Annual Report 2013 by Caisses populaires acadiennes

EFFICIENCY, GROWTH, DIFFERENCE Annual Report

2013

Mission

Our values

To give a better quality of life to our members, all the while taking part in the socioeconomic independence of New Brunswick’s Acadian community, respecting its linguistic identity and co-operative values.

• Solidarity in action, effort and environment • Pride of ownership • Equal decision power • Equal assets and sharing • Respect of the person and of the environment

Vision The Caisse populaire is the Acadian financial institution at its best, supporting the co-operative method where the first priority is the members and their needs.

The Annual Report was created by Communications and Strategic Planning: HEAD OFFICE Fédération des caisses populaires acadiennes 295 Saint-Pierre Blvd. Caraquet NB E1W 1B7 www.acadie.com

Coopérer sans frontières Bilan de responsabilité sociale

2013

Graphic Design: Mistral Communication

This annual report states financial and business result. To learn more about how communities benefit from our presence, see our Social Responsibility Report (Bilan de responsabilité sociale) available in French only at www.acadie.com/bilansocial.

Table of Contents Mouvement des caisses populaires acadiennes Committed to serving our members

Message from the President and Chief Executive Officer

Executive Committee

Governance

Our employees: Nobody does it better

Organization chart

Our strategic plan and orientations

Orientation 1 – Relative efficiency

Orientation 2 – Relative growth

Orientation 3 – The co-operative difference

Bridging collectively

Advantages of being a member or client of the Caisses populaires acadiennes

Close to our members and our clients

Financial position as at December 31

Combined financial statements

Fédération des caisses populaires acadiennes Board of Directors and management

Internal management structure

Consolidated financial statements

Acadia Life Consolidated financial statements

Office de stabilisation de la Fédération des caisses populaires acadiennes Board of Directors and management

Consolidated financial statements

Annual Report 2013

Committed to serving our members The Caisses populaires acadiennes owe their existence to their members, who have joined together to establish a ďŹ nancial institution that provides them with the ďŹ nancial products and services they need. Since the establishment of the first caisse in Petit-Rocher in 1936, people from a large number of communities joined their resources to establish several caisses. Over the years, these caisses generated sufficient surplus to create affiliates able to meet the increasingly diversified needs of their members.

Today, the Caisses populaires acadiennes are not only an inalienable collective heritage, but have also become the largest Acadian financial institution and provide their thousands of members with a comprehensive range of financial products and services. The Mouvement des caisses populaires acadiennes and the caisses, are more than a financial institution. By their co-operative nature, they take an active part in the social and economic development of the communities they serve, and the caisses return a large portion of their surplus to their members and community.

Our involvement, our activities • Assets of $3.35 billion

Our members

Economic contribution

• Approximately 155,000 member-owners

• Income taxes: $4.4 million

• 51 business locations operated by 15 caisses

Our employees

• 200 committed and democratically elected leaders

• Salaries and benefits: $73 million

• Approximately 10 institutions offering a comprehensive range of financial services • A state-of-the art Internet network

• 1000 dedicated employees

• The number one choice of business owners • Financing through business loans: $880 million

Community contribution • Member dividends in 2013: $1.6 million • Donations, sponsorships and scholarships: $2.1 million

With a focus on the future, we are doing everything we can to continue our financial and co-operative development.

Annual Report 2013

Message from the President and Chief Executive Officer Camille H. Thériault 2013: Efficiency, growth, diﬀerence For Acadia’s biggest financial institution, 2013 was quite a year. After making major changes to our network in recent years, we are beginning to harvest the fruits of our labours. The managers and employees of our Mouvement have continued to work tirelessly and resisted the temptation of sitting on our laurels. As President of the Mouvement for the past 11 years, I am looking forward to doing even more to continue providing the Caisses populaires acadiennes members with the best services available by modernizing our financial co-operative and securing its future. The past year has shown that our decisions were well-founded, despite the difficulties they entailed and the challenges of making the new structures work. We want to keep improving our efficiency for members without sacrificing our essentially Acadian and Francophone identity and, most importantly, while staying close to our communities. We have a new perspective on revitalizing our co-operative difference while staying true to our mission. Our ability to adapt to this new reality is sure to help us face increasingly strong competition. We had to make some tough decisions and close business locations in many communities in the past year, but we are confident that our choices were necessary to ensure sound management of member assets in light of changing consumer behaviour. Though we

have closed some 30 business locations in the last 3 years, we still have a stronger presence than any other financial institution, with 51 business locations—almost as many as all other banks on our territory combined.

Building on our success With over $3.35 billion in assets, we continue to influence decision making here in New Brunswick while promoting what sets us apart in terms of social involvement in the New Brunswick community. And that is even more inspiring given the business successes we achieved in the past year. Our Mouvement is in great financial health, and that’s why we have to stay on the forefront in our decision making. We are still one of the country’s most well-capitalized institutions. Our Financial Business Centre was a major cog in the historic partnership agreement with Université de Moncton. Putting an ultramodern Caisses populaires acadiennes business location on the campus of this prestigious educational institution in Moncton has furthered our goal of being an intergenerational caisse. Our great potential for attracting and keeping new members will make our future even more secure. The population is aging, and that includes our membership. This is something we cannot afford to ignore.

We have performed well and generated considerable profits. We believe that pursuing our transformation will provide even more benefits for our members.

The loss of a great builder I must take a moment to acknowledge the passing of a man whose legacy extends beyond our organization. It was with great sadness that we learned of the passing of Martin-J. Légère on March 27, 2013. Martin was a humble man dedicated to his family, his community and Acadia. He was a tireless builder, a defender of the French language and a great co-operator who directly and indirectly touched thousands of lives. He was a pillar of the Mouvement coopératif acadien and the founder of the Fédération des caisses populaires acadiennes. A ceremony was held in his memory in a chapel inside the building that bears his name in Caraquet.

A concerted management eﬀort Among our successes in 2013 is the impressive work accomplished in pension plan management. The current economic environment has made life difficult for retirement plans, and ours is no exception. We have had to act accordingly in order to maintain winning conditions for the retirement of all our employees. We turned to a consulting firm for support with this project. Employees, retirees and the employer were involved in this important work.

A number of solutions were considered, and the final decision was to convert our defined benefit plan to a shared risk pension model. This new plan ensures better financial health for our organization, minimizes the impacts on employees and retirees, and maintains attractive work conditions within our company. It also improves risk management and stands as another shining example of co-operation between employees, retirees and the employer.

A stronger presence than ever in our communities Our social commitment to the community remains a distinctive feature of our Mouvement. With over $2.1 million in donations, sponsorships and scholarships, we contribute more than any bank in our territory by redistributing our profits right here in New Brunswick. As such, we made decisions aimed at perpetuating the heritage of the pioneers of our wonderful Mouvement. We have ensured that we continue to have a presence locally, even in areas affected by the closing of points of services. In fact, many buildings left vacant have been offered to interested communities. That is in addition to our usual commitments. We have been particularly active among young people, including forging a major partnership with the Fédération des jeunes francophones du Nouveau-Brunswick (FJFNB). The Caisses populaires acadiennes has contributed more than $200,000 over 3 years. We are the only private

sector partner of FJFNB, which will benefit from the financial expertise of the caisses in improving the financial literacy of young people!

Recognition for our organization The Caisses populaires acadiennes was recognized as an employer again in 2013. For the second year in a row, we were named 1 of Canada’s Top 100 Employers in the prestigious Atlantic Canada’s Top Employers competition. Now in its 6th year, Atlantic Canada’s Top Employers recognizes employers that offer outstanding work conditions and benefits. Our business success is tied to our ability to retain the best employees. This is a team victory. The Caisses populaires acadiennes ranks among the industry’s best employers because we provide an exceptional work environment for our some 1,000 employees, and that is something we can all be proud of. Finally, the Caisses populaires acadiennes has added a new honour to our list of triumphs. We have been declared the winner of the 2013 Dr. Marilyn Trenholme Counsell Literacy Award in the Business/ Corporate Literacy Initiatives category for our Lire, découvrir et grandir literacy program.

Annual Report 2013

Building on our success In the coming months, we will continue to focus on the bridging collectively project announced at the end of the year. We are confident that the savings that will result from this merger will benefit our members and help our company grow and be more competitive and relevant as a co-operative. We do not take the idea of merging the administrative structures of the 15 existing caisses with the Fédération lightly. We know that this issue is a source of concern among certain members, as this is perhaps the biggest project the Fédération has undertaken since it was created in 1946. However, we are doing all we can to assess the impact of this project which is, after all, intended to meet the growing needs of our members, who are demanding increasingly competitive products and services from their financial co-operative. Our co-operative difference and our democratic processes are our great strengths, and our members will have the final say on whether or not the project goes ahead. We have the opportunity to modernize this great institution at a time when we are more stable than ever. It is much easier to make a decision when we are in control of our own destiny, rather than under the strain of financial difficulties.

Moving on to a new era of co-operation Our rich history goes back more than threequarters of a century. In today’s world, it is imperative to reinvent oneself and adapt to changes. Organizations that do not are destined to disappear. Over the years, we have been inspired by the first visionaries who believed in the co-operative formula in Acadia.

As stewards of this heritage, we now have a duty as administrators and managers to make decisions that meet the requirements of the financial industry and changing consumer behaviour to ensure the longevity of the Mouvement. The women and men elected by the members carry out their duties with passion and dedication. And every day, managers and employees work to sustain a responsible organization that meets the needs of its owners. Even with one single administrative structure, the Caisses populaires acadiennes and its 51 business locations will still be managed here, by people from here. Collectively, and in the spirit of modern co-operation, we will ensure that our members and communities continue to benefit from profits. We seek to maintain a profitable institution over the long term and create an intergenerational bridge by meeting the needs of future generations, just like those that came before them, so that we can go higher, further, together.

Camille Thériault President and Chief Executive Officer

Executive Committee Mouvement des caisses populaires acadiennes from left to right

Éric Aubé,

Executive Director Communications and Strategic Planning

Simonne Godin,

Corporate Secretary

Denis Laverdière,

Vice President and COO

Camille H. Thériault, President and CEO

Rolland LeBouthillier,

Vice President and COO Office

David Losier,

Vice President and CFO

Annual Report 2013

Governance The Caisses populaires acadiennes belong to their members. As member participation is central to our operations and our co-operative governance, we must constantly be mindful that all conditions are in place to make the democratic life of the caisses – as well as the organization as a whole – as prosperous as possible. The Board of Directors relies on its specifically tailored governance practices to perform its duties in an effective environment in which it has better management oversight, in keeping with its role to create long-term value for all members of the organization.

Association of the Caisses populaires Chairs: Critical leadership This group is primarily a communications tool to motivate and inform. It enables each caisse’s board of directors to draw from a common source, referring to the same workshops and other resources. Sharing information about objectives, visions, and guidelines is imperative if our well-planned growth is to continue.

Autonomy of the Mouvement and collective structures

Our caisse elected leaders must address increasingly complex issues while complying with strict governance requirements. To fulfill its role effectively, the Fédération uses a governance manual that outlines rules, roles, responsibilities, structures and ethical principles, thus fostering sound and effective management of its activities. This manual is also an information and assessment tool for members of the Fédération’s Board of Directors.

In 2013 the collective structures, i.e., the Financial Business Centre (FBC) and the administrative centre (ADMC) deployed a number of harmonization and optimization initiatives. A new governing body was set up for the FBC in accordance with its convention. The caisse-FBC assembly is composed of 2 caisse administrators and the general manager. Its main purpose is to make formal recommendations to the caisse boards of directors regarding the adoption of budgets, business plans and the main strategies of the FBC for every financial quarter.

The Board must be cognizant of industry trends affecting financial co-operatives. It must act with clarity and leadership in order to ensure that the organization of the Caisses populaires acadiennes evolves and adapts to our constantly changing world.

Along with these developments, the distribution network has undergone a reduction in the number of points of service. We can now confidently say that we have reached the optimal level, with 51 points of service throughout New Brunswick.

At the same time, the governance committee recommended a new assessment and self-assessment model that the board adopted in early 2013. Similarly, as a result of an initiative undertaken by the Association of the Caisses populaire Chairs, the caisse boards of directors have been using an assessment questionnaire to evaluate their performance.

We made these difficult decisions based on behavioural changes in order to keep pace with evolving member and customer needs and to provide sound asset management for all the Caisses populaires acadiennes members.

Expertise and governance

Our employees: Nobody does it better Being one of the largest private employers in New Brunswick is an ongoing challenge. And the fact that we are a co-operative adds a whole other dimension, especially since we are owned by nearly 155,000 members. Our mission makes us a diďŹ&#x20AC;erent kind of employer, one with broader social responsibilities than other companies.

A top employer Our caisses, subsidiaries and other Mouvement business units provide employment for nearly 1,000 individuals. We offer them competitive working conditions with professional opportunities to challenge their interests. We also provide a quality work environment and respect our employees; two critical factors in maintaining the service excellence our members enjoy. We could not sustain high performance levels throughout the organization were it not for our skilled, dedicated staff who are always willing to go the extra mile to achieve excellence. The expertise of our employees and managers is unrivalled â&#x20AC;&#x201C; they are our greatest asset.

Transparent communication Guided by a culture of communication and openness, we maintain a productive dialogue with our employees. We work together, using various communication tools and through regular meetings, to develop and share our strategic vision, business objectives, and results.

Achieving our full potential In order for our employees to be able to reach their full potential, we provide them with various training and information tools and the support and other means they need to excel. Training is a key element of our employeesâ&#x20AC;&#x2122; personal and professional growth as well as our competitive edge in the financial markets.

Making the most of our unrivaled expertise We rely on the experience of our employees, who give us an edge in this extremely competitive market. We have built our seasoned work force through effective recruitment and retention strategies.

It is also interesting to note that 55% of our workforce falls at the two extremes of seniority, as shown by the table below.

20 years and more

331

11 to 20 years

245

6 to 10 years

187

5 years and less

266 0

100

150

200

Supporting our successors Succession planning must be addressed if we are to ensure the future stability and viability of our organization. In this regard, we are always at the ready when it comes to developing employee competencies. We also welcome students and interns looking to gain professional experience during summer jobs or on-site internships.

250

300

350

Annual Report 2013

Organization chart

Mouvement des caisses populaires acadiennes

Cooperative Sector

Members populaires 15 caisses operated in 51 Business Locations business centre 1 financial operated in 4 regional offices Fédération des caisses populaires acadiennes Support Institutions Conseil acadien de la coopération Fondation des caisses populaires acadiennes Office de stabilisation de la Fédération des caisses populaires acadiennes

Corporate Sector

Acadia Service Corporation Acadia Service Centre

Acadia Financial Holdings Acadia Life Acadia General Insurance AVie Acadia Financial Services

As of April 1st, 2014

Northeast Northwest

Southeast

Caisses

Business Locations

Northeast Area Acadie

Bas-Caraquet, Caraquet, Grande-Anse, Inkerman, Paquetville and Pokemouche

Beresford

Chaleur

Allardville and Bathurst

des Fondateurs

Petit-Rocher and Robertville

des Iles

Lamèque

le Lien des deux Rivières

Saint-Isidore, Sheila and Tracadie

Néguac

Néguac and Rivière du Portage-Brantville

Shippagan

Northwest Area La Vallée de l’Érable

Grand-Sault, Saint-Léonard and Saint-Quentin

Madawaska

Edmundston, Saint-Jacques and Sainte-Anne de Madawaska

Restigouche

Balmoral, Campbellton, Eel River and Kedgwick

Trois Rives

Clair, Edmundston, Saint-Basile and Saint-François

Southeast Area Beauséjour

Fredericton and Moncton (4)

Dieppe-Memramcook

Dieppe and Memramcook

Sud-Est

Baie Sainte-Anne, Grand-Barachois, Bouctouche, Cap-Pelé, Cocagne, Grande-Digue, Richibucto, Rogersville, Saint-Antoine, Saint-Louis, Sainte-Marie and Shediac

As of April 1st, 2014

Annual Report 2013

Our strategic plan and orientations Our overarching strategy

Our new strategy, in context

We have just completed the first year of this strategic plan. In other words, we are well on our way to reaching our goals in terms of efficiency, growth and co-operative distinction.

