax assets and liabilities are as follows:

                                                                                                                   2003           2002
     FUTURE INCOME TAX ASSETS
     Buildings and equipment                                                                                   $     74     $       33
     Policy and related liabilities                                                                                 127             31
     Securities                                                                                                       –              1
     Cumulative provision for credit losses                                                                         155            139
     Unused tax losses                                                                                               18             30
     Accrued benefit liabilities                                                                                    143            126
     Other                                                                                                            –             71
                                                                                                               $    517     $      431
     FUTURE INCOME TAX LIABILITIES
     Buildings and equipment                                                                                   $    66      $       45
     Securities                                                                                                     11               5
     Accrued benefit assets                                                                                         48              59
     Other                                                                                                           7              26
                                                                                                               $    132     $      135
                                                                                                                                            Desjardins Group
page 116




                                Note 15   PATRONAGE ALLOCATIONS

                                Desjardins Group recorded a total of $298M ($333M in 2002 and $191M in 2001) in patronage allocations to caisse members, after the
                                recovery of related taxes. The annual expense is evaluated based on the patronage allocations paid out during the year and an estimate of
Combined Financial Statements




                                allocations that will be paid out in 2004 for the year ended December 31, 2003. The distribution base takes into consideration interest on
                                loans and deposits as well as various service charges collected from members. The caisses may pay out patronage allocations when legal and
                                regulatory requirements have been met.



                                Note 16   EMPLOYEE FUTURE BENEFIT PLANS

                                Desjardins Group offers its employees a multi-employer defined benefit pension plan, the Desjardins Group pension plan, which is 65%
                                financed by employers and 35% by participants. Benefits are calculated based on the number of years of participation in the plan and take
                                into consideration the average salary for the employee’s five most highly-paid years.

                                Desjardins Group also allows its retired employees to maintain certain insurance coverage, also within a multi-employer defined benefit
                                plan. The retiree pays 25% of the total premium.

                                The following table contains information on these plans:

                                As at December 31

                                                                                                                           2003                                  2002
                                                                                                                Pension               Other         Pension                 Other
                                                                                                                  plans               plans           plans                 plans
                                    CHANGE IN ACCRUED BENEFIT OBLIGATION
                                    Accrued benefit obligation at beginning of year                            $   3,429          $    421      $     3,396             $    469
                                    Service cost for the year                                                        175                17              174                   23
                                    Interest cost                                                                    222                27              209                   29
                                    Benefits paid                                                                   (129)              (11)            (144)                   (9)
                                    Transfers from other plans                                                         2                 –                 2                    –
                                    Transfers to other plans                                                          (1)                –                (3)                   –
                                    Plan amendments                                                                    –                 –                 –                 (52)
                                    Actuarial losses (gains)                                                         307                15             (205)                 (39)
                                    ACCRUED BENEFIT OBLIGATION AT VALUATION DATE                               $   4,005          $    469      $     3,429             $    421
                                    CHANGE IN FAIR VALUE OF PLAN ASSETS
                                    Fair value of plan assets at beginning of year                             $   3,037          $       –     $     3,234             $       –
                                    Actual return on plan assets                                                     353                  –            (115)                    –
                                    Employers’ contributions                                                          66                  –               54                    –
                                    Participants’ contributions                                                       35                  –               29                    –
                                    Benefits paid                                                                   (129)                 –            (144)                    –
                                    Transfers from other plans                                                         2                  –                 2                   –
                                    Transfers to other plans                                                          (1)                 –                (3)                  –
                                    Other changes                                                                     (6)                 –              (20)                   –
                                    FAIR VALUE OF PLAN ASSETS AT VALUATION DATE                                $   3,357          $       –     $     3,037             $       –
                                    FUNDED STATUS
                                    Funding deficit at year-end                                                $    (648)         $    (469)    $      (392)            $    (421)
                                    Unamortized net losses (gains)                                                   804                (43)            609                    (62)
                                    Employers’ contributions after valuation date                                     17                  –              14                      –
                                    ACCRUED BENEFIT ASSETS (LIABILITIES) AT YEAR-END                           $    173           $    (512)    $       231             $    (483)
                                    WEIGHTED AVERAGE ASSUMPTIONS
                                    Discount rate                                                                   6.00 %             6.00 %          6.25 %                6.25 %
                                    Expected rate of return on plan assets                                          7.00                  –            7.00                     –
                                    Rate of increase in future compensation                                         3.75               3.75            3.75                  3.75



                                For valuation purposes, the assumed average annual rate of increase in health care cost per participant was set at 9.6% for 2004. According
                                to the assumption chosen, this rate should gradually decline to 5.3% in 2008 and remain approximately at this level thereafter. As at
                                December 31, 2003, the plans held investments totalling $81M ($103M in 2002) in Desjardins Group entities.
Desjardins Group
                                                                                                                                                             page 117
Note 16   EMPLOYEE FUTURE BENEFIT PLANS (CONTINUED)

BREAKDOWN OF NET PLAN EXPENSE
As at December 31




                                                                                                                                                             Combined Financial Statements
                                                                2003                              2002                                  2001
                                                    Pension                Other       Pension               Other           Pension                Other
                                                      plans                plans         plans               plans             plans                plans
    Service cost for the year                       $    140           $     15    $       145           $     19        $       123            $     21
    Interest cost                                        222                 27            209                 29                192                  28
    Expected return on fund assets                      (247)                 –           (247)                 –               (242)                  –
    Distribution of surplus to retirees and other          6                 (3)            11                  –                 16                   –
    NET PLAN EXPENSE                                $   121            $     39    $      118            $     48        $       89             $     49



For the period from July 1, 2001 to December 27, 2003, a partial contribution holiday relative to the Desjardins Group pension plan was
granted to participants and employers as a result of the accumulated surplus as at January 1, 2001.

SENSITIVITY OF KEY ASSUMPTIONS IN 2003

                                                                                                                                               Change in
                                                                                                                Increase (decrease)              benefit
                                                                                                                     in obligation              expense
    PENSION PLANS
      Discount rate
        1% increase                                                                                                      $      (653)           $    (62)
        1% decrease                                                                                                              874                 129
      Rate of future compensation increase
        1% increase                                                                                                              282                   65
        1% decrease                                                                                                             (241)                 (48)
      Rate of return on plan assets
        1% increase                                                                                                                –                  (36)
        1% decrease                                                                                                                –                   36
    OTHER PLANS
      Discount rate
        1% increase                                                                                                              (73)                  (6)
        1% decrease                                                                                                               94                    8
      Rate of future compensation increase
        1% increase                                                                                                                4                    1
        1% decrease                                                                                                      $        (5)           $      (1)



The effect of a one percentage point increase or decrease in the assumed health care cost trend would have increased or decreased the
benefit expense for the year by $8M and increased the benefit obligation by $66M or reduced the benefit obligation by $51M, respectively.




                                                                                                                                                             Desjardins Group
page 118




                                Note 17   DERIVATIVE FINANCIAL INSTRUMENTS

                                Derivative financial instruments are contracts whose value is derived from an underlying asset, interest rate, exchange rate or other financial
                                index. They are used to transfer, modify or reduce actual or expected risks related to market risk. Derivative financial instruments can be
Combined Financial Statements




                                traded over the counter or on regulated exchanges.

                                Interest rate derivatives include swaps, forward rate agreements, futures contracts and options. Interest rate swaps are transactions in which
                                two parties exchange cash flows on a specified notional amount for a specified period. Fixed and floating interest payments are exchanged
                                between the parties, but not the notional principal amount. A forward rate agreement is an instrument that requires both parties to settle
                                in cash at a later date any difference between a contracted interest rate and the market interest rate, based on a notional amount. Futures
                                contracts are commitments to buy or sell commodities or financial instruments on a future specified date at a specified price. Futures are
                                standardized contracts transacted on regulated exchanges and are subject to daily cash margining.

                                Foreign exchange contracts include over-the-counter spot and forward exchange contracts and currency swaps. Over-the-counter forward
                                exchange contracts are commitments to exchange, at a future specified date, a given quantity of one currency for another at a rate of
                                exchange determined by the two parties when the contract is signed. Spot transactions are similar to over-the-counter forward exchange
                                contracts, except that delivery must be made within two business days following the contract date.

                                Currency swaps are transactions in which two parties exchange fixed interest payments on notional amounts in different currencies. In a
                                cross-currency interest rate swap, the parties exchange fixed and floating interest payments on notional amounts in different currencies.
                                Desjardins Group utilizes currency swaps and cross-currency interest rate swaps to manage its asset and liability exposures.

                                Options are contractual agreements under which the seller grants the purchaser the right but not the obligation to buy (call option) or sell
                                (put option) a specified amount of a financial instrument at a specified price, on or before a specified date. The seller receives a premium
                                from the purchaser in exchange for this right. Desjardins Group deals in options primarily to meet its clients’ needs and to manage its own
                                asset and liability exposures.

                                The other derivative instruments used are related to financial index transactions and include options and swaps.

                                Derivative financial instruments are primarily used to manage assets and liabilities related to interest rates and exchange rates, and to meet
                                the needs of clients and member caisses. The table “Derivative Financial Instruments – Credit Risk“ gives an overview of the portfolio of
                                derivative financial instruments at Desjardins Group and the related credit risk.

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

                                REPLACEMENT COST Cost of replacing, at the current market rates, all contracts having a positive market value, without factoring in the impact
                                of master netting agreements or any collateral which may be obtained.

                                FUTURE CREDIT EXPOSURE Potential for future changes in replacement value over the remaining life of the contracts based on a formula
                                prescribed by the Bank for International Settlements (BIS).

                                CREDIT RISK EQUIVALENT Total of the replacement cost and future credit exposure, except for certain items prescribed by the BIS, i.e., the
                                replacement cost of forward exchange contracts with an original maturity of less than 14 days and exchange-traded derivatives subject to
                                daily cash margining.

                                RISK-WEIGHTED BALANCE Risk related to the creditworthiness of the counterparty, calculated at the rates prescribed by the BIS.
Desjardins Group
                                                                                                                                                                                    page 119
Note 17       DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

DERIVATIVE FINANCIAL INSTRUMENTS – CREDIT RISK




                                                                                                                                                                                    Combined Financial Statements
                                                                                       2003                                                                    2002
                                               Notional     Replacement         Future credit       Credit risk Risk-weighted     Replacement           Credit risk Risk-weighted
                                               amount               cost           exposure         equivalent        balance             cost          equivalent        balance
      INTEREST RATE CONTRACTS
      Swaps                                  $ 27,806          $        616       $       108       $     724      $      178        $         701      $       798    $     201
      Forward rate agreements                   1,306                     –                 3               3               1                    2                3            1
      Futures contracts                         3,487                     1                 –               –               –                    1                –            –
      Options purchased                           517                     2                 –               2               –                    –                –            –
      Options written                             877                     –                 –               –               –                    –                –            –
                                                33,993                  619               111             729             179                  704              801          202
      FOREIGN EXCHANGE CONTRACTS
      Forward contracts                           6,533                 109                65             174              39                   17               54           16
      Swaps                                       4,231                 232               190             422             112                  272              468          140
                                                10,764                  341               255             596             151                  289              522          156
      OTHER CONTRACTS        (1)


      Swaps                                       3,765                  64               239             303              64                   10              205           43
      Options purchased                           2,058                 176               157             333             114                  100              295           86
      Options written                             2,052                   –                 –               –               –                    –                –            –
                                                  7,875                 240               396             636             178                  110              500          129
      TOTAL DERIVATIVE FINANCIAL
        INSTRUMENTS                          $ 52,632                  1,200      $       762       $   1,961             508                 1,103     $     1,823          487
      Impact of master netting
        agreements(2)                                                   535                                               218                  368                           101
      TOTAL DERIVATIVE FINANCIAL
        INSTRUMENTS AFTER NETTING
        AGREEMENTS                                             $        665                                        $      290        $         735                     $     386

(1) Includes contracts related to indexed term savings products.
(2) Impact of offsetting credit exposure when Desjardins Group holds master netting agreements without intent to settle net or simultaneously.



Almost all of the replacement cost is related to transactions with financial institutions that have high credit ratings. By far most contracts
are concluded by mutual agreement.

The following table presents the maturities of the notional amounts of derivative financial instruments:

                                                                                                Maturity                                                    2003            2002
                                                                       Under          From 1 to                Over                 Over
                                                                       1 year           3 years         3 to 5 years              5 years                   Total           Total
      INTEREST RATE CONTRACTS
      Swaps                                                        $    9,111         $    9,328           $    8,329         $    1,038              $ 27,806         $ 24,885
      Forward rate agreements                                             780                526                    –                  –                 1,306            1,255
      Futures contracts                                                 2,640                847                    –                  –                 3,487            2,826
      Options purchased                                                   517                  –                    –                  –                   517                7
      Options written                                                     627                250                    –                  –                   877              420
                                                                       13,675             10,951                8,329              1,038                33,993             29,393
      FOREIGN EXCHANGE CONTRACTS
      Forward contracts                                                 6,453                  80                   –                  –                 6,533              3,294
      Swaps                                                             1,268                 737               1,673                553                 4,231              3,893
                                                                        7,721                 817               1,673                553                10,764              7,187
      OTHER CONTRACTS(1)
      Swaps                                                              916                 247                2,576                    26              3,765              3,340
      Options purchased                                                  383               1,101                  560                    14              2,058              2,675
      Options written                                                    379               1,099                  560                    14              2,052              5,854
                                                                        1,678              2,447                3,696                    54              7,875             11,869
      TOTAL DERIVATIVE FINANCIAL INSTRUMENTS                       $ 23,074           $ 14,215             $ 13,698           $    1,645              $ 52,632         $ 48,449

(1) Includes contracts related to indexed term savings products.
                                                                                                                                                                                    Desjardins Group
page 120




                                Note 17      DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

                                DERIVATIVE FINANCIAL INSTRUMENTS – CREDIT RISK (CONTINUED)
                                The following table presents the derivative financial instruments according to the credit risk rating and the type of counterparty:
Combined Financial Statements




                                As at December 31

                                                                                                                                                      2003                                      2002
                                                                                                                                      Replacement         Risk-weighted          Replacement       Risk-weighted
                                                                                                                                              cost              balance                  cost            balance
                                      Credit risk rating(1)
                                        AAA, AA                                                                                            $        766         $      290            $     810           $     305
                                        A                                                                                                           399                198                  276                 169
                                        Not rated                                                                                                    35                 20                   17                  13
                                        Total                                                                                                   1,200                  508                1,103                 487
                                        Impact of master netting agreements(2)                                                                    535                  218                  368                 101
                                        Total after netting agreements                                                                     $        665         $      290            $     735           $     386
                                      Type of counterparty
                                        Financial institutions                                                                             $        904         $      302            $     834           $     280
                                        Other                                                                                                       296                206                  269                 207
                                        Total                                                                                                   1,200                  508                1,103                 487
                                        Impact of master netting agreements(2)                                                                    535                  218                  368                 101
                                        Total after netting agreements                                                                     $        665         $      290            $     735           $     386

                                (1) Credit risk ratings are established by recognized credit agencies. Non-rated counterparties are mainly members or clients of the Desjardins Group.
                                (2) Impact of offsetting credit exposure when Desjardins Group holds master netting agreements without intent to settle net or simultaneously.




