THE DESJARDINS ADVANTAGE 2015 ANNUAL REPORT DESJARDINS GROUP TABLE OF CONTENTS Message from the President .....................................................................................................1 Mission, vision and values ........................................................................................................4 Corporate highlights .................................................................................................................5 Management’s Discussion and Analysis ...................................................................................17 Combined Financial Statements ............................................................................................100 Corporate governance ..........................................................................................................182 Major components and subsidiaries .....................................................................................200 Glossary ...............................................................................................................................201 HEAD OFFICE Fédération des caisses Desjardins du Québec 100 Des Commandeurs Street Lévis, QC G6V 7N5 Canada Telephone: 418-835-8444 Toll-free: 1-866-835-8444 Fax: 418-833-5873 This annual report was produced by the Marketing, Communications and Cooperative Executive Division of Desjardins Group (Desjardins Group Marketing, Strategies and Innovation Corporate Division) and the Finance Executive Division and Office of the CFO of Desjardins Group (Finance Division). MESSAGE FROM THE PRESIDENT Solid performance and building blocks for the future For Desjardins Group, 2015 was a remarkable year in terms of results, accomplishments and commitments for the future. We worked hard on the three pillars of our strategic plan—service, growth and efficiency—and achieved the highest surplus earnings in our history, nearly $2 billion. That’s a 23% increase over 2014. Total income was over $15 billion. Through sound and prudent management of our surplus earnings, we maintained strong capitalization. As at December 31, 2015, our Tier 1A capital ratio was 16%, and our total capital ratio was 17.2%. This kept us in the top spot in North America in Bloomberg’s 2015 ranking of the World’s Strongest Banks. Thanks to our strong performance and solid base, the future is bright for Desjardins. BOLD, FORWARD-LOOKING INITIATIVES At our 22nd Congress, we committed to improving our efficiency and overall cohesiveness. We are taking action to ensure that Desjardins remains an innovative and successful cooperative financial group that serves our members and clients well. On January 1, 2015, we concluded the biggest transaction in our history, welcoming State Farm’s Canadian teams to the Desjardins family. In one fell swoop, this added over one million new clients to all those we already had the privilege of serving. In Greater Montreal, we rolled out new types of service centres that are helping drive membership numbers up. Our multi-caisse retail space at Marché central, our 360d youth and student centres and our new studio concept are innovative new ways to reach out to potential members in their daily lives. All of these new facilities feature state-of-the-art technology. Another result of our push for innovation was the launch of our Ajusto smartphone app for drivers and our Monetico Mobile and Monetico Mobile+ payment solutions for businesses. The recently opened Desjardins Lab—a joint initiative put forward by a group of Desjardins managers and employees—will also serve to spur innovation, in collaboration with outside partners. PUTTING THE SPOTLIGHT ON SERVICE Our employees stepped up their efforts in 2015 to offer our members and clients truly outstanding service. Satisfaction levels are up, which is a real motivator to continue focusing on service across Desjardins Group. We also added to our range of Desjardins Member Advantages. And with the support of the regions, we’re continuing the gradual rollout of our Signature Service in the caisse network. This service provides our affluent clientele with seasoned teams able to handle all their financial requirements. The end result has been a better member experience and a truer reflection of the Desjardins Promise: close, committed and beneficial. PRODUCTIVITY AND SOLIDITY FOR LONG-TERM SUCCESS With today’s competitive and increasingly regulated environment, we’re taking action on all fronts to drive gains in efficiency. And we’re doing it while meeting the needs of members and clients who are looking for 24/7 service. The Shared Services Centre—along with its 22 offices across 14 regions—has been up and running since late 2015, providing administrative services to the caisses. This frees up caisse personnel to focus on building relationships with their members. We’ve also invested heavily in technology to improve system stability. And our caisses continue to transform, developing their networks and improving their business processes. By strengthening our financial base, we’re laying the groundwork for Desjardins Group’s long-term development. 1 A LEADER IN COOPERATION AND PUTTING OUR MEMBERS SUSTAINABLE DEVELOPMENT AND CLIENTS FIRST Co-opme, our financial education and cooperation program, provides the opportunity We’ve shifted our focus to service in order to boost member and client satisfaction. to introduce distinctive initiatives that benefit our members and their communities. We We’ve also developed new satisfaction tools and metrics to monitor progress across launched our school caisse website in 2015 and will be revamping our student caisse Desjardins, and we’re using the same approach for all business lines. model in 2016. We’ve also broadened our solidarity-based finance offer by drawing The Desjardins Promise—close, committed and beneficial—is a powerful tool to on the expertise of Développement international Desjardins, which helps implement guide our entire organization. sustainable financing solutions around the world. These are big steps forward that will ensure our long-term growth and success. At Desjardins, we’re firmly committed to sustainable development and seek to play a leadership role in the much-needed transition to a greener economy. Our selection of green products is the most comprehensive on the market. We’ve also committed to reducing our greenhouse gas emissions by 20% compared to 2008 levels. MANY THANKS TO EVERYONE CHANGES TO THE CAISSE NETWORK The caisse network has seen significant changes, with the caisses and their centres AT DESJARDINS embracing many new business solutions. We have consolidated some activities, allowing I’m proud of these accomplishments, which we owe to our 4,800 officers and our caisses to focus on business development and service quality. Regional collaboration 48,000-odd managers and employees. Thank you from the bottom of my heart. I would between caisses is also much stronger, helping them achieve growth and leverage the also like to express my gratitude to the seven million members and clients who have full power of Desjardins for the benefit of our members and clients. placed their trust in us. These transformations have led to big changes in the roles of elected officers, general I will be concluding my second and last term as president in April 2016. Despite today’s managers and caisse managers, who have a greater part to play in making governance market volatility and a global climate of instability, I have the satisfaction of leaving even more efficient at their cooperatives. behind a strong and flourishing organization that is firmly focused on the future. We’ve also given the caisses more say in determining Desjardins’s priorities. This has An organization that inspires trust in its members, clients, officers and employees. entailed changes to the role of the Assembly of Representatives. Our congresses of elected officers in 2009, 2013 and 2015 also provided opportunities for delegates to express their thoughts and opinions on key issues related to Desjardins’s future. DESJARDINS THE STRENGTH OF DESJARDINS The new management structure implemented in 2009, which is organized around four business sectors and key support functions, has leveraged the strength of our group and made us more agile and cohesive, for the greater benefit of our members and clients. FROM 2008 TO 2015 We have begun to give true form to the notion of “Desjardins member and client.” The creation of Desjardins Technology Group Inc., the Shared Services Centre, the Online Business Centre, Desjardins Investments Inc., Desjardins Investment Product Operations A STRONGER DESJARDINS FOR Inc. and our Signature Service has also made us more efficient for our members A BRIGHTER FUTURE and clients. Desjardins, the leading cooperative financial group in Canada, inspires trust around the world through the commitment of its people, its financial strength and its contribution DESJARDINS IS GROWING to sustainable prosperity. So reads Desjardins Group’s vision statement. AND INNOVATING As my second and last term as Desjardins president draws to an end, I believe that Here are a few figures that show Desjardins’s remarkable growth over the past eight years. we have contributed to making this vision a reality, while also staying true to our mission and values. I am truly proud of what we’ve accomplished together over the As at December As at December past eight years. Increase 31, 2007 ($B)1 31, 2015 ($B)2 Guided by our development plan, strategic plans and the high-level directions