Economic turmoil has cast a new light on the management practices of many businesses, including co-operatives. How well an organization adapts to such change will determine where it fits within its sphere of activity. We are continuing our efforts to increase eďŹ&#x192;ciency and control spending, focusing on the strength of our network so as to optimize synergies and maximize profits.

A simple cursory glance reveals that 2013 was filled with success. The many initiatives to enhance efficiency, the work on pricing and the outstanding sales results speak for themselves. Some of the challenges we faced were due to the fact that the collective structures (the Administrative Centre and the Financial Business Centre) were in their first year of existence. With regard to the co-operative difference, the return of the bridging collectively concept provided a very different, positive angle to the revision of our commitment to the community.

Strategic planning for the next three years will centre around the ability of the caisses to focus their eďŹ&#x20AC;orts on providing consultative service that keeps pace with membersâ&#x20AC;&#x2122; evolving financial needs.

Our Mission Our Vision ORIENTATION 1

ORIENTATION 2

ORIENTATION 3

RELATIVE EFFICIENCY Our annual operating income grows faster than our annual operating expenditures.

RELATIVE GROWTH Our business volume grows at a percentage equal to or greater than the growth of New Brunswick’s financial markets.

CO-OPERATIVE DIFFERENCE Our caisses, by virtue of their distinguishing characteristics, co-operative values, and consistent actions, stand out from the competition and other regional companies.

Our Values

Orientation 1 RELATIVE EFFICIENCY: Our annual operating income grows faster than our annual operating expenditures.

Objective 1 Reduce annual expenditures by $1 million, $2 million, and $3 million for 2013, 2014, and 2015 respectively for the Mouvement, with the creation of the ADMC and FBC.

Objective 2

Objective 3

Continue the initiative to close or optimize business locations, recouping the following amounts:

Enhance Fédération efficiency by optimizing service at the caisses, recouping the following amounts for the Mouvement:

2013: $ 2 million for the Mouvement over 2012 2014: Close 4 additional business locations, recouping $2.4 million over 2012 2015: Close 3 additional business locations, recouping $2.7 million over 2012

2013: E fficiency analysis of the Fédération, modifying its structure, talent management program, etc. as needed 2014: P ay $0.00407/$100 in shares held to caisses that attain an 85% member and employee satisfaction rate 2015: P ay $0.00377/$100 in shares held to caisses that attain an 85% member and employee satisfaction rate

Annual Report 2013

Our strategic plan and orientations (continued) Orientation 2 RELATIVE GROWTH: Our business volume grows at a percentage equal to or greater than the growth of New Brunswick’s financial markets.

Objective 4 Take the FBC fully operational in January 2013 and optimize it in 2014 and 2015 in such a way that our business sector achieves sound relative growth, equal to or greater than that of the market in New Brunswick, while maintaining adequate capitalization.

Objective 5 Implement a sales process optimization project in the 15 caisses to achieve sound private sector relative growth that is equal to or greater than that of the market in New Brunswick, while maintaining adequate capitalization.

Objective 6 Use a competitive approach and sectoral (business lines) strategy to develop Acadian market pricing that reflects organizational resources and will be perceived by members as adding value.

Objective 7 Ramp up the Acadia General Insurance business plan to cover the caisse service area and achieve our growth objectives more quickly. Objective 8 Define and implement a network asset management structure enabling this market segment to experience its share of growth, in line with the objectives set forth in its deployment plan.

Orientation 3 CO-OPERATIVE DIFFERENCE: Our caisses, by virtue of their distinguishing characteristics, co-operative values, and consistent actions, stand out from the competition and other regional companies.

Objective 9 Re-think the “co-operative dividend” and review the community involvement strategy. Objective 10 To further the concept of the “caisse for all ages,” develop and deploy a targeted strategy to meet the needs of young members (ages 15 to 29) in an aggressive, competitive, and proactive manner (including performance measures).

Bridging collectively Members make the decisions

Shaping the future today Members are demanding increasingly competitive products and services from their financial co-operative. This requires us to continually adapt the way we do things to meet their needs today and in the future. That’s why the Fédération and the caisses began discussing the possibility of merging into a single legal entity this year. Any company, whether or not it is a co-operative must: • remain profitable, efficient, and competitive • meet the needs and demands of its members • be completely available to its members at all business locations, not just at the local caisse With our enviable financial stability, we can continue developing and preparing for the future. The caisse boards of directors have given us the go-ahead to explore this option in-depth.

Each caisse will invite its members to meetings to learn about the project in-depth, talk about it and vote in a special general meeting.

Solid guiding principles We have adopted a framework around our mission and vision for this project, and these principles will guide every decision: • Involve all co-operative bodies in the discussion process and respect the democratic decision-making process. Members will have the final say. • Keep existing business locations open for at least 3 years. • Keep the head oﬃce open in Caraquet. • Maintain our co-operative, associative and Francophone identity in the future organization. • Strive for signiﬁcant positive impacts for the members and communities we serve (minimal impacts would not be justification to move forward).

Main steps Note: Every step is subject to approval by the Fédération board of directors.

April 2014

May to September 2014

October 2014

November 2014

Caisse Congress Caisse delegates will take a position for or against going forward with the project.

Final analysis and development of features Governance, structure, financial and regulatory framework, advantages for members, etc.

Member information sessions for each caisse Inform members and explain the project in-depth. Open the dialogue and answer questions.

Extraordinary meeting for each caisse Vote by members

Annual Report 2013

Advantages of being a member or client of the Caisses populaires acadiennes Everything under one roof

Mobile services: take control!

Being a caisse member means having access to a full range of financial services under one roof! The Caisses populaires acadiennes offers you an integrated line of products and services at the same address, including traditional banking services, investment products, personal and casualty insurance.

New mobile apps and functions have been designed for smartphones. They let you consult and manage your pending transactions, add new suppliers to pay bills, manage your budget and program alerts to make payments on time.

On the wave of social media The Caisses populaires has been active on social networks since 2009, and its presence continues to grow. • Over 1,300 people follow the Mouvement’s Facebook page. • More recently, in 2012 to be precise, we joined Twitter. We now have over 140 followers and we hope to keep growing in order to keep up with the way today’s generation uses smartphones to connect with businesses.

1,300

Facebook friends

Close to our members and our clients

New business location

200 professionals serving our members and clients An incomparable advisory team at your service As a member or client of the Caisses populaires acadiennes, you can count on the professionalism and expertise of: • 14 financial planners • 21 wealth management advisors • 70 personal finance advisors • 50 member services advisors • 34 account managers • 20 financial security advisors

A new, ultramodern business location on a university campus Located on the Université de Moncton campus, the new business location has a modern look and a finger on the digital pulse, with a proactive service offering adapted to the mobile needs of its student clients. The new centre offers a relaxed environment and an inviting reception area where digital technology is literally at your fingertips. It boasts a modern design with touchscreens and abundant open space with carefully thought-out lighting.

Annual Report 2013

Financial Position As of December 31, 2013 FINANCIAL SITUATION (in thousands of dollars) Mouvement des caisses populaires acadiennes 2013

2012

Variance

Net interest income

Â $90,942

$108,292

(16.0 %)

Other income

$55,287

$51,979

6.4 %

$1,552

$1,112

39.6 %

Assets

$3,352,115

$3,214,205

4.3 %

Equity

Â $333,945

$296,968

12.5 %

Member dividends

Comparison of results of 2013 with established financial targets for the year Profitability and productivity Total net revenues

Productivity index Surplus earnings before other items

Return on equity before other items

2013

2012

$146,229

$160,271

$4.36/$100

$4.99/$100

78.5%

81.8%

$28,492

$28,216

$0.85/$100

$0.88/$100

8.5%

9.5%

$5,446,250

$5,212,641

4.5%

4.7 %

$3,011

$1,020

$0.09/$100

$0.03/$100

Business Development Business volume Business volume growth Risk Credit losses

Financial Results 2013

Financial Results (in thousands of dollars)

FĂŠdĂŠration des caisses populaires acadiennes 2013

2012

Variance

$14,838

$15,006

(1.1%)

$3,942

$2,359

67.1%

Assets

$586,008

$535,127

9.5%

Equity

$41,384

$31,374

31.9%

Financial revenue Surplus earnings before other items

Annual Report 2013

Financial Results of sectors in 2013 Year-end highlights (in thousand of dollars) Acadia Life 2013

2012

Variance

Revenue

$7,684

$21,044

(63.49%)

Insurance benefits

$4,761

$4,445

7.11%

Operating income before dividends

$6,152

$2,607

135.98%

Dividendes to the Caisses populaires acadiennes

$2,164

$1,437

50.59%

Assets

$107,237

$115,544

(7.19%)

Shareholderâ&#x20AC;&#x2122;s equity

$38,508

$34,149

12.76%

Office de stabilisation de la FĂŠdĂŠration des caisses populaires acadiennes 2013

2012

Variance

Contribution income from the Caisses populaires acadiennes

$4,579

$4,412

3.79%

Investment income

$3,170

$3,340

(5.09%)

$103,529

$101,871

1.63%

$95,383

$92,890

2.68%

Assets Net assets

Mouvement des caisses populaires acadiennes Combined financial statements as of December 31, 2013 Table of contents Managementâ&#x20AC;&#x2122;s Responsibility for Financial Information

Independent Auditorsâ&#x20AC;&#x2122; Report

Combined Statement of Financial Position

Combined Statement of Income

Combined Statement of Comprehensive Income

Combined Statement of Changes in Equity

Combined Statement of Cash Flows

Notes to the Combined Financial Statements

Annual Report 2013

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL INFORMATION

The combined financial statements of the Mouvement des caisses populaires acadiennes and all the information contained in this annual report are the responsibility of the management of La Fédération des Caisses Populaires Acadiennes Limitée, whose duty is to ensure their integrity and fairness. The combined financial statements were prepared in accordance with International Financial Reporting Standards. The combined financial statements necessarily contain amounts established by management according to estimates that it deems to be fair and reasonable. These estimates include, among other things, the establishment of actuarial liabilities performed by the valuation actuaries of the Mouvement, the evaluation of the accrued employee benefit liability and the measurement of the fair values of the Mouvement's financial instruments. All financial information presented in the annual report is consistent with the audited combined financial statements. The board of directors of La Fédération des Caisses Populaires Acadiennes Limitée ensures that management fulfils its responsibilities with regard to the presentation of financial information and the approval of the combined financial statements of the Mouvement des caisses populaires acadiennes. The board of directors exercises this role mainly through the audit committees that meet with the auditors, in accordance with their mandate. The combined financial statements were audited by the auditors appointed by the board of directors, Ernst & Young LLP, whose report follows. The auditors may meet with the audit committees at any time to discuss their audit and any questions related thereto, notably the integrity of the financial information provided.

Camille H. Thériault President and Chief Executive Officer

David Losier, CGA Vice President and Chief Financial Officer

Caraquet, New Brunswick April 15, 2014

-1-

INDEPENDENT AUDITORS' REPORT

To the members of La FĂŠdĂŠration des Caisses Populaires Acadiennes LimitĂŠe, We have audited the accompanying combined financial statements of the Mouvement des caisses populaires acadiennes, which comprise the statement of financial position as at December 31, 2013 and the statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's responsibility for the combined financial statements Management is responsible for the preparation and fair presentation of these combined financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines necessary to enable the preparation of combined financial statements that are free from material misstatement, whether due to fraud or error. Auditors' responsibility Our responsibiliy is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the combined financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Mouvement des caisses populaires acadiennes as at December 31, 2013 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Dieppe, New Brunswick April 15, 2014

Chartered Accountants

Annual Report 2013

Mouvement des caisses populaires acadiennes Combined Statement of Financial Position As at December 31 (in thousands of dollars)

December 31, 2013 Note

December 31, 2012 Restated (note 5)

January 1st, 2012 Restated (note 5)

ASSETS $

Cash Securities

Loans Personal Business

Allowance for credit losses Other assets Accrued interest, receivables and other assets Capital assets Intangible assets Reinsurance assets

9 10 11 12

Total assets

74,430

101,197

104,099

498,341

490,633

485,593

1,823,943 879,839

1,741,093 803,951

1,665,001 737,969

2,703,782 (25,663)

2,545,044 (24,648)

2,402,970 (26,837)

2,678,119

2,520,396

2,376,133

55,333 37,951 2,247 5,694

56,051 36,941 2,142 6,845

74,191 36,397 1,799 7,385

101,225

101,979

119,772

$ 3,352,115

$ 3,214,205

$ 3,085,597

$ 1,145,903 1,596,565

$ 1,121,311 1,546,286

$ 1,089,907 1,483,813

2,742,468

2,667,597

2,573,720

62,997 90,327 114,122 8,256

76,104 33,812 139,129 595

71,256 5,428 147,640 4,785

275,702

249,640

229,109

9,460 4,677 7,541 312,267

9,538 4,765 7,749 274,916

9,664 4,230 16,655 252,219

333,945

296,968

282,768

$ 3,352,115

$ 3,214,205

$ 3,085,597

LIABILITIES AND EQUITY Liabilities Deposits Payable on demand Payable on a fixed date Other liabilities Actuarial liabilities Borrowings Accrued interest, payables and other liabilities Deferred taxes

12 13 14 21

Equity Share capital Accumulated other comprehensive income Distributable surplus earnings General reserve

16 17 24

Total liabilities and equity

The accompanying notes are an integral part of the combined financial statements. On behalf of the board of directors of La Fédération des Caisses Populaires Acadiennes Limitée,

Pierre-Marcel Desjardins Chairman of the board

Guy J. Richard Vice chair of the board -3-

27 Mouvement des caisses populaires acadiennes Combined Statement of Income

For the year ended December 31 (in thousands of dollars) 2013

Note

2012 Restated (notes 3 and 5)

INCOME $

Financial income Financial expense

128,280 37,338

149,021 40,729

90,942 3,011

108,292 1,020

Net financial income after provision for credit losses

87,931

107,272

Other income Mainly related to the administration of deposits Related to the administration of other services Net insurance and annuity premiums

20,019 19,197 16,071

20,504 15,730 15,745

55,287

51,979

73,447 47,921 (6,642)

73,737 46,899 10,399

Net financial income Provision for credit losses

Other expenses Salaries and fringe benefits General and other expenses Net insurance and annuity benefits

114,726 Surplus earnings before other items Others items

Surplus earnings before income taxes Income taxes

Surplus earnings for the year before member dividends Member dividends Income taxes recovered on member dividends Surplus earnings for the year

22 21 $

131,035

28,492

28,216

(10,202)

(11,266)

18,290

16,950

7,013

3,734

11,277

13,216

(1,552) 392

(1,112) 278

10,117

The accompanying notes are an integral part of the combined financial statements.