                                Note 18      INTEREST RATE SENSITIVITY AND MATURITY MATCHING

                                The following table illustrates Desjardins Group’s interest rate sensitivity position as at December 31:

                                      2003                                                                                                                                               Non-interest
                                                                                                                                                                                            sensitive
                                                                                                 Immediately          Under      From 3 to Over 6 to           Over 1 to           Over            and
                                                                                                rate-sensitive     3 months      6 months 12 months              5 years         5 years    liabilities        Total
                                      ASSETS
                                      Cash and deposits with financial institutions                 $        –     $       – $            – $      – $      – $                       – $       1,357     $    1,357
                                      Securities                                                           489         5,571            572      374    4,874                     6,590           920         19,390
                                        Effective interest rate                                                         2.74 %         4.38 %   4.39 %   5.02 %                    5.94 %
                                      Loans                                                              8,689         9,593          9,450   11,215   27,006                     1,163           386         67,502
                                        Effective interest rate                                                         6.44 %         5.87 %   5.64 %   6.44 %                    6.92 %
                                      Other assets                                                            –          485              –        –        –                         –         5,918          6,403
                                                                                                    $    9,178     $ 15,649      $ 10,022       $ 11,589       $ 31,880      $    7,753     $   8,581     $ 94,652
                                      LIABILITIES AND EQUITY
                                      Deposits                                                      $    9,157     $   7,591 $        7,057 $        9,705 $ 19,482 $             1,320 $ 16,032          $ 70,344
                                        Effective interest rate                                                         2.45 %         2.95 %         2.62 %   3.88 %              4.16 %
                                      Subordinated debentures and borrowings                                  –            –              –              –      235               1,073        –               1,308
                                        Effective interest rate                                                                                                7.31 %              6.13 %
                                      Policy and related liabilities                                          –            –               –             –        –                   –    9,294               9,294
                                      Other liabilities                                                       –          577               –             –        –                   –    6,931               7,508
                                      Equity                                                                  –            –               –             –        –                   –    6,198               6,198
                                                                                                    $    9,157     $   8,168     $    7,057     $    9,705     $ 19,717      $    2,393     $ 38,455      $ 94,652
                                      On-balance sheet gap                                          $       21     $    7,481 $       2,965 $        1,884     $ 12,163      $    5,360     $ (29,874) $           –
                                      Off-balance sheet gap                                                  –         (8,280)         (863)            90        8,826             227             –              –
                                      TOTAL GAP                                                     $       21     $     (799) $      2,102     $    1,974     $ 20,989      $    5,587     $ (29,874) $           –
Desjardins Group
                                                                                                                                                          page 121
Note 18     INTEREST RATE SENSITIVITY AND MATURITY MATCHING (CONTINUED)

     2002                                                                                                                    Non-interest
                                                                                                                                 sensitive




                                                                                                                                                          Combined Financial Statements
                                                  Immediately        Under    From 3 to Over 6 to    Over 1 to         Over           and
                                                 rate-sensitive   3 months    6 months 12 months       5 years       5 years    liabilities       Total
     Total assets                                   $   7,801     $ 13,390    $   9,627   $ 11,721   $ 28,325    $    7,059    $ 7,420        $ 85,343
     Total liabilities and equity                   $   6,873     $ 7,045     $   5,589   $ 9,787    $ 20,185    $    1,380    $ 34,484       $ 85,343
     On-balance sheet gap                           $     928     $    6,345 $ 4,038 $ 1,934 $          8,140    $    5,679 $ (27,064) $             –
     Off-balance sheet gap                                  –         (4,070)  (1,586) (1,940)          7,670            (74)       –                –
     TOTAL GAP                                      $     928     $   2,275   $   2,452   $     (6) $ 15,810     $    5,605    $ (27,064) $          –



The determination of the interest rate gap, which is based on the earlier of the repricing or maturity date of assets, liabilities and derivative
financial instruments used to manage interest rate risk, relies on various assumptions.

The interest rate gap may change significantly in subsequent periods based on member and client preferences, and the application of the
Group’s asset and liability management policy.

The main assumptions used are:

NON-INTEREST SENSITIVE INSTRUMENTS AND ACTUARIAL AND RELATED LIABILITIES Some balance sheet items, such as equity securities and equity, are
not sources of interest rate risk. These items are indicated in the Non-interest sensitive instrument column.

In addition, policy and related liabilities are presented in this column. During the normal course of business, the life and health insurance
subsidiary has adopted a policy of matching assets and liabilities which clearly defines acceptable differences in order to prevent mismatched
cash flows. Compliance with the policy is strictly monitored on a regular basis by the life and health insurance subsidiary. One of the controls
is to test the difference between the duration of liabilities and the duration of the assets matching them. The duration measures the
sensitivity of the market value of assets and liabilities to changes related to interest rates. This test is performed for savings products and
insurance products separately, because they have different matching policies stipulating different acceptable targets, and because savings
products are more interest-sensitive than insurance products. For the savings product segment as at December 31, 2003, the duration of
assets was lower than the duration of liabilities by 0.10 years (the duration of assets was higher than the duration of liabilities by 0.12 years
in 2002 and lower by 0.01 years in 2001). Since the valuation method required for savings already recognizes the impact of possible changes
in interest rates, a sudden increase or decrease in interest rates would not have a material impact on the life and health insurance subsidiary.

DEPOSITS OR LIABILITIES Non-interest-bearing deposits are considered non-interest sensitive. Interest-bearing, non-maturity deposits with an
interest rate that does not move on a specific rate basis, such as the prime rate, are considered non-interest sensitive.

ASSETS Assets such as loans are reported based on the scheduled repayment date.

EFFECTIVE INTEREST RATE The effective interest rates indicated represent the historical rates for fixed-rate instruments carried at unamortized
cost, and the current market rates for variable-rate instruments or for instruments carried at fair value.




                                                                                                                                                          Desjardins Group
page 122




                                Note 19    FAIR VALUE OF FINANCIAL INSTRUMENTS

                                ON-BALANCE SHEET FINANCIAL INSTRUMENTS
                                Although estimated fair value is used to determine the approximate value at which these financial instruments could be traded in a current
Combined Financial Statements




                                transaction between willing parties, a number of these financial instruments have no trading market. As a result, their fair value is based
                                on estimates using net present value and other valuation methods which are strongly influenced by the assumptions used concerning the
                                amount and timing of estimated future cash flows and discount rates, which reflect varying degrees of risk. Furthermore, the estimated fair
                                values presented do not reflect the value of assets and liabilities that are not considered financial instruments, such as premises and
                                equipment. Also, the value of other non-financial assets and liabilities has been excluded. Given the role of judgment in applying many of
                                the accepted estimation and valuation techniques for calculating fair value, fair values are not necessarily comparable among financial
                                institutions. Estimated fair value reflects market conditions on a given date, and for this reason cannot be representative of future fair
                                values. They also cannot be considered as being realizable in the event of immediate settlement of these instruments.

                                The following methods and assumptions were used to estimate the fair values of the financial instruments on the balance sheet:

                                FINANCIAL INSTRUMENTS VALUED AT CARRYING VALUE The fair value of certain financial instruments on the balance sheet that are maturing in
                                the short term was assumed to be approximately equal to their carrying value. These financial instruments include the following items:
                                “Cash and deposits with financial institutions“, “Other financial assets“, and “Other financial liabilities“.

                                SECURITIES The estimated fair value of the securities is disclosed in Note 3 to the financial statements as a function of quoted market prices, when
                                available. When quoted market prices are not available, the estimated fair value is determined using the market rates for similar securities.

                                LOANS For certain variable-rate loans, whose rates are frequently revised, the estimated fair value is assumed to be equal to their carrying
                                value. The fair value of other loans is estimated using a discounted cash flow calculation method that uses market interest rates currently
                                charged for similar new loans as at December 31, applied to expected maturity amounts. For impaired loans, the fair value is equal to the
                                carrying value in accordance with the valuation techniques described in Note 1 to the financial statements.

                                DEPOSITS The fair value of deposits with no stated maturity is assumed to be equal to their carrying value. The estimated fair value of fixed
                                rate deposits is determined by discounting the contractual cash flows using market interest rates currently being offered for deposits with
                                relatively the same remaining terms.

                                POLICY AND RELATED LIABILITIES The fair value of policy liabilities is based on the fair value of the related assets hedging them, given the
                                interrelationship existing between these two balance sheet items.

                                SUBORDINATED DEBENTURES AND BORROWINGS The fair value of subordinated debentures and borrowings is based on the market rates for
                                similar issues or borrowings, or on the rates currently offered to Desjardins Group for debt securities with the same remaining terms.

                                OFF-BALANCE SHEET FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of off-balance sheet items:

                                OFF-BALANCE SHEET FINANCIAL INSTRUMENTS WITH CONTRACTUAL AMOUNTS REPRESENTING A CREDIT RISK As credit commitments are primarily
                                assigned variable interest rates, they do not present an interest rate risk.

                                DERIVATIVE FINANCIAL INSTRUMENTS The estimated fair value of derivative financial instruments is calculated using pricing models that
                                incorporate current market prices and the contractual prices of the underlying instruments, the time value of money and yield curves. The fair
                                value of derivative financial instruments is presented without taking into account the impact of legally binding master netting agreements.
Desjardins Group
                                                                                                                                                                               page 123
Note 19      FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

ON-BALANCE SHEET FINANCIAL INSTRUMENTS




                                                                                                                                                                               Combined Financial Statements
                                                                                          2003                                                        2002
                                                                      Fair           Carrying                                        Fair        Carrying
                                                                    value               value           Difference                 value            value       Difference
      ASSETS
      Cash and deposits with financial institutions             $    1,357          $    1,357           $        –           $    1,355         $    1,355       $       –
      Securities                                                    20,090              19,390                  700               17,352             16,767             585
      Loans                                                         68,167              67,502                  665               62,187             61,369             818
      Other financial assets                                         3,111               3,111                    –                2,610              2,610               –
      LIABILITIES
      Deposits                                                      72,039              70,344                1,695               64,241             62,901           1,340
      Policy and related liabilities                                 9,734               9,294                  440                8,754              8,370             384
      Borrowings                                                       171                 154                   17                  257                237              20
      Subordinated debentures                                        1,295               1,154                  141                1,288              1,208              80
      Other financial liabilities                                    5,254               5,254                    –                4,226              4,226               –



DERIVATIVE FINANCIAL INSTRUMENTS (ON AND OFF-BALANCE SHEET)

                                                                                          2003                                                        2002
                                                          Positive value Negative value             Net fair value       Positive value     Negative value    Net fair value
      INTEREST RATE CONTRACTS
      Swaps                                                     $     616           $      223           $      393           $      701         $     263        $     438
      Forward rate agreements                                           –                    2                   (2)                   2                 1                1
      Futures contracts                                                 1                    –                    1                    1                 –                1
      Options purchased                                                 2                    –                    2                    –                 –                –
      Options written                                                   –                    –                    –                    –                 1               (1)
      FOREIGN EXCHANGE CONTRACTS
      Forward contracts                                               109                  128                  (19)                  17                13                4
      Swaps                                                           232                  450                 (218)                 272               358              (86)
      OTHER CONTRACTS(1)
      Swaps                                                            64                   14                   50                   10                41              (31)
      Options purchased                                               176                    –                  176                  100                 –              100
      Options written                                                   –                  175                 (175)                   –               567             (567)
                                                                     1,200                 992                  208                1,103              1,244            (141)
      Impact of master netting agreements(2)                           535                 535                                       368                368
      TOTAL DERIVATIVE FINANCIAL INSTRUMENTS                    $     665           $      457           $      208           $      735         $     876        $    (141)

(1) Includes contracts related to indexed term savings products.
(2) Impact of offsetting credit exposure when Desjardins Group holds master netting agreements without intent to settle net or simultaneously.




Note 20      COMMITMENTS, GUARANTEES AND CONTINGENCIES

COMMITMENTS
FINANCIAL INSTRUMENTS WITH CONTRACTUAL AMOUNTS REPRESENTING A CREDIT RISK The primary purpose of these instruments is to ensure that
members and clients have funds available when necessary for variable terms to maturity and under specific conditions. The collateral security
requirements of Desjardins Group with respect to these credit instruments are generally the same as for loans.

Guarantees and standby letters of credit are irrevocable undertakings by Desjardins Group to make payments for a member or client that
cannot meet its financial obligations toward third parties, and represent the same credit risk as loans.