12,382

Annual Report 2013

Mouvement des caisses populaires acadiennes Combined Statement of Comprehensive Income For the year ended December 31 (in thousands of dollars)

2013

Note

2012 Restated (notes 3 and 5)

COMPREHENSIVE INCOME Surplus earnings for the year

10,117

12,382

Other comprehensive income Item that will not be reclassified to the statement of income Change in the accrued employee benefit liability Change during the year Income taxes

33,146 (5,994)

1,997 (461)

Total of the item that will not be reclassified to the statement of income

27,152

1,536

Items to be reclassified to the statement of income Unrealized changes in fair value on available-for-sale instruments Change during the year Income taxes Reclassified to income Realized losses (gains) on available-for-sale instruments Income taxes

Total of the items to be reclassified to the statement of income

644 (174)

(65)

470

(31) 8

85 (20)

(23)

(88)

535

27,064

Total other comprehensive income, net of income taxes Comprehensive income

120 (185)

37,181

The accompanying notes are an integral part of the combined financial statements.

2,071 $

14,453

29 Mouvement des caisses populaires acadiennes Combined Statement of Changes in Equity For the year ended December 31 (in thousands of dollars)

2013 Accumulated other Share comprehensive capital income Beginning balance

Distribution by the members Interest on capitalization shares General reserve Balance after distribution Surplus earnings for the year Other comprehensive income Comprehensive income Net transfer to the general reserve (note 23) Net change in share capital Other Ending balance

9,538

7,749

General reserve $

(14) (7,735)

274,916

Total equity $

7,735

296,968

9,538

4,765

282,651

296,954

10,117

(14) -

(88)

27,152

27,064

(88)

10,117

27,152

37,181

(2,576)

2,576

(78) $

4,765

Distributable surplus earnings

9,460

4,677

7,541

(112) $

312,267

The accompanying notes are an integral part of the combined financial statements.

(78) (112) $

333,945

Annual Report 2013

Mouvement des caisses populaires acadiennes Combined Statement of Changes in Equity (continued) For the year ended December 31 (in thousands of dollars)

2012

Beginning balance

Accumulated other Share comprehensive capital income

Distributable surplus earnings

9,664

16,655

9,664

4,230

268,829

282,723

12,382

535

1,536

2,071

535

12,382

1,536

14,453

(4,633)

4,633

4,765

16,610

282,768

9,538

(45) (16,610)

252,219

Total equity

(126) $

4,230

General reserve

7,749

(45) -

(82) $

274,916

The accompanying notes are an integral part of the combined financial statements.

(126) (82) $

296,968

31 Mouvement des caisses populaires acadiennes Combined Statement of Cash Flows

For the year ended December 31 (in thousands of dollars) 2013

2012 Restated (notes 3 and 5)

OPERATING ACTIVITIES Surplus earnings before income taxes Adjustments for determining cash flows Depreciation of capital and intangible assets Amortization of premiums and discounts on securities Net change in actuarial liabilities Change in investment contract liabilities Provision for credit losses Other items at fair value Change in accrued employee benefit liability Change in reinsurance assets Net change in interest receivable and payable Net change in loans Net change in deposits Other Income taxes paid during the year Member dividends paid

18,290

16,950

3,682 (1,481) (13,107) (144) 3,011 10,202 (2,507) 1,151 (1,378) (160,734) 74,871 2,646 (6,972) (964)

3,924 (1,370) 4,848 (52) 1,020 11,266 497 540 738 (145,283) 93,877 (3,393) (9,855) (1,457)

(73,434)

(27,750)

56,515 (78)

28,384 (126)

56,437

28,258

(4,973) (4,797)

1,401 (4,811)

(9,770)

(3,410)

Decrease in cash

(26,767)

(2,902)

Cash, beginning of year

101,197

Cash flows from operating activities

FINANCING ACTIVITIES Net change in borrowings Net change in share capital Cash flows from financing activities

INVESTING ACTIVITIES Net change in securities Net acquisitions of capital and intangible assets Cash flows from investing activities

Cash, end of year

104,099

74,430

101,197

129,310 39,746 1,182

149,041 40,011 698

Other cash flow information relating to operating activities: Interest received during the year Interest paid during the year Dividends received during the year

The accompanying notes are an integral part of the combined financial statements.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) The Mouvement des caisses populaires acadiennes (Mouvement) includes the Caisses populaires, the Office de Stabilisation de la Fédération des Caisses populaires acadiennes limitée (Office de stabilisation), La Fédération des Caisses Populaires Acadiennes Limitée and its subsidiaries (Fédération), the Société de portefeuille Acadie Vie Inc. and its subsidiaries Acadia Life and AVie (Acadia Life) and the Commercial Loan Fund of the Caisses Populaires Acadiennes (Commercial Loan Fund). The Mouvement, a cooperative financial group, is a first-line agent in the social and economic development of its environment. The headquarters of the Mouvement are located at 295 St-Pierre Boulevard West, Caraquet, New Brunswick, Canada. These combined financial statements and notes were approved by the board of directors on April 15, 2014. Note 1.

Basis of presentation International Financial Reporting Standards These combined financial statements have been prepared by management of the Mouvement in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). These combined financial statements have been prepared on the basis of historical cost, except for the revaluation of certain financial assets and liabilities at fair value, including securities at fair value through profit or loss, available-for-sale securities and derivative financial instruments. Statement of compliance The combined financial statements of the Mouvement as at December 31, 2013 have been prepared in accordance with IFRS.

Note 2.

Significant accounting policies Basis of presentation of the combined financial statements As an integrated services group, the Mouvement is a complete economic entity. The combined financial statements of the Mouvement have been established in order to present the financial position, financial performance and cash flows of this economic entity. As a group, the Caisses populaires own the entire share capital of the Fédération, which is responsible for setting the strategic directions and for coordinating the activities of the Mouvement. The role of the Fédération is also to protect the interests of the members of the Mouvement and to promote the development of the group. By the very nature of the Caisses populaires and the Fédération as financial services cooperatives, these combined financial statements differ from the consolidated financial statements of a group with a traditional organizational structure. Thus, the financial statements of the Mouvement are a combination of the annual accounts of the Caisses populaires and the other entities of the group. The share capital represents the total share capital issued by the Caisses populaires to their members. Scope of consolidation The combined financial statements of the Mouvement are derived from the financial statements of the Caisses populaires, the Office de stabilisation and the Commercial Loan Fund, and the consolidated financial statements of the Fédération and Acadia Life. These last three are included as they are held directly by the Caisses populaires; the Office de stabilisation is included since the majority of its board of directors represents the Caisses populaires and the Fédération.

33 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued The financial statements of all entities of the Mouvement have been prepared for the same reference period using consistent accounting policies. All intercompany balances, income and expenses as well as gains and losses on internal transactions have been eliminated. Use of estimates and judgment The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities recorded and the presentation of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The actual results could differ from these estimates. The main items for which management had to make these estimates and assumptions include insurance contract liabilities and reinsurance assets, the allowance for credit losses, valuation of financial instruments at fair value, the provision for member dividends, income taxes and the evaluation of the accrued employee benefit liability. The estimates and assumptions with respect to these elements are presented below. Insurance contract liabilities and reinsurance assets Actuarial liabilities are determined using the Canadian Asset Liability Method (CALM), in accordance with accepted actuarial practice in Canada. Under the CALM, the calculation of the actuarial liabilities, net of the reinsurance assets, is based on an explicit projection of cash flows using the current best estimate assumptions for each cash flow component and each significant contingency. Investment returns are based on projected investment income using the current asset portfolio and projected reinvestment strategies. Each non-economic assumption is adjusted by a margin for adverse deviation. With respect to investment returns, the provision for adverse deviation is established by using yield scenarios. These scenarios are determined using a deterministic model that includes testing prescribed by Canadian actuarial standards. The period used for the projection is the policy lifetime for most insurance contracts. For certain types of contracts, a shorter projection period may be used. However, this period is limited to the term of the liability over which the Mouvement is exposed to significant risk without the ability to adjust policy premiums or charges related to the contract. Additional information is presented in note 12. Allowance for credit losses The Mouvement establishes separately, loan by loan, individual allowances on each loan that is considered impaired. To determine the estimated recoverable amount, the Mouvement discounts the future expected cash flows at the interest rate inherent to the loan. When the amounts and timing of future cash flows cannot be estimated with reasonable reliability, the estimated recoverable amount is determined using the fair value of the collateral underlying the loan. The model for determining the collective allowance takes into account certain factors, including the probabilities of default and rates of historical losses. Model results are then examined, taking into account the level of the existing collective allowance as well as management's evaluation of the quality of the portfolio, economic conditions and credit market conditions. Given the significance of the amounts and their inherent uncertainty, a change in the estimates and judgments could materially affect the amounts of the allowances.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued Valuation of financial instruments at fair value The evaluation of the fair value of financial instruments is based on a fair value hierarchy depending on whether the inputs used for valuation are observable or not. Note 26 presents the distribution of the fair value measurements between the three levels of the hierarchy. The fair value is based on estimates using present value and other valuation methods, which are strongly influenced by the assumptions used about the amount and timing of estimated future cash flows and about discount rates that reflect varying degrees of risk, including liquidity risk and credit risk. Given the role of judgment in the application of a large number of acceptable valuation techniques and estimates for the calculation of fair values, they are not necessarily comparable among financial institutions. The fair value reflects market conditions at a given date and, therefore, may not be representative of future fair values. It also cannot be interpreted as a realizable amount in the event of immediate settlement. Provision for member dividends The provision for member dividends is estimated by the management of the Caisses populaires based on the volume of activity of each member. The payment of the dividend is subject to member approval. Income taxes Determining the provision for income taxes involves an element of judgment. The calculation of income taxes on surplus earnings is based on the tax treatment of the transactions recorded in the combined financial statements. The Mouvement recognizes a liability for anticipated tax adjustments based on an estimate of the additional taxes payable. When the amount payable is different from that originally recorded, the difference affects the income taxes expense, and the provision for income taxes could increase or decrease in subsequent years. Deferred tax assets and liabilities reflect management's estimate of the value of loss carryforwards and other temporary differences. The valuation of deferred tax assets is based on assumptions about the results of future periods, about the timing of the reversal of temporary differences and about the tax rates in effect at the time of reversal, which may change depending on government fiscal policies. In addition, management must assess whether it is more likely than not that deferred tax assets will be realized before they expire and, according to all available evidence, whether it is necessary to record an allowance for impairment of some or all of the deferred tax assets. Moreover, in determining the income taxes on surplus earnings recorded on the combined statement of income, management interprets the tax legislation in various jurisdictions. Using other assumptions or interpretations could lead to significantly different provisions for income taxes. Evaluation of the accrued employee benefit liability The present value of the accrued defined benefit pension plans liability is calculated on an actuarial basis using a number of assumptions. Any change in these assumptions would have an impact on the carrying amount of the accrued employee benefit liability. The assumptions used and additional information can be found in note 15. Financial instruments All financial assets must, at the time of initial recognition, be recorded at fair value and classified as at fair value through profit or loss, as available-for-sale, as held-to-maturity or as loans and receivables, based on the characteristics of the instrument and the purpose for which they were acquired. Financial liabilities must be measured at amortized cost or classified as at fair value through profit or loss. Purchases and sales of financial assets are recorded using the trade date.

35 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued Financial instruments at fair value through profit or loss are measured at fair value and any change in fair value is recorded in profit or loss in the year in which these changes occur. Financial instruments can be classified in this category either because they are classified as held for trading or because, upon initial recognition, they were designated as at fair value through profit or loss. This designation may be made if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases or if a group of financial assets, financial liabilities or both is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy and information about the group is provided internally on that basis to key management personnel. With the exception of the derivative financial instruments that are classified as held for trading, the financial instruments at fair value through profit or loss are classified in this category through initial designation. Interest income earned and dividends received are included in financial income using the accrual method. Amortization of premiums and discounts is included in unrealized gains and losses, using the accrual method. Financial instruments classified as available-for-sale (AFS) are measured at fair value and any unrealized gains or losses are recorded in other comprehensive income. AFS financial instruments are non-derivative financial assets that are designated as AFS or that are not classified as loans and receivables, held-to-maturity financial instruments or as financial assets at fair value through profit or loss. Interest revenue earned, amortization of premiums and discounts and dividends received are included in financial income, using the accrual method. When a decline in the fair value of a security is significant or prolonged, the resulting loss is immediately recognized in profit or loss. Financial assets classified as held-to-maturity (HTM), loans and receivables and other financial liabilities are carried at amortized cost using the effective interest method. Interest or dividends arising from these financial instruments are included in financial income and expense. Transaction costs relating to the acquisition of AFS investments are capitalized and then amortized over the term of the investment using the effective interest method. Those arising from the disposition of investments are deducted from the proceeds of disposition. Investment management fees are charged to income as they are incurred. Transaction costs attributable to financial instruments classified as loans and receivables are capitalized and amortized using the effective interest method. Derivative instruments The Caisses populaires and the FĂŠdĂŠration use swaps, options and foreign exchange contracts to manage the risks inherent in their financial assets and liabilities. As provided for by IFRS, the Caisses populaires and the FĂŠdĂŠration have elected not to adopt hedge accounting for these derivatives in light of the complexity of the requirements for documenting hedging relationships. These instruments, including the embedded derivatives that have to be accounted for separately, are classified as held for trading and are recognized at their fair value. They are included on the statement of financial position as other assets or liabilities and any change in fair value is recognized on the statement of income with the other items. Income or expenses with respect to these instruments are recognized in income as an adjustment to financial income or expense. Cash Cash is classified as loans and receivables and includes cash on hand and current accounts.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued Securities Securities issued by Canada, other public sector organizations, and financial institutions and other corporations include money market securities and bonds. Money market securities held by the Fédération and Acadia Life are classified as at fair value through profit or loss. Money market securities held by the Office de stabilisation are classified as available-for-sale. The bonds held by Acadia Life and in the Fédération’s liquidity fund are classified as at fair value through profit or loss. The bonds held in the Fédération’s general fund as well as those held by the Office de stabilisation are classified as available-for-sale. The asset-backed long-term notes are classified as at fair value through profit or loss. The equities and the investment funds are classified as available-for-sale. The other investments include mainly deposit certificates, which are classified as loans and receivables. Investment income is recorded using the accrual basis of accounting. Loans The loans are classified as loans and receivables. They are recorded at cost using the effective interest rate method, net of the allowance for credit losses. The allowance for credit losses on impaired loans is charged immediately to income. Other assets With the exception of the derivative instruments, the financial assets included in other assets are classified as loans and receivables. Deposits The deposits are classified as other financial liabilities and are carried at amortized cost using the effective interest rate method. Deposits payable on demand, interest-bearing or not, are usually deposits held in chequing accounts and savings accounts. Deposits payable on a fixed date are interest-bearing deposits usually held in fixed-term deposit accounts, guaranteed investment certificates or other similar instruments, with terms generally varying from one day to five years and maturing on a predetermined date. Other liabilities Borrowings and financial liabilities included in other liabilities, with the exception of the derivative instruments, are classified as other financial liabilities and are carried at amortized cost using the effective interest rate method.