In securities lending transactions, Desjardins Group acts as an agent for the owner of a security who agrees to lend it to a borrower for a
fee under the terms of a pre-arranged contract. Securities loans must at all times be guaranteed by the borrower.                                                              Desjardins Group
page 124




                                Note 20      COMMITMENTS, GUARANTEES AND CONTINGENCIES (CONTINUED)

                                COMMITMENTS (CONTINUED)
                                FINANCIAL INSTRUMENTS WITH CONTRACTUAL AMOUNTS REPRESENTING A CREDIT RISK (CONTINUED) Credit substitutes represent the guarantee fully
Combined Financial Statements




                                assumed by Desjardins Group with respect to credit commitments related to certain indexed term savings products. The credit risk related
                                to loan substitutes is basically the same as for the issue of a letter of credit.

                                Credit commitments represent unused portions of authorizations to extend credit in the form of loans, guarantees or letters of credit.

                                The total amount of credit instruments does not necessarily represent future cash requirements since many of these instruments will expire
                                or terminate without being funded. The following table represents the contractual amounts:

                                                                                                                                                                                      2003           2002
                                      Guarantees and standby letters of credit                                                                                                   $      339     $      246
                                      Securities lending(1)                                                                                                                           4,149          3,272
                                      Credit substitutes                                                                                                                                  –          2,800
                                      Credit commitments
                                        Original term of one year or less                                                                                                            23,498         18,485
                                        Original term of over one year                                                                                                                2,109          2,148
                                                                                                                                                                                 $ 30,095       $ 26,951

                                (1) Secured by marketable securities, generally issued by the federal and provincial governments, representing 105% of the contractual amount.



                                COMMITMENTS UNDER LEASES AND SERVICE CONTRACTS The minimum future commitments as at December 31, 2003 under building and
                                equipment leases and service contracts were as follows:

                                                                                                                                                        Premises and               Information technology
                                                                                                                                                          equipment               and telecommunications
                                      2004                                                                                                                   $       79                         $     259
                                      2005                                                                                                                           58                               259
                                      2006                                                                                                                           47                               259
                                      2007                                                                                                                           31                               259
                                      2008                                                                                                                           24                               186
                                      2009 and thereafter                                                                                                           147                               436
                                                                                                                                                             $      386                         $    1,658



                                Building lease expenses, net of rental income, included in non-interest expenses for the year ended December 31, 2003 were $37M ($34M
                                in 2002 and $25M in 2001).

                                OTHER COMMITMENTS On October 22, 2003, a subsidiary of the Desjardins Group accepted a purchase offer with respect to its Bahamas
                                division. This transaction, however, is subject to the approval of regulatory authorities in the Bahamas and to other conditions. Expressed in
                                Canadian dollars, the assets for the Bahamas division totalled $169M as at December 31, 2003 ($189M in 2002), and net income included in
                                surplus earnings before patronage allocations totalled $4M for 2003 ($2M for 2002). The net premiums of the Bahamas division are $66M
                                in 2003 ($60M in 2002).

                                PLEDGED ASSETS In the normal course of business, the assets pledges by Desjardins Group are presented in the following table:

                                                                                                                                                                                      2003           2002
                                      Assets pledged to the following counterparties:
                                        Bank of Canada                                                                                                                           $     110      $     130
                                        Clearing systems, payment systems and depositories                                                                                             224            152
                                        Regulated entities                                                                                                                               9              4
                                      Assets pledged for the following transactions:
                                        Transactions on derivative products                                                                                                              6              1
                                        Borrowings and securities                                                                                                                       98              1
                                        Obligations related to securities sold under repurchase agreements                                                                             431             15
                                                                                                                                                                                 $     878      $     303
Desjardins Group
                                                                                                                                                      page 125
Note 20   COMMITMENTS, GUARANTEES AND CONTINGENCIES (CONTINUED)

GUARANTEES
In February 2003, the Canadian Institute of Chartered Accountants adopted Accounting Guideline AcG-14 concerning financial statement




                                                                                                                                                      Combined Financial Statements
disclosures to be made by an entity about guarantees it has issued. AcG-14 came into effect on January 1, 2003.

Under this Accounting Guideline, a guarantee is a contract or an indemnification agreement that contingently requires the Desjardins Group
entities to make payments to the guaranteed party based on changes in i) an interest rate, an exchange rate, a security price or commodity
price, or a price or rate index or the occurrence or non-occurrence of a specified event, ii) 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.

Desjardins Group entities have issued the following guarantees to third parties:

GUARANTEES AND STANDBY LETTERS OF CREDIT Guarantees and standby letters of credit represent an irrevocable commitment by Desjardins
Group to make payments in the event that a member or client cannot meet its obligations to third parties. These instruments are generally
collateralized in accordance with the same policy Desjardins Group has with respect to loans. The term of these products does not exceed
five years.

The general provision for credit losses covers all the credit risks including guarantees and standby letters of credit.

DERIVATIVE PRODUCTS Some Desjardins Group subsidiaries have performed credit default swaps with bank counterparties. These subsidiaries
have made an irrevocable commitment to the counterparties to assume the credit risk for the bonds that constitute the underlying assets
for the swaps. The guarantee given by these subsidiaries is to provide partial or total payment for one security or all the securities following
an unfavourable credit event leading to default on payment.

The maximum amount of the guarantee is the notional amount of the swap. The amounts disbursed will depend on the nature of the
default and the recovery rates of the securities in collection.

The underlying assets for the swaps are corporate bonds or tranches within high-quality securitization structures. All underlying securities
are rated between A to AAA by the rating agencies. The swap contracts expire through to September 2016.

SECURITIES LENDING In securities lending transactions, a subsidiary of Desjardins Group acts as agent for the owner of a security who agrees
to lend it to a borrower for a fee under the terms of a pre-arranged contract. Securities loans must at all times be secured by the borrower
(secured by marketable securities generally issued by the federal and provincial governments). There is a risk of loss if the borrower defaults
to honour its commitments and the value of the collateral is not adequate to cover the amount of the loan. The credit risk related to these
transactions is considered to be minimal since the subsidiaries deal only with reputable stock brokerage firms and financial institutions.
Furthermore, the borrower pledges securities of a value at least equivalent to the amount of the loan adjusted on a daily basis.

E-COMMERCE PLACE As part of the E-Commerce Place project (ECP), a Desjardins Group subsidiary has entered into contractual agreements
that meet the definition of guarantees with clients, suppliers, partners and creditors. The contracts include various indemnification clauses
under which it could be required to disburse an amount or expense by virtue of an adverse judgement. The indemnifications relate, among
other things, to damages that may be claimed by the guaranteed party as a result of default on a contract or failure to perform or to
terminate a phase of the project, violation of an environmental law, or failure to repay a government subsidy obtained or to repay the
amount of a loan plus a premium for prepayment in case of fraud. Under certain contracts, the Desjardins group subsidiary assumes joint
and several responsibility with some of its partners.

The nature of indemnification agreements prevents management from providing a reasonable estimate of the maximum potential amount
that the Desjardins Group subsidiary could be required to pay to counterparties. In Management’s opinion, the probability of occurrence of
such events is very low.

OTHER INDEMNIFICATION COMMITMENTS In the normal course of its operations, the Desjardins Group enters into a number of agreements
containing indemnification provisions such as those normally related to the sale of assets, purchase agreements, service delivery agreements,
outsourcing agreements, lease agreements, compensation agreements and transfer of assets or shares. Under these agreements, Desjardins
Group may be liable for indemnifying the counterparty if certain events occur, such as, amendments to statutes and regulations (including
tax rules) as well as to declared financial situations, the existence of undeclared liabilities and losses resulting from third-party activities or
as a result of third-party litigation. The indemnification provisions vary from one contract to the next. In several cases, no predetermined
amount or limit appears in the contract, and future events that trigger a payment are difficult to foresee. Therefore, Desjardins Group is
not in a position to provide a reasonable estimate of the maximum amount that it could be required to pay counterparties. Historically,
payments made under these commitments have been negligible.                                                                                           Desjardins Group
page 126




                                Note 20        COMMITMENTS, GUARANTEES AND CONTINGENCIES (CONTINUED)

                                GUARANTEES (CONTINUED)
                                OTHER GUARANTEES A Desjardins Group subsidiary gave an irrevocable joint and several guarantee for the obligations assumed by Desjardins
Combined Financial Statements




                                Credit Union Inc. (DCU), until April 1, 2006 under the terms of a contract signed between the Government of Ontario and DCU regarding
                                the acquisition of assets of the Province of Ontario Savings Office. The agreement contains several conditions, including minimum standards
                                for personnel and the operation of branches. The Desjardins Group subsidiary is not in a position to make a reasonable estimate of the
                                maximum amount that it could be required to pay under this agreement.

                                Maximum potential amount of future payments as guarantees:
                                (in millions of dollars)

                                       Guarantees and standby letters of credit                                                                    $     328
                                       Derivative products                                                                                         $     100
                                       Securities lending                                                                                          $   4,149



                                No amount was presented for these guarantees in the combined balance sheet as at December 31, 2003.

                                CONTINGENCIES
                                Desjardins Group entities are the subject of claims and lawsuits for damages amounting to approximately $61M, all of which are being
                                contested. A lawsuit filed in March 1993 for the sum of $48M was settled in 2000. From a legal standpoint, the case is closed. However, other
                                parties have replaced the previous ones and have petitioned to have the settlement annulled. Their petition was rejected by Superior Court
                                in July 2002, but the parties launched an appeal in August 2002. No provision has been recorded, as Management believes that the claim
                                is ill-founded.

                                Over the past several years, legal actions have been filed against a number of insurance companies operating in the United States and
                                Canada related to the sale of vanishing premium life insurance policies. In certain cases, these actions have resulted in substantial payments
                                for these companies. A Desjardins Group subsidiary has been named in a class action suit related to such policies in Canada. Although the
                                case is in the preliminary stages and, accordingly, it is difficult to make a conclusive assessment of the probable outcome of such litigation,
                                based on past settlement of similar proceedings, Management does not believe that a significant liability will result.

                                In addition, other Desjardins Group entities are engaged in various lawsuits arising in the normal course of business. Many of these suits are
                                in connection with measures taken by the entities to collect past-due loans and exercise their rights in respect of assets given as collateral
                                for a loan. In Management’s opinion, the total amount of contingent liability resulting from these lawsuits will not have a material impact
                                on the financial position of Desjardins Group.



                                Note 21        CONCENTRATION OF CREDIT RISK

                                A concentration of credit risk exists when a certain number of borrowers or counterparties located in the same geographical region have
                                similar characteristics or engage in similar activities. The evolution of economic, political or other conditions may compromise their abilities
                                to meet their contractual obligations. By far most of the securities, loans and deposits of Desjardins Group are related to the Québec market.



                                Note 22        SEGMENTED INFORMATION

                                Desjardins Group is a cooperative financial movement operating mainly in Québec. Under the authority of the Board of Directors of the
                                Fédération des caisses Desjardins du Québec, the President of Desjardins Group manages the cooperative network and the network of
                                subsidiary companies. The cooperative network, whose main activity is financial intermediation, offers individuals and businesses a wide
                                range of credit, investment and banking services, as well as financial advice. The activities of the network of subsidiaries are primarily in the
                                areas of insurance, trust services and asset management, which are grouped into Desjardins Financial Corporation. The activities of the
                                network also include securities brokerage, venture capital, which are mainly grouped under the subsidiaries Desjardins Securities Inc. and
                                Desjardins Venture Capital.

                                The activities of the two networks complement each other. Transactions between them in the normal course of business are valued at the
                                exchange value, which corresponds to the amount of consideration agreed to and accepted by the partners. The results of the main
                                segments reflect internal financial reporting systems and are compatible with the rules used in preparing the combined financial statements
                                of Desjardins Group.
Desjardins Group
                                                                                                                                                                                  page 127
Note 22      SEGMENTED INFORMATION (CONTINUED)

      2003                                                                                                                  Insurance,      Securities
                                                                                                                         trust services    brokerage,




                                                                                                                                                                                  Combined Financial Statements
                                                                                                        Financial            and asset venture capital            Combined
                                                                                                  intermediation         management         and other                 total (1)
      Net interest income                                                                                $    2,796           $      585            $      (6)     $    3,378
      Other income                                                                                              806                3,579                  217           4,334
      Provisions for credit losses                                                                              (80)                   7                    –             (73)
      Non-interest expenses                                                                                  (2,528)              (3,958)                (271)         (6,492)
      CONTINUED OPERATING SURPLUS (DEFICIENCY) EARNINGS                                                         994                  213                  (60)         1,147
      Income taxes on surplus earning                                                                          (299)                 (17)                   8           (308)
      Non-controlling interests                                                                                   –                  (25)                   –            (25)
      Discontinued operations                                                                                     –                    –                    2              2
      SURPLUS EARNINGS (DEFICIENCY) BEFORE PATRONAGE ALLOCATIONS                                                695                  171                  (50)           816
      Patronage allocations, net of income taxes                                                                298                    –                    –            298
      SURPLUS EARNINGS (DEFICIENCY) FOR THE YEAR AFTER PATRONAGE ALLOCATIONS                             $      397           $      171            $     (50)     $     518
      SEGMENT ASSETS                                                                                     $ 79,357             $ 13,004              $   2,291      $ 94,652



      2002                                                                                                                  Insurance,      Securities
                                                                                                                         trust services    brokerage,
                                                                                                        Financial            and asset venture capital            Combined
                                                                                                  intermediation         management         and other                 total (1)
      Net interest income                                                                                $    2,723           $      556            $       (9)    $    3,278
      Other income                                                                                              745                2,937                  256           3,610
      Provisions for credit losses                                                                             (112)                   3                     –           (109)
      Non-interest expenses                                                                                  (2,300)              (3,259)                (284)         (5,523)
      CONTINUED OPERATING SURPLUS (DEFICIENCY) EARNINGS                                                       1,056                  237                  (37)         1,256
      Income taxes on surplus earning                                                                          (290)                  (82)                  1           (371)
      Non-controlling interests                                                                                   –                  (24)                   –            (24)
      Discontinued operations                                                                                     –                     –                 (13)           (13)
      SURPLUS EARNINGS (DEFICIENCY) BEFORE PATRONAGE ALLOCATIONS                                                766                  131                  (49)           848
      Patronage allocations, net of income taxes                                                                333                    –                    –            333
      SURPLUS EARNINGS (DEFICIENCY) FOR THE YEAR AFTER PATRONAGE ALLOCATIONS                             $      433           $      131            $     (49)     $     515
      SEGMENT ASSETS                                                                                     $ 71,405             $ 11,920              $   2,018      $ 85,343



      2001                                                                                                                  Insurance,      Securities
                                                                                                                         trust services    brokerage,
                                                                                                        Financial            and asset venture capital            Combined
                                                                                                  intermediation         management         and other                 total (1)
      Net interest income                                                                                $    2,344           $      560            $      14      $    2,910
      Other income                                                                                              720                2,737                  158           3,405
      Provisions for credit losses                                                                             (247)                  10                    –            (237)
      Non-interest expenses                                                                                  (2,155)              (3,187)                (153)         (5,277)
      CONTINUED OPERATING SURPLUS EARNINGS                                                                      662                  120                   19            801
      Income taxes on surplus earning                                                                          (166)                  (10)                  (3)         (179)
      Non-controlling interests                                                                                   –                  (20)                  (3)           (23)
      Discontinued operations                                                                                     –                     –                 (11)            (11)
      SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS                                                             496                   90                    2            588
      Patronage allocations, net of income taxes                                                                191                    –                    –            191
      SURPLUS EARNINGS FOR THE YEAR AFTER PATRONAGE ALLOCATIONS                                          $      305           $       90            $       2      $     397
      SEGMENT ASSETS                                                                                     $ 67,579             $ 11,721              $   1,193      $ 80,493

(1) The difference between the total of results and the sum of the operating segment results presented above is due to intersegment transactions.
                                                                                                                                                                                  Desjardins Group
page 128




                                Note 23      BUSINESS ACQUISITIONS AND DISPOSALS

                                2003
                                On September 30, 2003, a subsidiary of the Desjardins Group concluded an agreement to acquire all common shares of NorthWest Asset
Combined Financial Statements




                                Management Inc. and its subsidiary NorthWest Mutual Funds Inc., a mutual fund manager and distributor. This acquisition was accounted
                                for using the purchase method. The purchase price totalled $23M, which is comprised of $20M paid in cash in 2003, $2M that will be paid
                                in 2004 and $1M in 2005. The excess of the purchase price over the fair value of net liabilities assumed, an amount of $42M, was at the
                                outset attributed to management contracts and to the NorthWest trademark as intangible assets in the amounts of $10M and $3M,
                                respectively. The balance of $29M was attributed to goodwill and will be tax deductible and recognized in full in the “Insurance, Trust
                                Services, and Asset Management“ sector. The intangible assets acquired have indefinite useful lives and are not amortized.

                                The details of the purchase price are as follows:

                                       Tangible assets acquired
                                       Cash                                                                                                                      $       3
                                       Other assets                                                                                                                     12
                                                                                                                                                                 $      15
                                       Liabilities assumed
                                       Accounts payable                                                                                                          $       2
                                       Borrowings                                                                                                                       30
                                       Non-controlling interests                                                                                                         2
                                                                                                                                                                 $      34
                                       Net liabilities assumed                                                                                                   $      19
                                       Intangible assets with indefinite useful lives                                                                                   13
                                       Goodwill                                                                                                                         29
                                       Purchase price                                                                                                            $      23



                                2001
                                On April 12, 2001, a Desjardins Group subsidiary acquired all the shares of 2995271 Canada Inc. and its subsidiary Gabbay International. This
                                transaction was recorded using the purchase method. The purchase price, payable in three cash instalments, was set based on a percentage
                                of the market value of assets under management that will continue to be managed as at March 31, 2001, 2002 and 2003. A preliminary
                                purchase price of $0.7M was estimated and recorded entirely as goodwill. An amount of $0.3M was paid in cash at the purchase date and
                                the balance of $0.4M is payable over the two years following acquisition.

                                On August 8, 2001, another Desjardins Group subsidiary acquired certain assets and assumed certain liabilities of Groome Capital.com for a
                                cash consideration of $1, including costs related to the transaction. Once the fair value of the net assets was allocated, the surplus amount
                                of $2.6M was recorded as goodwill.

                                During the year, the life and health insurance subsidiary sold its investment in the Centre d’autorisation et de paiement des services de santé
                                (C.A.P.S.S.). The general insurance subsidiary sold a 10% interest in The Personal General Insurance. The gains, totalling $20M, were included
                                in “Other income – Other“.



                                Note 24      DISCONTINUED OPERATIONS

                                On September 28, 2003, Sécur, a Desjardins Group subsidiary, sold assets related to securities transportation and automated service for a cash
                                consideration of $5M and a $5M balance of sale including interest payable in instalments until September 2010.

                                The breakdown of discontinued operations in the combined statement of income is presented in the following table:

                                For the twelve-month periods ended December 31

                                                                                                                                     2003            2002             2001
                                       Loss on disposal of assets                                                                $      (1)      $       –       $       –
                                       Operating surplus earnings (deficiency) until date of sale                                        3             (13)            (11)
                                                                                                                                 $       2       $     (13)      $     (11)
Desjardins Group
                                                                                                                                                   page 129
Note 24   DISCONTINUED OPERATIONS (CONTINUED)

The assets and liabilities related to discontinued operations presented as at December 31, 2002 under the headings “Other assets – Other“
and “Other liabilities – Other“, are as follows:




                                                                                                                                                   Combined Financial Statements
    ASSETS
    Equipment                                                                                                                     $       8
    Other assets – Other                                                                                                                  2
                                                                                                                                  $      10
    LIABILITIES
    Other liabilities – Other                                                                                                     $       2




Note 25   RESTRUCTURING OF ASSET MANAGEMENT ACTIVITIES

In 2003, a Desjardins Group subsidiary implemented a major two-phase action plan intended to develop its asset and investment
management services. The plan includes the consolidation, under a new investment segment called Desjardins Asset Management, of asset
management activities with investment management activities. A new corporation was also created in which certain assets under
management, previously managed by subsidiaries of Desjardins Group, were transferred. Subsequently, 70% of this corporation’s shares
(Fiera Capital Management Inc.), were sold to an external partner. This restructuring resulted in a net gain of $5M before taxes. In addition,
as part of this restructuring, the management of certain assets was entrusted, on a temporary basis, to Fiera Capital Management Inc. (FCM).
To this effect, the subsidiary undertook to guarantee FCM a minimum level of fee income for a period not to extend past June 13, 2004.



NOTE 26      SUBSEQUENT EVENT

AFFILIATION AGREEMENT
During 2003, the Fédération des caisses populaires de l’Ontario (FCPO) and the Fédération des caisses Desjardins du Québec (FCDQ)
authorized the renewal of their partnership agreement. The guiding principle of the new protocol for affiliation was to ensure that the
caisses populaires of Ontario (CPO) affiliated with the FCPO enjoy the same rights, services, benefits and obligations as the caisses of Québec.
To accomplish this, the general meeting of the FCPO will be recognized as a regional general meeting within the FCDQ. The Chairman of
the Board of Directors of the FCPO will act as a member of the Board of Directors of the FCDQ. The members of the Board of Directors of
the FCPO will act as the CPO council of representatives for the FCDQ. The amendments to the protocols for affiliation will result in the
recognition of the FCPO and the CPO as full members of the FCDQ, in the same manner as the caisses of Québec.

The new agreement, in effect since January 1, 2004, will lead to a business combination between the FCPO, the CPO and Desjardins Group.
This consolidation will be recorded using the pooling of interests method. Under this method, the various assets, liabilities and equity of the
FCPO, the CPO and Desjardins Group will be consolidated at the carrying values recorded by the constituent entities.

The assets, total revenue and accumulated surplus before allocations of Fédération des caisses populaires de l’Ontario are $2,250M, $101M
and $21M, respectively, as at December 31, 2003.




                                                                                                                                                   Desjardins Group
page 130




                         ADDITIONAL INFORMATION
Additional Information




                         FIVE-YEAR STATISTICAL REVIEW
                         OF DESJARDINS GROUP IN QUÉBEC

                         COMBINED BALANCE SHEET
                         As at December 31
                         (in millions of $)

                                                                                                                    2003                  2002 (1)              2001 (1)        2000 (1)        1999 (1)
                                ASSETS
                                Cash and deposits with financial institutions                                  $    1,357           $    1,355             $    1,316      $    1,065      $     935
                                Securities
                                  Investment account                                                               18,357               15,993                 15,658          14,973          14,812
                                  Trading account                                                                   1,033                  774                    383             200              82
                                                                                                                   19,390               16,767                 16,041          15,173          14,894
                                Loans
                                  Residential mortgages                                                            36,457               33,230                 30,617          29,036          28,414
                                  Consumer, credit card and other personal loans                                   12,203               11,039                 10,203           9,859           9,766
                                  Business and government                                                          19,676               17,992                 17,586          16,897          16,229
                                                                                                                   68,336               62,261                 58,406          55,792          54,409
                                  Cumulative provision for credit losses                                             (834)                (892)                  (929)           (853)           (939)
                                                                                                                   67,502               61,369                 57,477          54,939          53,470
                                Other assets                                                                        6,403                5,852                  5,659           4,940           3,888
                                TOTAL ASSETS                                                                   $ 94,652             $ 85,343               $ 80,493        $ 76,117        $ 73,187
                                LIABILITIES AND EQUITY
                                Deposits
                                 Individuals                                                                   $ 50,024             $ 46,581               $ 44,870        $ 43,013        $ 40,347
                                 Business and government                                                         14,225               12,509                 11,342           9,308           9,005
                                 Deposit-taking institutions and other                                            6,095                3,811                  4,353           5,186           6,869
                                                                                                                   70,344               62,901                 60,565          57,507          56,221
                                Policy and related liabilities                                                      9,294                8,370                  8,065           7,819           7,253
                                Borrowings                                                                            154                  237                    270             244             131
                                Subordinated debentures                                                             1,154                1,208                    444             494             487
                                Other liabilities                                                                   7,508                6,951                  5,944           5,243           4,623
                                                                                                                   18,110               16,766                 14,723          13,800          12,494
                                EQUITY
                                  Capital stock                                                                       869                  851                    844             819             809
                                  Undistributed surplus earnings                                                      516                  475                    321             279              96
                                  Reserves                                                                          4,813                4,350                  4,040           3,712           3,567
                                                                                                                    6,198                5,676                  5,205           4,810           4,472
                                TOTAL LIABILITIES AND EQUITY                                                   $ 94,652             $ 85,343               $ 80,493        $ 76,117        $ 73,187



                         PRIMARY FINANCIAL MEASURES
                         As at December 31
                         (in millions of $ and as a percentage)

                                                                                                                    2003                  2002 (1)              2001 (1)        2000 (1)        1999 (1)
                                Tier 1 capital ratio                                                              13.01 %              12.78 %                12.95 %         12.26 %         11.68 %
                                Total capital ratio                                                               13.03                13.34                  11.86           11.33           11.82
                                Return on average equity(2)                                                        13.8                  15.6                  12.0            11.4              7.8
                                Productivity ratio(2)                                                              67.9                  64.8                  68.3            74.7            76.1
                                Impaired loans coverage ratio                                                     144.8                140.0                  123.9            96.7            91.7
                                Net impaired loans as a percentage of net loans                                   (0.38)                (0.41)                (0.31)           0.05            0.16
                                Average assets                                                                 $ 89,708             $ 83,449               $ 78,770        $ 74,652        $ 71,596
                                Average loans                                                                    64,425               59,483                 56,221          54,205          53,320
                                Average deposits                                                                 66,301               62,219                 59,497          56,864          54,796

                         (1) Data restated to reflect the presentation adopted in 2003.
                         (2) The return on average equity ratio and the productivity ratio are established according to financial intermediation segment
                             and include the share of earnings generated by caisse investments in the subsidiaries.
Desjardins Group
                                                                                                                                                    page 131
COMBINED STATEMENT OF INCOME
For the year ended December 31
(in millions of $)

                                                                               2003         2002 (1)       2001 (1)       2000 (1)       1999 (1)




                                                                                                                                                    Additional Information
       INTEREST INCOME
         Loans                                                             $   4,189    $   4,035      $   4,296      $   4,055      $   3,845
         Securities                                                              840          852            871          1,041            935
                                                                               5,029        4,887          5,167          5,096          4,780
       INTEREST EXPENSE
         Deposits                                                              1,567        1,531          2,204          2,329          2,152
         Subordinated debentures and borrowings                                   84           78             53             49             49
                                                                               1,651        1,609          2,257          2,378          2,201
       NET INTEREST INCOME                                                     3,378        3,278          2,910          2,718          2,579
       OTHER INCOME
         Net premiums                                                          3,082        2,623          2,381          2,062          1,813
         Deposit and payment service charges                                     381          359            363            348            320
         Lending fees and card service revenues                                  190          161            141            134            122
         Trust services and securities dealing                                   222          188            180            187            162
         Other                                                                   459          279            340            391            506
                                                                               4,334        3,610          3,405          3,122          2,923
       TOTAL INCOME                                                            7,712        6,888          6,315          5,840          5,502
       PROVISIONS FOR CREDIT LOSSES                                              73          109            237            127            179
       NON-INTEREST EXPENSES
         Claims, benefits, annuities and changes in insurance provisions       3,034        2,349          2,245          2,114          1,987
         Salaries and fringe benefits                                          1,745        1,587          1,461          1,449          1,381
         Premises, equipment and furniture, including depreciation               341          337            340            448            491
         Communications                                                          172          170            178            174            164
         Restructuring costs                                                       –            –              –              –             55
         Other                                                                 1,200        1,080          1,053            899            807
                                                                               6,492        5,523          5,277          5,084          4,885
       OPERATING SURPLUS EARNINGS FROM CONTINUING OPERATIONS                   1,147        1,256           801            629            438
       Income taxes                                                              308          371           179            114            138
       OPERATING SURPLUS EARNINGS FROM CONTINUING OPERATIONS BEFORE
        NON-CONTROLLING INTERESTS AND PATRONAGE ALLOCATIONS         839                      885            622            515            300
       Non-controlling interests                                                 25           24             23             30             19
       OPERATING SURPLUS EARNINGS FROM CONTINUING OPERATIONS
        BEFORE PATRONAGE ALLOCATIONS                                            814          861            599            485            281
       Discontinued operations                                                    2           (13)          (11)            (2)            55
       SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS TO MEMBERS                  816          848           588            483            336
       Patronage allocations to members                                          440          490           269            143            122
       Tax recovery on patronage allocations to members                         (142)        (157)          (78)           (41)           (26)
       SURPLUS EARNINGS FOR THE YEAR AFTER PATRONAGE
         ALLOCATIONS TO MEMBERS                                            $    518     $    515       $    397       $    381       $    240

(1) Data restated to reflect the presentation adopted in 2003.