- 13 -

37 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued Loans In general, there is objective evidence of impairment when: a) there is good reason to believe that a portion of the principal or interest might not be recovered, b) the interest or the principal is contractually 90 days overdue, unless the loan is fully secured or is in the process of being collected or c) the loan is more than 180 days in arrears. When loans are classified as impaired, previously accrued but uncollected interest is capitalized to the loan. Loans cease to be considered impaired when principal and interest payments are up to date and there is no longer any doubt as to the recovery of the loan. Collateral is obtained if deemed necessary for a member's loan facility, after an assessment of their creditworthiness. Collateral usually takes the form of an asset such as cash, government securities, stocks, receivables, inventory or capital assets. Assets acquired by way of settlement of a loan are initially measured at fair value. The difference between the carrying amount of the loan prior to foreclosure and the amount at which the foreclosed assets are initially measured is recognized in the allowance for credit losses. Any future change in their fair value, but not in excess of the cumulative losses recognized subsequent to the foreclosure date, is recognized on the statement of income. Allowance for credit losses The allowance for credit losses reflects management’s best estimate with regard to potential losses related to the loan portfolio and its assessment of economic conditions. Any material change could result in an adjustment of the currently recognized amount of the allowance for credit losses. The allowance is increased by the provision for credit losses posted to the statement of income and decreased by write-offs and recoveries on previously provisioned loans. The allowance for credit losses is made up of individual and collective allowances. Credit risk is assessed regularly for the loan portfolio and individual allowances are determined on a loan by loan basis for all loans considered impaired. In the case of loans that are not considered individually impaired, a collective allowance is calculated based on the loan portfolio and past performance in terms of losses. The model for determining the collective allowance takes into account a number of factors including the probability of default (frequency of losses), the amount of losses when default occurs (significance of losses) and the gross amounts at risk of default. The evaluation of the collective allowance also depends on management's assessment of current trends in the credit quality of the relevant sectors, the impact of changes in its credit policies as well as economic conditions. Loans are written off when all possible attempts to restructure or collect them have been made and it is unlikely that other sums can be recovered. Impaired loans are valued by discounting projected future cash flows at the interest rate inherent to the loan. The difference between this valuation and the loan balance becomes an allowance. Any change in the allowance for credit losses due to the passing of time is recognized in financial income. Any change in the allowance for loan losses attributable to a revision of projected receipts is recorded under “Provision for credit losses’’ on the statement of income. The allowance for credit losses also includes a collective allowance for losses on student loans. No allowance for credit losses is accrued on federal student loans while students are still in school as repayment of these loans only begins six months after studies are completed. Evaluation of the allowance for losses on student loans on a loan by loan basis is not possible because it is difficult to establish students’ repayment capabilities. Therefore, a collective allowance is accrued. Management uses a method based on the past history of losses on student loans to establish the amount of the allowance.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued Capital assets Land is recorded at cost. Buildings and equipment and other are recorded at cost less accumulated depreciation and are depreciated over their estimated useful life using the straightline method. Gains and losses from disposal are included in income in the year in which they occur and are included in other income. The capital assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When the carrying value exceeds the recoverable amount, the carrying value is adjusted and an impairment loss is recognized in profit or loss.

Useful life Buildings Equipment and other

5 to 60 years 1 to 25 years

Intangible assets Intangible assets include software, acquired or internally generated, and are recorded at cost. They are depreciated over their useful life using the straight-line method over one year to 15 years. The intangible assets are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When the carrying value exceeds the recoverable amount, the carrying value is adjusted and an impairment loss is recognized in profit or loss. Inventory Inventories are valued at the lower of cost and net realizable value. Cost is determined using the first in, first out method. Reinsurance assets In the normal course of business, the Mouvement uses reinsurance to limit its exposure to risk. The reinsurance assets represent amounts owed to the Mouvement by reinsurance companies for ceded insurance contract liabilities. These amounts are calculated in a manner similar to the actuarial liabilities for future benefits under insurance contracts, in accordance with the reinsurance agreements. The reinsurance assets are tested for impairment annually. When there is objective evidence that a reinsurance asset is impaired, the carrying value of that asset is written down to its recoverable value and the resulting loss is recognized in profit or loss. Insurance and investment contract liabilities i.

Classification of contracts

Insurance contracts are contracts that transfer a significant insurance risk at the time of issue of the contract. Insurance risk is transferred when the Mouvement agrees to compensate the policyholder if an uncertain future event specified in the contract adversely affects the policyholder. Insurance contracts may also include the transfer of a non significant financial risk. Contracts issued by the Mouvement that transfer a significant insurance risk are classified as insurance contracts in accordance with IFRS 4 "Insurance contracts". Contracts that do not meet the definition of an insurance contract in accordance with IFRS are classified as investment or service contracts, accordingly. Investment contracts are contracts that involve financial risk without significant insurance risk.

39 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued When a contract has been classified as an insurance contract, it remains an insurance contract for the rest of its term, even if the insurance risk decreases significantly during this period, until its expiry or the expiration of all rights and obligations. However, an investment contract may be reclassified as an insurance policy after its issue if the insurance risk becomes significant. ii. Insurance contract liabilities Insurance contract liabilities consist of actuarial liabilities and liabilities for claims yet to be settled and not yet made. Actuarial liabilities represent the amounts which, together with estimated future premiums and net investment income, will allow the Mouvement to meet all of its obligations regarding estimated future benefits, taxes other than income taxes and related future expenses. The appointed actuary of the Mouvement is required to determine the actuarial liabilities needed to meet its future commitments. Actuarial liabilities are determined using the Canadian Asset Liability Method (CALM), in accordance with Canadian accepted actuarial practice. The reinsurers' share of the actuarial liabilities is recognized as an asset on the statement of financial position as "Reinsurance assets". iii. Liability sufficiency test The Mouvement meets the minimum requirements of the liability sufficiency test given that it takes into consideration, when determining the actuarial liabilities, current estimates of all contractual and related cash flows, such as the costs of processing claims and cash flows resulting from embedded options and guarantees. Moreover, if the liability is not sufficient, the entire deficiency is recognized in income. iv. Investment contract liabilities The investment contracts of the Mouvement comprise mainly annuity certain contracts. Amounts received as premiums are initially recognized on the statement of financial position as deposits. Subsequently, deposits and withdrawals are recorded directly as an adjustment of the liability on the statement of financial position. v. Reinsurance The Mouvement uses reinsurance treaties for contracts with coverage in excess of certain maximum amounts that vary based on the nature of the activities. In addition, it purchases additional reinsurance protection against large-scale catastrophic events. Liabilities for claims yet to be settled and not yet made These liabilities consist of life insurance claims known at year end that have not yet been settled as well as an estimate of the insurance claims where the death has occurred but the claim has not yet been received by the Mouvement.

- 16 -

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 2.

Significant accounting policies - continued Currency translation Monetary assets and liabilities in foreign currency are converted at the exchange rate at year end. Other assets and liabilities are converted at the original exchange rate. Statement of income items are converted at the average exchange rate for the year. Exchange gains and losses are included in current profit or loss. Member dividends Member dividends are a distribution of surplus earnings for the year based on the volume of activity of each member. As such, they are recognized on the statement of income. Income taxes The Mouvement uses the tax asset and liability method of accounting for income taxes. Under this method, income taxes on earnings include both current taxes and deferred taxes. Current taxes represent the taxes on the year's taxable income. Current tax assets and liabilities for the current and prior years are measured at the amount expected to be paid to or recovered from the taxation authorities, using the tax rates that were enacted or substantively enacted at the reporting date. Deferred taxes are recognized based on the expected tax consequences of the differences between the carrying value of items on the statement of financial position and their tax basis, using the tax rates that are enacted or substantively enacted for the years in which it is expected that the differences will reverse. A deferred tax asset is recognized to the extent that future realization of the tax benefit is more likely than not. Pension plans Until December 31, 2013, the Mouvement participated in the Mouvement des caisses populaires acadiennes employee pension plan, as part of a multi-employer defined benefit plan that guaranteed the payment of pension benefits. Pension plan benefits were based on the number of years of plan participation and the employee's salary. The Mouvement accounted for this plan as a defined benefit plan. The cost of the benefits was determined using the Projected Unit Credit Method. The accrued employee benefit liability was measured using an actuarial valuation in accordance with IFRS. Actuarial gains and losses were recognized in other comprehensive income in the period in which they arose. These gains and losses were also recognized immediately in equity and were not reclassified to profit or loss in a subsequent period. At year end, the pension plan was converted to a shared risk plan. The impact of this conversion is described in note 15. The Mouvement also participates in two other defined benefit pension plans. Revenue recognition Financial income is recognized using the accrual basis of accounting. Revenues related to the administration of deposits consist primarily of fees relating to payment orders issued without sufficient funds and of service fees. These revenues are recognized when the transaction occurs in accordance with the prevailing fee agreement with the member. Gross premiums for all types of insurance contracts are recognized as revenue when due and the amount can be determined objectively. Net premiums represent gross premiums, net of the portion ceded to reinsurers. As soon as these premiums are recognized, the related actuarial liabilities are calculated so that benefits and expenses of these products are recorded. The other revenues are recognized when a good is transferred or a service rendered and the transaction is measurable.

41 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 3.

Changes in accounting policies IFRS 13 "Fair value measurement" On January 1st, 2013, the Mouvement adopted IFRS 13 ''Fair value measurement''. This standard defines fair value and sets out a single framework for measuring the fair value of all transactions and balances for which IFRS require or permit such measurement. It improves the consistency between the various fair value concepts defined in various existing IFRS. In addition, it carries forward disclosure requirements concerning the fair value of financial instruments and expands their scope to all items measured at fair value. The retrospective application of this new standard had no impact on the Mouvementâ&#x20AC;&#x2122;s income or financial position. The new IFRS 13 disclosure requirements are presented in note 26. IAS 1 "Presentation of financial statements" On January 1st, 2013, the Mouvement adopted the amendments to IAS 1 ''Presentation of financial statements''. These amendments, which relate to the presentation of other comprehensive income, require the presentation by nature of items of other comprehensive income by distinguishing those that will be reclassified to the statement of income in a subsequent period from those that will not. The retrospective application of these amendments resulted in changes to the presentation of the statement of comprehensive income but had no impact on the Mouvementâ&#x20AC;&#x2122;s income or financial position. IAS 19 "Employee benefits" On January 1st, 2013, the Mouvement adopted the amendments to IAS 19 ''Employee benefits'', which change the accounting rules related to employee benefits, most notably those related to defined benefit plans. This standard now requires that all actuarial gains and losses be recognized immediately in other comprehensive income; that the difference between the actual return on plan assets and the interest income included in interest expense be recognized in other comprehensive income; that past service costs be directly recognized in the statement of income when they occur; and that employee contributions used to pay the deficit, which are required and set out in the terms of the defined benefit plans, reduce the liability recognized on the statement of financial position. The requirements of this amended standard have been applied retrospectively. Accordingly, the difference between the actual return on plan assets and the interest income included in interest expense in the amount of $2.6 million has been reclassified in the comparative figures from the "Salary and fringe benefits" expense on the statement of income to the "Change in the accrued employee benefit liability" on the statement of comprehensive income. The new IAS 19 disclosure requirements are presented in note 15.

Note 4.

Future accounting changes IFRS 9 "Financial instruments" The IASB published in November 2009 and amended in October 2010 IFRS 9 "Financial instruments" as part of its project to replace IAS 39 "Financial instruments: Recognition and measurement". This standard defines a new way of classifying and measuring financial assets and liabilities. Financial assets will be classified in three categories (amortized cost, fair value through profit or loss and fair value through equity), on the basis of the entity's financial asset management model and the characteristics of their contractual cash flows. Financial liabilities will be classified in the same categories as those defined in IAS 39, but measurement of financial liabilities under the fair value option has been modified to consider the entity's own credit risk.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 4.

Future accounting changes - continued The Mouvement has not yet assessed the impact of the adoption of IFRS 9. Since the impact of the adoption depends on the financial instruments held by the Mouvement on the date of adoption, the effects cannot be quantified. A mandatory effective date for IFRS 9 has not yet been set. Early adoption is permitted.

Note 5.

Prior period adjustments During the year, the Mouvement realized that the stabilization fund maintained by the Office de stabilisation should result in a deferred tax liability. A taxable temporary difference does not arise from this stabilization fund in the financial statements of the Office de stabilisation, but does in the Mouvement's combined financial statements. The statement of financial position as at January 1st, 2012 and the December 31, 2012 financial statements have been restated for this adjustment. A deferred tax liability has been recorded in the amount of $19.9 million at January 1st, 2012 and $20.7 million at December 31, 2012, the income tax expense has been increased by $0.8 million for the year ended December 31, 2012 and equity has been decreased by $19.9 million at January 1st, 2012 and $20.7 million at December 31, 2012. The Mouvement also realized that the collective allowance on certains loans had not been recorded. The statement of financial position as at January 1st, 2012 and the December 31, 2012 financial statements have been restated for this adjustment. The allowance for credit losses has been increased by $1.0 million at January 1st and December 31, 2012, a deferred tax asset has been recorded for $0.2 million at January 1st and December 31, 2012 and equity has been decreased by $0.8 million at January 1st and December 31, 2012. The impact on the surplus earnings for the year ended December 31, 2012 was insignificant.

Note 6.

Securities

2013

2012

Securities by issuer: Canada Other public sector organizations Financial institutions and other corporations Asset-backed long-term notes (note 7) Equities Investment funds and other

Note 7.

105,764 207,428 88,188 31,155 53,879 11,927

104,382 197,424 97,545 29,088 52,195 9,999

498,341

490,633

Asset-backed long-term notes At year end, the Mouvement held investments in asset-backed long-term notes (ABLN) with an initial book value of $33.6 million (2012 - $35.2 million). The value of these investments has been estimated at $31.2 million (2012 - $29.1 million) and a gain of $3.2 million (2012 $6.1 million) has been recognized in income.

43 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 8.

Loans Loans by category of borrowers

Personal Residential mortgages Consumer and other Business

2013

2012

$ 1,330,824 493,119 879,839

$ 1,259,344 481,749 803,951

$ 2,703,782

$ 2,545,044

Credit quality of loans

2013 Personal Loans, neither past due nor impaired, gross Loans, past due but not impaired, gross Gross impaired loans Total gross loans Individual allowances Collective allowance Total net loans

$ 1,786,501 33,467 3,975

1,823,943 (1,733) $ 1,822,210

Business

Total

847,380 9,557 22,902

$ 2,633,881 43,024 26,877

879,839 (7,493) $

2,703,782 (9,226) (16,437)

872,346

$ 2,678,119

Business

Total

781,511 7,944 14,496

$ 2,486,275 39,653 19,116

2012 Personal Loans, neither past due nor impaired, gross Loans, past due but not impaired, gross Gross impaired loans Total gross loans Individual allowances Collective allowance Total net loans

$ 1,704,764 31,709 4,620

1,741,093 (1,841) $ 1,739,252

803,951 (4,507) $

799,444

2,545,044 (6,348) (18,300) $ 2,520,396

Past due loans are loans on which the counterparty has failed to make a payment when contractually due.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 8.

Loans - continued Loans past due but not impaired

2013 From 1 to 29 days Personal Business

From 30 to 59 days

From 60 to 90 days 89 days and greater

Total

$ 21,741 8,248

4,479 622

1,947 644

5,300 43

$ 33,467 9,557

$ 29,989

5,101

2,591

5,343

$ 43,024

90 days and greater

Total

2012 From 1 to 29 days Personal Business

From 30 to 59 days

From 60 to 89 days

$ 22,743 6,899

5,085 649

1,742 396

2,139 -

$ 31,709 7,944

$ 29,642

5,734

2,138

2,139

$ 39,653

In addition, there is a total of $0.7 million (2012 - $1.1 million) in student loans in an interestexempt period, which implies an element of delinquency since the students cannot meet their commitments. Impaired loans and individual allowances

2013

Gross Personal Business

Individual allowances

Net

3,975 22,902

(1,733) (7,493)

2,242 15,409

26,877

(9,226)

17,651

45 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 8.

Loans - continued

2012 Individual allowances

Gross Personal Business

Net

4,620 14,496

(1,841) (4,507)

2,779 9,989

19,116

(6,348)

12,768

Change in the allowance for credit losses

Individual allowances, beginning of year Provision for credit losses Write-offs and other Individual allowances, end of year

Note 9.

Personal

Business

1,841 1,184 (1,292)

4,507 3,829 (843)

1,733

7,493

2013

2012

Total

6,348 5,013 (2,135)

7,932 1,890 (3,474)

9,226

6,348

Collective allowance, beginning of year Provision for credit losses Other

18,300 (2,002) 139

18,905 (870) 265

Collective allowance, end of year

16,437

18,300

$ 25,663

$ 24,648

Accrued interest, receivables and other assets

2013 Accrued interest Derivative instruments Prepaid expenses Income taxes recoverable Inventory Receivables Foreclosed assets Other

2012

14,758 23,133 6,137 2,043 239 6,145 1,551 1,327

15,788 26,056 5,483 227 2,127 1,715 4,655

55,333

56,051

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 10.

Capital assets

Land

Buildings

Equipment and other

Total

Cost: December 31, 2011 Acquisitions Dispositions and write-offs Assets classified as held for sale

December 31, 2012 Acquisitions Dispositions and write-offs Assets classified as held for sale December 31, 2013

8,235 245 (119)

49,196 1,608 (1,404)

35,457 3,283 (4,538)

92,888 5,136 (6,061)

(165)

(1,129)

(63)

(1,357)

8,196 (177)

48,271 2,337 (1,056)

34,139 4,069 (3,278)

90,606 6,406 (4,511)

(156)

(1,252)

(342)

(1,750)

7,863

48,300

34,588

90,751

26,252 1,757 (1,015)

30,239 1,741 (4,480)

56,491 3,498 (5,495)

Accumulated depreciation: December 31, 2011 Depreciation Dispositions and write-offs Assets classified as held for sale December 31, 2012 Depreciation Dispositions and write-offs Assets classified as held for sale December 31, 2013

(769)

(60)

(829)

26,225 1,458 (1,056)

27,440 1,770 (1,443)

53,665 3,228 (2,499)

(1,252)

(342)

(1,594)

25,375

27,425

52,800

7,863 8,196

22,925 22,046

7,163 6,699

37,951 36,941

Net book value: December 31, 2013 December 31, 2012

The buildings include an amount of $1.7 million (2012 - $0 million) for a building under construction.

- 23 -

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 11.

Intangible assets

Acquired software

Internally generated software

Total

Cost: December 31, 2011 Acquisitions Dispositions and write-offs

December 31, 2012 Acquisitions December 31, 2013

2,645 740 (591)

2,794 552

1,617 29 -

1,646 7

4,262 769 (591) 4,440 559

3,346

1,653

4,999

2,313 245 (591)

150 181 -

2,463 426 (591)

Accumulated depreciation: December 31, 2011 Depreciation Dispositions and write-offs December 31, 2012 Depreciation December 31, 2013

1,967 273

331 181

2,298 454

2,240

512

2,752

1,106 827

1,141 1,315

2,247 2,142

Net book value: December 31, 2013 December 31, 2012

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 12.

Actuarial liabilities Nature Actuarial liabilities represent the estimated amount that, together with future premiums and net investment income, will be sufficient to cover future benefits and expenses related to existing insurance contracts. Actuarial liabilities are determined using the Canadian Asset Liability Method (CALM), in accordance with Canadian accepted actuarial practice, as set out by the Canadian Institute of Actuaries (CIA). The calculation of the actuarial liabilities necessarily includes the risk that actual results could deviate from the best estimates. This risk varies in proportion to the length of the estimation period and the possible instability of the factors used for calculating the liability. The appointed actuary is required to add to each assumption a margin to reflect the uncertainty of the determination of the best estimates and the risk of deteriorating underwriting experience. The CIA prescribes the range of acceptable margins. The appointed actuary must evaluate various scenarios using a cash flow projection method to establish a margin for adverse deviation that adequately covers the risks, including interest rate risk. This provision is recorded in future income when it is no longer required to cover estimation error. If the estimates of future conditions change during the term of a contract, the present value of the changes is recognized in profit or loss immediately. Composition The composition of the actuarial liabilities of the policies is as follows:

2013 Actuarial liabilities Personal life insurance Group and health insurance Annuities

Reinsurance assets

Net amount

56,281 2,460 4,256

4,882 812 -

51,399 1,648 4,256

62,997

5,694

57,303

2012 Actuarial liabilities Personal life insurance Group and health insurance Annuities

- 25 -

Reinsurance assets

Net amount

68,767 2,376 4,961

5,832 1,013 -

62,935 1,363 4,961

76,104

6,845

69,259

49 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 12.

Actuarial liabilities - continued The assets covering the actuarial liabilities include the following:

2013 Life insurance Bonds and short-term securities Reinsurance assets Other

Annuities

Total

53,018 5,694 29

4,254 2

57,272 5,694 31

58,741

4,256

62,997

2012 Life insurance Bonds and short-term securities Reinsurance assets Other

Annuities

Total

64,223 6,845 75

4,956 5

69,179 6,845 80

71,143

4,961

76,104

Actuarial assumptions The nature and method of determining the most significant assumptions used in the computation of the actuarial liabilities comply with industry practice. The actuarial assumptions deal with mortality and morbidity, policy lapse rates, investment income and operating expenses. Measurement uncertainty The basic assumptions used to determine the actuarial liabilities represent the best estimates of the range of possible outcomes. Actuaries must include a margin in each assumption to recognize the uncertainty surrounding the determination of best estimates, to take into account possible deterioration of underwriting experience and to provide the best assurance that the actuarial liabilities will be sufficient to pay future benefits. The CIA prescribes a range of allowable margins. Margins used are at least in the middle of the suggested range. Mortality The mortality assumption is based on a combination of the Mouvement's most recent experience and the industry's recent experience as published by the CIA. An increase (a decrease for annuities) of 1% of the most likely assumption would result in an increase of approximately $0.5 million in the actuarial liabilities (2012 - $0.5 million).

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 12.

Actuarial liabilities - continued Morbidity The morbidity assumption is based on the Mouvement's experience and industry results over long periods of time. The majority of products for which a morbidity assumption is significant consists of products whose premiums can be adjusted to reflect the Mouvement's actual experience. In the case of products on which morbidity has a significant effect, a deterioration of 1% of the most likely assumption would not have a significant impact on the actuarial liabilities. Investment income The calculation of the actuarial liabilities reflects the projected net investment income of the assets covering the liabilities. It also takes into account the income that the Mouvement expects to earn on reinvestment or to give up in order to finance the mismatch of cash flows. Interest rate and credit risk projections include some uncertainty. The Mouvement considers this uncertainty by including margins for credit risk in its projections of investment income and by evaluating future interest rate scenarios. Projected investment returns are reduced in anticipation of future credit losses on assets. One way to measure the interest rate risk associated with these assumptions is to determine the effect of an immediate increase or decrease of 1% of interest rates on the present value of net projected cash flows of the assets and liabilities related to the Mouvement's personal insurance activities. These changes in interest rates would impact the projected cash flows. An immediate increase of 1% in interest rates would result in a decrease in the fair value of the assets matched to the liabilities of approximately $13.0 million (2012 - $17.3 million) and a decrease in the corresponding liabilities of $19.2 million (2012 - $23.2 million), resulting in a net positive impact of $6.2 million (2012 - $5.9 million) on the year's income before taxes. An immediate decrease of 1% in interest rates would result in an increase in the fair value of the assets matched to the liabilities of approximately $17.4 million (2012 - $23.4 million) and an increase in the corresponding liabilities of $29.3 million (2012 - $36.3 million), resulting in a net negative impact of $11.9 million (2012 - $12.9 million) on the year's income before taxes. Expenses Amounts are included in the actuarial liabilities for the costs of administering the existing contracts, including the cost of premium collection, the adjudication and processing of benefits, periodic actuarial calculations, preparation and sending of statements, related indirect expenses, renewal commissions and general expenses. The projections of expenses consider estimates of variables such as inflation, productivity and indirect tax rates. An increase of 1% of the most likely assumption of policy management expenses would increase the actuarial liabilities by approximately $0.2 million (2012 - $0.2 million). Policy lapse or cancellation rates Policyholders can choose to allow their policy to lapse by ceasing to pay their premiums. The Mouvement bases its estimate of policy lapse rates on the past performance of each of its business lines. A business line is considered to be based on policy lapses if an increase in the policy lapse rate is accompanied by an increase in profitability. However, if a decrease in the policy lapse rate is accompanied by an increase in profitability, the business line is not considered to be based on policy lapses.

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 12.

Actuarial liabilities - continued Change in actuarial liabilities The following table shows the changes in actuarial liabilities over the last two fiscal years: 2013 Actuarial liabilities Balance, beginning of year

Normal increase (decrease) for: Existing contracts New contracts

76,104

2012

Reinsurance assets $

(10,391) (3,949)

62,997

(1,151) $

5,694

71,256

Reinsurance assets $

5,249 1,289

111

(13,107) Balance, end of year

(1,456) 194

1,233

Changes in assumptions

6,845

Actuarial liabilities

7,385 (1,150) 762

(1,690)

(152)

4,848

(540)

76,104

6,845

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 13.

Borrowings

2013 Former operating credit, repaid during the year.

2012

8,458

Operating credit, authorized amount of $100 million, bearing interest at the cost of funds plus 0.425%, renewable in 2014.

65,000

Operating credit, authorized amount of $25 million, bearing interest at the cost of funds plus 0.25%.

20,000

Loan from the Regional Development Corporation to the Office de stabilisation (of an original amount of $9.9 million), repayable periodically from 2023 to 2032. The interest revenue received on the stabilization preferred shares of La Caisse Populaire de Shippagan LimitĂŠe as well as the proceeds of any redemption of said shares must be applied against this loanâ&#x20AC;&#x2122;s principal. This loan is interest-free and was initially recorded at its fair value.

5,327

5,354

90,327

33,812

The projected loan principal repayments for the next five years are as follows: 2014 - $85,096 2015 96 2016 96 2017 96 2018 96 The Mouvement also has an operating credit with an authorized amount of $12.5 million, bearing interest at the prime rate plus 0.75% and renewable in 2014, and an operating credit of $25 million, without interest, for trading derivatives. At December 31, 2013 and 2012, these facilities were not used.

53 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 14.

Accrued interest, payables and other liabilities

2013 Accrued interest Derivative instruments Payables Income taxes payable Deferred revenue Promissory notes Accrued employee benefit liability (note 15) Liabilities for claims yet to be settled and not yet made Investment contract liabilities Other

23,680 3,576 39,758 2,355 272 40,818

2012 $

505 346 2,812 $

114,122

26,088 26,330 556 1,765 436 76,471 899 490 6,094

139,129

The promissory notes bear interest at rates ranging from 1.25% to 1.85% and have maturities ranging from July 2014 to July 2017. They are retractable by the holder before the maturity date. Note 15.

Accrued employee benefit liability The Mouvement participates in a funded pension plan through the Mouvement des caisses populaires acadiennes employee pension plan and two unfunded defined benefit pension plans. The Mouvement's employee pension plan is subject to the provisions of the Pension Benefits Act of New Brunswick, which requires the financing of solvency and funding deficits. The governance of this pension plan is the responsibility of the pension plan's pension committee. The Mouvement recognizes, in the combined statement of financial position, the liability related to these plans. At year end, the funded pension plan was converted to a shared risk pension plan. As a result of this conversion, the actuarial risk and the investment risk are no longer assumed by the employer; as a result, the pension plan will be recorded in the future as if it were a defined contribution pension plan. For the group of employees that are still active, this has had the effect of reducing the defined benefit plan obligation by $124.1 million at year end and of creating a gain of $21.6 million upon conversion. However, for those already retired, they continue to be part of the former plan until annuities are purchased by the pension plan from an insurance company, which will be done before the end of 2015. The impact of this conversion is reflected in the following tables. Under the new plan, the initial contribution rate for active participants is 6.75% of their salary up to the maximum pensionable earnings (MPE) and 9.00% of their salary that exceeds the MPE (9.50% and 12.50% for the employer). Principal actuarial assumptions The principal actuarial assumptions used in measuring the defined benefit obligation are as follows:

Discount rate Expected rate of salary increases Mortality

2013

2012

4.60% 3.50% CPMRPP2014 Public

4.00% 3.50% 90% of UP94 generational table

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 15.

Accrued employee benefit liability - continued Defined benefit pension plans The following tables show the liabilities and costs recognized in respect of the defined benefit pension plans for the Mouvement.

2013

2012

Change in the defined benefit plan obligation Defined benefit plan obligation at beginning of year Current service cost Interest expense Participants' contributions Benefits paid Actuarial losses (gains) arising from: The plans' experience Changes in financial assumptions Changes in demographic assumptions Past service costs Impact of conversion

210,237 6,693 8,498 3,422 (5,682)

61 (34,923) 8,097 (3) (124,071)

Defined benefit plan obligation at end of year

196,128 7,258 8,908 3,362 (6,970) (1,424) 2,975 -

72,329

210,237

138,068 5,706

122,705 5,660

Change in fair value of plan assets Fair value of plan assets at beginning of year Interest on plan assets Difference between the actual return on assets and interest income Administrative expenses Employers' contributions Employees' contribution Benefits paid Impact of conversion

8,308 (1,024) 12,425 3,422 (5,682) (102,452)

3,548 (687) 10,450 3,362 (6,970) -

Fair value of plan assets at end of year

58,771

138,068

Accounting deficit Minimum funding requirements under IFRIC 14

13,558 1,927

72,169 -

Accrued employee benefit liability

15,485

72,169

The defined benefit obligation is divided as follows between the funded plan and the unfunded plans:

2013 Funded plan Unfunded plans

2012

69,296 3,033

207,437 2,800

72,329

210,237

55 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 15.

Accrued employee benefit liability - continued Expense recognized for defined benefit plans The amounts recognized on the statement of income under "Salaries and fringe benefits" for the year ended December 31 are as follows:

2013

2012

Current service cost Interest expense Interest on plan assets Administrative expenses Past service cost Gain on conversion of the plan

6,693 8,498 (5,706) 1,024 (3) (21,619)

7,258 8,908 (5,660) 687 -

Expense recognized in profit or loss

(11,113)

11,193

The amounts recognized in other comprehensive income for the year ended December 31 are as follows:

2013 Gains for the year Minimum funding requirements under IFRIC 14 Change in accrued employee benefit liability recorded in other comprehensive income

2012

(35,073) 1,927

(1,997) -

(33,146)

(1,997)

Allocation of pension plan assets The fair value of the pension plan assets is detailed as follows:

Bonds Investment funds Other

2013 %

2012 %

43.50 55.81 0.69

41.51 56.98 1.51

100.00

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 15.

Accrued employee benefit liability - continued Sensitivity to the discount rate The following table shows the impact of a one percentage point change in the discount rate on the defined benefit plan obligation at December 31:

2013 Increase of 1% Decrease of 1%

(7,423) 9,042

2012 $

(35,440) 47,067

The above sensitivity analysis was developped using a method that extrapolates the impact on the defined benefit plan obligation of reasonable changes in the significant assumptions at the closing date. Expected contributions for 2014 The Mouvement expects to contribute $5.1 million to the shared risk pension plan in the next year. Other accrued employee benefit liability Due to the conversion to the shared risk pension plan, the Mouvement has committed to paying temporary contributions of $3 million per year for 10 years, or until the funding ratio reaches 140%. An amount of $21.5 million has been recognized as a liability for these payments. This liability has been determined through an analysis of probabilities that considers multiple scenarios and has been discounted using a yield curve that takes into consideration the expected schedule of payments. Since it is only an estimate, the amount of the liability could change in the future. Other retirement benefits The Mouvement also offers to some of its employees a benefit in the form of a one-time payment upon retirement. This benefit is based on the salary and the number of years worked for the Mouvement at the time of retirement. The liability recorded for these benefits amounts to $3.8 million (2012 - $4.3 million). Amount recognized under "Accrued employee benefit liability" The "Accrued employee benefit liability" recorded in note 14 consists of the following:

2013 Liability for pension plans Liability for temporary contributions Liability for other retirement benefits

2012

15,485 21,519 3,814

72,169 4,302

40,818

76,471

57 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 16.