                                                                                                                                                    Desjardins Group
page 132




                         PRINCIPAL QUARTERLY INFORMATION OF DESJARDINS GROUP IN QUÉBEC

                         COMBINED STATEMENT OF INCOME
                         (unaudited, by quarter and in millions of $)
Additional Information




                                                                                                                          2003                                                     2002(1)
                                                                                                     Q4            Q3             Q2             Q1              Q4          Q3              Q2          Q1
                               Net interest income                                           $      855     $     884     $      829     $      810     $        964   $    785      $       753   $    776
                               Other income                                                       1,235         1,062          1,047            990            1,006        846              840        918
                               Total income                                                       2,090         1,946          1,876          1,800            1,970       1,631         1,593         1,694
                               Provisions for credit losses (recoveries)                              9            (8)            38             34                2          21            53            33
                               Non-interest expenses                                              1,906         1,555          1,517          1,514            1,556       1,270         1,307         1,390
                               OPERATING SURPLUS EARNINGS
                                ON CONTINUING OPERATIONS                                            175            399           321            252             412         340              233        271
                               Income taxes                                                            3           130           100             75             118         103              77          73
                               Non-controlling interests                                               6             8             7              4               8           5               5           6
                               Discontinued operations                                                 –            (1)           (1)             –               5           9              (1)          –
                               SURPLUS EARNINGS BEFORE PATRONAGE
                                 ALLOCATIONS TO MEMBERS                                             166            262           215            173             281         223              152        192
                               Patronage allocations, net of taxes recovered                         75             95            64             64             162          65               66         40
                               SURPLUS EARNINGS FOR THE PERIOD AFTER
                                 PATRONAGE ALLOCATIONS                                       $        91    $      167    $      151     $      109     $       119    $    158      $       86    $    152



                         COMBINED BALANCE SHEET
                         (unaudited, at quarter-end and in millions of $)

                                                                                                                          2003                                                     2002(1)
                                                                                                     Q4            Q3             Q2             Q1              Q4          Q3              Q2          Q1
                               ASSETS
                               Cash and deposits with financial institutions                 $    1,357 $ 1,143 $ 1,361 $    909 $ 1,355 $ 1,609 $    650 $    559
                               Securities – investment account                                   18,357   17,475  18,075  15,311   15,993  16,444  17,198   16,000
                               Securities – trading account                                       1,033    1,062     653     748      774     770     666      526
                               Residential mortgages                                             36,457   35,610  34,924  33,523   33,230  32,724  32,239   30,912
                               Consumer, credit card, and other personal loans                   12,203   12,039  11,608  11,279   11,039  10,851  10,493   10,353
                               Loans to business and government                                  19,676   19,208  18,843  18,867   17,992  17,816  17,741   18,201
                               Cumulative provision for credit losses                              (834)    (855)   (890)   (901)    (892)   (916)   (923)    (924)
                               Other assets                                                       6,403    6,231   6,212   6,111    5,852   6,375   5,898    6,149
                               TOTAL ASSETS                                                  $ 94,652       $ 91,913      $ 90,786       $ 85,847       $ 85,343       $ 85,673      $ 83,962      $ 81,776
                               LIABILITIES AND EQUITY
                               Deposits by individuals                                       $ 50,024       $ 48,677      $ 48,792       $ 46,917       $ 46,581       $ 45,980      $ 46,192      $ 45,346
                               Deposits by business and government                             14,225         13,942        14,570         12,204         12,509         12,914        12,560        10,792
                               Deposits by deposit-taking institutions and other                6,095          5,463         3,897          3,800          3,811          4,858         3,935         5,052
                               Policy and related liabilities                                   9,294          8,845         8,664          8,474          8,370          8,263         8,193         8,144
                               Subordinated debentures and borrowings                           1,308          1,331         1,299          1,323          1,445          1,494         1,476           700
                               Other liabilities                                                7,508          7,545         7,617          7,346          6,951          6,612         6,141         6,370
                               Equity                                                           6,198          6,110         5,947          5,783          5,676          5,552         5,465         5,372
                               TOTAL LIABILITIES AND EQUITY                                  $ 94,652       $ 91,913      $ 90,786       $ 85,847       $ 85,343       $ 85,673      $ 83,962      $ 81,776



                         PRIMARY FINANCIAL MEASURES
                         (unaudited, by quarter or at quarter-end, as a percentage and in millions of $)

                                                                                                                          2003                                                     2002(1)
                                                                                                     Q4            Q3             Q2             Q1              Q4          Q3              Q2          Q1
                               Return on average equity(2)                                       10.7 %   17.5 %   14.8 %   12.3 %    19.9 %   16.3 %   11.3 %   14.8 %
                               Productivity ratio(2)                                             65.3     64.1     65.7     68.5      60.3     60.8     68.0     65.5
                               Impaired loans coverage ratio                                    144.8    146.2    150.6    147.5    140.0     143.4    138.0    130.1
                               Net impaired loans as a percentage of net loans                  (0.38)   (0.41)   (0.46)   (0.46)    (0.41)   (0.45)   (0.42)   (0.37)
                               Average assets                                                $ 93,283 $ 91,350 $ 88,317 $ 85,595 $ 85,508 $ 84,818 $ 82,869 $ 81,135
                               Average loans                                                   66,752   65,244   63,627   62,069   60,922    60,013   59,046   58,010
                               Average deposits                                                69,213   67,671   65,090   62,911   63,327    63,220   61,939   60,878

                         (1) Data restated to reflect the presentation adopted in 2003.
                         (2) The return on average equity ratio and the productivity ratio are established according to the financial intermediation segment
Desjardins Group




                             and include the share of earnings generated by caisse investments in the subsidiaries.
                                                                                                                           page 133
PRINCIPAL STATISTICS BY BUSINESS SEGMENT

FINANCIAL INTERMEDIATION
As at December 31




                                                                                                                           Additional Information
(in millions of $)

                                                                      2003        2002        2001       2000       1999
       CAISSES AND FÉDÉRATION
       Assets                                                     $ 72,969    $ 66,856    $ 62,240   $ 57,871   $ 55,662
       Securities                                                    8,203       7,188       7,246      6,957      6,441
       Loans                                                        61,528      55,879      51,280     47,436     45,972
       Deposits                                                     61,531      57,892      54,852     50,409     47,335
       Equity                                                        5,848       5,341       4,843      4,491      4,110
       Surplus earnings before patronage allocations to members        663         715         463        362        221
       Patronage allocations to members                                440         490         269        143        122
       CAISSE CENTRALE DESJARDINS
       Assets                                                     $ 13,433    $ 10,605    $ 10,176   $ 10,098   $ 11,465
       Securities                                                    3,619       3,868       3,132      3,203      3,999
       Loans                                                         8,122       5,087       5,501      5,527      6,280
       Deposits                                                     10,122       7,788       7,505      7,674      9,300
       Net income                                                       40          35          40         35         28
       FONDS DE SÉCURITÉ DESJARDINS
       Assets                                                     $    497    $    465    $    434   $    411   $    408
       Net fund value                                                  485         453         409        392        367
       Net surplus earnings                                             32          43          17         25         10
       CAPITAL DESJARDINS
       Assets                                                     $   1,076   $   1,137   $    330   $    312   $    300
       Senior bonds                                                   1,058       1,116        319        300        289




                                                                                                                           Desjardins Group
page 134




                         INSURANCE, TRUST SERVICES AND ASSET MANAGEMENT
                         As at December 31
                         (in millions of $ and as a percentage)

                                                                                                                    2003                 2002                 2001              2000           1999
Additional Information




                               DESJARDINS FINANCIAL SECURITY
                               Insurance and annuity premiums                                                  $  2,079             $  1,764             $  1,612          $  1,563       $  1,457
                               In-force life insurance (insured capital)                                        129,307              126,569              117,497           114,606        115,119
                               In-force pension contracts (funds held)                                            3,569                3,272                3,387             3,505          3,636
                               Return on equity                                                                    14.1 %               10.8 %               10.5 %            10.5 %           2.8 %
                               Segregated funds                                                                $ 4,384              $ 4,025              $ 4,505           $ 4,855        $ 4,781
                               DESJARDINS GENERAL INSURANCE GROUP
                               Gross premiums written                                                          $    1,270           $    1,068           $     936         $     672      $     512
                               Growth in number of in-force policies                                                   5.9 %                4.4 %               2.0 %             5.6 %          3.0 %
                               Combined ratio                                                                        97.9                 96.8                 98.2              96.9           98.2
                               Return on equity                                                                      13.4                 10.5                  8.7              13.6           14.3
                               DESJARDINS SPECIALIZED FINANCIAL SERVICES MANAGEMENT
                               Fee income                                                                      $     90             $     91             $     89          $     87       $     81
                               Return on equity                                                                    13.5 %               22.6 %               23.9 %            22.6 %         46.3 %
                               Investment funds outstanding                                                    $ 6,382              $ 4,870              $ 5,055           $ 4,438        $ 4,117
                               Assets under administration                                                      167,181              143,432              145,675           148,630        133,640
                               DESJARDINS ASSET MANAGEMENT
                               Fee income                                                                      $       48           $       48           $       45        $       33     $       27
                               Assets under management                                                             25,515               17,263               16,288            15,038         14,165
                               ELANTIS INVESTMENT MANAGEMENT
                               Fee income                                                                      $       15 (1)       $       21           $       22        $       20     $       19
                               Assets under management                                                                  –               11,301               11,714            10,975         11,476

                         (1) As part of the reorganization of asset management activities, a portion of revenues and assets under management has been included
                             with Desjardins Asset Management since September 13, 2003.



                         SECURITIES, VENTURE CAPITAL AND OTHER
                         As at December 31
                         (in millions of $ and as a percentage, unless otherwise stated)

                                                                                                                    2003                 2002                 2001              2000           1999
                               DESJARDINS SECURITIES
                               Total revenues                                                                  $    170             $      116           $      104        $      116     $       71
                               Number of clients (in thousands)                                                     266                    254                  223               212            167
                               Return on equity                                                                     (8.6)%                (11.0)%              11.8 %            40.9 %         14.6 %
                               Assets under administration                                                     $ 13,827             $    9,822           $    8,244        $    7,158     $    5,986
                               DESJARDINS VENTURE CAPITAL(1)
                               Assets                                                                          $     154            $      191           $      183        $     156      $     154
                               Investments, at cost                                                                  144                   176                  170              120             82
                               Equity                                                                                138                   174                   78              151            138
                               Net earnings (net loss)                                                               (51)                   (26)                  4               18             57

                         (1) At the beginning of 2002, a reorganization took place that divided the operations of Investissement Desjardins into two legal entities.
                             The two new entities are: Desjardins Venture Capital Inc. and Desjardins Venture Capital, Limited Partnership. For the purpose of compiling
                             statistics for the above table, the results of the two entities were added together.
Desjardins Group
                                                                                                                                                                                 page 135
PRINCIPAL FINANCIAL RESULTS OF THE CAISSES AND FEDERATIONS
OF ONTARIO, MANITOBA AND NEW BRUNSWICK

The Ontario, Manitoba and New Brunswick federations, comprising 68 caisses, are auxiliary members of the Fédération des caisses Desjardins




                                                                                                                                                                                 Additional Information
du Québec. They are governed by their own legislation, regulations and by-laws.