Share capital Authorized The share capital is made up of membership shares, surplus shares, capitalization shares and permanent investment shares. The Caisses populaires may issue an unlimited number of membership shares with an issue price of $5 each, redeemable under certain conditions stipulated in the Credit Unions Act and in the statutes of the Caisses populaires. Members have only one vote regardless of the number of membership shares they must buy and hold according to the requirements set out in the Bylaws of the Caisses populaires. The By-laws of the Caisses populaires authorize the issue of surplus shares with a par value of $10 each. These shares confer no voting right or economic interest in the allocation of surplus earnings and are not refundable except in certain special situations stipulated in the By-laws and in the statutes of the Caisses populaires. The By-laws of the Caisses populaires authorize the issue of capitalization shares with a par value of $500 each. These shares confer no voting right and are not refundable except in certain special situations stipulated in the By-laws and in the statutes of the Caisses populaires. The interest rate is determined annually at the general meeting of each Caisse populaire. The permanent investment shares have been issued by a Caisse populaire in accordance with the Act. These shares have a par value of $1 each and are non-cumulative, non-voting and nonparticipating. The shares issued and paid are distributed as follows:

2013 Membership shares Permanent investment shares

2012

4,460 5,000

4,538 5,000

9,460

9,538

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 17.

Accumulated other comprehensive income The accumulated other comprehensive income includes unrealized gains of $6.2 million (2012 $6.1 million) on available-for-sale instruments less income taxes of $1.5 million (2012 $1.4 million).

Note 18.

Net insurance and annuity premiums

2013 Gross insurance and annuity premiums Premiums ceded to reinsurers

Note 19.

2012

18,220 (2,149)

18,075 (2,330)

16,071

15,745

Net insurance and annuity benefits

2013 Gross insurance benefits Benefits ceded to reinsurers Annuity benefits Change in insurance contract liabilities Change in reinsurance assets

Note 20.

2012

6,183 (1,422) 553 (13,107) 1,151

5,503 (1,058) 566 4,848 540

(6,642)

10,399

Other items

2013 Revenues (losses) arising from the accounting of the following items at fair value: Derivative instruments Asset-backed long-term notes (note 7) Bonds

2012

(11,456) 3,193 (1,939)

(16,337) 6,102 (1,031)

(10,202)

(11,266)

The change in fair value of the bonds held by Acadia Life is not included in the other items because the bonds are matched with the actuarial liabilities.

59 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 21.

Income taxes Income taxes for the years presented in the combined statement of income are composed of the following elements:

Income taxes (recovered)

Current Income taxes Taxes related to the change in tax rate Income taxes recovered on member dividends

4,754

4,362

(911)

3,170

(392) $

Total 2013

Deferred

3,843

3,170

Total 2012

(392)

2,259

3,680

(278)

6,621

3,456

The provision for income taxes in the combined statement of income differs from that established by application of the Canadian statutory tax rate for the following reasons:

2013 Income taxes at the statutory rate Small business deduction, used by some entities of the Mouvement Non-taxable revenues Change in tax rate on the beginning balance of the deferred income taxes Other

4,755

2012 $

(237) (885)

(406) (280)

2,827 553 $

7,013

4,238

54 128 $

3,734

The change in the applicable tax rate compared to the previous period comes from an increase in the provincial tax rate.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 21.

Income taxes - continued The composition of the deferred income tax liability, by type of temporary differences and carryforwards, is as follows:

December 31, 2013

Note 22.

December 31, 2012

January 1st, 2012

Capital and intangible assets $ Securities and derivative financial instruments Allowance for credit losses Employee benefits liability Non-capital losses Actuarial liabilities Stabilization fund Other

1,632 (2,185) 4,088 10,388 2,427 12 (24,957) 339

1,385 (5,073) 4,201 17,037 2,005 21 (20,658) 487

1,145 (8,803) 4,047 17,520 2,041 22 (19,880) (877)

(8,256)

(595)

(4,785)

Member dividends The member dividends of $1.6 million that appear on the statement of income are based on a resolution of the board of directors of each of the Caisses populaires to recommend that their general assemblies approve these member dividends. The amount is calculated based on the interest on loans and deposits and user fees collected from members. The Caisses populaires may distribute member dividends when legal and regulatory requirements have been met.

Note 23.

Transfer to general reserve The surplus earnings for the year after member dividends have been partially transferred to the general reserve as required under the By-laws of the entities of the Mouvement.

Note 24.

Distributable surplus earnings The distribution is decided annually by members at the general meetings of certain Caisses populaires given that their regulatory capitalization is higher than that stipulated in the By-laws, which is 5% of total assets, subject to restrictions imposed by the Office de stabilisation.

Note 25.

Related party transactions Key management personnel compensation The key management personnel of the Mouvement are the members of the board of directors and senior management. These people have the authority and responsibility for planning, directing and controlling the activities of the Mouvement.

61 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 25.

Related party transactions - continued For the year ended December 31, the compensation of the key management personnel of the Mouvement is as follows:

2013 Short-term benefits Post-employment benefits

Note 26.

2012

1,979 431

1,624 308

2,410

1,932

Fair value of financial instruments The following methods and assumptions have been used to estimate the fair value of the financial instruments: Securities: The estimated fair value of securities is based on quoted market prices, when available. When quoted market prices are not available, estimated fair value is determined using other methods such as market rates for similar securities. Loans: For certain variable rate loans, whose rates are revised frequently, the estimated fair value is assumed to be equal to the carrying value. The fair value of the other loans is estimated using a discounted cash flow calculation method that uses market interest rates currently charged for similar new loans as of December 31, applied to expected maturity amounts. For impaired loans, fair value is equal to carrying value in accordance with the valuation techniques described in note 2. Deposits and promissory notes: The fair value of deposits with no stated maturity is assumed to be equal to the carrying value. The fair value of fixed rate deposits and the promissory notes is determined by discounting contractual cash flows using market interest rates currently offered for deposits and promissory notes with relatively similar terms remaining to maturity. Reinsurance assets and insurance contract liabilities: The fair value of the reinsurance assets and the insurance contract liabilities has not been established. However, the Mouvement annually segments the assets that cover the actuarial liabilities or the liabilities for the different business lines. It attempts, within reasonable limits, to match the assets' cash flows with those of the liabilities. In this way, changes in the realizable values of assets should generally be offset by changes in the realizable values of the items associated with the actuarial liabilities. Borrowings: For the operating credits, fair value equals the book value because they bear interest either at a variable rate or at rates that are close to the market rate. For the Office de stabilisation's loan, the fair value is determined by discounting expected future contractual cash flows using a discount rate equal to the rate of return earned on the related investment at that date. Investment contract liabilities: The fair value of the investment contract liabilities is assumed to be equal to the carrying value. Derivative instruments: The fair value of derivative instruments is calculated based on the net present value of expected cash flows at the market interest rates currently charged for instruments with similar features and maturities.

- 38 -

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 26.

Fair value of financial instruments - continued The fair value of financial instruments according to their classification in the categories defined by the standards for financial instruments is as follows:

2013 At fair value through profit or loss $

Loans and receivables and financial Availableliabilities at for-sale amortized cost $ $

Total $

Fair value $

Financial assets Cash Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Loans Other assets

74,430

98,524 214,427 31,155 23,133

5,919 82,510 53,879 11,663 -

264 2,678,119 20,903

104,443 296,937 31,155 53,879 11,927 2,678,119 44,036

104,443 296,937 31,155 53,879 11,927 2,689,255 44,036

Total financial assets

367,239

153,971

2,773,716

3,294,926

3,306,062

2,742,468 2,762,021

Financial liabilities Deposits Other liabilities Accrued interest, payables and other liabilities Borrowings

2,742,468

3,576 -

67,373 90,327

70,949 90,327

Total financial liabilities

3,576

2,900,168

2,903,744

70,949 90,327 2,923,297

Financial instruments at fair value through profit or loss are included in this category upon initial designation, with the exception of the other assets and liabilities, which are held for trading.

63 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 26.

Fair value of financial instruments - continued

2012 At fair value through profit or loss $

Loans and receivables and financial Availableliabilities at for-sale amortized cost $ $

Total $

Fair value $

Financial assets Cash Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Loans Other assets

101,197

130,328 181,838 29,088 26,056

5,050 82,135 52,195 9,731 -

268 2,520,396 17,915

135,378 263,973 29,088 52,195 9,999 2,520,396 43,971

135,378 263,973 29,088 52,195 9,999 2,545,206 43,971

Total financial assets

367,310

149,111

2,639,776

3,156,197

3,181,007

Financial liabilities Deposits Other liabilities Accrued interest, payables and other liabilities Borrowings

2,667,597

2,689,616

60,337 33,812

60,338 33,812

Total financial liabilities

2,761,746

2,783,766

Financial instruments at fair value through profit or loss are included in this category upon initial designation, with the exception of the other assets, which are held for trading.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 26.

Fair value of financial instruments - continued Classification of fair value measurements in the fair value hierarchy IFRS 13 "Fair value measurement" establishes a fair value hierarchy that reflects the relative weight of the data used for valuation. The hierarchy consists of the following levels: Level 1 - Quoted prices in active markets for identical financial instruments. Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the financial instrument, either directly or indirectly. Level 3 - Inputs for the financial instrument that are not based on observable market data. The following table presents the measurement levels according to the fair value hierarchy:

2013 Level 1

Level 2

Level 3

Total

Financial instruments recorded at fair value Assets Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Derivative instruments

104,443 296,937

8,356

31,155 45,523

31,155 53,879

11,663 23,133

3,576

$ 2,689,255

2,762,021 272

Liabilities Derivative instruments

Financial instruments for which fair value is disclosed Assets Loans

Liabilities Deposits Promissory notes

65 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 26.

Fair value of financial instruments - continued

2012 Level 1

Level 2

Level 3

Total

Financial instruments recorded at fair value Assets Securities Money market securities Bonds Asset-backed long-term notes Equities Investment funds and other Derivative instruments

135,378 263,973

6,901

29,088 45,294

29,088 52,195

9,731 26,056

$ 2,545,206

2,689,616 437

Financial instruments for which fair value is disclosed Assets Loans

Liabilities Deposits Promissory notes

Note 27.

Commitments and contingencies Standby letters of credit and credit commitments The primary purpose of financial instruments that present a credit risk is to ensure that members and clients have funds available when necessary for variable terms and under specific conditions. The collateral security policy of the Mouvement with respect to these credit instruments is generally the same as that applied to loans. Standby letters of credit are irrevocable commitments by the Mouvement to make payments for members or clients who might not be able to meet their financial obligations to third parties and represent the same credit risk as loans. Credit commitments represent unused portions of authorizations to extend credit in the form of loans or standby 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 maximum amount of standby letters of credit and credit commitments is presented in note 29.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 27.

Commitments and contingencies - continued Other commitments At year end, minimum future commitments relating to the purchases of services, to construction contracts as well as to sponsorship and donation agreements are as follows:

2014 2015

1,467 82

1,549

Contingencies The Mouvement is party to various business litigation matters, lawsuits and potential claims arising in the course of normal business activities. 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 the Mouvement. Note 28.

Leases Lessee Operating lease As of year end, the future minimum lease commitments under non-cancellable operating leases for premises and equipment are presented in the following table: 2013

Note 29.

2012

Under 1 year 1 to 5 years More than 5 years

335 731 436

408 1,000 968

Total

1,502

2,376

Financial instrument risk management The Mouvement is exposed to different types of risk in the normal course of operations, including credit risk, liquidity risk and market risk. The Mouvement's objective in risk management is to optimize the risk-return trade-off, within set limits, by applying integrated risk management and control strategies, policies and procedures throughout its activities. Under the Mouvementâ&#x20AC;&#x2122;s risk management approach, its entities and units are accountable for the combined results and the quality of risk management practices. The boards of directors of the Mouvement's components also play a pivotal role in monitoring the risks and results of those units and entities. Several committees support the boards of directors and management teams of each component in their efforts to fulfill their risk management responsibilities.

67 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued CREDIT RISK Credit risk is the risk of losses resulting from a borrower's or a counterparty's failure to honour its contractual obligations, whether or not these obligations appear on the combined statement of financial position. Most of the loans and deposits of the Mouvement are related to the New Brunswick market. Credit risk management The Mouvement upholds its goal of effectively serving all of its members. To this end, it has developed distribution channels specialized by product and member type. The units and components that make up these channels are considered centres of expertise and are accountable for their performance in their respective markets, including credit risk. In this regard, they have latitude regarding the framework they use and credit granting and are also equipped with the corresponding management and monitoring tools and structures. Framework Policies and practices for credit management define the framework within which lending operations and other transactions that feature a credit risk are to be carried out, as well as the controls required in their regard. For this purpose, they define, among other things: 路 management, follow-up and control of credit risk; and 路 the roles and responsibilities of the main parties involved in credit. The credit practices designate the guidelines for credit risk management and control and the financing terms and conditions applicable to borrowers. The credit policies and practices are reviewed annually. These policies and practices make it possible to define the responsibilities of the parties involved, the degree of risk that the Mouvement is willing to assume, the concentration limits and risk management and control guidelines. Credit granting To assess the risk of credit activities with individuals and smaller businesses, credit rating systems, based on proven statistics, are generally used. These systems were developed using a history of borrower behaviour with a profile or characteristics similar to those of the applicant to determine the risk of a particular transaction. The performance of these systems is analyzed on an ongoing basis and adjustments are made regularly with a view to assessing transaction and borrower risk as accurately as possible. The granting of credit to businesses is based on an analysis of the various parameters of each file, where each borrower is assigned a risk rating. These ratings are assigned individually following a detailed examination of the financial, market and management characteristics of the business. The depth of the analysis and the approval level required depend on the product as well as the complexity and scope of the transaction risk. Larger loans are approved by the F茅d茅ration.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued File monitoring and management of higher risks Portfolios are monitored by the Mouvement's business units using procedures that set out the degree of depth and frequency of review based on the quality and extent of the risk related to the commitments. The management of higher-risk loans involves follow-up controls adapted to their particular circumstances. Credit risk mitigation In its lending operations, the Mouvement obtains collateral if deemed necessary for a memberâ&#x20AC;&#x2122;s loan facility following an assessment of their creditworthiness. Collateral is normally comprised of assets such as cash, government securities, shares, receivables, inventory or capital assets. For some portfolios, programs offered by organizations such as the Canada Mortgage and Housing Corporation (CMHC) are used in addition to the customary collateral. At December 31, loans guaranteed by the CMHC represented 55% (2012 - 60%) of the residential mortgage portfolio. Maximum credit risk exposure

2013

2012

Recognized on the statement of financial position Cash Securities Loans Personal Business Reinsurance assets Other financial assets

38,729 432,535

63,411 428,439

1,822,210 872,346 5,694 20,903

1,739,252 799,444 6,845 17,915

$ 3,192,417

$ 3,055,306

13,929 477,389

14,828 433,403

491,318

448,231

Off-statement of financial position Standby letters of credit Credit commitments

69 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued The following table presents the credit quality of the money market securities and bonds portfolios, evaluated in accordance with external credit risk ratings. The other financial assets of the Mouvement are not rated.