COMBINED BALANCE SHEET
(unaudited)(1)

As at December 31
(in millions of $)

                                                                                                                                                           2003         2002
       ASSETS
         Cash and securities                                                                                                                         $      775     $     823
         Loans                                                                                                                                            3,796         3,537
         Land, buildings and equipment                                                                                                                       89            92
         Other assets                                                                                                                                        68            69
       TOTAL ASSETS                                                                                                                                  $    4,728     $   4,521
       LIABILITIES AND EQUITY
         Deposits                                                                                                                                    $    4,196     $   4,055
         Other liabilities                                                                                                                                  159           123
         Equity
           Capital stock                                                                                                                                     25           23
           Share capital                                                                                                                                     75           73
           Undistributed surplus earnings                                                                                                                    25           19
           Reserves                                                                                                                                         248          228
       TOTAL LIABILITIES AND EQUITY                                                                                                                  $    4,728     $   4,521



COMBINED STATEMENT OF INCOME
(unaudited)(1)

For the year ended December 31
(in millions of $)

                                                                                                                                                           2003         2002
       Interest income                                                                                                                               $      276     $    265
       Interest expense                                                                                                                                     112          112
       Net interest income                                                                                                                                  164          153
       Other income                                                                                                                                          51           47
       Total income                                                                                                                                         215          200
       Provisions for credit losses                                                                                                                           4            3
       Non-interest expenses                                                                                                                                169          163
       OPERATING SURPLUS EARNINGS                                                                                                                             42          34
       Income taxes                                                                                                                                            8           7
       OPERATING SURPLUS EARNINGS BEFORE PATRONAGE ALLOCATIONS TO MEMBERS                                                                                     34          27
       Patronage allocations to members                                                                                                                        9            7
       Tax recovery on patronage allocations to members                                                                                                       (1)          (1)
       SURPLUS EARNINGS FOR THE YEAR AFTER PATRONAGE ALLOCATIONS TO MEMBERS                                                                          $        26    $     21

(1) The combined balance sheet and combined statement of income include data from the caisses and federations in Ontario, Manitoba and New Brunswick,
    after eliminating the transactions and balances of the caisses and federations among themselves. Because the financial years of the caisses do not coincide,
    the undistributed surplus earnings do not correspond to the surplus earnings presented in the statement of income.



                                                                                                                                                                                 Desjardins Group
page 136




                       CORPORATE GOVERNANCE
Corporate Governance




                       The Fédération des caisses Desjardins du Québec has been developing its corporate governance program since 1998 and
                       provides leadership to Desjardins caisses and Desjardins Group subsidiaries in order to promote ongoing, continuous and
                       thorough improvement of their governance system.

                       Although the following information in specific to the Fédération, it has a broader application as well, since Desjardins
                       Financial Corporation (the “Corporation“) and Caisse centrale Desjardins (CCD) also rely on governance systems aligned
                       with that of the Fédération. Since 2003, this same notion also applies to Desjardins Venture Capital and Desjardins
                       Securities. By using a single management structure, whose purpose is to ensure coherence and consistency among
                       Desjardins Group’s main orientations, the Fédération, the Corporation, CCD, and now Desjardins Venture Capital all
                       share the same directors.



                       HIGHLIGHTS

                       The main improvements made or initiatives taken in 2003 with respect to the governance program consisted of the following:

                       ■   The adoption of a governance policy, by the subsidiaries (Desjardins Financial Security, Desjardins General Insurance
                           Group, Desjardins Trust, Desjardins Securities and Desjardins Asset Management) in line with the orientations set by
                           the Fédération;
                       ■   In response to an analysis carried out in 2002, the adoption of a plan to incorporate an integrated risk management
                           program across Desjardins Group and in accordance with the definition of governance of integrated risk management;
                       ■   The appointment of a Desjardins Group compliance officer to coordinate the implementation of the Group
                           Compliance Policy;
                       ■   The identification of Desjardins initiatives with respect to Bill 198, which regulates financial disclosure and internal
                           controls to ensure compliance with rules issued by the Ontario Securities Commission. It should be noted that Capital
                           Desjardins, the Fédération, CCD, the Financial Corporation and Desjardins Trust are issuers subject to Bill 198;
                       ■   A study of new accounting standards and their impact on Desjardins;
                       ■   The drafting and subsequent discussions of a draft charter applicable to the audit commissions and committees for the
                           Fédération, Caisse centrale and Desjardins Group subsidiaries (to be adopted in the first fiscal half-year of 2004);
                       ■   The development of a single code of ethics and rules of performance applicable for the first time to Desjardins Group
                           employees and elected officers. This code will be posted on the Desjardins Web site during the first fiscal half-year of
                           2004, and various public awareness and exchange initiatives are planned, including a confidential disclosure mechanism
                           to address deviations from the Code;
                       ■   The implementation of the succession plan for management positions at the Fédération and in certain subsidiaries.
                           This initiative will continue in 2004;
                       ■   A provincial meeting among some 600 caisse presidents and caisse general managers on the topic of global, lasting
                           performance. The performance model presented aims to strike a balance between client satisfaction, the motivation
                           and satisfaction of employees and elected officers, and productivity.




                                            CORPORATE GOVERNANCE POLICY OF THE FÉDÉRATION

                                            The corporate governance policy adopted by the Fédération describes what it must do to respect the industry guidelines(1)
                                            on corporate governance, while adapting these guidelines to the cooperative nature of Desjardins.

                                            The first difference is a fundamental one because it relates to the very purpose behind the Board of Directors’ decisions
                                            with respect to corporate governance. Ultimately, the purpose of these decisions is to enable the Fédération to carry out
                                            its mission, which is to contribute to improving the economic and social well-being of individuals and the community. It
                                            is guided by long-term objectives and is focused on creating economic value for its owner-users, i.e., caisse members, who
                                            thus benefit from:

                                            ■   a competitive, comprehensive, integrated and accessible service offering;
                                            ■   individual and collective patronage allocations;
                                            ■   active contribution to local and regional development.

                                            To attain these objectives, Desjardins gives itself the means to ensure sufficient profitability, which allows it to ensure its
                                            longevity and respect its cooperative difference.
Desjardins Group




                                            (1) The responsibility of issuing guidelines affecting corporate governance now comes under the Canadian Securities Administrators.
                                                                                                                                                    page 137
APPLICATION OF CORPORATE GOVERNANCE GUIDELINES

Overall, the Fédération respects the spirit of the guidelines, adapted to reflect the distinctive nature of its cooperative values.




                                                                                                                                                    Corporate Governance
MANDATE OF THE BOARD OF DIRECTORS
1) MANAGEMENT OF THE FÉDÉRATION The Board of Directors assumes full managerial responsibility of the Fédération
by administering its business in a sound and prudent manner. It ensures that procedures and structures are established
in line with its role of oversight and control. Periodically, it reviews its operations from the standpoint of continued
improvement and safeguards the assets of Desjardins Group and its five million members and its clients.

It plays a dual role since its responsibilities apply both to the Fédération as a business as well as to Desjardins Group. The
Fédération is in fact the organization which guides, plans and coordinates all Desjardins Group operations.

The Board exercises all the powers of the Fédération except for those which it may delegate from time to time to its
commissions and committees. The Board is responsible for the following responsibilities in particular:

a. Strategic planning process The Board of Directors implemented a continuous strategic planning process for Desjardins
Group. The Board is supported by the Strategic Planning and Development Committee; specifically, this committee helps
the Board to ensure that strategic orientations and plans are incorporated throughout the caisses and the subsidiaries
and that business development strategies are consistent and coherent, all while being mindful of the risk involved.

Out of the strategic plan comes the cooperative network’s business plan (known as PARC) and an activity plan.
Responsibility for implementing the strategic planning process rests with the Management Committee, and the Board’s
role in this respect is one of follow-up, monitoring and control and ensures that information is obtained to correct
discrepancies. As for the Financial Corporation, CCD, Desjardins Venture Capital and Desjardins Securities, their Board of
Directors adopts a triennial strategic and financial plan that is updated annually.

In 2003, with a view to the future and to training, the Fédération sent several of its elected officers to international
conventions on subjects such as competition, membership issues, capitalization, and the development of financial
services cooperatives around the world.


                     b. Identification and management of main risks The Board is responsible for identifying the main risks of the Fédération and
                     Desjardins Group and ensures that the required systems are in place for integrated management of the main risks. The
                     Fédération has the support of the Integrated Risk Management Group.

                     After receiving, in 2002, a comprehensive analysis of the risk management situation at Desjardins Group, the Group
                     authorized, in 2003, the implementation of a project that will enable Desjardins Group to adopt the advanced integrated
                     risk management methods set out in the Basel Accord and other frameworks for financial institutions. Also, in 2003, the
                     Board adopted Desjardins Group’s governance of risk, including the management framework and the key principles and
                     responsibilities of the various structures pertaining to risk management. This structure will lead, in 2004, to the
                     implementation of the Board’s new commission on risk management and to a review of the Audit and Inspection
                     Commission’s mandate so as to properly split up the roles of these structures in this manner.

                     c. Succession planning The task of providing the business with a succession planning program is the responsibility of the
                     Human Resources and Operations Group of the Fédération as part of a three-year human resources plan. The Human
                     Resources Commission oversees the plan and reports to the Board of Directors or makes recommendations to it.

                     In 2003, the President and Chief Executive Officer of Desjardins Group had a specific objective with respect to succession
                     planning for the management positions at the Fédération, the Financial Corporation, CCD, Desjardins Venture Capital,
                     and Desjardins Securities, given the strategic nature of this issue. At the Board of Directors’ meeting held in December,
                     he submitted a summary of the initiatives aimed at achieving this objective made during the year. The two key activities
                     performed in 2003 were the assessment of the potential of senior vice-presidents and vice-presidents, the locating of
                     talent as well as the introduction of measures to facilitate mobility within the Group. It should be noted that the various
                     components of Desjardins Group offer a natural pool of candidates for assuming key management functions.

                     One of the hallmarks of Desjardins’ cooperative difference is that the successor to the President and Chief Executive
                     Officer is chosen by a 256-person electoral college that includes representatives from Québec and Ontario caisses and the
                     President and Chief Executive Officer of Desjardins Group. Although it does not have to appoint the incumbent, the
                     Board of Directors oversees that succession is properly planned by determining the major criteria for the President of
                     Desjardins Group. The electoral process is governed by a Fédération by-law. The most recent process resulted in
                     re-election by acclamation of the current President and Chief Executive Officer, for a second and final four-year mandate.
                                                                                                                                                    Desjardins Group
page 138




                       d. Strategic communication policy The Board of Directors has adopted internal and external communication policies in order
                       to improve its relations with the caisses and their members, the subsidiaries and their clients, socio-economic and
                       community organizations, opinion makers, the public, the media, the rating agencies and the various levels of
                       government. In the first fiscal half-year of 2004, the Board will discuss the major annual strategic orientations with
Corporate Governance




                       respect to communications as well as activities to carry out and the results to assess.

                       The Fédération uses different channels to communicate effectively with its various stakeholders, including its
                       Communications and Public Affairs Department, the Ombudsman, the support team reporting to the Board of Ethics of
                       the Secretary General, the complaint settlement process in the caisses (Your Satisfaction is Our Priority), the annual
                       general meetings, the release of Desjardins Group’s quarterly financial results (including the Annual Report, Community
                       Involvement Report, such publications as Mes Finances-Ma Caisse, Desjardins, Desjardins Entreprises and Partenaires, as
                       well as information bulletins distributed to employees), a toll-free telephone line, the Web site, including a section entitled
                       “Relations with members“ (www.desjardins.com) as well as member services at the Fédération (1-866-835-8444, ext. 8422).

                       The Board of Directors set up four advisory commissions (young people, women, cultural communities and native
                       peoples) to help identify and validate strategies and action plans to enhance Desjardins Group’s responsiveness to the
                       needs and representation of its various clienteles. It also formed a member satisfaction commission which is chaired by
                       the President and Chief Executive Officer of the Group. In 2003, the Fédération set up two Round Tables, one addressing
                       agriculture and the other addressing the environment. The second Round Table brought together representatives from
                       all communities working towards a common goal, namely, sustainable development. The outcome of this consultation
                       will inspire Desjardins in its future steps towards achieving its environmental objectives.

                       In addition, the Fédération communicates with rating agencies and coordinates relations with the various levels
                       of government.


                                           e. Internal reporting system and integrity of control systems The Board of Directors, seconded by its Audit and Inspection
                                           Commission, ensures the implementation of effective control systems (accounting, administrative and management) to
                                           safeguard the integrity of its operations and obtains the required accountability from managers. The Board is supported
                                           in this responsibility by Desjardins Group’s Internal Auditor, who adopts an annual plan based on the recommendations
                                           of its Audit and Inspection Commission. To satisfy the new requirements of Bill 198, work is in progress to improve the
                                           documentation of the controls used during the production of financial statements.

                                           The Board also ensures that the Fédération’s Management Committee 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 as they arise and also measure the risks involved. From now on Board
                                           members will assess the quality of each file submitted, as they are submitted, that support decisions made. Also,
                                           management has recently started to use a new trend chart by which it can more effectively monitor primary performance
                                           indicators; this will surely benefit the Board, as they will now obtain decision-bearing data more expeditiously.

                                           Board members receive a quarterly management information report that combines the main financial and non-financial
                                           indicators that will enable them to assess Desjardins Group’s situation and the status of the Fédération’s projects. The
                                           board 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 meets regularly according to a predetermined
                                           schedule. In 2003, 20 Board meetings were held, of which a certain number by way of conference call. Board members
                                           receive the agenda, along with any appropriate documentation, far enough in advance to ensure productive discussions
                                           and facilitate the decision-making process.

                                           2) COMPOSITION OF THE BOARD OF DIRECTORS The Fédération’s Board of Directors has been composed of 22 members since
                                           January 1, 2004, a majority of whom are unrelated and independent parties. The criteria for membership are listed in
                                           paragraph 3. As at December 31, 2003, the Board included six women, representing close to 30% of members, a first
                                           among large financial institutions in Canada.

                                           The Vice-Chairs of the Abitibi-Témiscamingue–Nord et Ouest du Québec, and Bas-Saint-Laurent–Gaspésie–Îles-de-la-Madeleine
                                           regions also serve on the Board of Directors as managing directors.