2013 Money market securities R1-H R1-M R1-L

Bonds AAA AA A BBB

2012

56,880 30,856 16,707

38,305 84,379 12,694

104,443

135,378

95,867 86,042 107,391 7,637

92,537 65,677 97,560 8,199

296,937

263,973

LIQUIDITY RISK Liquidity risk refers to the Mouvementâ&#x20AC;&#x2122;s capacity to raise the necessary funds (by increasing liabilities or converting assets) to meet a financial obligation, whether or not it appears on the combined statement of financial position, on the date it is due or otherwise. The Mouvement manages liquidity risk in order to ensure that it has access, on a timely basis and in a profitable manner, to the funds needed to meet its financial obligations as they become due, in both routine and crisis situations. Managing this risk involves maintaining a minimum level of liquid securities, stable and diversified sources of funding and an action plan to implement in extraordinary circumstances. Liquidity risk management is a key component in an overall risk management strategy because it is essential to preserving market and depositor confidence. Policies have been established describing the principles, limits and procedures that apply to liquidity risk management. The Mouvement also has a liquidity contingency plan to deal with a crisis situation. This plan also identifies sources of liquidities that are available in exceptional situations. This plan permits an effective intervention in order to minimize disruptions caused by sudden changes in member and client behaviour and potential disruptions in markets or economic conditions. The Credit Unions Act sets out the minimum level of liquidity that the Caisses populaires must maintain. This liquidity level is centrally managed by the Mouvement's treasury and is monitored on a monthly basis. Eligible securities must meet high security and negotiability standards. The securities portfolio in the liquidity fund comprises mostly securities issued by governments, public bodies and private companies with high credit ratings, i.e. R1-L or better.

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued The Mouvement's treasury ensures stable sources of funding by type, source and maturity. The following table presents certain financial instruments by remaining contractual maturity:

2013 Under 1 year Deposits Borrowings Other financial liabilities Credit commitments Standby letters of credit Derivative instruments with net settlement Derivative instruments with gross settlement

$ 1,894,372 85,096 38,921 477,389 13,929

1 to 5 years $

(906) 4,015

928,828 384 24 -

Over 5 years $

Total

7,959 -

$ 2,823,200 93,439 38,945 477,389 13,929

4,835

3,929

4,015

Over 5 years

Total

2012 Under 1 year Deposits Borrowings Other financial liabilities Credit commitments Standby letters of credit Derivative instruments with net settlement Derivative instruments with gross settlement

$ 1,924,705 28,647 60,109 433,403 14,828

1 to 5 years $

819,381 384 24 -

8,055 -

$ 2,744,086 37,086 60,133 433,403 14,828

1,576

269

1,845

MARKET RISK Market risk refers to the risk of changes in the fair value of financial instruments as a result of changes in parameters affecting this value such as interest rates, exchange rates, credit spreads and their volatility. The Mouvement is mainly exposed to interest rate risk through positions related to its traditional financing and deposit-taking activities. Interest rate risk management The Mouvement is exposed to interest rate risk, which represents the potential impact of interest rate fluctuations on net financial income and the economic value of its equity.

71 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued Dynamic and prudent management is applied to optimize net financial income while minimizing the negative impact of interest rate movements. Simulations are used to measure the impact of different variables on net financial income and the economic value of equity. The assumptions used in the simulations are based on an analysis of historical data and the impact of different interest rate conditions on the data, and concern changes in the structure of the statement of financial position, member behaviour and pricing. The Mouvement's investment committee is responsible for analyzing and adopting the global matching strategy in order to have proper risk management. The following table presents the potential impact, at year end, of a sudden and sustained 1% increase or decrease in interest rates (before income taxes) on the Mouvement's surplus earnings and equity:

2013 $

Impact of an increase Impact of a decrease

2012

(872) 957

(653) 719

The extent of the interest rate risk depends on the gap between assets, liabilities and offstatement of financial position instruments. The situation presented reflects the position as at that date, and may change depending on membersâ&#x20AC;&#x2122; behaviour, the interest rate environment and the strategies adopted by the Mouvement's investment committee. The tables below succintly show the matching of the maturities of the Mouvement's assets and liabilities at year end.

2013 Net gap on the statement of financial position Non interest rate-sensitive items

$(1,256,624)

Impact of derivative instruments $

Total gap $(1,256,624)

Interest rate-sensitive items Floating rate Fixed rate - 0 to 12 months Fixed rate - 1 to 5 years Fixed rate - over 5 years

639,304 316,476 159,758 144,463

(710,425) 710,425 -

639,304 (393,949) 870,183 144,463

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued

2012 Net gap on the statement of financial position Non interest rate-sensitive items

$(1,255,684)

Impact of derivative instruments $

Total gap $(1,255,684)

Interest rate-sensitive items Floating rate Fixed rate - 0 to 12 months Fixed rate - 1 to 5 years Fixed rate - over 5 years

728,235 256,898 111,055 159,835

(767,375) 759,375 8,000

728,235 (510,477) 870,430 167,835

The net gap position on the statement of financial position is based on maturity dates or, if closer, the interest rate revision dates of fixed-rate assets and liabilities. This gap position represents the difference between the total assets and the total liabilities and equity for a given period. The above tables show year end balances, except in the case of certain non interest ratesensitive assets and liabilities for which the average monthly balance is provided as it is used for managing sharply fluctuating daily balances. The impact attributable to derivatives represents the cumulative net notional amount related to interest rate swaps used to control interest rate risks. At year end, the conditions for these swaps were such that they had offsetting impacts for some periods reported in the table. Swaps are transactions under which two parties exchange fixed and variable rate payments, based on a notional amount. A positive total gap for a given period indicates that a sustained rise in interest rates would have the effect of increasing the net financial income of the Mouvement, while a sustained decline in interest rates would decrease net financial income. The reverse occurs when the sensitivity gap is negative. Foreign exchange risk management Foreign exchange risk arises when the actual or expected value of assets denominated in a foreign currency is higher or lower than that of liabilities denominated in the same currency. Certain components have adopted specific policies to manage foreign exchange risk, notably by limiting the gap between the assets and liabilities denominated in U.S. dollars. Certain components use foreign exchange contracts to help them match their assets and liabilities in U.S. dollars. However, the Mouvementâ&#x20AC;&#x2122;s exposure to this risk is limited because the majority of its transactions are conducted in Canadian dollars. At year end, the Mouvement has contracts to buy $15.0 million (2012 - $0 million) in U.S. dollars.

73 Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 29.

Financial instrument risk management - continued The statement of financial position includes the following amounts in Canadian dollars with respect to financial assets and liabilities with cash flows denominated in U.S. dollars:

2013 Cash Securities Loans Other assets Deposits

6,985 7,292 39 6 25,221

2012 $

31,758 5,063 20 7 33,219

INSURANCE AND REINSURANCE RISK In the normal course of operations, the Mouvement is exposed to insurance risk. This risk represents the risk that the initial pricing is or will become insufficient; it arises from the selection of risks, from claims settlement and from contractual clause management. The Mouvement attempts to limit the risk of loss to which it is exposed with regards to a single insured or a catastrophic event affecting many insureds and to recover a portion of the claims paid by means of reinsurance agreements. In the event that the reinsurers are not able to honour their contractual obligations, the Mouvement is liable for contingent risks related to retrocession. Reinsurance is arranged primarily with a single reinsurer. This reinsurer is rated AA- by the credit-rating agency Standard & Poor's. Note 30.

Capital management The Mouvement's capital is composed of its equity and the collective allowance for credit losses. The capital management goal of the Mouvement is to ensure that a sufficient level of high-quality capital is maintained in order to preserve flexibility for its development, to maintain a favourable credit rating and to maintain the confidence of depositors and financial markets. Caisses populaires Capital management is the responsibility of the Caisse populaires' board of directors. In accordance with the Credit Unions Act, a Caisse populaire must maintain a minimum amount of capital corresponding to 5% of its total assets. The regulatory capital of the Caisses populaires, which is composed of equity and the collective allowance for credit losses, represents 8.4% of total assets (2012 - 7.7%). The stabilization preferred shares issued by certain Caisses populaires to the Office de stabilisation are not included in the regulatory capital because they are eliminated in the combined financial statements of the Mouvement. In addition to the regulatory capital maintained by the Caisses populaires, the Office de stabilisation maintains a stabilization fund in accordance with the Credit Unions Act in order to protect its member Caisses populaires against financial losses and insolvency and to provide them with the necessary financial assistance for the purposes of stabilization. At year end, the balance of this fund is $92.4 million (2012 - $89.8 million).

Annual Report 2013

Mouvement des caisses populaires acadiennes Notes to the Combined Financial Statements

For the year ended December 31, 2013 (in thousands of dollars) Note 30.

Capital management - continued Fédération The Fédération’s objective is to maintain a capitalization ratio of 5% of its assets. At year end, its capitalization ratio is 7.1% (2012 - 5.9%). One of the Fédération’s subsidiaries, Acadia Financial Services Inc., is subject to externally imposed capital requirements. It manages its capital in such a way as to respect the regulatory requirements imposed by the Mutual Fund Dealers Association of Canada. Acadia Life Under the Insurance Companies Act, federal life insurance companies are required to maintain sufficient capital. In addition, the Act requires that companies that operate branches in Canada maintain a sufficient excess of assets over liabilities. The professional standards of the CIA require that the designated actuary perform annually a dynamic review of capital sufficiency. This review highlights to management the evolution of the surplus and the risks to the company's solvency. This process requires the actuary to analyze and project, using scenarios, trends in the company's financial situation, considering the current circumstances, its recent past and its business plan. Within this process, regulatory formulas are used as standards for capital sufficiency. Currently, the required minimum continuing capital and surplus requirement (MCCSR) on available capital is 120%. However, the Office of the Superintendent of Financial Institutions Canada (OSFI) and the New Brunswick Superintendent of Insurance expect that each institution will establish and maintain a target MCCSR ratio of at least 150%. The minimum MCCSR threshold set by Acadia Life is 200%. However, in accordance with the strategic planning of the insurance company, the MCCSR target is 250% in order to take into consideration market volatility and economic conditions, innovations within the industry, trends in business combinations and changes occurring internationally. This target is revised every three years or as needed if changes occur in the market or in legislation. At year end, Acadia Life's MCCSR is 400.4% (2012 - 354.4 %). Mouvement At year end, the Mouvement's capitalization ratio is 10.4% (2012 - 9.8%).

Note 31.

Comparative figures Certain comparative figures have been reclassified to conform with the presentation used in the current year.

Annual Report 2013

FĂŠdĂŠration des caisses populaires acadiennes

Board of Directors and Management Fédération des caisses populaires acadiennes from left to right

Roland T. Cormier

André Chouinard

Lloyd Plourde

David Losier

Pierre-Marcel Desjardins

Camille H. Thériault

Hugues Thériault

Denis Laverdière

Elmo Caissie

Allain Santerre

Gilles Godin Vice Chair and Director Northeast

Hermel Chiasson

Philippe Ferguson

Eric Aubé

Director Northeast

Executive Director Communications and Strategic Planning

Rolland LeBouthillier

Guy J. Richard

Vice President and COO Office

Director Southeast

Simonne Godin

Maurice Picard

Director Southeast

Director Northwest Chairman and Director Southeast Director Northeast Director Southeast

Corporate Secretary

Director Northwest

Vice President and CFO President and CEO

Vice President and COO Director Northwest Director Northeast

Director Northwest

Annual Report 2013

Internal Management Structure

Fédération des caisses populaires acadiennes

Legal Affairs Marc Roy

President and CEO Camille H. Thériault

Corporate Secretary Simonne Godin

Executive Director Communications and Strategic Planning Éric Aubé

Vice President and CFO David Losier

Credit and Recovery Services Pierre Cormier

Vice President and COO Denis Laverdière

Human Resources and Training Pierre Giard

Finance Services Pierre Doiron

Management Services

IT & Network Support Services Florence Caissie

Éric St-Pierre

Health and Life Insurance and Mutual Funds

Business Development – Personal Marc-André Comeau

Yves Duguay

AVie Yvon Godin

Acadia Financial Services

Business Development – Commercial

Acadia Service Centre

Gilles Lanteigne

Acadia General Insurance

Acadia Life Legend Directly related to the President and CEO Departments

As of April 1st, 2014

Business relation or subsidiary (not part of the Management Committee)

INDEPENDENT STATEMENTS

AUDITORS'

REPORT

THE

SUMMARY

CONSOLIDATED

FINANCIAL

To the directors of La Fédération des Caisses Populaires Acadiennes Limitée The accompanying summary consolidated financial statements, which comprise the consolidated statement of financial position as at December 31, 2013 and the consolidated statements of income, comprehensive income and changes in equity for the year then ended, are derived from the audited consolidated financial statements of LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2013. We expressed an unmodified audit opinion on those consolidated financial statements in our auditors' report dated March 13, 2014. The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE. Management's responsibility for the summary consolidated financial statements Management is responsible for the preparation of a summary of the audited consolidated financial statements. Auditors' responsibility Our responsibility is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, "Engagements to Report on Summary Financial Statements." Opinion In our opinon, the summary consolidated financial statements derived from the audited consolidated financial statements of LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2013 are a fair summary of those financial statements, in accordance with International Financial Reporting Standards.