                                           3) APPLYING THE DEFINITION OF UNRELATED PARTY The Board of Directors is comprised of five related officers, including the
                                           Chairman of the Board and Chief Executive Officer of Desjardins Group and the four caisse general managers who serve
                                           on the Board. The directors have no business or personal relationships with members of the Management Committee of
                                           the Fédération, or interests which, in the opinion of the Board, could significantly interfere with their ability to act in
                                           the best interests of the Fédération or Desjardins Group, or 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, and to
                                           the declarations of interest filed annually by the directors.
Desjardins Group




                                           A list of directors and their statuses (related or unrelated and independent) is presented at the end of this declaration.
                                                                                                                                                                                       page 139
4) NOMINATION PROCEDURE Given the cooperative structure of Desjardins Group and the principle of delegation which
prevails within the Group, the Fédération’s Board of Directors is composed of persons elected by the delegates of the
caisses belonging to the Fédération who, at meetings in each region, directly elect 17 of the 22 Board members. They
assume the chairmanship of the Council of Representatives (CORE)(2). Thus, it is the caisse delegates who must choose




                                                                                                                                                                                       Corporate Governance
from among the interested candidates the candidates most apt to assume two roles, namely, that of director of the
Fédération and Desjardins Group as a whole and that of regional representation.

It should be noted that the chairs of the councils of representatives are responsible for ensuring that the orientations,
as defined by the Board, are understood by the caisses and for communicating to the Board the concerns of the caisses
they represent.

The four remaining positions filled by caisse general managers are determined at an election held at a meeting of
representatives of the Fédération, and the final position is reserved for the Chairman of the Board and Chief Executive
Officer of Desjardins Group. Consequently, the Corporate Governance Commission is not required to play a role in the
selection of the Board of Directors of the Fédération, but is, however, in charge of the selection process of the directors
of the Desjardins Group subsidiaries.

■   The process of electing the directors of the Fédération therefore ensures the independence of the members of the
    Board vis-à-vis the President and Chief Executive Officer of Desjardins Group since this individual has no influence on
    the choice of these directors.
■   The rules governing the composition of the Board foster a certain stability and continuity in the corporate governance
    of Desjardins Group given that its members have three-year renewable terms and that each year one third of the
    Board members withdraw from their positions. This affords the directors the time needed to deepen their
    understanding of issues and to make a valuable contribution to the Board.
■   The composition of the Board is balanced by the presence of representatives from all regions of Québec, from the
    group caisses, and recently, from Ontario caisses populaires, but also by the skills and experience they offer (chartered
    accountants, lawyers, notaries, managers, a professional mediator, a professor of management, an entrepreneur, etc.).

5) ASSESSING THE EFFECTIVENESS OF STRUCTURES The Board of Directors and its commissions and committees evaluate their
performance annually by using quantifiable objectives set by the Board at the beginning of the year. Areas for
improvement, and points to be monitored identified during this evaluation are written into an action plan
recommended to the Board by the Corporate Governance Commission (which also oversees the plan). The evaluation
program for all Fédération structures also calls for a personal self-assessment followed by a meeting with the Chairman
of the Board. In 2003, the Chairman of the Board individually met with the 13 members of the Board. The Chairman is
responsible for the evaluation process, and the Corporate Governance Commission provides oversight.


                     6) ORIENTATION AND TRAINING PROGRAM FOR NEW DIRECTORS The Fédération offers its directors orientation and ongoing
                     training, and develops sessions tailored to their specific needs. New directors attend an integration session that involves
                     meeting with members of Management and receiving a reference manual containing all the information they need to
                     carry out their duties.

                     As needed and upon request, meetings with specialists from the Fédération are also organized to give new directors a
                     more complete picture of certain strategic projects. In 2003, the directors were encouraged to express their training needs,
                     which would later form the basis of the training plan to be recommended by the Corporate Governance Commission.

                     Beginning in 2004, the training program for directors will be incorporated into the activities of the Desjardins Cooperative
                     Institute, a new training institute created for the elected volunteer officers and managers of Desjardins Group.
                     The Institute’s mission is three-fold: Desjardins Awareness, Desjardins Governance and Management and Desjardins
                     Innovation.

                     7) SIZE OF THE BOARD The Board of Directors is of a size that prioritizes adequate representation of the caisses in the 17
                     Québec regions and in one region of Ontario. Moreover, the presence of four caisse general managers ensures that the
                     orientations adopted by the Board and their implementation are adapted to the operational realities of the caisses.

                     The efficient running of meetings and good discipline among the directors themselves compensate for the size of the
                     Board. Furthermore, as the Chairman of the Board and the Chief Executive Officer holds an informal gathering the day
                     before every Board meeting, it ensures that the discussion of the agenda remains on topic at the formal meeting the
                     following day. The results of the performance evaluation of the Board of Directors reveals the very significant relevance
                     of these meetings.                                                                                                                                                Desjardins Group




                     (2) CORE are democratically-elected entities of the Fédération which are responsible for making decisions in each region with regard to adopting the regional
                         business plan, granting sponsorships and donations and designating the representatives of Desjardins with outside regional agencies. Since January 1, 2004,
                         a new CORE has been added, namely, the one for the Fédération des caisses populaires de l’Ontario.
page 140




                       8) REMUNERATION OF DIRECTORS The Board has adopted a policy for the payment of remuneration to directors that it
                       reviewed in 2003 on the recommendation of the Corporate Governance Commission. This policy is in line with industry
                       trends and reflects the responsibilities, risks and requirements inherent to directors’ functions and to Desjardins Group
                       culture in this regard.
Corporate Governance




                       Moreover, in accordance with the Act Respecting Financial Services Cooperatives, the global budget allowance for the
                       payment of attendance allowances for members of the Board of Directors, CORE and the Board of Ethics is authorized
                       by the Fédération’s general meeting.

                       9) COMPOSITION OF COMMISSIONS AND COMMITTEES The Board has created a number of commissions and committees to
                       support and streamline its control and monitoring activities. These commissions and committees are comprised entirely or
                       almost entirely of unrelated parties. The mandate of these commissions and committees is reviewed annually so they may
                       adequately support the Board in its role of guiding, planning and monitoring.

                       10) RESPONSIBILITY FOR CORPORATE GOVERNANCE The Board has given the Corporate Governance Commission the
                       responsibility of applying and updating the corporate governance program in light of industry trends. The commission
                       reports on its observations and makes recommendations to the Board of Directors.

                       11) DEFINING THE AUTHORITY OF THE MANAGEMENT COMMITTEE The responsibilities of the Chairman of the Board and the
                       Chief Executive Officer of Desjardins Group are set out in the corporate governance by-law of the Fédération. The
                       responsibilities of the President and Chief Operating Officer of the Fédération are also defined in this by-law. In addition,
                       the Board has set out in writing a clear distribution of responsibilities between the Board of Directors and the
                       Management Committee.

                       The annual objectives of the Chairman of the Board and Chief Executive Officer of Desjardins Group are recommended
                       to the Board of Directors by the Committee on the Aggregate Remuneration of the President and Chief Executive Officer
                       of Desjardins Group. The objectives of the President and Chief Operating Officer of the Fédération are established by the
                       President and Chief Executive Officer as part of its profit-sharing plan. The Human Resources Commission recommended
                       guidelines to the Board of Directors, guidelines for setting objectives to ensure sound management of profit-sharing
                       plans and an equitable application for all components of Desjardins.

                       The degree to which these objectives are achieved is measured through an annual review process. With respect to
                       the performance of the President and Chief Executive Officer of Desjardins Group, under the supervision of the
                       aforementioned committee, each director participates anonymously in the review process using a model prepared in
                       advance by this committee. The evaluation process was revised in 2003 in order to specify the following:

                       ■   the method of determining annual objectives for the President and Chief Executive Officer, the role of the Committee
                           on the Aggregate Remuneration in this regard and the relevant tools;
                       ■   the assessment procedure of the degree to which the annual objectives of the President and Chief Executive Officer
                           have been met;
                       ■   the role of the Committee on the Aggregate Remuneration as well as the tools made available to directors.


                                           12) THE BOARD’S INDEPENDENCE FROM THE MANAGEMENT COMMITTEE The Board has created different structures and
                                           procedures to safeguard its independence from the Management of the Fédération. These include the following:

                                           1) having only one member of Management of the Fédération who is also an officer elected by representatives of
                                              members (Chairman of the Board and Chief Executive Officer of Desjardins Group);
                                           2) holding an informal gathering of directors the day before each Board meeting, for which the President and Chief
                                              Executive Officer does the follow-up with members of Management;
                                           3) the Chair of the Audit and Inspection Commission (AIC) is assumed by an unrelated officer;
                                           4) assigning responsibility to the Corporate Governance Commission (of which only one member is a related party) for:
                                              a) managing relations between the Board and the Management Committee of the Fédération, and;
                                              b) ensuring that the Board fulfills its duties. In addition, the responsibility of developing or supervising agendas for
                                                 the Board of Directors and its committees is assigned to the Chairman of the Board and the Chief Executive Officer
                                                 of Desjardins Group;
                                           5) the creation of the Committee on the Aggregate Remuneration of the President and Chief Executive Officer of
                                              Desjardins Group on which only unrelated and independent directors serve;
                                           6) ensuring that the members of the Human Resources Commission and the Committee on the Aggregate Remuneration
                                              of the President and Chief Executive Officer of Desjardins Group are seconded by an external consultant with respect
                                              to matters dealing with the aggregate remuneration of officers.

                                           Note that the Fédération has a Board of Ethics whose members are elected at the General Meeting. Its members are all
                                           independent from senior management and the Board of Directors.
Desjardins Group
                                                                                                                                                                                    page 141
Position against separating the functions of the Chairman of the Board and Chief Executive Officer(3) Desjardins does not intend to
separate the functions of the Chairman of the Board and of the President and Chief Executive Officer of Desjardins Group
for the following reasons:




                                                                                                                                                                                    Corporate Governance
■   The President and Chief Executive Officer is chosen by an electoral college comprised of 256 elected officers (an
    approach unique to Desjardins) whose primary responsibility is to ensure that the interests of Desjardins members are
    protected. The President and Chief Executive Officer is accountable in this capacity to five million Desjardins members.
■   The interests of the President and Chief Executive Officer are aligned with those of these five million members. It is
    the General Meeting comprised of their representatives that assigned this task to the President and Chief Executive
    Officer by means of a by-law. At Desjardins, the General Meeting is made up of approximately 2,000 delegates.
■   The President and Chief Executive Officer has no influence over the choice of members who serve on the Board of
    Directors, which is one of the justifications made in favour of the separation of the two functions. In fact, all the
    directors of the Fédération are elected at a regional general meeting or by group caisses or at a representatives’
    meeting as discussed in point 4 of this disclosure.
■   The General Meeting believes that the Chairman of the Board must possess in-depth knowledge about the activities
    and affairs of both the Fédération and Desjardins Group in order to effectively act as a leader, whether it is among
    elected officers, members, or the management teams of various Desjardins components. The Board assigned the
    Chairman of the Board, in accordance with the by-law, the responsibility of being the authorized spokesperson for the
    Fédération and Desjardins Group.
■   The Annual Meeting created the position of President and Chief Operating Officer of the Fédération to release the
    Chairman of the Board and Chief Executive Officer from of operational considerations. Moreover, the Management
    Committee of the Fédération is chaired by the President and Chief Operating Officer; the Chairman of the Board and
    Chief Executive Officer is a member of the committee to ensure that the orientations set by the Board are adequately
    reflected in the various projects.


                     13) AUDIT AND INSPECTION COMMISSION – MANDATE AND COMPOSITION The Audit and Inspection Commission (AIC),
                     established under the Act Respecting Financial Services Cooperatives for its activities related to the inspection of caisses,
                     acts as an audit committee for the Fédération. It is composed entirely of unrelated and independent officers; two of the
                     members, including the Committee Chair, have accounting expertise.

                     The roles and responsibilities of the AIC have been defined in such a way so as to give its members a very clear
                     understanding of their monitoring duties. The AIC has all the power and information it needs to fulfill its mandate. Its
                     role is to review all financial information and supervise the implementation of an effective control process and the
                     required rendering of accounts. It has direct communication channels with the persons responsible for internal audit at
                     Desjardins Group, with the Desjardins Bureau for Financial Monitoring and Enforcement(4) and with the external auditors
                     in order to discuss and review certain issues. The AIC may, as needed, discuss these issues without the managers
                     responsible being present.

                     The AIC ensures the independence of the internal audit division of Desjardins Group and adopts its annual action plan.
                     In 2004, this Commission will be given a new charter in compliance with the new requirements for audit committees.

                     14) HIRING OUTSIDE ADVISORS A director may hire the services of an outside advisor at the expense of the Fédération.
                     However, to ensure that such services are relevant, a request must be submitted to the Corporate Governance Commission.




                     (3) It should be noted that for Desjardins Group’s caisses and subsidiaries, these two functions are separate.
                                                                                                                                                                                    Desjardins Group




                     (4) The Desjardins Bureau for Financial Monitoring and Enforcement provides independent opinions on caisses’ management and financial statements, and
                         monitors, through inspections and audits, the risks associated with network activities and determines whether these risks are managed based on sound and
                         prudent management practices in compliance with legislation, standards and the rules of conduct in force; moreover, it audits the caisses’ financial
                         statements and co-audits the financial statements of Desjardins Group based on recognized audit standards, and expresses an opinion on these financial
                         statements.
page 142




                       MANDATES AND COMPOSITION OF THE COMMISSIONS, COMMITTEES
                       AND BOARD OF ETHICS OF THE FÉDÉRATION
                       As at December 31, 2003
Corporate Governance




                       EXECUTIVE COMMITTEE (COMPOSED OF 7 DIRECTORS)
                       This Committee has the same functions and powers as the Board of Directors, with the exception of those which the
                       Board may reserve for itself or assign to another committee or commission. Its mandate was drawn up by the Board of
                       Directors. In 2003, it held 11 meetings.

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

                       AUDIT AND INSPECTION COMMISSION (COMPOSED OF FIVE DIRECTORS)
                       This commission oversees the internal audit activities of Desjardins Group and the Desjardins Bureau for Financial
                       Monitoring and Enforcement, supports the Board in its monitoring and control responsibilities, and acts as an audit
                       committee for the Fédération. In 2003, it held 15 meetings.