March 13, 2014 Dieppe, New Brunswick

Chartered accountants

Annual Report 2013

LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31,

2013

ASSETS Cash and deposits with other financial institutions

20,158,432

2012 $

34,972,575

Securities

313,218,463

297,551,473

Loans Affiliated caisses Residential mortgages Students Other related parties

39,439,912 178,794,526 1,309,531 3,819,162

27,186,451 146,152,441 1,426,576 889,637

223,363,131

175,655,105

16,642,631 3,731,210 7,027,945 1,866,263

13,464,761 4,736,872 6,769,309 1,976,977

29,268,049

26,947,919

$ 586,008,075

$ 535,127,072

$ 420,515,335

$ 433,960,678

85,000,000 27,184,311 272,200

28,458,299 21,230,873 435,922

112,456,511

50,125,094

11,651,786

19,667,168

544,623,632

503,752,940

Members' net assets Share capital Undistributed surplus earnings

20,067,321 21,317,122

18,267,301 13,130,334

Non-controlling interests

41,384,443 -

31,397,635 (23,503)

41,384,443

31,374,132

$ 586,008,075

$ 535,127,072

Other assets Accrued interest, receivables and other assets Deferred income taxes Capital assets Intangible assets

LIABILITIES Deposits Other liabilities Borrowings Accrued interest, payables and other liabilities Promissory notes

Employee benefit liability

EQUITY

FOR THE BOARD OF DIRECTORS

Pierre-Marcel Desjardins Chairman

Guy J. Richard Vice Chair

81 LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE CONSOLIDATED STATEMENT OF INCOME Year ended December 31, FINANCIAL INCOME Cash Securities Loans - residential mortgages Loans - affiliated caisses Loans - students Loans - other

2013 $

FINANCIAL EXPENSES Deposits - affiliated caisses Deposits - other Borrowings and other financial expenses

69,237 8,672,175 5,116,285 844,824 88,088 47,616

2012 $

118,574 8,413,604 5,755,879 610,064 88,258 19,405

14,838,225

15,005,784

6,880,672 356,140 2,192,737

8,739,183 389,737 1,152,099

9,429,549

10,281,019

NET FINANCIAL INCOME RECOVERY ON IMPAIRED LOANS

5,408,676 (387,291)

4,724,765 (536,712)

NET FINANCIAL INCOME AFTER RECOVERY ON IMPAIRED LOANS

5,795,967

5,261,477

16,115,305 20,249,222

11,709,335 19,832,970

36,364,527

31,542,305

21,589,725 16,628,273

19,112,043 15,332,949

38,217,998

34,444,992

SURPLUS EARNINGS BEFORE OTHER ITEMS Other items

3,942,496 338,334

2,358,790 3,915,736

SURPLUS EARNINGS BEFORE TAXES INCOME TAXES

4,280,830 1,253,111

6,274,526 1,439,298

SURPLUS EARNINGS BEFORE DIVIDENDS

3,027,719

4,835,228

OTHER INCOME Contributions from affiliated caisses Other

EXPENSES OTHER THAN FINANCIAL EXPENSES Wages and benefits Other

Member dividends Income taxes recovered on member dividends

SURPLUS EARNINGS FOR THE YEAR

1,082,762 (281,518)

801,244

2,226,475

4,835,228

Annual Report 2013

LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December 31,

SURPLUS EARNINGS FOR THE YEAR

2013

2,226,475

2012

4,835,228

7,676,799 (1,941,402) 732,366

572,241 (123,611) -

6,467,763

448,630

COMPREHENSIVE INCOME

8,694,238

5,283,858

SURPLUS EARNINGS FOR THE YEAR RELATED TO: Members Non-controlling interests

2,221,390 5,085

4,832,723 2,505

2,226,475

4,835,228

8,670,513 23,725

5,279,484 4,374

8,694,238

5,283,858

COMPREHENSIVE INCOME RELATED TO: Members Non-controlling interests

83 LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF CHANGES IN EQUITY

Year ended December 31, 2013

Undistributed Total surplus equity related earnings to members $ $

Share capital $

Non-controlling interests $

18,267,301

13,130,334

31,397,635

Surplus earnings for the year

2,221,390

5,085

2,226,475

Other comprehensive income

6,449,123

18,640

6,467,763

Balance, beginning of year

(23,503)

Total equity $ 31,374,132

8,670,513

23,725

8,694,238

1,800,020

Dividends

(639,356)

Income taxes recovered on dividends Refundable dividend tax on hand

166,233 (10,602)

(177)

166,233 (10,779)

Redemption of non-controlling interests

(45)

20,067,321

21,317,122

41,384,443

Comprehensive income Share capital issued

Balance, end of year

Year ended December 31, 2012

Undistributed surplus earnings $

Share capital $ Balance, beginning of year

Total equity related to members $

Non-controlling interests $

Total equity $

18,165,505

7,865,301

26,030,806

(27,695)

26,003,111

Surplus earnings for the year

4,832,723

2,505

4,835,228

Other comprehensive income

446,761

1,869

448,630 5,283,858

Comprehensive income Share capital issued Refundable dividend tax on hand Balance, end of year

5,279,484

4,374

101,796

(14,451)

(182)

(14,633)

18,267,301

13,130,334

31,397,635

(23,503)

31,374,132

Annual Report 2013

Acadia Life

INDEPENDENT STATEMENTS

AUDITORS'

REPORT

THE

SUMMARY

CONSOLIDATED

FINANCIAL

To the directors of Acadia Life The accompanying summary consolidated financial statements, which comprise the statement of financial position as at December 31, 2013 and the consolidated statements of income, comprehensive income and changes in equity for the year then ended, are derived from the audited consolidated financial statements of Acadia Life for the year ended December 31, 2013. We expressed an unmodified audit opinion on those consolidated financial statements in our auditors' report dated March 13, 2014. The summary consolidated financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary consolidated financial statements, therefore, is not a substitute for reading the audited consolidated financial statements of Acadia Life. Management's responsibility for the summary consolidated financial statements Management is responsible for the preparation of a summary of the audited consolidated financial statements. Auditors' responsiblity Our responsiblity is to express an opinion on the summary consolidated financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standards (CAS) 810, "Engagements to Report on Summary Financial Statements". Opinion In our opinion, the summary consolidated financial statements derived from the audited consolidated financial statements of Acadia Life for the year ended December 31, 2013 are a fair summary of those financial statements, in accordance with International Financial Reporting Standards.

March 13, 2014 Dieppe, New Brunswick

Chartered Accountants

Annual Report 2013

APPOINTED ACTUARY'S REPORT

To the board of directors of Acadia Life: I have valued the policy liabilities and reinsurance recoverables on the statement of financial position of Acadia Life (on a consolidation basis) as at December 31, 2013 and their change in the statement of income (on a consolidation basis) for the year then ended, in accordance with accepted actuarial practice in Canada, including selection of appropriate assumptions and methods. In my opinion, the amount of policy liabilities net of reinsurance recoverables makes appropriate provision for all policyholder obligations and the consolidated financial statements fairly present the result of the valuation.

Jacques Tremblay, FICA Toronto, February 28, 2014

87 ACADIA LIFE CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, ASSETS Investments Money market securities Bonds Investment funds Equities Asset-backed long-term notes

2013

9,446,876 78,718,433 9,730,677 6,901,352 873,997 105,671,335 887,978 1,700,019 6,845,357 165,705 273,428

$ 107,237,224

$ 115,543,822

62,997,244 505,319

76,104,462 899,076

63,502,563 346,024 2,163,785 828,763 135,209 1,207,611 544,884

77,003,538 490,241 1,437,239 1,096,438 98,429 286,593 982,292

68,728,839

81,394,770

15,887,118 2,658,883 19,962,384

15,887,118 699,658 17,562,276

38,508,385

34,149,052

$ 107,237,224

$ 115,543,822

Investment contract liabilities Patronage allocations and bonuses payable Payables and accrued expenses Due to related entities, without interest Income taxes payable Employee benefit liability

SHAREHOLDER'S EQUITY Capital stock Accumulated other comprehensive income Undistributed surplus

FOR THE BOARD OF DIRECTORS

Pierre-Marcel Desjardins Chairman

96,472,875 2,771,046 1,798,794 5,694,045 380,501 119,963

Cash Receivables Reinsurance assets Intangible assets Deferred income tax asset

LIABILITIES Insurance contract liabilities Actuarial liabilities Provision for claims under settlement and claims not received

6,139,492 69,369,114 11,662,670 8,355,684 945,915

2012

Guy J. Richard Vice Chairman

Annual Report 2013

ACADIA LIFE CONSOLIDATED STATEMENT OF INCOME Year ended December 31,

REVENUE Gross insurance and annuity premiums Premiums ceded to reinsurers

2013

Net insurance and annuity premiums Net investment income Management fees Commission revenue

OPERATING EXPENSES Gross insurance benefits Insurance benefits ceded to reinsurers Annuity benefits Change in insurance contract liabilities Change in investment contract liabilities Change in reinsurance assets Wages and other operating expenses

OPERATING INCOME BEFORE PATRONAGE ALLOCATIONS AND BONUSES Patronage allocations and bonuses to the caisses INCOME BEFORE TAXES INCOME TAXES Current income taxes Deferred taxes relating to temporary differences and deferrals Deferred taxes relating to the change in tax rate

2012

18,806,666 $ (2,149,236) 16,657,430 (11,008,091) 325,380 1,709,519

16,391,052 2,915,741 294,956 1,441,886

7,684,238

21,043,635

6,183,499 (1,422,327) 553,197 (13,107,218) (144,217) 1,151,312 8,318,179

5,502,764 (1,057,560) 565,600 4,848,948 (51,817) 539,380 8,089,408

1,532,425

18,436,723

6,151,813

2,606,912

2,163,785

1,437,239

3,988,028

1,169,673

945,954 70,097 (2,228)

287,081 18,817 -

1,013,823 NET INCOME

18,721,452 (2,330,400)

2,974,205

305,898 $

863,775

89 ACADIA LIFE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended December 31,

NET INCOME

2013

OTHER COMPREHENSIVE INCOME Item that will not be reclassified to the consolidated statement of income Change in the employee benefit liability Change during the year Deferred taxes relating to temporary differences and deferrals Deferred taxes relating to the change in tax rate Total of the item that will not be reclassified to the consolidated statement of income Items that will be reclassified to the consolidated statement of income Unrealized changes in fair value on available-for-sale securities Change during the year Income taxes

Reclassified to income Realized losses (gains) on available-for-sale securities Income taxes

Total items that will be reclassified to the consolidated statement of income Total other comprehensive income, net of taxes COMPREHENSIVE INCOME

2,974,205

2012

863,775

389,782 (105,241) 19,646

19,327 (4,832) -

304,187

14,495

2,698,228 (716,557)

976,479 (244,120)

1,981,671

732,359

(30,336) 7,890

40,097 (10,024)

(22,446)

30,073

1,959,225

762,432

2,263,412

776,927

5,237,617

1,640,702

Annual Report 2013

ACADIA LIFE CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year ended December 31, 2013

Balance, beginning of the year

Capital stock

Accumulated other comprehensive income

15,887,118

699,658

Undistributed surplus

17,562,276

Total equity

34,149,052

Net income Other comprehensive income

1,959,225

2,974,205 304,187

2,974,205 2,263,412

Comprehensive income Dividends

1,959,225 -

3,278,392 (878,284)

5,237,617 (878,284)

Balance, end of the year

15,887,118

2,658,883

19,962,384

38,508,385

Year ended December 31, 2012 Accumulated other comprehensive income

Capital stock

Balance, beginning of the year

Net income Other comprehensive income Comprehensive income Dividends Share capital issued Balance, end of the year

14,671,034

(62,774) $

762,432

1,216,084

762,432 -

15,887,118

Undistributed surplus

699,658

17,900,090

Total equity

863,775 14,495

863,775 776,927

878,270 (1,216,084) $

17,562,276

32,508,350

1,640,702 (1,216,084) 1,216,084 $

34,149,052

Office de stabilisation de la FĂŠdĂŠration des caisses populaires acadiennes

Annual Report 2013

Board of Directors and Management Office de stabilisation de la Fédération des caisses populaires acadiennes from left to right

Gary Donald Long

Wanita McGraw

Pierre LeBlanc

Camille H. Thériault

Marcel Lanteigne

Rolland LeBouthillier

Janice Lirette Evers

Simonne Godin

Gilles Haché

Luc St-Jarre

appointed by the Board of Fédération Caisses populaires and Credit Unions Superintendant Chairman and Caisses populaires members’ representative Caisses populaires members’ representative Vice Chair and appointed by the Minister of Justice

Roger Lessard

Caisses populaires members’ representative

appointed by the Board of Fédération President and CEO

Vice President and COO Office Corporate Secretary appointed by the Minister of Justice

INDEPENDENT AUDITORS' REPORT ON THE SUMMARY FINANCIAL STATEMENTS To the Directors of L'Office de Stabilisation de la Fédération des Caisses populaires acadiennes limitée The accompanying summary financial statements, which comprise the statement of financial position as at December 31, 2013 and the statements of income, comprehensive income and changes in net assets for the year then ended, are derived from the audited financial statements of L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2013. We expressed an unmodified audit opinion on those financial statements in our auditors' report dated February 21, 2014. The summary financial statements do not contain all the disclosures required by International Financial Reporting Standards. Reading the summary financial statements, therefore, is not a substitute for reading the audited financial statements of L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE. Management's responsibility for the summary financial statements Management is responsible for the preparation of a summary of the audited financial statements. Auditors' responsibility Our responsibility is to express an opinion on the summary financial statements based on our procedures, which were conducted in accordance with Canadian Auditing Standard (CAS) 810, "Engagements to Report on Summary Financial Statements." Opinion In our opinon, the summary financial statements derived from the audited financial statements of L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE for the year ended December 31, 2013 are a fair summary of those financial statements, in accordance with International Financial Reporting Standards.

February 21, 2014 Dieppe, New Brunswick

Chartered Accountants

Annual Report 2013

L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF FINANCIAL POSITION December 31,

2013

2012

ASSETS $

Cash Other assets Accrued investment income Recoverable income taxes Other receivables Prepaid expenses

1,324,082

708,049

518,334 94,915 2,391 4,805

517,239 310,827 3,283 2,688

620,445

834,037

Securities

88,428,988

87,185,074

Investment in stabilization preferred shares

13,143,609

11,797

$ 103,528,921

$ 101,870,814

Investment - other Capital assets

LIABILITIES Payables and accrued liabilities Deferred income taxes Long-term debt Employee benefit liability

1,672,604 428,732 5,327,486 716,810

1,639,087 899,082 5,353,645 1,088,716

8,145,632

8,980,530

2,948,302 90,417,837 2,017,150

3,070,390 85,755,874 4,064,020

95,383,289

92,890,284

$ 103,528,921

$ 101,870,814

NET ASSETS Appropriated net assets Unappropriated net assets Accumulated other comprehensive income

ON BEHALF OF THE BOARD

Marcel Lanteigne Chairman

Janice Lirette Evers Chair, Audit Committee

95 L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF INCOME Year ended December 31,

REVENUE Investment income Contribution income Revenue - other

2013

EXPENSES Services purchased from the Fédération General and administration expenses Expense related to the fair value of the long-term debt

INCOME BEFORE TAXES INCOME TAXES Current Deferred

NET INCOME

3,170,286 4,578,905 24,400

2012

3,339,959 4,411,929 23,690

7,773,591

7,775,578

1,404,516 2,032,480 122,088

2,339,751 1,928,432 203,900

3,559,084

4,472,083

4,214,507

3,303,495

(54,907) (14,799)

(190,805) 31,414

(69,706)

(159,391)

4,284,213

3,462,886

Annual Report 2013

L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE COMPREHENSIVE INCOME Year ended December 31,

NET INCOME

2013

OTHER COMPREHENSIVE INCOME Item that will not be reclassified to the statement of income Changes in the employee benefit liability Change during the year Income taxes Total of the item that will not be reclassified to the statement of income Items that will be reclassified to the statement of income Unrealized changes in fair value on available-for-sale securities Decrease during the period Income taxes

Reclassified to income Realized losses (gains) on available-for-sale securities Income taxes

Total of items that will be reclassified to the statement of income Total of other comprehensive income, net of income taxes COMPREHENSIVE INCOME

2012

4,284,213

3,462,886

332,028 (76,366)

(68,081) 14,298

255,662

(53,783)

(2,578,588) 531,874

(332,596) 69,845

(2,046,714)

(262,751)

(200) 44

44,523 (9,716)

(156)

34,807

(2,046,870)

(227,944)

(1,791,208)

(281,727)

2,493,005

3,181,159

97 L'OFFICE DE STABILISATION DE LA FÉDÉRATION DES CAISSES POPULAIRES ACADIENNES LIMITÉE STATEMENT OF CHANGES IN NET ASSETS

Year ended December 31, 2013 Appropriated net assets

Balance at beginning of year

3,070,390

Net income Other comprehensive income

Comprehensive income Transfers Balance at end of year

Unappropriated net assets

(122,088) $

2,948,302

85,755,874

Accumulated other comprehensive income

4,064,020

Total net assets

92,890,284

4,284,213 255,662

(2,046,870)

4,284,213 (1,791,208)

4,539,875 122,088

(2,046,870) -

2,493,005 -

90,417,837

2,017,150

95,383,289

Year ended December 31, 2012 Appropriated net assets

Balance at beginning of year

Net income Other comprehensive income

3,274,290

Comprehensive income Transfers Balance at end of year

Unappropriated net assets

(203,900) $

3,070,390

82,142,871

Accumulated other comprehensive income

4,291,964

Total net assets

89,709,125

3,462,886 (53,783)

(227,944)

3,462,886 (281,727)

3,409,103 203,900

(227,944) -

3,181,159 -

85,755,874

4,064,020

92,890,284

Acadie.com