                       MEMBERS:
                       ■   Andrée Lafortune, FCA, Chair*
                       ■   Jean-Guy Bureau*
                       ■   Marcel Lauzon*
                       ■   Pierre Leblanc, FCA*
                       ■   Jacqueline Mondy*

                                           COOPERATIVE ORIENTATIONS COMMISSION (COMPOSED OF FIVE DIRECTORS)
                                           This commission ensures compliance with cooperative values and the elements of the cooperative difference. If required,
                                           it submits recommendations to the Board. In 2003, it held nine meetings.

                                           MEMBERS:
                                           ■   Clément Samson, Chair*
                                           ■   Frances Carrier
                                           ■   Raymond Gagné*
                                           ■   Sylvie St-Pierre-Babin*
                                           ■   Benoît Turcotte*

                                           HUMAN RESOURCES COMMISSION (COMPOSED OF FIVE DIRECTORS)
                                           This commission is mandated to periodically review Desjardins Group’s positioning in terms of aggregate compensation
                                           to ensure that Desjardins Group remains competitive on the market. It makes sure that the compensation practices
                                           applied at Desjardins Group comply with Desjardins Group’s policies and guiding principles. The Commission’s mandate
                                           excludes the review of matters regarding the employment contracts of the Chairman of the Board and Chief Executive
                                           Officer. It held eight meetings in 2003.

                                           MEMBERS:
                                           ■   Alban D’Amours, Chairman of the Board
                                           ■   Madeleine Lapierre, Vice-Chair of the Board*
                                           ■   Pierre Tardif, Secretary of the Board*
                                           ■   Raymond Gagné*
                                           ■   Denis Paré*
Desjardins Group
                                                                                                                                            page 143
COMMITTEE ON THE AGGREGATE REMUNERATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
OF DESJARDINS GROUP (COMPOSED OF FOUR DIRECTORS)
This Committee, all of whose members are unrelated parties, is mandated to make recommendations to the Board regarding
the remuneration and working conditions, as well as the annual objectives of the President and Chief Executive Officer. The




                                                                                                                                            Corporate Governance
Committee held three meetings in 2003.

MEMBERS:
■   Madeleine Lapierre, Vice-Chair of the Board*
■   Pierre Tardif, Secretary of the Board*
■   Raymond Gagné*
■   Denis Paré*

CORPORATE GOVERNANCE COMMISSION (COMPOSED OF FIVE DIRECTORS)
This commission is mandated to support the Board of Directors in applying and updating the corporate governance
program. It also oversees the process for recommending candidates for seats on the boards of directors of Desjardins
Group subsidiaries. In addition, it is responsible for supervising the performance review program for members of the Board
of Directors and its commissions and committees. The Corporate Governance Commission held eight meetings in 2003.

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


                    DESJARDINS GROUP RETIREMENT COMMITTEE (COMPOSED OF REPRESENTATIVES
                    OF EMPLOYERS, PARTICIPANTS AND RETIREES, PLUS ONE EXTERNAL MEMBER)
                    The Board of Directors assumes responsibility for the sound and prudent management of the pension plan in compliance
                    with statutes and regulations. The Retirement Committee is the administrator of the Desjardins Group pension plan and
                    trustee of the pension fund. Its responsibilities are set out in the Québec Supplemental Pension Plans Act and by the
                    Board of Directors within the Desjardins Group pension plan Regulation. The Retirement Committee is supported by an
                    Investment Committee whose mandate is to monitor observance and application of the established investment policy.
                    The Retirement Committee held eight meetings in 2003.

                    MEMBERS FROM THE BOARD OF DIRECTORS REPRESENTING THE EMPLOYERS:
                    ■   Madeleine Lapierre, Chair*
                    ■   Jacques Baril*
                    ■   Paul-André Lavoie*
                    ■   Pierre Leblanc*
                    ■   Daniel Mercier*
                    ■   Denis Paré*

                    REPRESENTING THE PARTICIPANTS:
                    ■   Odette Breton
                    ■   Edgar Joly
                    ■   Michel Michaud
                    ■   Clément Roberge

                    OBSERVERS, REPRESENTING THE PARTICIPANTS
                    ■   Johanne Rock
                    ■   Yvon Lesiège

                    REPRESENTING THE RETIREES AND PARTICIPANTS ENTITLED TO A DEFERRED PENSION
                    ■   Normand Deschênes

                    EXTERNAL REPRESENTATIVE
                    ■   Reynald Harpin*

                                                                                                                                            Desjardins Group
page 144




                       BOARD OF ETHICS (COMPOSED OF ELECTED OFFICERS)
                       Under the law, the Fédération has a Board of Ethics that is independent of the Board of Directors and whose members
                       are elected officers of Desjardins. The Board of Ethics enjoys the support of a team which reports to the Secretary General
                       of the Fédération. In 2003, it held 16 meetings, including two training sessions.
Corporate Governance




                       One of the main responsibilities of the Board of Ethics is to ensure independence and objectivity of the Fédération’s
                       inspection and audit services (Desjardins Bureau for Financial Monitoring and Enforcement – see footnote for paragraph
                       13) with respect to caisses and to make recommendations to the President of the Fédération for the appointment of the
                       person responsible for managing these services.

                       In addition to the responsibilities mentioned above, the role of the Board of Ethics is to adopt the rules of conduct
                       applicable to the officers of Desjardins Group and to the employees of the Fédération, caisses and subsidiaries (officers
                       only), present them for approval to the Board of Directors and ensure that they are respected by the caisses and the
                       Fédération, support the caisses and the Fédération in applying the rules of conduct, issue notices, make observations and
                       recommendations with respect to ethical issues (especially in circumstances of misconduct), and notify the Board thereof,
                       and, if the Fédération violates the provisions of the Act Respecting Financial Services Cooperatives and regulations
                       governing restricted party transactions and conflicts of interest, ensure that the complaints regarding the Fédération
                       originating from the caisses or other members of the Fédération (Caisse centrale, holding companies).

                       MEMBERS:
                       ■   Hélène Lee-Gosselin, Chair*
                       ■   Norman Grant, Secretary*
                       ■   Éric Béchard*
                       ■   Isabelle Bourgeois*
                       ■   Marcel Cardinal*
                       ■   Marc Méthot*
                       ■   Claire Sarrazin*

                                           STRATEGIC PLANNING AND DEVELOPMENT COMMITTEE (COMPOSED OF TEN MEMBERS OF MANAGEMENT)
                                           This committee supports the President and Chief Executive Officer of Desjardins Group and the Board of Directors in their
                                           responsibility of providing Desjardins Group with a single direction and single management structure. To achieve this, it
                                           helps the Board to incorporate the strategic orientations of the cooperative network and the subsidiaries and to
                                           implement business development strategies. It held nine meetings in 2003.

                                           MEMBERS:
                                           ■   Alban D’Amours                 Chairman of the Board and Chief Executive Officer of Desjardins Group
                                           ■   Bertrand Laferrière            President and Chief Operating Officer, Fédération des caisses Desjardins du Québec
                                           ■   Pierre Brossard                Senior Vice-President, Institutional Affairs and Executive Assistant to the President of
                                                                              Desjardins Group
                                           ■   Luc Chabot                     President and Chief Operating Officer, Desjardins Venture Capital
                                           ■   Pauline D’Amboise              Secretary General, Fédération des caisses Desjardins du Québec
                                           ■   Jean-Pierre DeMontigny         President and Chief Operating Officer, Desjardins Securities
                                           ■   Marc Jean                      Vice-President, Planning and Cooperation, and Executive Assistant to the President and
                                                                              Chief Operating Officer of the Fédération
                                           ■   Jean-Guy Langelier             President and Chief Operating Officer of CCD
                                           ■   Monique F. Leroux              President of Desjardins Financial Corporation and Chief Executive Officer of the Subsidiaries
                                           ■   Marcel Pepin                   Executive Vice-President and Head, Corporate Affairs, Desjardins Financial Corporation
Desjardins Group




                                           Note – * means an unrelated and independent person
                                                                                                                                                   page 145
GLOSSARY OF FINANCIAL TERMS




                                                                                                                                                   Glossary of Financial Terms
ACCEPTANCES                                                               GUARANTEES AND STANDY LETTERS OF CREDIT
Short-term debt securities that can be traded in the money market,        Essentially, an irrevocable undertaking by a financial institution to
which a financial institution guarantees for a borrower in exchange       make payments for a member or client who cannot meet his or her
for a stamping fee.                                                       financial obligations towards third parties.

ASSETS UNDER ADMINISTRATION AND ASSETS UNDER MANAGEMENT                   HEDGING
Assets administered or managed by a financial institution that are        A risk management technique used to offset interest rate risk,
beneficially owned by members and clients and therefore do not            currency risk, and risks arising from financial indicators.
appear on the financial institution’s balance sheet. The services
provided in respect of assets under administration are adminis-           IMPAIRED LOANS
trative in nature, such as custodial services, collection of investment   Loans are classified as impaired when, in the opinion of
income and settlement of buy and sell transactions, while the             management, timely collection of principal and interest is almost
services provided in respect of assets under management include           certain to be impossible. Loans, except for credit card balances, are
selecting investments and offering investment advice. The assets          generally accounted for on a cash basis when a payment has been
may also be administered by the financial institution.                    past due for 90 days or more, unless they are adequately secured
                                                                          and in process of being collected. All loans more than 180 days past
COMPANY SUBJECT TO SIGNIFICANCE INFLUENCE                                 due are classified as impaired.
A company in Québec in which Desjardins Group holds between
20% and 50% of the capital stock.                                         INVESTMENT ACCOUNT
                                                                          Securities held until maturity or until the market offers more
CREDIT INSTRUMENTS                                                        attractive investment opportunities.
Credit facilities offered to members and clients in the form of loans
and other financing vehicles appearing on the balance sheet, or in        MATCHING
the form of off-balance sheet products such as guarantees, letters        The process of adjusting asset and liability maturities as well as
of credit and securities lending.                                         off-balance sheet items in order to minimize risks related to interest
                                                                          rates, currency, and other financial indicators. Matching is used in
CUMULATIVE PROVISION FOR CREDIT LOSSES                                    asset and liability management.
An amount that management deems sufficient to cover the
anticipated credit losses related to the portfolio of loans and other     MEASUREMENT OF FAIR VALUE
on-balance sheet and off-balance sheet assets and liabilities. Specific   Estimate of securities and financial instruments at the market rate
provisions and the general provision are added to the cumulative          and end of the year. When the price of a security is unavailable, fair
provision for credit losses, and write-offs and recoveries are            value is measured using market prices of similar securities.
deducted from it.
                                                                          NET INTEREST INCOME
DERIVATIVE FINANCIAL INSTRUMENT                                           The difference between what a financial institution receives on
A contract whose value is “derived“ primarily from interest or            assets such as loans and securities and what it pays out on liability
exchange rates. Derivative financial instruments are used to              items such as deposits and subordinated debentures.
transfer, modify or reduce current or expected risks, including risks
related to interest and exchange rates and other risks arising from       NOTIONAL AMOUNT
financial indicators.                                                     Reference amount used to calculate payments for instruments like
                                                                          forward rate agreements and interest rate swaps. It is called
FORWARD EXCHANGE CONTRACT                                                 “notional“ because it does not change hands.
A commitment to buy or sell a fixed amount of foreign currency
at a future specified date and at a set rate of exchange.




                                                                                                                                                   Desjardins Group
page 146




                              OFF-BALANCE SHEET FINANCIAL INSTRUMENTS                                      SECURITIES LENDING
                              A wide range of products offered to members and clients. There               Operations by which a financial institution acts as the authorized
                              are two categories: (i) credit instruments, which offer members and          agent of a security owner, who agrees to lend the security to a
                              clients liquid asset protection and (ii) derivative financial instruments.   borrower in exchange for a commission paid under the terms and
Glossary of Financial Terms




                                                                                                           conditions of a pre-established contract.
                              OPERATING UNIT
                              A component of a unit in which separate and significantly                    STOCK INDEX OPTION
                              important activities are carried out. An operating unit is generally         The right (but not the obligation) to buy (call option) or sell (put
                              synonymous with a business segment or subsidiary.                            option) at or by a specific date a given quantity of a stock index at
                                                                                                           a specific price (strike price).
                              PATRONAGE ALLOCATION
                              A distribution of surplus earnings to members on the basis of their          SUBORDINATED DEBENTURE
                              transactions with their caisse, decided by the members at the                An unsecured bond subordinated in right of payment in the event
                              general meeting.                                                             of liquidation to the claims of depositors and certain other creditors.

                              PERMANENT SHARE                                                              SUBSIDIARY OR SUBSIDIARY COMPANY
                              Capital stock offered to caisse members.                                     A company in which Desjardins Group holds the majority of the stock.

                              PROVISIONS FOR CREDIT LOSSES                                                 TRADING ACCOUNT
                              An amount added to the cumulative provision for credit losses.               Short-term securities held for trading purposes.
                              Specific provisions are established to reduce the carrying value of
                              some assets (especially loans) to an estimated realizable value. The
                              general provision is established for losses anticipated in regard to
                              total loans, particularly in sectors of activity where loan losses may
                              not yet be estimated on an individual basis.

                              RISK-WEIGHTED OFF-BALANCE SHEET ASSETS
                              AND FINANCIAL INSTRUMENTS
                              An integral part of calculating risk-based capital ratios. The face
                              value of low-risk assets is adjusted using risk weighting factors to
                              take into account a comparable risk among all types of assets. The
                              inherent risk of off-balance sheet financial instruments is also taken
                              into consideration, first by adjusting the notional values to balance
                              sheet (or credit) equivalents, and then by applying the appropriate
                              risk weighting factors.
Desjardins Group

				
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